InvestMacro FX

By James McKee

After you have nailed down the basics of interpreting a chart and have decided on a time frame that works for you it is time to add further analysis to your chart. Most charting software such as MT4 (meta trader 4), and other proprietary charting systems used by major brokers contain all the tools mentioned herein. Proper utilization of these tools is vital to your success as a trader and must be understood thoroughly. The first (and arguably most important) of these tools is referred to as Fibonacci retracement, and this system is made possible thanks to the famous Mathematician Fibonacci.

Trading with the Fibonacci indicator can seem deceptively easy for some; however, it must be noted that while technical indicators are good guides they are not guarantees. Fibonacci retracement is no exception to this rule and must be adhered to as such; strict reliance on technical indicators can result in staggering losses, and this is why they should be tested prior to being taken live. Results will be mixed at first, and over time once someone has the feel for a new indicator such as Fibonacci they will be able to apply it with more skill over time.

In order to establish Fibonacci levels use the Fibonacci retracement tool on your respective software (MT4, etc…) and draw a line from the top of a trend to the bottom. At this point you will see a graph plotted out within your chart, and if the currency should happen to “break” Fibonacci levels then you know the price of that currency could be poised to move in a big way. The key trading with Fibonacci or any other technical indicator is not to jump in too early, even once the currency has broken Fibonacci levels it is important to wait for “confirmation” prior to making a trade.

Trading within Fibonacci levels is a far safer bet than trading without them, once a currency pair has “bounced” within Fibonacci levels it is a fairly good bet that they will continue to move in that direction. The reason Fibonacci retracement works a good portion of the time on the online forex exchange is that many traders follow the movement of this indicator and trade accordingly; however, traders are not the only people to influence the market, and decisions such as those made by central banks can bring a new spin on any session. Finonacci retracement is often used in combination with EMA levels and Parabolic SAR technical indicators.

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 online forex trading regularly.

By David Adams

If you ever want to impress a potential new friend, it’s generally not a good idea to tell them that you are a day trader. Over the years, day trading has been associated with well-intentioned individuals losing their life savings, jumping out of skyscraper windows, and going insane. While I cannot make any particular judgments about my own sanity, I have yet to lose my life savings or jump out of a skyscraper window. Yet the fact remains there is a tremendous amount of failure in the day trading business. Of course, this begs the question; why do so many day traders fail?

There are a variety of reasons day traders experience such a high rate of failure; some are very correctable, and others cannot be helped. Whenever I look over a chart that I have traded, I often ask myself why I did not take this trade, or that trade; it all looks very easy in retrospect, yet it is not as easy to initiate trades as the market progresses throughout the trading session.

Some of the most prominent and important reasons for failure are:

• Lack of preparation to trade. Trading is a full-time job and a trader must be aware of a wide variety of variables occurring on a global scale.
• Lack of proper trading technique. I suppose this is the most prevalent problem in trading today.
• Trading the wrong equity instrument. Some equity has tremendous begs to be day traded, while others are very difficult to day trade.

I begin trading in my own personal trading room at 6:15 AM, and I have usually been up for 45 minutes or so studying the overseas markets, the overnight markets, and a few predictive reports to which I subscribe. On the other hand, the majority of the traders in my room show up 5 minutes before the market opens without the slightest idea of what has occurred overnight and no idea about what the day’s trading action may hold. Now you could argue that sense I am the moderator in a trading room it is my job to stay on top of the day’s action; but it is my belief that trading rooms are good places to learn to trade and then move on. I would hate to consider myself a permanent member of any trading room rather than a well trained trader who is fully capable of placing trades without advice. My point is simple; to be a good trader you have to put in daily preparation before you begin trading.

By far and away the greatest deficiency I see in new traders, or traders who are struggling with their profitability, is a lack of proper trading technique. It’s difficult to place blame on any certain cause in this dilemma, because I see trading systems that have been taught that are substandard and really have no chance for the trader to earn a consistent income. On the other hand, it is not uncommon to see traders who have taken a quality course but not put the time in to thoroughly understand and implement the principles of the course. In both instances, regardless of the cause, the new trader is destined to fail. From my standpoint, learning proper trading technique and being able to implement that technique is the cornerstone of consistent and profitable trading. Unfortunately, I have met very few new traders who have put the time and effort into learning a system well enough to implement it properly.

Finally, I see new traders trading a variety of equity instruments that are downright impossible for an inexperienced trader to master. I suggest learning to day trade on the e-mini’s. But even on the e-mini’s, most no students want to begin with the ES contract, which is (in my opinion) is extremely difficult to trade without a good deal of experience. On the other hand, there are a wide variety of lesser contracts with a great deal of liquidity that are far more forgiving than the ES contract. Just the same, the new traders that come to my trading room or training course have typically been failing on the ES contract. I asked them why they are trading such a difficult contract. The answers range from nebulous to an “I don’t know.” It is best to start your day trading experience on a contract that is forgiving and will allow you to learn at a low cost, and I stress this fact in my training.

In summary we have identified three basic areas where new traders tend to fail. I find most traders are poorly prepared, on a daily basis, to tackle the rigors of the Chicago Mercantile exchange. We have also noted that a large number of traders do not possess the prerequisite skills to ever trade effectively and must go through some retraining before they will be profitable. And finally, there is a good number of traders who simply trade the wrong instrument. Find a system, master it, and trade the right contract. That’s the equation for success.

About the Author

Real Live Trading Doesn’t Lie. Spend several days in my trading room and see if you can benefit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here

By James Woolley

There are lots of traders all around the world who make excellent profits from forex trading. Some will trade from home using their own money, whilst others will trade for a large bank using the bank’s money. Both of these groups of traders will share similar traits and characteristics, so how can you emulate their success yourself?

Well first of all you need to have an incredible amount of discipline, as well as a real desire to succeed. You need to work long and hard to find a winning system, which can take some people many months and years, and then you need to be disciplined enough to stick to this system and make sure that you use strict money management principles. You should also ensure that you do not start chasing losses when things go against you.

However what I really want to talk about in this article is the need to trade like the professional traders. This means using the same time frames, the same fibonacci levels and the same levels of support and resistance.

So in other words you want to be seeing the same things that the majority of other traders are seeing because this will make your task of making consistent profits a lot easier. In a lot of cases traders will react to things in a certain way, which makes it easier to predict price moves in the currency markets.

Therefore you do not want to be using less common time frames such as the 3 minute chart or the 2 hour chart, for example. You want to be using the most popular time frames that a lot of other traders are using, such as the 1 hour and daily charts, for instance.

You also want to be using common tools such as fibonacci retracement levels on these most common charts because they will help give you areas of support and resistance where the price is most likely to reverse in the opposite direction.

You also want to be drawing lines of support and resistance on your charts that are likely to be identical to those used by so many other traders. If you draw your own arbitrary lines on your charts, then it will be a waste of time because the price probably won’t react to any of your lines of support or resistance.

So the point is that you need to have probability on your side if you want to make money from currency trading, and the best way to do that is to trade the most common time frames and identify areas of support and resistance that everyone else will be looking at as well. The price will often react in a predictable fashion around these key areas because many traders will be seeing the same levels of support and resistance, and will act accordingly.

You don’t need to use lots of fancy indicators to be successful in this industry. You simply need to follow the professional traders, who will often use minimal indicators and simply trade price action around the key support and resistance levels that everyone else is looking at.

About the Author

Click here to read a review of Currency Cash Machine, the new membership site that allows you to mirror trade the signals of a professional hedge fund trader, and to find more tips and strategies relating to forex currency trading.

By James McKee

The world of trading can be a very intimidating place for those who are not familiar with the finance world. Charts look chaotic at first and there is a language that is completely unique to the trading world. When first trying to figure out whether or not trading is right for you, and it is important to have a basic knowledge base prior to deciding whether or not you want to move forward. After laying the foundation for your trading education there is one thing to always remember: “You will win, but you will also lose.” No one profits from every trade they make, but with practice there is the opportunity to win much more often than you lose.

In the world of day trading the major markets most people participate in are stocks, commodities, futures, and currencies. Among the most active markets is in fact the currency market; the currency market or Forex (Foreign Currency Exchange) is an exchange in which currencies are compared against one another to determine value. The only way to figure out how much the US dollar is worth is to compare it against the Euro, the Swiss Franc or other currency. When currencies are traded for profit they are “paired” in order to establish the current value of a given currency against another.

While shifts in the value of currency are relatively small (often less than 1% a day) the use of leverage makes it possible for a trader to profit immensely from a relatively small amount of exposure. For example, if you were to invest $2000.00 at 50:1 leverage that would mean that you invested $100,000.00 in the market place, and if you make a trade going in the right direction, and it moves one percent you just made $1000.00. Of course, you do not have to wait for it to move a full one percent, and taking even 20-30% from a trade is not bad if you are making that from an investment every day.

Of course there has to be a measure of discipline within a trader’s routine prior to even thinking about trading live in order to profit. The use of a free demo account is invaluable to new traders since it provides the exact same experience as live trading (minus profits or losses of course); no one should ever use real money until they are profitable in a demo account. With some learning and due diligence applied a new trader could have there demo account at a steadily profitable status within months; although, everyone is different and no one should give up so long as they are making progress. There is the very real opportunity for many who love the finance world to move onto the online forex exchange and make it a full time job, but only those who are willing to truly commit them sel

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 online forex trading regularly.

By David Adams

It’s not unusual to see pieces written that enumerate important points in the field of e-mini trading. Many intimate that there may be 3 or 4 key skills that will put a new trader well on his way to trading success. Generally speaking, the articles are well written and the points are valid. On the other hand, I would like to point out that they are a wide variety of skills that must be thoroughly learned in order to trade profitably.

I suppose the most difficult aspect of learning to trade is the steep learning curve the profession entails. It’s simply not enough to learn to recognize a good set up, or find an occasional good trade. No, there is a well-defined skill set that must be learned. For a trader can develop the necessary confidence to attack the e-mini markets with consistent success. That is a key word here, too. Consistency. Great traders are consistent day in and day out, while they may have to adjust their trading style incrementally to specific market conditions, their overall style remains consistent and their profitability is also consistent.

Some of the skills that are often overlooked include areas such as:

• Money management and proper trade scaling
• Trade management
• Learning to set proper stop loss and profit targets
• Learning to deal with your broker’s mindset
• Setting specific trading rules and never deviating from those rules
• Learning to trade a specific contract and understanding the personality of that contract
• Choosing a specific trading methodology that will work over the long run
• Understanding the zero-sum nature of the futures markets and its idiosyncrasies
• Understanding chart reading
• Understanding price action
• Learning which contracts have limited potential for profits and why
• Understanding the emotional and psychological parameters a trader must work with within, and this may be the most pivotal and important skill to learn. Yet it is the least discussed and most overlooked aspect of e-mini trading. More traders go broke because their emotions betray them than any technical skill.

This is just a partial list of a much longer list of specific skills that every e-mini trader must gain an understanding. To trade consistently, a trader must learn to execute these skills and others to consistently profit. Certain deficiencies in training or emotions will eventually cause a trader to exit the business prematurely; so a determined student continues his learning experience through reading books and articles throughout the course of his or her career. The day you stop learning is the day you start moving backwards in your trading ability.

You’ll notice that on the last bulleted point I added a few extra lines, and that was intentional. With some exceptions, the psychology of trading is often overlooked in favor of learning technical skills that will assure good setups. In my experience, it is usually the emotional makeup of an individual trader that assures his or her success, as the technical skills are a matter of rote memorization and practice. Controlling your emotions, however, is a far more difficult exercise and many traders fail miserably under stressful conditions or chaotic market situations. Whether you are winning or losing in a daily trading session, you must learn to maintain a consistent viewpoint and methodology in your trading.

It would take an entire book to fully explain all of the ramifications of each of the bullet points I outlined above. My goal is to encourage e-mini traders to learn more than an ordinary trading course offers because there is more to learn. On average, I read a new book on trading on a weekly basis. It is also common for me to reread older books to refresh my training in specific areas. Trading is a business that requires a great deal of multitasking and a variety of emotional and technical skills and in order to succeed you must develop a level of confidence in a far wider context than is often thought. On the other hand, it can be done. Many traders make a great living on a daily basis because they have mastered a long list of skills an e-mini trader must learn. I encourage all new traders to continue in their trading education by expanding their knowledge base through reading and browsing magazine articles.

In summary, I have pointed out the wide variety of skills and e-mini trader must learn. Obviously, not all of these skills can be mastered overnight, but they can be learned through education, time, and experience. If you desire to be a successful e-mini trader, make it mission to expand your knowledge base on the wide variety of topics it takes to be successful.

About the Author

Real Live Trading Doesn’t Lie. Spend several days in my trading room and see if you can benefit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here

By James Woolley

If you receive newsletters from various forex sites, you will be aware that there are new products being launched all the time. These include things such as automated trading robots, trading systems, signal services and training courses. However it is forex membership sites that seem to be popular right now, and this is the topic I want to talk about today.

The fact is that forex membership sites are quite common these days. You only have to go online and search for this term to find lots of different sites you can join. All of these sites have a similar business model. They offer a particular service and you, the consumer, pays either a lifetime membership or an ongoing monthly or yearly membership fee to receive this service.

So for example you will find sites that offer profitable trading signals for a monthly fee and sites that offer educational material and ongoing training and support every week. Every single aspect of currency trading is generally catered for.

However the point I want to make is that in the last few years these membership sites have really come on leaps and bounds. Whereas a lot of these sites only offered a basic service, quite a few of them are branching out and offering a range of different services all for a single membership fee.

So instead of offering trading signals, for instance, sites will not only offer this service as part of the membership, but will also offer a range of other services such as trading tools and software, training videos, access to professional traders and member forums.

In other words they provide everything you need to help you become a profitable forex trader, and this obviously makes sense because if you continue to lose money and do not even cover the membership fee, then you will obviously cancel your subscription pretty quickly. However if you continue to improve your trading and are moving in the right direction, then you will stay subscribed for much longer.

This is all good news for aspiring currency traders because companies are realizing that they need to provide professional services that are really going to help traders achieve their goals. So as a result these membership sites are becoming more and more advanced and are providing a range of different services to help you succeed.

Traditional membership sites have always been fairly basic, but all that is now changing and hopefully we are going to be seeing bigger and better websites cropping up all the time as each year passes. Of course there will still be some that are a waste of money, but it’s the ones that give you profitable trading signals and access to professional traders (at the very least) that are most valuable, and these are you ones you should consider joining.

About the Author

Click here for more forex trading tips and to read all about Forex Power Group, which is a brand new forex membership site that has just launched.

A combination of central bank monetary policy decisions and the Greek debt crisis may be the key drivers in this week’s FX trading.

While this week’s economic calendar is significantly lighter than the previous, key monetary policy decisions will come from central bank meetings in Japan and Switzerland. Both are expected to hold interest rates steady at their current levels. Tuesday will bring key inflationary data from China as m/m CPI is expected to rise 5.5%. This may induce a fifth interest rate increase from the Chinese central bank. Additional monetary policy tightening may result in a further drag on Chinese equities. The CSI 300 index is down 6% this year and down over 11% since yearly high.

The UK, US, and the euro zone are set to release CPI numbers throughout the week. Both the US and the EU have firmly anchored inflation expectations as was emphasized by their respected central bankers last week. For the UK the Bank of England continues to maintain the position that inflationary pressures will be transitory and is expected to keep interest rates at low levels, though increased volatility may be seen in sterling on Tuesday with the CPI data release.

Market participants will continue to focus on the tiff between Germany and the ECB. This weekend Eurogroup head Jean-Claude Juncker said Greece needs a “soft, voluntary restructuring” of its debt, a proposal backed by German Finance Minister Wolfgang Schauble. This is in stark contrast to the ECB’s position against any restructuring which would involve a credit event as defined by the rating agencies. In separate comments on both Thursday and Friday ECB President Trichet clarified the ECB’s position. A compromise will be needed prior to the Eurogroup meeting on June 20th or risk losing support from the IMF for Greek agreement. As such the dollar could continue to trade on firmer footing as could the safe haven currencies of the Swiss franc and Japanese yen.

Read more forex trading news on our forex blog.

By James McKee

Now that change has come to Portugal with regard to the latest bailout in the EU many are considering changes ahead for the Euro. Lately the Euro has been climbing against other majors (especially the USD) on the online forex exchange. This comes as a result of news of the bailout and a continuingly low interest rate coming from the European Central Bank. Such news has continued to fuel the Euro in an upward fashion and this trend should continue into next week. With the bailout now in place many Portuguese citizens have said they have had enough with the socialist government that was in place before. More conservative government figureheads have been selected in an effort to recover the Portuguese budget and get them on the right track.

The proposed austerity measures (some of the deepest in Europe) are already beginning to lead many citizens to revolt. Massive demonstrations and even isolated incidents of violence have been seen throughout the nation. The Portuguese people have said enough with the austerity measures in place; however, there is no way to simply wish them away. In fact, as time goes on it is more and likely that austerity measures will only worsen as the government struggles to cover the now truly mountainous debt they are covered in. While government officials claim a recovery in the next couple years it is highly unlikely, and many believe the collapse of the European Union is imminent. The wealthier countries such as Germany have simply had enough and want countries to stand on their own.

This latest round of bailouts might seem like a fix but it is not, the money being loaned to Portugal was in fact made out of thin air. In lending money to Portugal there are some temporary hopes for stability and reform; however, the truth is that since this money was created from nothing it is contributing to inflation. The Euro is facing a bubble of massive proportions, and the only reason it is doing well against the USD on the online forex exchange is that the USD is hurting so badly. Compared to the USD the Euro is doing well; although, the United States is starting to become a lot more serious about its own austerity measures and is beginning to implement massive reforms. The future remains highly uncertain for Portugal and the rest of the EU, and change is coming one way or another.

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 online forex trading regularly.

By David Adams

It’s not unusual for me to peruse prominent (and some not so prominent) e-mini trading education sites and see what’s being promoted and how it’s being promoted. Often times, I find the promises and guarantees espoused on these sites appalling. On the other hand, there are a handful of training educators who seem honest and realistic in the manner in which they portray e-mini trading. That being said, many of the sites promote e-mini trading as something akin to the California gold rush. It is not uncommon to see e-mini trading portrayed as a method to “get rich quick” with a minimal amount of effort.

For the record: E-mini trading is not a get rich quick scheme and takes a considerable amount of effort and time to become proficient and profitable. Further, if an individual believes he or she can read an e-book or two and then slay the markets they are hopelessly mistaken. In this article, I would like to present an accurate portrayal of what e-mini trading “is,” and what e-mini trading “is not.” Some may find my description of the path to e-mini trading success daunting and be terribly disappointed. That’s okay with me because every potential new trader should have a clear idea of this high competition arena they are considering for a career.

Let’s start with a clear idea of what e-mini trading is not:

• E-mini trading is not a “get rich quick” profession. The stark truth is that the majority of people who embark on a career in trading lose some or all of their money.
• There are very few individuals who are “natural” traders. The vast majority of new traders will find many of the concepts in e-mini trading unnatural and confusing. It takes time and experience to become a consistently profitable e-mini trader.
• Most trading books or manuals present a specific system for a new trader to study. The system approach to trading is fraught with danger. These systems may work very well under certain market conditions, but the market is a creature of many moods and very few systems work well in all market situations. The vast majority of mechanical e-mini trading systems fail miserably in non-trending or consolidating markets.
• Most consistently profitable traders are highly disciplined in their approach to the market and have developed their trading style and discipline through years of study and experience.

One common characteristic I see on many trading sites is a quote that suggests that you should be able to double your account value on a monthly basis. Some sites even suggest that you may earn even more than double your account value on a monthly basis. It’s not unusual to see headlines on these sites claim returns ranging from 300% to infinity.

It is highly improbable that you are going to double your account on a monthly basis. It’s improbable that I am going to double my account on a monthly basis. Granted, I have had some exceptional months in my trading career, but the notion that I can consistently double my account each month is preposterous.

Fact: In the first several months of your e-mini trading career you will be lucky to break even. Even more to the point, most new traders lose considerable sums of money during the early stages of their trading career. The statistics suggest that 50% of all new traders lose their entire trading account balance.

Many sites lay claim to have discovered a revolutionary new approach to trading that virtually assures profits. While the methodology of trading has evolved rapidly over the last several years, I am unaware of any revolutionary new approaches to trading that will ensure a new trader will stumble into a highly profitable trading career from day one of their trading experience. To be sure, rates of return for traders and investors have remained fairly consistent for the last 20 years despite billions of dollars of ongoing market research by large institutional trading organizations. In short, most of the “revolutionary” new techniques are recycled version of current oscillators of older trading techniques

Fact: Profitable trading still lies in the domain of highly skilled and experienced traders. I am unaware of any revolutionary new trading techniques that have dramatically improved the rate of success in trading, including the most recent wrinkle in trading marketing: the trading robot. The automated trading on Wall Street is generally performed by computers in the “Cray Supercomputer” class of computer. It takes very little analytical skill to reason that a trading robot that retails for $279 will fill your pockets with hundreds of thousands of dollars. Trading robots are just another example of the “next best” innovation. The algorithms that I have been able to analyze on several trading robots rely upon simple moving averages and well-known oscillators. This is hardly the stuff of any new revolutionary approach. They are quite profitable for the individuals who are selling these machines, but the empirical evidence has shown that they typically performed poorly.

Finally, many of the trading courses offered confine themselves to a strict systems approach to trading. I will spare the reader an extended discussion on the shortcomings of systems-based trading, but will comment that systems-based trading is generally effective during trending markets. Further, depending upon which source you care to quote, the market typically trends 30% to 40% of the time. During consolidation periods, commonly referred to as range bound trading, systems based trading often struggles mightily. Further, markets often undergo periods of very random trading and systems-based trading is poorly suited for this type of trading. In short, most system-based trading approaches work well under well-defined conditions. I would also point out that few traders require any special trading system to trade a trending market, as these markets are where the majority of trading profits occur and are relatively easy to spot and from which to profit.

Fact: It is my experience that successful and consistent traders learn to read and interpret charts, as opposed to confine their learning experience to the tight parameters of system trading. This is not a blanket indictment of all systems-based trading, but a generalization from my experience with systems based trading. Most profitable traders are proficient in a wide range of market conditions and to understand the trading style required to trade those market conditions ease efficiently. Further, learning to trade in a wide variety of trading conditions is generally accomplished through the experience gained by trading with another experienced and profitable trader, or through a mentorship program with a qualified and experience trader.

In summary, I have tried to emphasize that trading programs offered may not be a good choice for new traders. Specifically, I have warned against utilizing trading systems that offer inflated profit rates. Finally, I would encourage all traders to find an experienced trader who may be a friend, or hiring an experienced trader through a mentoring program. I have no doubt that there are trading courses that cover some of the deficiencies we have outlined in this article but as yet not been able to locate such a program. I encourage new traders to give some of the above points careful thought, because trading education is often an expensive proposition, but under the right conditions most individuals can learn to trade profitably and with consistency.

About the Author

Real Live Trading Doesn’t Lie. Spend several days in my trading room and see if you can benefit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here