InvestMacro FX

By Nicholas Dockerty

Financial spread betting is fast becoming an essential extra tool for investors and traders to use to take advantage of shifting short-and long-term trends on the financial markets. One of the reasons it’s attractive to seasoned market participants is the sheer amount of markets you can take a position on.

For instance, if you were interested in the mining industry you could spread bet commodity prices, industry sectors, forex, indices, shares, binaries and options.

Since the start of the global recession we’ve seen commodity prices steadily rise. While the headlines tend to be taken each week by gold breaking another price record we’ve seen the prices of aluminium, coal, copper and silver go up too.

As a result of this trend we’ve seen the profits of the major mining and metal based companies’ rise and rise and begin to dominate the direction of FTSE 100. There are now thirteen such companies in the FTSE 100 and they are:

Rio Tinto; BHP Billiton; Fresnillo; Kazakhmys; Eurasian Natural Resources; Vedanta; Lonmin; African Barrick Gold; Antofagasta; Xstrata; Randgold Resources; Johnson Matthey; Anglo American.

While it’s a heavyweight industry – accounting for well over a third of the total market capitalisation of all the companies within the FTSE 100 – it’s also a fragile one too.

Substantial profits make for healthy share prices. However, with mining companies being so dependent on commodity prices and commodity prices being so dependent on a range of factors not always in the direct control of the mining companies, the day-to-day share prices of mining companies are prone to fluctuate.

Each commodity has its own unique combination of factors that will influence it.

If the Central Bank of China announces it’s trying to slow down its economy by raising interest rates it will affect the price of copper as demand is likely to fall for commodities used in manufacturing. If the US dollar rises after a boom in domestic GDP then the price of gold will be affected as demand for the precious metal will fall as it won’t be such a successful hedge against a weak dollar.

There is no doubt then that mining companies are increasingly exerting a powerful influence on the overall direction of the UK’s leading index. And more so than ever before it’s better to look at the broader FTSE 250 to get a more truer picture of how well UK plc is doing.

Indeed, consider what affect a major fall in commodity prices might have on the direction of the UK’s leading index?

About the Author

IG Index is the leading spread betting company in the UK with one-in-two UK financial spread bettors having an account with them – according to a survey by research organisation Investment Trends. You can find out more at www.igindex.co.uk.

By James McKee

As economic conditions grow worse throughout the world many officials are left with wondering if it is time to “pull out all the stops” and begin resorting to currency wars. The primary focus of the recent G20 summit seems to have been trade deficits between China and the United States in which the United States appears to be seeking out solutions. This has upset many smaller nations who feel that the G20 should have been more “well rounded” and addressed problems aside from those being suffered by the United States. The recent rise and fall of the US dollar certainly seems to be on everyone’s mind when it comes to the Forex market and the United States government seems to be making efforts to release its trading deficit.

When one country’s currency is devalued by another this can result in the rapid buying and selling of the opposing country’s currency, depending on the situation this cause either a rise or a fall in their currency value. Such efforts may in fact prove to be necessary if events such as the G20 leave many countries feeling “out in the cold” with regard to global economic policy change. This can certainly be a good thing for Forex traders though because currency wars will be very public affairs with predictable results that a clever trader can bet on accordingly.

One of the other major issues on the chopping block at the G20 summit was an initiative to limit a country’s surplus to 4% of their own GDP. This is a move that many believe will motivate China to raise the value of their currency. This is a move that would force China to spend considerable amounts of their enormous financial surplus that severely dwarfs any other in the world. If this did come about it would help the US economy immensely and of course every other economy in the world.

About the Author

Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the forex exchange rates regularly.

By Ray Timus

A crucial issue in Forex investing is to deal with all that information that flows into the market. How you manage this area is up to your knowledge level.

You might find yourself being in one of the two situations: a forex beginner, or already a trader. If you are a forex beginner, start with learning about the market and its concepts, then play on a demo account and then, in a third stage of learning, start trading for real. You go back from time to time to upgrading your knowledge, simulating on a demo and then again trading for real, so you should see this as a continuous process.

On the other hand, if you are already active in the forex field, you should search for continuous improvement of your knowledge, regarding technical analysis, as well as fundamental analysis that has to do with international economics.

An important tool every trader should watch is the Economic Calendar, where you see chronologically the most important economic data that come from the big economies in the world. This is critical, as the data can influence also other markets, like the stock market or the bond markets.

The most traded currencies in the Forex investing world

In a 3 trillion dollar market a day, some important currency pairs concentrate almost all the interest of market participants.

First we have the “majors”, standing for the most traded currencies, representing the important economies in the world: USD – the American dollar, EUR – the European currency, GBP – the British pound, JPY – the Japanese Yen, AUD – the Australian dollar.

Secondly, we have a range of big economies or mid-sized economies, which represent different type of countries. Some economies are linked to services, like New Zealand, and here we have NZD – the New Zealand Dollar, other economies are linked to natural resources: CAD – the Canadian Dollar, RUB – the Russian Ruoble, BRL – the Brazilian Real, NOK – the Norwegian Kroner.

A separate category is RMB – the Chinese Reminbi (or Chinese yuan), because here we don’t have a full flexibility of the currency. Even though China is one of the biggest economies in the world, its currency has very limited fluctuations, and might not seem as interesting for forex investing. It is expected that in the future the importance and the flexibility of the Chinese currency will grow.

See all you need to know about Forex on www.forex-bestglobaltrading.com where you can find multiple resources on technical analysis, how to choose a broker, Economic Calendar and many other useful tools in the forex investing activity.

About the Author

Expert in Forex trading and stocks trading, having my own company in this field since 2006.

By Owen Trimball

If you’re an option trader and your main objective is to be able to quickly and efficiently create option positions with high ‘open interest’ and therefore great liquidity, then the underlying stocks that make up the Dow Jones Index might be just right for you.

The Dow Jones Industrial Index (DJIA) is made up of 30 large companies based in the USA. They all have options, so all you need to do is find a list of the DOW30 together with their stock symbols and create a watchlist in your charting package or broker account. Once you have that, simply analyze these price charts on a daily basis, looking for familiar patterns that to you, mean trading signals according to whatever criteria you use.

Because the Dow Jones stock are so highly traded, you can not only do simply buys of call and put options, but is is also much easier to create advanced options positions such as condors, butterfly, calendar and ratio spreads. These involve a combination of long and short positions which can involve a wide spread of strike prices. The DOW 30 is one place where you shouldn’t have any trouble locating “way out of the money” option strikes which still have great open interest.

Some option trading educators adopt the policy that it is a good idea to have a limited number of stocks that you follow anyway. The idea is that you ‘get to know’ these stocks intimately and become familiar with the way they trade. They become your trading ‘friends’ and you know which signals are the most reliable for each of them. Thirty stocks is a good sized watchlist for anyone, so you should have no problem finding enough trades.

You can use the Dow 30 stock for range trading strategies, delta neutral strategies, as well as vertical spreads, calendar spreads and ratio spreads.

It’s important that whatever option software you are using to trade these options, has the capability to give you the current implied volatility (IV) in the option premium compared to the historical volatility (HV) of the underlying stock. Due to the high ebb and flow of demand for Dow 30 stocks, their option prices can sometimes be overpriced or underpriced. This is critical information that you need to know, particularly if you’re considering using spreads or straddles.

Straddle options should always have low implied volatility and therefore be underpriced. You want them cheap so that if the stock price explodes, the increase in implied volatility in the option premiums that often comes with increased buying or selling volumes will add to your potential profit.

For spread positions, you should prefer higher IV on the short (sold) leg of the position compared to the IV for the long (bought) leg. This will give you an edge, particularly if the stock doesn’t move in your anticipated direction. It isn’t a problem if the IV is the same, but you definitely want to avoid spreads where the IV of the long position is greater than that of the short leg.

The Dow 30 stocks tend to trade in predictable patterns which produce reliable indicators and therefore, can be stocks of choice for better trading results.

If you decide to adopt these large US companies as your option trading friends, you should look for a reputable broker based in the USA that allows you to easily fund and withdraw from, your account from anywhere in the world. Set up your watchlist, wait patiently for the right entry signals, stick to your plan, manage your trading capital carefully and there is no reason why you shouldn’t realize some consistent cashflow.

About the Author

Owen has traded options for many years. Visit his popular site to discover the advantages of Option Trading and how strategies like Dow Jones Option Trading can provide a regular income without the need for large trading capital.

By James Woolley – One of the easiest ways to make money as a forex day trader is to wait for the price to trade in a narrow range before breaking upwards or downwards out of this range. However while this sounds easy on paper, there are two key points you have to consider when trading these potentially profitable breakouts.

First of all it’s important to note that the best breakouts will generally occur in the first half of the trading session before the big moves have got under way. That’s because the overnight trading range (from a UK perspective) is often very narrow for the major currency pairs, so any breakouts that subsequently occur will often be quite considerable.

So you should seriously consider trading around the time when the London and European markets open, and ideally a couple of hours before this as well because sometimes you get some breakouts that occur quite early in the day. You do not really want to be trading towards the end of the trading day when the European markets are coming to an end because even though the US markets are just getting going around this time, the big moves have usually already happened by this time.

The second key point I want to make is that breakout trading by it’s very nature is not a surefire way of making money. That’s because if you actually watch the price action on a daily basis, you will see that many of these breakouts will fizzle out very quickly.

To combat this problem it is always a good idea to take some profits as early as you can (with half your position), and move your stop loss up to break-even as soon as possible. That way you will usually generate some profits from a trade even if the breakout is a false one because there will always be a little bit of momentum right at the start of one of these price moves.

If the price moves back into the range you will have already banked a small profit, but if the price continues to move in the required direction you can potentially bank some massive profits. This is particularly true at the start of the day, as I’ve already mentioned, because there is often much more potential for the price to move strongly in a certain direction.

So what I am basically saying in this article is that if you do trade intraday forex breakouts, it is best to scale out of a position in two stages because by taking some small profits early and moving your stop loss to break-even you give yourself a risk-free trade. It is also a good idea to trade these breakouts early in the trading session because this is when the biggest and most predictable price moves generally occur.

About the Author

Click here to learn all about Forex Morning Trade, a new but highly effective day trading strategy, and to read a full Forex Profit Multiplier review.

By James McKee

Europe is not the only continent looking to tighten its belt at the cost of the common man for the sake of an improved economy. Forex traders should take note of the fact that the United States at large has begun a very real effort to tamper with its economy by any means necessary. Among the proposed initiatives is once again raising the retirement age and lowering Medicaid benefits. The rest of the world is encouraging such measures due to the fact that many other countries are not creating money to solve their problems, they are cutting their budgets.

Among the proposed measures in the US are provisions that would make capital gains and dividends taxable as income as opposed to investment revenue. At current none of the markets are reacting to these proposals, however as their possible implementation date (2012) draws near we are sure to changes in the forex currency exchange and elsewhere. Many financial experts believe that in the short term the dollar will remain at current levels, however once these new measures are implemented the dollar may become even more unstable.

Too little too late is the phrase on the lips of many economists as the United States struggles to find a viable solution to the strife currently being experienced there by citizens at all levels. While other countries such as France and England have undergone pre-emptive strategies to stabilize their economy through difficult measures the United States just continues to print money that diminishes the value of the US dollar. Traders should take notice of these issues with the US dollar when considering it in a pair on the Forex currency exchange. Indicators are abound where the US dollar is concerned and all signs continue to point to instability and as the Federal Reserve’s recent decision truly soaks in it will certainly have an impact.

About the Author

Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the forex exchange rates regularly.

By James McKee

Many traders will have a favorite pair or trading system that they utilize to make money in the market. This can be a great thing for beginners because it allows one to become familiar with a particular currency on the Forex currency exchange however in the long term being flexible is vital to success. There are times when any currency or pair will be far from desirable to trade in due to extreme instability. While there are systems out there that make it possible to predict the behavior of currency some of the time there are no guarantees. This is why we as traders must stay nimble and adaptable at all times.

Bearing in mind that trading currency at different rates is the name of the game with regard to the Forex market. Trading different pairs on the forex currency exchange can be scary at first because each of the majors behaves differently but you must familiarize yourself with them. When trying a new pair or currency it is a great idea to utilize a demo account to avoid losses before familiarizing yourself with a currency. It is usually best to stick with somewhat “stable” majors such as the CAD or AUD when first starting out as a trader but eventually the JPY and USD should also be examined.

While some aspects of Forex trading do remain constant others are in constant motion that is what makes trading difficult. If it were simple there would be no room for profit and none of would have a “job”. Being grateful for the tumultuous nature of the market is a stretch for most, but being grateful that serious competition is less than common than elsewhere is not. Change is scary for everyone but most people do not face their fears and thus can never prosper in some ways. As traders it is our job to face our fears and insecurities and never be afraid to fail so long as we learn something.

About the Author

Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the forex exchange rates regularly.

By Benjamin Stockton – Newcomers are often fired-up by visions of getting quick profits from forex trading that they hastily rush into it. Very unwise of them considering that the market is rather complex. Oftentimes they realize too late that they have much to learn before they can be successful in trading. The best commonsense forex advice one can give them? Study the market first, develop a trading strategy, and then go.

Despite many newcomers getting disappointed, there is money to be made in forex trading. Plenty of it. It’s just a matter of being more deliberate in your approach. For example, you do not use just any kind of forex software. There are many kinds and not all will be good. You want something that’s simple but has all the features that can help you develop a sound trading strategy. The software must have simple indicators that are easy to read and provides you all information and signals for setting-up trades with more than a better chance of earning profits.

One of the most important things a newcomer does to really prepare for forex trading is taking demo trading seriously. All softwares allow practice trading using live market situations as backdrop. Demo trading is crucial to your forex trading education. Not until have you applied the known theories of trading such as forex trends analysis using technical and fundamental analysis, forex leverage, forex margins, etc.., can you begin to really understand the market and earn from it.

You are not, of course, expected to master forex trading that easily. You will probably need a certain husbanding along the way. You will not believe it but forex companies, the good ones at least, which supply the softwares are totally dedicated to transforming into a hotshot trader. It’s in their interest that you become one and so assign technical support personnel to help you with certain problems. Another feature most software have is the trader’s community forum composed of traders using the platform. You can seek advice from any of the veteran traders in the forum for any knotty trading situations you encounter or ask them about some good forex strategies.

Succeeding in forex trading is not impossible. It’s just a question of how you make use of the resources available to you.

About the Author

Benjamin Stockton is a dedicated to three children and forex tracker. <html>To learn more about forex advice and the latest and most effective forex strategies, tools and mindset that will allow you to make lots of money from trading forex please visit http://learnforexstrategies.org now.</html>

By James McKee

When approaching an intraday trade it is very important that a trader always bear in mind the chance of false breakouts and prepare accordingly. When preparing to enter a trade it is important to look for ascending and descending triangles, this is because the pattern established creates a directional bias for the trade. With an ascending triangle bullish gains are being bought at ever increasing levels while the bearish levels are attempting to establish steady support. When trading within these patterns it is best for the trader to keep the pair’s previous pattern in mind before the triangle appeared.

The direction a triangle takes on is an effort to break the horizontal support or resistance. If the pair was going in this direction prior to the formation of the triangle it makes the trade very potentially profitable. The time of day one makes a trade in is also of the utmost importance, because trading when there is high volume as opposed to low volume is always a great idea. Due to this trading during the London session is a great way to achieve the goal of making high volume trades.

Making a trade during a time when there is high volume is key in avoiding false breakouts as is often the case near the close of the Japanese session. A trader’s schedule can be either be their best friend or their worse enemy depending on when they are active versus inactive within the market. The simple fact that many traders are not awake at 3AM eastern time means that they are missing out on the opening of the London trading session, the period which happens to produce the highest volume. False breakouts can of course occur during peak periods as well and as we all know there are no guarantees in the Forex currency exchange, but there are certainly advantages.

About the Author

Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the forex exchange rates regularly.

By James McKee

The US dollar just does not seem to want to budge despite interventions and attempts by the Federal Reserve to stimulate the economy by pumping six hundred billion dollars into the US economy. Talks between the United States and South Korea are an attempt to stimulate an ailing US economy by increasing exports and raising the GDP. Talks however have broken down numerous times due to political tensions in America regarding free trade. A raise in GDP could signal an increase in the value of the USD on the Forex currency exchange. GDP is among the top indicators for currency value when it comes to any economy.

President Barack Obama visited South Korea in an attempt to start brokering a resolution to the current trade dilemma but was unable to do so. The goal of the United States president was to arrive at a resolution by the end of the G20 summit so that United States car manufacturers and beef producers could begin exporting it to South Korea. Such a deal if brokered has the potential to double United States export rates. Once the negotiations are completed and South Korea finds an amicable arrangement with the United States it will be single largest deal brokered by the US since NAFTA.

South Korean activists are very much against the importation of US beef due to a breakout of mad cow disease in 2003, at which time South Korea refused to import anymore US beef. This was a huge blow the US beef producers who have been making an effort to regain a presence in South Korea ever since. A re-negotiated agreement with South Korea would mean a large increase in US exports and this would in turn add considerable value to the US dollar. Traders in the Forex exchange should take note and keep a close eye on the USD.

About the Author

Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the forex exchange rates regularly.