Option Arbitrage in the Forex Market
What is arbitrage? Arbitrage is the simultaneous buying and selling of identical financial instruments taking advantage of price discrepancies between different brokers, exchanges, clearing firms, etc. and thus locking in a profit. On paper, arbitrage is a risk-less trading strategy. In the real world however, risks abound.
So why trade arbitrage? Well, if the risks can be managed, arbitrage can be extremely profitable if you can find the opportunities and take advantage of the opportunities before they disappear. After all, the arbitrage opportunity is present because one side is slow to react to market news, momentum, etc. When it corrects the opportunity is gone.
Why arbitrage forex options? Well, because the opportunity exists if you look far it. The forex market is a cash inter-bank / inter-dealer market. In simplest terms, this means the foreign currencies traded in the forex market are traded directly between banks, foreign currency dealers and forex investors wishing either to diversify, speculate or to hedge foreign currency risk. The forex market is not a "market" in the traditional sense due to the fact that there is no centralized location for forex trading activity and, therefore, trades placed in the forex market are considered over-the-counter (OTC). Forex trading between parties occurs through computer terminals, exchanges and over telephones at thousands of locations worldwide.
Therefore the forex market is not as efficient as the NYSE for example. Price discrepancies exist between trading platforms, clearing firms, banks, etc if only for a small period of time. Options pricing is also affected for the same reasons but since there are other components involved in pricing an option than just the price of underlying currency, they tend to exist for longer periods of time.
One of the most common causes of option pricing differences is the calculation of volatility. Volatility is generally the standard deviation measured over a period of time. Sounds simple enough right? Well, if compare the volatility measure across different forex option providers, you'll likely find differences as large as 2%. When you find this you have also probably found an arbitrage opportunity.
Now that you've found an arbitrage opportunity, how do you trade it? Well, that's a bit trickier and this article cannot possibly cover all the risks associated with pulling off the trade but I will list some issues you should consider.
First of all, are the options really the same? Are the contract sizes, expiration dates and times the same? American or European style?
You also need to consider execution risk. Will there be slippage. Will there be a time delay in getting filled. Is the market moving too fast?
Exit strategy, how are you going to exit the trade and still capture the profit? What happens if the options expire in-the money? Out-of-the-money? What if you get assigned a position on one option but not the other?
These are just a few of the issues one must consider when trying to profit from option arbitrage. The key to option arbitrage is not unlike any other trade -- planning and risk management. Plan the trade, manage the risks, and execute the plan and you will be successful.
John Nobile,Senior Account Executive,CFOS/FX,http://www.cfosfx.com
5 Questions You Need To Have Answered Before You Back-Test Your Forex SystemHow To Handle A String Of LossesInternet and Computer Systems in the FOREX BusinessThe Secrets of the Super-TradersWhy Forex Traders Plan To Fail Before They Even Place Their First Trade & How You Can Know It & ...Forex Signal, Forex Signals AdviceChoosing A Forex BrokerAssessing the Opportunities Presented by the New Iraqi CurrencyOnline ForexFOREX 101: Make Money with Currency TradingWhy Demo Account Performance Is Often Better Than Real Account PerformanceIs The U.S. Dollar About To Reverse Course?Option Arbitrage in the Forex MarketA Short Introduction To FOREXForex2u Forex Strategy On Successful Forex TradingFinancial Crises, Global Capital Flows and the International Financial ArchitectureFactors Influencing a Currency Pair Exchange RateTrading Profitably on the Foreign Exchange MarketBe a Smarter FOREX Currency Trader: Three Basic PrinciplesTrading Tips No 1: Learn How to Trade The Moment of TruthHedging Foreign Exchange RisksHow Do Other Countries Devalue Their Currencies?An Evaluation of the DevaluationAdvantages of Trading FOREX Over Stocks and CommoditiesForex Options Market OverviewWhy Hedge Foreign Currency Risk?Types of Foreign Currency Hedging VehiclesForex Market OverviewWhat are Your Options Regarding Forex Options Brokers?The Margin Advantages of Trading FOREX.The Seven Most Traded Currencies in FOREX.The Miracle of ForexForex Trading
Showing posts with label Forex Trading Online. Show all posts
Showing posts with label Forex Trading Online. Show all posts
Sunday, September 14, 2008
Margin Advantages of Trading
The Margin Advantages of Trading FOREX.
There is one aspect that is considered as one of the best advantages of FOREX Trading. This is related to the amount of money you need to place a trade, this is known as "margin", and in short, this is all that can be lost in a the case you had a bad trade.
I state it like this because, even though I know with proper self-taught education you're NOT going to lose as much as you win anyway, I want you to know that despite the super-high leverage associated with FOREX trading (200:1 is possible; meaning that if you put up $1 the trading vendor will allow you to trade like you really have $200), it's still arguably less risky than futures (commodities) trading. And, forget stocks, you'll never get this type of LEVERAGE in the equities market.
Futures markets are often prone to sudden and dramatic moves, against which you can not protect yourself, even by trading with protective stops. Your position may be liquidated at a loss, and you'll be liable for any resulting deficit in the account. But because of the FX markets deep liquidity and 24-hour, continuous trading, dangerous trading gaps and limit moves are eliminated. Orders are executed quickly, without slippage or partial fills. And finally, there are no margin calls -- for your protection, ALL our recommended brokers will automatically close out some or all of your open positions if your account equity falls below the level required to hold the positions. Think of this as a final, automatic stop, always working on your behalf to prevent a debit balance. In fact, if you pick from our list of recommended brokers, we guarantee that you will never lose more than you have in your FOREX account.
http://www.1-forex.com
Omar Vargas; Forex trader and freelance writer. http://www.1-forex.com
5 Questions You Need To Have Answered Before You Back-Test Your Forex SystemHow To Handle A String Of LossesInternet and Computer Systems in the FOREX BusinessThe Secrets of the Super-TradersWhy Forex Traders Plan To Fail Before They Even Place Their First Trade & How You Can Know It & ...Forex Signal, Forex Signals AdviceChoosing A Forex BrokerAssessing the Opportunities Presented by the New Iraqi CurrencyOnline ForexFOREX 101: Make Money with Currency TradingWhy Demo Account Performance Is Often Better Than Real Account PerformanceIs The U.S. Dollar About To Reverse Course?Option Arbitrage in the Forex MarketA Short Introduction To FOREXForex2u Forex Strategy On Successful Forex TradingFinancial Crises, Global Capital Flows and the International Financial ArchitectureFactors Influencing a Currency Pair Exchange RateTrading Profitably on the Foreign Exchange MarketBe a Smarter FOREX Currency Trader: Three Basic PrinciplesTrading Tips No 1: Learn How to Trade The Moment of TruthHedging Foreign Exchange RisksHow Do Other Countries Devalue Their Currencies?An Evaluation of the DevaluationAdvantages of Trading FOREX Over Stocks and CommoditiesForex Options Market OverviewWhy Hedge Foreign Currency Risk?Types of Foreign Currency Hedging VehiclesForex Market OverviewWhat are Your Options Regarding Forex Options Brokers?The Margin Advantages of Trading FOREX.The Seven Most Traded Currencies in FOREX.The Miracle of Forex
There is one aspect that is considered as one of the best advantages of FOREX Trading. This is related to the amount of money you need to place a trade, this is known as "margin", and in short, this is all that can be lost in a the case you had a bad trade.
I state it like this because, even though I know with proper self-taught education you're NOT going to lose as much as you win anyway, I want you to know that despite the super-high leverage associated with FOREX trading (200:1 is possible; meaning that if you put up $1 the trading vendor will allow you to trade like you really have $200), it's still arguably less risky than futures (commodities) trading. And, forget stocks, you'll never get this type of LEVERAGE in the equities market.
Futures markets are often prone to sudden and dramatic moves, against which you can not protect yourself, even by trading with protective stops. Your position may be liquidated at a loss, and you'll be liable for any resulting deficit in the account. But because of the FX markets deep liquidity and 24-hour, continuous trading, dangerous trading gaps and limit moves are eliminated. Orders are executed quickly, without slippage or partial fills. And finally, there are no margin calls -- for your protection, ALL our recommended brokers will automatically close out some or all of your open positions if your account equity falls below the level required to hold the positions. Think of this as a final, automatic stop, always working on your behalf to prevent a debit balance. In fact, if you pick from our list of recommended brokers, we guarantee that you will never lose more than you have in your FOREX account.
http://www.1-forex.com
Omar Vargas; Forex trader and freelance writer. http://www.1-forex.com
5 Questions You Need To Have Answered Before You Back-Test Your Forex SystemHow To Handle A String Of LossesInternet and Computer Systems in the FOREX BusinessThe Secrets of the Super-TradersWhy Forex Traders Plan To Fail Before They Even Place Their First Trade & How You Can Know It & ...Forex Signal, Forex Signals AdviceChoosing A Forex BrokerAssessing the Opportunities Presented by the New Iraqi CurrencyOnline ForexFOREX 101: Make Money with Currency TradingWhy Demo Account Performance Is Often Better Than Real Account PerformanceIs The U.S. Dollar About To Reverse Course?Option Arbitrage in the Forex MarketA Short Introduction To FOREXForex2u Forex Strategy On Successful Forex TradingFinancial Crises, Global Capital Flows and the International Financial ArchitectureFactors Influencing a Currency Pair Exchange RateTrading Profitably on the Foreign Exchange MarketBe a Smarter FOREX Currency Trader: Three Basic PrinciplesTrading Tips No 1: Learn How to Trade The Moment of TruthHedging Foreign Exchange RisksHow Do Other Countries Devalue Their Currencies?An Evaluation of the DevaluationAdvantages of Trading FOREX Over Stocks and CommoditiesForex Options Market OverviewWhy Hedge Foreign Currency Risk?Types of Foreign Currency Hedging VehiclesForex Market OverviewWhat are Your Options Regarding Forex Options Brokers?The Margin Advantages of Trading FOREX.The Seven Most Traded Currencies in FOREX.The Miracle of Forex
The U.S. Trade Deficit is NOT a Vice
The U.S. Trade Deficit is NOT a Vice by Jack Crooks
The public is consistently fed doomsday scenarios from sources that absolutely should not be ill-informed, including the International Monetary Fund, the Federal Reserve and the Treasury.
These guys should be the most informed bunch of all. But many are dead wrong when it comes to the U.S. current account deficit and its doomful impact on the U.S. dollar.
Don't Be Misled — The U.S. Trade Deficit is NOT a Vice
We learned on Thursday that the U.S. trade deficit widened to a 16-month high in the month of July.
Yes, I know the lofty price of crude oil had a lot to do with the widening deficit. And the steep plunge in oil prices is set to narrow this deficit in coming months. That's all well and good. But even if the deficit remained as is, would it really be all that bad?
July's trade deficit hit a 16-month high.
Here's the myth:
The U.S. trade deficits grow by inordinate amounts each year. The United States simply cannot sustain such debts to foreign nations. What happens when foreign nations refuse to fund our cravings to spend, spend, spend? Ultimately we must pay back these borrowings, and when the time comes we won't be able to do that. U.S. Economic Armageddon is looming.
Now let me explain three reasons why that myth is wrong ...
Myth Busting Reason #1: It's All Relative ...
There's no doubt that the U.S. current account deficit is an astronomical number. But due to the growth trends in money supply over many years, figures in the billions and trillions of dollars are now commonplace ... and will only grow larger. But like so many other things, it's a relative game. And that's where this trade deficit theory goes wrong ...
The U.S. current account deficit for all of 2007 relative to, say, U.S. assets isn't so bad. In fact, the annual trade deficit last year only made up a small, 1.2% of U.S. net worth. That's hardly approaching worrisome levels, much less the catastrophic, dollar-is-dead-where-it-stands levels that so many doomsayers preach.
And even when you consider that foreign debt sits at around $2 trillion and is growing at a rate of 5% per year, the U.S. is in perfectly fine shape. That's because the U.S. net worth of more than $50 trillion is growing by roughly $3 trillion a year.
Internal Sponsorship
Urgent Crisis Briefing:Registration deadline!
The safety of every stock, mutual fund and ETF you own now hangs in the balance ...
This great credit crisis is rapidly spreading beyond banks ... beyond brokers ... beyond the entire financial sector ... to many of the most widely held non-financial stocks in America!
To protect your money and to profit, it's critical that you attend Monday's free Crisis Briefing, Plague to Pandemic.
Click here for more information ...
Myth Busting Reason #2: Don't Overlook the Profits ...
Forget for a moment that U.S. imports consistently outpace U.S. exports. The deficit only measure sales, when in fact profits go overlooked.
Take the example of a computer. While it may cost $500 to have it assembled and shipped from overseas, it might sell for $800 in the U.S. We realize a trade deficit of $500, yes. But we also realize a sizeable profit margin on the computer's sale.
Myth Busting Reason #3:The U.S. is in the Banking Business ...
In just three months, the U.S. earned $100 BILLION from its banking business.
The U.S. is currently borrowing $731 billion per year from foreign investors, just as a bank would. And at the same time the U.S. is earning a return on its foreign assets and foreign direct investments. What it earns on those assets more than makes up for what it borrows.
For instance, income on U.S. assets owned by foreigners grew by $197 billion in the three months ending in March 2008. At the same time, income on U.S.-owned assets and direct investments abroad jumped by $295 billion. That's a net positive of roughly $100 billion of income for the U.S. in the first quarter alone.
If this were unsustainable, foreign debt would make up a far larger proportion of U.S. net worth and would be growing much faster than the current 5% per year. Also, the U.S. would be losing out on its investments or at least realizing smaller yields on its foreign investments relative to what foreigners earned on investments in the U.S.
Dollar Bears are Having a Change of Heart
You may be wondering, though, if the current account is not responsible for structural dollar weakness why then has the dollar cratered for the last seven and a half years?
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When Would You Stop Going There?
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It's often said, "The Stock Market is just a big casino." And it's true. But the important omission in that statement (to keep the masses out!) is the dealer in this casino tips his hand to the select few... the insiders.
Such powerful knowledge could make YOU very rich indeed ...
Click to learn more ...
Here are two reasons:
It was time for prices to adjust. Currencies go through cycles, just as economies do. After a sizeable run from 1995 through 2001, the U.S. dollar was sitting high, and needed to come back down to earth. During this time global dynamics, speculation and U.S.-dollar sentiment all shifted to shake up the investing environment. Various negative-U.S. revelations only added to the selling momentum along the way.
Diminishing confidence in U.S. capital markets and the U.S. financial system. This gained traction at the beginning of the dollar's bear market that began in early 2002 and then again in 2007. Not surprisingly those periods were marked by the Nasdaq bubble and the housing/subprime bubble. Perhaps legitimate cause for concern at the time. But U.S. capital markets remain among the deepest and most efficient in the world.
Ironically though, we may have reached a point where each of these dollar drivers remains in play ... only this time in the other direction.
The dollar has had a long fall, and it's due for some strengthening. No longer is the U.S. the only major economy that's suffering. To that point, a softening global economy and a lingering credit crunch are leading to a major shift in money flow. Dollars are coming back into U.S. capital markets.
And that's very supportive of the U.S. dollar.
Best wishes,
Jack
P.S. Want to share your thoughts on the economy — or any other investment topic — with our entire Money and Markets audience? Then check out the Editor-For-A-Day contest that we're running right now!
About Money and Markets
For more information and archived issues, visit http://www.moneyandmarkets.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Christina Kern, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.
5 Questions You Need To Have Answered Before You Back-Test Your Forex SystemHow To Handle A String Of LossesInternet and Computer Systems in the FOREX BusinessThe Secrets of the Super-TradersWhy Forex Traders Plan To Fail Before They Even Place Their First Trade & How You Can Know It & ...Forex Signal, Forex Signals AdviceChoosing A Forex BrokerAssessing the Opportunities Presented by the New Iraqi CurrencyOnline ForexFOREX 101: Make Money with Currency TradingWhy Demo Account Performance Is Often Better Than Real Account PerformanceIs The U.S. Dollar About To Reverse Course?Option Arbitrage in the Forex MarketA Short Introduction To FOREXForex2u Forex Strategy On Successful Forex TradingFinancial Crises, Global Capital Flows and the International Financial ArchitectureFactors Influencing a Currency Pair Exchange RateTrading Profitably on the Foreign Exchange MarketBe a Smarter FOREX Currency Trader: Three Basic PrinciplesTrading Tips No 1: Learn How to Trade The Moment of TruthHedging Foreign Exchange RisksHow Do Other Countries Devalue Their Currencies?An Evaluation of the DevaluationAdvantages of Trading FOREX Over Stocks and CommoditiesForex Options Market OverviewWhy Hedge Foreign Currency Risk?Types of Foreign Currency Hedging VehiclesForex Market OverviewWhat are Your Options Regarding Forex Options Brokers?The Margin Advantages of Trading FOREX.The Seven Most Traded Currencies in FOREX.The Miracle of Forex
The public is consistently fed doomsday scenarios from sources that absolutely should not be ill-informed, including the International Monetary Fund, the Federal Reserve and the Treasury.
These guys should be the most informed bunch of all. But many are dead wrong when it comes to the U.S. current account deficit and its doomful impact on the U.S. dollar.
Don't Be Misled — The U.S. Trade Deficit is NOT a Vice
We learned on Thursday that the U.S. trade deficit widened to a 16-month high in the month of July.
Yes, I know the lofty price of crude oil had a lot to do with the widening deficit. And the steep plunge in oil prices is set to narrow this deficit in coming months. That's all well and good. But even if the deficit remained as is, would it really be all that bad?
July's trade deficit hit a 16-month high.
Here's the myth:
The U.S. trade deficits grow by inordinate amounts each year. The United States simply cannot sustain such debts to foreign nations. What happens when foreign nations refuse to fund our cravings to spend, spend, spend? Ultimately we must pay back these borrowings, and when the time comes we won't be able to do that. U.S. Economic Armageddon is looming.
Now let me explain three reasons why that myth is wrong ...
Myth Busting Reason #1: It's All Relative ...
There's no doubt that the U.S. current account deficit is an astronomical number. But due to the growth trends in money supply over many years, figures in the billions and trillions of dollars are now commonplace ... and will only grow larger. But like so many other things, it's a relative game. And that's where this trade deficit theory goes wrong ...
The U.S. current account deficit for all of 2007 relative to, say, U.S. assets isn't so bad. In fact, the annual trade deficit last year only made up a small, 1.2% of U.S. net worth. That's hardly approaching worrisome levels, much less the catastrophic, dollar-is-dead-where-it-stands levels that so many doomsayers preach.
And even when you consider that foreign debt sits at around $2 trillion and is growing at a rate of 5% per year, the U.S. is in perfectly fine shape. That's because the U.S. net worth of more than $50 trillion is growing by roughly $3 trillion a year.
Internal Sponsorship
Urgent Crisis Briefing:Registration deadline!
The safety of every stock, mutual fund and ETF you own now hangs in the balance ...
This great credit crisis is rapidly spreading beyond banks ... beyond brokers ... beyond the entire financial sector ... to many of the most widely held non-financial stocks in America!
To protect your money and to profit, it's critical that you attend Monday's free Crisis Briefing, Plague to Pandemic.
Click here for more information ...
Myth Busting Reason #2: Don't Overlook the Profits ...
Forget for a moment that U.S. imports consistently outpace U.S. exports. The deficit only measure sales, when in fact profits go overlooked.
Take the example of a computer. While it may cost $500 to have it assembled and shipped from overseas, it might sell for $800 in the U.S. We realize a trade deficit of $500, yes. But we also realize a sizeable profit margin on the computer's sale.
Myth Busting Reason #3:The U.S. is in the Banking Business ...
In just three months, the U.S. earned $100 BILLION from its banking business.
The U.S. is currently borrowing $731 billion per year from foreign investors, just as a bank would. And at the same time the U.S. is earning a return on its foreign assets and foreign direct investments. What it earns on those assets more than makes up for what it borrows.
For instance, income on U.S. assets owned by foreigners grew by $197 billion in the three months ending in March 2008. At the same time, income on U.S.-owned assets and direct investments abroad jumped by $295 billion. That's a net positive of roughly $100 billion of income for the U.S. in the first quarter alone.
If this were unsustainable, foreign debt would make up a far larger proportion of U.S. net worth and would be growing much faster than the current 5% per year. Also, the U.S. would be losing out on its investments or at least realizing smaller yields on its foreign investments relative to what foreigners earned on investments in the U.S.
Dollar Bears are Having a Change of Heart
You may be wondering, though, if the current account is not responsible for structural dollar weakness why then has the dollar cratered for the last seven and a half years?
External Sponsorship
Imagine Knowing of a Casino Where the Dealer Tipped His Hand Before You Made Your Move and Didn't Care How Many Times You Beat Him.
When Would You Stop Going There?
This is nothing to do with games of chance, but I hope your answer to that question would be a resounding, "NEVER!!" Assuming you're sane that is... Well, that is a virtually PERFECT analogy of the power of the insider signal!
It's often said, "The Stock Market is just a big casino." And it's true. But the important omission in that statement (to keep the masses out!) is the dealer in this casino tips his hand to the select few... the insiders.
Such powerful knowledge could make YOU very rich indeed ...
Click to learn more ...
Here are two reasons:
It was time for prices to adjust. Currencies go through cycles, just as economies do. After a sizeable run from 1995 through 2001, the U.S. dollar was sitting high, and needed to come back down to earth. During this time global dynamics, speculation and U.S.-dollar sentiment all shifted to shake up the investing environment. Various negative-U.S. revelations only added to the selling momentum along the way.
Diminishing confidence in U.S. capital markets and the U.S. financial system. This gained traction at the beginning of the dollar's bear market that began in early 2002 and then again in 2007. Not surprisingly those periods were marked by the Nasdaq bubble and the housing/subprime bubble. Perhaps legitimate cause for concern at the time. But U.S. capital markets remain among the deepest and most efficient in the world.
Ironically though, we may have reached a point where each of these dollar drivers remains in play ... only this time in the other direction.
The dollar has had a long fall, and it's due for some strengthening. No longer is the U.S. the only major economy that's suffering. To that point, a softening global economy and a lingering credit crunch are leading to a major shift in money flow. Dollars are coming back into U.S. capital markets.
And that's very supportive of the U.S. dollar.
Best wishes,
Jack
P.S. Want to share your thoughts on the economy — or any other investment topic — with our entire Money and Markets audience? Then check out the Editor-For-A-Day contest that we're running right now!
About Money and Markets
For more information and archived issues, visit http://www.moneyandmarkets.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Christina Kern, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.
5 Questions You Need To Have Answered Before You Back-Test Your Forex SystemHow To Handle A String Of LossesInternet and Computer Systems in the FOREX BusinessThe Secrets of the Super-TradersWhy Forex Traders Plan To Fail Before They Even Place Their First Trade & How You Can Know It & ...Forex Signal, Forex Signals AdviceChoosing A Forex BrokerAssessing the Opportunities Presented by the New Iraqi CurrencyOnline ForexFOREX 101: Make Money with Currency TradingWhy Demo Account Performance Is Often Better Than Real Account PerformanceIs The U.S. Dollar About To Reverse Course?Option Arbitrage in the Forex MarketA Short Introduction To FOREXForex2u Forex Strategy On Successful Forex TradingFinancial Crises, Global Capital Flows and the International Financial ArchitectureFactors Influencing a Currency Pair Exchange RateTrading Profitably on the Foreign Exchange MarketBe a Smarter FOREX Currency Trader: Three Basic PrinciplesTrading Tips No 1: Learn How to Trade The Moment of TruthHedging Foreign Exchange RisksHow Do Other Countries Devalue Their Currencies?An Evaluation of the DevaluationAdvantages of Trading FOREX Over Stocks and CommoditiesForex Options Market OverviewWhy Hedge Foreign Currency Risk?Types of Foreign Currency Hedging VehiclesForex Market OverviewWhat are Your Options Regarding Forex Options Brokers?The Margin Advantages of Trading FOREX.The Seven Most Traded Currencies in FOREX.The Miracle of Forex
Friday, September 12, 2008
Make Money with Currency Trading
For those unfamiliar with the term, FOREX (FOReign EXchange market), refers to an international exchange market where currencies are bought and sold. The Foreign Exchange Market that we see today began in the 1970's, when free exchange rates and floating currencies were introduced. In such an environment only participants in the market determine the price of one currency against another, based upon supply and demand for that currency.
FOREX is a somewhat unique market for a number of reasons. Firstly, it is one of the few markets in which it can be said with very few qualifications that it is free of external controls and that it cannot be manipulated. It is also the largest liquid financial market, with trade reaching between 1 and 1.5 trillion US dollars a day. With this much money moving this fast, it is clear why a single investor would find it near impossible to significantly affect the price of a major currency. Furthermore, the liquidity of the market means that unlike some rarely traded stock, traders are able to open and close positions within a few seconds as there are always willing buyers and sellers.
Another somewhat unique characteristic of the FOREX money market is the variance of its participants. Investors find a number of reasons for entering the market, some as longer term hedge investors, while others utilize massive credit lines to seek large short term gains. Interestingly, unlike blue-chip stocks, which are usually most attractive only to the long term investor, the combination of rather constant but small daily fluctuations in currency prices, create an environment which attracts investors with a broad range of strategies.
How FOREX Works
Transactions in foreign currencies are not centralized on an exchange, unlike say the NYSE, and thus take place all over the world via telecommunications. Trade is open 24 hours a day from Sunday afternoon until Friday afternoon (00:00 GMT on Monday to 10:00 pm GMT on Friday). In almost every time zone around the world, there are dealers who will quote all major currencies. After deciding what currency the investor would like to purchase, he or she does so via one of these dealers (some of which can be found online). It is quite common practice for investors to speculate on currency prices by getting a credit line (which are available to those with capital as small as $500), and vastly increase their potential gains and losses. This is called marginal trading.
Marginal Trading
Marginal trading is simply the term used for trading with borrowed capital. It is appealing because of the fact that in FOREX investments can be made without a real money supply. This allows investors to invest much more money with fewer money transfer costs, and open bigger positions with a much smaller amount of actual capital. Thus, one can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. Marginal trading in an exchange market is quantified in lots. The term "lot" refers to approximately $100,000, an amount which can be obtained by putting up as little as 0.5% or $500.
EXAMPLE: You believe that signals in the market are indicating that the British Pound will go up against the US Dollar. You open 1 lot for buying the Pound with a 1% margin at the price of 1.49889 and wait for the exchange rate to climb. At some point in the future, your predictions come true and you decide to sell. You close the position at 1.5050 and earn 61 pips or about $405. Thus, on an initial capital investment of $1,000, you have made over 40% in profits. (Just as an example of how exchange rates change in the course of a day, an average daily change of the Euro (in Dollars) is about 70 to 100 pips.)
When you decide to close a position, the deposit sum that you originally made is returned to you and a calculation of your profits or losses is done. This profit or loss is then credited to your account.
Investment Strategies: Technical Analysis and Fundamental Analysis
The two fundamental strategies in investing in FOREX are Technical Analysis or Fundamental Analysis. Most small and medium sized investors in financial markets use Technical Analysis. This technique stems from the assumption that all information about the market and a particular currency's future fluctuations is found in the price chain. That is to say, that all factors which have an effect on the price have already been considered by the market and are thus reflected in the price. Essentially then, what this type of investor does is base his/her investments upon three fundamental suppositions. These are: that the movement of the market considers all factors, that the movement of prices is purposeful and directly tied to these events, and that history repeats itself. Someone utilizing technical analysis looks at the highest and lowest prices of a currency, the prices of opening and closing, and the volume of transactions. This investor does not try to outsmart the market, or even predict major long term trends, but simply looks at what has happened to that currency in the recent past, and predicts that the small fluctuations will generally continue just as they have before.
A Fundamental Analysis is one which analyzes the current situations in the country of the currency, including such things as its economy, its political situation, and other related rumors. By the numbers, a country's economy depends on a number of quantifiable measurements such as its Central Bank's interest rate, the national unemployment level, tax policy and the rate of inflation. An investor can also anticipate that less quantifiable occurrences, such as political unrest or transition will also have an effect on the market. Before basing all predictions on the factors alone, however, it is important to remember that investors must also keep in mind the expectations and anticipations of market participants. For just as in any stock market, the value of a currency is also based in large part on perceptions of and anticipations about that currency, not solely on its reality.
Make Money with Currency Trading on FOREX
FOREX investing is one of the most potentially rewarding types of investments available. While certainly the risk is great, the ability to conduct marginal trading on FOREX means that potential profits are enormous relative to initial capital investments. Another benefit of FOREX is that its size prevents almost all attempts by others to influence the market for their own gain. So that when investing in foreign currency markets one can feel quite confident that the investment he or she is making has the same opportunity for profit as other investors throughout the world. While investing in FOREX short term requires a certain degree of diligence, investors who utilize a technical analysis can feel relatively confident that their own ability to read the daily fluctuations of the currency market are sufficiently adequate to give them the knowledge necessary to make informed investments.
Rich McIver is a contributing writer for The Forex Blog: Currency Trading News ( http://www.forexblog.org ).
Rob Schmidt Recommends Commission Blueprint for Your Success
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Boston Terrier Secrets. Breakthrough New Book Reveals How To Have The Happiest, Healthiest And Most Well Behaved Boston Terrier
You make some bucks on the world wide web? Common thats pathetic.. I make thousands.. See how i do it. Forex-Killer.com
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FOREX is a somewhat unique market for a number of reasons. Firstly, it is one of the few markets in which it can be said with very few qualifications that it is free of external controls and that it cannot be manipulated. It is also the largest liquid financial market, with trade reaching between 1 and 1.5 trillion US dollars a day. With this much money moving this fast, it is clear why a single investor would find it near impossible to significantly affect the price of a major currency. Furthermore, the liquidity of the market means that unlike some rarely traded stock, traders are able to open and close positions within a few seconds as there are always willing buyers and sellers.
Another somewhat unique characteristic of the FOREX money market is the variance of its participants. Investors find a number of reasons for entering the market, some as longer term hedge investors, while others utilize massive credit lines to seek large short term gains. Interestingly, unlike blue-chip stocks, which are usually most attractive only to the long term investor, the combination of rather constant but small daily fluctuations in currency prices, create an environment which attracts investors with a broad range of strategies.
How FOREX Works
Transactions in foreign currencies are not centralized on an exchange, unlike say the NYSE, and thus take place all over the world via telecommunications. Trade is open 24 hours a day from Sunday afternoon until Friday afternoon (00:00 GMT on Monday to 10:00 pm GMT on Friday). In almost every time zone around the world, there are dealers who will quote all major currencies. After deciding what currency the investor would like to purchase, he or she does so via one of these dealers (some of which can be found online). It is quite common practice for investors to speculate on currency prices by getting a credit line (which are available to those with capital as small as $500), and vastly increase their potential gains and losses. This is called marginal trading.
Marginal Trading
Marginal trading is simply the term used for trading with borrowed capital. It is appealing because of the fact that in FOREX investments can be made without a real money supply. This allows investors to invest much more money with fewer money transfer costs, and open bigger positions with a much smaller amount of actual capital. Thus, one can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. Marginal trading in an exchange market is quantified in lots. The term "lot" refers to approximately $100,000, an amount which can be obtained by putting up as little as 0.5% or $500.
EXAMPLE: You believe that signals in the market are indicating that the British Pound will go up against the US Dollar. You open 1 lot for buying the Pound with a 1% margin at the price of 1.49889 and wait for the exchange rate to climb. At some point in the future, your predictions come true and you decide to sell. You close the position at 1.5050 and earn 61 pips or about $405. Thus, on an initial capital investment of $1,000, you have made over 40% in profits. (Just as an example of how exchange rates change in the course of a day, an average daily change of the Euro (in Dollars) is about 70 to 100 pips.)
When you decide to close a position, the deposit sum that you originally made is returned to you and a calculation of your profits or losses is done. This profit or loss is then credited to your account.
Investment Strategies: Technical Analysis and Fundamental Analysis
The two fundamental strategies in investing in FOREX are Technical Analysis or Fundamental Analysis. Most small and medium sized investors in financial markets use Technical Analysis. This technique stems from the assumption that all information about the market and a particular currency's future fluctuations is found in the price chain. That is to say, that all factors which have an effect on the price have already been considered by the market and are thus reflected in the price. Essentially then, what this type of investor does is base his/her investments upon three fundamental suppositions. These are: that the movement of the market considers all factors, that the movement of prices is purposeful and directly tied to these events, and that history repeats itself. Someone utilizing technical analysis looks at the highest and lowest prices of a currency, the prices of opening and closing, and the volume of transactions. This investor does not try to outsmart the market, or even predict major long term trends, but simply looks at what has happened to that currency in the recent past, and predicts that the small fluctuations will generally continue just as they have before.
A Fundamental Analysis is one which analyzes the current situations in the country of the currency, including such things as its economy, its political situation, and other related rumors. By the numbers, a country's economy depends on a number of quantifiable measurements such as its Central Bank's interest rate, the national unemployment level, tax policy and the rate of inflation. An investor can also anticipate that less quantifiable occurrences, such as political unrest or transition will also have an effect on the market. Before basing all predictions on the factors alone, however, it is important to remember that investors must also keep in mind the expectations and anticipations of market participants. For just as in any stock market, the value of a currency is also based in large part on perceptions of and anticipations about that currency, not solely on its reality.
Make Money with Currency Trading on FOREX
FOREX investing is one of the most potentially rewarding types of investments available. While certainly the risk is great, the ability to conduct marginal trading on FOREX means that potential profits are enormous relative to initial capital investments. Another benefit of FOREX is that its size prevents almost all attempts by others to influence the market for their own gain. So that when investing in foreign currency markets one can feel quite confident that the investment he or she is making has the same opportunity for profit as other investors throughout the world. While investing in FOREX short term requires a certain degree of diligence, investors who utilize a technical analysis can feel relatively confident that their own ability to read the daily fluctuations of the currency market are sufficiently adequate to give them the knowledge necessary to make informed investments.
Rich McIver is a contributing writer for The Forex Blog: Currency Trading News ( http://www.forexblog.org ).
Rob Schmidt Recommends Commission Blueprint for Your Success
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Boston Terrier Secrets. Breakthrough New Book Reveals How To Have The Happiest, Healthiest And Most Well Behaved Boston Terrier
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Any reliable Forex signals providers available?
any reliable Forex signals providers available?
Personally, I will say do not pay for Forex signals. Think about it - if a Forex signals provider sells Forex signals for living, you can doubt their Forex trading skills? Or else if they are pretty good in Forex trading and making lot's of profit, I am wondering why do they still bother to sell Forex signals for money. Thus, what would be the value of such Forex signals providers? The answer is ZERO.
There are Forex traders who have been relying on Forex signals arguing those Forex signals providers really help them making money in Forex trading. These Forex traders can even show their Forex trading logs as evidence. After some though, I came out with the assumption that assuming I am the owner of a Forex signals provider, in order for my business to be in black, obviously I need some satisfying customers......
Full article available at: http://www.forex.labuan.net/forex-signal.html
Alvin Han is the editor of http://www.forex.labuan.net
Rob Schmidt Recommends Commission Blueprint for Your Success
Create your own water hybrid for under $150!
Free Registry Cleaner and Spyware Remover Scan
Google is Paying Out Big Money
Discover a More Effective Training Method for Fat Loss and Heart Health!
What is the Best Ab Workout for Belly Fat Loss?
Save the Romance
pinup tattoos, wings tattoos, angel tattoos, girl tattoos, sexy tattoos, cloud tattoos, sun tattoos
Boston Terrier Secrets. Breakthrough New Book Reveals How To Have The Happiest, Healthiest And Most Well Behaved Boston Terrier
You make some bucks on the world wide web? Common thats pathetic.. I make thousands.. See how i do it. Forex-Killer.com
Your Best Man Speech
SEX, LOVE and RELATIONSHIP
automatic cash making website
Health Internet Business
WOW! You had best get on this QUICK Shhhh! … Click Here to Add Just 1-Line of Code that Forces Any Site to Magically Make Money!
Personally, I will say do not pay for Forex signals. Think about it - if a Forex signals provider sells Forex signals for living, you can doubt their Forex trading skills? Or else if they are pretty good in Forex trading and making lot's of profit, I am wondering why do they still bother to sell Forex signals for money. Thus, what would be the value of such Forex signals providers? The answer is ZERO.
There are Forex traders who have been relying on Forex signals arguing those Forex signals providers really help them making money in Forex trading. These Forex traders can even show their Forex trading logs as evidence. After some though, I came out with the assumption that assuming I am the owner of a Forex signals provider, in order for my business to be in black, obviously I need some satisfying customers......
Full article available at: http://www.forex.labuan.net/forex-signal.html
Alvin Han is the editor of http://www.forex.labuan.net
Rob Schmidt Recommends Commission Blueprint for Your Success
Create your own water hybrid for under $150!
Free Registry Cleaner and Spyware Remover Scan
Google is Paying Out Big Money
Discover a More Effective Training Method for Fat Loss and Heart Health!
What is the Best Ab Workout for Belly Fat Loss?
Save the Romance
pinup tattoos, wings tattoos, angel tattoos, girl tattoos, sexy tattoos, cloud tattoos, sun tattoos
Boston Terrier Secrets. Breakthrough New Book Reveals How To Have The Happiest, Healthiest And Most Well Behaved Boston Terrier
You make some bucks on the world wide web? Common thats pathetic.. I make thousands.. See how i do it. Forex-Killer.com
Your Best Man Speech
SEX, LOVE and RELATIONSHIP
automatic cash making website
Health Internet Business
WOW! You had best get on this QUICK Shhhh! … Click Here to Add Just 1-Line of Code that Forces Any Site to Magically Make Money!
Have you heard the wise saying that a trader who fails to plan, plans to fail?
Have you heard the wise saying that a trader who fails to plan, plans to fail? I have, and I was once that trader! However, did you know that even though traders who have constructed a plan, which incorporates their trading stategy (their "edge"), they have a plan that is likely to fail?
If we look at all traders who participate in the market: we have one group that fails to plan and therefore plans to fail; another group whose plan is failed; and a third group who properly plans and therefore does not fail.
Is it any wonder that the success rate for forex traders is so slim?
Well it doesn't have to be.
Here's a list of reasons why those whose plan is destined for failure fail:
1. They become emotionally attached to their ideas about how the market should be with minimal or inadequate testing;
2. They fall in love with their back-tested net profit results without fully understanding other key statistical data;
3. They don't admit they're plan is wrong.
Let's explore each point in a little more detail.
1. Becoming emotionally attached to your ideas without adequate results
Most new traders when they realize the importance of obtaining a trading plan and sticking to that plan immediately begin to use the knowledge they have been taught and haphazardly throw it all together into what they deem their "trading plan".
When they are questioned on whether they have a trading plan most of these traders answer with an unequivocal "Yes!".
Most of these traders are destined for failure because their strategy is untested. They rely on blind faith to guide them through the trading jungle to make their untold millions. Would you walk from one length of the Amazon jungle to the other blind-folded? Of course not! You'll have to watch out for all the snakes, tarantulas, and other creepy things that go bump in the night, so why would you approach trading in the same fashion? I mean all you're really doing is placing the blind-fold on your capital!
Why do traders do this?
Because it's easy. That's right... it's easy. They don't need to learn a computer language to type their system into some piece of software that will take them the better part of 6 months to a year to learn, and they don't have to spend any money on buying historical data. Therefore it's easy and it's cheap and it also conserves time!
So does success meet lazy people like this?
Not many! However I will admit that it does meet a fortunate few - only those lucky enough to start their trading during roaring markets where even a monkey can make money! To repeat again: don't wear the blind-fold. Your success may be great at the start, but given time and trades, you'll be the one out of the game - having depleted all your capital.
So what do you do if you KNOW that your method is untested?
If you have the time, the money and the learning capacity I would strongly encourage you to purchase some back-testing software (such as Wealth-Lab Developer), acquire some forex data, ask heaps of questions on the Wealth-Lab forum on how to code your ideas and within 3-6 months you'll be safely coding your own forex system and testing adequately.
If you do not have the time, the money nor the learning capacity I would strongly suggest that you manually write down your system into clearly defined steps that you MUST follow. Then, after opening a DEMO forex account you would trade your system according to the rules you have set out. Trading your rules until about 20 trades have been completed.
After traders obtain their results from their testing period they unfortunately look at only one figure and make a rash conclusion about the system based on that one performance figure, namely, the net profit. This then leads us into the next problem of why traders plans are failed prior to placing their first live trade...
2. They fall in love with the net profit result and no longer question it any further!
The net profit is only one statistic among thousands, however, to keep things simple we will look at the top 3 results that you need to make sure you fully understand.
Here are the other statistical pieces of data that you should look at when your system has completed its testing period:
I. How many trades did it have? If you have made a nice profit, but have only had 3 trades during the testing period you do not have a sufficient sample space to arrive at any safe conclusions. Can you imagine what would happen to Neil Armstrong if NASA had only done 3 computations on how they would arrive on the moon??!! If it's not good for NASA then it's probably not good for you either, however, as NASA do zillions of computations you would only need to conduct about 20 trades as the bare minimum before you can arrive at any safe conclusions;
II. What was your money management procedure during the testing phase? This is by far the most important point, however, you need to make sure your system is properly working prior to even embarking on this difficult area (hence the reason why it is a CLOSE second to the above point). Be sure you fully understand what I am about to explain (read it several times to absorb it if need be)... If you test a method whereby you rely on a percentage amount of capital on a trade you can be biasing your results!
How?
Let us look at the following comparison sheet where we plot 21 trades with their pip return (we'll assume that each pip = US$1), and compare the returns against using 10 contracts per trade, 10% capital per trade, or 2% risk per trade...
Example Trade Sheet
Now as you can see from the results they can easily be doctored according to the different type of money management technique you use and what variable you decide to use it on (i.e. who is to say that we not use 20 contracts per trade, or 20% capital, or 5% risk per trade - all of these would inflate the net return figures).
It is best when you trade to stay at a fixed quantity. If you use any results that require a percentage calculation of the equity balance prior to the trade quantity being calculated you will BIAS the last trades more than the trades at the start. Hence, using a fixed quantity throughout the entire sample is one of the true indications of whether your system is profitable or not.
III. What was the drawdown? This is the largest peak to trough distance on your equity curve. In other words, if you were to enter in on the day the equity curve made a peak, how much would you have lost if you bailed out at the lowest point? To test this manually you would obtain an equity curve peak trace how far the equity curve goes down until it moves higher that the peak you started from - the lowest point made between these two points will be your trough figure which you will then subtract from your starting peak figure. The figure with the largest % loss would be your drawdown.
You would then need to look at this drawdown figure and determine whether or not it fits your risk profile. Would you be okay mentally if your account was down the drawdown % figure? If not, then you're going to have to re-create another system. As a rule I don't like systems that generate more than 30% drawdown.
One other statistic that incorporates drawdown that I like to check to determine whether the system is profitable or not is the recovery factor. The recovery factor divides the net profit by the drawdown (without the negative sign). As an example, if the net profit were $5,659 and the drawdown were -$3,542 dividing the net profit by the drawdown would result in a recovery factor of 1.597 (get rid of the minus sign). I generally prefer systems to have this statistic above 3.
So even though we have created our system that fits our personality and risk tolerance level well trades can still fail by not heeding the third and final statement...
Rob Schmidt Recommends Commission Blueprint for Your Success
Create your own water hybrid for under $150!
Free Registry Cleaner and Spyware Remover Scan
Google is Paying Out Big Money
Discover a More Effective Training Method for Fat Loss and Heart Health!
What is the Best Ab Workout for Belly Fat Loss?
Save the Romance
pinup tattoos, wings tattoos, angel tattoos, girl tattoos, sexy tattoos, cloud tattoos, sun tattoos
Boston Terrier Secrets. Breakthrough New Book Reveals How To Have The Happiest, Healthiest And Most Well Behaved Boston Terrier
You make some bucks on the world wide web? Common thats pathetic.. I make thousands.. See how i do it. Forex-Killer.com
Your Best Man Speech
SEX, LOVE and RELATIONSHIP
automatic cash making website
Health Internet Business
WOW! You had best get on this QUICK Shhhh! … Click Here to Add Just 1-Line of Code that Forces Any Site to Magically Make Money!
If we look at all traders who participate in the market: we have one group that fails to plan and therefore plans to fail; another group whose plan is failed; and a third group who properly plans and therefore does not fail.
Is it any wonder that the success rate for forex traders is so slim?
Well it doesn't have to be.
Here's a list of reasons why those whose plan is destined for failure fail:
1. They become emotionally attached to their ideas about how the market should be with minimal or inadequate testing;
2. They fall in love with their back-tested net profit results without fully understanding other key statistical data;
3. They don't admit they're plan is wrong.
Let's explore each point in a little more detail.
1. Becoming emotionally attached to your ideas without adequate results
Most new traders when they realize the importance of obtaining a trading plan and sticking to that plan immediately begin to use the knowledge they have been taught and haphazardly throw it all together into what they deem their "trading plan".
When they are questioned on whether they have a trading plan most of these traders answer with an unequivocal "Yes!".
Most of these traders are destined for failure because their strategy is untested. They rely on blind faith to guide them through the trading jungle to make their untold millions. Would you walk from one length of the Amazon jungle to the other blind-folded? Of course not! You'll have to watch out for all the snakes, tarantulas, and other creepy things that go bump in the night, so why would you approach trading in the same fashion? I mean all you're really doing is placing the blind-fold on your capital!
Why do traders do this?
Because it's easy. That's right... it's easy. They don't need to learn a computer language to type their system into some piece of software that will take them the better part of 6 months to a year to learn, and they don't have to spend any money on buying historical data. Therefore it's easy and it's cheap and it also conserves time!
So does success meet lazy people like this?
Not many! However I will admit that it does meet a fortunate few - only those lucky enough to start their trading during roaring markets where even a monkey can make money! To repeat again: don't wear the blind-fold. Your success may be great at the start, but given time and trades, you'll be the one out of the game - having depleted all your capital.
So what do you do if you KNOW that your method is untested?
If you have the time, the money and the learning capacity I would strongly encourage you to purchase some back-testing software (such as Wealth-Lab Developer), acquire some forex data, ask heaps of questions on the Wealth-Lab forum on how to code your ideas and within 3-6 months you'll be safely coding your own forex system and testing adequately.
If you do not have the time, the money nor the learning capacity I would strongly suggest that you manually write down your system into clearly defined steps that you MUST follow. Then, after opening a DEMO forex account you would trade your system according to the rules you have set out. Trading your rules until about 20 trades have been completed.
After traders obtain their results from their testing period they unfortunately look at only one figure and make a rash conclusion about the system based on that one performance figure, namely, the net profit. This then leads us into the next problem of why traders plans are failed prior to placing their first live trade...
2. They fall in love with the net profit result and no longer question it any further!
The net profit is only one statistic among thousands, however, to keep things simple we will look at the top 3 results that you need to make sure you fully understand.
Here are the other statistical pieces of data that you should look at when your system has completed its testing period:
I. How many trades did it have? If you have made a nice profit, but have only had 3 trades during the testing period you do not have a sufficient sample space to arrive at any safe conclusions. Can you imagine what would happen to Neil Armstrong if NASA had only done 3 computations on how they would arrive on the moon??!! If it's not good for NASA then it's probably not good for you either, however, as NASA do zillions of computations you would only need to conduct about 20 trades as the bare minimum before you can arrive at any safe conclusions;
II. What was your money management procedure during the testing phase? This is by far the most important point, however, you need to make sure your system is properly working prior to even embarking on this difficult area (hence the reason why it is a CLOSE second to the above point). Be sure you fully understand what I am about to explain (read it several times to absorb it if need be)... If you test a method whereby you rely on a percentage amount of capital on a trade you can be biasing your results!
How?
Let us look at the following comparison sheet where we plot 21 trades with their pip return (we'll assume that each pip = US$1), and compare the returns against using 10 contracts per trade, 10% capital per trade, or 2% risk per trade...
Example Trade Sheet
Now as you can see from the results they can easily be doctored according to the different type of money management technique you use and what variable you decide to use it on (i.e. who is to say that we not use 20 contracts per trade, or 20% capital, or 5% risk per trade - all of these would inflate the net return figures).
It is best when you trade to stay at a fixed quantity. If you use any results that require a percentage calculation of the equity balance prior to the trade quantity being calculated you will BIAS the last trades more than the trades at the start. Hence, using a fixed quantity throughout the entire sample is one of the true indications of whether your system is profitable or not.
III. What was the drawdown? This is the largest peak to trough distance on your equity curve. In other words, if you were to enter in on the day the equity curve made a peak, how much would you have lost if you bailed out at the lowest point? To test this manually you would obtain an equity curve peak trace how far the equity curve goes down until it moves higher that the peak you started from - the lowest point made between these two points will be your trough figure which you will then subtract from your starting peak figure. The figure with the largest % loss would be your drawdown.
You would then need to look at this drawdown figure and determine whether or not it fits your risk profile. Would you be okay mentally if your account was down the drawdown % figure? If not, then you're going to have to re-create another system. As a rule I don't like systems that generate more than 30% drawdown.
One other statistic that incorporates drawdown that I like to check to determine whether the system is profitable or not is the recovery factor. The recovery factor divides the net profit by the drawdown (without the negative sign). As an example, if the net profit were $5,659 and the drawdown were -$3,542 dividing the net profit by the drawdown would result in a recovery factor of 1.597 (get rid of the minus sign). I generally prefer systems to have this statistic above 3.
So even though we have created our system that fits our personality and risk tolerance level well trades can still fail by not heeding the third and final statement...
Rob Schmidt Recommends Commission Blueprint for Your Success
Create your own water hybrid for under $150!
Free Registry Cleaner and Spyware Remover Scan
Google is Paying Out Big Money
Discover a More Effective Training Method for Fat Loss and Heart Health!
What is the Best Ab Workout for Belly Fat Loss?
Save the Romance
pinup tattoos, wings tattoos, angel tattoos, girl tattoos, sexy tattoos, cloud tattoos, sun tattoos
Boston Terrier Secrets. Breakthrough New Book Reveals How To Have The Happiest, Healthiest And Most Well Behaved Boston Terrier
You make some bucks on the world wide web? Common thats pathetic.. I make thousands.. See how i do it. Forex-Killer.com
Your Best Man Speech
SEX, LOVE and RELATIONSHIP
automatic cash making website
Health Internet Business
WOW! You had best get on this QUICK Shhhh! … Click Here to Add Just 1-Line of Code that Forces Any Site to Magically Make Money!
Forex Trading Online
As 90-95% of new forex traders lose money within the first 3-6 months this article helps to guide new forex traders by asking 5 questions that the forex trader needs to know prior to back-testing their forex system.
Let us jump right in...
1. What data type are you using (or going to use)?
I know this sounds strange, especially if you have experience from another market such as stocks as their generally is only one type of data source available. However, in the forex market you can have up to 4 different data types: bid, ask, mid and indicative. Each have their own little nuances.
If you would like to know more about the data types then visit the article written about the perils of indicative prices. As this will save me from having to repeat the information again and boring those who've already read it.
So, if you know you have indicative prices then you know you're in for some good results! However, if you have any of the other three you need to be careful on how stop and limit orders are placed.
As an example: If we had bid price history and we were looking to place a buy entry stop at 0830 EST according to the day's high, then we know that the bid price will not accurately reflect what the actual price of our order should be. You would have noticed that if you placed a buy entry stop at the exact same price as that of the day's high you would have entered prematurely - you would have entered 4 or 5 pips before the high or the low of the day was touched (the exact same amount as the spread your broker offers!).
This leads me into the next most important question...
2. What spread is your broker offering on the currencies you are bask-testing?
You need to know this as this can help you set your slippage settings on each currency.
As our example in question 1 pointed out. We found that our buy at the day's high method did not exactly work because we bought at the BID PRICE high, not the ASK PRICE high - the price that we need when we place our order TO BUY.
Therefore, we enter in a slippage setting representing the spread that would be exhibited by this trade on this currency.
But knowing at what price to buy is only half the problem... how do we know what quantity to buy?
3. What margin does your broker offer?
If we know at what price to buy our currency at we need to inform our broker on what quantity to buy to fulfill the order. We only know what quantity to buy by the margin that the brokerage firm offers.
Most brokerage firms offer 100:1 leverage, however, some firms offer mini accounts with 200:1 leverage, others only 50:1 leverage.
Find out the margin required.
4. What restrictions does your broker impose?
Now, I don't just mean margin and spread restrictions as I have mentioned above. These are important in their own right, what you need to find out are the details.
This is probably the most important question of all as the fine line between success and failure can be found in the details. Now you can have this questioned by one of two ways: 1. You can find out through experience (generally the most expensive way unless done through the demo account!); or 2. You ask your broker (the cheapest and best way).
Why is this so important? I hear you ask. Well let's say you have a system that trades any gaps that might form on Sunday at 1700 EST, but your broker does not open until 1730 EST. You either need to factor this restriction in to your system, or move onto another system completely. Or, you may have a system that has 10 pip stops, but you find out that your broker will only let you place 15 pip stops from your initial entry price. Once again you will need to change your system to see whether it still performs well, or throw out your system (or change your broker)!
In fact one of the most devastating restrictions imposed by FXCM is that they do not accept stop entry orders if price never happens to trade at your entry stop price! FXCM will honor and "take the loss" of your OPEN stop positions, but if the liquidity is not there and price has shot straight through your stop price then you will miss out. This can have disastrous effects on your system results as you are left wondering on trades where you made good returns - "Would FXCM have got me in?". You may want to read of some of the quirks I use when placing entry stop orders on FXCM that could be of huge benefit to you to help you possibly get around this problem.
The restrictions by your broker are only half your systems' success, you also need to find out about another more important restriction... yourself. This leads me to the final point...
5. What restrictions do you have?
This is a vitally important question. Most people test their systems and fall in love with the results but find when they trade their system they have lost their account and that most of the best signals occurred while they were sound asleep!
As the forex market is a 24 hour market, you need to put into place restrictions in your system that will be realisticly conducted by you during the course of a normal trading day. There is no use operating a trailing stop method that changes your stop points during times when you are asleep and cannot possibly do so.
I hope this article has made you aware of some of the important things that need to be known prior to testing your system.
Article written by Ryan Sheehy from Currency Secrets.com. Where you will find reviews on forex data vendors, signal providers, brokers, and popular forex resources, along with more quality articles... all for f*ree!
Rob Schmidt Recommends Commission Blueprint for Your Success
Create your own water hybrid for under $150!
Free Registry Cleaner and Spyware Remover Scan
Google is Paying Out Big Money
Discover a More Effective Training Method for Fat Loss and Heart Health!
What is the Best Ab Workout for Belly Fat Loss?
Save the Romance
pinup tattoos, wings tattoos, angel tattoos, girl tattoos, sexy tattoos, cloud tattoos, sun tattoos
Boston Terrier Secrets. Breakthrough New Book Reveals How To Have The Happiest, Healthiest And Most Well Behaved Boston Terrier
You make some bucks on the world wide web? Common thats pathetic.. I make thousands.. See how i do it. Forex-Killer.com
Your Best Man Speech
SEX, LOVE and RELATIONSHIP
automatic cash making website
Health Internet Business
WOW! You had best get on this QUICK Shhhh! … Click Here to Add Just 1-Line of Code that Forces Any Site to Magically Make Money!
Let us jump right in...
1. What data type are you using (or going to use)?
I know this sounds strange, especially if you have experience from another market such as stocks as their generally is only one type of data source available. However, in the forex market you can have up to 4 different data types: bid, ask, mid and indicative. Each have their own little nuances.
If you would like to know more about the data types then visit the article written about the perils of indicative prices. As this will save me from having to repeat the information again and boring those who've already read it.
So, if you know you have indicative prices then you know you're in for some good results! However, if you have any of the other three you need to be careful on how stop and limit orders are placed.
As an example: If we had bid price history and we were looking to place a buy entry stop at 0830 EST according to the day's high, then we know that the bid price will not accurately reflect what the actual price of our order should be. You would have noticed that if you placed a buy entry stop at the exact same price as that of the day's high you would have entered prematurely - you would have entered 4 or 5 pips before the high or the low of the day was touched (the exact same amount as the spread your broker offers!).
This leads me into the next most important question...
2. What spread is your broker offering on the currencies you are bask-testing?
You need to know this as this can help you set your slippage settings on each currency.
As our example in question 1 pointed out. We found that our buy at the day's high method did not exactly work because we bought at the BID PRICE high, not the ASK PRICE high - the price that we need when we place our order TO BUY.
Therefore, we enter in a slippage setting representing the spread that would be exhibited by this trade on this currency.
But knowing at what price to buy is only half the problem... how do we know what quantity to buy?
3. What margin does your broker offer?
If we know at what price to buy our currency at we need to inform our broker on what quantity to buy to fulfill the order. We only know what quantity to buy by the margin that the brokerage firm offers.
Most brokerage firms offer 100:1 leverage, however, some firms offer mini accounts with 200:1 leverage, others only 50:1 leverage.
Find out the margin required.
4. What restrictions does your broker impose?
Now, I don't just mean margin and spread restrictions as I have mentioned above. These are important in their own right, what you need to find out are the details.
This is probably the most important question of all as the fine line between success and failure can be found in the details. Now you can have this questioned by one of two ways: 1. You can find out through experience (generally the most expensive way unless done through the demo account!); or 2. You ask your broker (the cheapest and best way).
Why is this so important? I hear you ask. Well let's say you have a system that trades any gaps that might form on Sunday at 1700 EST, but your broker does not open until 1730 EST. You either need to factor this restriction in to your system, or move onto another system completely. Or, you may have a system that has 10 pip stops, but you find out that your broker will only let you place 15 pip stops from your initial entry price. Once again you will need to change your system to see whether it still performs well, or throw out your system (or change your broker)!
In fact one of the most devastating restrictions imposed by FXCM is that they do not accept stop entry orders if price never happens to trade at your entry stop price! FXCM will honor and "take the loss" of your OPEN stop positions, but if the liquidity is not there and price has shot straight through your stop price then you will miss out. This can have disastrous effects on your system results as you are left wondering on trades where you made good returns - "Would FXCM have got me in?". You may want to read of some of the quirks I use when placing entry stop orders on FXCM that could be of huge benefit to you to help you possibly get around this problem.
The restrictions by your broker are only half your systems' success, you also need to find out about another more important restriction... yourself. This leads me to the final point...
5. What restrictions do you have?
This is a vitally important question. Most people test their systems and fall in love with the results but find when they trade their system they have lost their account and that most of the best signals occurred while they were sound asleep!
As the forex market is a 24 hour market, you need to put into place restrictions in your system that will be realisticly conducted by you during the course of a normal trading day. There is no use operating a trailing stop method that changes your stop points during times when you are asleep and cannot possibly do so.
I hope this article has made you aware of some of the important things that need to be known prior to testing your system.
Article written by Ryan Sheehy from Currency Secrets.com. Where you will find reviews on forex data vendors, signal providers, brokers, and popular forex resources, along with more quality articles... all for f*ree!
Rob Schmidt Recommends Commission Blueprint for Your Success
Create your own water hybrid for under $150!
Free Registry Cleaner and Spyware Remover Scan
Google is Paying Out Big Money
Discover a More Effective Training Method for Fat Loss and Heart Health!
What is the Best Ab Workout for Belly Fat Loss?
Save the Romance
pinup tattoos, wings tattoos, angel tattoos, girl tattoos, sexy tattoos, cloud tattoos, sun tattoos
Boston Terrier Secrets. Breakthrough New Book Reveals How To Have The Happiest, Healthiest And Most Well Behaved Boston Terrier
You make some bucks on the world wide web? Common thats pathetic.. I make thousands.. See how i do it. Forex-Killer.com
Your Best Man Speech
SEX, LOVE and RELATIONSHIP
automatic cash making website
Health Internet Business
WOW! You had best get on this QUICK Shhhh! … Click Here to Add Just 1-Line of Code that Forces Any Site to Magically Make Money!
Monday, September 01, 2008
You make some bucks on the world wide web? Common thats pathetic.. I make thousands.. See how i do it. Forex-Killer.com
You make some bucks on the world wide web? Common thats pathetic.. I make thousands.. See how i do it. Forex-Killer.com active forex trade
Aren`t you fed up with all those Forex E-books that promise heaven and deliver hell? Oreven worse, ultra complicated strategies to follow, markets to analyze (talk about havingfreedom, hu?) and sleepless nights in front of the PC praying those pips would take a turnaround?I definitely was and put all my knowledge and that of several colleagues into an automatedsoftware that does it all. It analyzes the markets and gives you a clear buy or sell order.All you have to do is feed it with the necessary data. A simple 2 minute process.We have sold over 1000 Copies so far (in less than 2 weeks) and got hundreds oftestimonials of people that changed their lives for the better. Its brand new and unique.---------- Forex Killer Testimonials ----------------http://www.forex-killer.com/testimonials1.html-----------------------------------------------------Those people earn thousands of dollars each month and fire their bosses. Why don`t you too?I urge you to take this chance asap. We are going to increase the pricing over the nextdays dramatically because right now we are practically "giving" our secrets away.FORGET FOREX E-BOOKS. They suck.. plain and simple. Get the software that tells you what todo and WHEN to do it and finally start earning the big bucks you truly deserve.Besides what do you have to loose? We have a full 58 days refund policy in place supervisedby clickbank. Should you not be able to use the software (we have a bunch of highly trainedmonkeys that actually rock at it) or not be happy for whatever other case (no money totrade, dont like the appareance or the colors of the software) We refund you.. NO questionsasked & no strings attached. And you are going to keep the software too!.. Heck Iseriously think we are out of our minds :)Get your key to ultimate wealth now.. Download the forex-killer Now.Click Here!
Best wishes,Andreas KirchbergerProfessional forex trader
Aren`t you fed up with all those Forex E-books that promise heaven and deliver hell? Oreven worse, ultra complicated strategies to follow, markets to analyze (talk about havingfreedom, hu?) and sleepless nights in front of the PC praying those pips would take a turnaround?I definitely was and put all my knowledge and that of several colleagues into an automatedsoftware that does it all. It analyzes the markets and gives you a clear buy or sell order.All you have to do is feed it with the necessary data. A simple 2 minute process.We have sold over 1000 Copies so far (in less than 2 weeks) and got hundreds oftestimonials of people that changed their lives for the better. Its brand new and unique.---------- Forex Killer Testimonials ----------------http://www.forex-killer.com/testimonials1.html-----------------------------------------------------Those people earn thousands of dollars each month and fire their bosses. Why don`t you too?I urge you to take this chance asap. We are going to increase the pricing over the nextdays dramatically because right now we are practically "giving" our secrets away.FORGET FOREX E-BOOKS. They suck.. plain and simple. Get the software that tells you what todo and WHEN to do it and finally start earning the big bucks you truly deserve.Besides what do you have to loose? We have a full 58 days refund policy in place supervisedby clickbank. Should you not be able to use the software (we have a bunch of highly trainedmonkeys that actually rock at it) or not be happy for whatever other case (no money totrade, dont like the appareance or the colors of the software) We refund you.. NO questionsasked & no strings attached. And you are going to keep the software too!.. Heck Iseriously think we are out of our minds :)Get your key to ultimate wealth now.. Download the forex-killer Now.Click Here!
Best wishes,Andreas KirchbergerProfessional forex trader
Saturday, August 16, 2008
Trading Online ,Reasons You Should
Forex Trading Online - 7 Reasons Why You Should!
Forex trading online is a fast way to use your investment capital to it's fullest. The Forex markets offer distinct advantages to the small and large traders alike, making Forex currency trading in many ways preferable to other markets such as stocks, options or traditional futures. Here are seven reasons why you'll want to look into Forex Trading online.
1 - Forex is the largest market.
Forex trading volume of more than 1.9 billion, more than 3 times larger than the equities market and more than 5 times bigger than futures, give Forex traders nearly unlimited liquidity and flexibility.
2 - Forex never sleeps!
You can execute forex trading online 24/7, from 7AM New Zealand time on Monday morning, to 5PM New York time on Friday evening. No waiting for markets to open: they're open all night! This makes Forex trading online a very attractive component that fits easily into your day (or night!)
3 - No Bulls or Bears!
Because Forex trading online involves the buying of one currency while simultaneously selling another, you have an equal opportunity for profit no matter which direction the currency is headed. Another advantage is that there are only around 14 pairs of currencies to trade, as opposed to many thousands of stocks, options and futures.
4 - Forex Trading online offers great leverage!
You can make the most of your investment resources with Forex trading online. Some brokers offer 200:1 margin ratios in your trading accounts. Mini-FX accounts, which can typically be opened with only $200-300, offer 0.5% margin, meaning that $50 in trading capital can control a 10,000 unit currency position. This is why people are flocking to Forex trading online as a way to highly leverage their investments.
5 - Forex prices are predictable.
Currency prices, though volatile, tend to create and follow trends, allowing the technically trained Forex trader to spot and take advantage of many entry and exit points.
6 - Forex trading online is commission free!
That's right! No commissions, no exchange fees or any other hidden fees. This is a very transparent market, and you'll find it very easy to research the currencies and the countries involved. Forex brokers make a small percentage of the bid/ask spread, and that's it. No longer any need to compute commissions and fees when executing a trade.
7 - Forex trading online is instant!
The FX market is astoundingly fast! Your orders are executed, filled and confirmed usually within 1-2 seconds. Since this is all done electronically with no humans involved, there is little to slow it down!
Forex trading online can get you where you want to go quicker and more profitably than any other form of trading. Check it out and see what Forex trading online can do for you!
Keith Thompson is the webmaster of Forex Trading Today; a blog focusing on the latest Forex news and resources.
Momentum Trading: A Practical Day Trading Strategy to Get Profits from Hot StocksMomentum day trading can be extremely profitable when done correctly..
Forex Trading Online - 7 Reasons Why You Should!Forex trading online is a fast way to use your investment capital to it's fullest. The Forex markets offer distinct advantages to the small and large traders alike, making Forex currency trading in many ways preferable to other markets such as stocks, options or traditional futures.
What is Forex Trading?Forex, or Foreign Exchange, is the simultaneous exchange of one country's currency for that of another.The way it works is an investor who wishes to purchase or sell one currency for another with the hope of making a profit when the value of the currencies change in favor of the investor.
Day Trading Success- The Key Is SurvivalMost new traders tend to focus just about all their time and energy on finding nearly perfect "setups", but trade setups, even very good ones, are *not* the key to successful trading. It's the *way* you trade your setups that keeps your losses smaller than your gains.
A Beginner's Guide to FOREXFOREX is the abbreviation for the Foreign Exchange market. FOREX is basically an international exchange market where currencies from all over the world are bought and sold for profit.
What I Learnt Losing £60,000 My First Year as a Full-time TraderDuring my first year as a local (independent trader) on the floor of LIFFE, I bought and sold 8804 FTSE futures contracts, about 40 contracts per day on average. The result was a loss of £61,620 or -£267 per trading day.
Where is the Market Going?If you ask me whether the market will have moved up or down by this time next year, well I may as well flip a coin, because I don't know.If you ask me whether the market will have moved up or down by this time next month, well again, I may as well flip a coin, because I still don't know.
The Yin and the Yang of MarketsI am reading a fantastic book on trading, first published in 1924, by Richard D. Wyckoff, titled "How I Trade and Invest in Stocks & Bonds".
A Fools GameI received an email this week with a question (below) which caused me to think about the wisdom of pursuing trading as a career. Regardless of your trading time span, the skills and concerns of active short-term trading are relevant to all market particpipants.
Stopping YourselfI read on a bulletin board a traders comment that on his first outing trading the E-Mini S&P 500 he lost on each of his trades. He noted though, that had he had a wider stop each of his trades would have been profitable and that therefore he would be trading with a wider stop in future.
Day Trading - Moving Averages vs Support and ResistanceWhen day trading the SP and Nasdaq futures, do you rely on your moving averages more than your support & resistant areas?During the first hour of trading, the support and resistance zones on the SP and Nasdaq futures are the most important things to watch. The moving averages have not yet had a chance to come into play.
Crisis of Confidence in the EUThe European Union (EU) constitution was dealt a double blow, first by a French "no" vote on 29-May and then by a follow on "no" from the Netherlands on 01-Jun. To add insult to injury, one low level Italian diplomat quickly called for a referendum in Italy to decide if a return to the lira was warranted.
Day Trading the Index Futures - How to Judge Good EntriesQUESTION: If the SP futures fall through support and go straight down for another two points, and I want to get short, should I a.)enter immediately, b.
How to Trade CurrencyWe all know when you go on a trip to another country; you need to take some travelers checks and some cash in the currency of that country. This can be advantageous because one country's currency is usually worth more or less than the other.
ISO 4217 in Forex TradingISO 4217 is an international standard describing three letter codes to define the names of currencies established by the International Organization for Standardization (ISO).The first two letters of the code are the two letters of ISO 3166-1 alpha-2 country codes (which are similar to those used for national top-level domains on the internet) and the third is usually the initial of the currency itself.
Forex trading online is a fast way to use your investment capital to it's fullest. The Forex markets offer distinct advantages to the small and large traders alike, making Forex currency trading in many ways preferable to other markets such as stocks, options or traditional futures. Here are seven reasons why you'll want to look into Forex Trading online.
1 - Forex is the largest market.
Forex trading volume of more than 1.9 billion, more than 3 times larger than the equities market and more than 5 times bigger than futures, give Forex traders nearly unlimited liquidity and flexibility.
2 - Forex never sleeps!
You can execute forex trading online 24/7, from 7AM New Zealand time on Monday morning, to 5PM New York time on Friday evening. No waiting for markets to open: they're open all night! This makes Forex trading online a very attractive component that fits easily into your day (or night!)
3 - No Bulls or Bears!
Because Forex trading online involves the buying of one currency while simultaneously selling another, you have an equal opportunity for profit no matter which direction the currency is headed. Another advantage is that there are only around 14 pairs of currencies to trade, as opposed to many thousands of stocks, options and futures.
4 - Forex Trading online offers great leverage!
You can make the most of your investment resources with Forex trading online. Some brokers offer 200:1 margin ratios in your trading accounts. Mini-FX accounts, which can typically be opened with only $200-300, offer 0.5% margin, meaning that $50 in trading capital can control a 10,000 unit currency position. This is why people are flocking to Forex trading online as a way to highly leverage their investments.
5 - Forex prices are predictable.
Currency prices, though volatile, tend to create and follow trends, allowing the technically trained Forex trader to spot and take advantage of many entry and exit points.
6 - Forex trading online is commission free!
That's right! No commissions, no exchange fees or any other hidden fees. This is a very transparent market, and you'll find it very easy to research the currencies and the countries involved. Forex brokers make a small percentage of the bid/ask spread, and that's it. No longer any need to compute commissions and fees when executing a trade.
7 - Forex trading online is instant!
The FX market is astoundingly fast! Your orders are executed, filled and confirmed usually within 1-2 seconds. Since this is all done electronically with no humans involved, there is little to slow it down!
Forex trading online can get you where you want to go quicker and more profitably than any other form of trading. Check it out and see what Forex trading online can do for you!
Keith Thompson is the webmaster of Forex Trading Today; a blog focusing on the latest Forex news and resources.
Momentum Trading: A Practical Day Trading Strategy to Get Profits from Hot StocksMomentum day trading can be extremely profitable when done correctly..
Forex Trading Online - 7 Reasons Why You Should!Forex trading online is a fast way to use your investment capital to it's fullest. The Forex markets offer distinct advantages to the small and large traders alike, making Forex currency trading in many ways preferable to other markets such as stocks, options or traditional futures.
What is Forex Trading?Forex, or Foreign Exchange, is the simultaneous exchange of one country's currency for that of another.The way it works is an investor who wishes to purchase or sell one currency for another with the hope of making a profit when the value of the currencies change in favor of the investor.
Day Trading Success- The Key Is SurvivalMost new traders tend to focus just about all their time and energy on finding nearly perfect "setups", but trade setups, even very good ones, are *not* the key to successful trading. It's the *way* you trade your setups that keeps your losses smaller than your gains.
A Beginner's Guide to FOREXFOREX is the abbreviation for the Foreign Exchange market. FOREX is basically an international exchange market where currencies from all over the world are bought and sold for profit.
What I Learnt Losing £60,000 My First Year as a Full-time TraderDuring my first year as a local (independent trader) on the floor of LIFFE, I bought and sold 8804 FTSE futures contracts, about 40 contracts per day on average. The result was a loss of £61,620 or -£267 per trading day.
Where is the Market Going?If you ask me whether the market will have moved up or down by this time next year, well I may as well flip a coin, because I don't know.If you ask me whether the market will have moved up or down by this time next month, well again, I may as well flip a coin, because I still don't know.
The Yin and the Yang of MarketsI am reading a fantastic book on trading, first published in 1924, by Richard D. Wyckoff, titled "How I Trade and Invest in Stocks & Bonds".
A Fools GameI received an email this week with a question (below) which caused me to think about the wisdom of pursuing trading as a career. Regardless of your trading time span, the skills and concerns of active short-term trading are relevant to all market particpipants.
Stopping YourselfI read on a bulletin board a traders comment that on his first outing trading the E-Mini S&P 500 he lost on each of his trades. He noted though, that had he had a wider stop each of his trades would have been profitable and that therefore he would be trading with a wider stop in future.
Day Trading - Moving Averages vs Support and ResistanceWhen day trading the SP and Nasdaq futures, do you rely on your moving averages more than your support & resistant areas?During the first hour of trading, the support and resistance zones on the SP and Nasdaq futures are the most important things to watch. The moving averages have not yet had a chance to come into play.
Crisis of Confidence in the EUThe European Union (EU) constitution was dealt a double blow, first by a French "no" vote on 29-May and then by a follow on "no" from the Netherlands on 01-Jun. To add insult to injury, one low level Italian diplomat quickly called for a referendum in Italy to decide if a return to the lira was warranted.
Day Trading the Index Futures - How to Judge Good EntriesQUESTION: If the SP futures fall through support and go straight down for another two points, and I want to get short, should I a.)enter immediately, b.
How to Trade CurrencyWe all know when you go on a trip to another country; you need to take some travelers checks and some cash in the currency of that country. This can be advantageous because one country's currency is usually worth more or less than the other.
ISO 4217 in Forex TradingISO 4217 is an international standard describing three letter codes to define the names of currencies established by the International Organization for Standardization (ISO).The first two letters of the code are the two letters of ISO 3166-1 alpha-2 country codes (which are similar to those used for national top-level domains on the internet) and the third is usually the initial of the currency itself.
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