Forex Strategy : Momentum Trading Systems Attractive on US Dollar Trend

An early-week turnaround in the US Dollar has led our trend-based trading signals , and a continuation in US Dollar strength could set up ideal conditions for outperformance in key strategies. Extremely choppy market price action has made it difficult for longer-term trend traders to catch worthwhile currency moves, and our Momentum systems are no exception. Yet markets have been a bit too volatile for our Range strategies to do well, and unclear market outlook leaves us in a difficult position. When in doubt, we typically revert back to our high-risk/high-reward Momentum and Breakout systems.
Given our bias, we leave ourselves at clear risk of being shaken out on continued market choppiness. Yet the rewards on a sustained US Dollar breakout could offset the low-probability nature of Momentum and Breakout trades.

Forex Trading Automated Systems Outlook
Momentum2 and Momentum1 have put up lackluster numbers as of late, with directionless and volatile price action shaking out the trend-following trading signals. Momentum2 has been marginally more successful because it typically switches direction much more quickly, and it has accordingly been the first to latch on nascent trends. We like its prospects and will accordingly favor said trades through the near-term.

Forex Market Conditions Outlook

NOTE: Data has once again been changed. Due to the ineffectiveness of the 30-day horizon, we are returning to the original 90-day time horizon.

Definitions
Volatility Percentile – The higher the number, the more likely we are to see strong movements in price. This number tells us where current implied volatility levels stand in relation to the past 30 days of trading. We have found that implied volatilities tend to remain very high or very low for extended periods of time. As such, it is helpful to know where the current implied volatility level stands in relation to its medium-term range.

Trend – This indicator measures trend intensity by telling us where price stands in relation to its 30 trading-day range. A very low number tells us that price is currently at or near monthly lows, while a higher number tells us that we are near the highs. A value at or near 50 percent tells us that we are at the middle of the currency pair’s monthly range.
Range High – 90-day closing high.
Range Low – 90-day closing low.
Last – Current market price.

Strategy – Based on the above criteria, we assign the more likely profitable strategy for any given currency pair. A highly volatile currency pair (Volatility Percentile very high) suggests that we should look to use Breakout strategies. More moderate volatility levels and strong Trend values make Momentum trades more attractive, while the lowest Vol Percentile and Trend indicator figures make Range Trading the more attractive strategy.
The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FOREX CAPITAL MARKETS, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. FOREX CAPITAL MARKETS, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FOREX CAPITAL MARKETS, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.

Article source: http://www.dailyfx.com

Short-Term Forex Technical Outlook: EUR/CHF

The drop in risk appetite pushed the EUR/CHF lower during the previous day and the pair may continue to trend lower as market sentiment wanes however, as the Swiss National Bank attempts to put a floor on the exchange rate in an effort to stem the risks for deflation, speculation for a currency-intervention could lead the pair higher over the week.


Currency Pair: EUR/CHF

chart: 60 Min Charts

Short-Term Bias: Flat


Analysis

The drop in risk appetite pushed the EUR/CHF lower during the previous day and the pair may continue to trend lower as market sentiment wanes however, as the Swiss National Bank attempts to put a floor on the exchange rate in an effort to stem the risks for deflation, speculation for a currency-intervention could lead the pair higher over the week. After slipping to a low of 1.4299 in October, the euro-franc bounced back to reach a high of 1.5885 on 12/15, but the lack of momentum to break back above 1.5270-80 (38.2% Fib) and the 200-Day moving average is likely to hold the pair within range as investors weigh the outlook for future policy. At the same time, as the European Central Bank puts a floor on the interest rate and maintains a dovish outlook for future prices, expectations for further easing is likely to weigh on the exchange rate as growth and inflation falter. Over the next few hours of trading, we may see the Swiss franc continue to benefit from safe-haven flows however, as the EUR/CHF approaches oversold territory, moves to the downside are likely to be capped, and we may see the pair push back above 1.5090-1.5100 (50.0% Fib) to fill-in the gap from the 120 SMA. Nevertheless, as the Swiss National Bank is widely expected to hold the benchmark interest rate at 0.25% later this week, comments from the central bank head are likely to spark volatility in the currency market, and the board may decide to expand its purchases of foreign currencies as the risks for deflation intensify. Be sure to check out other Technical Reports from FX ONLINE TRADING for additional information on the major currency pairs.

source: http://www.dailyfx.com/

US Dollar Rally Continues as DJIA Tests Key Support at 8600

US Dollar Rally Continues as DJIA Tests Key Support at 8600
The US dollar was one of the biggest winners on a day when equities and FX carry trades took a beating, indicating that the greenback hasn’t lost its luster as a “safe haven” asset. Looking to the news of the day, the US Treasury said that foreign demand for US assets rose more slowly during the month of April, as total net purchases of long-term equities, notes and bonds increased by a net $11.2 billion, down from $55.4 billion in March. Meanwhile, the New York Fed’s “Empire” manufacturing index fell more than expected to a reading of -9.41 in the month of June from -4.55, signaling a deeper contraction in business activity. A look at the breakdown of the report shows that the shipments component fell negative once again after rising into positive territory last month for the first time since July 2008. In fact, every other component - including prices paid/received, new orders, inventories, and number of employee - remained negative, suggesting that the manufacturing sector is far from recovery.

According to Bloomberg News, the Commerce Department may report on Tuesday that US housing starts and building permits staged a healthy rebound during the month of May. Indeed, housing starts are projected to have risen to an annual rate of 485K from a record low of 458K, while building permits are forecasted to have risen to 508K from a record low of 498K (revised up from 494K). This will be one of the first housing-related indexes released for the month of May, but as we saw with last month's results, it isn't necessarily a great leading indicator as new and existing sales improved while starts and permits tumbled. Nevertheless, surprisingly strong results could offer a boost to investor sentiment, while unexpected declines could lead risk aversion to dominate once again.

Euro Tumbles as ECB Says Banks Stand to Lose Another $283 Billion
The euro fell sharply against the greenback after the European Central Bank (ECB) said that commercial banks in the region may stand to lose another $283 billion by the 2010 due to write downs. Indeed, European banks have not been as quick to realize losses as US banks have, suggesting that negative news for the European financial sector is likely to seep out for quite a while longer. Looking ahead to Tuesday, Eurostat has already estimated that Euro-zone inflation stagnated during the month of May, but traders should still keep an eye on the final reading of this report. Indeed, Eurostat may confirm that CPI stagnated on both a monthly and annual basis, the lowest readings on record. However, the European Central Bank has already stated that they anticipate that CPI growth will “decline further and temporarily remain negative over the coming months, before returning to positive territory by the end of 2009,” which may prevent speculation from arising about the prospect of additional rate cuts. Nevertheless, surprisingly weak results could still weigh on the euro upon release.

Swiss Franc Mixed as Inflation Measure Plunge to 22+ Year Low
The Swiss franc ended on a mixed note, losing against the British pound, US dollar, and Japanese yen while gaining against the commodity dollars and euro, as the Swiss producer and import price index fell 0.3 percent in May, dragging the annual rate down to -5.0 percent, the lowest since December 1986. Indeed, lower commodity prices and a stronger Swiss franc, which dampens import prices from the Euro-zone, have both been contributors to the drop in Swiss inflation. This turns our attention to Thursday, when we’ll see a policy announcement from the Swiss National Bank (SNB). The SNB is likely to leave their 3-month LIBOR target range unchanged at 0.0 percent – 0.75 percent, but the thing to watch for in the SNB’s subsequent policy statement is talk of FX intervention. Indeed, the SNB’s last statement on March 12 indicated that the central bank wanted to “prevent any further appreciation of the Swiss franc against the euro” in an effort to “counter the risk of deflation and of a dramatic deterioration in the economy.” Similar comments have the potential to drive the Swiss franc lower upon this 3:30 ET release, while a neutral policy stance and no mention of currencies will likely lead the Swissie higher.

British Pound Down vs. US Dollar, Japanese Yen Ahead of UK CPI Report
The British pound was actually one of the stronger currencies of the day on Monday, except when it came to GBP/USD and GBP/JPY, as the pairs fell toward near-term support levels at 1.6250 and 159.00, respectively. The British pound could come under pressure on Tuesday, though, as UK inflation data will be released. While the May reading of UK CPI is projected to rise 0.3 percent, following a 0.2 percent gain in April, the annual rate may fall to an annual rate of 2.0 percent from 2.3 percent. Such a result would mark a 19-month low and would also bring CPI in line with the Bank of England’s (BOE) target. Nevertheless, the central bank has said in the past that they expect inflation to full much lower later in the year, and greater-than-expected declines could trigger British pound declines amidst fears that CPI will eventually fall negative.

Japanese Yen Gains as FX Carry Trades Tumble – Will the Bank of Japan Have Any Impact on the JPY Crosses?
The Japanese yen rallied across the majors, even beating out the US dollar, as a more-than 3 percent plunge in some European equity indices and a 2.13 percent drop in the DJIA signaled wide-spread risk aversion, weighing on FX carry trades. While risk trends will likely continue to determine price action for the Japanese yen crosses, the currency will face some event risk overnight. Just before midnight, the Bank of Japan is anticipated to announce that they are leaving rates unchanged at 0.10 percent, but this is not the part of the central bank’s announcement that will garner the most attention. Instead, the FX markets may only respond to the sentiment reflected in their subsequent policy statement. After the BOJ’s last meeting, they raised their outlook on the economy for the first time in nearly 3 years, saying that “economic conditions have been deteriorating, but exports and production are beginning to level out.” There is speculation that the BOJ will upgrade their outlook once again, and if this is the case, the Japanese yen could gain on a very short-term basis. On a longer-term basis, though, risk trends have been driving price action and the impact of positive BOJ commentary may not go very far.
Article source: http://www.dailyfx.com

USDCHF Looking at a Strong Range Should The Dollar's Rally Ease

The markets have experienced a dramatic reversal in risk appetite and the US dollar through past 24 hours. It isn’t a coincidence that this turn between sentiment and currency come hand-in-hand; and it should not be forgotten when defining our trades.































Why Would USDCHF Hold a Range?

Levels to Watch:
-Range Top: 1.0965 (Pivot, Fibs)
-Range Bottom: 1.0600 (Trend, Fib)

In an unlikely turn of events, the Swiss economic docket is the more heavily stocked calendar for USDCHF. An SNB rate decision, first quarter industrial production report, retail sales figures and the SECO growth outlook offer high-level event risk. However, while these indicators are fundamentally important; they have little chance of catalyzing a major breakout. The true threat to this pair is risk appetite and the general strength of the dollar.

Today’s 150-point, USDCHF rally marked a minor break above resistance – though the true technical turning point lies around 1.0965. Through the first half of May, this level acted as a temporary double bottom. And, since the break, it has reverted into a range resistance with multiple tests. With a 50% Fib as confirmation, we could see another rebuff.


Suggested Strategy
Short: Half-sized entry orders will be placed at 1.0935 to fall within today’s range.
Stop: An initial stop of 1.1035 should avoid moderate false breakout attempts. To secure
profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (100) at 1.0835 and the second target will be 1.0735.


Trading Tip – The markets have experienced a dramatic reversal in risk appetite and the US dollar through past 24 hours. It isn’t a coincidence that these this turn between sentiment and currency come hand-and-hand; and it should not be forgotten when defining our trades. For USDCHF, the links to this underlying fundamental driver are blurred. The dollar is the primary safe haven when liquidity and financial conditions are threatened; but the franc itself is considered a safe haven currency and this specific pair’s bond to EURUSD can sometimes overwhelm other considerations. To garner a clear outlook for this pair, we need to narrow the conditions effecting USDCHF to its simplest form. The dollar is the primary driver for this pair; and therefore, a range or breakout rests with the direction and intensity of risk appetite. A pull back in optimism following the G8 meeting is reasonable considering officials’ decision to avoid a unified withdrawal for government funds on fears that the economic recovery is still too fragile. Balancing it out, this does help to break the stride on a very aggressive appreciation in yield-intense assets; but at the same time, this does not present something the market did not already know. Technicals present a clear setup for a range; but we need to acknowledge the risks. A reasonable stop is notionally wide, so we have to cut position size. Furthermore, this pair is very similar to the USDJPY setup from this past Friday; and exposure to risk-trends should not be leveraged. For timing, we will cancel all open orders by Wednesday or should spot hit 1.08 before entry.

Event Risk for US and Switzerland

US – Scheduled economic event risk from the US docket has tapered off over the past week. Looking ahead, the docket once again is expected to produce little in the way of market-moving event risk. For influence, most of the notable releases will filter through price action by adjusting expectations for long-term growth. Wednesday’s first quarter current account balance is the most commanding piece of data; yet it clearly lags the GDP numbers that have already been well documented. Indicators like housing starts and industrial production will present more timely numbers to work with; but their impact on forecasts for economic recovery is questionable. Straying from the confines of data, speaking engagements for policy officials on the health of the economy and financial markets will help market participants benchmark their expectations and perhaps give a look into future policy efforts. In the meantime, the high volatility in risk sentiment following this past weekend’s G8 meeting could blur the dollar’s immediate future.

Switzerland – Risk trends still hold a considerable influence over the Swiss franc; but this direct link has tapered significantly from 12 months ago. Today we can see that the health of the Euro Zone economy and Switzerland’s own domestic faring are just as influential to direction (if not more) than its status as a safe haven. At the G8 meeting this past weekend, it was made abundantly clear that European officials would not perform their own bank stress tests – threatening regional financial troubles. As for the domestic economy, factory activity, retail sales and the SECO forecast will all factor in. The SNB could even surprise with quantities easing.
Article source: http://www.dailyfx.com

Calm Markets Highlights the AUDCAD's Range; But Stability Won't Last Forever

Congestion has grown so prevalent that it has started to set in for even the most volatile and high-risk currency pairs. However, all ranges eventually come to an end (with those risk-laden pairs typically making the first move). For AUDCAD, the fundamental catalysts for a potential breakout are relatively reserved; but the technical build up is coming upon its critical state.

Why Would AUDCAD Hold a Range?




















· Levels to Watch:
-Range Top: 0.8930 (Fib, Range High)
-Range Bottom: 0.8760 (Trend, Fibs, SMA)

· Sentiment is still sidelined for even the most risk-sensitive currency pairs; but this does not mean we should leverage our risk to unforeseen fundamental event risk. Even though there is a considerable yield differential for AUDCAD (indeed all Aussie dollar crosses have such a gap), this pair nonetheless finds stability in the relative strength of the two economies; the stability in their respective financial systems; and a shared interest in commodities.

· This yet another chart pattern that promises short-term congestion but threatens breakout pressure further out on the horizon. AUDCAD has produced a rising wedge formation that has really taken shape since March. There is a clear, bullish bias; but resistance in a long-term Fib (Jul. to Oct. 2008) and prominent pivot can buy time for range activity.

Suggested Strategy

· Short: Entry orders will be placed at 0.8925 for an aggressive risk/reward profile.
· Stop: An initial stop of 0.8975 covers the pivot high but not the May 19 false breakout. To secure profit, move the stop on the second lot to breakeven when the first target hits.
· Target: The first objective equals risk (50) at 0.8875 and the second target will be 0.8800.

Trading Tip – Congestion has grown so prevalent that it has started to set in for even the most volatile and high-risk currency pairs. However, all ranges eventually come to an end (with those risk-laden pairs typically making the first move). For AUDCAD, the fundamental catalysts for a potential breakout are relatively reserved; but the technical build up is coming upon its critical state. For the past three months, this commodity bloc cross has developed an ascending wedge pattern with a clear top at 0.8930. Frequent test and rejections of this resistance have since solidified its prominence among the technically savvy; but it also calls greater attention to itself. Now with approximately 150-175 pips to work with; this wedge will soon have to decide on a direction. Though it is difficult to estimate when a breakout could occur, it is best to err on the side of caution. Therefore; our strategy will be held open until Friday’s London session close. Should our orders still stagnate until then, or spot hit 0.8840 before our entry, we will cancel them. Looking at the setup itself, there are a few particulars that should be noted. Entry is aggressive (set very close to resistance); but that is a necessity considering the timing and tension in the range. Furthermore, the stop does not cover the March false breakout, but this is accordance with a reasonable risk/reward setup. And, another push above resistance as aggressive as that is likely to evolve into a true trend revival.
Event Risk for Australia and Canada

Australia – The Australian dollar may be the best positioned economy among the G10. Should the recovery in risk appetite continue, the Aussie dollar will draw capital with the highest benchmark yield among its global counterparts. At the same time, should sentiment sour and investors seek safety in a stable economy and financial system; Australia has maintained growth and credit conditions are still robust thanks to relatively small exposure to the financial collapse in the Western world as well as relatively modest counterparty risk among local lenders. However, skeptical market participants are still waiting for any sign that the economy is not as healthy as the currency and data have suggested. Data over the coming week will help establish a benchmark for expectations. First quarter housing construction, employment and the RBA minutes will present a mishmash of market-moving fundamental data.

Canada – There has been a lot of activity on the Canadian dollar’s fundamental front; but much of this data (and its market-moving influence) has come and gone. Looking at the docket for the coming week, the offerings are relatively bare-bones. Before the weekend, only the capacity utilization rate figure for the first quarter is of note; and even this indicator is lagging and a derivative of labor. The offerings within scope after the lull in volatility are just as staid. Manufacturing shipments is a repetition of trade data; and inflation has lost much of its impact since interest rates have been so thoroughly reduced. The greater threat to activity over the coming week will come through speculation surrounding the health of the US economy – its largest trade partner.
source: http://www.dailyfx.com/

Risk Trends Continue to Dictate Price Action in Currency Market

The USD has continued and looks to remain inversely correlated to commodity and stock markets (ie risk appetite). Yesterday's U.S. Treasury's $19 billion auction of 10-year paper was OK, though the 3.99% award rate was high and illustrates that higher yields are being needed to get the paper sold in the current environment. The higher yield backdrop raises concerns about the impact of higher mortgage rates to America's soft recovery, which in turn keeps the U.S. currency on a downer, in addition to Russia's active stance to wind down dollar reserves. The AUD and NZD were strong performers in Asia, aided by better than expected employment data out of Australia in addition to firm commodity prices. The Kiwi also benefited after the RBNZ kept rates steady at 2.50% rather than cutting 25bp as expected (though the statement remain dovish). Reports of rising demand for oil in China also fed risk appetite trades, being exhibitive of improving global economic conditions. Ahead Thursday, markets will look to the $11 billion 30-year bond sale after a poor 10-year sale yesterday. The U.S. has some interesting data on retail sales, initial jobless claims, and business inventories. The European calendar is relatively quiet, with only the ECB monthly report (likely to repeat president Trichet's statement from last week) and the BoE inflation expectations survey and Swedish May CPI.
source: http://www.dailyfx.com/

U.K. Recession May Have Ended in March, Pound Continues to Rally

Cable has recovered nicely from losses in NY on Wednesday, with the currency reaching a low of 1.6241 to open in Asia at 1.6342 and steadily rise to 1.6420. The Cable fell on warnings from BOE Barker, that rates could remain low for some time. But, aiding the recovery was the report from the NIESR on Wednesday that the UK recession may have ended in March. Also seen as positive are the comments from BOE Sentance that the UK and global economy are bottoming. Resistance remains at 1.6473 and the highs traded on Wednesday. No real strong direction for sterling crosses emerged in Asia with GBP/JPY range bound between 160.35-160.87 and EUR/GBP stabilizing after Wednesday's decline, and trading a range of 0.8547-65.
source: http://www.dailyfx.com

NZDUSD Range Fully Tuned Into Risk Appetite

There has been a sharp pull back in risk appetite over the past week; but this reversal (seen in most risk-sensitive assets) has not yet evolved beyond retracement into a true trend change. This crossroads in sentiment it as clear as it gets for NZDUSD.

Why Would NZDUSD Hold a Range?

· Levels to Watch:
-Range Top: 0.6600 (Fibs)
-Range Bottom: 0.6135 (Trend, Fibs, SMA, Pivot)

· The dollar has found its footing over the past week thanks to a round of comparatively good economic data and a marked turn in risk appetite. There are major fundamental concerns behind NZDUSD: whether sentiment is rising or falling and benchmarking the United State’s pace of economic recovery to the rest of the world. It is difficult to qualify shifts in optimism and growth; but Friday’s G8 meeting and a round of data can alter things.

· There are two, very prominent trends colliding. On a shorter-term basis, this pair is in a steep bear trend (four consecutive down days). There was naturally a need for a retracement after such an aggressive rally from March. However, the bullish bias is still in place; and there are two trendlines, a notable Fib confluence and pivot around 0.6125/50.

Suggested Strategy

· Short: Half-sized entry orders will be placed at 0.6180 to use the proximity of support.
· Stop: An initial stop of 0.6080 offers a buffer over the rising trend and pivot zone. To secure profit, move the stop on the second lot to breakeven when the first target hits.
· Target: The first objective equals risk (100) at 0.6280 and the second target will be 0.6470.

Trading Tip – There has been a sharp pull back in risk appetite over the past week; but this reversal (seen in most risk-sensitive assets) has not yet evolved beyond retracement into a true trend change. This crossroads in sentiment it as clear as it gets for NZDUSD. Fundamentally, the pair is comprised of two diametrically opposing currencies. The New Zealand dollar is the consummate high-yield currency with a particular dependency on the global appeal of its interest bearing assets. On the other end of the scale, the US dollar is prized for its liquidity and expected to remain at the low end of the yield curve for some time to come. Few, specific events threaten to alter this broader market theme going forward; but the RBNZ rate decision on Wednesday and G8 meeting beginning on Friday could get things moving. Looking at the charts, we see that multi-month, bullish bias is still in place. We have very specific levels to work with for NZDUSD; but it is the presence of support on other key assets (equities, treasury yields) that inspires confidence in the face of this past week’s reversal. Our strategy is looking to take advantage of spot’s proximity to support. Our stop is wide enough to cover the pivot (that was the range high from November to May); but to set a buffer this wide and maintain a reasonable risk profile, we had to cut position size in half. We will cancel all open orders before Wednesday’s rate decision or should spot hit 0.61 or 0.6325 before entry.

Event Risk for New Zealand and US

New Zealand – Native event risk is exceptionally dense for the New Zealand currency over the next week – though the market will likely still look for direction from broader risk trends. Forecasting which indicators or events can alter such a broad and encompassing driver is difficult as speculating its ultimate direction. However, policy efforts (and success) in the US, UK and Europe seems to be the most consistent guide to such activities recently. For short-term volatility and directing the kiwi’s place in the risk web, we have a few ky indicators. Most noteworthy is Wednesday’s RBNZ rate decision which is expected to pass without a change. This would follow the general pace of sentiment recently; but conflict with Governor Bollards vow to revive the economy. Contributing to the broader view of growth, both the terms of trading and manufacturing readings for the first quarter will monitor two vital sectors for activity. The GDP numbers are due on the 25th/26th. Finally retail sales will be smaller in scope but timelier in nature.

US – The dollar is a currency that now plays a bigger role in the FX market. It is the safe haven of choice when liquidity freezes up and the favored counter currency when risk appetite is heating up. However, the greenback has greater control over its place in the risk spectrum through virtue of its size and prominence as the world’s reserve currency (for now). Over the coming week, data will add to or detract from arguments that the US is pacing the global economic recovery. If that is the case, the dollar would be seen as a safe haven and a source of higher returns in the near future. Indicators like the University of Michigan confidence survey, retail sales, trade balance, industrial production and housing starts reports will offer a broad look at the economy’s health.

Pound Falls as Government Crisis Deepens

The British pound fell sharply versus the euro and the dollar as a fifth U.K. minister resigned, increasing the already significant concerns on Gordon Brown’s government stability and the British political future.
The United Kingdom’s prime minister Gordon Brown is facing a severe crisis in the Parliament, as Pensions Secretary James Purnell resigned this week, being the fifth minister to step down since the beginning of the government crisis. The situation deepened in the Parliament as local elections results indicated that Brown’s Labour Party lost eight seats, an evidence of discontentment towards his government. The pound suffered directly the reflections of the current political crisis, posting the biggest weekly decline April, followed by a drop in the Government bonds rate.
A part from the real estate crisis that affected the U.K. heavily, economists state that the government crisis will make it virtually impossible for the British currency to rebound and as concerns on Brown’s resignation emerge, the pressure is on the pound. Signs of recovery as economic data and consumer confidence numbers will not be sufficient to bring the pound to higher levels. Currently in a recession, the United Kingdom government crisis added to the pessimism concerning the country’s economic outlook, keeping the pound bearish for the mid-term future.
GBP/USD dropped to 1.6040 from 1.6370. EUR/GBP rose significantly from 0.8705 to 0.8845. GBP/JPY fell slightly to 155.11 from 156.40.
If you want to comment on the Great Britain pound’s recent action or have any questions regarding this currency, please, feel free to reply below.

source: http://www.topforexnews.com

Which Forex Bot is better?

We all know that theres a LOT of money to be made in the forex trading market. The newest and easiest was it by using a robot that trades for you 24/7. I've purchased the top two rated robots and have been keeping tabs on their progress.

MegaDroid:
Although MegaDroid was recently released to the public on March 28th it has actually been running since 2004. I have great respect for the creators for testing and perfecting the robot for so long. MegaDroid is the first to use RCTPA technology and is considered to be capable of making very fast trades with 95.82% accuracy. One of the leading problems with the older robots was the inability to open and close the trades fast enough. Since megadroid has only been available to the public for 1 month, there is not a lot of feedback as to how the robot is doing for the general public. For myself, I can say that it is making a steady profit day after day. MegaDroid is my number one choice for beginners who have little to invest and need a place to start. For those with a larger investment see my review on Fap Turbo. Forex MegaDroid also offers easy installation, an introductory low price at $97 (soon to be $399), 24/7 support, instructions, member-only access, 1 trading license, very fast trading capabilities, and an outstanding robot that will trade for you 24/7. Its never been easier to make money while you sleep!Summary: MegaDroid is my number 1 choice for beginners, those with a small investment amount, and those that already have Fap Turbo and want to run more than one trading account. Get MegaDroid Now.

Fap Turbo:
Fap Turbo is my favorite choice when it comes to those with larger investments and those with experience in the forex market. Its been around since 2007 and it immediately blew all of the other robots out of the water within a week of test time. My one rejection to fap turbo is that the installation process could be difficult for beginners. I myself had to use customer support a few times before I got everything set up. If you're familiar with the installation process, you'll be fine. Since Fap Turbo has been out for quite some time, there is a large amount of information out there from the general public about its successes. You'll also have access to the Fap Turbo Forum after purchasing. This is very helpful if you're curious to see how others are doing. Fap Turbo offers an average installation experience, a decent price at $140 (sale price), 24/7 support, member-only access, 1 trading license, super fast trading capabilities, tons of proof of success, a 60 day money-back guarantee, dual download options (You can chose the beginner or pro version of the robot) Summary: Fap Turbo is my number 1 choice for those with larger amounts to invest, those upgrading from MegaDroid, and of course those who just want to have multiple robots working for them. I myself have fap turbo and megadroid running 24/7 for me.TIP: Fap Turbo is going to recommend using FXDD as your metatrader broker. I do not recommend them. Their spreads are far too high for Fap Turbo to trade well. My fap turbo has been most successful with my Alpari US account.
source: http://www.forexarticlecollection.com

How to choose the Best Professional Forex Brokers

If you are thinking of getting in touch with USA forex brokers, there are some important factors you need to consider. It's actually not that tough to find one considering there are lots of these professionals out in the market today. The real challenge however is finding someone who can really bring you results and assure that you are going to get quality services out of your investment. Bear in mind that forex brokers' rates vary accordingly and they may turn out to be a bit pricey.The reason why it is important to hire a forex broker that specifically trades in the US dollar currency is that it gives you exposure to experiential and technical aspects. The US currency is one of the most widely used trading money in the market today. It's like the base where other currencies peg their rates at so when the US dollar fluctuates, it tends to change the course of the trading market as well. Liquidity is something that you must expect when it comes to the trading game.Here are some important points you might need to consider when it comes to choosing among USA forex brokers.

1. Is the forex broker duly regulated? - The US bank and its related financial agencies have a say on the players in the forex market. Therefore it is important that you get in touch with these types of people. The great thing about using forex brokers who are regulated is that they are quite meticulous with their process. They need to do this because aside from liaising with you and their business spread partners, they also need to submit their financial standing and reports to regulating authorities. This way, you are assured that you are getting in touch with reliable people with a solid reputation.

2. Be the one to specify your trading platform - Although forex brokers are known to employ their own trading platforms, it would still be best if you are the one who will be giving directions for this system. Your trading platform should depend on the amount of time you can devote on the project and your work system. There are many different kinds of trading systems which you can use. You can either choose to have your trading run on autopilot, you may want to purchase a licensed trading software, or simply log online to an open source trading network. If you are not yet familiar with these things then you can also ask the expertise of forex brokers to help you choose the platform that would suit you best.3. Trading methods used - Aside from the trading platform being used, you should also delve deeper into the specifics of the trading methods being used by your preferred forex broker. Here is where things such as spread, funds safety, and fractional trading would come into picture. All of these key ingredients to facilitate your forex business.Do not let yourself be overwhelmed with having plenty of choices for USA forex brokers. Make sure you trim them down to qualified individuals whom you feel comfortable to work with.
source: http://www.forexarticlecollection.com/

Dealing With Online Forex Brokers

Online forex brokers can turn out to be your competitive advantage in the line of foreign currency trading. They are deemed as a valuable asset especially if you wanted to enter into a high stakes game of currency trading. Because of these, forex brokers are highly esteemed in the market and there are some misconceptions that have also been formed around them. With the industry booming, it's about time that some of those misconceptions be straightened out once and for all.The Truth behind Trading with BrokersMost of the time, we feel way too assured for our own good when we get the services of online forex brokers. We tend to feel that we are in the hands of experts so all we have to do is sit back and relax as they do all the needed work for us. So when things don't turn out quite the way we expect them to, we tend to put all the blame on the brokers. Sometimes we even feel cheated that we are paying for nothing. But the truth is that we are also to blame for the losses we incur.All forex brokers know that in the trading arena, losses amounting to 95% are but a common thing. This is why most of them choose to abide by the rules of day trading. Exchanging currencies are very dynamic and at the end of the day, all your broker ever really does is to provide you with leads. The hand that still makes all the vital decisions is yours and not your broker.Brokers and Offered LeverageOne of the selling points used by most forex brokers is the leverage they offer. Leverage is the profits that you can be promised by relying on just one forex broker alone. Some even go as far as giving 300:1 and unfortunately some people take the bait. In truth, 20:1 is the maximum that brokers can handle and assure you with. It's easy to believe that they can do it with a spectrum of trading methods but at the end of the day, keep in mind that these brokers are human too. They can only do so much to cover that much and also consider the fact that you may not be their only client.Listening to Your Forex BrokerOne of the great offers that a forex broker can perhaps give you as an extra benefit is their word of advice. You would especially appreciate this if you are new in the game. But the thing is, you should not swallow every piece of advice that your forex broker will give you. Online forex brokers are hired to help you find opportunities but they should never be the ones made to handle the course of your business. At the end of the day, you should still listen to your own gut feel and instincts.Also, you should never buy most of the things that your forex broker tells you out of the context of work. As much as possible, keep your relationship at a professional level.
source: http://www.forexarticlecollection.com/

5 Reasons For Becoming A World Currency Trader

5 Reasons For Becoming A World Currency Trader
The foreign currency exchange market offers today’s investor many advantages and here are just reasons why you might want to become a world currency trader.

A Market Which Never Closes
Many of the trading markets around the world are situated in fixed locations and operate within strict trading hours, often limited to just five or six hours a day between Monday and Friday. The Forex market however is open 24 hours a day.
This means that traders can not only take advantage of international events and react literally as they happen, but they also have the ability set their own trading hours. If you prefer to work in the mornings then that’s fine but, if this doesn’t suit you, then you can choose to trade during the afternoon, late evening or even in the middle of the night if you want to.

Low Trading Costs
In many markets, like the equity market, traders not only have to pay a spread (the difference in price between buying and selling a stock) but also have to pay a commission to the broker. On small trades this commission can typically be about $20 and this can rise rapidly to over $100 for larger trades.
Because the foreign currency exchange market is a wholly electronic market many of the traditional trading costs are eliminated and you are in affect reduced to paying nothing more than the spread. In addition, the extremely liquid nature of the global currency exchange market means that spreads are normally much tighter than those seen in other markets.

The Ability To Trade On High Leverage
In most markets where a trader has an opportunity to trade on leverage the leverage offered is often quite low. In the case of equity markets, for example, professional equity day traders will normally operate on a leverage of about ten times their capital. In the Forex market by contrast it is quite common to find that traders are permitted to trade at one hundred to two hundred times their capital.
A downside of high leverage is that it can of course lead to high losses as well as high gains. However, within the foreign currency market, risk management is extremely tightly controlled.

Limited Slippage
In currency trading trades are executed immediately using real-time prices at which firms will buy or sell the currencies quoted. In almost all cases this means that the price you see and the price you pay are the same.
This is not often the case in other markets where there can be often considerable delays between placing an order and that order being executed during which time the price will often move against you.

The Chance To Profit In Both Rising And Falling Markets
Equity markets follow rising and falling trends (cycling between Bull and Bear markets), but the Forex market does not suffer this cycling which comes from structural bias in the market.
World currency trading always involves two currencies so that if you are down on one currency then you are up on the other. There is therefore always the potential for making a profit whether the market is rising or falling.
source: http://learningforextradingonline.com

Trade forex with your head not your heart!

Trade Forex with your head not your heart!
Sounds simple…right? In actuality, this is the number one reason why day traders lose their shirts. They let their emotions get the best of them and end up doing something real stupid. Trust me I’ve done it.
When trading currency, you need to take yourself away from the platform and look at your trades in actual bills not numerical values on a computer screen. For example, let’s say you short the USD/JPY for a 50 mini-lot right before a data release and it tanks. The USD/JPY goes down about 50 some odd pips and now you’re up $2500 in about thirty seconds.
Now, if you were smart, you would close the position and take your profit, but you’re not and you decide to let it ride. The market goes down about another 10 pips. So, now you’re up $3000 and you still won’t close it. You think that it’s going to keep tanking and that you could make 5-6k on this one trade…wishful thinking.
All of sudden the market retraces and shoots back up 20 pips, your still up about $2000, but now you tell yourself, I’ll wait until it goes back down a few pips and then close it. Too late, the market ignites and now you’re break-even and then you’re negative. In the end you take a $500 loser, which isn’t too bad, but considering you were up $3000 it’s like you lost $3500.
Now, let’s pretend you did this same trade with actual, physical dollar bills. Now or days most people trade from a three wide spread, so let’s say that you gave a trade booker $150 cash to place a short USD/JPY 50 lot. The data is released and this man keeps giving you $50 bills and before you know it you have $3000 in your hands. In order to keep this money all you have to say is close.
You decide to press your luck and wait and the market continues to trend down and now you have $3500 cash. All of sudden, the market begins to retrace and this nice young man starts taking $50 from you each pip it retraces. How many pips does the market have to retrace before you say close? Maybe, ten pips? Once you saw actual dollar bills being taken away from you, you would throw in the towel. So, how does one improve their money management skills?
First of all, realize that you are trading real money. I’m sure you realize that the money you are trading is real money, but do you conceptualize it? When you make a few hundred or a few thousand dollars trading, do you feel like someone just handed you cash? Of course not! Every time you’re trading, no matter if you are profitable or not profitable visualize and grasp the outcome. Don’t just watch your balance and equity fluctuate; you need to relate your loss and gains to every day life.
For example, let’s say you have a 10k account and in the first week you doubled that to 20k. You need to step back and understand what you just accomplished; you just made 10k in one week by sitting in front of your computer and trading currency. Now, let’s take that money and put it to everyday use. If you were handed a free 10k, what would you do with the money?
Would you pay of some debt, by a car, put money down on a home, go on a vacation, put it towards school, I think you get the gist. All I’m saying is that 10k is yours, you own it and there is no reason you have to keep in the FOREX. You are that 10% that succeeded this week, but the law of averages states that you are most likely to be the 90% next week. If not next week then the week after and if not then, eventually you will.
If you invest 10k and your account doubles to 20k, why would you pull out 15k leave in 5k and go for the gusto? If you lose your remaining 5k who cares you still made 5k in a week at your computer. Tell me another investment where I can make 50% on a 10k investment in one week. Turn around the following week pull my initial investment and my profit and still have 5k to play with. If I hadn’t experienced this first hand then I would have never believed it. DO NOT GIVE YOUR WINNINGS BACK TO THE MARKET! It’s not worth it.
source: http://www.forex-articles.net

What makes a good Trading Strategy?

Ask most NEW traders, and they will tell you about some moving average or combination of indicators or a chart pattern that they use. This is, as the more experienced trader knows, an entry point and not a strategy.
Any trader who is more experienced will say a strategy should also include money management, risk control, perhaps stop losses and of course, an exit point. They might also say that you must let your profits run and cut your losses short. A well-read trader will also tell you that your strategy should fit with your trading personality.
BUT there is one other vital ingredient that many traders forget - and that is to fully understand the "personality" of what you trade. Some traders specialise in say, gold or Brent crude or currencies or they might specialise in a particular index such as the FTSE 100 or the Dow but many traders choose to trade shares. Indeed some traders dabble in a bit of everything. I think this is the area that causes many traders to fail or at least not reach their full potential.
In my view: You absolutely MUST specialise.
I am sure that on the surface most people would say that sounds sensible but here is why it is a MUST!
Superficially, many charts look the same. I bet if you had not seen the charts for some time and someone where to show you a chart of Brent Crude over 6 months and then a chart of Barclays PLC over the same 6 months you would be hard pushed to say which was which purely on the look of the chart.
However, I bet that if you found a trader who trades ONLY Barclays day in and day out and also found someone who trades ONLY Brent Crude day in and day out, both of them would easily identify which was which. WHY?
Because every share, index or commodity has it’s own "personality".
Some will be volatile intra-day, some will follow their sector or the main index (market followers), some will do their own thing, some will spike up and down regularly, some will stop at key moving averages and some will just plough through. Some will move by 5% on average before they retrace and some by 2%. Some will gap up or down regularly, some will not. You get the idea!
Therefore, no matter how good you are at analysing indicators, moving averages, trends and patterns, the same strategy WILL NOT work for everything. I would go so far as to say that a strategy that works well for Bovis Homes, for example, is likely NOT to work for BT Group - they have very different "personalities".
So let’s return to our question: What makes a good trading strategy? Let me answer with a series of ten questions that you need to find answers to, in order to build a REALLY GOOD strategy.
What do you want to trade (share, index, commodity, currency, etc)? If your answer is shares (plural) I would urge you to pick one typical share at this stage to really specialise. You can add more later.
What "personality" does that share, index etc have?
What entry system is the most reliable for that share?
What stop loss system is the most effective for that share?
What average risk will a typical trade carry?
What exit system works well for that share?
What is your trading personality (attitude to risk, losses, discipline, how much do you worry etc) and can you trade that strategy without overriding it?
What timescale do you want to trade? (Using intra-day or end of day data)
How much data do you keep on past trades to help identify strategy weaknesses?
How does all this fit with your trading objectives?
Once you have an answer to each question you need to do one final thing. Make sure all those things fit together and complement each other. For example, if the ideal stop loss position represents a big average risk and conflicts with your own attitude to risk, you need to start again. If you will override your exit point because greed makes you hang in for more, you need to think again. Perhaps you shouldn’t trade that stock in the first place - look for one with a different "personality" which will lead to a strategy you can trade comfortably.
It is a long and sometimes painful iterative journey. You might need to go round and round in ever decreasing circles over a long time. Testing and refining, testing and refining before you can truly have a reliable and repeatable strategy that REALLY WORKS for you.
THEN, you can look for other things to trade that have the same "personality" as your specialist stock, index, commodity or currency.
But if it were easy, everyone would be doing it right?
Good luck and enjoy your trading.

W.D. Gann Trading Methods - Genius Trader or Overrated Guru

W.D. Gann is one of the most famous traders of all time, and has a huge devoted following - however the fact is, Gann never made the huge profits many of his disciples claim.
He did not have a success rate of 90%, as is often claimed - the logic his methods are based upon are unsound, and his predictive methods don’t predict - they leave everything to subjective opinion!
Let’s examine his theories of investment in more detail and see.
Let’s look at some common myths about how great a trader Gann actually was:
Many sources quote Gann’s trading profits at $50 million dollars, however this is not true.
An interview that Alexander Elder had with his son tells the truth.
Firstly, his son confirmed that when his father died in the 1950s his estate was valued at just $100,000 - and that included his house.
Secondly, his son confirmed that Gann was unable to make enough money from trading, and therefore supplemented his income by writing and selling courses.
W.D. Gann’s Predictions
Many sources quote he had a success rate in all his trades of over 90% - again not true. We can easily deduce this from the value of his estate.
If he could make money trading and had a 90% success rate, he would have made hundreds of millions in his trading career - and he clearly did not - that’s why he had to sell books and courses.
The only evidence of a 90% success rate came from a small number of trades - and was not representative of them all.
Gann’s Methods are Predictive
Gann came to the conclusion that all natural phenomena are cyclical - including financial markets. This is true, but this is an obvious statement - we all know we’re going to die but when exactly?
A predictive theory is not a predictive theory if it can’t predict.
If Gann’s theory really is predictive, then there would be no market - as we would all know the price in advance!
Gann’s theory is subjective - and he really had no way of predicting the future with accuracy. It’s all subjective analysis and this is NOT a predictive theory.
Gann’s Logic
The basis of Gann’s theory is the principle that price and time must balance.
His methods are based on the squaring of price with time - this occurs when a unit of price equals a unit of time.
Gann for example would take a prominent high in the market, convert that dollar unit into a specified period of time and project it forward. When that time is reached, price and time are squared - and a market turn is due.
What? - How can one unit of price equal one unit of time? If you think about and answer this question for yourself, you will see how absurd the connection is.
This isn’t the only inconsistency used in his analysis - we also have the legendary Fibonacci numbers which are supposed to work with stunning accuracy - but they don’t, and neither do all sorts of astrology and geometry, that appeals to the far out investment crowd.
As we have seen, Gann was a trader who had modest success, and claimed to have discovered a predictive theory - which predicts nothing with accuracy.
Finally, we have so many subjective indicators cobbled together, that the theory can prove anything in hindsight, but if you want a tool to trade the markets look elsewhere.
For those of you still not convinced - I recently saw on the Internet, Gann’s trading methods selling for under $1,000!
Sounds like a bargain to get trades with 90% accuracy - I wonder how many serious money managers have it on their bookshelf.
Enough said.

How to Win the Forex Battle

Every trading activity is in fact participating in a battle. Winning the battle is a matter of knowledge, skill and experience. If you miss any of those you are going to join the long line of losers. Some says that 95 to 99 percent of the traders are lining up on the loser’s side.
How to win the battle in the currency market? It is easy to answer that question, based on the above approach – prepare yourself for the battle. If you treat currency market activity as a hobby you’ll ultimately lose all investments there. If you treat it as a business you still may loose everything.
The correct approach is: consider each pressing of the Buy/Sell button as entering a battlefield. If you enter it without having a knowledge, skill and experience on how to win, you are destined to fail. You may have some lucky trades in the beginning, though. That, by the way, is the worst case scenario for the rookie in trading.
The earlier you get your “bad” lessons, the better for your overall experience. No mater how good you consider yourself prepared, after demo trading lessons, you have no idea of the forces ruling on the real market.
In fact the worst enemy you are going to face in the very beginning is not hiding behind the walls of the global currency trading centers. Your most dangerous foe is hiding deep inside of you. That enemy is so powerful that you will be amazed how quickly it will wash away all your carefully considered decision.
No one has been able to evade the force of that destructive power. No one can understand or realize that force unless it has been confronted face to face. Start trading with real money and you will face it too. Fear, Greed or Hope are some of the names of that power.
Fear forces you to sell near the bottom and buy near the top. Greed forces you to get out of the market prematurely. Hope will keep in the trade until you loose everything. Fear may save you but hope may wreck you completely. Greed will never make you rich.
It is easy to give advice to trade without emotions and use the logic, only. How you can achieve that if you never have been there. You need to go through that turmoil, pick up your loses due to your emotional decisions and than analyze.
Study all your “bad” trades, because they are the most precious gifts on the way to proficiency in trading. Growing as an experienced trader is possible only after getting your losses in the beginning. Then sit down and carefully study the lessons they brought to you.
One thing traders never want to do is to admit of being wrong. The market is a constantly changing and it demands flexibility in taking decision. That implies monitoring and constantly adjusting, changing your decision and action. When your logical analyzes suggest that you are wrong – get out, quickly.
Once you overcome the emotions, concentrate on developing your signature way of trading. You can start with following different advisors and system and picking from them the things you like. Demo trade and test your ideas until you find the trade system which is matching completely your personality.
Now, you have to go back to emotion in a controlled way. Every time your system suggests a trade look inside you and see how you feel about this trade. You feel bad – discard it. If you feel good – keep it.
Here comes the final step: Looking for the final approval sign before submitting the trade. Here is the time, where the mastership shows up. Your weapon is loaded, the target is clearly seen on the visor and the finger is on the trigger. You have to make that final exhale, get the target over the cross point and shoot it.
How much knowledge, skill, experience and patience you need to build within in order to reach that very final stage of trading proficiency? Only you’ll know that and only you can do it. The rest is just numbers in your bank account.
Building a fortune by trading currency is not a mirage in the desert of live. There are hundreds of traders who are making living of that business and you can do it too. Study all you can find on the net and follow the steps of the best if you want to win that battle.
source:http://www.forex-articles.net/

What's the Best Forex Strategy?

Many forex traders find themselves asking the age old question what's the best forex strategy? To know the answer to that question, one must look at the history of trading. Not just forex trading, but trading, in general.The moment that the first bell rang on the stock market floor, traders were coming up with strategies to beat the market. Obviously they didn't have the technology that most of us have at our disposal. They didn't have the thousand dollar charting platforms that so many traders are overpaying for, just for the privilege of using them, nowadays. So how do you think the successful traders of the past made their money?Well, one way was through fundamental analysis. They were able to comprehend a company's financial statements such as balance sheets, income statements, statement of cash flows, etc. to know a bargain when they saw one. But these kind of people would be categorized as investors, not traders. Traders generally believed in technical analysis over fundamental analysis.So how did traders of that generation made their money? Simple. They understood the concept of price action. Plenty of floor traders became rich just by paying attention to how the other floor traders were trading the respective stock.How come a concept as simple as price action has been pushed back in favor of all the technological bells and whistles that most people use in their day to day trading?People, today somehow feel that the best forex strategy has to be in these maze of indicators,colors, noises,and whatever else is en vogue nowadays. Its really quite sad that it has gotten to this point.Traders used to pride themselves on how they were able to truly understand the market, but in the present time we live in, they are more worried about understanding what their indicators are telling them.If you want to learn forex, then its a good idea to learn from our ancestors. The less is more approach has and will always result in more success. To find out more about price action and to get a forex trading education, make sure to visit Trading In The Buff.
source: http://www.forexarticlecollection.com/

What Type Of Forex Trader Are You?

What are some things that separate a good trader from a great one? Guts, instincts, intelligence and, most importantly, timing. Just as there are many types of traders, there is an equal number of different time frames that assist traders in developing their ideas and executing their strategies. At the same time, timing also helps market warriors take several things that are outside of a trader's control into account. Some of these items include position leveraging, nuances of different currency pairs, and the effects of scheduled and unscheduled news releases in the market. As a result, timing is always a major consideration when participating in the foreign exchange world, and is a crucial factor that is almost always ignored by novice traders.

Want to bring your trading skills to the next level? Read on to learn more about time frames and how to use them to your advantage.

Common Trader Time frames
In the grander scheme of things, there are plenty of names and designations that traders go by. But when taking time into consideration, traders and strategies tend to fall into three broader and more common categories: day trader, swing trader and position trader.

1. The Day Trader
Let's begin with what seems to be the most appealing of the three designations, the day trader. A day trader will, for a lack of a better definition, trade for the day. These are market participants that will usually avoid holding anything after the session close and will trade in a high-volume fashion.

On a typical day, this short-term trader will generally aim for a quick turnover rate on one or more trades, anywhere from 10- to 100-times the normal transaction size. This is in order to capture more profit from a rather small swing. As a result, traders who work in proprietary shops in this fashion will tend to use shorter time-frame charts, using one-, five-, or 15-minute periods. In addition, day traders tend to rely more on technical trading patterns and volatile pairs to make their profits. Although a long-term fundamental bias can be helpful, these professionals are looking for opportunities in the short term.

Figure 1
Source: FX Trek Intellicharts

One such currency pair is the British pound/Japanese yen as shown in Figure 1, above. This pair is considered to be extremely volatile, and is great for short-term traders, as average hourly ranges can be as high as 100 pips. This fact overshadows the 10- to 20-pip ranges in slower moving currency pairs like the euro/U.S. dollar or euro/British pound.

2. Swing Trader
Taking advantage of a longer time frame, the swing trader will sometimes hold positions for a couple of hours - maybe even days or longer - in order to call a turn in the market. Unlike a day trader, the swing trader is looking to profit from an entry into the market, hoping the change in direction will help his or her position. In this respect, timing is more important in a swing trader's strategy compared to a day trader. However, both traders share the same preference for technical over fundamental analysis. A savvy swing trade will likely take place in a more liquid currency pair like the British pound/U.S. dollar. In the example below (Figure 2), notice how a swing trader would be able to capitalize on the double bottom that followed a precipitous drop in the GBP/USD currency pair. The entry would be placed on a test of support, helping the swing trader to capitalize on a shift in directional trend, netting a two-day profit of 1,400 pips.


Figure 2
Source: FX Trek Intellicharts

3. The Position Trader
Usually the longest time frame of the three, the position trader differs mainly in his or her perspective of the market. Instead of monitoring short-term market movements like the day and swing style, these traders tend to look at a longer term plan. Position strategies span days, weeks, months or even years. As a result, traders will look at technical formations but will more than likely adhere strictly to longer term fundamental models and opportunities. These FX portfolio managers will analyze and consider economic models, governmental decisions and interest rates to make trading decisions. The wide array of considerations will place the position trade in any of the major currencies that are considered liquid. This includes many of the G7 currencies as well as the emerging market favorites.

Additional Considerations
With three different categories of traders, there are also several different factors within these categories that contribute to success. Just knowing the time frame isn't enough. Every trader needs to understand some basic considerations that affect traders on an individual level.

Leverage
Widely considered a double-edged sword, leverage is a day trader's best friend. With the relatively small fluctuations that the currency market offers, a trader without leverage is like a fisherman without a fishing pole. In other words, without the proper tools, a professional is left unable to capitalize on a given opportunity. As a result, a day trader will always consider how much leverage or risk he or she is willing to take on before transacting in any trade. Similarly, a swing trader may also think about his or her risk parameters. Although their positions are sometimes meant for longer term fluctuations, in some situations, the swing trader will have to feel some pain before making any gain on a position. In the example below (Figure 3), notice how there are several points in the downtrend where a swing trader could have capitalized on the Australian dollar/U.S. dollar currency pair. Adding the slow stochastic oscillator, a swing strategy would have attempted to enter into the market at points surrounding each golden cross. However, over the span of two to three days, the trader would have had to withstand some losses before the actual market turn could be called correctly. Magnify these losses with leverage and the final profit/loss would be disastrous without proper risk assessment.

Figure 3
Source: FX Trek Intellicharts

Different Currency Pairs
In addition to leverage, currency pair volatility should also be considered. It's one thing to know how much you may potentially lose per trade, but it's just as important to know how fast your trade can lose. As a result, different time frames will call for different currency pairs. Knowing that the British pound/Japanese yen currency cross sometimes fluctuates 100 pips in an hour may be a great challenge for day traders, but it may not make sense for the swing trader who is trying to take advantage of a change in market direction. For this reason alone, swing traders will want to follow more widely recognized G7 major pairs as they tend to be more liquid than emerging market and cross currencies. For example, the euro/U.S. dollar is preferred over the Australian dollar/Japanese yen for this reason.

News Releases
Finally, traders in all three categories must always be aware of both unscheduled and scheduled news releases and how they affect the market. Whether these releases are economic announcements, central bank press conferences or the occasional surprise rate decision, traders in all three categories will have individual adjustments to make.

Short-term traders will tend to be the most affected, as losses can be exacerbated while swing trader directional bias will be corrupted. To this effect, some in the market will prefer the comfort of being a position trader. With a longer term perspective, and hopefully a more comprehensive portfolio, the position trader is somewhat filtered by these occurrences as they have already anticipated the temporary price disruption. As long as price continues to conform to the longer term view, position traders are rather shielded as they look ahead to their benchmark targets. A great example of this can be seen on the first Friday of every month in the U.S. non-farm payrolls report. Although short-term players have to deal with choppy and rather volatile trading following each release, the longer-term position player remains relatively sheltered as long as the longer term bias remains unchanged.

Figure 4
Source: FX Trek Intellicharts

Which Time Frame Is Right?
Which time frame is right really depends on the trader. Do you thrive in volatile currency pairs? Or do you have other commitments and prefer the sheltered, long-term profitability of a position trade? Fortunately, you don't have to be pigeon-holed into one category. Let's take a look at how different time frames can be combined to produce a profitable market position.

Like a Position Trader
As a position trader, the first thing to analyze is the economy - in this case, in the U.K. Let's assume that given global conditions, the U.K.'s economy will continue to show weakness in line with other countries. Manufacturing is on the downtrend with industrial production as consumer sentiment and spending continue to tick lower. Worsening the situation has been the fact that policymakers continue to use benchmark interest rates to boost liquidity and consumption, which causes the currency to sell off because lower interest rates mean cheaper money. Technically, the longer term picture also looks distressing against the U.S. dollar. Figure 5 shows two death crosses in our oscillators, combined with significant resistance that has already been tested and failed to offer a bearish signal.

Figure 5
Source: FX Trek Intellicharts

Like a Day Trader
After we establish the long-term trend, which in this case would be a continued deleveraging, or sell off, of the British pound, we isolate intraday opportunities that give us the ability to sell into this trend through simple technical analysis (support and resistance). A good strategy for this would be to look for great short opportunities at the London open after the price action has ranged from the Asian session.

Although too easy to believe, this process is widely overlooked for more complex strategies. Traders tend to analyze the longer term picture without assessing their risk when entering into the market, thus taking on more losses than they should. Bringing the action to the short-term charts helps us to see not only what is happening, but also to minimize longer and unnecessary drawdowns.

The Bottom Line
Timeframes are extremely important to any trader. Whether you're a day, swing, or even position trader, time frames are always a critical consideration in an individual's strategy and its implementation. Given its considerations and precautions, the knowledge of time in trading and execution can help every novice trader head toward greatness.
source: http://www.investopedia.com/

Forex Minis Shrink Risk Exposure

Trading currencies means buying one country's currency while simultaneously selling another country's currency. Every currency trade therefore involves two currencies. The usual size of a currency pair is 100,000 units, known as a "standard lot."

In most cases, beginner traders do not want to stomach the risk that comes with the exposure of a standard lot. As a result, most online forex brokers offer the ability to trade mini lots, which are 10,000 units of the currency rather than 100,000. For a new trader, these mini lots can be an especially effective tool for learning to trade forex.

What is a Pip?
Before one can fully understand the benefits of a mini lot, it is important to review the concept of a pip. A pip is the smallest increment that a currency pair can move. For most currency pairs, a pip is a change in the fourth decimal place of the currency quote. For example, if EUR/USD is quoted at 1.5567 and it moves to 1.5568, it has increased by 1 pip. The value of 1 pip is calculated by the size of the lot that is traded. So, if you buy a standard lot of 100,000 EUR/USD at 1.5567 and it goes to 1.5568, a 1-pip move, then the value of your trade has increased by $10 (or 100,000 x 0.0001).

If we did the exact same calculation using a mini lot, then we would multiply the 1 pip by the size of a 10,000 mini lot instead of the usual 100,000 lot. So 10,000 x 0.0001 = $1. When you trade a standard lot, the value of the pip is $10, but when trading a mini lot the value of a pip is $1. This is true when the U.S. dollar is the second, or quoted, currency in the pair.

Base Currency Vs. Quote Currency
One other piece of information to remember is that a currency pair is comprised of a base currency, which is the first currency listed in the pair, and the quote currency, which is the second currency listed in the pair. In the case of the EUR/USD, the euro is the base currency and the dollar is the quote currency.

The profit or loss is always expressed in terms of the quote currency. If the currency pair is the GBP/USD, then the base currency is the British pound and the quote currency is the U.S. dollar. For the USD/CAD, the base currency is the U.S. dollar and the quote currency is the Canadian dollar. Why the dollar is listed first in some instances but second in others is just a matter of convention.

The Value of a Pip
The last important point that should be noted before we talk about mini lots specifically is the value of a pip. Suppose you are trading the GBP/JPY; the British pound is the base currency and the Japanese yen is the quote currency. Now in this instance, we have an exception to the fourth decimal place rule for the size of a pip. In the case of the yen, 1 pip is measured in the second decimal place. The yen is the only exception. To calculate the value of the move, if we buy dollars against the yen and the dollar goes up from 103.45 to 103.46, then we have a 1-pip move. Multiplying by the standard lot of 100,000 x 0.01 = 1,000 yen. To bring this back to dollars, you would then divide the 1,000 yen by the dollar rate, let's say it's 103.46, which equals $9.66.

Why Trade Minis?
The real value of trading minis is in the versatility it provides in matching the trade size to an acceptable level of risk. For example, suppose you decide to take a long position in the USD/JPY. Let's assume that your entry point is 103.55 and that you've set your stop-loss order 15 pips away at 103.40. If you have $1,000 in your trading account, the maximum risk you should take in any trade is 3% of your trading capital. Because your capital is $1,000, 3% of your capital is $30. If you are stopped out of this trade and you are trading a mini lot, you will lose $15. But if you are prepared to risk $30, you can actually trade two mini lots and get the power and benefit of some leverage. If you were only trading standard lots, this trade would not be possible because a 15-pip loss, as per this example, would be $150, which is 15% of your $1,000 trading capital. Given a risk tolerance of 3% of the portfolio, this is too much risk for one trade.

Mini lots allow a trader to adjust the amount of effective leverage used in each trade. With mini contracts, you can trade the equivalent of one standard lot by simply trading 10 minis. If you only want to trade a half of a standard lot, you can do so by buying five mini lots.

The Bottom Line
Mini lots provide flexibility that standard lots cannot offer. A mini lot is simply 10% of a standard lot and therefore, by trading in minis you can trade in fractions of a standard lot, anywhere from 1 mini to 10 minis. Mini lots are useful if the natural stop loss for your trade is farther away than the maximum risk you feel comfortable taking. You can simply reduce the risk by decreasing the number of minis until that number would equate to the stop-loss risk. Of course, if your market maker offers you 100:1 leverage, then for an account of $1,000, you can trade up to 10 minis at a time. The number of minis traded should be governed by how much you can lose if your trade goes wrong, which should not exceed 2-3% per trade.
source: http://www.investopedia.com/

Forex Software - Choosing the Best

When it comes to forex trading the forex software you choose is essential. There are so many forex trading companies all competing for your business that choosing the right forex software can be quite a difficult task. Most of the forex software products available offers live online forex trading platforms but what other components are vital when it comes to your forex software.

Key Elements For Your Forex Software

Before purchasing any forex software there are a few essential items that should be included. The most important is security and your online forex trading software should include a 128 bit SSL encryption which will prevent hackers from accessing any of your personal details and information such as your account balance, transaction history, etc.

Providing the best security for your forex trading will include a company that provides 24 hour technical server support for your forex software, 24 hour maintenance should anything go wrong, daily backups of all information, and a security system that has been designed to prevent any unauthorized access. Along with these security protocols there are also some forex trading companies that use smart cards and fingerprint scanners to ensure that only their employees can have access to their servers.

Another important factor when it comes to choosing your forex software is to check what the company’s downtime is like. When it comes to trading forex and particularly your online forex trading you need to ensure that the forex software you choose is reliable and available 24 hours a day. The forex software you choose for your forex trading should also have technical support available at all times should your session be cut short.

Ensuring that all the above features are listed in the forex software you choose will help to ensure your forex trading success.
source: http://www.forex-articles.net/

April 16 Market Commentary and Technical Levels

EURUSD Outlook
The EURUSD attempted to push lower yesterday. The pair bottomed at 1.3146 but further bearish scenario was rejected as the pair closed higher at 1.3225. On 4 chart below we can see that the trendline support still doing a good job preventing the pair from further bearish attack. The bias is neutral in nearest term. Immediate resistance is seen at 1.3270. Break above that level could trigger further bullish momentum testing 1.3340. Initial support at 1.3100 area. CCI in neutral area in all three time frames (hourly, 4h, daily).



EURUSD Daily Supports and Resistances:

S1= 1.3149
S2= 1.3073
S3= 1.3001
R1= 1.3297
R2= 1.3369
R3= 1.3445
GBPUSD Outlook
The GBPUSD continued its’ bullish momentum yesterday. The pair break above important resistance at 1.4980, topped at 1.5034 and closed at 1.4995. Technically the bias is bullish in nearest term but 1.5000 area is a psychological level so I think the pair need to stay above it to confirm the bullish scenario targeting 1.5200 area. CCI about to cross the 100 line down on 4 chart so watch out for a potential downside pressure testing 1.4970/50 support area. Break below that area would take the pair into neutral bias.



GBPUSD Daily Supports and Resistances:

S1= 1.4866
S2= 1.4737
S3= 1.4653
R1= 1.5079
R2= 1.5163
R3= 1.5292
USDJPY Outlook
The USDJPY was corrected higher yesterday. On hourly chart we have a Hammer candlestick formation appeared followed by significant bullish correction. The bias is bullish in nearest term but we need a break above 99.64 area to confirm further bullish correction scenario towards 100.50 area. Immediate support at 98.90. CCI in neutral area in all three time frames (hourly, 4h, daily).



USDJPY Daily Supports and Resistances:

S1= 98.44
S2= 97.55
S3= 96.95
R1= 99.93
R2= 100.53
R3= 101.42
USDCHF Outlook
The USDCHF attempted to push higher yesterday. The pair topped at 1.1485 but closed lower at 1.1426. The bias remains neutral in nearest term. We still have bullish channel on hourly chart and the price is moving lower testing the lower line of the bullish channel. A breakdown to the downside could trigger further bearish momentum towards 1.1350 area. Immediate resistance is seen at 1.1485 – 1.1515 area. CCI in neutral area in all three time frames (hourly, 4h, daily).



USDCHF Daily Supports and Resistances:

S1= 1.1365
S2= 1.1304
S3= 1.1244
R1= 1.1486
R2= 1.1546
R3= 1.1607
source:http://blog.fxinstructor.com/april-16-market-commentary-and-technical-levels-2/