# Independence - If you are new to forex, you will either decide to trade your own money or to have a broker trade it for you. So far, so good. But your risk of losing increases exponentially if you either of these two things:
Interfere with what your broker is doing on your behalf (as his strategy might require a long gestation period);
Seek advice from too many sources - multiple input will only result in multiple losses. Take a position, ride with it and then analyse the outcome - by yourself, for yourself.
# Tiny margins - Margin trading is one of the biggest advantages in trading forex as it allows you to trade amounts far larger than the total of your deposits. However, it can also be dangerous to novice traders as it can appeal to the greed factor that destroys many forex traders. The best guideline is to increase your leverage in line with your experience and success.
# No strategy - The aim of making money is not a trading strategy. A strategy is your map for how you plan to make money. Your strategy details the approach you are going to take, which currencies you are going to trade and how you will manage your risk. Without a strategy, you may become one of the 90% of new traders that lose their money.
# Trading Off-Peak Hours - Professional FX traders, option traders, and hedge funds posses a huge advantage over small retail traders during off-peak hours (between 2200 CET and 1000 CET) as they can hedge their positions and move them around when there is far small trade volume is going through (meaning their risk is smaller). The best advice for trading during off peak hours is simple - don't.
Wednesday, June 24, 2009
Forex Trading Tips
Why do hundreds of thousands online traders and investors trade the forex market every day, and how do they make money doing it?
This two-part report clearly and simply details essential tips on how to avoid typical pitfalls and start making more money in your forex trading.
1. Trade pairs, not currencies - Like any relationship, you have to know both sides. Success or failure in forex trading depends upon being right about both currencies and how they impact one another, not just one.
2. Knowledge is Power - When starting out trading forex online, it is essential that you understand the basics of this market if you want to make the most of your investments.
The main forex influencer is global news and events. For example, say an ECB statement is released on European interest rates which typically will cause a flurry of activity. Most newcomers react violently to news like this and close their positions and subsequently miss out on some of the best trading opportunities by waiting until the market calms down. The potential in the forex market is in the volatility, not in its tranquility.
3. Unambitious trading - Many new traders will place very tight orders in order to take very small profits. This is not a sustainable approach because although you may be profitable in the short run (if you are lucky), you risk losing in the longer term as you have to recover the difference between the bid and the ask price before you can make any profit and this is much more difficult when you make small trades than when you make larger ones.
4. Over-cautious trading - Like the trader who tries to take small incremental profits all the time, the trader who places tight stop losses with a retail forex broker is doomed. As we stated above, you have to give your position a fair chance to demonstrate its ability to produce. If you don't place reasonable stop losses that allow your trade to do so, you will always end up undercutting yourself and losing a small piece of your deposit with every trade.
This two-part report clearly and simply details essential tips on how to avoid typical pitfalls and start making more money in your forex trading.
1. Trade pairs, not currencies - Like any relationship, you have to know both sides. Success or failure in forex trading depends upon being right about both currencies and how they impact one another, not just one.
2. Knowledge is Power - When starting out trading forex online, it is essential that you understand the basics of this market if you want to make the most of your investments.
The main forex influencer is global news and events. For example, say an ECB statement is released on European interest rates which typically will cause a flurry of activity. Most newcomers react violently to news like this and close their positions and subsequently miss out on some of the best trading opportunities by waiting until the market calms down. The potential in the forex market is in the volatility, not in its tranquility.
3. Unambitious trading - Many new traders will place very tight orders in order to take very small profits. This is not a sustainable approach because although you may be profitable in the short run (if you are lucky), you risk losing in the longer term as you have to recover the difference between the bid and the ask price before you can make any profit and this is much more difficult when you make small trades than when you make larger ones.
4. Over-cautious trading - Like the trader who tries to take small incremental profits all the time, the trader who places tight stop losses with a retail forex broker is doomed. As we stated above, you have to give your position a fair chance to demonstrate its ability to produce. If you don't place reasonable stop losses that allow your trade to do so, you will always end up undercutting yourself and losing a small piece of your deposit with every trade.
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Forex - US Session: Dollar Resumes Downward Trend After Session of Profit-Taking
The dollar declined against most of the G10 as investors and Traders resumed diversification out of dollar denominated assets and into higher yielding instruments. . Equity markets are slightly higher in the US and marginally higher overseas in Europe. This activity is likely to be fairly neutral due ahead of the FOMC meeting tomorrow and several other smaller economic data points.
Today's Forex Strategy
Last updated
24 Jun 2009, 13.42
FOMC decision and monetary policy statement finally upon us today - will they say anything interesting? Strong US Durable Goods Orders.
24 Jun 2009, 13.42
FOMC decision and monetary policy statement finally upon us today - will they say anything interesting? Strong US Durable Goods Orders.
The History of Forex
The Forex trading market is a relatively new phenomenon. Never before in the history of the world have we seen such an amazing event. In only 30 years, this industry has developed from almost nothing to a daily US$1.5 trillion market. How did this happen? Was it by design? Or was it by accident?
Well the answer falls somewhere in between. There are three distinct time frames that set the stage for today's style of currency trading. The first time frame is the pre-currency trading era of the 1950s. The second time frame is the worldwide, politically volatile atmosphere of the 1970s. The third time frame is what has occurred in this free market economy since the demise of the gold standard 30 years ago. In each time frame, there have been three catalysts: war, gold, and foreign banks- that have played a significant role in propelling currency development.
Posted by me at 6:00 AM 2 comments
Pre-Currency Trading Era – The 1950s
Entering into the 1950s, the United States of America had a distinct advantage over war-torn Europe. While Germany was heavily sanctioned, England, France, Italy, and several other Old World nations were just coming to terms with the heavy investment needed to rebuild their countries.
As a way to make it easier for the rest of the world to rebuild, the Bretton Woods Agreement was adopted. It was innocuously simple: in an effort to keep the United States of America (USA) from buying everything in sight, the Bretton Woods Agreement kept the USA in check by requiring all foreign currencies be pegged to the US Dollar. Some pegs were strong, some pegs were weak, but at the end of the day they never moved more than 1% in any direction. Like today's problem with the Chinese Yuan, forced to a peg against the dollar, it kept a constant, controlled flow of US dollars out of the country.
The peg would not have been so bad if not for the fact that the US dollar also had a unique relationship with gold. Just like currencies, gold was pegged to the dollar at a fixed value of US$35/ounce. What made it even worse was that US currency, at the time, was directly exchangeable for gold. This strategy was fine as long as the Fort Knox gold reserves exceeded $23 billion.
After World War II, the USA became the primary economic super power. Many foreign countries began to acquire US currency in lieu of gold. The dollar gained prominence in a way no other currency ever had before.
At the same time, we began to see the rebuilding of the Old World and foreign trade began to gain momentum. In 1950, foreign countries held US $8 billion. We also saw the oil business begin its ascent as a prominent import/export industry.
Posted by me at 5:59 AM 0 comments
The 1970's United States Currency Policy Meltdown
Once again, we are hit with the triumvirate of war, the restrictive gold standard, and dollars in foreign banks.
This time, each problem was feeding directly off of the others. The Vietnam Conflict had drained our gold reserves heavily. By 1970, Fort Knox only held US$12 Billion.
The growth of the oil business and the increase in foreign trade caused a boom in the demand for US dollars in foreign banks. Over US$ 47 Billion was sitting in overseas banks.
On paper, our gold reserves were over-leveraged by almost 4 to 1. As a nation, we did not know how to react to such an overbearing assault on our currency. Then along came the invention of the Eurodollar to make our nightmare worse.
Foreign banks with US dollars would make low-interest loans in US dollars to importers and exporters. Although the dollars were never repatriated, the US was still on the hook to exchange these “credit”-created dollars for the gold we kept on reserve.
Then came a miracle in disguise . The Bretton Woods Agreement collapsed. In the over-leveraged gold-dollar environment, many countries began to feel frustrated with the artificial peg.
In blatant defiance to the agreement in 1971, Germany declared that they would float the Deutsche mark. They were tired of the artificial peg that was keeping their economy depressed.
In the first hour of trading, over US$1 billion were exchanged for Deutsche marks. For the first time, the public had voiced their opinion against being so heavily weighted with dollars.
With Germany completely ignoring the Bretton Woods Agreement by floating their currency, the US government had nothing left to do but put the final nail in the coffin of the U.S.'s currency policy. The Bretton Woods Agreement was dissolved.
Three short months after the Deutsche mark began to float, the US moved off of the gold standard. Gold was allowed to float freely like any other currency. Oil, although priced in US dollars, soon switched to a peg against gold. Gold and oil prices jumped ten-fold.
The currency dynamics were soon changed on a global scale and it became accepted practice that countries began to float their own currency.
Posted by me at 5:58 AM 0 comments
New Rules of Currency
In 1971, the Smithsonian Agreement replaced the Bretton Woods Agreement and authorized “forward currency contracts”, adding validity to the Eurodollar phenomenon. It didn’t work. A year later the European Joint Float was established. It, and the Smithsonian Agreement, were scrapped in 1973. Even though they were dissolved the concept of “forward currency contracts” stayed as part of the banking system.
Once currencies began to “free-float”, they immediately moved away from their gentlemanly 1% fluctuations on either side to huge price ranges, going anywhere from 20-25% daily.
From 1970-1973, the total foreign exchange volume went from US$25 Billion to US$100 Billion. With oil prices up, gold prices up, and an economy still reeling from the rapid currency shift, “stagflation”, rising inflation while real incomes remained the same, soon hit the United States.
Posted by me at 5:57 AM 0 comments
Today's Currency World
In the 30 years since the collapse of the last gentlemanly agreement on currency rates, many momentous events have occurred that have affected currencies worldwide. The Japanese yen gained prominence because of Japan's heavy export relationship with the United States. The USSR collapsed. We have had several undeclared wars, the south Asian economies have risen and collapsed, and several investor bubbles have come and gone.
Each time, currencies have come away with a newly earned respect by the masses. There has also been a constant element of surprise that keeps you guessing what's next.
Current conditions, such as the United States' perpetual war on “terror”, the permanent introduction and dominance of the euro currency, the steady O.P.E.C. increases in oil prices, and gold's renaissance as a store of value, will likely have a tremendous impact on the future of what it means to trade currencies.
This could be a fundamental shift in the next phase of currency development.
The Forex trading market is a relatively new phenomenon. Never before in the history of the world have we seen such an amazing event. In only 30 years, this industry has developed from almost nothing to a daily US$1.5 trillion market. How did this happen? Was it by design? Or was it by accident?
Well the answer falls somewhere in between. There are three distinct time frames that set the stage for today's style of currency trading. The first time frame is the pre-currency trading era of the 1950s. The second time frame is the worldwide, politically volatile atmosphere of the 1970s. The third time frame is what has occurred in this free market economy since the demise of the gold standard 30 years ago. In each time frame, there have been three catalysts: war, gold, and foreign banks- that have played a significant role in propelling currency development.
Posted by me at 6:00 AM 2 comments
Pre-Currency Trading Era – The 1950s
Entering into the 1950s, the United States of America had a distinct advantage over war-torn Europe. While Germany was heavily sanctioned, England, France, Italy, and several other Old World nations were just coming to terms with the heavy investment needed to rebuild their countries.
As a way to make it easier for the rest of the world to rebuild, the Bretton Woods Agreement was adopted. It was innocuously simple: in an effort to keep the United States of America (USA) from buying everything in sight, the Bretton Woods Agreement kept the USA in check by requiring all foreign currencies be pegged to the US Dollar. Some pegs were strong, some pegs were weak, but at the end of the day they never moved more than 1% in any direction. Like today's problem with the Chinese Yuan, forced to a peg against the dollar, it kept a constant, controlled flow of US dollars out of the country.
The peg would not have been so bad if not for the fact that the US dollar also had a unique relationship with gold. Just like currencies, gold was pegged to the dollar at a fixed value of US$35/ounce. What made it even worse was that US currency, at the time, was directly exchangeable for gold. This strategy was fine as long as the Fort Knox gold reserves exceeded $23 billion.
After World War II, the USA became the primary economic super power. Many foreign countries began to acquire US currency in lieu of gold. The dollar gained prominence in a way no other currency ever had before.
At the same time, we began to see the rebuilding of the Old World and foreign trade began to gain momentum. In 1950, foreign countries held US $8 billion. We also saw the oil business begin its ascent as a prominent import/export industry.
Posted by me at 5:59 AM 0 comments
The 1970's United States Currency Policy Meltdown
Once again, we are hit with the triumvirate of war, the restrictive gold standard, and dollars in foreign banks.
This time, each problem was feeding directly off of the others. The Vietnam Conflict had drained our gold reserves heavily. By 1970, Fort Knox only held US$12 Billion.
The growth of the oil business and the increase in foreign trade caused a boom in the demand for US dollars in foreign banks. Over US$ 47 Billion was sitting in overseas banks.
On paper, our gold reserves were over-leveraged by almost 4 to 1. As a nation, we did not know how to react to such an overbearing assault on our currency. Then along came the invention of the Eurodollar to make our nightmare worse.
Foreign banks with US dollars would make low-interest loans in US dollars to importers and exporters. Although the dollars were never repatriated, the US was still on the hook to exchange these “credit”-created dollars for the gold we kept on reserve.
Then came a miracle in disguise . The Bretton Woods Agreement collapsed. In the over-leveraged gold-dollar environment, many countries began to feel frustrated with the artificial peg.
In blatant defiance to the agreement in 1971, Germany declared that they would float the Deutsche mark. They were tired of the artificial peg that was keeping their economy depressed.
In the first hour of trading, over US$1 billion were exchanged for Deutsche marks. For the first time, the public had voiced their opinion against being so heavily weighted with dollars.
With Germany completely ignoring the Bretton Woods Agreement by floating their currency, the US government had nothing left to do but put the final nail in the coffin of the U.S.'s currency policy. The Bretton Woods Agreement was dissolved.
Three short months after the Deutsche mark began to float, the US moved off of the gold standard. Gold was allowed to float freely like any other currency. Oil, although priced in US dollars, soon switched to a peg against gold. Gold and oil prices jumped ten-fold.
The currency dynamics were soon changed on a global scale and it became accepted practice that countries began to float their own currency.
Posted by me at 5:58 AM 0 comments
New Rules of Currency
In 1971, the Smithsonian Agreement replaced the Bretton Woods Agreement and authorized “forward currency contracts”, adding validity to the Eurodollar phenomenon. It didn’t work. A year later the European Joint Float was established. It, and the Smithsonian Agreement, were scrapped in 1973. Even though they were dissolved the concept of “forward currency contracts” stayed as part of the banking system.
Once currencies began to “free-float”, they immediately moved away from their gentlemanly 1% fluctuations on either side to huge price ranges, going anywhere from 20-25% daily.
From 1970-1973, the total foreign exchange volume went from US$25 Billion to US$100 Billion. With oil prices up, gold prices up, and an economy still reeling from the rapid currency shift, “stagflation”, rising inflation while real incomes remained the same, soon hit the United States.
Posted by me at 5:57 AM 0 comments
Today's Currency World
In the 30 years since the collapse of the last gentlemanly agreement on currency rates, many momentous events have occurred that have affected currencies worldwide. The Japanese yen gained prominence because of Japan's heavy export relationship with the United States. The USSR collapsed. We have had several undeclared wars, the south Asian economies have risen and collapsed, and several investor bubbles have come and gone.
Each time, currencies have come away with a newly earned respect by the masses. There has also been a constant element of surprise that keeps you guessing what's next.
Current conditions, such as the United States' perpetual war on “terror”, the permanent introduction and dominance of the euro currency, the steady O.P.E.C. increases in oil prices, and gold's renaissance as a store of value, will likely have a tremendous impact on the future of what it means to trade currencies.
This could be a fundamental shift in the next phase of currency development.
BSE Sensex or Bombay Stock Exchange Sensitive Index is a value-weighted index composed of 30 stocks started in 01 of jan, 1986. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around one-fifth of the market capitalization of the BSE. The base value of the sensex is 100 on April 1, 1979, and the base year of BSE-SENSEX is 1978-79.
At irregular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to make sure it reflects current market conditions. The index is calculated based on a free-float capitalization method; a variation of the market cap method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by company insiders[1].
The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the BSE Sensex works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation.[2]
At irregular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to make sure it reflects current market conditions. The index is calculated based on a free-float capitalization method; a variation of the market cap method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by company insiders[1].
The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the BSE Sensex works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation.[2]
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