Wednesday, June 3, 2009

Forex Trading And Analysis

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I've become a little frustrated with most of news sources out there. If you've been an active forex trader for any length of time you'll notice that talking heads are always trying to tell you why something happened.

That's really nice, and might possibly help you learn about various financial interactions, but it's absolutely useless from a trading point of view. If you are trading you need to figure out what's going to happen -- not what just happened. Check out this video (complete with atrociously low audio levels).

This type of analysis is unlikely to help you with your fx trading tomorrow. Generally, how the markets will move tomorrow, based on tomorrow's news, is not something you'll get from any of the gurus and talking heads.

On the other hand useful analysis will be too slow to be meaningful. For example, I'm very confident the world economy will eventually recover. When that happens we'll have a period of high interest rates as rising commodity prices drive inflation. Guess what? This will mean that carry trades pairs will end up at much higher prices. Unfortunately, I can't tell you when the world is going to focus on this. Generally, not before the money moves from wherever it is to wherever it is finally going to end up.

The closest thing to predictive analysis, or something you can really use to drive your forex trades, is technical analysis. Charting. Something which gets very little respect in some circles. Many people don't understand it and many others discount it because it isn't able to make perfectly accurate predictions. Technical analysis does not have to be a perfect tool for prediction. It merely has to increase the odds that your fx positions end up earning you a profit.

Euro US Dollar Exchange Rate Forecast

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Written by Jamie Saettele, Senior Currency Strategist; John Rivera, Currency Analyst; Ilya Spivak, Currency Analyst

Euro / US Dollar Monthly Technical Forecast




Sentiment and technical considerations favor a top forming now. On the sentiment side, the risk reversal rate (call option volatility - put option volatility) on 25 delta 3 month EURUSD options is the highest in at least 6 years (I have data that extends only to 2003) and speculators (as reported from the CFTC through COT numbers) are net short US dollars for the first time since May 2008 (near a former USD bottom). Technically, the decline from 1.4723 counts as an impulse (5 waves) and the rally from 1.2454 is in 3 waves (to this point). RSI is divergent and in overbought territory. The risk to going short now against 1.4723 is that the rally from 1.2454 extends into 5 waves and above 1.4723 in order to complete a larger correction from 1.2327. In this case, there is measured resistance from 1.4791 to 1.4850.

Euro / US Dollar Interest Rate Forecast

Although the main driver of EUR/USD price action has been risk sentiment, it is curious how the pair has rebounded to more closely track the differential in interest rate expectations. The ECB lowering their benchmark rate to a record low 1.00% from 1.25% helped closed the gap as it widened the spread to -11 from -5. The central bank announcing that it will begin on quantitative easing by buying “covered bonds “has eased expectations that they may ultimately lower rates to near zero following the Fed’s lead.

There has been much debate in the public forum from committee members as to whether 1.00% represents the bottom for interest rates and whether the €60 billion in bond purchases is the limit. Unemployment reaching to an almost decade high of 9.2% and inflation falling to 0.6% have caused enough concern that it will keep open the possibility of future action which could be a weighing factor on the pair. Additionally, expectations that the U.S. will emerge first from the downturn could see flows return to the dollar and lift against currencies with lagging economies like the Euro.


Euro / US Dollar Valuation Forecast

EURUSD Valuation Forecast: Bearish


The Euro remains the most substantially overvalued currency against the US Dollar, trading over three thousand pips above its “fair” exchange rate. Although EURUSD has seen decisive gains on the back of a rebound in risk appetite beginning in early March, the long-term fundamental picture is supportive of a broadly bearish scenario: a smaller-scale fiscal effort and a deliberately slow approach to monetary easing suggest the Euro Zone's economic recovery will lag behind that of the US, fueling expectations that the Fed will be first to raise interest rates and boost demand for greenback. Still, the pair’s current momentum cannot be ignored and it is possible that prices could head deeper into overvalued territory before a correction materializes. The deepening disparity is ultimately advantageous, offering sellers a better entry point once a correction does materialize.


What is Purchasing Power Parity?

One of the oldest and most basic fundamental approaches to determining the “fair” exchange rate of one currency to another relies on the concept of Purchasing Power Parity. This approach says that an identical product should cost the same from one country to another, with the only difference in the price tag accounted for by the exchange rate. For example, if a pencil costs €1 in Europe and $1.20 in the US, the “fair” EURUSD exchange rate should be 1.20. For our purposes, we will use the PPP values provided annually by the Organization for Economic Cooperation and Development (OECD). We compare these values to current market rates to determine how much each currency is under- or over-valued against the US Dollar.


Choosing A Day Trading System

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CocupEveryone that aspires to trade in the markets should select a consistent trading system. Below are the principles for examining a trading system. How many of these principles do you adopt with your current approach?

  • To corroborate a trading system you need a minimum of 50 trades in the test. You should also have at least 75 ticks (overall market trades) in a bar to have a sound charting approach.
  • Calculate your average profit per trade, the average loss, and the percentage of your all wins and losses.
  • The biggest winning trade should not surpass 50 of the net profit. Otherwise the random lucky trade factor will throw off your system results.
  • What is the Expectancy Ratio of your method? If it does not surpass 2 to 1 with a 50 but makes money, can you psychologically trade it and except all the losses necessary to stick with the system?
  • As Van K. Tharp, Mark Douglas, Bill Williams, and Bent Steenbarger the Market Wizards all say, you trade your beliefs about the market. What does your trading system expose about your trading mentality? Does your system lead to doubt or confidence?
  • Compare your trading system to other types of investments. Which system has the best Internal Rate of Return with the least risk? At minimum you need at least four times the return of a low risk investment (T-Bills) to make your system worth trading.


What is the best approach to build a solid trading system? Just like you build anything else. You first start with a goal, and apply the principles to reach the end result. Then you create a plan to achieve that goal, which includes all the risks, rewards, terms and conditions necessary to reach your goal.

The missing element is often the next step: execute the plan, closely observe your results, and make necessary modifications or changes to the system. The last step is to observe your emotions to see if you can accurately trade these signals, and play the probabilities for gains versus losses as you have laid out your system.

Mental control is the biggest challenge of any trading system. Have a plan, and trade your plan. This is the best path to achieve your goals.

Tuesday, June 2, 2009

Dollar Stable Against Euro

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After hitting this year’s low against multiple currencies, the dollar remained stable against the euro, showing a slight correction, yet, the sentiment remains bearish as risk appetite grows.

The greenback hit its lowest rate versus a basket of currencies this Monday, after a long rally fueled by economic signs of recovery in Asia and Europe, damping demand for the dollar’s safety investment profile. Today, the dollar is rather stable, with slight gains against the euro, yet it continues to lose ground against commodity-linked currencies like the Australian dollar and the Brazilian real. A strong rally in world equities markets is bringing back risk appetite among investors, leaving the dollar as an investment to look for higher-yielding positions in the stock markets.

Economists have rather divergent opinions, while some consider the euro to be overbought against the dollar, most of them agree that the global slump easing and the current optimistic scenario in the financial markets are likely to continue to weigh on the dollar. It is highly considerable that the greenback will continue to see losses against currencies like the Aussie and the South Korean won, but the main pairs traded will the dollar have a rather misty mid-term future.

EUR/USD traded at 1.4125 falling in the intraday comparison from 1.4135, AUD/USD remained virtually stable at 0.8077.

If you want to comment on the U.S. dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.


The Use of Currency Trading Pairs

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If you plan to go into forex, one of the most important points you need to understand is how currency trading pairs work. Although you are free to experiment and sift through other currencies where you can possibly make a profit, pairs in currency trading are the basics where you will base your trading plans from. If you are new in the field of currency trading, you should definitely consider being an expert with the currency pairs before you explore other fields.

In forex, currency pairs work by relating their values against each other. Each pair is composed of a base currency and a quote currency. The base currency is the first among the pair which is the target currency that you wanted to buy. Meanwhile, the quote currency is the second among the pair which tells you how much of it do you need to buy the base currency or the first one. Using the USD to Euro conversion, a quote presented as USD/Euro=.067 simply means that you will need 0.067 Euros to be able to purchase one US dollar.

Working with Currency Trading Pairs

To be able to plot out your plan in the forex business, you will constantly need to consult your own currency pairs. Among the most popular trading pairs are the combinations of US dollars and Euros, US dollars and Japanese Yen, US Dollars and Swiss Franc. Most of the forex traders use US dollars as their quote currency since it is the most widely used currency in the world. The Euro, Swiss Franc, and the Japanese Yen are among the highest yielding and also most volatile base currencies in the trading game.

As a forex trader, it is your responsibility to keep track of currencies individually. In reality there really are no hard and fast rules about currency pairs. You are the one who gets to ultimately decide which of these pairs you plan to keep an eye on and develop. But it helps to have a separate track of these currencies individually so that if a raise occurs in each of them, you can easily form your pairs and make a sell or buy them at the soonest possible time. The thing about currency pairs is that they may not last as long as you would like them to. Sometimes, you need to make quick pair ups to keep ahead of the game.

Choosing the Best Currency Trading Pairs

As mentioned, there are actually no limits to which currencies must be paired against each other. What it takes is a watchful eye and keen observation to make sure that you have the right combination to trade in the currency market. But if you are a newbie and you are still trying to gain your momentum in the currency market, it will be good to stick with major currencies, such as dollars and euros, as your quote currency.

Although these currencies fluctuate as much as the others, they are also the more frequently used. These currencies will help you develop your own style when it comes to scouting the currency trading game since they are widely used. It is also a good idea to keep only two pairs at a time and gradually increase as you gain more confidence in buying and selling your existing currencies.

Monday, June 1, 2009

Ailing dollar sets gold on track to top US$1,000

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Dollar weakness could prove a boon to gold, pushing prices to new highs for the year above US$1,000 (HK$7,800), as the influence from stock markets and attitudes towards risk wane in favour of its traditional driver.

As the dollar tumbled in the past several weeks, investors looked anew at its fundamentals at a time when gold- specific factors were lacking, leaving the metal to move unfettered through key resistance at US$935.50.

It continued to soar, closing at US$980.30 an ounce on the COMEX
division of the New York Mercantile Exchange on Friday.

Markets have cast aside dollar- positive risk aversion to focus on what makes it most vulnerable - a trillion- dollar-plus US deficit and the impact of unorthodox monetary policy to boost lending.



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If the spotlight on weak dollar fundamentals intensifies, gold could find itself in the eye of a perfect storm. "The dollar/gold relationship will look prominent under two conditions: one is if the dollar is moving around a lot, and the second is if the gold price isn't moving around a lot," said Virtual Metals analyst Matthew Turner.

Bullion's link to the dollar is a well- established one, with the metal traditionally used as a hedge against weakness in the US currency.

A softer dollar also makes dollar- priced gold cheaper for holders of other currencies.

That relationship broke down early this year as both assets benefited from a flight to safety among investors.

According to Reuters data, gold in fact showed a positive correlation with the dollar of 0.5 in January, as stock market sentiment proved the overriding factor to both.

In May, however, it was back to -0.8, close to a perfect negative correlation of -1.

The fact that dollar weakness, rather than risk aversion or other factors, was behind gold's rise was also shown by the its relative stability when priced in other currencies.

The outlook for gold therefore looks largely contingent on the path of the dollar over the coming months.

"People are fearful again that we could be facing a dollar collapse, which would have severe ramifications across the board," said Calyon metals analyst Robin Bhar.

However some analysts, including Virtual Metals' Turner, believe the dollar could pause in its run lower, especially with policymakers now hinting at further interest rate cuts in Europe, which would knock the euro and limit bullion's short-term gains.

Inflation sparked by quantitative easing - under which governments inject fresh money into the financial system - plus sky-high government borrowing to meet the cost of ballots and fiscal stimulus packages could send the euro to US$1.45, analysts said.

Ashraf Laidi, chief markets strategist at CMC Markets, said he sees the euro re-testing its highs of around US$1.55/1.57 by the end of the year.

This could send gold to US$1,200- US$1,300 an ounce by the end of the third quarter, he said.

Gold is a widely used hedge against rising prices, as it is considered to hold its value while paper currencies fluctuate.

Moreover, the precious metal is likely to benefit from fears of a more widespread currency crisis, analysts say.

"Gold is going up when the dollar is weak, but none of the major currencies are standing out as looking particularly attractive at the moment," said UBS strategist John Reade.

regards,
abouts-forex.blogspot.com

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Buying Gold Coins

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Should you be buying gold as an investment today? I wouldn't because the price of gold has been extremely volatile lately and if you get in at the top, it's like getting in at the top of the real estate, stock and any other market, any gains may be lost. If you're going to go into the gold market, the rules are the same as any other investment, it's best to go in a little at a time. Invest the same amount of money every month and any ups and downs will be smoothed and you won't be concerned by the violent swings.

There are other reasons to buy gold besides making a killing in the market. Even conservative investors should have some gold in their portfolio no matter what the market is doing. Not necessarily as an investment, but as insurance. In worst case scenarios, gold will always be worth something, in the best case, gold will be worth more than cash that's in the banks and stocks.

What kind of gold do you buy?

Isn't gold, gold? There are gold coins, gold bullion, antique gold coins, gold stocks, gold mines, futures and commodities markets, stocks and funds that invest in gold mining and equipment that's used to mine gold and precious metals.There are American gold coins and several countries produce gold coins of some sort and in several different denominations, sizes and quality.

Should you buy gold online?

How do you know an online dealer is reputable? The same way you know a brick and mortar gold dealer is reputable. Check the Better Business Bureau, check with independent sources from Internet, family and friends. If they've only been in business a short time, be extra wary, but even established dealers have been known to have problems.

One of the several questions you should be considering is if you want to keep the gold yourself or have the dealer keep it for you. If you're extra cautious and want to ensure your gold is actually in your hands instead of a piece of paper saying it's in a vault somewhere, you may be paying a premium for shipping and insurance. This is another good reason to buy small quantities spread over time. Then there's safety deposit rental if your bank doesn't provide one for free.

What about gold confiscation?

A major reason given for buying gold coins instead of bullion is that in America's history, the government confiscated all gold bullion and reimbursed citizens in paper dollars for their gold, whether they liked the price or not. This law is still on the books and is still a valid law that many, especially now are particularly worried about. An exemption was made during the confiscation for dentist gold, gold jewelry and coins that had intrinsic value to collectors. Does this mean the American Eagle gold coin series has intrinsic value to collectors? New American Eagle gold coins are considered bullion and may be subject to confiscation. If that's a particular concern, ensure you're buying antique gold coins. Those coins come with a hefty premium, dealers and brokers know that and try and push the sell of old gold coins for exactly those reasons.

Selling your gold is the easy part. Because it's gold, you can sell it any time and anywhere in the world. There are always dealers in any decent sized metropolitan area, but like any insurance policy, you shouldn't cash it in unless you absolutely need it.

What You Should Know About it

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There are a lot of opportunities online now a day where one can make a living and in some cases make a serious income which will enable them to quite their day job. These online opportunities include affiliate marketing, multi-level marketing, paid survey, online investment and the list goes on. Among the opportunities, foreign currency exchange or better known as Forex Trading is one that many online income opportunity seekers looking for.

However there are a lot of things and aspects should be considered before one decides to make forex trading as their prime online business. A better understanding of the forex industry and how forex trading operates are important.

Foreign exchange market
Foreign exchange market is the place where currencies are trade. Banks (commercial and central bank) and financial institutions will facilitate the buying and selling of foreign currencies transaction activities here. Other financial institutions include currency speculators, corporations and other institutions.
The main purpose of the forex market is to facilitate international trade and investment. Major currencies traded are US Dollar, Pound Sterling, Euro, Japanese Yen,etc. The continuation growing of the daily volume in global foreign currency exchange market and its related markets have make forex market one of the largest financial market in the world.

Foreign Exchange Rate
Forex rate are determine by floating exchange rate and fixed exchange rate. Fixed foreign exchange rate are decided and fixed by its government. Under floating exchange rate system, forex rate will be fluctuating according to the demand and supply of the particular currency. If the demand (buying) for a certain currency is more than what its supply (selling), its rate will be higher. There are 3 major factors which determine the buying and selling of a currency. There are Economic factors, Political conditions and Market psychology. However, these things tend to be short-term, and don't affect it for long.

Margin Account
To trade in foreign currency exchange, a bond account called margin account should be open. It’s like a saving account where you should deposit certain amount of money in it before you start your forex trading activity. This account will be overseen and monitored by your broker. Different brokers require different amount of margin money to keep your positions open.Normally your broker will not allow you to risk more than what is in your margin account.

How foreign currency is trade
Foreign currency trading occurs when one country's currency is traded for another country's currency at the prevailing exchange rate.Currency is trade in LOTS. Each lot has amount of currency and its trade on a point or pips system. Different currencies have its worth of amount for each point or pips.

Advantages of Forex trading over other types of investment
As compare to other type of investments, Forex trading has the following advantages:
i). Lower margin
ii). No commission and exchange fees
iii). Lower risk
iv). 24 hour market place
v). Free market place

Conclusion
Lots of people make money on online forex trading; some people have become extremely wealthy however as with any online business opportunities, there are no guarantees that you will make money or lose everything you own. You need to be very careful and exercise due diligence. Learn as much as you can about online Forex trading before investing any money and start trading.

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Sunday, May 31, 2009

PDA Mobile Forex Trading

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Are you PDA users want to monitor the movement and forex trading through your PDA or Pocket PC phone wherever you are and whenever using signal GPRS Packet data or... coming here given a application / software is a file format. CAB and you can download forex trading application for mobile with a free.

Mobile trading (m-trading) — controlling of trading account via mobile devices such a cellular phone or a PDA (Personal Digital Assistant). Wireless access technologies WAP and GPRS provide access to the Internet.

System requirements: PDA, Windows Pocket PC 2002 or higher.

MetaTrader 4 Mobile for Pocket PC program is comparable with full-function trading terminal. You have a possibility of full access to financial markets and making deals from anywhere of the world.Moreover, technical analysis and graphical visualization of financial instruments are available (including off-line mode - without connecting to server). Trade dealing is done with careful observation of confidentiality and is absolutely safe. If required, you always have the history of completed trade deals.


MetaTrader 4 Mobile features:

  • sound alerts - there is no need anymore to watch PDA frequently, alerts will inform about changes in the market;Trailing Stops are a technology that allows to drag the current Stop Loss level (SL) of the order automatically following to the moves of the price in the direction of increasing the profit of the order;
  • support of 30 technical indicators, among them are Alligator, Bollinger Bands, Ichimoku Kinko Hyo;
  • VGA-mode the support of which allows to see much more information on the PDA display having 640x480 resolution;
  • multilanguage support allows to switch between languages of the mobile terminal interface and work with all features of the terminal in the native language;
  • access to the news flow allows to make reasonable decisions considering the latest events at the world financial markets.


  • Download:
    Terminal MetaTrader 4
    Download Metatrader4 for PDA (Windows Installer)
    Download Metatrader4 for PDA (cab)

 

About FOREX 2009. Foreign Exchange (FOREX) Unlike other financial markets, the Forex is market has no physical location and no central exchange (off-exchange)!!