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Monday, July 6, 2009

Forex For The Small Speculator

Today was a banner day for me... trading the AUD/JPY with a return of more than 10% NAV. The market simply walked up and down my trend lines bringing me profits with every pass. How come this doesn't happen more often?

Anyway, as a small time speculator I thought I'd outline some issues that we face compared to some of the larger traders:
  • We trade in very small lot sizes
  • To make any meaningful revenue we may trade with a large percentage of our NAV.
  • Carry trading strategies may be meaningless
Each of these issues is something that we need to think about and potentially make some adjustments to compensate.

Small Lot Sizes
If you want to trade in small lot sizes you need to find a broker that doesn't charge you an arm and a leg for the privilege. I trade at Oanda and they let you trade with any lot size without any adjustment in spreads. I recommend them and I'd give a referral link if they had an affiliate program.

Trading Large NAV Percentags
There is nothing wrong with trading a large percentage of your NAV as long as you know what you are doing. It's a problem if you are trading this way because you keep acquiring positions as the market moves against you. It's okay if you take a measured defined risk because the market has entered a condition that you have decided represents an opportunity. It is very important to get out of losing positions once you know that your market position is unfounded.

Carry Trading Becomes Useless
If you only have hundreds of dollars in your Forex account, then there is no point trying to take advantage of carry trades. If the market didn't fluctuate so much it might be worthwhile, but in all likelihood you'll make a few bucks here and there and end up wasting your time. So what if you make 200% over a year, you still only have several hundred dollars in your account.

Concluding Thoughts
When you are trading relatively large positions relative to your account size, it can be exciting. You'll quickly win or lose tens of percentage points. If you are good you'll be able to build up a bit of a nest egg before too long and then start trading more appropriately for the size of the account you've built up. Quite simply, as your account gets larger the need to large risks dissipates.

Get out there, take your time, make sure the market sets itself up for you just right, and then stomp around and rip a few dollars out!

Getting A Forex Education - Forex Books

How many of us in the Forex market simply jumped in the market and started trading? I know that was my path. I tossed a few dollars in an account and figured losing it would be a paid lesson in how the markets work.

I can't say that this hasn't been a valuable path. I've learned some good lessons along the way:
  • it's important to let go of losses early so you have enough capital to sink your teeth into an opportunity that does work.
  • No indicator or strategy has all the answers -- stop looking for the holy grail of trading
  • The market can easily whipsaw you to tears if you aren't careful
  • If you place close stops they will often be taken out before the market goes your way
Really, the list of anecdotal learning is endless and difficult to put into words. However, I recognize that this isn't enough to make me a successful trader, though from time to time I'm starting to taste success. It's finally time for me to bite the bullet and learn more about trading.

No, don't worry, I'm not going to buy some stupid multi-thousand dollar Forex training course. That would be stupid. Forex trading is very related to trading in general and there is no shortage of information on either subject. To make a long story short I've purchased four books recently:
  • Currency Trading for Dummies
  • Swing Trading for Dummies
  • The 10 Essentials of Forex Trading
  • Technical Analysis for Dummies
All of these were available at a nearby bookstore -- so I didn't have to order something online and wait for delivery.

More importantly, let me list the credentials of the authors of the above books. Respectively, they are:
  • Mark Gallant: Chairman and founder, GAIN Capital Group. Brian Dolan: Chief currency strategist,
  • Omar Bassal, Head of Asset Management, NBK Capital
  • Jared Marinez, FXCHIEF and founder of The Market Traders Institute, Inc.
  • Barbara Rockefeller, International economist and trader
My advice? Never, ever, fail to look for the ideas of experts. Even if you don't agree with everything they say, which is appropriate, they should be able to increase your understanding and improve your own thinking.

I've had some days with a NAV appreciation of 10%, 20% or more. I'd like to have a lot more days like that... and I don't think that online sources created for the purpose of flogging affiliate commissions will do that for me.

A Winning Forex Trading Philosophy

I'm starting to believe that being successful trading Forex has more to do with your philosophy than anything else.

You cannot trade based on how much money you want to make. You cannot trade based on how much money you need to make. This means that you can't push money into the market, desperately searching for opportunity, risking a large portion of your net asset value in the process.

You must trade lightly.

When you trade lightly, you simply let the market give you the returns that it is willing to relinquish to you. Quite simply, it is not a process of taking.

If you can change your mindset it will give you a lot of peace compared to the level of stress that many generate. Dip your toes into the market, following your strategy, with a level of investment that simply cannot begin to raise your blood pressure.

A little bit of market wisdom, developed with experience, combined with an appropriate philosophy will generate profits. I know that this is difficult to consider or even believe in today's rational calculating world, but the only way to win is to not fight the market. It is way too big for you.

Stop trying to generate winning positions and simply let the market give them to you.

Part Time Currency Trader

As I've written before it is quite easy to become a currency trader. The harder part is being a currency trader that doesn't lose money. You see, according to the scuttlebutt on the forums, about 90% of new traders end up losing their money to the market.

Are you thinking about trying your hand?

I'm not here to talk you out of it. I myself am a part time currency trader. By day I work at my office job and by night I fight crime with a mask and cape. Wait, no, that's not right. By night I trade online when family duties allow me to squander a chunk of time.

Trading part time has it's challenges. You will see endless market movements that you did not participate in. You will miss opportunities to open or close a position even though your ideas about what would happen next were proven right. In fact, a very large part of trading well involves being able to deal with the psychological aspects of trading, whether part time or not.

If you read other posts in my blog, such as this one on trading philosophy, you'll see that I recommend working with very small trades. If you take larger trades, relative to your available capital, you'll find the emotional stress greatly magnified. It is very difficult to make good decisions as you watch your capital evaporate before your eyes.

Nothing will drive you from the market quicker than watching your capital shrink, panicking and saving what little you can, and then watching the market reverse leaving you without a stake. Or, perhaps worse, you do get back in after seeing a healthy rise, only to watch the market reverse yet again and wreak havoc on your capital once again.

It happens. I'm sure it happens a lot.

Did I mention that I'm not trying to talk you out of becoming a currency trader? It certainly isn't impossible to trade successfully but you really have to understand that there are many different ways to be unsuccessful. One very easy way to fail is to enter the market during a period in which it is easy to understand market behavior, think that trading is quite easy, and then have the market turn upside down and brutally fleece you.

Let's see. Yes, another painful lesson is developing the discipline to set stops and then have them tripped trivially, while the market does in fact go in the direction that you expected. Of course, this sets you up for the opposite, hanging on to a trade endlessly expecting to go as you expected, while it sucks up more and more capital.

My advice, do become a currency trader. Take your time. Learn with a practice account. Eventually, switch to a micro or nano account and trade with very small amounts of money. Continue to play with very small capitalizations until you have blown up your account once or twice -- this happens when you get a margin call and all your funds (except active margin) are forfeited.

Take the long view. There is always going to be another opportunity. No currency pair moves only up or only down. When trading part time you must either make accurate predictions or tread softly enough that the market can't move far enough to cause a margin call.

Anyway, to get into some information you can act on, if you are totally new to the game you'll want to know the following:
  • Most, if not all, companies that offer online foreign exchange trading provide free forex demo accounts. These practice accounts are the same as live accounts except of course that you don't trade real money.

  • A currency trading platform is simply a fancy name for what is usually branded currency trading software. This software will let you view charts for various currency pairs, add indicators and execute trades

  • Forex trading is global. You can trade starting on Monday moring in Asia until Friday night in New York. Trading is 24 hours a day during this period though each trading session will offer differing market volume and behavior.

  • If you are looking for a place to open your first forex demo account I'd suggest Oanda. To ensure that you don't think I'm compensated to say that I'll ask you to search Google to find them. They are a reputable company that allows you to trade with very small amounts -- which is great for starting out.
Good luck my friend, I wish you every success.

How To Become A Currency Trader

If you are anything like me, you probably imagine that it is difficult to become a foreign currency trader. Perhaps there are rules, regulations and other hoops that have to be jumped through. Maybe you need large amounts of cash in order to get started.


Becoming a Forex currency trader is incredibly simple!

Get A Demo Account
As I beginner I'd suggest you sign up with Oanda. Not only do they have a good reputation but they offer other advantages for a beginning trader as well:
  • You can sign up for a live account with very little initial capital.

  • You can execute trades of just about any arbitrary (small) size.
Of course, you can start with a free demo account before getting a live account. Just about everyone will recommend you do so, including me. However, at some point you need to trade with real money to learn about the psychological aspects of trading.

So, that's what I did. I started with $100 in my account and was off to the markets. Sweet, I'm a forex trader!

Learning To Trade Foreign Exchange
If you have a demo account, enter some trades. See what happens. Then, after the results come in, search for information about what happened. You'll find some helpful advice in blogs, such as mine, as well as various tutorial and forum sites. I would suggest that you buy a book or two on forex trading, technical analysis and perhaps something concerning the attributes of successful traders. I've listed some books that I found helpful on this blog post about getting a forex education.

Trading With Real Money
Don't rush to trade with real money. One of the most important things to realize is that there is always another opportunity -- there is no need to let the fear of missing out intrude on your good sense. In fact, the issue of psychology is immensely important in trading and once you move to real money trading you'll realize this very quickly.

Frankly, though I counsel otherwise, I wasn't be able to trade realistically while not actually risking my own money, so I started trading with a tiny account, funded with $100, almost immediately. Personally, with a few dollars on the table, I found that my interest level, formality and trading style were all upped a notch.

Trading Sessions
Except for weekends the markets are open all the time. However, different period of time often have different characteristics. This is because of trading in currencies generally follows the business day around the world from timezone to timezone.

Account Safety
Oh, I should mention, these days Forex trading with a reputable company (such as Oanda) is quite safe. While there are large risks and large rewards, my risks are essentially limited to the capital that I have put into my account. With wise strategies I can limit risks further, but as a beginner it is comforting to know that I can't lose more than I let sit in my account no matter how foolish a beginner mistake I might make.

I should stress that you could lose all the capital you put in your account, so do not start out with a large account with the idea that you will only conduct small trades. At the very least, create some sub-accounts and keep the majority of your capital out of harms way until you have blown up your play money account, learned a few lessons, and know how to protect your capital.

What You'll Learn
Above and beyond the simple mechanics of opening an account and executing trades there are tons of things you'll need to study to become a successful trader. These include:
  • Reading candlestick charts.
  • Interpreting indicators.
  • Support and resistance levels.
  • Fundamental economic analysis.
  • National economic news events.
Each of these issues can span multiple chapters or perhaps an entire text depending on the depth of information being presented.

I also invite you to read my blog. I started out from scratch and can address issues in a way that can be helpful for a beginner. Please feel free to ask questions and I'll do my best to point you to useful information if I can't give you a good answer myself.

Monday, June 1, 2009

2 forex_usdjpy_090519_bollinger_002

2  forex_usdjpy_090519_bollinger_002 by chucho_chevere., estrategias forex, cursos forex, manuales forex, seniales forex, software forex, mercado forex, Ganar Dinero con Forex, robots de forex, forex, forex killer, forexautopilot, metatrader4, street smart forex, Ea, Expert Advisors, Asesores Expertos, Sistemas Automaticos de forex, inversiones en forex, ganar pips, bolsa, rentabilidad, trading forex, finanzas forex, dinero, ifcmarkets, Crisis Economica, systems forex, tecnoforex,

EUR/USD Rises for Third Day as GM Goes Bankrupt

Euro continued to advance sharply against the U.S. dollar today as the U.S. are witnessing their biggest bankruptcy case in history. Economic indicators that came out from the United States today (other than GM bankruptcy) were better than expected. EUR/USD is now trading near 1.4209.

Personal income rose by 0.5% in April after decreasing by 0.2% in March (revised up from -0.3%). Personal spending decreased by 0.1% in April, following 0.3% drop in March (revised down from -0.2%). Forecasts for both indicators showed -0.2%.

Construction spending at seasonally adjusted annual rate rose by 0.8% in April after 0.4% gain in March (revised up from 0.4% growth). Median forecast by the analysts pointed at 0.8% decline.

ISM in manufacturing sector rose from 40.1% to 42.8% in May — almost the same as expected (42%).

Some Interesting Chart Patterns as of May 31st 2009

I’d like to share 5 interesting chart patterns that I’ve spotted on the market recently and some of them I currently use in my trading. I won’t give any recommendations regarding their usage here, but if you are familiar with pattern trading then you’ll know how to interpret these images. You can click on any image for a much better and clear picture. Use them on your own risk.

1. EUR/USD, Weekly, 2 Falling Wedges:
EUR/USD, W1, 2009-05-31

2. EUR/JPY, Daily, Ascending Wedge (Triangle):
EUR/JPY, D1, 2009-05-31

3. GBP/JPY, Daily, Ascending Triangle:
GBP/JPY, D1, 2009-05-31

4. USD/CHF, Daily, Falling Wedge:
USD/CHF, D1, 2009-05-31

5. NZD/JPY, Daily, Ascending Triangle:
NZD/JPY, D1, 2009-05-31

Forex Trading Weekly Forecast - 06.01.09

US Dollar: Will Heavy Event Risk Stem the Bleeding?

Fundamental Outlook for US Dollar: Neutral

- Consumer confidence rises to an eight month high; but is this optimism warranted?
- Durable goods orders jump and housing statistics continue their slow improvement
- Despite a positive revision to first quarter growth, the US economy trudged through its worst six months is 50 years

The statistics on the US dollar are ghastly. Through the month of May, the world’s most actively traded currency plunged 547 pips or 6.5 percent on a traded weighted basis to its lowest level this year. With the momentum building, there was no shortage of reason to sell this currency. The 1Q GDP revisions confirmed the country’s worst six month period of economic activity in 51 years. Policy officials warned that a recovery could be pushed back into 2010. Rising national debt levels intensified speculation that the US sovereign debt rating was in jeopardy. And, once again, international calls to abandon the US dollar as a reserve currency were amplified. All of these are legitimate concerns; but none of them are new or immediate problems. This is what is important to remember heading into the coming week. Risk appetite will no doubt has its influence on the greenback; but a dense list of high-level event risk (from the US docket and abroad) will cast the battered currency in a more objective light as we see where the US really stands in the global scale between economic depression and recovery.

Referring to the dollar’s own calendar, fundamental traders will respond to a wide range of proven market movers. The scope of the list will cover nearly every facet of the US economy and will therefore better qualify speculation as to whether the there are signs of ‘green shoots.’ This is a misleading and perhaps overused term that allude to the beginning signs of growth. Like the rest of the world, the United States if far from growth; and what speculators benchmark now is the deceleration in the pace of contraction. Topping the list for potential impact (as it usually does) is the monthly non-farm payrolls report. The consensus from Bloomberg’s survey economists projects another 521,000 jobs lost through May. It is first interesting to note that the spread on expectations has grown to be relatively tight (forecasts range between a 450,000 and 600,000 drop). More important though is the pace of job losses. If this figure prints as expected, it would mark the second month that the rate of payroll reductions slowed and it would be an overall, significant improvement on January’s record breaking 741,000. As the leading indicator for economic health, a steady improvement of this caliber could single-handedly convert a bulk of the market to believers that the world’s largest economy is on track to recovery ahead of its major trade partners.

Nothing to scoff at itself, the rest of the data crossing the wires over the coming week will cover the health of the individual sectors in a little more detail. Consumers – whose spending accounts for 70 percent of the economy – will evaluated through personal income, spending and credit figures. If we are to expect a genuine economic recovery before the end of the year, we should see a turn in these figures relatively soon. From the business side of things, the ISM manufacturing and services sector surveys are due on Monday and Wednesday respectively. The outlook for factory activity has been negative for 15 months now and services seven – though the reversal since the end of 2008 has been relatively aggressive. Finally, the pending home sales figure will be a lagging indicator for the housing market, but consistent improvements from data in this group will eventually pan out to a true revival.

Alone, the round of US data will gauge how the American economy is performing compared to last month, last quarter and last year. However, for currency traders, the Forex market is a relative game in which the pace of US growth and returns must be set against its global counterparts to gauge the strength of the dollar. In this capacity, we must set the dollar against the backdrop of the major releases from other economies next week. The list of notables includes: the RBA, BoC, ECB and BoE rate decisions; Canadian 1Q GDP; Australia 1Q GDP; Swiss 1Q GDP; Canadian employment; and 1Q Japanese capital spending among others.

Euro Outlook to Depend on ECB Rate Decision, S&P 500 Performance

Fundamental Outlook for Euro This Week: Neutral

- Euro Zone inflation registers at 0.0 percent ahead of ECB Rate Decision
- Euro Zone Consumer Confidence bounces, has sentiment truly turned?
- EURUSD defies technical forecasts, where’s the next turning point?

The Euro surged to fresh year-to-date highs against the US dollar, but sharp Greenback declines overshadowed the Euro’s relative underperformance versus the British Pound and other key counterparts. The EUR/GBP exchange rate languished near year-to-date lows despite the surge in the EUR/USD, and the Euro was actually the third-worst performing currency of the G10. Unimpressive European fundamental data certainly did little to bolster the domestic currency’s cause. Negative surprises in German Gross Domestic Product figures and Euro Zone Consumer Price Index data hardly proved constructive ahead of the coming week’s European Central Bank rate decision. Market attention now turns to the flurry of central bank rate announcements in the days ahead. The ECB is widely forecast to leave rates unchanged, but FX traders will pay especially close attention to any noteworthy shifts in rhetoric from the regional central bank.

Market prices and economist forecasts overwhelmingly point to unchanged European interest rates through the coming meeting, but financial markets will listen closely for details on the ECB’s announced €60 billion in covered bond purchases. As central banks around the world have enacted fairly aggressive unconventional measures to boost money supply, many have criticized the ECB as being slow to react to deflationary financial conditions across the Euro area. The €60 billion in bond purchases pales in comparison to the US Federal Reserve’s massive Term Asset-Backed Securities Loan Facility (TALF) program, but it’s at least a start. All the same, the Euro may have actually benefited from the domestic central bank’s relatively muted response to the global financial crisis. Fears of overly-aggressive monetary and fiscal expansion have played a fairly significant part in ongoing US Dollar weakness. If the ECB were to announce similarly aggressive monetary measures (highly unlikely), the Euro could likewise fall against global counterparts.

Euro Zone economic event risk remains otherwise limited, and it will be far more important to watch developments in other economies. Interest rate announcements out of the Bank of England, Reserve Bank of Australia, Bank of Canada, and US Federal Reserve will make for an interesting week in FX Trading markets. Though it is especially difficult to predict what effect these likely varied announcements will have on global economic sentiment, any signs of a turnaround in the recent global equity market rally could have especially noteworthy effects on the US Dollar. The traditionally safe-haven USD has fallen substantially on vast improvements in global risk sentiment, and Friday’s rally in the US S&P 500 left the dollar at the very bottom of its trading range. It will be critical to watch whether such risk-taking trends can be sustained in the face of massive global economic headwinds.

Japanese Yen Loses on Carry Demand, Data to Highlight Economic Downsides

Fundamental Outlook for Japanese Yen: Neutral

- The Bank of Japan upgraded their economic outlook for the first time since 2006
- Japan’s trade deficit shrank in April to 52.2 billion yen from -97.1 billion yen
- Japan’s all-industry index fell yet again in March by 2.4%, following a 2.3 percent drop in February

Unlike the week prior, there weren’t many major economic releases for Japan, and we ultimately saw the Japanese yen fall 0.6 percent against the US dollar, more than 2 percent against the British pound and Swiss franc, roughly 3 percent against the Australian dollar and Canadian dollar, and a whopping 3.9 percent against the New Zealand dollar. The moves were in line with a 3.6 percent drop in the S&P 500, suggesting that risk trends are still dominating Japanese yen price action, for the most part.

That said, there was a bit of optimism stoked about the Japanese economy after the Bank of Japan’s Monthly Report was released, as they upgraded their outlook for the first time since 2006. The report said that “economic conditions have been deteriorating, but exports and production are beginning to level out.” It is clear, though, that the BOJ sees foreign demand as being the only chance for recovery in Japan, as “private demand is likely to continue weakening with corporate profits and firms' funding conditions remaining severe and a worsening employment and income situation.”

This point may be highlighted over the next week, as labor cash earnings are forecasted to contract for the eleventh straight month and by the most in almost seven year during April as the index may post at -4.2 percent. Furthermore, capital spending is projected to have plummeted 27.1 percent in Q1, suggesting that businesses do not expect growth to resume any time soon and adding to evidence that job losses could continue to climb.

That said, traders should keep an eye on major equity indexes like the S&P 500, as a rally above its May 8 high of 930 would suggest that risk appetite may be high enough to lead FX carry trades higher. On the other hand, reversals in risk assets could set the stage for a sharp pullback in the Japanese yen crosses.

British Pound Remains Overbought After Rally Above 1.61

Fundamental Outlook for British Pound: Bearish

- UK mortgage approvals jumped during April, according to British Bankers Association
- A CBI survey showed the UK retail sales tumbled in May
- UK house prices rose by the most since 2006 in May, according to Nationwide Building Society

GBP/USD broke clear above resistance at the 38.2 percent fib of 2.0160-1.3503 at 1.6049 on Friday, as the greenback fell sharply across the majors. However, GBP/USD remains very overbought according to daily RSI, and while extremes can hold for days and weeks, the moves suggest the pair could turn lower at any time, making it dangerous to buy into the trend.

There will be a variety of growth-related indicators released next week, as the Purchasing Managers’ Index (PMI) for the UK manufacturing, construction, and services sectors are due out. All of the indexes are projected to improve, but the big question is if they can breach the 50 mark, which would indicate an expansion in business activity. Services PMI was the closest to this level at 48.7 during April, and thus, a better-than-expected result could boost speculation that the UK economy is in for a consumer-led recovery.

On Thursday, the Bank of England is expected to leave rates unchanged for the third straight month at an all-time low of 0.50 percent. Based on the BOE’s last policy statement and the minutes from the meeting, we know that the central bank expanded their quantitative easing (QE) program by 50 billion pounds to 125 billion pounds (which happened to be by a unanimous vote), that the drop in Q1 GDP of -1.9 percent was worse than expected, and that CPI will likely will be below the BOE’s 2 percent inflation target in the medium term. The minutes also revealed that some members thought that “a case could be made for a larger stimulus,” but the high uncertainty of QE led them to believe that there was “no pressing need for the larger extension” at that point. Ultimately, how the British pound responds will likely depend on the BOE’s QE stance. Signs that the BOE may increase their gilt purchases could weigh heavily on the British pound, especially against the euro, while the opposite (steady rates, no QE expansion) could provide a boost to the UK’s currency, though the markets are just as likely to show no reaction in this case.

Written by John Kicklighter, David Rodriguez, Terri Belkas, John Rivera and David Song, Currency Analysts
Article Source - Forex Trading Weekly Forecast 06.01.2009

SocialTwist Tell-a-Friend US Dollar Sees Selling Pressure as Chinese Data Boosts Risk Appetite (Euro Open)

The US Dollar saw selling pressure after data showed China’s manufacturing sector expanded for the third consecutive month in May, boosting stock markets on hopes that the Asian giant would help reignite global demand. Australian economic news yielded mixed results in overnight trading. May’s UK Manufacturing PMI is on tap in European hours.

Key Overnight Developments

• Australian Manufacturing Shrinks at Slower Pace, Retail Sales Rise
• Risky Assets See Boost as Chinese Manufacturing Expands for Third Month

Critical Levels

The Euro was confined to a familiar range in overnight trading, oscillating in a 60-pip band above the 1.41 level. The British Pound trended gently upward, testing as high as 1.6245 before retreating back to the 1.62 mark. The US Dollar saw heavy selling pressure overnight as China’s manufacturing sector expanded for the third consecutive month in May, boosting stock markets on hopes that the Asian giant would reignite global demand, but prices retraced ahead of the European trading open.

Asia Session Highlights

Australia’s AiG Performance of Manufacturing Index rose to 37.5 in May, the highest in seven months, rebounding from a record low at 30.1 registered in the preceding month. The reading remains below the 50 “boom-bust” level, suggesting that manufacturing continued to shrink but at a slower pace. Looking at the details of the report, the Production and New Orders components of the metric saw the most improvement while Inventories and Input Prices fell. This is cautiously encouraging news for the sector that employs over 21% of Australia’s labor force: rising orders and depleting inventories suggest firms are seeing a bit of a pick-up in demand, feeding hopes of eventual stabilization in employment and consumption.

Australian Retail Sales continued to trend broadly higher: although receipts added a bit less than expected on a month-to-month basis (0.3% vs. 0.5% forecast), annualized sales grew 6.8% in the year to April, the most since January 2008. Retail activity is likely being supported by fiscal stimulus: the government has provided every Australian with A$950 in cash handouts since March. Sales of household goods outperformed, rising 3.9%. Although consumers’ willingness to commit to bigger-ticket purchases is heartening, it remains to be seen if momentum can be maintained after the fiscal boost is exhausted. Indeed, continued weakness in discretionary spending suggests Australians view the handouts as temporary relief and reflect expectations of lower spending power in the future.

Still, the antipodean economy is hardly out of the woods. TD Securities’ inflation estimate revealed that the annual pace of price growth fell to 1.5% in May, the lowest reading on record, while Company Operating Profits fell much more than economists expected in the first quarter, shedding -7.2%. This highlights that while the pace of decline may moderate over the coming months, a meaningful return to vibrant growth and employment is farther out on the horizon. Indeed, the economy is expected to continue to shrink through the end of this year with a modest rebound seen in the first quarter of 2010.

Euro Session: What to Expect

The UK Purchasing Manager Index is set to show that manufacturing contracted at a slower pace in May, rising to 44.0 from 42.9 in the previous month. On balance, only a print above the 50 “boom-bust” level is likely to have any substantial impact on the British Pound with sector weakness having been priced in for some time now. The data is most likely going to take a back seat to risk trends: US equity index futures are trading higher ahead of the opening bell in Europe suggesting risky assets will continue to advance, threatening safety-linked currencies (most notably the US Dollar) with continued selling pressure.

Written by Ilya Spivak, Currency Analyst

High Volatility might continue this Week

After depreciating consistently over the past few weeks, the USD is now traded over 1.41 against the EUR, and over 1.62 against the GBP. This week on Thursday, at 11.45 GMT, the ECB will deliver its periodical Interest Rates statement. Forecasts show that the number is expected to stay at 1%. Such a decision could create strong volatility for the leading currencies, as many have expected the ECB to force movement in the EUR. Forex traders should prepare for what is shaping up to be a fool of opportunities' trading week.

USD - Dollar Losses Strength at All Fronts

Last week, the Dollar continued its bearish trend against all the major currencies, and the EUR/USD saw a six month high, as the pair was traded at the 1.4150 level.

Last weeks publications from the U.S economy were characterized with contradicting indications. While some showed that the public has retained its faith in the U.S economy, others have shown that it is still early to say that the crisis is behind us. And it appears that until sharp evident will sign the end of the crisis, the Dollar's bullishness could continue.

The main news from the U.S last week were the Consumer Confidence, which delivered a surprising positive result, providing the best figure in 8 months. However, the weekly Unemployment Claims remained above 600K for the 17 consecutive times. This number is simply overwhelming. In addition, the New Home Sales report, which is considered to be one of the most reliable indicators regarding the housing sector, showed a rather disappointing figure, as only 352K new single-family homes were sold during April.

As for the week ahead, a batch of data is expected from the U.S economy, and this could be a fantastic week for traders to enjoy the heavy volatility of the market in order to enlarge their profits. Special attention should be given to the Non-Farm Employment Change expected on Friday, as this indicator tends to have an immense impact on the leading currencies and on top of them the USD. Currently it seems that if the actual result will be similar to forecasts of 520K, a reverse of trends could take place by the weekend.

EUR - EUR Soars on Positive German Data

Last week, traders who went long on the EUR made some significant profits. The EUR saw rising trends against the USD, the GBP and the JPY, as its most impressive uptrend was against the Dollar.

The two main news events from the Euro-Zone last week came from the German economy. Germany holds the largest and strongest economy in the Euro-Zone, and thus the relevant publications from this economy usually have a hefty impact over the EUR.

On Monday, the German Business Climate report was published, and even though it failed to reach expectations, the result was still the best figure in 6 months, showing that businesses around Germany are starting to feel improvement in their current business conditions. Then on Thursday, the German Unemployment Change indicator showed that merely one thousand individuals have lost their jobs during April. This was the best figure in 6 months as well. The combination of the two surveys seems to be 1 of the main reasons that strengthened the EUR against the major currencies.

Looking ahead to this week, the most notable publication from the Euro-Zone will be the Minimum bid Rate, which is of course the European Interest Rates announcement. Currently, analysts suspect that the European Central Bank (ECB) will leave interest rates at 1.00%, however, in case that the ECB will decide to manipulate rates, this will sure have a high impact on the EUR.

JPY - Mixed Signals from the Japanese Economy

During last week's trading session, the Yen saw mixed result against the leading currencies. Whilst the JPY depreciated against the EUR and the Pound, it saw rising trends against the USD.

The leading indicators which were published from the Japanese economy showed mixed signals that could explain the large volatility of the Yen. The Japanese Trade Balance, which measures the difference in value between imported and exported goods during April, delivered an unexpected negative figure, making it the ninth month in a raw on which Japan sees more importing activity than exporting. These figures are devastating for the Japanese economy, which is built on its export. On the other hand, The Preliminary Industrial Production showed an increase of 5.2% in April as opposed to March. This means that the Japanese consumers feel more secure in their economic condition, and this has the potential of pulling the country out of recession.

Ad for this week, traders should pay special attention to the Capital Spending report, scheduled for Wednesday. This report measures the change in the total value of new capital expenditures made by businesses, and is expected to show a 27.1 decrease in the last quarter. If the real result will be similar, a bearish trend for the JPY could take place.

Oil - Crude Oil Breaches the $67 line.

Crude Oil is traded near six month high as a barrel of Crude Oil is currently valued for over $65.

Crude Oil was boosted from the weak Dollar, as many other commodities such as Gold reacted in similar ways to the weakening USD. The one thing that these commodities have in common is that they are all valued in Dollars, and as such, when a dramatic change in the Dollar value itself takes place it usually has an immediate impact on commodities such as Crude Oil as well.

In addition, it seems that the summer is supporting oil's prices as well. As the vacation season begins, more and more air flight companies which were under the risk of filing for bankruptcy, are reporting higher than expected profits, stimulating them to expand their business activity, and therefore dramatically elevate the demand for oil. For as long as demand rises, and the USD depreciated, the prices of Crude Oil could reach higher, maybe even $70 a barrel.

Looking ahead to this week, traders should follow the main news from the U.S economy, as the changes of the Dollar will surely continue to dominant oil's fluctuations. And if the USD will expand its free fall, don't be surprised if a barrel of oil will reach $70.

Heiken Ashi Trading System

Heiken Ashi (or Heikin Ashi, Heikin-Ashi) is the method of representing the charts using the Japanese technique of the balanced bars. Compared to the traditional Japanese candlestick charts the Heiken Ashi charts are more easily read, provide clearer picture of the market and allow easy trend spotting. What is good about this method is that it’s included into the standard set of the MetaTrader 4 indicators. You can find it there under the Custom submenu. I won’t explain how to calculate those candlesticks here because MT4 does it all automatically for you and you don’t have to worry about how those candles are drawn. Here I will tell you how to use Heiken Ashi in trading the trends. You can see the example Heiken Ashi chart:

Heiken Ashi Chart Example

As you see, white bodies are the uptrend candles and the red bodies are the downtrend candles. The upper shadows are usually absent on the downtrends and the lower shadows are absent when the trend is going up. There are 5 Heiken Ashi scenarios for trends:

  1. Trend is normal. Rising white bodies signal ascending trend and falling red bodies signal descending trend.
  2. Trend is getting stronger. Rising longer white bodies with no lower shadows for ascending trend; falling longer red bodies with no upper shadows for descending trend.
  3. Trend is getting weaker. Candle bodies become shorter and for ascending trends lower shadows occur, for descending trends — upper shadows.
  4. Trend consolidation. Small candle bodies with both upper and lower shadows.
  5. Trend is changing (not accurate signal). Very small candle body with long upper and lower shadows.

That’s all you have to know to trade on the trends successfully if you are using Heiken Ashi charting method. But I also recommend reading some other article on Heiken Ashi if you want to learn more about using it.

Forex: Tools of Trade

Although, the success in the Forex trading is largely associated with the trading strategies and systems that can be usually bought for money, those are not the real tools of the Forex trader. They can only be considered as the «shortcuts to the riches». Every professional should employ his own tools of trade and the Forex traders should have them too. Independent on the professionalism level of the trader, these tools help to analyze the markets and to calculate all the necessary numbers for money management and position taking:

MetaTrader 4 platform — perhaps the most important of the tools, a successful Forex trader should have. Even if you don’t trade with MetaTrader broker you should still download this free platform and use it for charts and technical analysis. With MetaTrader you can browse charts and the past history of almost all currency pairs, you can apply dozens of standard indicators and use the custom user-tailored indicators, you can back-test strategies using their strategy tester and forward-test your systems and expert advisors on the free demo servers. MetaTrader is your number one tool if you want to go beyond the beginner’s level in Forex.

Risk and reward calculator — a helpful tool if you prefer to know your reward-to-risk ratio before opening a real money position and manage your risks correctly. This risk-to-reward calculator will only for the chart patterns with the distinctive local peak and bottom. It’s based on the Fibonacci retracements.

Pip value calculator — it’s not a trivial task to calculate the value of a pip if you trade exotic currency pairs and/or have your trading account in some exotic currency. Understanding the value of the pip is important to accurately calculate your profits and losses. The on-line pip value calculator tool will help you to determine the pip value with the minimum efforts from your side.

Pivot points calculator — this tool will be useful to you only if you prefer to trade using technical pivot levels. There are many types of pivot calculators available — floor pivots, Tom Demark’s pivots, Camarilla pivots, Woodie’s pivots, etc. I suggest you using the on-line pivot point calculator, which combines the calculation of all the possible pivot point types.

Fibonacci calculator — if you trade via the MetaTrader platform you don’t need a separate Fibonacci calculator because you can use the standard indicator to build Fibonacci retracement levels. But if you use some web-based or some other inferior platform, you’ll enjoy calculating the Fibo levels with the on-line Fibonacci calculator.

Friday, May 29, 2009

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