InvestMacro FX

By James Woolley – One of the most popular methods of trading when it comes to forex is to identify and trade overbought and oversold positions. However is this really the best way to trade the forex markets?

If you’ve been a trader for any period of time you will know that it is extremely difficult to catch the top or bottom of a market, and to do this on a consistent basis is even more difficult.

Even technical analysis experts struggle to pick out tops and bottoms of trading ranges on a regular basis, and although they may get lucky occasionally, there will be plenty of other times when they’ve entered a position too early or too late.

It’s important to note that a currency pair, or indeed any financial instrument can remain overbought or oversold for a very long time, and may become even more so. Just because certain technical indicators signal a probable high or low has been reached, does not necessarily mean that this is the case.

For example, there may be several indicators such as RSI, CCI and stochastics, for instance, indicating that the GBP/USD pair is currently overbought and therefore ripe for shorting, but there’s still no reason why it couldn’t go 200 points higher into even more overbought territory.

Furthermore this is the case whether you’re trading short term or long term. Yes it’s true that forex pairs do conform fairly well to technical analysis, but there are always exceptions (otherwise we would all be millionaires).

The problem with this method of trading is that you are always fighting the trend, which is why I personally prefer to use methods that follow the overall trend.

However, if you do want to trade overbought and oversold positions, you can still go with the trend to some extent by waiting for a solid confirmation that a reversal is taking place.

This will mean that you don’t catch all of a move but you will have added confidence in your trade that a true reversal is about to take place when you do enter a position.

For example you could use crossover indicators like EMAs, MACD and TRIX for confirmation.

Anyway the main point I want to get across is that trying to consistently find highs and lows is a difficult way of trading which is why you’re better off either using a trend-following method or waiting for added confirmation if you do want to trade this way.

About the Author

James Woolley runs a blog where you can learn forex trading and read his Forex Trading Machine review

By Warren Seah – Forex trading is a very profitable business but it can be also a very risky business that is if proper money management is not employed. If a forex trader don’t make proper use of stop loss placements and trailing stop loss or take profit levels, he will be taking on high risk which means that any trades may bring his equity account to the risk of ruin. These tools are very essential, and it is very difficult to make profit in Forex without making proper use of these tools.

What are stop loss orders?

It is a type of order which will automatically close a trade at a set level in order to prevent further losses. Often, it is used as a safety precaution and is most needed when a trader made a bad trade.

For instance, say you just bought the EUR/USD at 1.4000 because you expect the euro to appreciate and reach 1.4100 (+100 pips) in the short term. You want to protect yourself by placing a stop loss below 1.4000, say 1.3980, so that if the price does not go your way the trading platform can automatically close the order to prevent you from losing more than 20 pips.

Stop loss orders not only free the forex trader from the computer, it forces him to limit his losses prior to making the trade by way of money management.

While placing stop loss is one of the sound principles of money management, on the other hand, it may cause some trades to hit the stop loss, this is often called a stop out. This is one of the most cited reason why beginning traders are afraid to place stop loss. Another reason will be because of a broker’s (scammer in disguise) stop loss hunting activity (it is most important to stick with a regulated brokerage company)

Trading Insurance For Forex Traders

A stop out by the price hitting the stop loss will cost the forex trader money just like the cost of insurance, but the trader didn’t lose it all and he can regroup and relook at his trading performance at the end of trading day. Stop loss is like an insurance policy- property insurance insured the property and indemify for losses.

In the event that the house is damaged, the insurance company will indemify the losses and the money can be used to rebuilt the house and help the owner overcome emotional shock and financial troubles.

Ensuring a stop-loss is placed in every trade is the first step to proper money management. Putting a money management plan into place may create some additional costs in both time and money. But these costs can work to a trader’s advantage in the same way like paying for a monthly insurance premium cost can protect policy owner against catastrophe for a variety of situation in day to day life.

By implementing a stop-loss is like an insurance policy, a trader is protecting himself from the worst-case scenario, limiting his risk and ensuring that his equity account will not be completely devastated in the event of a catastrophic event that he has little or no control over. Basically, it means that he can come back to trade another day.

About the Author

Warren Seah

“Introducing 11 Exit Strategies, What Every Disciplined Traders Need … Go Without It You Could End Up Being A PIP VICTIM Just Like Thousands Of Traders Out There.”

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By James Woolley – I started trading forex a few years ago now after having previously traded the FTSE 100 index and specific shares. Just as in these other markets there is one big lesson to be learned from trading forex and that is as follows.

If you want to become a successful forex trader you have to learn to cut your losses early and let your winning trades run for as long as possible.

When I first started out I used to make a lot of mistakes, but it was all part of the learning experience and I’ve come out of it a consistently profitable trader.

The biggest mistake I made initially was not having any stop losses at all, so any relatively small losses I incurred used to mount up and become big losses.

It’s very easy to believe that you will ultimately be proved right and stick with a trade, which is what I did quite a lot initially, but this can be very expensive and to be honest I quickly learned that’s it’s best just to accept you were wrong, take a small loss, and move on to the next trade.

On the opposite side, when it comes to winners you should either have a set target price and profit you are looking to achieve and stick to it, or ideally you should let your profits run as long as possible.

Any target profit should be higher than the stop loss you are setting. For example, if your stop loss is 10 points away from the entry price, then your limit price should be more than 10 otherwise you will need a fairly high win ratio of 50% just to break even.

Make sure you stick to this target as it is very easy to see a profit and grab it before the price has reached your target price.

Another approach is to close part of your trade at the same number of points away from the entry price as the stop loss so you guarantee yourself a profit, and let the remaining portion run as long as possible to squeeze out as much profit as you can. You can move your stop loss to break even so this remaining portion left open doesn’t turn into a loss, and the worst that can happen is you break even.

Alternatively you could just let your profits run as long as possible and use technical indicators to decide when a trade has run it’s course. For example, if a trade goes into profit, you could move the stop loss to break even straight away and let it run.

All of these methods are used to some extent by all profitable traders, but the key lesson is to make full use of stop losses. You want to make your trading pot grow over time, and the best way of doing this is by cutting your losses early and letting your winners run. This way you don’t need a high percentage of your trades to be winning ones, you just need a small percentage of winning trades which are allowed to accumulate.

About the Author

James Woolley has been trading currencies for around five years. He also runs a blog where he reveals all his best forex tips and strategies

By Warren Seah – Forex money management has long been a topic shun by many retail traders due to being restrictive to the vast potential of the profits one may gain. It is true that there is a huge potential to gain the market if one is willing to risk some capital but that may be only just an once in a while moment. In order to make consistent and profitable trades it takes just more than just plonking in huge amount of capital into a single trade. It requires forex money management skills to do so.

Ask yourself these few questions to begin with:

1. Do you always lose more than what you are comfortable with in a single trade?

2. Do you always enter more trades than usual when you have just lost a trade?

3. Do you have a threshold of how much you can afford to lose before your account goes bust?

If you have answered Yes to any of the above questions, it is time to re-look into your trading plan and you may want to add forex money management to your planning.

For beginners who are looking to earn big bucks off the market, you are normally eager for huge success in a short period of time but trust me it is also the surest way to burn your account in the shortest time.

It is always advisable to start small with risking amount of money that you are comfortable to the point that should you lose this in a trade, it will not upset your life balance. For starters, risking 1%-2% per trade is good. It allows you to build up your confidence slowly in trading and when you are ready, you can afford to risk more but I would suggest no more than 5% per trade.

There are simple ways to perform money management to your trades which you can explore:

1. Having equity stop in place

-You decide how low you can go before you go crazy over the losses

2. Have a trading time frame

-Trade at times when you are absolutely at ease, cause you won’t want to get emotionally involved with your trade.

3. Don’t over-trade

-Overtrading causes you to lose your focus and putting your money into more trades that you could not afford more to lose

Always keep check of your trading behavior during trades and do a reflection upon your actions after your trades. Document your trading behaviors and rectify them as soon as possible. Forex money management practices are to be encouraged if you want your trading journey to be more successful and consistent.

About the Author

Warren Seah

“Introducing 11 Exit Strategies, What Every Disciplined Traders Need … Go Without It You Could End Up Being A PIP VICTIM Just Like Thousands Of Traders Out There.”

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By James Woolley – A lot of the major financial institutions take very long-term positions on the various different currency pairs, but amongst individual traders there are very few traders who trade this way. So why is this?

Well I think the main reason is because people who trade for themselves from the comfort of their own home simply do not have the patience to hold on to these long-term trades. Although you can potentially make huge profits from riding these long drawn out trends (often totalling several thousand points), the majority of traders prefer the excitement of day trading or prefer to place trades that last one or two days at the most.

Another reason why many people are put off of the idea of long-term trading is because they do not know when to exit a position. This can be a real problem because it you call it correctly, do you bank a profit of 500 points, for instance, or do you try and hold on for another month or two in the hope that it falls another 2000 points? If you hold on, the price could quite easily bounce back and wipe out your current 500 point profit.

This is a real dilemma and is one reason why many traders prefer to trade short-term charts. If they get it wrong they know that another trading opportunity will be along very soon. However this isn’t always the case when you trade the long-term charts such as the daily or weekly charts, for example, because you may be waiting months for the next decent set-up.

Finally there is one other reason why people stick to short-term trading and that’s because if you trade the daily or weekly charts, you obviously have to employ pretty large stop losses in order to give the position a chance to unwind. You can’t target gains of 500, 1000 or 2000 points, for instance, if you use a stop loss of 20 or even 50 points, because this simply isn’t big enough. So because you need to use a larger stop loss, you obviously need a decent amount of capital to trade with otherwise one loss could destroy your account.

So to summarize, although I believe that long-term trading is the easiest and most profitable way to trade the forex markets, I accept that it’s not for everyone. For a start you need a decent amount of capital behind you, and you also need a great deal of patience and discipline in order to extract maximum profits from these long-term trades.

About the Author

Click here for a complete list of forex brokers and to read a full review of Forex Mastery.

By Cedric Welsch – Finding a forex trading system that works will require a little bit of knowledge and first-hand experience with forex markets and trading. Way it works is that traders can use the forex market to buy and sell currency pairs. The profit comes from currency fluctuations that create a difference in the relative values of the currency pair.

The key to it is to know when and where the fluctuations and long-term currency changes will come. For this, forex traders have developed systems that use strategies based on multiple indicators. There is a large range of possibilities to construct or buy a trade system.

The trader first has to decide on which strategy to use. Trading systems have built in strategies that depend on a combination of indicators. It is even possible to build one, and forex trading courses usually teach traders how to do this. But it’s a bit like reinventing the wheel, when one needs to buy a car.

It’s also difficult to point towards a forex trade system that works more efficiently than the rest. There are new ones that pop up in the market every other day. Traders who haven’t used one previously and are having difficulties sorting out the good ones from the rest should visit a few forex review sites.

It’s also a good idea to try out the system first, in case the vendor offers a free trial. If not, the least that can be done is to study all the historical data related to the system. Find out the average pip gain the system can rack up in a week or a month for a specific number of trades.

Before buying into a system, it might be advisable to learn a little more about how the system is built and how it works. Building one from scratch is not strictly necessary in order to know how to use it, but it does help. When one knows how the system in question is able to combine indicators to execute the trading strategy, it makes it easier to extract the most from the system.

Some traders are able to fine tune the entire process so that the system can be automated and is able to enter and exit trades without any supervision. The computer is left on, the system plugs into the trading platform, and will execute trades 24/7. To summarize, before starting to look around for a forex trade system that works, try to find out how these systems work.

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

AUDUSD broke above 0.9404 (2009 high). Further rise is still possible next week and next target would be at 0.9600 area. Support is at 0.9240, as long as this level holds, uptrend from 0.8771 could be expected to continue. However, a breakdown below 0.9240 level will indicate that a cycle top has been formed on daily chart, then pullback to the lower border of the rising price channel could be seen to follow.

For long term analysis, AUDUSD has formed a cycle bottom at 0.8066 level on weekly chart. Rise towards 0.9849 (2008 high) is still possible in a couple of weeks.

Weekly Forex Forecast

EWI’s Senior Tutorial Instructor Jeffrey Kennedy gives you practical lessons — free

By Elliott Wave International

There are two camps of market analysts out there: the fundamental camp and the technical one. Fundamental analysts look at things like the GDP, unemployment, interest rates, etc. to make logical assumptions about where the stock market is going.

Technical analysts use none of that. They look at the market’s internals to gauge the trend: things like momentum, trend channels — and yes, Elliott wave patterns.

And this is your free chance to learn how they do it.

We’ve put together a free 54-page Club EWI resource for you, “The Ultimate Technical Analysis Handbook.” Below is a short excerpt from chapter 3. Enjoy! (For details on how to read this free report in full, look below.)

The Ultimate Technical Analysis Handbook
Chapter 3: How To Integrate Technical Indicators Into an Elliott Wave Forecast
By EWI’s Senior Tutorial Instructor Jeffrey Kennedy

I love a good love-hate relationship, and that’s what I’ve got with technical indicators. Technical indicators are those fancy computerized studies that you frequently see at the bottom of price charts that are supposed to tell you what the market is going to do next (as if they really could). The most common studies include MACD, Stochastics, RSI and ADX, just to name a few.

I often hate technical studies because they divert my attention from what’s most important — PRICE. … Nevertheless, I have found a way to live with them, and I do use them. Here’s how: Rather than using technical indicators as a means to gauge momentum or pick tops and bottoms, I use them to identify potential trade setups.

Out of the hundreds of technical indicators I have worked with over the years, my favorite study is MACD (an acronym for Moving Average Convergence-Divergence). … Even though the standard settings for MACD are 12/26/9, I like to use 12/25/9 (it’s just me being different). An example of MACD is shown in Figure 6 (Coffee).

The simplest trading rule for MACD is to buy when the Signal line (the thin line) crosses above the MACD line (the thick line), and sell when the Signal line crosses below the MACD line. Although many people use MACD this way, I choose not to… I like to focus on different information that I’ve observed and named: Hooks, Slingshots and Zero-Line Reversals. Once I explain these, you’ll understand why I’ve learned to love technical indicators. …

By CountingPips.com

U.S. Consumer Prices increased for the second month in a row as energy price increases helped push the index higher, according to a report released today by the U.S. Department of Labor. The Consumer Price Index, a key measurement of inflation, increased by 0.3 percent in August following an increase of 0.3 percent in July. Today’s data matched economic forecasts that were expecting a 0.3 percent increase. Consumer prices had been in decline for three straight months before July.

The annual rate of consumer prices rose by 1.1 percent when compared to August 2009 following an increase in July by 1.2 percent. Rising energy prices were a significant contributor in the increased inflation as the report showed that energy prices rose by 2.3 percent and gasoline prices increased by 3.9 percent for the month. Food prices rose by 0.2 percent in August after a 0.1 percent decline in July.

The core inflation reading, excluding volatile food and energy prices, was flat for the month and below the market forecasts expecting a 0.1 percent gain. The annual rate of core inflation increased by 0.9 percent for August following an increase of 0.9 percent in July.

US Dollar on defensive in Forex Trading

The U.S. dollar has been mostly lower in forex trading today against the other major currencies in the early going of the US trading session. The dollar has been gaining versus the Canadian dollar while trading lower against the British pound sterling, New Zealand dollar, Australian dollar, Swiss franc and the Japanese yen, according to currency data by Oanda. The dollar is currently trading almost unchanged against the euro at time of writing.

The US stock markets, meanwhile, have had a positive session to start the day with the Dow Jones rising by over 40 points, the Nasdaq increasing by over 10 points and the S&P 500 showing a quick 5 point gain.  Oil has traded about unchanged at $74.60 while gold has risen to a new record high by gaining $7.70 to $1279.60 per ounce.

By Anton Eljwizat – The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, as I demonstrate below, the 8-hour chart signals that a bearish reversal is imminent, and it might have the potential of reaching towards 111.00 in the coming days. This might be a good opportunity for forex traders to enter the trend at a very early stage and a great entry price.

• Below is the 8-hour chart of the EUR/JPY currency pair.

• The technical indicators used are the Slow Stochastic, Williams Percent Range, and Relative Strength Index (RSI).

• Point 1: The Slow Stochastic indicates a bearish cross, signaling that the next move may be in a downward direction.

• Point 2: The Relative Strength Index (RSI) signals that the price of this pair currently floats in the over-bought territory, indicating downward pressure.

• Point 3: The Williams Percent Range has peaked near at the 0 marker, which means that there may actually be a strong level of downward pressure.

EUR/JPY 8-Hour Chart

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.