The typical novice student usually comes to a class with a predefined perception of the markets and it is my job to show them the reality of how Forex really operates.
The 7 Pillars is a unique summary of the tried and tested skill sets which any rookie speculator needs to learn from in order to get the results they are looking for. For this week's article, I would like to run through each of these 7 Pillars making them specific to the world of Forex trading, so we can all fully understand the main requirements and skill sets necessary to make it as a consistently profitable trader in today's financial arena.
The 7 Pillars is a unique summary of the tried and tested skill sets which any rookie speculator needs to learn from in order to get the results they are looking for. For this week's article, I would like to run through each of these 7 Pillars making them specific to the world of Forex trading, so we can all fully understand the main requirements and skill sets necessary to make it as a consistently profitable trader in today's financial arena.
A major story in late 2009 was the negative correlation between equities and the U.S. dollar. It appears the attention has been well deserved: both the 3-month and 1-year rolling correlations are the lowest they’ve been in at least two decades.
I get plenty of questions emailed to me and I endeavor to answer as many as I can, even sometimes publicly through another one of these articles. However, on numerous occasions I have been asked to give my longer term outlook on the market and I thought that as we are coming to the end of the year, now would be a good time to do so. As this is a Forex article, I thought I would take a look at the good old US Dollar, a central and intrinsic piece of the economic puzzle.
There is a lot of information on trading and I mean a lot. As traders we can use various tools such as charts, news, Fundamentals and Technical Indicators to name just a few. But what are the best ones to use? In a world full of opinion and hypothesis, it can often be difficult to decide on what route to take when speculating in the Forex markets.
This week's article will review some of the new regulations affecting retail Forex traders with accounts in the US that took effect in August, 2009. Includes how to use stops and limits after July 31st along with a discussion of FIFO and counter party risk.
Recently, I had lunch with a fellow Forex trader that I met several years ago. During our conversation, I asked him how his trading was going. His answer was "I am still working at getting consistent." I asked him if he had a written plan that included specific trading rules and strategies to accomplish this goal, and he said no. I strongly encouraged him to do this vital task before he took his next trade. I use a mechanical approach to my trading which includes specific rules for trading both a trending market, and a range bound market. My friend continues to look for the Holy Grail, one size fits all type of system that does not exist...
Successful short term Forex trading is the goal of many new traders who enter the Forex markets each year. For them, life begins and ends on the one or five minute chart. It is important to understand that the trend on a small time frame chart may only be a retracement of the primary trend from a higher time frame chart. As a result, understanding the higher time frame trend is an important step in becoming a successful, short term Forex trader.
Both of these are different ways for a trader to enter the markets they are trading that are trending higher. These entries can be used in any market, but certain types of entries will work better in the Forex markets due to the 24-hour trading session. Each type of entry has a set of rules including a method for entry, a first profit target, and a stop loss. Let's examine both of these strategies and explain how and when to use them effectively when trading Forex from the long side...
FX Options can be tailored to meet your own FX market forecast while balancing between your investment goals and tolerance for risk. Some of the key beneits to trading FX Options include their limited risk, the ability to implement longer term strategies (relative to the short-term nature of the FX Spot market), as well as the multiple combinations of expiration months and strike prices...
In order to meet your financial goals in today's environment, it's imperative to consider all of the different asset classes, including cash, equities, bonds, options, natural resources, precious [[[meta]]]ls, real estate and foreign currencies. If you are actively managing your own finances, exchange-traded currency options are one of the most versatile trading instruments with strategies for forecasting and hedging to minimize your exposure to risk.
When I write my articles, I give my opinion about what I believe is happening to the currencies of the world based on the news I hear, the experts I follow, and my personal experiences of the economic cycles I have seen in the past. This fundamental information helps me understand what reports and indicators the economists of the world believe will shape future events. The charts provide me with the clues as to where the buyers and sellers are waiting to act in the future based on their actions in the past. The US Dollar Index (USDX) is the main currency chart I watch for clues as to the sentiment of the currency traders of the world, and for the places where battles have taken place in the past that may once again shape the future...
The only way to keep yourself out of trouble in the Forex market, and also profit from various market periods, is to know what trend the market is in and, most importantly, know what the next trend is going to be...
As we move through 2009, what can investors expect? How much uncertainty? When will the markets finally "shift" direction? Only time will tell. No market guru can predict with 100% certainty how the markets are going to perform over the next year. FX Options are available each trading day for retail investors, institutions and market makers. As an investor, it’s important to carefully monitor the risk and reward relationship on a daily basis to ind the appropriate trades for your portfolios.
The financial markets are constantly looking ahead for information to price themselves.
With the recent dramatic upheavals in the fnancial markets, hope has been replaced by
despair. The markets generally experience four price stages in their own "life cycle":
consolidation, breakout, equilibrium, and the reversal of the previous breakout. The challenge for investors is not only qualifying which stage the market is in, but also the various sub-stages it encounters...
We haven't discussed carry trades in quite a while, but this strategy may be coming back into vogue. Many assume that carry trades must include a short position in the Japanese Yen, but this is not the case; any currency that possesses low interest rates becomes a viable shorting candidate for this trading strategy...
Options vertical spread strategies can help to mitigate any volatility risk. In this current high implied volatility environment, vertical spread strategies are great for entering new FX options positions...
FX Options, just like other exchange-traded options, gives investors financial control of an asset, but with limited risk. Investors can purchase calls (the right to buy the US dollar exchange rate), or puts (the right to sell the US dollar exchange rate) based on their views of the markets, creating a limited risk profile. Sellers can earn premiums, but with substantial (theoretically even unlimited) risk. If investors expected large potential moves in the FX marketplace, buying calls or puts might make sense.
With the ever-quickening pace of globalization, the popularity of exchange-listed foreign exchange options has only increased as investors seek more transparency and
flexibility in their trading. FX Options provide investors with more choices. How can you decide which FX options strategy is appropriate for you?
How to trade in Forex micro accounts. Micro accounts just became popular last year, and many traders aren’t even aware that they exist. This is a big deal because it means you can sustain larger draw downs without risking large sums of money; in other words, your style of trading does not have be dictated by the size of your account.
I've often heard some investor-traders refer to technical analysis as "voodoo." Granted, there's a lot of so-called "indicators" out there that are more than a little mysterious and subjective, from Gann lines to planetary alignments. And some of their proponents are in their own galaxies as well. Now, even many of my option trader buddies who do volatility arbitrage are TA cynics. But, what I have to remind them of is that looking at volatility charts is a form of "technical analysis" just like looking at moving averages of price. They are both based on historical statistics, plotted on a graph in a given time frame. They hate when I tell them that, because they think that statistical vol arb is somehow more pure than "voodoo" statistical price analysis.
The FED lowering it's effective Fed Funds target rate to between 25 bp and zero, and it's sweeping new debt purchase program, sent the euro up by 3-cents in 90 minutes, from roughly $1.38 to over $1.41. In this article we'll look at the EUR/USD pair as well as how to convert forex volatility for your trading range...
Fib strategies have become very popular in forex trading. But today there are so many permutations and variations on this basic theme that sometimes the useful aspects of this technique get lost in the shuffle. This question opened the door for what we might call the "Great Fibonacci Debate". Read on...
Since we are in the midst of a credit crisis, our chosen indicator for gauging fear in the current environment is the Ted Spread. Another famous "fear gauge", the CBOE's Volatility Index (VIX), is currently reflecting a slightly more relaxed environment. In this article, we chart the surprising similarities between the VIX and the Ted Spread.
Because Forex is relatively new to the retail trading public, scammers who make unrealistic promises are becoming a constant nuisance. Here's a good rule of thumb, and it doesn't matter if you're trading stocks, futures, options, or Forex – If anyone promises outlandish returns, don't believe it; it's probably a scam.
Okay, so things are rough out there. But just because the world is facing financial Armageddon, and long-term investments are falling apart faster than the New York Mets in September, that doesn't mean your trading account has to suffer. In fact, some traders thrive in this rock 'em, sock 'em environment. Just take a look at the volatility in the Great Britain Pound – U.S. Dollar currency pair (symbol GBP/USD)...
Currency volatility is at its highest point since the year 2000, as the markets swing wildly while absorbing bad news of historic proportions. The head spinning moves we've seen recently have driven the Average True Range, also known as ATR, of the major currency pairs to levels that are rarely reached. In this article, we will explore the basic mechanics of ATR and explain why it is so important to forex traders.
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Latest Forum Posts
Volatile Volatility
Hype. It's as useful as the weather report....a nice approximation, but still just an approximation....
Think Or Swim Problems
Any updates? I was strongly considering TOS, but your assessment made me wary....
Volatile Volatility
I think it gets so much press because of the "fear gauge" label, and not necessarily for its usefulness. It's...
