Trading Currency Blog

Larry Haywood asked:


Foreign exchange trading, also known as Forex trading, has become more and more popular with investors and traders these days. With the ongoing recession in the capital markets, a lot of folks believe buying and selling of currencies is a safe investment. Whenever you look at the mechanics of a currency spot trade, the chance of making money is somewhere around 50%. With each currency spot transaction, someone loses money while the other individual makes some. Despite this, not everyone is profitable from trading currencies. As a matter of fact, it is estimated that almost 80% of all currency traders lose money in their attempts.

Using these statistics, one can easily assume that the 20% of profitable traders either have access to some kind of insider info or a mysterious way to manipulate the market. But even the United States, British, and Japanese governments have systematically failed in their previous attempts to manipulate the world’s currency markets; which squelches that possibility all together.

The fact is, profitable currency traders are simply better at using accessible info than their unprofitable counterparts are. Profitable traders know how to choose the most applicable information from the enormous heap of economical data that’s released by governments and institutions on a day by day basis. They understand how to head off information overload and zoom in on exclusively the most important facts and numbers that are most probable to have an effect on the currency market. With that in mind, these are the five major national economic reports that each successful trader looks at:

Unemployment Reports. Unexpected surprises in unemployment figures generally have a big impact on the Forex market. If, for example, the anticipated unemployment rate is 6% for a specific country, but the report shows an actual rate of 4%, then this can cause a strengthening of the national currency.

Interest Rates. Interest rates are directly related to the strength of a specific currency. When interest rates move up, it draws in foreign investors and will lead to a stronger currency. The opposite takes place when interest rates go downward.

Consumer Price Index. The CPI is a monthly report that measures the costs of goods in a country and compares this to salaries. An abrupt hike up in inflation is always damaging to the strength of a currency and so it’s vital to maintain a close eye on this economic indicator.

Trade Balance. The trade balance measures how much a country exports and how much it imports. A trade deficit means that exports surpass imports and a country is sending out more money than it is taking in. This has a very noticeable impact on the demand for a countries currency. But one must remember that a trade deficit isn’t always a bad thing. One must take into account the specific conditions of a country to see why a trade surplus or deficit exists.

Retail Sales. A monthly report of retail sales is possibly the most effective indicator of the average person’s thoughts about his nations economy. Sentiment plays a highly critical role in spending patterns, which, in turn, affects the strength of a nations currency.

For currency traders who may plan on being intermediate or permanent players, successful Forex trading means that you need to gain some basic knowledge about worldwide economics and trade. Trading currencies without an awareness of the economic circumstances that bear upon a particular currency market will ultimately lead to losing money. To earn money with Forex trading over the long-run, you also need to learn how to adhere to stable trends and indicators and place your orders accordingly. That is the surest, if not the only way, of trading currency for profits.



BARRIENTEZ

Mark Mc Donnell asked:


This article is Part 4 of a series of 9 articles dedicated to help anyone to trade the foreign exchange.

Multiple time frame analysis (MTFA) is the inspection of trend indicators, starting with the largest trends and timeframes, and working backwards down through successively smaller timeframes to see how the smaller timeframes and trends feed the larger ones. When the smaller timeframes are in agreement with the larger trends you can enter a spot forex trade. If no trend exists the smaller timeframes and trends will, at some point, build a larger trends.

MTFA has been around for nearly 25 years. The MTFA method is applicable to stock and commodities trading, equity options and currency options. The method is applicable to any currency pair. We are respectful of the strong technical work of Kathy Lien and Brian Shannon outlining MTFA and their technical papers are available on the Forexearlywarning website.

MTFA works, it is that simple. Pips can be made and the method is effective, especially when larger timeframes and trends are traded for larger pip totals. Money management ratios also improve when you are entering a larger trend.

By applying MTFA to multiple forex pairs your odds increase again, this is because you can choose to trade the best and largest trend available in the spot forex and ride the trends longer.

In order to conduct and accomplish a multiple timeframe analysis on the spot forex you need the proper platform and a set of trend analysis tools and indicators to facilitate the process. Some tools are very expensive some are free. You must be able to analyze 10 to 20 timeframes per pair prior to conduct a complete MTFA on a currency pair. You also must analyze the top 15-20 traded currency pairs to seek out the best opportunity.

The first step when conducting a MTFA on a currency pair is to inspect the largest 3 or 4 trends. See what pairs have established larger trends, whether the trending pairs are at the beginning, middle or deep into the trend, which pairs are not trending (oscillating) and which pairs could be developing a brand new trend. If there is a pair that interests you check the next support and resistance area and set a price alarm. When the price alarm hits check the smaller timeframes to see if they are in agreement with the larger trends, and if so enter the trade.

You can use off the shelf trend indicators to conduct multiple timeframe analysis. Simple indicators like exponential moving averages are fine. Just apply them across multiple timeframes.

Is it possible to make multiple time frame analysis better?? I believe the answer is yes. Incorporating parallel and inverse analysis into the analysis as well as support and resistance to set price alarms for notification of momentum or possible entry point can all help.

Scalpers may find the method to be to their liking because you will never trade against the larger trends and potentially hang onto trades much longer. One of the biggest reasons people scalp is that they have no idea which direction the trend is on the pair they want to trade. Or they only look at one timeframe. Traders scalp the foreign exchange but statistics show that people who hang on longer and ride longer trends make the most pips.

Why do traders not use multiple timeframe analysis? Mostly because analyzing alot of pairs and timeframes takes time and people basically are lazy. Most scalpers only look at one timeframe and could possibly be trading against a larger trend, or a scalper may be at the beginning of a very large move and exit way too early. If you are near the end of a trend you may also enter a trade after a long move and be entering near the end of the trend. This is bad money management under any scenario. Scalpers need MTFA but people who would like to stay in their trades longer would, by nature require knowledge of MTFA.

MTFA analysis of the spot forex is here to stay. Traders worldwide are accepting and learning to understand the method. MTFA is a rigorous method or analyzing the forex. But it is not difficult to learn. When combined with parallel and inverse analysis is quite powerful. It can be applies to any pair using free tools available on the internet from many spot forex brokers.



SHARRAR

Sacha Tarkovsky asked:


Anyone can become a successful forex trader from home, if they learn the right knowledge and learn how to apply it.

Here we will look at a proven way to make big profits quickly with low risk in global forex markets - even if you never traded before.

Step 1 – Work Smart Not Hard

In many professions you get paid for how many hours you put in, but this does not apply to the world of currency trading:

You get paid for being right.

There are many clever people who spent huge amounts of time building currency trading systems that are extremely complicated and clever, but don’t make money.

The good news is that everything about forex trading can be specifically learned.

It’s also a fact that the best methods are not complicated they are extremely simple. A simple system is more robust in the face of ever changing currency fluctuations.

A Simple system is also easy to understand and apply and this gives a user confidence, which translates into discipline, which is essential for online trading success.

Step 2 – A Method for huge gains

Let’s now look at a methodology that can make huge gains in currency trading.

The a great methodology for any trader to use is one based upon breakouts of valid resistance.

Breakouts are simple to understand and easy to spot, yet most traders don’t use this methodology, as it makes them feel uncomfortable.

Let’s look first at why it is so successful and a fact that most traders don’t realize which is, most big moves in currency trading start from new market highs, NOT market lows.

If you buy breaks of resistance to new market highs you can catch these moves.

Most traders can’t do this because they want to “buy low and sell high” and they wait for the pullback to buy at a better price, however the really big moves don’t pull back and most traders miss them.

If you buy these breakouts, you can make big profits and keep in mind “buy high sell higher” is a great way to make money. Yes, you have missed the start of the move, but the odds are on your side if you enter on a breakout that the move will continue.

To make money in forex trading, buy breaks of significant resistance and use trend lines and just a few confirming indicators and you have a simple, but powerful way of trading.

Step 3 Taking Risks

If you don’t like risk then you shouldn’t trade currency markets.

Most traders spend so much time trying to restrict risk, they actually create it and ensure they lose. They place stops to close or trailing them to quickly and are stopped out by normal market volatility.

If you want to win at forex trading, you need to take meaningful risks.

If you are trading a small account risk as much as 10% per trade and don’t move your stop too quickly. This will ensure you won’t be bumped out of the trade by normal market volatility and can stay with the longer term trends.

Step 4 Patience

You need to be patient and only trade the best forex trading signals that occur at breakouts of valid resistance.

You don’t make money for how often you trade, but for being right.

Many traders like to be in the market all the time in case they miss a move, but this simply ensures they lose.

When you are in a currency trade, you then need to be patient with market volatility eating into your open equity. This is not easy!

When you have to sit and watch dips in your open equity of thousands of dollars however, being patient and riding out this volatility will be very rewarding if you accept it and focus on the longer term trends.

Successful Forex trading

Is within reach of all traders and involves working smart not hard, having confidence in what you do and having a method that works, that you can apply with discipline to take calculated risks at the right time.

The above tips will help you win at forex trading, if you incorporate them into your forex trading strategy.



JARRETT

Sacha Tarkovsky asked:


Day trading systems are everywhere, but it is impossible to make money from them - for 2 main reasons which are outlined below.

If you think you can make money day trading, you need to think again and read the facts below.

If you are thinking of buying a day trading system ask any vendor to show you a real track record of profits and you won’t get one.

The reason?

Day trading by its very nature is flawed and does not produce consistent profits over the longer term.

1. How Currencies trend

On a short term daily basis trying to guess the action in a day is similar to flipping a coin. – All short term daily movements are random.

Currency markets reflect the health of the economy overall and trend longer term.

If you look at long term trend following you have reliable data to work with over a period of time but this is not so in day trading.

If you are a technical trader (and most day trading systems are) if you don’t have enough reliable data you cannot attempt to put the odds in your favour.

2. Day trading breaks the fundamental rule of trading:

You have heard it many times: “cut your losses and run your profits” You need to have far bigger profits than losses to make profits longer term.

Sure you can cut your losses but you can’t run your profits.

Generally most readers have more losing trades than winners and if you cut a winning trade in a day session how can you ever make money? – You can’t.

You will simply lose your equity quickly day trading.

So why do traders do it?

Because they believe vendors who make claims and produce hypothetical track records.

Check with these vendors and ask for a track record you won’t get one.

They make money selling you the system and then making more money on kickbacks from brokers (remember transaction costs are higher) on day trading systems.

So broker and vendor win you lose your money that’s the real story of most day traders.

If you want to make money trade longer term and also never buy a system from a vendor unless you get a real-time track record, over at least 3 years – however you will wait a long time for one of those on a day trading system



MCDEVITT

James Theiss asked:


Typically, in the FOREX market, currencies are traded in pairs. For example, Euro/US Dollar or US Dollar/Japanese Yen. Whenever you trade currencies online, you are then, buying one currency and selling another. Currency pairs are abbreviated. The above pairs would be EUR/USD and USD/JPY. The currency on the left is called the base currency, and the one on the right is the cross currency.

The value of a currency pair is determined by the strength or weakness of the base currency in relation to the cross currency. The base currency value is always 1. That means when you see a quote of 1.4652 for the EUR/USD, its value means 1 Euro will buy 1.4652 dollars. The next day you may see a quote for the EUR/USD of 1.4725. If you listen to the financial news you will hear them say something along the lines of, “the Euro gained strength against the Dollar today”, or “the Dollar fell today against the Euro”. In pocketbook english, that simply means it takes more dollars today to buy 1 Euro than yesterday.

Let’s say you have an online FOREX account and bought the EUR/USD yesterday at the above price of 1.4652 and today you sold, or closed out your trade at 1.4725. That would leave a profit of 73 pips. What the heck is a pip you might ask. Well a pip has two definitions but they both mean the same thing, dollar wise at least: Price Interest Point and Percentage In Point. I have never been able to get a clear difference in the definitions no matter who I have asked, and don’t really worry about it anymore because, like I said, they mean the same thing dollar wise.

When you trade currencies online you will have to open an account with a forex dealer. You can open either a standard account or a mini account. In the standard account a pip is worth approximately $10 dollars, and in the mini account it is worth approximately $1 dollar. It used to be the pip was the smallest unit of value in the FOREX market. Today however, many forex dealers quote in tenths of a pip. They have carried out the quote one extra decimal number to give better and more accurate spreads. So the above quote might have read 1.47253, where the 3 is the tenth of a pip. So its value would be either $3 dollars or $.30 cents depending on the type of account you have.

You may have noticed that I said pip values are approximately $1 dollar. That’s because each currency pair has its own pip value. The true value is determined by mathematical formulas and the exchange rate of the currency pair. Some pip values are fixed and others fluctuate slightly as one currency rises or falls in value relative to the other currency in the pair.

Currency trades are made in fixed dollar amounts called lots. One lot in a standard account is equal to $1000, which controls $100,000. One lot in the mini account is equal to $100, and controls $10,000. Both standard and mini accounts typically have a 1% margin which allows the FOREX trader 100 to 1 leverage on their investment dollars.

If you trade currencies online, the ultimate goal is to capture as many pips as you can, and not get bogged down in the details of what the exact value of each currency pair is. Unless you are interested in becoming an economist or some such thing, the information presented here is more than enough to let you get on with putting as many pips in your account as possible.



ALEN

Kelly Price asked:


Electronic currency trading has bought the vast potential of this market to anyone with an internet connection and a computer and some small seed capital. Here we will look at how anyone can learn to trade currencies and enjoy success if they follow some basic guidelines.

The first point to make is that over 95% of traders who try electronic currency trading lose their money and the reason is they either get the wrong education or do not have the mindset for success. So what do you have to do to be successful?

First let’s take a look at the advantages trading currency online gives you and here are just a few.

- Anyone can learn currency trading and succeed - no special education is required

- You only need an internet connection and some seed capital

- You can trade for big profit opportunities every day

- There is never a recession, as one currency rises another must fall and vice versa

- You can trade in around 30 minutes a day or less

- You can leverage your investment by 200:1 or more!

As you can see there are many advantages of currency trading but you need to know how to use them and use them wisely especially leverage. Leverage is the key to big gains but it also wipes out more trading accounts than any other factor.

Leverage is simply the ability to invest more than you have in your trading account. If you have $500.00 in your account and leverage by 200:1, you have the potential to trade $100,000!

Be Careful With Leverage

The reason most traders lose is they don’t understand how to use leverage. While 200:1 is tempting to use, on small accounts it leads to a swift wipe out of equity. If you have a small account 20:1 is plenty to use.

Be Patient

The other point to keep in mind with electronic currency trading is that while there are opportunities to trade each day, you only want to trade highs odds trades and this means being patient and trading infrequently.

Another reason novice traders lose is they simply trade too much and trade low odds scenarios.

If you want to make money at electronic currency trading, trade high odds set ups and they come around only every few weeks but remember you don’t get rewarded for trading often, you get rewarded for being right.

I know traders who trade less than 20 times a year yet make triple digit gains and you can to!

Discipline is the Key

The key to currency trading profits is to have a robust simple currency trading system you have confidence in and can apply with discipline.

You must be able to apply your system with discipline through losing periods, until you hit a home run (which you will if your system is based on sound logic), in currency trading you have to lose to win and not lose discipline.

The Road to Currency Trading Success

Currency trading looks easy but of course appearances can be deceptive and while anyone can learn to trade currencies, you need to get the right forex education and mindset and apply your trading system with confidence and discipline.

Electronic currency trading, if you prepare yourself correctly can be the gateway to a lucrative second or even a life changing income. Its exciting, its fun and if you put in a bit of effort, you can enjoy currency trading success.



HAGGETT

Sacha Tarkovsky asked:


If you want to make money in forex trading the first point to keep in mind is you cannot make a regular income. That’s not to say you cannot make long term profits – you can, but the e-books and forex day trading courses that promise regular profits are doomed to failure.

The forex markets are volatile and they produce moves each day that in theory can make you thousands of dollars – The problem is however is trying to catch these moves for profit in advance.

The myth of regualr in income from fforex markets is spread by forex day trading system vendors, however Forex day trading systems and profits are a contradiction in terms:

Day traders always lose longer term and you never see a real time track record of profits.

Why?

Because you can never get the odds on your side, as the data in short time frames is meaningless.

There are othercurrency trading systems that say that markets move with scientific accuracy and because of this you can make a regular income.

These theories are loved by the far out investment crowd and the king of the theories is Elliot wave.

Elliot wave says it’s a scientific theory and then tells you that you have to decide which patterns are correct to trade!

Anyone can see the flaw in this theory – if it’s scientific, then you should not have to make subjective judgements it should be objective!

Let’s look at some positives when making money from forex trading.

Firstly, you can get the odds on your side over the longer term and secondly, you can make massive profits.

Just keep these points firmly in mind:

1. It’s an Odds Game

Being an odds game you are never certain to win, but as the skilled gambler knows if you play with the odds you may lose the odd hand but you will win longer term.

2. You cant force profits from the market

You have to wait for the right conditions to present themselves, for your trading signals to be effective – this means waiting weeks or months on some currency trading systems.

The two points discussed above mean that you can make money from forex trading, but your profits will be in erratic time frames.

In light of the above keep this point in mind:

It is not un-common for the top traders in the world to go for months or more than a year or more, without making a profit. When you trade currencies you need to judge your profitability over years, not months or weeks.

Many vendors put about the myth you can make regular profits from forex trading, as it suits their interest – to appeal to the buyer’s greed, these guys simply sell stories and are not traders.

If you don’t believe me ask for a track record of real profits and you won’t get one.

So forget about scientific theories and making profits every week that’s not the reality of forex trading.

The good news is:

That if you play the odds when trading currencies online and take a long term view you can make big consistent capital gains over the longer term.



BRUMWELL

Sacha Tarkovsky asked:


Anyone can become a successful forex trader from home, if they learn the right knowledge and learn how to apply it.

Here we will look at a proven way to make big profits quickly with low risk in global forex markets - even if you never traded before.

Step 1 – Work Smart Not Hard

In many professions you get paid for how many hours you put in, but this does not apply to the world of currency trading:

You get paid for being right.

There are many clever people who spent huge amounts of time building currency trading systems that are extremely complicated and clever, but don’t make money.

The good news is that everything about forex trading can be specifically learned.

It’s also a fact that the best methods are not complicated they are extremely simple. A simple system is more robust in the face of ever changing currency fluctuations.

A Simple system is also easy to understand and apply and this gives a user confidence, which translates into discipline, which is essential for online trading success.

Step 2 – A Method for huge gains

Let’s now look at a methodology that can make huge gains in currency trading.

The a great methodology for any trader to use is one based upon breakouts of valid resistance.

Breakouts are simple to understand and easy to spot, yet most traders don’t use this methodology, as it makes them feel uncomfortable.

Let’s look first at why it is so successful and a fact that most traders don’t realize which is, most big moves in currency trading start from new market highs, NOT market lows.

If you buy breaks of resistance to new market highs you can catch these moves.

Most traders can’t do this because they want to “buy low and sell high” and they wait for the pullback to buy at a better price, however the really big moves don’t pull back and most traders miss them.

If you buy these breakouts, you can make big profits and keep in mind “buy high sell higher” is a great way to make money. Yes, you have missed the start of the move, but the odds are on your side if you enter on a breakout that the move will continue.

To make money in forex trading, buy breaks of significant resistance and use trend lines and just a few confirming indicators and you have a simple, but powerful way of trading.

Step 3 Taking Risks

If you don’t like risk then you shouldn’t trade currency markets.

Most traders spend so much time trying to restrict risk, they actually create it and ensure they lose. They place stops to close or trailing them to quickly and are stopped out by normal market volatility.

If you want to win at forex trading, you need to take meaningful risks.

If you are trading a small account risk as much as 10% per trade and don’t move your stop too quickly. This will ensure you won’t be bumped out of the trade by normal market volatility and can stay with the longer term trends.

Step 4 Patience

You need to be patient and only trade the best forex trading signals that occur at breakouts of valid resistance.

You don’t make money for how often you trade, but for being right.

Many traders like to be in the market all the time in case they miss a move, but this simply ensures they lose.

When you are in a currency trade, you then need to be patient with market volatility eating into your open equity. This is not easy!

When you have to sit and watch dips in your open equity of thousands of dollars however, being patient and riding out this volatility will be very rewarding if you accept it and focus on the longer term trends.

Successful Forex trading

Is within reach of all traders and involves working smart not hard, having confidence in what you do and having a method that works, that you can apply with discipline to take calculated risks at the right time.

The above tips will help you win at forex trading, if you incorporate them into your forex trading strategy.



PAPANDREA

Uchenna Ani-Okoye asked:


Currency trading systems remove emotions from trading, which is the major reason the majority of traders end up losing. A bit of brains and lot of research can help you make a tidy sum in currency trading. What is surprising is that they used much uncomplicated currency trading systems.

All currency trading systems will have periods of drawdown and losses. If you have those than currency trading on the foreign exchange (forex) is only a few clicks away. Forex currency trading is no longer the domain of large corporations, banks or wealthy individual investors.

Eventually my contacts in e-currency trading lead to a few very reliable wealthy friends who sprung me onto other opportunities and private investments that area still generating money to this day. As mentioned before, don’t be impressed with books on currency trading that use a lot of technical terms. Currency trading or FX trading can be a real pain in the **** to understand.

Currency trading also known as Forex (Foreign exchange) or FX is the buying and selling of countries currencies, the US dollar is considered the world trading currency, that’s real currency trading.

Don’t day trade this is the biggest myth of currency trading. The market trend is simply defined as the direction of market prices, a concept that is essential to the success of technical analysis in currency trading. Reliability of data: advice that can be found inside books on foreign currency trading is only as good as the reliability of the data used in putting that book together.

If you’re inexperienced at assessing systems, keep practising, and you’ll soon get an idea of the actual returns and draw downs that currency trading systems are capable of (without the hype). But before stepping in this volatile world of foreign currency trading a small time investor should always keep in mind the implications and pitfalls that this market is entailed with. The basics of currency trading also give you the rationalization for the complex decisions.

Practice a procedure like the one above day after day and begin to see some progress as you get nearer the time you make profits consistently from currency trading. Here is one currency trading tip that can be of great help to you: If you desire to take the safest route possible, go for hedge investments. Here is some advice on how to hold profits in your currency trading.

Work Smart - The amount of effort you put into currency trading has no bearing on how successful you will be and you can easily do all your trading in under an hour a day which leads onto: 4. The Importance of Discipline Currency trading success is rooted in a successful method applied with discipline. These two things alone make the Currency Trading (forex) fairly unappealing to individuals.

Forex currency trading is a huge market. This may sound an odd statement after all the communications and information available is more advanced than ever before, but this is not help it can actually hinder your quest for currency trading success - Here’s why. Go with one or the other and our view is with currency trading research go with the technical.

Through these training methods you can learn Forex currency trading easily; you come to know about the secure and safe places to conduct online currency trade, and how to use various online resources and tools for Forex trading. So there you have 3 tips to make money fast in currency trading. These courses walk you through each step of the account set-up process to advanced eCurrency trading strategies all on-screen.



REDINGTON

Kelly Price asked:


If you are a novice trader perhaps the easiest forex trading strategy to use is a swing trading strategy as it overcomes two problems that most novice traders face but cant overcome.

By using a swing trading strategy not only can you overcome these problems, you can give yourself a great chance of currency trading success.

Let’s look at this forex trading strategy in more detail

1. Patience

Most novice traders lack patience and they think the more they trade the better.

Most go for forex day trading which is probably the best way to lose money you can get – day trading simply does and cannot work, due to the fact all short term volatility is random.

You can never get the odds in your favour and you can never win – PERIOD.

Other traders however lack patience when long term forex trend following – they simply cannot accept the profits it wants to give them!

We all want profits – but when you sit on a long term trade and see open equity dips of thousands of dollars the temptation to take it is huge and most novice traders bank profits far to soon.

If you are forex trend following you need to take a bit more risk and that means hanging on for longer term gains.

Most traders simply don’t have the patience and discipline to do this and it’s hard even for pro traders.

Swing trading when incorporated in a forex trading strategy overcomes the problem.

You are looking at making profits in periods of 3 days to a few weeks, so you are never holding a position for long periods, and there are plenty of opportunities to keep the trader interested and finally, stop loss protection can be tight keeping risk low.

Forex swing trading is easier than long term trend following as you don’t have to be so patient, it’s easy to maintain discipline, which is the key to big forex gains.

2. Swing Trading is simple

Swing trading tends to be quite simple to learn.

All you need to do is look at support and resistance and use some momentum indicators to time your trades.

One or two timing indicators are all you need to judge price momentum as it moves into test support and resistance and your all set to swing trade.

Being simple to understand is a big advantage, because from understanding comes confidence and from confidence, flows discipline – the key to successful trading is having the disipline to foloow your plan through periods of losses and is a trait all succesful traders have.

So if you want to trade currencies then try swing trading its simple, easy on the mind and can be very profitable.

Consider it as part of your forex trading strategy and let it help lead you to the currency trading success you desire.



KEATHLEY