The Forex Analysis Type

There are two main, but at the same time confronting schools in forex analysis. They are the fundamentalists and technicians.

There is no clear answer as to which is right. Sometimes it appears that the technicians make better picks. Other times it seems the fundamentalists are making the right call. One thing is certain, when one group of analysts is wrong the other will surely emerge saying, "We told you so." So, which is right for you? There are many potential answers to that question. Three variants of popular answers are:

If you are a "long-term" Forex investor looking for companies with solid foundation, growth and income potential, the fundamentals may sway you.

If you are a "short-term" Forex investor (Forex market trader) looking for companies who are "on the verge" of being discovered, fundamentals will be useful to you.

If you are a "long-term" investor who is not as concerned about one company's basics because you will diversify to minimize risk, or you are a "short-term" investor waiting for investor sentiment to change, then technical analysis will be helpful to you.

Today, many investors use both fundamental analysis and technical analysis. The technicians can tell you about the broad market and its trends. The fundamentalists tell you whether an issue has the "basics" necessary to meet your investment objectives.

The Forex Risks

Assuming you are dealing with a reputable broker, there are still risks to FOREX trading. Transactions are subject to unexpected rate changes, volatile markets and political events.

Any investments have the whole set of risks.

What factors define the risks? Many factors. Among them:

1) The Basic purposes of the company
2) The Organization (mechanism) of the purpose achievement
3) Management of the company, that defines its successful and long functioning
4) Presence of sufficient own company's resources for opposition various acts of God

All rest (duration of existence, the big building in the center of the town, big attractive office, the affable personnel) are not so essential. Forex market stand independently from other markets first of all because it is out of the exchange. Why so happens - probably because it formed rather recently, about 20 years ago, and banks became its participants. By virtue of development of a communication facility and automation banks began to trading "directly", not requiring in the special organizations - stock exchanges. Been born, this market became global at once, and in one country it was not possible to limit, "settle" it legislatively. Therefore there is such dislike and neglect for this market from many "classical" financiers. Nevertheless for a lot of the European and North American banks speculative operations on Forex market are the basic source of the income while the quantity of the personnel working in other markets, is constantly reduced.

So, Forex market practically has no legislative regulation in one country, and in the majority of the countries is equated to the organization of games. It follows from this that Forex market's broker does not require any licenses and certificates. It is the usual legal person.

Here is the second important fact - Forex market is not adjusted, despite of set of the confused problems and risks in addition to the risk connected with movements of the price of the market. These problems rotate around of trust, honesty of carrying out of operations, managed of Forex risks, a transparency and marketing of Forex brokers. But in the beginning we should understand, that, unlike highly adjustable exchange markets, broker firms cannot be carried to any separate stock exchange on character of problems and risks.

FOREX trading can be risky, but there are ways to limit risk and financial exposure.

Every FOREX trader needs to know at least the basics about technical analysis and how to read financial charts. He should study chart movements and indicators and understand how charts are interpreted.

Even the most knowledgeable traders, however, can't predict with absolute certainty how the market will behave. For this reason, every FOREX transaction should take advantage of available tools designed to minimize loss. Stop-loss orders are the most common ways of minimizing risk when placing an entry order. A stop-loss order contains instructions to exit your position if the currency price reaches a certain point. If you take a long position (expecting the price to rise) you would place a stop loss order below current market price. If you take a short position (expecting the price to fall) you would place a stop loss order above current market price.

As an example, if you take a short position on USD/CDN it means you expect the US dollar to fall against the Canadian dollar. The quote is USD/CDN 1.2138/43 - you can sell US$1 for 1.2138 CDN dollars or sell 1.2143 CDN dollars for US$1.

You place an order in the following way:
Sell USD: 1 standard lot USD/CDN @ 1.2138 = $121,380 CDN
Pip Value: 1 pip = $10
Stop-Loss: 1.2148
Margin: $1,000 (1%)

You are selling US$100,000 and buying CDN$121,380. Your stop loss order will be executed if the dollar goes above 1.2148, in which case you will lose $100.

However, USD/CDN falls to 1.2118/23. You can now sell $1 US for 1.2118 CDN or sell 1.2123 CDN for $1 US.

Because of the immense volume of FOREX, however, it is impossible for one force to control the market for any length of time. Market forces will prevail in the long run, making FOREX one of the most open and fair investment opportunities available.

Prices of foreign exchange are indicated by FOREX quotes in pairs of currencies. The first currency is the 'base' and the second is the 'quote' currency. In this example:

USD/EUR = 0.8419

...the currency pair is US dollars and European euros. The base currency (USD) is always at '1' and the quote currency shows how much it costs to buy one unit of the base currency. In this example, 1 US dollar costs 0.8419 euros.

Conversely...

EUR/USD = 1.1882

...tells us that it costs 1.1882 US dollars to buy 1 euro.

When the price of the quote currency goes up it indicates that the base currency is becoming stronger – one unit of the base currency will buy more of the quote currency. If the quote currency falls, however, the base currency is becoming weaker.

FOREX quotes are seen in 'bid' and 'ask' prices. Bid is the price that buyers will pay for the base currency (while selling the quote currency), and ask is the price that sellers will sell the base currency (while buying the quote currency).

Symbol Bid Ask

USD/CAD 1.2392 1.2397

This chart tells us that we can buy one American dollar for 1.2397 Canadian dollars, or sell one American dollar for 1.2392 Canadian dollars. The most commonly traded currencies pairs are the "Majors": GBP/USD, EUR/USD, AUD/USD, USD/JPY, USD/CHF, and USD/CAD.

We often see exchange rates listed in cross currency charts that list many different currencies and their values against each other. An example of such a chart is seen here:
US $ Ca $ Euro UK ?
US $ 1.00000 1.24060 0.83935 0.56870
Ca $ 0.80606 1.00000 0.67657 0.45841
Euro 1.19140 1.47805 1.00000 0.67755
UK ? 1.75840 2.18147 1.47591 1.00000

In this chart, the currencies listed down the left side of the chart are the base currencies and the currencies at the top are the quote currencies. We can convert the chart above into currency pairs by following the row beside the base currency. Using US dollars as the base currency we get the following currency pairs:
USD/CAD = 1.24060
USD/EUR = 0.83935
USD/GBP = 0.56870

...which tells us that one US dollar is equal to the corresponding value of the quote currency. To find the opposite pair e.g. CAD/USD follow the Canadian dollar row to the US dollar column - CAD/USD = 0.80606 (one Canadian dollar is worth 0.80606 US dollars).

There is no standard for cross-currency charts: some have the base currency on the top and some have it on the side. How to tell which is which? You need to know at least one pair of currencies and which one of the pair is more valuable.

To minimize your forex risks you may use stop and limit orders.

The Quotation and spreads

Quotation (forex quote) is the actual price or the bid or ask price of either cash commodities or futures or options contracts at a particular time. Quote is an indicative market price, normally used for information purposes only.

Currencies are quoted in pairs. The first listed currency is known as the base currency, while the second is called the counter or quote currency. In the wholesale market, currencies are quoted using five significant numbers, with the last placeholder called a point or a pip.

Like all financial products, forex quotes include a "bid" and "ask". By quoting both the bid and ask in real time, FXCM ensures that traders always receive a fair price on all transactions. As in any traded instrument, there is an immediate cost in establishing a position. For example, USD/JPY may bid at 131.40 and ask at 131.45; this five-pip spread defines the trader’s cost, which can be recovered with a favorable currency move in the market.

It's really quite simple to read a foreign exchange quote if you remember two things: 1) The first currency listed first is the base currency and 2) the value of the base currency is always 1.

The US dollar is the main currency of the Forex market and is considered the 'base' currency for quotes. This includes USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/JPY 120.01 means that one U.S. dollar is equal to 120.01 Japanese yen.

When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated in value and the other currency has weakened. If the USD/JPY quote we previously mentioned increases to 123.01, the dollar is stronger because it will now buy more yen than before. Note (three exceptions): the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR). In these cases, quote such as GBP/USD 1.4366, meaning that one British pound equals 1.4366 U.S. dollars.

In other words, if a currency quote goes higher, that increases the value of the base currency. A lower quote means the base currency is weakening.

Cross currencies are the currency pairs that do not involve the U.S. dollar. For example, a quote of EUR/JPY 127.95 signifies that one Euro is equal to 127.95 Japanese yen.

When trading forex you will often see a two-sided quote, consisting of a 'bid' and 'offer'. The 'bid' is the price at which you can sell the base currency (at the same time buying the counter currency). The 'ask' is the price at which you can buy the base currency (at the same time selling the counter currency).

Direct and indirect quotes

On the Currency exchange market in every country, the local currency is quoted directly or indirectly against the American dollar and the other foreign currencies. The direct quoting is the amount of the local currency that is needed to buy one unit of the foreign currency and respectively the amount of local currency that is due to be received when one unit of foreign currency is being sold. In Japan, for example:

120.44- 120.52 USD/JPY

signifies that the dealers are buying one dollar for 120.44 yen, but are selling the very same unit for 120.52 yen.

Alternatively the indirect quote is the amount of the foreign currency needed to buy one unit of the local currency. The amount of foreign currency that is received if one local currency unit is sold to a dealer. This type of indirect quote is used for British pounds versus the US dollar, for example:
1.3600 – 1.3610 GBP/USD

This means, that you have to pay 1.3610 USD to buy 1 GBP and if you want to sell 1 GBP, you will receive 1.3600 USD for it.

Bid Price, Ask Price (Spread)

Like all traded instruments (stocks, bonds, futures etc.) there is a selling price (known as the “bid” price) and a buying price (the “ask” price). The difference between the two is called the “spread”.

The Spread - the cost a trader incurs when taking a position
GBP/USD 1.6545/1.6550 Sell Price/Buy Price

If you decide to long the currency pair (buy the base currency) because you think it will appreciate in value. You would enter the trade at the buy price, which means that if you wanted to immediately turn around and sell the same currency you just bought, you would have to sell it at the sell price, which is always lower than the buy price and you would lose the difference of that spread. In other words, the price of the currency you just bought would have to appreciate the value of the spread for you to break even.

The same thing applies if you want to sell the base currency, only you would enter the trade at the sell price which means that if you wanted to buy back what you just sold before the exchange rate had a chance to move, it would cost you the spread (in this case, 5 pips).

When you open a trade, the trading platform will show you the price you bought or sold the currency pair at. If, for example, you go long (buy) a currency pair, it will show the price you bought at, as well as the current sell price (the buy price minus the spread). In order to get into profit, the market will have to move at least the number of pips in the spread for you to break even. What this obviously means is that the tighter the spread, the better, because it means that the currency has a smaller value to rise before you’re into profit.

Standard Spreads

The good news is that, because we have the advantage of dealing directly with the market makers, most spreads in the currency market tend to be very tight (much tighter than any other financial market), not to mention, we also avoid round-turn commissions that traders in other markets pay to the brokerage houses on each and every trade.

The standard spread can vary from currency pair to currency pair. The more heavily a currency pair is traded, the less volatile it tends to be. Therefore, the most heavily traded currency pairs (the majors) tend to have the tightest spreads, whereas, the less traded, more volatile currency pairs (the crosses & exotics) tend to have wider spreads. The standard spread is 4-5 pips on the Majors and 5-20 pips on the Crosses & Exotics.

The closer the two prices are to each other, the “tighter” the spread, and the further they are from each other, the “wider” the spread.

In all cases, the bid (sell) price is always lower then the ask (buy) price.

In the forex market, the sell/buy price is usually expressed with sell price first in following way:
GBP/USD 1.6545/1.6550 Sell Price/Buy Price

However, the buy price is often abbreviated by only showing the last two decimal places as follows
GBP/USD 1.6545/50

The buy price is what has to be paid in the secondary currency to obtain one unit of the base currency. The sell price is what will be obtained in the secondary currency when selling one unit of the base currency. In this case, the spread is 5 pips.

Technical Strategy - Victoria Secret

Victoria secret is a trick to make profit from bullish market which is nearly close to top levels (saturated levels) in Eur/Usd and Gbp/Usd pairs. I developed the trick at 2005. Some were fails, but most of them are ended with great profit.

I booked profit of 200 pips in Eur/Usd at the last week of January 2006 with using only 1 order and 1 overnight. But unfortunately, I was loss for -35 pips at the first week of January 2006 in Eur/Usd. And I was succeed to take profit of 300 pips in Gbp/Usd in December 2005. Therefore, I strongly recommend you to use stop loss in implementing this trick. I use 35 pips gap from open position for Eur/Usd and 50 pips gap from open position for Gbp/Usd.

When the Dollar is weakening against the Euro and Pounds and enters its saturated levels, then it’s time for us to wait for its correction. Will correction occur (due to economic data impacts or just for technical rebound), usually it will make significant movement. And this is a good opportunity to enter market.

The easiest way to predict saturated levels and find Victoria Secret opportunity is by looking at RSI (14) indicator at time frame of 1D. When bullish market is reaching 65 level (crossing above 65), then it’s time for us to look forward to waiting for Victoria Secret opportunity.

Use candlestick mode on your chart. When RSI (14) at time frame of 1D crosses above 65, take a good look at market price. If market price forms ‘empty candlestick’ (closing price above opening price), then we’ll wait for ‘shaded candlestick’ (closing price below opening price) on the next days.

When you got the ‘shaded candlestick’, then the day after that would be our Victoria Secret day.

So the pattern would be: Empty candlestick-shaded candlestick-victoria secret candlestick

Yup, I know… you might need to be patience to make profit from this trick. But considering its reward, it is worth to wait for the opportunity.

When market price at Victoria Secret candlestick is equal to high level at shaded candlestick, then it’s time to sell. And do not forget to use stop loss.

When market price moves nearly our stop loss, then we’re not going to do anything. If our stop loss is hit, then let it go. It means that this is not our lucky day. But if market price moves downward then we’re so close to big victory.

Its main purpose is to earn big victory and usually the opportunity occurs in low volatile market. Therefore, I named it Victoria Secret trick.

One trick that will make you feels comfortable with your profit and makes you please to ‘see’ it. Just like ‘the other’ Victoria Secret. You know what I mean.

Forex Risk Managenent Strategy

The Forex market behaves differently from other markets. The speed, volatility, and enormous size of the Forex market are unlike anything else in the financial world. Beware: the Forex market cannot be controlled - no single event, individual, or factor rules it. As such, it is the closest market to what economists call ?a perfect market?! However, just like any other speculative business, increased risk entails chances for a higher profits as well as higher losses.

-Currency markets are highly speculative and volatile in nature-
Any currency can become very expensive or very cheap in relation to any or all other currencies in a matter of days, hours, or sometimes, in minutes. The unpredictable nature of currencies is what attracts an investor to trade and invest in this market.

-Exit the Forex market at profit targets-
Limit orders, also known as Take-Profit orders, allow Forex traders to exit the Forex market at pre-determined profit targets. If you are short (sold) a currency pair, the system will only allow you to place a limit order below the current market price, because this is the profit zone. Similarly, if you are long (bought) the currency pair, the system will only allow you to place a limit order above the current market price. Take-Profit orders help create a disciplined trading methodology and make it possible for traders to walk away from the computer without continuously monitoring the market.

Technical Strategy - Gann Numbers

W.D. Gann was a stock and a commodity trader working in the '50s, who reputedly made over $50 million in the markets. He made his fortune using methods that he developed for trading instruments based on relationships between price movement and time, known as time/price equivalents. There is no easy explanation for Gann's methods, but in essence he used angles in charts to determine support and resistance areas, and to predict the times of future trend changes. He also used lines in charts to predict support and resistance areas.

Technical Strategy - Recognizing the Trends

A trend refers to the direction of prices. Rising peaks and troughs constitute an up trend; falling peaks and troughs constitute a downtrend that determines the steepness of the current trend. The breaking of a trend line usually signals a trend reversal. Horizontal peaks and troughs characterize a trading range.

In general, Charles Dow categorized trends into 3 categories: (a) Bull trend (up-trend: a series of highs and lows, where each high is higher than the previous one); (b) Bear trend (down-trend: a series of highs and lows, where each low is lower than the previous one); (c) Treading trend (horizontal-trend: a series of highs and lows, where peaks and lows are around the same as the previous peaks and lows).

Moving averages are used to smooth price information in order to confirm trends and support-and-resistance levels. They are also useful in deciding on a trading strategy, particularly in futures trading or a market with a strong up or down trend. Recognizing a trend may be done using standard deviation, which is a measure of volatility. Bollinger Bands, for example, illustrate trends with this approach. When the markets become more volatile, the bands widen (move further away from the average), while during less volatile periods, the bands contract (move closer to the average).

Various Trend lines
Pattern recognition in Trend lines, which detect and draw the following patterns: ascending; descending; symmetrically & extended triangles; wedges; trend channels.

Technical Strategy - Waves and Gaps

Elliott's wave theory:
The Elliott Wave Theory is an approach to market analysis that is based on repetitive wave patterns and the Fibonacci number sequence. An ideal Elliott wave pattern shows a five-wave advance followed by a three-wave decline.

Trading Gaps
Gaps are spaces left on the bar chart where no trading has taken place. Gaps can be created by factors such as regular buying or selling pressure, earnings announcements, a change in an analyst's outlook or any other type of news release.

An up gap is formed when the lowest price on a trading day is higher than the highest high of the previous day. A down gap is formed when the highest price of the day is lower than the lowest price of the prior day. An up gap is usually a sign of market strength, while a down gap is a sign of market weakness. A breakaway gap is a price gap that forms on the completion of an important price pattern. It usually signals the beginning of an important price move. A runaway gap is a price gap that usually occurs around the mid-point of an important market trend. For that reason, it is also called a measuring gap. An exhaustion gap is a price gap that occurs at the end of an important trend and signals that the trend is ending.

Fundamentals Strategy - Interest Rates

Interest Rates are a tool at the central bank’s disposal used to accomplish certain fiscal goals.

By opting to increase interest rates, for example, the Federal Reserve is altering the cost of lending and borrowing money in a way that would make consumers less likely to spend and more likely to save, slowing down economic productivity and growth.

Fundamental Analysis of the Interest Rate
Interest rates play an important role in fundamental analysis. An increase in interest rates can typically increase the value of a currency; foreign investors must purchase the local currency in order to take advantage of favorable interest rates, thereby increasing demand and price.

Fundamentals Strategy - Non Farm Payroll

The Non-Farm Payroll (NFP) is a percentage that denotes the well-being of an economy through the strength of its labor market.
Of all economic indicators, employment figures are widely recognized as among the most important. The Non-Farm Payroll is a section of the larger US Employment or Labor Report; which includes Payroll Employment, Unemployment, and Average Hourly Earnings Growth. NFP shows the employment rate for non-agricultural industries, breaking down data into sections for employee, women, and production or non-supervisory positions. The information is compiled by the Current Employment Statistics Program, which takes a survey of a sample of businesses to arrive at the data used in the Labor Report. The data is fresh each month and approximately 400,000 businesses are used in the survey, spanning 810 industries.

Fundamental Analysis of the NFP
Although it may seem counterintuitive to analyze such a small section of the Employment Report when other figures - particularly Unemployment Rate with its widely proclaimed socioeconomic implications - seem to have a tighter grip on the economic situation, analysis of the NFP is well worth the time.

An increasing trend in NFP indicates a strong economy.

A decreasing NFP is a sign of looming unemployment and thus a weaker economy.

The NFP is an indicator of labor market strength. If the economy is in a downturn and employment is hard to come by, the NFP will be lower. The unemployment figures are not observed as closely by most investors since the manner in which unemployment is calculated makes it more of a lagging indicator of changes in employment. Why look at a delayed re-hash of the NFP's ramifications in the Unemployment figures when you could just look straight at the NFP?

As the NFP technically measure the change in the number of workers for a given month, it is best to observe it on a 6 to 9 month moving average to take in any consequential trends.

NFP and the Labor Report are part of the Current Employment Statistics Survey conducted by the U.S. Department of Labor. Numbers are released by the Bureau of Economic Analysis on a month basis on the 1st Friday of the month at 8:30 am EST.

Fundamentals Strategy - Producers Price Index

The Producer Price Index (PPI) is a measure of the prices charged by producers as it changes over time. An early indicator of upward pressure on prices on the supply side, this indicator is closely connected to the Consumer Price Index (CPI), which takes into account both supply and demand side inflationary pressures.


Fundamental Analysis of the PPI

Fundamental Analysis of the PPI resembles that of the CPI. As inflationary pressures show signs of increasing, so does the likelihood of an increase in interest rates—a rise in the lending rate increases capital inflows and leads to higher demand for a particular currency, increasing its value.

The PPI is released by the Conference Board on a monthly basis around the 11th of each month at 10:00 am EST.

Fundamentals Strategy - Gross Domestic Product

The Gross Domestic Product (GDP) is a calculation that measures the total production output of goods and services by a given country.
It has proved to be the most thorough gauge of economic performance. Measured in both nominal and real (or inflation-adjusted) terms, GDP is the sum of four main components: net exports, private investment, private consumption, and government purchases. In terms of country analysis, the GDP is similar to the Gross Profit Margin of a company in that both account for change in growth.

Both the real GDP - calculated with regard to the changes in inflation - and the nominal GDP - calculated using only current dollar values without taking into account any deflators or multipliers - are reported. Nominal GDP is useful for observing the market value of goods and services produced in a given year or quarter. Real GDP is the quantity of economic output, a factor in the calculation of the overall rate of economic growth. The key figure within the mass of data contained in the GDP is the percentage growth over the previous quarter and over the previous year.

The complete report consists of three releases: 1) advanced, 2) preliminary and 3) final. The preliminary and final releases come out in the months before the final, and have a greater impact on the Forex market.


Fundamental Analysis of the GDP
Fundamental Analysis of GDP is critical, since central banks monitor this indicator to identify increasing inflation.

An increase in GDP indicates a strong economy, but may signal inflation and thus an increase in interest rates.

A decrease in GDP is a sign of lowering productivity and thus a weaker economy.

Average GDP growth clocks in at 2.5 to 3% annually; any higher than that is an indication of possible inflation, since with greater economic productivity inevitably comes inflation. If such is the case, central banks like the FED and the ECB tend to tighten monetary policy by increasing interest rates in an attempt at slowing the economy’s rate of growth. A decrease in GDP is often pre-empted by an increase in nation-wide inventories - common factors like slowing growth and changing consumer demands affect both.

Because it is released quarterly, the GDP's data often lags a bit behind, diminishing its use as a predictive indicator. Most traders focus on the Advance Report and the Preliminary Report since they are released in the months before the final figure - large discrepancies between the earlier and final GDP reports often cause significant volatility.

GDP numbers are released by the Bureau of Economic Analysis on a quarterly basis on the 25th of the month at 8:30 am EST

Fundamentals Strategy - Consumer Confidence Index

The Consumer Confidence Index (CCI) is widely considered one of the most accurate indicators of consumer confidence.
The Federal Reserve looks closely at consumer confidence when determining interest rates. Data for the index is collected from 5,000 consumer interviews that include questions regarding assessments of current business conditions, and expectations for future conditions, family wages, and employment.

Given the report is conducted regionally, the results also tend to have an effect on the values of local real estate areas.

Fundamental Analysis of the CCI
As the consumer confidence rises, so does propensity for consumers to spend, boosting Gross Domestic Product and other performance indicators. As future prospects regarding an economy improve, so does the value of its currency.

A high CCI indicates a stronger currency.

A low CCI is a sign of a weakening currency.

A low CCI is indicative of lower consumer spending and high interest rates, since high interest rates cause an economic slowdown for everyone from big businesses to individual consumers by making it expensive to borrow money. That is how CCI loosely correlates with interest rates. Consumers are more likely to save when the cost of borrowing increases to ride out dismal economic performance. High employment levels, low interest rates, and increased wages will usually have an encouraging effect on the CCI, although if confidence is increasing too steeply it may be a precursor to inflation.

It is crucial to note that lowering interest rates does not necessarily lend itself to an immediate boost in consumer confidence - the effect of changes in other economic indicators lags in the CCI, it may take 6 to 8 months before ramifications are reflected in spending.

Given that there are no hard figures collected in the formation of the CCI - that is, raw data is just in survey form and "planned spending" is recorded, rather than actual figures - it is helpful to look at broad charts when using this indicator. Month to month changes are not considered crucial enough to trend. A 3 ton 6 month Moving Average chart is recommended; a breach of the MA can be considered significant movement.

The consumer confidence report, published by The Conference Board, is released on a monthly basis on the last Tuesday of the month at 10:00 am EST.

Fundamentals Strategy - Consumer Price Index

The Consumer Price Index (CPI) tracks the cost of a fixed set of goods that are considered representative of a typical consumer’s purchasing actions by comparing current prices with prices from an earlier period.
Mathematically, it represents changes in prices of all goods and services purchased by an average household for consumption. Costs of living and sales and excise taxes paid by the consumer are included in the measure; however, investment tools - stocks and bonds - and income taxes are not. Proliferate use of this measure of inflation is attributed to the fact that all of the factors of production that determine the inflationary forces from both the supply and demand side are considered.

In the United States, the report itself is broken down into multiple aggregate groups, allowing industry dissection with greater convenience. The CPI's are available by:

Location - for the four Census regions of the US, city classifications of various sizes and classes, and down to 26 local area classifications.
Category - namely Energy, Food, and Core (Goods and Services).
Population Group - the CPI for All Urban Consumers (CPI-U) and the CPI for Urban Wage Earners (CPI-W). The CPI-U takes into account 87% of the population, including professionals, the self-employed, and the unemployed. The CPI-W at 32% converts only hourly wage earners and clerical workers.
Prices for the CPI are collected from a gamut of urban areas, stores, and service establishments and items are weighted according to expenditures on that item as reported by the Consumer Expenditure Survey. Changes in the price level, expressed in percentage terms, are weighted appropriately.

As the CPI is extremely diversified, it is difficult to see consequential movements given the "noise" created by volatile factors like energy and food prices. Keeping your attention to the "core rate" is recommended - this eliminates much noise. In the United States, the average increase in CPi is about 1 to 2%; if the increase if more dramatic than this it is a warning of plummeting purchasing power and possible inflation.


Fundamental Analysis of the CPI

The value of the CPI in fundamental analysis rest heavily on its reliability as an indicator of inflation - it is often used as a deflator to find the purchasing power of a currency. The information it provides with regard to price changes is utilized by consumers as in aid to making economics decisions, and by governments as a guide for structuring and implementing fiscal and monetary policies. In particular, national banks tend to see a rising CPI as a harbinger of high inflation, which they battle by raising short term interest rates. As such:

When prices increase and the CPI is therefore high, the purchasing power of a currency declines and there may be an increase in interest rate.

When prices decrease and the CPI is low, purchasing power increases.

Using the CPI, one can predict future interest fluctuations and the resulting changes in currency exchange rates. Changes in interest rate are a trigger for trading techniques like carry-trades. For more information, check Strategies.

When used in conjunction with a report on a nation's exports, the CPI is useful in checking on the country's position in international trade. Along with basic knowledge of the economic condition of a given country, the CPI will help in answering the question of whether the country making or losing money on its products and services:

When the CPI is high, exports are expected to be on the rise.

When the CPI drops, exports will fall and imports are expected to take the spotlight.

For example, Japan has a massively export-oriented economy. When Japan's CPI began to fall and the yen started rising, the government was in a panic trying to lower the value of the yen in order to keep its exports high. Relative economic health can be determined using these two indicators.

As a side note, it is extremely useful to keep track of a country's exports regardless; it is a highly observed indicator. Prices of exports often change relative to a currency's strength.

For more information concerning the report published in the United States, or to obtain it, visit the U.S. Department of Labor webpage. A comparable report can be downloaded from the European Central Bank, which publishes its monthly bulletin regarding the HICP (the EU’s CPI equivalent) and other economic indicators.

The CPI is released by the Bureau of Labor Statistics at 8:30 am EST on the 15th or each month, several days after the Producer Price Index’s (PPI) release.

Fundamentals Strategy - Economic Indicators

FX Traders frequently reference this data, which are important measures of growth, inflation, and productivity, to assess the value of a currency.
Through the use of these figures, countries can by looked at more like companies - their values are quantitative expressions of a country's well being much like the figures in a company's quarterly earning report are indicative of its prosperity. With these numbers, assessing a currency becomes more methodical.

Here are a few helpful hints about how to maximize your use of these figures:



Start keeping an economic calendar on hand. Indicators are usually released at given intervals with pre-set release dates. Keeping track of when a figure will come out gives you the advantage of foresight, allowing you to predict when rates will experience the greatest change. You will start noticing correlations between the figures.


Stay aware of which indicators are drawing the most attention. The figures with the most eyes on them are the most likely to trigger the largest shifts in price and volume. The reason many trading techniques work is that there are large numbers of traders following certain numbers and philosophies at the same time. Know why certain figures are being followed and you will be able to stay ahead of the game.


Make sure to buffer your quantitative assessments by keeping yourself updated on the international news. It is important to keep in mind that while these indicators usually carry the most weight when it comes to assessing a country's economic health, they may not be the only things affecting a change in a currency rate.


Do not be tempted into short-tem trades based on fundamental analytics. These fundamental assessments are conducted to determine long-term strategies and positions. Placing trades in the short-term basis, particularly in the case of establishing a position just prior to a numbers release, is considered an extremely risky proposition. Fundamental analysis aims for larger and more predicable profits by relying on long-term positions. There are a variety of techniques to manipulate short-term positions in technical analysis.


In order to avoid heavy losses, short-term traders will often close positions or set conservative stops on their open positions to minimize losses. As any good trader would do, be sure to set reasonable stops. Consider the money invested in Forex risk capital - be sure it can survive a heavy loss.


Practice. Even for experienced equity traders, there are unique qualities in the Forex market that demand some Forex experience in order to draw out maximum profit. A few brokers will allow you a limited free trial on their software to let you get a feel for the market. Check another posts for details.

Fundamentals Strategy - Introduction

Forex fundamental analysis is one of two widely recognized approaches to foreign exchange market analysis.
An alternative to technical analysis, which makes use of market trends (i.e. chart analysis) to determine the future value of a particular currency in the FX market, fundamental analysis describes methods of present and future valuation determined by social, economic, and political variables. While technical analysis is praised for its effectiveness at predicting short-term trends (under 3 months), the fundamental analysis approach is better suited at forecasting long-term movement in the FX market.

Employing fundamental analysis strategies requires a basic understanding of supply and demand, the underlying force behind all financial markets. In the case of the FX market, the commodity being exchanged is a particular currency. Because the value of a currency is derived from the economic health of its respective country, global (or local) macroeconomic changes can invariably have an impact on currency rates. Fundamental analysis itself is broken down into two broad subcategories: capital flows and trade flows.

The Fundamental Analysis

A fundamental trading strategy consists of strategic assessments in which a certain currency is traded based on virtually any criteria excluding the price action. These criteria include, but are not limited to, the economic condition that the country the currency represents, monetary policy, and other elements that are fundamental to economies.

The focus of fundamental analysis lies on the economic, social and political forces that drive supply and demand. There is no single set of beliefs that guide fundamental analysis, yet most fundamental analysts look at various macroeconomic indicators such as economic growth rates, interest rates, inflation, and unemployment. Several theories prevail as to how currencies should be valued.

Alone, fundamental analysis can be stressful when dealing with commodities, currencies and other "margined" products. The reason for this is that often fundamental analysis does not provide specific entry and exit points, and therefore it can be difficult for risk to be controlled when utilizing leverage techniques.

Currency prices are a reflection of the balance between supply and demand for currencies. Interest rates and the overall strength of the economy are the two primary factors that affect supply and demand. Economic indicators (for example, GDP, foreign investment and the trade balance) reflect the overall health of an economy. Therefore, they are responsible for the underlying changes in supply and demand for that currency. A tremendous amount of data is released at regular intervals, and some of this data is significant. Data that is related to interest rates and international trade is analyzed very closely.

Technical Strategy - The Bollinger Bands

Bollinger Bands measure the relative price levels over a period time. The study is comprised of three lines. A simple moving average in the middle, an upper band and a lower band. The upper band derived from simple moving average plus 2 standard deviation. The lower band derived from simple moving average minus 2 standard deviation.

20 day simple moving average is recommended for the study. Bollinger Bands become wider when the market is more volatile while narrows during less volatile periods

Technical Strategy - Stochastic Slow

The Slow Stochastic is an indicator measures overbought and oversold conditions in the market. It is comprised of two lines, the %K and the %D line. The range of oscillate is between 0% and 100%.


%K is the number of periods in the chart. If the chart is a daily chart, then the %K number denotes days. If the chart is a weekly chart, then the %K number denotes weeks.

%D is the number of periods used in the Moving Average calculation.

Stochastic above 80% often indicates an overbought condition while below 20% indicates oversold condition.

Technical Strategy - Parabolic SAR

Parabolic SAR

Developed by Welles Wilder, creator of RSI and DMI, the Parabolic SAR sets trailing price stops for long or short positions. Also referred to as the stop-and-reversal indicator (SAR stands for "stop and reversal"), Parabolic SAR is more popular for setting stops than for establishing direction or trend. Wilder recommended establishing the trend first, and then trading with Parabolic SAR in the direction of the trend. If the trend is up, buy when the indicator moves below the price. If the trend is down, sell when the indicator moves above the price.

The formula is quite complex and beyond the scope of this definition, but interpretation is relatively straightforward. The dotted lines below the price establish the trailing stop for a long position and the lines above establish the trailing stop for a short position. At the beginning of the move, the Parabolic SAR will provide a greater cushion between the price and the trailing stop. As the move gets underway, the distance between the price and the indicator will shrink, thus making for a tighter stop-loss as the price moves in a favorable direction.

There are two variables: the step and the maximum step. The higher the step is set, the more sensitive the indicator will be to price changes. If the step is set too high, the indicator will fluctuate above and below the price too often, making interpretation difficult. The maximum step controls the adjustment of the SAR as the price moves. The lower the maximum step is set, the further the trailing stop will be from the price. Wilder recommends setting the step at 0.02 and the maximum step at 0.20.

Technical Strategy - MACD

MACD gives a view of the relationship between two moving averages of asset prices and the moving average of that relationship. It may be graphically displayed in a number of ways, among which is a plot of an MACD line indicating the difference of two exponential moving averages for a longer and shorter period respectively, and a so-called signal line, which plots an exponential moving average of the MACD. Another popular convention displays the divergence of the MACD line from the signal line in graphically as histogram.

As a plot of moving averages and a histogram, the MACD may be used as a stand-alone indicator and used effectively in combination. Popular strategies for interpretation include looking for crossovers of the MACD line and its signal line, or of the histogram zero midline, divergence of the indicator from price trends, and as a predictor of overbuying and overselling, as the shorter moving average deviates from its longer counterpart.

Technical Strategy - The Moving Averages

Moving Averages

If you believe in the "trend-in-your-friend" tenet of technical analysis, moving averages are very helpful. Moving averages tell the average price in a given point of time over a defined period of time. They are called moving because they reflect the latest average, while adhering to the same time measure.

A weakness of moving averages is that they lag the market, so they do not necessarily signal a change in trends. To address this issue, using a shorter period, such as 5 or 10 day moving average, would be more reflective of the recent price action than the 40 or 200-day moving averages.

Alternatively, moving averages may be used by combining two averages of distinct time- frames. Whether using 5 and 20-day MA, or 40 and 200-day MA, buy signals are usually detected when the shorter-term average crosses above the longer-term average. Conversely, sell signals are suggested when the shorter average falls below the longer one.

There are three kind of mathematically distinct moving averages: Simple MA; Linearly Weighted MA; and Exponentially Smoothed. The latter choice is the preferred one because it assigns greater weight for the most recent data, and considers data in the entire life of the instrument.

Technical Strategy - Support & Resistance Line

Support and resistance levels are points where a chart experiences recurring upward or downward pressure. A support level is usually the low point in any chart pattern (hourly, weekly or annually), whereas a resistance level is the high or the peak point of the pattern. These points are identified as support and resistance when they show a tendency to reappear. It is best to buy/sell near support/resistance levels that are unlikely to be broken.

Once these levels are broken, they tend to become the opposite obstacle. Thus, in a rising market, a resistance level that is broken, could serve as a support for the upward trend, whereas in a falling market; once a support level is broken, it could turn into a resistance.

Technical Strategy - Fibonacci

The fibonacci retracement is a good tool for novice and seasoned traders. It is can be used as a stand along study or an additional study to confirm price movement of a currency pair. The fibonacci retracement is displayed by drawing a trendline between two extereme points.

For example, the picture on the right is a USD/JPY chart. The fibonacci retracement is configured from the highest point 105.86 to lowest point 104.69. There are 6 levels shown on the chart, 0%, 38.2%, 50%, 61.8%, 78.6% and 100%. You may customize the various levels as you prefer.

After a significant move, currency price will retrace a significant portion from the original move. Typically, the fibonacci retracement is interpreted in a percentage basis. However, traders like to use prices as labels instead of percentages to obtain a more articulate picture of a specific currency pair movement. You may use both percentage and price in the fibonacci retracement configuration.

Technical Strategy - Pivot Points

Pivot Point Analysis

We often hear some seasoned traders talking about an equity price nearing a certain support or resistance level. These levels are widely used to predict the market movement. How are these support and resistance levels derived? It is the use of pivot point. Although a full trading book may consist of many mathematics formulas and studies such as fibonacci arcs, gann fans, moving averages, and others, pivot point is still one of the commonly used strategies in the financial markets.

How Can I Apply Pivot Point

There are variations of pivot calculation. The most common used is the 5 point system that consists of Pivot Point, Support 1, Resistance 1, Support 2, Resistance 2. Some traders also go a step further to Support 3 and Resistance 3.

R2 = P + (H - L) = P + (R1 - S1)
R1 = (P x 2) - L
P = (H + L + C) / 3
S1 = (P x 2) - H
S2 = P - (H - L) = P - (R1 - S1)

S represent support, R represents resistance, P represents pivot point, H represents high, L represents low and C represents close.



Traditionally, stock traders use a 24-hour cycle of high, low and close. Because the extreme volatility in the forex market. Forex traders may use even shorter time intervals.

Major Currency Traded in Forex Market

The most traded currency in Forex market are United States dollar, Eurozone Euro , Japanese Yen , British Pound Sterling, Swiss Franc, Australian dollar , and Canadian Dollars.

Forex market is much USD-centered, where United States currency is involved in more than 80% of the trades. Major traded pairs in FX market are EUR/USD, which yields 28% from total trades. USD/JPY and GBP/USD come second and third, with take up 17% and 14% from the global forex trading respectively.

United States Dollar (USD) Overview
The U.S. dollar uses the decimal system, consisting of 100 (equal) cents (symbol ¢).

In another division, there are 1,000 mills or ten dimes to a dollar; additionally, the term eagle was used in the Coinage Act of 1792 for the denomination of ten dollars, and subsequently was used in naming gold coins. In the second half of the 19th century there were occasional discussions of creating a $50 gold coin, which was referred to as a "Half Union," thus implying a denomination of 1 Union = $100. However, only cents are in everyday use as divisions of the dollar; "dime" is used solely as the name of the coin with the value of 10¢, while "eagle" and "mill" are largely unknown to the general public, though mills are sometimes used in matters of tax levies and gasoline prices.

When currently issued in circulating form, denominations equal to or less than a dollar are emitted as U.S. coins while denominations equal to or greater than a dollar are emitted as Federal Reserve notes (with the exception of gold, silver and platinum coins valued up to $100 as legal tender, but worth far more as bullion). (Both one-dollar coins and notes are produced today, although the note form is significantly more common.) In the past, paper money was occasionally issued in denominations less than a dollar (fractional currency) and gold coins were issued for circulation up to the value of 20 dollars. More about USD at Wikipedia.

Pound Sterling (GBP) Overview
The pound (symbol: £; ISO code: GBP), divided into 100 pence, is the official currency of the United Kingdom and the Crown dependencies. The slang term "quid" is commonly used in place of "pound(s)". The official full name pound sterling (plural: pounds sterling) is used mainly in formal contexts and also when it is necessary to distinguish the currency used within the United Kingdom from others that have the same name.

The currency name — but not the names of its units — is sometimes abbreviated to just "sterling", particularly in the wholesale financial markets; so "payment accepted in sterling", but never "that costs five sterling". The abbreviations "ster." or "stg." are sometimes used. The term British pound is commonly used in less formal contexts, although it is not an official name of the currency.

The pound was originally the value of one pound Tower weight of sterling silver (hence "pound sterling"). The currency sign is the pound sign, originally ₤ with two cross-bars, then later more commonly £ with a single cross-bar. The pound sign derives from the black-letter "L", from the abbreviation LSD – librae, solidi, denarii – used for the pounds, shillings and pence of the original duodecimal currency system. Libra was the basic Roman unit of weight, which in turn derived from the Latin word for scales or balance. The ISO 4217 currency code is GBP (Great Britain pound). Occasionally the abbreviation UKP is seen, but this is incorrect. The Crown dependencies use their own (non-ISO) codes. Stocks are often traded in pence, so traders may refer to Pence sterling, GBX (sometimes GBp), when listing stock prices. More about GBP at Wikipedia.

Euro (EUR) Overview
The euro (currency sign: €; banking code: EUR) is the official currency of the Eurozone (also known as the Euro Area), which consists of the European states of Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia, and Spain, and will extend to include Cyprus and Malta from 1 January 2008.

It is the single currency for more than 317 million Europeans. Including areas using currencies pegged to the euro, the euro directly affects more than 480 million people worldwide. With more than €610 billion in circulation as of December 2006 (equivalent to US$802 billion at the exchange rates at the time), the euro surpasses the U.S. dollar in terms of combined value of cash in circulation.

While all European Union (EU) member states are eligible to join if they comply with certain monetary requirements, not all EU members have chosen to adopt the currency. All nations that have joined the EU since the 1993 implementation of the Maastricht Treaty have pledged to adopt the euro in due course. Maastricht obliged current members to join the euro; however, the United Kingdom and Denmark negotiated exemptions from that requirement for themselves. Sweden turned down the euro in a 2003 referendum, and has circumvented the requirement to join the euro area by not meeting the membership criteria. Several small European states (The Vatican, Monaco, and San Marino), although not EU members, have adopted the euro due to currency unions with member states. Andorra, Montenegro, and Kosovo have adopted the euro unilaterally. More about EUR at Wikipedia.

Japanese Yen (JPY) Overview
The yen or en is the currency of Japan. It is also widely used as a reserve currency after the United States dollar, the euro and the pound sterling. The ISO 4217 codes for the yen are JPY and 392. The Latinised symbol is ¥ while in Japanese it is also written with the kanji 円. While not a usage specific to currency, large quantities of yen are often counted in multiples of 10,000 in the same way as values in the United States are often quoted or rounded off to hundreds or thousands.

The yen was introduced by the Meiji government in 1870 as a system resembling those in Europe. The yen replaced the complex monetary system of the Edo period, based The New Currency Act of 1871 stipulated the adoption of the decimal accounting system of yen, sen, and rin, with the coins being round and cast as in the West.

The yen was legally defined as 0.78 troy ounces (24.26 g) of pure silver, or 1.5 grams of pure gold. The same amount of silver is worth about 1181 modern yen while the same amount of gold is worth about 3572 yen. The Act also moved Japan onto the gold standard. (The sen and the rin were eventually taken out of circulation at the end of 1953.) More about JPY at Wikipedia.

Knowing the Currency Symbol
When starting in Forex trading, it would be wise to start trading with the major seven. It is also recommended to start with your own country currency if you are living in one of the major seven country as you are in a better position to judge the value of the currency. You should be aware that currencies are normally stated in a three-alphabate symbol in FX market.

The Forex Strategy - Technical Analysis

Taken from forex forums.

1. System name : Daily swing
Time Frame : 15 and 30 minute
Indicator : EMA 5
EMA 10
RSI 14
Stochastic 10,3,3

Buy signal if : EMA 5 Cross over and above EMA 10
RSI must above 50
Stochastic Turned up

Sell signal if : EMA 10 Cross over and above EMA 5
RSI must <50> 50
MACD Crossed and must >0

2. System name : MACD strategy
Time frame : 5 minut dan 15 minut
Indicator : WMA 5
WMA 13
Slow stochastic 8,3,3
RSI 13
MACD 3,34,7

Buy signal if : WMA 5 cross over and above WMA 13
stochastic turned up
RSI > 50
MACD Crossed and must >0

Sell signal if : WMA 13 cross over and above WMA 5
Stochastic turned down
RSI <50>
MACD Crossed and histogram <0

3. Candlestick strategy
did you know just the chart can tell you when to buy and sell with simple click. when I Look thr chandlestick chart I look if the chart is uptrend and the trend will be offer. the chandlestick will show you the pattern. just with 3 chandles you can sell or buy before your indicator tell. if you want to use the strategy, you must understand and save in your memory some of pattern. download the chandlestick e-book in the e-book download zone. enjoy....... All of trading strategy will make profit if you are dicipline to use the strategy, Remember that decipline is a key to be a succses.

What is Forex SIgnalling?

Unless you are already a full-time trader, or unable to access a computer 24 hours a day, it’s difficult to trade forex on a part-time basis. Many forex brokers and independent companies have developed trading systems that offer forex signals telling the user when to buy and sell. The execution of a trade could be as simple as pressing a button or making a telephone call.

Forex trading signals usually operate on a mathematical formula and when parameters are met, a signal is sent out via e-mail or phone. Once the signal is received, it’s up to the user to decide whether or not to take the signal.

There are a lot of mixed reviews on forex signal service providers. To be truthful most signal services work, it’s the individual that fails to follow the system. Even though you are not deciding when it’s a good time to buy or sell, your emotions can still get in the way if you are coming off of a losing streak. It is however possible to weed out a lot of the losing signals if you are able to identify the overall trend.

Some companies claim to make 20% per month using automated trading systems. I’ll be the first to say that these systems do exist; it’s just a matter of testing the different trading software’s out there to see which ones work and which ones do not.

When seeking out a reliable source of forex signals be sure that their data is back tested and the company has a proven track record. Most systems will offer a trail period that enables you to test the system before committing to their service completely. Prices for these systems can range anywhere from $15 to $500 per month depending on the quality of the signals.

If a novice trader is lucky enough to find a personal forex trader that manages a small group of people and their money this can sometimes be even more profitable then the large forex signal service providers. However, finding reliable forex traders and trusting them with your funds are hard to come by.

In my personal opinion, there is nothing wrong with using forex signal providers given you do not have time to trade for yourself. However, taking a bit of time to learn how the forex market reacts to news and events will greatly enhance you trading profits.

originally written by Tim Rohrer

10 Thinkings that MUST NOT inside your mind..

Thinking that they can control the market

Using indicators are 100% safe

Following market prediction without analyzing

Doubling their lots to replace their loss

Stop learning and analyzing when already get some profits

Hold a loss position in order to wait the price back

Underestimate writing daily journal

Opening new position without plan

They will never lose

Brokers can't lose

This two-part report clearly and simply details essential tips on how to avoid typical pitfalls and start making more money in your forex trading.

1. Trade pairs, not currencies - Like any relationship, you have to know both sides. Success or failure in forex trading depends upon being right about both currencies and how they impact one another, not just one.

2. Knowledge is Power - When starting out trading forex online, it is essential that you understand the basics of this market if you want to make the most of your investments.

The main forex influencer is global news and events. For example, say an ECB statement is released on European interest rates which typically will cause a flurry of activity. Most newcomers react violently to news like this and close their positions and subsequently miss out on some of the best trading opportunities by waiting until the market calms down. The potential in the forex market is in the volatility, not in its tranquility.

3. Unambitious trading - Many new traders will place very tight orders in order to take very small profits. This is not a sustainable approach because although you may be profitable in the short run (if you are lucky), you risk losing in the longer term as you have to recover the difference between the bid and the ask price before you can make any profit and this is much more difficult when you make small trades than when you make larger ones.

4. Over-cautious trading - Like the trader who tries to take small incremental profits all the time, the trader who places tight stop losses with a retail forex broker is doomed. As we stated above, you have to give your position a fair chance to demonstrate its ability to produce. If you don't place reasonable stop losses that allow your trade to do so, you will always end up undercutting yourself and losing a small piece of your deposit with every trade.

5. Independence - If you are new to forex, you will either decide to trade your own money or to have a broker trade it for you. So far, so good. But your risk of losing increases exponentially if you either of these two things:

Interfere with what your broker is doing on your behalf (as his strategy might require a long gestation period);

Seek advice from too many sources - multiple input will only result in multiple losses. Take a position, ride with it and then analyse the outcome - by yourself, for yourself.

6. Tiny margins - Margin trading is one of the biggest advantages in trading forex as it allows you to trade amounts far larger than the total of your deposits. However, it can also be dangerous to novice traders as it can appeal to the greed factor that destroys many forex traders. The best guideline is to increase your leverage in line with your experience and success.

7. No strategy - The aim of making money is not a trading strategy. A strategy is your map for how you plan to make money. Your strategy details the approach you are going to take, which currencies you are going to trade and how you will manage your risk. Without a strategy, you may become one of the 90% of new traders that lose their money.

8. Trading Off-Peak Hours - Professional FX traders, option traders, and hedge funds posses a huge advantage over small retail traders during off-peak hours (between 2200 CET and 1000 CET) as they can hedge their positions and move them around when there is far small trade volume is going through (meaning their risk is smaller). The best advice for trading during off peak hours is simple - don't.

9. The only way is up/down - When the market is on its way up, the market is on its way up. When the market is going down, the market is going down. That's it. There are many systems which analyse past trends, but none that can accurately predict the future. But if you acknowledge to yourself that all that is happening at any time is that the market is simply moving, you'll be amazed at how hard it is to blame anyone else.

10. Trade on the news - Most of the really big market moves occur around news time. Trading volume is high and the moves are significant; this means there is no better time to trade than when news is released. This is when the big players adjust their positions and prices change resulting in a serious currency flow.

11. Exiting Trades - If you place a trade and it's not working out for you, get out. Don't compound your mistake by staying in and hoping for a reversal. If you're in a winning trade, don't talk yourself out of the position because you're bored or want to relieve stress; stress is a natural part of trading; get used to it.

12. Don't trade too short-term - If you are aiming to make less than 20 points profit, don't undertake the trade. The spread you are trading on will make the odds against you far too high.

13. Don't be smart - The most successful traders I know keep their trading simple. They don't analyse all day or research historical trends and track web logs and their results are excellent.

14. Tops and Bottoms - There are no real "bargains" in trading foreign exchange. Trade in the direction the price is going in and you're results will be almost guaranteed to improve.

15. Ignoring the technicals- Understanding whether the market is over-extended long or short is a key indicator of price action. Spikes occur in the market when it is moving all one way.

16. Emotional Trading - Without that all-important strategy, you're trades essentially are thoughts only and thoughts are emotions and a very poor foundation for trading. When most of us are upset and emotional, we don't tend to make the wisest decisions. Don't let your emotions sway you.

17. Confidence - Confidence comes from successful trading. If you lose money early in your trading career it's very difficult to regain it; the trick is not to go off half-cocked; learn the business before you trade. Remember, knowledge is power.

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Forex Trading Tips - 2

The second and final part of this report clearly and simply details more essential tips on how to avoid the pitfalls and start making more money in your forex trading.

1. Take it like a man - If you decide to ride a loss, you are simply displaying stupidity and cowardice. It takes guts to accept your loss and wait for tomorrow to try again. Sticking to a bad position ruins lots of traders - permanently. Try to remember that the market often behaves illogically, so don't get commit to any one trade; it's just a trade. One good trade will not make you a trading success; it's ongoing regular performance over months and years that makes a good trader.

2. Focus - Fantasising about possible profits and then "spending" them before you have realised them is no good. Focus on your current position(s) and place reasonable stop losses at the time you do the trade. Then sit back and enjoy the ride - you have no real control from now on, the market will do what it wants to do.

3. Don't trust demos - Demo trading often causes new traders to learn bad habits. These bad habits, which can be very dangerous in the long run, come about because you are playing with virtual money. Once you know how your broker's system works, start trading small amounts and only take the risk you can afford to win or lose.

4. Stick to the strategy - When you make money on a well thought-out strategic trade, don't go and lose half of it next time on a fancy; stick to your strategy and invest profits on the next trade that matches your long-term goals.

5. Trade today - Most successful day traders are highly focused on what's happening in the short-term, not what may happen over the next month. If you're trading with 40 to 60-point stops focus on what's happening today as the market will probably move too quickly to consider the long-term future. However, the long-term trends are not unimportant; they will not always help you though if you're trading intraday.

6. The clues are in the details - The bottom line on your account balance doesn't tell the whole story. Consider individual trade details; analyse your losses and the telling losing streaks. Generally, traders that make money without suffering significant daily losses have the best chance of sustaining positive performance in the long term.

7. Simulated Results - Be very careful and wary about infamous "black box" systems. These so-called trading signal systems do not often explain exactly how the trade signals they generate are produced. Typically, these systems only show their track record of extraordinary results - historical results. Successfully predicting future trade scenarios is altogether more complex. The high-speed algorithmic capabilities of these systems provide significant retrospective trading systems, not ones which will help you trade effectively in the future.

8. Get to know one cross at a time - Each currency pair is unique, and has a unique way of moving in the marketplace. The forces which cause the pair to move up and down are individual to each cross, so study them and learn from your experience and apply your learning to one cross at a time.

9. Risk Reward - If you put a 20 point stop and a 50 point profit your chances of winning are probably about 1-3 against you. In fact, given the spread you're trading on, it's more likely to be 1-4. Play the odds the market gives you.

10. Trading for Wrong Reasons - Don't trade if you are bored, unsure or reacting on a whim. The reason that you are bored in the first place is probably because there is no trade to make in the first place. If you are unsure, it's probably because you can't see the trade to make, so don't make one.

11. Zen Trading- Even when you have taken a position in the markets, you should try and think as you would if you hadn't taken one. This level of detachment is essential if you want to retain your clarity of mind and avoid succumbing to emotional impulses and therefore increasing the likelihood of incurring losses. To achieve this, you need to cultivate a calm and relaxed outlook. Trade in brief periods of no more than a few hours at a time and accept that once the trade has been made, it's out of your hands.

12. Determination - Once you have decided to place a trade, stick to it and let it run its course. This means that if your stop loss is close to being triggered, let it trigger. If you move your stop midway through a trade's life, you are more than likely to suffer worse moves against you. Your determination must be show itself when you acknowledge that you got it wrong, so get out.

13. Short-term Moving Average Crossovers - This is one of the most dangerous trade scenarios for non professional traders. When the short-term moving average crosses the longer-term moving average it only means that the average price in the short run is equal to the average price in the longer run. This is neither a bullish nor bearish indication, so don't fall into the trap of believing it is one.

14. Stochastic - Another dangerous scenario. When it first signals an exhausted condition that's when the big spike in the "exhausted" currency cross tends to occur. My advice is to buy on the first sign of an overbought cross and then sell on the first sign of an oversold one. This approach means that you'll be with the trend and have successfully identified a positive move that still has some way to go. So if percentage K and percentage D are both crossing 80, then buy! (This is the same on sell side, where you sell at 20).

15. One cross is all that counts - EURUSD seems to be trading higher, so you buy GBPUSD because it appears not to have moved yet. This is dangerous. Focus on one cross at a time - if EURUSD looks good to you, then just buy EURUSD.

16. Wrong Broker - A lot of FOREX brokers are in business only to make money from yours. Read forums, blogs and chats around the net to get an unbiased opinion before you choose your broker.

17. Too bullish - Trading statistics show that 90% of most traders will fail at some point. Being too bullish about your trading aptitude can be fatal to your long-term success. You can always learn more about trading the markets, even if you are currently successful in your trades. Stay modest, and keep your eyes open for new ideas and bad habits you might be falling in to.

18. Interpret forex news yourself - Learn to read the source documents of forex news and events - don't rely on the interpretations of news media or others.

Basics guide : The Facts about Forex Trading

Foundation #1: Currency Trading is not a Get-Rich-Quick Scheme.

Currency trading is a SKILL that takes TIME to learn. Skilled Traders
can and do make money in this field, however like any other occupation or
career, success doesn’t just happen overnight. Here is a great ‘formula’
for success:
Practice + Patience + Persistence = Profits
As they say, there is no substitute for hard work and diligence. Practice
trading on a demo account and pretend the virtual money is your own real
money. Do not open a live trading account until you are profitable
trading on a demo account. Stick to the plan and you can be
successful.

Foundation #2: I highly recommend that you follow 1 or maybe 2 major currency pairs.

It gets far too complicated to keep tabs on all four. I also recommend that
traders choose one of the majors because the spread is the best and they
are the most liquid. The Euro/USD is the most commonly traded pair and
usually has the best ‘spread’ because of its liquidity. The USD/Swiss Franc is
usually the most volatile and moves the most during the trading week. The
USD/Yen moves a lot on the news out of Japan and normally the Pound
Sterling/USD is more stable in it’s moves than the other three.

Foundation #3: Follow and understand the daily Forex News and Analysis of the
professional currency analysts.

Even though this system is based solely on technical analysis of charts, it is
important to get a birds-eye view of the currency markets and the news that
affects the prices. It is also important that you know and understand what the
key technical ‘support’ and ‘resistance’ levels are in the currency pair that you
want to trade. Support is a predicted level to buy (where currency pair should
move up on the charts), resistance is a predicted level to sell (where the
currency pair should move down on the charts).
Fortunately, all the best Forex news and analysis is offered free on the
Internet. Here is what you should do first:
*While you are reading the daily news and technical analysis, write
down on a piece of paper what direction the analysts are saying
about the major currency pair you are following and the key support
and resistance levels for the day.

A. Go to http://www.forexnews.com/ and you will find 24hr news and analysis on
the spot FX markets. The site will give you the big picture of how the
economic calendar and central banks affect the currency markets. A
great resource.

B. Then go to http://www.fxstreet.com/ and click on the ‘Top Forex Reports’. Here
there is a wonderful listing of all the major daily currency analysis and
forecasts with support and resistance and direction forecasts.

C. Click on http://www.currencypro.com/ and go to ‘Today’s Market Research’ and
there you will find more excellent analysis on the Major Currency pairs.
Another great Forex Portal.

Foundation #4: Learn how to use the technical indicators in this course and
always trade with stop losses!

It is worth your time to be patient and learn how to use the technical
indicators on the charts that you will be reading about shortly.

6 It is important when you are trading Forex, to be disciplined and to stick to
a plan. Don’t just trade your ‘gut’ feeling. Use the technical indicators
outlined and always enter in stop losses on every trade. Remember that
everyone who trades has a different tolerance for losses. Depending on
your risk capital, and strategy, set your stop losses accordingly.

The Basic Guide into Forex Trading

When it comes to forex trading, understanding the terminology and the forex trading strategies before you begin is vital. There are many web based companies that provide online forex trading tutorials that revolve around real time forex trading. Using a forex tutorial will give you the beginner knowledge you need to take part in trading forex.

After you have completed your forex tutorial there are some basic forex trading tips that all beginners will find useful. The most important thing to remember when trading forex and the most important forex trading strategy is to remember to always place stop loss orders. Using this strategy in your online forex trading will help to prevent and limit your losses.

The next important step for online forex trading is to take profit orders at the same time as placing your stop loss orders. This is done by using the OCO order function that is available with most online forex trading systems. Take profit orders work on the same basis as the stop loss orders and help to eliminate the risk of locking into a profit too early.

Another beginner’s tip is to use a positive risk/reward ratio. This means that you should choose the amount you are willing to make on your forex trade beforehand and it should be more than or equal to the amount that you are willing to loose. This tip is essential if you want to be successful in your forex trading.

It is important for any forex trading beginner to note that successful online forex trading takes patience and is a long term investment. It takes controlled forex trading along with discipline and patience to make your forex trading profitable. Continued research and forex tutorials and guides will help you to learn more and remember as with all successful ventures; knowledge equals power.

Originally written by : Oliver Turner

The Forex Trading Magic

If you search on the internet you’ll find millions of investment programs such as real estate, stock trading, bond trading, mutual funds, CDs, auction programs and various internet programs.

I have not done many internet income opportunities or programs or affiliate programs because I had been lucky to discover a very easy way to make money through forex trading, (Foreign currency trading)
safely on the internet.

Perhaps you know about only stock trading or bond trading which are common, but not forex trading.

Forex trading is the most profitable and attractive internet income opportunity because you can do it from home or office and from any country in the world.

In forex trading, you don’t need to do any marketing or selling or internet promotion to succeed.

In forex trading, you don’t need to spend thousands of dollars to do any internet promotion.

In forex trading, you don’t need any stocks or warehousing.

In forex trading , all that you’ve to do is open an account with one of the brokers with as little as $300 or $2000.

Then follow simple instructions to buy and sell the currencies.

When the price of the currency is low, you buy.

In a few seconds or minutes, the price will go up, and you sell it and make a profit.

By so doing , in a day, you can easily make $500-$1000 by just buying, selling and trading these foreign currencies for about 3 or 4 hrs!

And get this:

You don’t even have to be stuck sitting behind your computer buying and selling these foreign currencies.

You can enter all your buy trades and specify the sell prices you desire and then log off.

Whenever the values of these foreign currencies rise and your selling prices reach, the currencies will be automatically sold for you and you make money!

You can do forex trading and at the same time keep your day job, because in forex trading, there is no work to do.

In the future when you have made hundreds of thousands of dollars, you may then quit your job and just keep doing currency forex trading forever and go on permanent vacation!

To understand the beauty of forex trading Picture this:

In the morning, you get up from sleep at 6 am.

You go to your bathroom and have your shower.

At 7am, you hurry and eat your breakfast.

At 7.20 am, you login into your forex trading account on the internet and spend 10 minutes to buy about 3 or 4 different currencies, [for example British Pound, Euro, CHF (Swiss Currency) and Yen (Japanese currency).]

You can specify the price at which you wish to sell each currency.

Then you can log off.

By 9 am, you’re at work in your office or business place.

You do your job as usual and by 5 pm, you’re finished and heading home.

When you get back home around 6.30 pm, you login into your forex trading account to see how much money you’ve made.

Holy Molly, there in your account it says you have made $750!

"Is this for real?", you wonder…

Yes, it is. (Your eyes are not deceiving you…)

$750 in a day for just clicking your mouse twice and doing no work?

(Whereas at your job, you work 8 hrs, but make only probably $150..)

This is how easy it is to make money from forex trading.

But before you use real money to open a live forex trading account, you have to open a free trial (demo) forex trading account and practice first, to understand how it works and to acquire the right skills.

This free demo (trial) forex trading account (forex simulation trading) will help you to reduce a lot of risks that can lead to loss.

In forex trading, you can choose how much money to invest, how much money to make and when to make it.

You can make money daily, 365 days all year from forex trading.

Your computer can be transformed into an "ATM" machine that cranks out cash for you daily (without large investment or hassles) from forex trading.

In forex trading, you can choose what type of risk you can manage, when to invest and when not to invest.

In forex trading, you’re the boss. You may do as you please.

When forex trading is compared to other investment programs such as stock trading, bond trading, mutual funds, real estate and regular business, it is evident that forex trading is the fastest and greatest way to make money in the world.

Forex trading is a 2.5 trillion dollars daily business and it is larger than all the stock trading in the world combined.

These are some of the reasons why I believe that forex trading is the fastest and best way to create fantastic wealth.

Perhaps from reading this article you’ll now come to know why forex trading is the secret behind the greatest wealth on earth and why it has been kept hidden from the average people of the world and therefore little known to the masses.

May these forex trading insights open your eyes to the possibility of infinite wealth and success that can be yours from forex trading.

Please feel free to print or publish this article anywhere and read and also send to your friends and well wishers and please preserve the author’s resource box below.


By I-key Benney, CEO

Basic Knowledse : Facts about Forex market

As a matter of fact, large international banks are still the major traders in currency exchange market. Deutsche Bank is one of the top currency traders; along with other major banks like UBS, Citi Group, HSBC, Barclays, J. P. Morgan Chase, Coldman Sachs, ABN Amro, Morgan Stanley, and Merril Lynch; these banks are said to be responsible for more than 70% trades in currency market.

When you are trading Forex with currency dealer, the Forex quotes might look a bit different from our previous example. Often, a two-sided quote, consisting of 'bid' and 'ask' price, is listed when dealing with currency brokers. For example, EUR/USD 1.2385/1.2390: 1.2385 is known as the 'bid' price while 1.2390 is commonly known as the 'ask' or 'buy' price. The 'bid' is the price at which you can sell the base currency; while the 'ask' is the price at which you can buy the base currency. As you study the numbers, you might realize that the two-sided currency price is quoted against you. Traders are forced to buy the currency in a higher price than the selling one. This is done because FOREX trades are done without any commission chargers. Thru quoting currency 'bid & ask' price differently in this way, the currency brokers are manage to make profit without charging their client commission fees directly.

Basics Knowledge : How currency exchange (FOREX) market works

I bet you are well aware of the existent of Forex trading nowadays. Forex market exists wherever one currency is traded for another. Forex, or Foreign Exchange Market, is generally works as an international currency exchange market. Investors and speculators are allowed to trade currencies from all around the world thru Forex trading.
Forex is a very unique type of trading where traders are buying and selling 'money' in the same time. The trades are done in pairs, such as Euro/JPY, USD/CHF, and CAD/USD. It is the world largest trading market where an average of $1.9 trillion trades is done on a daily basis. The turnover rates in FOREX are nearly 30 times larger than the total volume of equity trades in United States.
Despite its large volume of trades done daily, Forex is relative new to the publics nonetheless. It is only made available to publics in year 1998 where big sized inter-bank units are sliced into smaller pieces and offered to individual traders like you and me. Before that, Forex is a game only for banks, multi national cooperation, and big currency dealers. Only those with large business size and strong financial background were permitted to trade foreign currencies.

Introduction to Forex Trading

The foreign exchange (FOREX) market is the purchase or sale of a currency against sale or purchase of another. The object in Forex is to exchange one currency for another in the expectation that the price will change so that the currency you bought will increase in value compared to the one you sold. Through Forex education and training it is possible to speculate the direction of the market and receive a good return on your investment. The major participants in the FOREX include commercial and investment banks and central banks. Other participants include corporations, hedge funds, and millions of speculation traders like you. Some of the top banks in the world such as Bank of American, Credit Suisse, and Morgan Stanley are major players when it comes to the FOREX. In order to make money within this realm, you will be competing against all of the major banks as well as individual traders. When beginning in the FOREX, it’s important to select a reputable broker. After all, the broker is going to be the one paying you when it’s time to cash out. A broker acts as a middle man between you and the FOREX. When you place a trade in the FOREX, your position is filled by the broker and the broker sends the order off to the banks. When it’s time to be paid, your money is with the broker and they need to be able to cover your positions in the market. Most brokers offer a 3 to 5 pip spread on all the major currencies pairs, such as the ERU/USD, GBP/USD and the USD/JPY. A 3 to 5 pip spread basically means that the FOREX must move 3 to 5 pips before your trade is in profit. One pip can be worth any amount, depending on how much money you’re willing to risk per trade. There are two types of traders, fundamentalist and technical traders. Fundamentalist study the cause of market movement, whereas technicians study the effect. Most traders identify themselves as both a technician and fundamentalist. Most fundamentalist will have knowledge of charts, indicators and chart analysis. Similarly most technicians are aware of the fundamentals. However, the problem is that the charts and fundamentals are often in conflict one another. It’s usually a wise decision to have a bit of training in both fundamentals and technical analysis. One of the most important factors in the FOREX is learning to manage your money. Traders will experience losses in the FOREX; therefore it is essential that a trader utilizes proper money management. In many cases money management is a simple concept, yet to practice money management consistently is very challenging. Generally speaking money management is knowing when to cut your losses. For each trade, a trader should be looking to make three times the amount they plan to lose. This way a trader only has to be right 33% of the time in order to be in profit

originally written by : Tim Rohrer