InvestMacro FX

By David Adams

I don’t doubt the legion of day traders who claim great success with options and stocks. But neither of these investments meets the criteria for a great day trading instrument for me.

Why?

The real issue in day trading stocks for me is the lack of leverage available to maximize profits. Regulation T is currently set at 50%, which means your margin account must contain at least 50% if the net value of your holdings at all times. You have some leverage, I suppose, but not enough to satiate my appetite for profits.

Generally speaking, stocks are not nearly as volatile as the index futures contracts, and the one essential prerequisite for earning profits, substantial profits, is volatility. In other words, if the stock doesn’t move substantially, you are forced to wait until it does. I don’t hold any day traded equities overnight, so commission costs are a real concern in trading stocks. No, I need something with some real volatility to day trade.

You might argue that Penny Stocks provide the needed price movement to day trade. They do, as a matter of fact. But many penny stocks are of dubious value, and getting accurate information about a penny stock can be an arduous adventure. Further, the market maker in a penny stock might well be the company itself, or proxy market maker closely tied to the penny stock company. The end result can be some fairly wide bid/ask pricing, which is very common. No, I want publicly traded investment instruments with a high degree of transparency for my trading.

Options are a wonderful way to hedge a current holding in your portfolio, but they can be less than adequate for a novice trader, or even an intermediate trader. There are some very adept traders who quite well with options, but generally speaking, my experience with options traders finds a very unhappy crew. With good reason. There are many variables to deal with in options trading; strike prices, expiration dates, price decay, to name a few. I don’t like the odds, and options traders are often disappointed in their results. For years we read about former baseball great Lenny Dykstra and his genius in options trading, ads trumpeted his acumen in this field….until he declared bankruptcy a few months back, 60 million in the red. Case closed.

Futures give me an instrument with adequate liquidity, a transparent market, and plenty of price action to profit. Of course, because there is plenty of price movement should not be a promise of profits. You have to be on the right side of the price movement to make money, and that chore can be difficult. But the potential is there, and I have made a living many years in the futures markets with good success. I cannot say my endeavors with stocks and options, in a day trading sense, are nearly as successful.

I would say that I do buy and hold a small basket of stocks, but I am concerned, in this article, with strict day trading, and stocks don’t provide me with enough price movement to profit in a way I find acceptable.

About the Author

I write mainly about financial topics, specifically daytrading the emini contract, and many of my more technical techniques can be found at my blog, The Fractal Futures Trader.

By Justin Thomas – There are five major and numerous minor currencies in the world, and the currency pairs they form can influence the cost and the total final value of your currency transfer.

Sending money from Point A to Point B within a country is relatively easy and the cost of this currency transfer is determined only by the fees of the service provider you have selected. Transferring money abroad is something different: it involves not only the fees and charges but also the currency exchange rate between two particular currencies called a “currency pair.” In the Forex market, the value of a currency is determined in terms of another, thereby forming its price. The initial currency is referred to as “base currency,”whereas the currency to which it is compared is called “quote currency.”Basically, this means that you need a certain amount of currency X to purchase one unit of currency Y.

Thus, if you are sending, say, GBP 100 to a relative of yours in Australia, he will receive the money after they are converted into Australian dollars, unless he possesses a bank account in British pounds. Even if so, he will have to utilise this ?100 to “purchase”as many Australian dollars as GBP 100 can buy. Obviously, this mechanism influences not only the cost of your currency transfer but it also affects the final value of the money received. You can hedge against the currency risks by using currency options but it is a good idea to consult an expert before doing so.

In fact, all currencies are traded in pairs and Forex brokers quote them using the format AAA/BBB, where AAA stands for the base currency and BBB is the quote currency (for example GBP/AUD). It is very hard for an individual to take advantage of the fluctuations of these currency pairs because one has to trade them in large volumes to earn a profit and be able to get a favourable currency exchange rate.

Most of the trades on the Forex market, up to 90% of the daily volumes, involve the six major currency pairs or majors: EUR/USD, GBP/USD, USD/CHF and USD/JPY,. There are also cross rates, called crosses, in which the U.S. is not involved. Some of the most popular crosses include: GBP/JPY, GBP/CHF, GBP/CAD, EUR/GBP, EUR/CHF, EUR/JPY and EUR/CAD.

Companies specialising in currency trade and transfers frequently utilise alongside major currency pairs various exotic crosses to offer a favourable exchange rate to their customers. However, one must have deep knowledge of exotic currencies to profit from such crosses because very often the market for exotic currencies lacks liquidity and they are not quoted on many Forex trading platforms. Moreover, to profit from exotic or uncommon currencies sometimes several trades between different currencies are required and one could not expect to be successful in conducting such deals unless he is an experienced Forex trader.

Keeping an eye on the development of currency pairs can help choose the right time to make a currency transfer abroad but it is better to consult a specialised company when the matter in hand is to get a favourable exchange rate for a particular currency pair.

By Cedric Welsch – Today’s technology has provided us with some of the best forex training programs ever available. The advent of these various programs makes it easier to learn and master the art of Forex trading. Before signing up or purchasing any training program you should be sure that the program is offering you just what it says, as well as what you are looking for. You should research several different programs before making a decision of which one you will finally choose. The best programs available today are those that give you what is called comprehensive training. This type of training takes two important factors into consideration and these are: theoretical training and practical training.

While it is difficult to say what the best forex training programs are, those that offer this type of training are considered to be among the best. The theoretical portion of this type of training program will provide you with the necessary knowledge that is required to understand the basic concepts of the Forex market and trading. They should focus on the impact that the movement of various currencies has on the value of your holdings. It should also give you a firm understanding of the different factors such as employment levels, oil prices, the economic and trade policies of other countries and how all of this has an influence on the Forex trading platform.

By being cognizant and and staying informed of these factors you are better able to develop a method for understanding how the various currencies will do in the market. This portion of your training should also be an introduction to the various financial tools available to foreign traders that allow them to analyze and track currency movements and the trend of the market. Be aware that they are hundreds of different tools available to help you do this and your training program should make a recommendation or at least give you the understanding and knowledge so that you will be able to decide which tools you will need in order to be successful.

Your chosen program should help you determine which currencies you should buy at a given time and went to unload, after all the name of the game is to make a profit and to do that in the Forex market it requires the correct timing. The practical part of your training program is where you’ll actually practice all the different theories and skills that you have learned. You will be operating out of a demo platform where you will actually be able to get a feel of how the market works. You will work to develop your trading skills until you have developed a concrete trading strategy and are ready for the real thing. By either consulting with a financial adviser or doing a search on the Internet you will be able to find some of the best Forex training programs available today, which will be your key to becoming a successful trader in this market.

About the Author

Do you want to really make profits with forex? Make sure you get fresh updates ahead of everybody else here: Forex News

Also, you need to know how to read and analyze the trading market well. Learn Currency Trading News

By Benjamin Stockton

The attraction of making money quick has been drawing a lot of people towards forex trading. There are good reasons why they are attracted; the forex market is the biggest financial market in the world and with huge amounts of money circulating, estimated to reach more than three million dollars a day, the temptation to get a piece of the action is quite reasonable. Unfortunately a lot of newcomers get burned in initial tries and either they got no more money to invest or they got really chastised by the experience. Some, however, manage stay on board. The secret why they succeeded while majority failed is because they understood right at the very start that though you can earn money from trading forex fast, you can only lose money just as fast. The market offers great opportunities for profit taking but it is littered with forex dangers as well.

One of the trading practices that holds a lot promise but is fraught with hidden dangers is forex leverage . The use of leverage allows people to control bigger trades with just a minimum deposit on their trading accounts. The higher the leverage, say 400:1, the bigger the trades you can set-up. Naturally, a few pips moving your predicted path earns you big money, but a few pips moving against your position can wipe you out in a matter of minutes. Evidently, it’s not advisable for newcomers just learning the ropes to go for high leveraged trades. It is more prudent to be content with low but steady earnings until they have perfected a foolproof trading strategy.

Another forex danger you must avoid is not using the stop loss/gain mechanism that every forex platform provides properly. The stop loss/gain puts a limit to your losses should the market goes against you. It provides you breathing room to assess your position and make some adjustments. As long as something is left in your account there’s still a chance of recovering and even earning with fine-tuned stop gain/loss set-up and better trading strategy.

Failure to read forex movements or trends properly is the biggest boo-boo you can make and you will get you a heavy beating soon enough. So consult more experienced traders at least until you have learned to read forex charts well enough to trade without expert assistance. This danger is related to reading trends properly – not reacting to major economic news or events. Usually major events like the OPEC increasing the price of oil create ripples in the market and it would be foolhardy not to make some adjustments to your trading position. There are other dangers but the one with most impact is going into the market not having a tested trading plan. Study of the well established currency movement patterns is a must. You can always put them into a test during demo trades to see how they work in actual trading scenarios.

About the Author

Benjamin Stockton is a dedicated father to three children and forex tracker. If you want to knoew more about forex dangers 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.

By David Adams

Like a lot of people, I have a college education. Years ago I planned a career in corporate America and live the middle class American dream. I was lucky, I fell into the trading business and learned about money. It wasn’t on purpose, I didn’t suddenly decide that being a trader was a great idea…the job was offered to me.

During one the current recession, I have made one very interesting observation about the US population. We don’t have the slightest idea on how to make money efficiently with a level of low risk. We’ve forgotten the principle of the American dream. It’s shocking

I have a friend who is a university professor and has found his salary cut back drastically and has decided he is going to start a restaurant. Of course, it will take all of his savings and a hefty loan from a banking friend to finance his operation, and then there is the problem of running a successful restaurant. He knows nothing about restaurants, or making money, but a restaurant was the best idea he could come up with. And he is going to risk his life savings and mortgage his future on a bet that he can make the thing work out. I hope he does…

What’s wrong with this picture? We are a country of technology and education, but the true sense of entrepreneurship we enjoyed in the past is fading.

Do you have a Plan B? Sure, you can sell some fruity health drinks that promise everlasting life, sell berries to lose weight, or pester your friends to death with the latest MLM opportunity, complete with ads of successful MLMer’s driving Ferrari’s and living in mansions. I think anyone who has every been involved in an MLM knows how the story usually works out. It ain’t pretty, or cheap.

What wrong with learning a skill specifically designed to make money?

This is the point where I become completely baffled. I trade, all I do is try to make money. I don’t try to sell anyone, and my income is is not dependent on someone else buying the latest gizmo I am trying to hawk. I have a distinct and specialized skill that is easily taught and readily learned and yet this business is often ignored. Oh, some people might look into it a little bit, and usually get frustrated with the terminology or the fact that it may take a bit of learning, time and practice to get good. But once you got it, baby, you become a money making machine. A goose that lays golden eggs, yet few people will take the time to learn this relatively easy skill.

In my opinion, most people know more about their lawn than they do their money, and this recession is eating away the money they have.

It doesn’t have to be that way. I just don’t understand.

About the Author

I write mainly about financial topics, specifically daytrading the ES and YM emini contract, and many of my more advanced techniques can be found at my blog, The Fractal Futures Trader.

I also write an ongoing commentary, which is a bit more opinionated, at The Fractal Traders Commentary

By Cedric Welsch – To discover why forex pairs that correlate act as they do, a study of the economies of the issuing nations is necessary. This forex pair is a comparison and is the basis of the exchange rate of one currency for another. Changes and anomalies in the economy of a nation whose note is included in this comparison will cause proportional changes in the exchange rate. Those changes that violate this range of proportions provide arbitrage opportunities. Some of those economic changes are related to the currency itself, and others are related to the economy that the currency represents.

A major factor that affects forex pairs that correlate is that the common idea in the upper circles of the finance world is that inflation is good. There is nothing as certain as the lust of a secretive administer of a fiat monetary system to inflate the money supply. In fact, the money supply could be inflated by printing more money and purchasing anything with it. Nevertheless, one can rest assured that if inflation is considered good, and it is possible to create it at the will of the printer, there will be more of it. It is the comparison of the change in inflation rates that interests those who trade currencies. A factor that interacts with this phenomenon is the actual production of a nation’s goods and services.

The value of currency is arrived at by comparing the quantity of money in the system and the amount of goods and services that could possibly be traded for it. With all else being equal, if the money supply is inflated, and the productions of goods and services remains the same or decreases, the value of each unit of money deflates. Therefore, it is equal to fewer goods, services, and any given foreign currency than it was in the past. The change in the money supply and the change in the production of goods and services are the two main factors in the study of exchange rates.

Forex pairs that correlate represent economies that correlate. The economies correlate in terms of their special products, services, and currencies and the growth or decline thereof. There are other factors, such as the cost to acquire their special raw materials and the price available from the market for their special production. Each nation has its specialty, and it is always a common thought when thinking about the currency, its prospects, and the forex pairs that correlate with it.

About the Author

Do you want to really make profits with forex? Make sure you get fresh updates ahead of everybody else here: Forex News

Also, you need to know how to read and analyze the trading market well. Learn Currency Trading News

By David Adams

Is there any real value in predictive statistics that traders seem to pull out of thin air? The proponents of the random market theory (efficient market theory and it’s many variations) would say “absolutely not.” But the army of Fibonacci proponents and a sea of floor traders who use them beg to differ, because they have watched prices stop on Fibonacci numbers time after time. The question, then, is a simple one; Someone has to be right and someone has to be wrong, why do the market adherents in each camp disagree on something so fundamental?

Do you find it ironic that we understand the more about the subatomic world of molecules than we know about how the market and it’s functions? Some of the best and brightest academics claim there is no predictive ability in using Fibonacci trading. Why? The science of predictive indicators does not pass the litmus test of scientific legitimacy. If you have ever traded Fibonacci numbers, can you tell me whether the market will turn on 38% retracement, 50% retracement, 61.8 retracement? That’s the problem academics have with these systems, there are no empirical facts. Yet many traders swear by them and are very successful in trading them profitably.

Welcome to the world of day trading. It’s a world where traders use systems that are wildly varied and the results are unpredictable. Because the functions of the market are not well understood, as evidenced by the universe of varying opinions on market price action, you will find a plethora of divergent theories and traders who vociferously defend the system they trade to the exclusion of other trading systems. Further, you are unlikely to find two traders who trade identically, even if their investment philosophy is identical.

Let’s start with the Fibonacci numbers. The ratio used to calculate this set of numbers is 1.618 and it stays constant throughout the sequence. Originally identified by mathematician Leonardo Fibonacci in the thirteenth century, their popularity has increased exponentially in day trading. The question is whether they work, and why do they work. Anyone who has traded Fibonacci numbers comes to realize that the market often pauses, sometimes turns, and often blasts right through the sequence of Fibonacci retracements. There is no denying the numbers are relevant, and traders pay attention to them.

But why does the market stop and start so often on these numbers? In trading we don’t necessarily worry about the “why” questions, if something works or has predictive value it is used. You cannot necessarily predict which Fibonacci number the market will choose to honor. On the other hand, many people identify market high and possible lows using Fibonacci ratios, but any trader could identify these point using the alternate method of support and resistance. Yet this support and resistance often occurs right at the 50% or 61.8% Fibonacci levels. Sheesh…..

It is my opinion that Fibonacci numbers work just fine, but the reason they work is because so many technical traders use the system. When the market makes a move from trough to peak, most technical traders will immediately add the Fibonacci retracements to the entire move, and hence the system becomes a self fulfilling prophecy. And that’s okay. Many true Fibonacci traders take offense to this explanation, and claim there is relevance in the ratio. Perhaps there is, but I’m not buying that explanation. As a chaos theory adherent, I feel the only scientifically relevant explanation is the self-fulfilling prophecy argument. The Fib people point to ancient architecture and a wide variety of natural phenomena that use the Fibonacci sequence. It’s true, lots of ancients architects and unexplained phenomena have relevance in their respective fields, but I cannot connect the dots. Which is to say, “yes there are Fibonacci numbers all about, but what does that have to do with investing?” The answer is a resounding “nothing at all.”

But I still use Fibonacci numbers in my trading…

As a day trader, my job requires me to take profitable trades. Whether the Fibonacci sequence is scientifically verifiable is irrelevant to me, as I am only concerned with profitable trades. I cannot recommend using only Fibonacci ratios in your trading. However, I always trace in the retracements after a significant market move, up or down. You would be surprised how often the market honors them, too. I especially like to trade the Fibonacci when it has already stopped and turned on a specific number, as this establishes real legitimacy for this point on the chart. Then I can go to work trading, based on the info the Fibonacci has imparted.

So there you have it, the reason the Fibonacci ratios work is unclear, and I am unwilling to bestow mythic credibility based on the history of the ratio. On the other hand, there is no denying the market pays attention to these numbers. Whether I believe they are a self-fulfilling prophecy is irrelevant, because as traders we only deal in profitable trades and growing account balances. The “why” just doesn’t matter.

About the Author

Many academics cannot find relevance in the Fibonacci sequence and give it short shrift, yet many Fibonacci traders swear by the system. I take a look at the facts of the system and try to sort through how the Fibonacci works, and why it works.

By Bemjamin Stockton – The biggest financial market and most liquid in the world, that’s what the forex market is. You can just imagine the kind of profit earning opportunities it offers. Sadly, as what many new to traders found out, it is not that easy. The forex market is complex; with many factors influencing currency movements that you always have to be alert for developing opportunities and dangerous situations as well. It’s a good thing forex companies and brokers have come up with various tools and software to help you with forex analysis. All traders, veterans and newcomers, rely on effective and efficient forex analysis to earn money from the forex market and avoid getting wiped-out.

What exactly is forex analysis? It’s the process of predicting where currency values will be going in the next minutes, hours or days. You earn money by buying a currency which you think will go up in price in the future and selling when that happens. Seems simple enough but currency values do not usually stay put or go the same direction for long periods of time. Along the way are sharp fluctuations which offer chances of earning but great dangers as well.

There are two kinds of forex analysis – fundamental and technical. Of the two fundamental analysis is perhaps easier but you have to have a firm grasp on the economics of the countries which issue the currencies and the various other factors make currencies fluctuate. Among the Internal factors that determine currency values are economic and political policies, balance of payments, employment, and a host of others. There are also external factors you have to consider. Fundamental analysis helps you have holistic view of the market and if the analysis is correct is a good basis for developing a good trading approach.

Technical analysis is more involved. It is a method of assessing currency values by studying the statistics produced by the trading activities in the forex market like volume and past prices. It is not the intrinsic value of the currency that’s measured, however, but possible movements vis-à-vis other currencies using charts and graphs in the hope of identifying certain patterns from which future trading activities can be based on. This analysis helps you identify favorable entry and exits points, ensuring that you earn money from every trade and avoid losing more than you can afford.

These seem a lot of hard work, but forex brokers are always ready to provide you appropriate forex trainings and even demo trades where you can practice until you have perfected a trading scheme that’s sure to bring in some money.

About the Author

Bemjamin Stockton is a dedicated father and forex tracker. If you want some invaluable advice on forex analysis please visit http://learnforexstrategies.org now.

By Cedric Welsch

The latest announcement made by the US Fed and the impact of this on the value of the US dollar seems to suggest that the state of the economy is indeed affecting the value of the dollar. The latest Fed statement that it is prepared to provide further stimulus to the US economy is indicative of two points. First that the Fed is acknowledging that the US economy is still weak, and second that the Fed may undertake quantitative easing to address the situation of a weak economy.

The poor performance on the consumer spending, employment front, lower housing wealth and soft prices, seem to have urged the Fed to make such a statement. Overall, the US economy grew 1.6% in the second quarter as compared to 3.7% in the previous quarter reflecting the slowing pace of economic recovery. Quantitative easing will imply that the Fed is open to purchasing more assets and flooding the economy with more liquidity. This effectively implies that the supply of dollars in the economy will go up and the markets feel that the value of the dollar should fall in line with such an eventuality.

The immediate impact of the Fed statement was a loss in the value of the dollar versus major trading currencies like the Yen, the Euro and the Canadian dollar. Analysts have interpreted the US Fed statement to suggest that while the chances of a double dip recession have dipped, the risk of deflation is high. The Fed has indicated that it is uncomfortable with the present levels of inflation and may indulge in purchase of bonds. Quantitative easing or an increase in money supply could help counter deflation as there will be more money chasing the same goods and services in the economy, which could put an upward pressure on prices and ward off deflation.

Quite clearly, the slowdown in the US economy and the measures that the Fed could take to counter the slowdown are leading to loss in the value for the US dollar. While, the markets may have reacted sharply to the Fed announcement, the US dollar continues to be the major risk aversion currency and could rise in case of the announcement of any untoward economic development. Such a development could force investors to turn to the safety of the US dollar and make it go up.

The US Fed’s announcement that it could take steps to stimulate the economy further led Asian stocks to recede, indicating some sellout. The funds from such sales could move back to US treasuries and boost the dollar, which would indicate the risk aversion sentiment. While, the Yen also acts as a risk aversion currency, any real substitute to the US dollar for the purpose is yet to be established.

However, the act of printing more money to induce inflation and to stimulate the economy could have an overbearing impact on the long term value of the US dollar. In the past, such acts have led to currencies plunging, though the US is likely to be careful in its quantitative easing such that no drastic fall takes place in the value of the dollar.

About the Author

Do you want to really make profits with forex? Make sure you get fresh updates ahead of everybody else here: Forex News Also, you need to know how to read and analyze the trading market well. Learn Currency Trading News

By James McKee

The Japanese Yen has begun to slide against other major currencies, which signals some headway being made by the Bank Of Japan regarding devaluing the Yen so inflation does not hurt their export revenues. Considering that Japan is an almost exclusively exporting country their economy would suffer more than many nations would if inflation takes hold of the island nation. Due to inflation that has already occurred Japan has shut down many factories due to decreased demand for their goods, and in turn unemployment and poverty in Japan have risen exponentially. The homeless population in Japan has also exploded prompting the construction of shelters to house Japanese citizens who find themselves falling on hard times.

The Bank Of Japan has lowered its interest rates as close to zero as it ever has, and only a week later does it take any sort of effect. This is ominous for Japan because there are no more cards left to play where their central bank is concerned. The United States who has always been an ally of Japan is far too busy with their own financial turmoil to aid the country as it slumps further and further into quagmire which no one can see the end of.

While the Yen has dropped slightly today a correction is certainly in the works for the near future. I would avoid pairing the Yen with the USD due to the USD’s extremely volatile nature as of late. The AUD still has some steam in it from the recent increases in the value of gold, considering Australia is the world’s third largest producer of gold it is a logical connection to make that the AUD will be rising in the short term. Considering that the value of gold is going nowhere but up since the world’s economies are going through the floor the AUD is definitely one to pair with the JPY due to its imminent correction. Stay vigilant and be critical of any data coming in that contradicts your instincts, happy trading!

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.