Global Banks

"New Rules" Hope to Stave Off Commercial Real Estate Defaults

2009-09-17T03:02:00.001+06:00

Mortgage services face a potential minefield of problems as New Rules Ease the Restructuring of CMBS Loans.

The Treasury, responding to the growing pain in the commercial real-estate industry, released new tax rules that make it easier for distressed property owners to restructure loans that were packaged by Wall Street firms and sold as securities.

Most in the real-estate industry, which lobbied intensely for the move, applauded the action. But some warned it has opened a Pandora's box, especially for servicers of the securities who will likely come under new pressure from borrowers and competing classes of investors.

The move is the first round of "additional guidance" the Treasury is weighing to stave off what many fear will be a commercial real-estate crisis, according to people familiar with the matter.

But some investors holding CMBS bonds are watching nervously because loan modifications, known as "mods," mightn't always be in their best interest. CMBS have junior and senior pieces, and the senior holders may be in a better position, when a borrower defaults, to foreclose and liquidate the property rather than modify the loan. Junior holders, on the other hand, might benefit from a mod because they mightn't get their money back in a forced sale.

"The biggest concern is that the guidance could open the floodgate for everyone to try to get some sort of loan modifications," said Aaron Bryson, a CMBS analyst at Barclays Capital. "There is a tremendous burden on the servicers to uphold their end of the bargain."

The move by the Treasury reflects the deep concern in government and industry circles over the problems looming in the $6.5 trillion market for commercial real estate. Just as the U.S. economy is struggling to regain its footing, defaults are mounting because of credit-market turmoil, along with declining property cash flows and plunging property values.

Previously, because of tax laws, servicers would not modify terms unless someone fell behind on payments. Now, many who can afford to pay will seek relief. As a result, servicers will have a more difficult time of deciding who is solvent and who is not, and what the right thing to do in picking winners and losers between junior and senior holders.

That the Treasury has to change such rules on the fly shows their concern over just how fragile this "recovery" is.

Yen Rises on CIT Group Bankruptcy Speculations

2009-09-11T01:25:00.000+06:00

The yen started today rebounding against several currencies like the euro and the pound, after CIT Group Inc. said it will probably not receive a federal loan to attempt a restructuring plan, leaving space for speculations that the commercial lender may file for bankruptcy.

Euro Continues Rally Against U.S. Dollar on Risk Appetite

2009-09-10T01:24:00.000+06:00

The euro is having one of the most positive weeks against the U.S. dollar in two months, as a risk appetite wave brought investors to purchases euro-priced assets.

Canadian Dollar Down as Crude Oil Declines

2009-09-09T01:19:00.000+06:00

The Canadian dollar, which started the week with an outstanding performance as traders, attracted by yield and driven by optimism, bought the loonie, fell today against several currencies as the crude oil, the main Canadian commodity export, declined.

Canadian Dollar Down as Crude Oil Declines

2009-09-08T01:18:00.000+06:00

What Are Business Loans

2009-09-07T18:11:00.001+06:00

Business loans can be defined as money lent for a specified amount of time at a specific interest rate to a specific person or people that operate a business or plan to operate a business. This definition is very broad, but so are the various types of loans available to business people. Deciding on which type of business loan that you and your company will benefit from the most is very important. Often times, a start-up business or someone that has never owned a business will find themselves more or less applying for a “personal” loan. This can be a very risky endeavor, mixing business loans with personal loans, however, often times it is the only available means for first time business owners.

One of the first things personal business owners need to do is establish business credit. Business credit can help you get a business only loan without using your personal credit. Establishing business credit can be done by:
1.) Opening up a business credit card account and paying it in full.

2.) Buying equipment and supplies from companies that will report good standing to the business credit bureaus.

3.) Having a good business plan with potential earnings, letters of intent, and any type of customer contracts already laid out.

All of these types of endeavors can help in receiving a business loan. Often times, financial institutions require in-depth business plans, be prepared to spend days working on just the certification paperwork prior to applying for a business loan. A business only loan can be obtained in the business name without use of personal credit as long as the business can justify the loan amount and the ability to pay it back.

There are several different types of business loans available, ranging from those secured with collateral, non-secure loans, which are based upon the credit worthiness of the applicant, and even government loans for small business ventures, women and minorities. Government loans are those loans secured by the government; in most instances these loans are available when the business or owner can prove that the community will prosper based upon the business at hand. For the most part, government loans are based upon personal credit.

The basis for which you may need or require a business loan may vary. Some of the most common business loans available to business owners are:

* Acquisitions or a loan to acquire an existing business
* Inventory loans
* Account Receivable Loans
* Working Capital Loans which converts a companies assets into working capital
* Equipment Leasing
* Commercial Property loans
* Warehouse financing
* International business loans
* Franchise loans

One of the most important tools when deciding on what type of business loan your company needs is research. Researching the different types of loans available to you and your company can save you money. First, look into the different type of business loans available to you in your state. Many states have government loans available; some even offer grants, which is money available for specific purposes that do not require repayment. Research the different type of Federal loans available. You can do this at the following website: www.sba.gov. Call your local bank and investment companies regarding the business loans they have available for you. Many times, business loans are not that hard to acquire. With research and a good business plan, your dreams may come true.

Applying for a Loan

2009-09-07T18:09:00.000+06:00

The process of applying for a business loan is a stringent one as compared to the standard procedures in obtaining a home mortgage loan or a personal loan. This is probably due to the fact that business loans contain a greater risk element as compared to other loans. Therefore, lenders need to exercise greater caution and emphasis when evaluating business loan applications in order to minimize their risk exposure.
With that, lenders evaluate their applicants based on the information that are provided as well as their judgment of the viability and profitability of the business being financed. Thus, business loan applicants will be required to submit a loan proposal along with their applications with the purpose of creating a positive impression upon the lender. The first element of a loan proposal is an executive summary, providing short descriptions of the type of business and the industry, the purpose and usage of the loan, the proposed repayment conditions as well as the intended loan period. After that, the company information is provided, enriching the reader with the nature of the business, the location of the business, company history, the products or services provided, key differentiation factors of the company or the product, the general growth of the industry, competitive information, growth potential and target customers.

It would help if you could include your company marketing strategy, detailed product information, historical information as well as projected growth plans for the company. Apart from that, if you plan to incorporate product or service extensions in the future, you should provide these descriptions within your loan proposal. If possible, geographical expansion plans will help in the proposal.

The next area that needs to be showcased in the proposal would be the credentials and experience of each member of the management team. Impressive credentials will provide assurance to the lender that the company is managed by individuals who are responsible and capable. This is important as having the wrong people managing the company could be detrimental for the business.

In any loan application, historical records are essential to be used in evaluating the performance of a company. As new companies do not yet have these records, the financial records of the owners will be used as the basis of evaluation. Income tax returns forms are also required by lenders. All of these records provided should be the latest copies less than 90 days old, with the exception of the income tax returns form.

If the loan is applied for an existing company in active operations, company financial statements, including profit and loss accounts, balance sheets and the net worth reconciliation record should be included in the loan proposal. Again, all of this information should also be the latest and less than 90 days old. Additionally, a listing of accounts receivables and other short term and long term debt should be attached.

On the other hand, if the loan application is submitted for a new business, a pro-forma balance sheet and profit and loss account should be provided. Apart from that, a cash flow projection for the upcoming year is drafted to indicate the possibility of recovering the debt. This also means that projected revenue, profits, costs incurred and expenditure should be listed out with definite explanations provided as well as a list of assumptions.

If you possess assets that you wish to use as collateral for your loan, details for this should be provided to the lender as well. It is often common for lenders to request for dual sources of repayment in the event that one source is defaulted. This means that if the business owner defaults on his repayments, the collateral can be sold in order to recover debt.

Finally, other documents normally required for a loan application would be items like the article of incorporation, lease agreements, partnership agreements, license, references, etc. As the list of required documentation, information and attachments differs between lenders, it is best to check with the individual lender on their specific information and documents required to be attached with the loan proposal.

The Basics of Borrowing Money

2009-09-07T18:08:00.000+06:00

Are you thinking about starting a business but have no money to do it with? Well, you're not alone. This article will tell you the basics of borrowing money.
A loan is money that is borrowed, and has to be paid back along with interest. If the money is borrowed from an institution such as a bank, this is called a commercial loan. Money that is borrowed from a friend or a relative is called a personal loan. The borrower, or debtor, is the business or individual that takes out the loan. The lender, or creditor, is the source from which the money was borrowed. The term, or period, is the time that is specified during which the borrower has to use the money borrowed before he has to repay the loan. The maturity of a loan is when a loan term reaches its end. The Principal is the amount that is borrowed from the lender. When you or your business borrows money, the lender wants to know when they will get their money back. Keep this in mind when you are looking for a lending source.
If the business is not able to repay the loan, the lending source has a right to legally come after assets to recoup it's money. The extent to which you are personally liable depends on the business structure your business is operating under.
If you are approved for a loan, that you will have to make scheduled payments (typically on monthly basis) plus interest. A loan can sometimes be set up as a balloon loan. A balloon loan will typically require smaller initial payments and one lump sum of what was borrowed as the final payment at the end of the term.
Borrowing from Institutions
Business loans generally fall into two main categories: short term and long term loans. A short term loan is a loan that is to be payed back within one year. Examples of short term loans include:
Working capital loans
Accounts receivable loans
Lines of credit
Long term loans are loans that are to be payed back typically from one to seven years. Long term loans are typically used for:
an expansion of a business
the purchase of equipment
real estate
Most business loans that are used for starting a business are long term loans.

When you approach an institution for a business loan, it will be looking at you as the business owner as closely as it will be looking at the business itself. One of the ways lending institutions make money is by lending money and they want to be as sure as possible that they get back their money with the interest owed.

The time between applying for a loan and learning that you have been approved (or disapproved) can vary. If you are disapproved, you may be told almost instantly. If you are approved, it may take a few days though it usually takes longer. It may even take several months to learn whether you or your business has being approved for the loan.
Borrowing from Family and Friends
If you don't want to, or can't get a commercial loan, you can consider getting a private loan from family or friends. This is usually real informal. However, you need to be careful because this can lead to ruined relationships.
If you are getting a private loan, it is in the best interest of the lender to have an agreement put in writing. The written agreement should state the principal, the interest charged and the terms of repayment. This puts the lender in better position either write off the loan on his or her tax return or to legally come after you.
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9 things you must do to maximize your chances of obtaining a small business loan

2009-09-07T18:06:00.000+06:00

To get approval for your small business loan application, you must be able to meet the lending criteria set down. Some organisations are more risk averse than others, and will therefore have more stringent criteria.

To vastly increase your chances of a successful funding application, you will need to present the following information: 1. The reason for the loan. The lender will be looking for something that fits within the normal range and expertise of your business. The amount may cover a number of items, so you will need to cover each.

2. The amount required, and the repayment term of the small business loan you want. (e.g. $10,000 term 5 years, payable quarterly).

3. Details of how you will repay the amount borrowed. For example, “From the increase in profits of reduced running costs of the Whizzbang Go4It”

4. Details of security you will be able to offer to the lender. This will act as reassurance for the lender. If you’re not prepared to put up some aspect of security, then why should they?

5. You will need to include your business plan which will serve to answer essential questions relating to management capabilities, information about the market you operate in. What kind of business you are in etc.

6. 3 Years financial statements. You will need to present quality financial information from your accounting software, preferably signed off by your accountant or tax advisor.

7. Latest Set of Management accounts. Again produced from your accounting software.

8. Accounts receivables (debtors) and payables (creditors) ageing reports.

9. Principals financial statements. – Particularly required if some form of security is necessary.

If you are a new company, the emphasis is going to be on your business plan , and the security (also called collateral) you or your business can provide against the loan.

You must take the time to practice presenting your case to the bank or lender to iron out any glitches. Practice on your colleagues and family (you never know, they might be so impressed, they'll invest or lend!). It may help to role play the lender and come up with as many pointy questions as possible. The more time you take the better your chances will be. (But remember, don’t fall into the analysis paralysis trap!)

Applying for a Business Loan

2009-09-07T18:04:00.000+06:00

The process of applying for a business loan is a stringent one as compared to the standard procedures in obtaining a home mortgage loan or a personal loan. This is probably due to the fact that business loans contain a greater risk element as compared to other loans. Therefore, lenders need to exercise greater caution and emphasis when evaluating business loan applications in order to minimize their risk exposure.

With that, lenders evaluate their applicants based on the information that are provided as well as their judgment of the viability and profitability of the business being financed. Thus, business loan applicants will be required to submit a loan proposal along with their applications with the purpose of creating a positive impression upon the lender.
The first element of a loan proposal is an executive summary, providing short descriptions of the type of business and the industry, the purpose and usage of the loan, the proposed repayment conditions as well as the intended loan period. After that, the company information is provided, enriching the reader with the nature of the business, the location of the business, company history, the products or services provided, key differentiation factors of the company or the product, the general growth of the industry, competitive information, growth potential and target customers.

It would help if you could include your company marketing strategy, detailed product information, historical information as well as projected growth plans for the company. Apart from that, if you plan to incorporate product or service extensions in the future, you should provide these descriptions within your loan proposal. If possible, geographical expansion plans will help in the proposal.

The next area that needs to be showcased in the proposal would be the credentials and experience of each member of the management team. Impressive credentials will provide assurance to the lender that the company is managed by individuals who are responsible and capable. This is important as having the wrong people managing the company could be detrimental for the business.

In any loan application, historical records are essential to be used in evaluating the performance of a company. As new companies do not yet have these records, the financial records of the owners will be used as the basis of evaluation. Income tax returns forms are also required by lenders. All of these records provided should be the latest copies less than 90 days old, with the exception of the income tax returns form.

If the loan is applied for an existing company in active operations, company financial statements, including profit and loss accounts, balance sheets and the net worth reconciliation record should be included in the loan proposal. Again, all of this information should also be the latest and less than 90 days old. Additionally, a listing of accounts receivables and other short term and long term debt should be attached.

On the other hand, if the loan application is submitted for a new business, a pro-forma balance sheet and profit and loss account should be provided. Apart from that, a cash flow projection for the upcoming year is drafted to indicate the possibility of recovering the debt. This also means that projected revenue, profits, costs incurred and expenditure should be listed out with definite explanations provided as well as a list of assumptions.

If you possess assets that you wish to use as collateral for your loan, details for this should be provided to the lender as well. It is often common for lenders to request for dual sources of repayment in the event that one source is defaulted. This means that if the business owner defaults on his repayments, the collateral can be sold in order to recover debt.

Finally, other documents normally required for a loan application would be items like the article of incorporation, lease agreements, partnership agreements, license, references, etc. As the list of required documentation, information and attachments differs between lenders, it is best to check with the individual lender on their specific information and documents required to be attached with the loan proposal.

Alternative Venture Finance : Federal Grants and Loans

2009-09-07T18:03:00.000+06:00

While most companies seeking venture capital initially think about angel investors and venture capitalists, a large alternative source of financing is federal grants and loans. The two largest federal grant programs are run by the Small Business Administration (SBA), and by Small Business Investment Companies (SBICs).

An SBA loan, regardless of whether it is a direct loan from the SBA, or, as is more common, a bank loan guaranteed by the SBA, is essentially a bank loan. The benefit of it versus a traditional bank loan is the rate. SBA rates are typically much less than traditional business loan rates.
In most cases, in a guaranteed SBA bank loan, the SBA guarantees 90 percent of the loan will be repaid to the bank. As such, banks are at much less risk than in most other loans, and are a bit more flexible with regards to who they offer these loans. However, the SBA usually requires the founders of the company to personally guarantee the loans, which makes them risky should the venture collapse.

Alternatively, Small Business Investment Companies (SBICs) are privately organized corporations that are licensed and regulated by the SBA. Small or emerging businesses which qualify for assistance from the SBIC program can receive equity capital and/or long-term loans from these companies. Essentially, these companies provide their own capital, which is supplemented by federal funds, to the companies they fund.

Interestingly, U.S. taxpayers benefits from the SBIC program as tax revenues generated from successful SBIC investments have more than covered the cost of the program. Likewise the program has created hundreds of thousands of jobs.

In summary, SBA and SBIC financing are viable alternatives to financing from angel investors and venture capitalists and should be considered in the capital raising process. Similarly to angel and VC financing, companies seeking SBA and SBIC financing need a strong management team and value proposition, and a highly professional and compelling business plan in order to raise the capital they need.

Financing and Refinancing Programs are Plentiful

2009-09-07T18:01:00.000+06:00

As cliché as it may sound, the “Money makes the world go round” adage still holds true. Especially nowadays when everything and anything tangible or intangible can be bought with one’s dollars, money is apparently of extreme importance. What if you want to buy a home or start your own business? How do you go about your financing endeavor? Read on for the best avenue that will “show you the money!”

Coupled with management and planning skills, financing is what will aid one in venturing into business if he/she wishes to make it grow and get the desired profit. Many financial institutions are offering various types of financing that may assist in tackling this matter.To better understand the wide array of financing options for your money needs, here is a rundown of the types of financing that you can avail.

1. Revolving Line of Credit

This is the most usual and most low-cost kind of business loan for small and medium-sized businesses. A revolving line of credit will fund a company’s working capital. This working capital typically consists of the sum of present assets minus the present liabilities.

2. Non-Capital Goods Financing

This is a type of financing that is for short-term deals. These deals are with settlement terms of about a year or may be less for buying goods, i.e., construction materials, products, and other non-capital stuff.

3. Project Finance

Financial companies offers financing for projects that need longer than 5 years repayment terms. Depending on the predicted cash flows and kind of revenue that a project is about to generate, this kind of financing undergoes extensive analysis.

4. Capital Equipment Financing

Extension of funding plans is possible if one chooses this financing. As the transaction requires it to be, the extension can go from 1 to 10 years.

5. Subordinated Mezzanine Debt

This is one of the more expensive types of financing compared to revolving line of credit and term debt. Lenders usually ask for equity like warrants to add on their earnings from interests.

6. Equity Financing

This form of financing is for investors that are brave enough to face major risks that this kind of financing brings. But with that warning of a great risk comes the expectation of high returns on the part of the equity investor.

7. Piggyback Financing

This program caters to homebuyers who avoid the required mortgage insurance when the mortgage is in excess of the 80 percent of the purchase price. Two mortgages with possible varying costs are available for the borrower with this type of financing.

8. Creative Financing

This option is when the buyer of the house is with a third-party lending institution, i.e., a bank or a loan company.

9. Owner Financing

This is when the property owner or seller finances the buyer.

These are some of the most popular financing possibilities one can acquire for his/her business or any money-involving activity. What would further serve you best in your decision making on which to stick to is considering payment terms you can afford and the right timing when applying for the funding plan.

With the many options mentioned, you are more armed with the several financing choices that will help you pull it off with yourbusiness, home buying or any endeavor that requires financial aid.

How to Choose a Bank for your Home Business

2009-09-07T18:00:00.000+06:00

You should thoroughly consider your business needs when selecting a financial institution or bank for your small/home business. You may want to consider the following points:

- The types of products and services that are offered.
- The bank's criteria for qualifying for a loan.
- The minimum balances for accounts, interest rates and charges for account services.
- Location and Access to ATMs
- Online Banking Services

One bank may specialize in home loans or auto loans while another may focus on commercial loans for businesses. Some banks may only offer basic deposit accounts while others have lock box services, sweep accounts, and even online banking! It's very important to evaluate your business needs before you select your banker.Here are some of the things that your banker may be able to help you with:

- Help you with the cash management needs of your business.
- Offer investment products of varying maturities or risks.
- Provide advice regarding what it will take to qualify for the loan that best meets your needs.
- Provide special loan programs for small businesses, including SBA loan programs and other government-guaranteed or agency loans.
- Assist you with finding financial information on your industry.

So compare different banks in order to find the one that will serve your business's needs and will also provide support and assistance during the infancy stage of your business. Selecting a bank that you can work with will be especially important as your business grows.

Start shopping around by gathering information to help you make this important selection. Compare interest rates on deposit accounts and basic consumer loans (most business loans are negotiated, so the rates won't be posted at the banking center). Also, look carefully at the charges for services. Tell them about your business and the form of organization so that they can tell you what special products and services or restrictions might apply.

Before selecting a bank, be sure to have a good understanding of your own business needs, and what you need from your bank. If you know what you will need from a bank, it will be much easier to evaluate and compare between various services. Remember, it is a good idea to establish a relationship with a banker, before you need money. The right banker will be someone that understands the needs of emerging and growing businesses. They will be interested in your business dreams and will help you achieve them.

Create Real Magic And New Customers

2009-09-07T17:58:00.000+06:00

Do you want a small business opportunity that could create more business for you? It is a chance to sell to the government. Bring in new customers is always the number one goal of many business owners. It is the life blood of any operation and if you want your business to stay healthy then you must bring in fresh new customers and keep them coming back with a great service or product.
I would like to introduce you to the 59.005 Business Development Assistance to Small Business program.
This program is excellent for bringing in new business and revenue. Get help from this program to sell to the government. They will assist your small business in obtaining a "fair" share of contracts and subcontracts for Federal government supplies and services and a "fair" share of property sold by the government.
What an excellent opportunity this is! I would rather sell a lot more to meet my goals than to have to get a small business loans or small business grants.
What they can do for your company is:(Restriction of bidding/award to small business only)
(1) Your application will set-aside the chance to increase the Federal procurement and disposal requirements awarded to small business for a great small business opportunity;
(2) You will receive consultation with procuring activities on structuring of procurement and sales planning to optimize small business participation;
(3) They will also review and analyze you small business capacity, credit, integrity, perseverance, and tenacity when challenged by contracting officers and certifying competence of such firms to perform as prime contractors, as appropriate, and monitoring performance of certificate of competency holders throughout contract life;
(4) They will also review of subcontracting plans and programs of large prime contractors to determine the extent that they are providing subcontracting opportunities to small businesses, veteran-owned businesses, service-disabled veteran-owned businesses, HUBZone qualified businesses, small disadvantaged business, and women-owned small businesses;
(5) When they give you consultation and advice for small businesses requesting assistance on government procurement or property sales matters, you must keep in mind that all consultants are not the same. It is very important to get one that you like and is passionate about their job.
(6) They will also help you with specific contract administration problems;
(7) They will see if you qualify for the SBA's procurement and financial programs;
(8) By doing this they want to breakout of items from a the same old stale source of buying in favor of full and open competition in order to achieve savings;
(9) One of the goals that they have is to review small business programs at Federal buying activities to evaluate effect on small business participation and recommend changes; and
(10) management of the Central Contractor Registration's Dynamic Small Business Search, a nationwide Internet database of information on small business, a marketing tool for small firms and a "link" to procurement opportunities. It pays to at least get registered and listed in this data base.
Existing and potential small businesses are eligible to apply. A small business is a business entity organized for profit, with a place of business located in the United States and which makes a significant contribution to the U.S. economy through payment of taxes and/or use of American Products, materials and/or labor.
Generally, an employee based size standard not in excess of 500 employees is used for manufacturers for wholesalers, average employment not in excess of 500 is used; for general construction, a revenue based size standard not over $28,500,000 is used; for specialty trade construction, revenues not over $12,000,000 is used; for retail and services contracts, revenues not over $6,000,000 is used; and for agricultural enterprises, gross annual sales not over $750,000 is used.
Self-certification of documentation is sufficient for representation as a small business, women-owned small business, veteran-owned small business and service-disabled veteran-owned small business. SBA certification is required for status as a HUBZone small business, 8(a) small business, and Small Disadvantaged Business.
The range is about 15 days for certificate of competency; no approval is required on other programs for this .small business opportunity.
The government grants that guarantees this small business opportunity programs for small business grants totaled: FY 04 $4,606,675,000; FY 05 est $3,250,000,000; FY 06 est $3,000,000,000. Administrative Expenses: FY 04 $38,013,000; FY 05 est $34,188,000; and FY 06 est $36,406,000
In fiscal year 2004, $11.2 billion in government grants for prime contracts was set-aside for procurement limited to small businesses to give you an excellent small business opportunity.
Title 13, Code of Federal Regulations, Part 125; "Government Contracting Programs;" Government Contracting and information for this small business opportunity from SBA offices. Forms to obtain necessary assistance are provided by SBA field offices. To find where they are listed you can go to Associate Administrator for Government Contracting, Small Business Administration, 409 3rd Street, SW., Washington, DC 20416. Telephone: (202) 205-6460 http://www.sba.gov
Other small business opportunity programs that are related to selling to the federal government are:
17.301, Non-Discrimination and Affirmative Action by Federal Contractors and Federally Assisted Construction Contractors can use this small business opportunity;
17.303, Wage and Hour Standards;
36.001, Fair Competition Counseling and Investigation of Complaints;
39.001, Business Services is another small business opportunity;
43.002, Technology Transfer is the chance to participate in another small business opportunity;
59.006, 8(a) Business Development is a good small business opportunity that you should consider.

Yen Rises After Hotel Blasts in Indonesia

2009-09-07T01:16:00.000+06:00

The yen, known for its refuge investment profile, rose for another day versus most of the 16 main traded currencies as explosions in Indonesia brought a certain amount of tension to financial markets in Asia this Friday.

Mexican Peso Falls Again on Crude Oil

2009-09-06T01:17:00.000+06:00

Mexico is, together with Canada, one of the main energy suppliers for the United States energy demands, and its national currency, the peso, fell again today as the crude oil declined in New York.

Pound Declines as Terrorist Attack Drives Traders to Safety

2009-09-05T01:16:00.000+06:00

The pound posted its first day of losses versus the U.S. dollar this week as explosions in Jakarta, the capital of Indonesia, attracted investors to the safety of the greenback, stopping a five-day rally that brought the pound up on renewed economic hopes.

Brazilian Real Posts Biggest Gain in Two Months on Optimism

2009-09-03T01:15:00.000+06:00

The Brazilian real, a high-yielding emergent market currency, ended this week’s session climbing massively against the U.S. dollar, as renewed optimism among traders attracted foreign investments, pushing the Brazilian currency up.

Dollar Slides as Optimism Attracts Investors to Yield

2009-09-02T01:14:00.000+06:00

The U.S. dollar posted the weakest performance versus the euro since May as corporate earnings in North America came better-than-expect and U.S. government reports brought optimism to equities and currency markets, attracting investors to high-yielding options, consequently damping demand for the greenback.

Pound Strengthens on House Prices Climb

2009-09-01T01:14:00.000+06:00

The pound started the week climbing versus the yen and the dollar, as stocks rose and the house prices in the U.K. had an increase in the month of June, raising attractiveness for the British currency.

Australian Dollar Hits Two-Week High on Stocks

2009-08-31T01:13:00.000+06:00

The Australian currency, often referred as the Aussie, strengthened to a two-week high versus the yen as stocks in Asia climbed this Monday, raising attractiveness for the yield of the Australian dollar.

Brazilian Real Hits 9-Month High on Economic Optimism

2009-08-30T01:13:00.000+06:00

The Brazilian currency posted another day of gains versus most of the main traded currencies and hit a 9-month high against the greenback as corporate earnings came better than expected combined with a rise in commodity prices.

Russian Ruble Climbs Intensively on Crude Oil Rally

2009-08-29T01:12:00.000+06:00

The Russian currency gained most in almost a decade as the crude oil reached $64 a barrel and metallic commodities are on the rise, creating speculations that Russia, a world leader in commodity exportation, will benefit from a global economic rebound.

Pound Slides Versus Majors on Public Deficit

2009-08-28T01:11:00.000+06:00

The pound dropped today versus the euro and the dollar, before a report, that even if did not come with extremely pessimist numbers, indicated a considerably high public deficit in the country, suggesting that the government may struggle to stabilize the nation’s finances.

Dollar Rebounds on CIT Group Concerns

2009-08-27T01:10:00.000+06:00

The U.S. currency rebounded versus several currencies after bottoming at a six-week low versus the euro, as speculations that the CIT Group

Swiss Central Bank Attempts to Control Franc Gains

2009-08-26T01:11:00.000+06:00

The Swiss central bank widened its foreign currency holdings in order to prevent the national currency to continue its rally, being the current foreign reserves in Switzerland the highest in twelve years.

Yen Rebounds on Global Banking Situation Concerns

2009-08-25T01:09:00.000+06:00

The yen rebounded versus a number of important currencies as concerns regarding an eventual recovery of banking institutions worldwide rose, consequently attracting investors once again to invest in the safety of the Japanese currency.

British Pound Weakens on House-Prices Decline Forecast

2009-08-24T01:08:00.000+06:00

The British currency lost against most of the 6 main traded currencies as a government institution affirmed that the crisis in the real estate market will persist until 2012, shunning investors from pound-prices assets, and stopping last week’s rally versus the greenback and the yen.

Euro Continues High as Demand for Safety Falters

2009-08-23T01:07:00.001+06:00

The euro continued at high-levels versus the dollar and the yen, as stocks rallied and risk appetite damped demand for the safety of the Japanese and American currency.

Dollar Down as Risk Appetite Spurs Demand for Yield

2009-08-23T01:07:00.000+06:00

The greenback posted a negative performance today as a decreased demand for safety made investors to leave the U.S. currency attracted to riskier assets in emergent markets.

Yen Declines as Stocks Rally Spurs Demand for Risk

2009-08-22T01:05:00.001+06:00

The yen lost against all 6 major currencies as stocks continued a rally that is already the longest since 2003 on speculations that the global slump maybe ending, damping demand for the safe profile of the Japanese currency.

New Zealand dollarThe New Zealand currency is trading this week near to a nine-month high versus the U.S. dollar, as corporate earnings and stocks p

2009-08-21T01:06:00.000+06:00

The New Zealand currency is trading this week near to a nine-month high versus the U.S. dollar, as corporate earnings and stocks performance attracted investors to the riskier profile of the kiwi if compared to more conservative currencies like the greenback and the yen.

Chilean Peso Hits One-Week Low on Copper Prices

2009-08-20T01:05:00.000+06:00

The Chilean currency had a weakening performance today, as the copper, one of the main exports of the South American nation declined, damping demand for the peso.

South African Rand Climbs on Corporative Fusion Speculations

2009-08-19T01:02:00.000+06:00

The South African Rand climbed sharply today as a stake in one of the main South African mobile operators may be purchased by an Indian group, injecting money in the country and raising confidence for the rand outlook.

Euro Continues High as Demand for Safety Falters

2009-08-18T01:01:00.000+06:00

The euro continued at high-levels versus the dollar and the yen, as stocks rallied and risk appetite damped demand for the safety of the Japanese and American currency.

Dollar Down as Risk Appetite Spurs Demand for Yield

2009-08-17T01:00:00.001+06:00

The greenback posted a negative performance today as a decreased demand for safety made investors to leave the U.S. currency attracted to riskier assets in emergent markets.

Yen Declines as Stocks Rally Spurs Demand for Risk

2009-08-17T01:00:00.000+06:00

New Zealand Dollar Rallies on Corporate Earnings

2009-08-16T01:00:00.000+06:00

South African Rand Climbs on Corporative Fusion Speculations

2009-08-15T00:59:00.000+06:00

South African Rand Down on Merging Speculations

2009-08-14T00:53:00.000+06:00

The South African currency, which hit an eleven-month high versus the greenback this week, pared its weekly gains as an Indian newspaper affirmed that the merging of Bharti with MTN may take longer than expected, raising concerns about investments in South Africa.

Microsoft, Nokia form alliance to rival RIM

2009-08-13T17:01:00.002+06:00

Microsoft Corp and Nokia announced an alliance on Wednesday to bring business software to smartphones and counter the dominance of Research in Motion Ltd's BlackBerry. The alliance between the world's largest software company and cell phone maker means the latest versions of Microsoft's Office applications, including Word, Excel, PowerPoint and messaging, will be available on a range of Nokia cell phones, which make up 45 percent of the global smartphone market. The two companies, at one time fierce rivals in the mobile telecommunications business, expect to offer Nokia phones running Office sometime next year.

"This is giving some of our competitors -- let's spell it out, RIM -- a run for their money," said Nokia Executive Vice President Robert Andersson, in a telephone interview. "I don't think BlackBerry has seen the kind of competition we can provide them now." Research in Motion's BlackBerry created the market for mobile e-mail, and its dominant position in the corporate sector, especially in North America, has protected it from Nokia's attempts to crack the market in recent years. "RIM should be reasonably safe in the near-term because Nokia's presence in the U.S. is relatively small," said Neil Mawston from research firm Strategy Analytics. "Partnering more closely with Microsoft will help to raise Nokia's profile in the U.S."

The alliance also aims to counter Google Inc's recent move into free online software, targeted at Microsoft's business customers, and the growing popularity of Apple Inc's iPhone device. "It's clear that Nokia and Microsoft are both facing competitive challenges, most notably from Google," said John Jackson, an analyst at wireless research firm CCS Insight. "It makes sense for these two companies to work together to see if they can pool their competitive strengths to try and counter some of this pressure." The alliance means Microsoft's new Office suite of applications could be available to a much wider audience than the users of Windows Mobile phones, which make up 9 percent of the smartphone market. "We see this as a great opportunity to deliver Office Mobile to 200 million Nokia smartphone customers," said Takeshi Numoto, an executive at Microsoft's Office business.

Analysts said Microsoft is clearly looking at the largest possible audience with the Nokia deal. "The deal is a good win for Microsoft and it will surely now be hoping to upsell the Microsoft suite of operating systems into Nokia's possible portfolios of smartphones, mobile Internet devices and netbooks over the next couple of years," said Strategy Analytics' Mawston. The two companies stressed that the new venture will not affect the future of Microsoft's Windows Mobile and Nokia's Symbian operating systems for smartphones. Executives said Nokia has no plans to make a Windows Mobile device. "We are extremely committed to Symbian," said Andersson. "This is very clear. This is a multi-year collaboration building on Symbian. We are as committed as before, if not more," he said. Microsoft shares rose 2.1 percent to $23.62 on Nasdaq while Nokia rose less than 1 percent to 9.30 euros in Helsinki. Shares in RIM were 0.5 percent lower in Toronto.

Citi hires External Help for Management Review

2009-08-13T16:59:00.000+06:00

Citigroup Inc has been forced by U.S. regulators to hire external consultants who will consider whether the New York company's current management is capable of leading it out of financial crisis, the Financial Times reported on its website. Recruitment firm Egon Zehnder has been retained by Citi to carry out a comprehensive management review that was requested by the U.S. government after its stress tests on banks in May, the paper said, citing people close to the situation. By the time it reports third-quarter results in October, Citi has to present a plan of action about possible managerial changes to the board and regulators, people familiar with the matter told the paper. A spokesman for Citigroup in Hong Kong declined to comment to Reuters on the report, while Egon Zehnder could not be immediately reached for comment. Citi, last month, announced its biggest management shake-up since the financial crisis began, replacing its chief financial officer and installing a new banking chief

Pound Slides on Quarterly Recession Numbers

2009-08-13T00:58:00.000+06:00

The pound posted losses today versus most of the 16 main traded currencies as today, gross domestic product figures released in the United Kingdom revealed that the quarterly recession in the European nation was more than double of what economists forecast.

Canadian Dollar Ends Third Week Gaining Versus Greenback

2009-08-12T00:49:00.000+06:00

The loonie is having a rocketing performance versus its U.S. counterpart even after a negative economic report in Canada indicated a higher-than-expected shrinking rate for the nation’s economy, reaffirming the high current risk appetite among traders.

Canadian Dollar Tumbles Again as Oil Slides

2009-08-11T00:51:00.000+06:00

The loonie fell again today after having interrupted its rally versus the greenback on Tuesday due to a fall in crude oil rates, affecting directly the commodity-linked Canadian currency.

Manufacturing Report Keeps U.S. Dollar Under Pressure

2009-08-10T00:48:00.000+06:00

The U.S. dollar started another week with optimism weighing negatively on its outlook, as a report is likely to indicate the highest manufacturing level in the United States in almost a year, attracting investors to higher-yielding currencies.

Forex Trading Methods - Dow Theory

2009-08-09T01:00:00.000+06:00

The Dow Theory has been around for almost 100 years, yet even in todays volatile and technology-driven markets, the basic components of Dow Theory still remain valid. Dow Theory was formulated from a series of Wall Street Journal editorials authored by Charles H. Dow from 1900 until the time of his death in 1902. These editorials reflected Dow’s beliefs on how the stock market behaved and how the market could be used to measure the health of the business environment.

Due to his death, Dow never published his complete theory on the markets, but several followers and associates have published works that have expanded on the editorials. Some of the most important contributions to Dow theory were William P. Hamilton's "The Stock Market Barometer" (1922), Robert Rhea's "The Dow Theory" (1932), E. George Schaefer's "How I Helped More Than 10,000 Investors To Profit In Stocks" (1960) and Richard Russell's "The Dow Theory Today" (1961).

Dow believed that the stock market as a whole was a reliable measure of overall business conditions within the economy and that by analyzing the overall market, one could accurately gauge those conditions and identify the direction of major market trends and the likely direction of individual stocks. Much of what we know today as technical analysis has its roots in Dow’s work. For this reason, all traders using technical analysis should get to know the six basic tenets of Dow Theory.

Six basic tenets of Dow Theory

1. The Market Discounts Everything

The first basic premise of Dow Theory suggests that all information - past, current and even future - is discounted into the markets and reflected in the prices of stocks and indexes. That information includes everything from the emotions of investors to inflation and interest-rate data, along with pending earnings announcements to be made by companies after the close. Based on this tenet, the only information excluded is that which is unknowable, such as a massive earthquake. But even then the risks of such an event are priced into the market.

The idea that the market discounts everything is not new to technical traders, as this is a major premise of many of the tools used in this field of study. Accordingly, in technical analysis one need only look at price movements, and not at other factors such as the balance sheet. Like mainstream technical analysis, Dow Theory is mainly focused on price. However, the two differ in that Dow Theory is concerned with the movements of the broad markets, rather than specific securities. It's important to note that while Dow Theory itself is focused on price movements and index trends, implementation can also incorporate elements of fundamental analysis, including value- and fundamental-oriented strategies.

2. The Three-Trend Market

An important part of Dow Theory is distinguishing the overall direction of the market. To do this, the theory uses trend analysis. Before we can get into the specifics of Dow Theory trend analysis, we need to understand trends. First, it's important to note that while the market tends to move in a general direction, or trend, it doesn't do so in a straight line. The market will rally up to a high (peak) and then sell off to a low (trough), but will generally move in one direction.

An upward trend is broken up into several rallies, where each rally has a high and a low. For a market to be considered in an uptrend, each peak in the rally must reach a higher level than the previous rally's peak, and each low in the rally must be higher than the previous rally's low.

A downward trend is broken up into several sell-offs, in which each sell-off also has a high and a low. To be considered a downtrend in Dow terms, each new low in the sell-off must be lower than the previous sell-off's low and the peak in the sell-off must be lower then the peak in the previous sell-off.

Now that we understand how Dow Theory defines a trend, we can look at the finer points of trend analysis. Dow Theory identifies three trends within the market: primary, secondary and minor. A primary trend is the largest trend lasting for more than a year, while a secondary trend is an intermediate trend that lasts three weeks to three months and is often associated with a movement against the primary trend. Finally, the minor trend often lasts less than three weeks and is associated with the movements in the intermediate trend.

Primary Trend
In Dow Theory, the primary trend is the major trend of the market, which makes it the most important one to determine. This is because the overriding trend is the one that affects the movements in stock prices. The primary trend will also impact the secondary and minor trends within the market. Dow determined that a primary trend will generally last between one and three years but could vary in some instances.
Regardless of trend length, the primary trend remains in effect until there is a confirmed reversal. For example, if in an uptrend the price closes below the low of a previously established trough, it could be a sign that the market is headed lower, and not higher. When reviewing trends, one of the most difficult things to determine is how long the price movement within a primary trend will last before it reverses. The most important aspect is to identify the direction of this trend and to trade with it, and not against it, until the weight of evidence suggests that the primary trend has reversed.

Secondary (Intermediate) Trend
In Dow Theory, a primary trend is the main direction in which the market is moving. Conversely, a secondary trend moves in the opposite direction of the primary trend, or as a correction to the primary trend. For example, an upward primary trend will be composed of secondary downward trends. This is the movement from a consecutively higher high to a consecutively lower high. In a primary downward trend the secondary trend will be an upward move, or a rally. This is the movement from a consecutively lower low to a consecutively higher low. In general, a secondary, or intermediate, trend typically lasts between three weeks and three months, while the retracement of the secondary trend generally ranges between one-third and two-thirds of the primary trend's movement. Another important characteristic of a secondary trend is that its moves are often more volatile than those of the primary move.

Minor Trend
The last of the three trend types in Dow Theory is the minor trend, which is defined as a market movement lasting less than three weeks. The minor trend is generally the corrective moves within a secondary move, or those moves that go against the direction of the secondary trend. Due to its short-term nature and the longer-term focus of Dow Theory, the minor trend is not of major concern to Dow Theory followers. But this doesn't mean it is completely irrelevant, the minor trend is watched with the large picture in mind, as these short-term price movements are a part of both the primary and secondary trends.

3. The Three Phases Of Primary Trends

Since the most vital trend to understand is the primary trend, this leads into the third tenet of Dow theory, which states that there are three phases to every primary trend – the accumulation phase (distribution phase), the public participation phase and a panic phase (excess phase).

Primary Upward Trend (Bull Market):

The Accumulation Phase
The first stage of a bull market is referred to as the accumulation phase, which is the start of the upward trend. This is also considered the point at which informed investors start to enter the market.The accumulation phase typically comes at the end of a downtrend, when everything is seemingly at its worst. But this is also the time when the price of the market is at its most attractive level because by this point most of the bad news is priced into the market, thereby limiting downside risk and offering attractive valuations. However, the accumulation phase can be the most difficult one to spot because it comes at the end of a downward move, which could be nothing more than a secondary move in a primary downward trend - instead of being the start of a new uptrend. This phase will also be characterized by persistent market pessimism, with many investors thinking things will only get worse.
From a more technical standpoint, the start of the accumulation phase will be marked by a period of price consolidation in the market. This occurs when the downtrend starts to flatten out, as selling pressure starts to dissipate. The mid-to-latter stages of the accumulation phase will see the price of the market start to move higher. A new upward trend will be confirmed when the market doesn't move to a consecutively lower low and high.

Public Participation Phase
When informed investors entered the market during the accumulation phase, they did so with the assumption that the worst was over and a recovery lay ahead. As this starts to materialize, the new primary trend moves into what is known as the public participation phase. During this phase, negative sentiment starts to dissipate as business conditions - marked by earnings growth and strong economic data - improve. As the good news starts to permeate the market, more and more investors move back in, sending prices higher. This phase tends not only to be the longest lasting, but also the one with the largest price movement. It's also the phase in which most technical and trend traders start to take long positions, as the new upward primary trend has confirmed itself - a sign these participants have waited for.

The Excess Phase
As the market has made a strong move higher on the improved business conditions and buying by market participants to move starts to age, we begin to move into the excess phase. At this point, the market is hot again for all investors.
The last stage in the upward trend, the excess phase, is the one in which the smart money starts to scale back its positions, selling them off to those now entering the market. The perception is that everything is running great and that only good things lie ahead. This is also usually the time when the last of the buyers start to enter the market - after large gains have been achieved. Like lambs to the slaughter, the late entrants hope that recent returns will continue. Unfortunately for them, they are buying near the top. During this phase, a lot of attention should be placed on signs of weakness in the trend, such as strengthening downward moves. Also, if the upward moves start to show weakness, it could be another sign that the trend may be near the start of a primary downtrend.

Primary Downward Trend (Bear Market):

The Distribution Phase
The first phase in a bear market is known as the distribution phase, the period in which informed buyers sell (distribute) their positions. This is the opposite of the accumulation phase during a bull market in that the informed buyers are now selling into an overbought market instead of buying in an oversold market.
In this phase, overall sentiment continues to be optimistic, with expectations of higher market levels. It is also the phase in which there is continued buying by the last of the investors in the market, especially those who missed the big move but are hoping for a similar one in the near future. As was the case in the accumulation phase, the distribution phase can be difficult to spot in its early stages. The reason for this is that it may be disguised as a secondary downward trend within the primary upward trend. From a technical standpoint, the distribution phase is represented by a topping of the market where the price movement starts to flatten as selling pressure increases. The mid to latter stages of the distribution phase will see prices start to fall as more and more investors, anticipating weakness, exit their positions. A new downward trend will be confirmed when the previous trend fails to make another consecutive higher high and low.

Public Participation Phase
This phase is similar to the public participation phase found in a primary upward trend in that it lasts the longest and will represent the largest part of the move - in this case downward. During this phase it is clear that the business conditions in the market are getting worse and the sentiment is becoming more negative as time goes on. The market continues to discount the worsening conditions as selling increases and buying dries up. This is also the point at which most trend followers and technical traders start to dump their positions and take short positions as the new downward trend has confirmed itself.

The Panic Phase
The last phase of the primary downward market tends to be filled with market panic and can lead to very large sell-offs in a very short period of time. In the panic phase, the market is wrought up with negative sentiment, including weak outlooks on companies, the economy and the overall market. During this phase you will see many investors selling off their stakes in panic. Usually these participants are the ones that just entered the market during the excess phase of the previous run-up in share price. But just when things start to look their worst is when the accumulation phase of a primary upward trend will begin and the cycle repeats itself.

4. Market Indexes Must Confirm Each Other

Under Dow Theory, a major reversal from a bull to a bear market (or vice versa) cannot be signaled unless both indexes (traditionally the Dow Industrial and Rail Averages) are in agreement. For example, if one index is confirming a new primary uptrend but another index remains in a primary downward trend, it is difficult to assume that a new trend has begun. The reason for this is that a primary trend, either up or down, is the overall direction of the stock market, which in Dow Theory is a reflection of business conditions in the economy. When the stock market is doing well, it is because business conditions are good, when the stock market is doing poorly, it is due to poor business conditions. If the two Dow indexes are in conflict, there is no clear trend in business conditions.

If business conditions cause the major indexes to travel in opposite directions, this disparity suggests that it will be difficult for a primary trend to develop. When trying to confirm a new primary trend, therefore, it's vital that more than one index shows similar signals within a relatively close period of time. If the indexes are in agreement, it is a sign that business conditions are moving in the indicated direction.

5. Volume Must Confirm The Trend

According to Dow Theory, the main signals for buying and selling are based on the price movements of the indexes. Volume is also used as a secondary indicator to help confirm what the price movement is suggesting.

From this tenet it follows that volume should increase when the price moves in the direction of the trend and decrease when the price moves in the opposite direction of the trend. For example, in an uptrend, volume should increase when the price rises and fall when the price falls. The reason for this is that the uptrend shows strength when volume increases because traders are more willing to buy an asset in the belief that the upward momentum will continue. Low volume during the corrective periods signals that most traders are not willing to close their positions because they believe the momentum of the primary trend will continue.

Conversely, if volume runs counter to the trend, it is a sign of weakness in the existing trend. For example, if the market is in an uptrend but volume is weak on the up move, it is a signal that buying is starting to dissipate. If buyers start to leave the market or turn into sellers, there is little chance that the market will continue its upward trend. The same is true for increased volume on down days, which is an indication that more and more participants are becoming sellers in the market. According to Dow Theory, once a trend has been confirmed by volume, the majority of money in the market should be moving with the trend and not against it.

6. Trend Remains In Effect Until Clear Reversal Occurs

The reason for identifying a trend is to determine the overall direction of the market so that trades can be made with the trends and not against them. As was illustrated in the third tenet, trends move from uptrend to downtrend, which makes it important to identify transitions between these two trend directions. In Dow Theory, the sixth and final tenet states that a trend remains in effect until the weight of evidence suggests that it has been reversed.

Traders wait for a clear picture of a trend reversal because the goal is not to confuse a true reversal in the primary trend with a secondary trend or brief correction. Remember that a secondary trend is a move in the opposite direction of the primary trend that will not continue. For example, imagine that the primary trend is up, but the indexes are currently selling off. If an investor were to take a short position, concluding that the sell-off is the start of a new primary downward trend, they could get burned when the primary trend continues.
Unless you can safely conclude, based on the weight of evidence, that the trend has changed, you will be trading against the trend. As a general rule, this is not a wise idea, as many have been hurt by trading against the market.

Conclusion

There is little doubt that Dow Theory is of major importance in the history of technical analysis. Many of its tenets and ideas are the basis of much of what we know today. Aspects of Dow Theory are also incorporated into other theories, such as Elliott Wave theory. However, since its original adaptation and subsequent updates, its relevance as a stand-alone analytical technique has weakened. The reason for this has been the advent of more advanced techniques and tools, which in part build off of Dow Theory, but greatly expand upon it.

One of the bigger problems with the theory is that followers can miss out on large gains due to the conservative nature of a trend-reversal signal. As we mentioned previously, a signal is confirmed when there is an end to successive highs (uptrend) or lows (downtrend). However, what often happens is that by the time the market has shown a clear sign of reversal, the market has already generated a large gain.
Another problem with Dow Theory is that over time, the economy - and the indexes originally used by Dow - has changed. Consequently, the link between them has weakened. For example, the industrial and transportation sectors of the economy are no longer the dominant parts. Technology, for example, now takes up a considerable portion of economic production and growth. This is important because the basis for watching the indexes is that they are the leading indicators of business conditions. The economy has clearly become more segmented, requiring the analysis of more indexes, which could greatly reduce the accuracy and timeliness of Dow Theory analysis.

Even though there are weaknesses in Dow Theory, it will always be important to technical analysis. The ideas of trending markets and peak-and-trough analysis are found constantly within technical writings and ideas. Also of importance in Dow Theory is the idea of emotions in the marketplace, which remains a characteristic of market trends. Charles Dow and Dow Theory helped investors improve their understanding of the markets and trading, making a big trace in the history of economics and trading strategies.

Euro Climbs on U.S. Data Speculations

2009-08-09T00:47:00.000+06:00

The euro has been trading near a two-month high versus the dollar during most of the past week, and may climb to higher levels today on a U.S. manufacturing report that is likely to show the highest production in a twelve-month period, raising risk appetite among investors and affecting the greenback negatively.

Forex Trading Methods - Day Trading

2009-08-08T01:00:00.000+06:00

What is Day Trading?

Day trading refers to the practice of buying and selling financial instruments within the same trading day such that all positions are usually closed before the market close of the trading day. This can occur in any marketplace but is most common in the foreign exchange market and stock market. Many day traders are bank or investment firm employees working as specialists in equity investment and fund management. However, with the advent of electronic trading and margin trading, day trading has become increasingly popular among casual, at home traders. Day traders utilize high amounts of leverage and short-term trading strategies to capitalize on small price movements in highly liquid stocks or currencies. They serve two critical functions in the marketplace - keeping the markets running efficiently via arbitrage and providing much of the markets' liquidity.

Trade Frequency

Although collectively called day trading, there are many styles within day trading. A day trader is actively searching for potential trading setups (that is, any stock or other financial instruments that, in the judgment of the day trader, is in a tension state, ready to accelerate in price in either direction, that when traded well has a potential for a substantial profit). The number of trades you can make per day are almost unlimited, as are the profits and losses.

Some day traders focus on very short-term trading within the trading day, in which a trade may last just a few minutes. Day traders may buy and sell many times in a trading day and may receive trading fee discounts from their broker for this trading volume.

Some day traders focus only on price momentum, others on technical patterns, and still others on an unlimited number of strategies they feel can be profitable. Some day traders exit positions before the market closes to avoid any and all unmanageable risks - negative price gaps (differences between the previous day's close and the next day's open bull price) at the open - overnight price movements against the position held. Other traders believe they should let the profits run, so it is acceptable to stay with a position after the market closes.

Day traders sometimes borrow money to trade. This is called margin trading. Since margin interests are typically only charged on overnight balances, the trader pays no fees for the margin benefit, although they still run the risk of a Margin call.

Profit and Risks

Because of the nature of financial leverage and the rapid returns that are possible, day trading can be either extremely profitable or extremely unprofitable, and high-risk profile traders can generate either huge percentage returns or huge percentage losses. Some day traders manage to earn millions per year solely by day trading.

Because of the high profits (and losses) that day trading makes possible, these traders are sometimes portrayed as "bandits" or "gamblers" by other investors. Some individuals, however, make a consistent living from day trading.
Nevertheless day trading can be very risky, especially if any of the following is present while trading:

- trading a loser's game/system rather than a game that's at least winnable,
- trading with poor discipline (ignoring your own strategy, tactics, rules),
- inadequate risk capital with the accompanying stress of having to "survive",
- incompetent money management (i.e. executing trades poorly).

The common use of buying on margin (using borrowed funds) amplifies gains and losses, such that substantial losses or gains can occur in a very short period of time. In addition, brokers usually allow bigger margins for day traders. Where overnight margins required to hold a stock position are normally 50% of the stock's value, many brokers allow pattern day trader accounts to use levels as low as 25% for intraday purchases. This means a day trader with the legal minimum $25,000 in his or her account can buy $100,000 worth of stock during the day, as long as half of those positions are exited before the market close. Because of the high risk of margin use, and of other day trading practices, a day trader will often have to exit a losing position very quickly, in order to prevent a greater, unacceptable loss, or even a disastrous loss, much larger than his or her original investment, or even larger than his or her total assets.

The Controversy

The profit potential of day trading is perhaps one of the most debated (and misunderstood) topics on Wall Street. Countless internet scams have capitalized on this confusion by promising enormous returns in a short period. Meanwhile, the media continues to promote this type of trading as a get-rich-quick scheme that always works. The truth lies somewhere in the middle. There are those who engage in this type of trading without sufficient knowledge (or some even admittedly for a gambler's high). However, there are day traders who are able to make a successful living. Many professional money managers and financial advisors shy away from day trading, arguing that in most cases the reward does not justify the risk. They often cite that no day trader is world renown, whereas icons like Warren Buffett and Peter Lynch are a testament to the success that can be attained by more traditional forms of investing. Conversely, those who do day trade insist there is profit to be made. They say the success rate is inherently lower as a result of the higher complexity and necessary risk of day trading, combined with all the related scams. Overall, the street remains divided on the issue. At the very least they agree that day trading is not for everyone and involves significant risks. Moreover, it demands an in-depth understanding of how the markets work and various strategies for profiting in the short term.

Day Trading For A Living

There are two primary divisions of professional day traders: those who work alone and/or those who work for a larger institution. Most day traders who trade for a living work for a large institution. The fact is these people have access to things individual traders could only dream of: a direct line to a dealing desk, large amounts of capital and leverage, expensive analytical software and much more. These traders are typically the ones looking for easy profits that can be made from arbitrage opportunities and news events. The resources to which they have access allow them to capitalize on these less risky day trades before individual traders can react. Individual traders often manage other people's money or simply trade with their own. Few of them have access to a dealing desk; however, they often have strong ties to a brokerage (due to the large amounts of commission spending) and access to other resources. However, the limited scope of these resources prevents them from competing directly with institutional day traders, instead, they are forced to take more risks. Individual traders typically day trade using technical analysis and swing trades, combined with some leverage, to generate adequate profits on such small price movements in highly liquid stocks.

Day trading demands access to some of the most complex financial services and instruments in the marketplace. Day traders require:

1. Access to the Trading Desk

This is usually reserved for traders working for larger institutions or those who manage large amounts of money. The dealing desk provides these traders with instantaneous order executions, which can become important, especially when sharp price movements occur. For example, when an acquisition is announced, day traders looking at merger arbitrage can get their orders in before the rest of the market, taking advantage of the price differential.

2. Multiple News Sources

In the move "Wall Street" Gordon Gekko says that 'information is the most important commodity when trading’. News provides the majority of opportunities day traders capitalize on, so it is imperative to be the first to know when something big happens. The typical trading room contains access to the Dow Jones Newswire, televisions showing CNBC and other news agencies, as well as software that constantly analyzes various other news sources for important stories.

3. Analytical Software

Trading software is an expensive necessity for most day traders. Those who rely on technical indicators or swing trades rely more on software than news.
Combined these tools provide traders with an edge over the rest of the marketplace. It is easy to see why, without them, so many inexperienced traders lose money.

Techniques

The following are several basic strategies by which day traders attempt to make profits. Besides these, some day traders also use contrarian (reverse) strategies (more commonly seen in algorithmic trading) to trade specifically against irrational behavior from day traders using these approaches.

Some of these approaches require shorting stocks instead of buying them normally: the trader borrows stock from his broker and sells the borrowed stock, hoping that the price will fall and he will be able to purchase the shares at a lower price. There are several technical problems with short sales - the broker may not have shares to lend in a specific issue, some short sales can only be made if the stock price or bid has just risen (known as an "uptick"), and the broker can call for the return of its shares at any time. Some of these restrictions (in particular the uptick rule) don't apply to trades of stocks that are actually shares of an exchange-traded fund (ETF).

1. Trend Following

Trend following, a strategy used in all trading time-frames, assumes that financial instruments which have been rising steadily will continue to rise, and vice versa with falling. The trend follower buys an instrument which has been risin,g or short-sells a falling one, in the expectation that the trend will continue.

2. Contrarian Investing

Contrarian investing is a market timing strategy used in all trading time-frames. It assumes that financial instruments which have been rising steadily will reverse and start to fall, and vice versa with falling. The contrarian trader buys an instrument which has been falling, or short-sells a rising one, in the expectation that the trend will change.

3. Range Trading

Range trading is a trading style in which stocks are watched that have either been rising off a support price or falling off a resistance price. That is, every time the stock hits a high, it falls back to the low, and vice versa. Such a stock is said to be "trading in a range", which is the opposite of trending. The range trader therefore buys the stock at or near the low price, and sells (and possibly short sells) at the high. A related approach to range trading is looking for moves outside of an established range, called a breakout (price moves up) or a breakdown (price moves down), and assume that once the range has been broken prices will continue in that direction for some time.

4. Scalping

Scalping was originally referred to as spread trading. Scalping is a trading style where small price gaps created by the bid-ask spread are exploited. It normally involves establishing and liquidating a position quickly, usually within minutes or even seconds. Scalping highly liquid instruments for off the floor day traders involves taking quick profits while minimizing risk (loss exposure). It applies technical analysis concepts such as over/under-bought, support and resistance zones as well as trend line, trading channel to enter the market at key points and take quick profits from small moves. The basic idea of scalping is to exploit the inefficiency of the market when volatility increases and the trading range expands.

5. Rebate Trading

Rebate Trading is an equity trading style that uses ECN rebates as a primary source of profit and revenue, considering the payment structure of ECN paying per share. Traders maximize their returns by trading low priced, high volume stocks. This enables them to trade more shares and have more liquidity with a set amount of capital.

6. News Playing

News playing is primarily the realm of the day trader. The basic strategy is to buy a stock which has just announced good news, or short sell on bad news. Such events provide enormous volatility in a stock and therefore the greatest chance for quick profits (or losses). Determining whether news is "good" or "bad" must be determined by the price action of the stock, because the market reaction may not match the tone of the news itself. The most common cause for this is when rumors or estimates of the event (like those issued by market and industry analysts) were already circulated before the official release, and prices have already moved in anticipation---the news is already priced in the stock.

Conclusion

Although day trading has become somewhat of a controversial phenomenon, its prevalence is undeniable. Day traders, both institutional and individual, play an important role in the marketplace by keeping the markets efficient and liquid. Some argue that individuals should stay away from day trading, while others argue that it is a viable means to profit. And although it is becoming increasingly popular among inexperienced traders, it should be left primarily to those with the skills and resources needed to succeed.

Forex Trading - Parabolic SAR

2009-08-07T01:00:00.000+06:00

In the world of short-term trading, experiences are defined by a trader's ability to anticipate a certain move in the price of currencies. There are many different indicators used to predict future direction, but few have proved to be as useful and easy to interpret as the parabolic SAR. The parabolic SAR is a technical indicator that is used by many traders to determine the direction of currency’s momentum and the point in time when this momentum has a higher-than-normal probability of switching directions. Sometimes known as the "stop and reversal system", the parabolic SAR was developed by the famous technician Welles Wilder, creator of the relative strength index, and it is shown as a series of dots placed either above or below currency’s price on a chart.

Calculation

The Parabolic SAR is calculated almost independently for each trend in the price. When the price is in an uptrend, the SAR appears below the price and converges upwards towards it. Similarly, on a downtrend, the SAR appears above the price and converges downwards.

At each step within a trend, the SAR is calculated ahead of time. That is, tomorrow's SAR value is built using data available today. The general formula used for this is:

SARn+1 = SARn + α(EP – SARn)

Where SARn and SARn+1 represent today's and tomorrow's SAR values, respectively.
The extreme point, EP, is a record kept during each trend that represents the highest value reached by the price during the current uptrend — or lowest value during a downtrend. On each period, if a new maximum (or minimum) is observed, the EP is updated with that value.

The α value represents the acceleration factor. Usually, this is set to a value of 0.02 initially. This factor is increased by 0.02 each time a new EP is recorded. In other words, each time a new EP is observed, it will increase the acceleration factor. This will then quicken the rate at which the SAR converges towards the price. To keep it from getting too large, a maximum value for the acceleration factor is normally set at 0.20, so that it never goes beyond that. For currency trading, it is preferable to use a value of 0.02.

The SAR is recursively calculated in this manner for each new period. There are, however, two special cases that will modify the SAR value:
- If tomorrow's SAR value lies within (or beyond) today's or yesterday's price range, the SAR must be set to the closest price bound. For example, if in an uptrend, the new SAR value is calculated and it results to be greater than today's or yesterday's lowest price, the SAR must be set equal to that lower boundary.
- If tomorrow's SAR value lies within (or beyond) tomorrow's price range, a new trend direction is then signaled, and the SAR must "switch sides".

Parabolic SAR

One of the most important aspects to keep in mind is that the positioning of the "dots" is used by traders to generate transaction signals depending on where the dot is placed relative to the asset's price. A dot placed below the price is deemed to be a bullish signal, causing traders to expect the momentum to remain in the upward direction. Conversely, a dot placed above the prices is used to illustrate that the bears are in control and that the momentum is likely to remain downward.

The first entry point on the buy side occurs when the most recent high price of an issue has been broken, it is at this time that the SAR is placed at the most recent low price. As the price of the currency rises, the dots will rise as well, first slowly and then picking up speed and accelerating with the trend. This accelerating system allows the investor to watch the trend develop and establish itself. The SAR starts to move a little faster as the trend develops and the dots soon catch up to the price action of the issue.

Parabolic SAR and the Short Sale

The parabolic SAR is extremely valuable because it is one of the easiest methods available for strategically setting the position of a stop-loss order. As you become more acquainted with technical indicators, you'll find that the parabolic SAR has built up quite the positive reputation for its role in helping many traders lock-in paper profits that have been realized in a trending environment. You can also see that professional traders who short the market will use this indicator to help determine the time to cover their short positions.

It is important to note that this indicator is extremely mechanical and will always assume that the trader is holding a long or short position. The ability for the parabolic SAR to respond to changing conditions removes all human emotion and allows the trader to be disciplined. On the other hand, the disadvantage of using this indicator it that the signals can lead to many false entries during periods of consolidation. Being whipsawed in and out of trades can often be extremely frustrating, even for the most successful traders.

Complimenting SAR with other indicators

Given the mechanical properties of the parabolic SAR, it is no surprise that it is a favorite among traders who develop their own strategies. In trading, it is better to have several indicators confirm a certain signal than to solely rely on one specific indicator, so most traders will choose to compliment the SAR trading signals by using other indicators such as stochastics, moving averages, candlestick patterns etc.

For example, a reversal of the dots from below the price to above is much more convincing when the price is trading below a long-term moving average than when it occurs when the price is above the moving average. Having the price remain below a long-term moving average suggests that the sellers are in control of the direction and that the recent reversal could be the beginning of another wave lower. Furthermore, a signal is considered stronger each time that an additional indicator confirms the same trend.

Conclusion

The parabolic SAR is a fairly good tool for traders looking for a strategic method of gauging a stock's direction or for portioning a stop-loss order. As illustrated above, this indicator proves to be extremely valuable in trending environments, but it can often lead to many false signals during periods of consolidation. This indicator is simple to implement into any strategy, but like all indicators, it is usually best if it is used in conjunction with other indicators to ensure that all information is being considered.

Forex Trading Methods - Elliott Waves

2009-08-06T01:00:00.000+06:00

What is Elliott Wave?

The Elliott Wave principle is a form of technical analysis that attempts to forecast trends in the financial markets and other collective activities, named after Ralph Nelson Elliott (1871–1948), an accountant who developed the concept in the 1930s, he proposed that market prices unfold in specific patterns, which practitioners today call Elliott Waves. Inspired by the Dow Theory and by observations found throughout nature, Elliott concluded that the movement of the financial market could be predicted by observing and identifying a repetitive pattern of waves. In fact, Elliott believed that all of man's activities, not just the financial market, were influenced by these identifiable series of waves.

Elliott based part of his work on the Dow Theory, which also defines price movement in terms of waves, but Elliott discovered the fractal nature of market action. Thus Elliott was able to analyze markets in greater depth, identifying the specific characteristics of wave patterns and making detailed market predictions based on the patterns he had identified.

In the 1930s, Ralph Nelson Elliott found that the markets exhibited certain repeated patterns. His primary research was with stock market data for the Dow Jones Industrial Average. This research identified patterns or waves that recur in the markets. Very simply, in the direction of the trend, expect five waves. Any corrections against the trend are in three waves. Three wave corrections are lettered as "a, b, c." These patterns can be seen in long-term as well as in short-term charts. Ideally, smaller patterns can be identified within bigger patterns. In this sense, Elliott Waves are like a piece of broccoli, where the smaller piece, if broken off from the bigger piece, does, in fact, look like the big piece. This information (about smaller patterns fitting into bigger patterns), coupled with the Fibonacci relationships between the waves, offers the trader a level of anticipation and/or prediction when searching for and identifying trading opportunities with solid reward/risk ratios.

There have been many theories about the origin and the meaning of the patterns that Elliott discovered, including human behavior and harmony in nature. These rules, though, as applied to technical analysis of the markets (stocks, commodities, futures, etc.), can be very useful regardless of their meaning and origin.

Theory Interpretation

The Elliott Wave Theory is interpreted as follows:
- Every action is followed by a reaction.
- Five waves move in the direction of the main trend followed by three corrective waves (a 5-3 move).
- A 5-3 move completes a cycle.
- This 5-3 move then becomes two subdivisions of the next higher 5-3 wave.
- The underlying 5-3 pattern remains constant, though the time span of each may vary.
Let's have a look at the following chart made up of eight waves (five up and three down) labeled 1, 2, 3, 4, 5, A, B and C.

You can see that the three waves in the direction of the trend are impulses, so these waves also have five waves within them. The waves against the trend are corrections and are composed of three waves.

Impulse Patterns

The impulse pattern consists of five waves. The five waves can be in either direction, up or down:

Wave 1 - Wave one is rarely obvious at its inception. When the first wave of a new bull market begins, the fundamental news is almost universally negative. The previous trend is considered still strongly in force. Fundamental analysts continue to revise their earnings estimates lower, the economy probably does not look strong. Sentiment surveys are decidedly bearish, put options are in vogue, and implied volatility in the options market is high. Volume might increase a bit as prices rise, but not by enough to alert many technical analysts.

Wave 2 - Wave two corrects wave one, but can never extend beyond the starting point of wave one. Typically, the news is still bad. As prices retest the prior low, bearish sentiment quickly builds, and "the crowd" haughtily reminds all that the bear market is still deeply ensconced. Still, some positive signs appear for those who are looking: volume should be lower during wave two than during wave one, prices usually do not retrace more than 61.8% of the wave one gains, and prices should fall in a three wave pattern.

Wave 3 - Wave three is usually the largest and most powerful wave in a trend (although some research suggests that in commodity markets, wave five is the largest). The news is now positive and fundamental analysts start to raise earnings estimates. Prices rise quickly, corrections are short-lived and shallow. Anyone looking to "get in on a pullback" will likely miss the boat. As wave three starts, the news is probably still bearish, and most market players remain negative; but by wave three's midpoint, "the crowd" will often join the new bullish trend. Wave three often extends wave one by a ratio of 1.618:1 (also known as The Golden Ratio).

Wave 4 - Wave four is typically clearly corrective. Prices may meander sideways for an extended period, and wave four typically retraces less than 38.2% of wave three. Volume is well below than that of wave three. This is a good place to buy a pull back if you understand the potential ahead for wave 5. Still, the most distinguishing feature of fourth waves is that they often prove very difficult to count.

Wave 5 - Wave five is the final leg in the direction of the dominant trend. The news is almost universally positive and everyone is bullish. Unfortunately, this is when many average investors finally buy in, right before the top. Volume is lower in wave five than in wave three, and many momentum indicators start to show divergences (prices reach a new high, the indicator does not reach a new peak). At the end of a major bull market, bears may very well be ridiculed.

Corrective Patterns

Corrections are very hard to master. Most Elliott traders make money during an impulse pattern and then lose it back during the corrective phase.

Wave A - Corrections are typically harder to identify than impulse moves. In wave A of a bear market, the fundamental news is usually still positive. Most analysts see the drop as a correction in a still-active bull market. Some technical indicators that accompany wave A include increased volume, rising implied volatility in the options markets and possibly a turn higher in open interest in related futures markets.

Wave B - Prices reverse higher, which many see as a resumption of the now long-gone bull market. Those familiar with classical technical analysis may see the peak as the right shoulder of a head and shoulders reversal pattern. The volume during wave B should be lower than in wave A. By this point, fundamentals are probably no longer improving, but they most likely have not yet turned negative.

Wave C - Prices move impulsively lower in five waves. Volume picks up, and by the third leg of wave C, almost everyone realizes that a bear market is firmly entrenched. Wave C is typically at least as large as wave A and often extends to 1.618 times wave A or beyond.

An impulse pattern consists of five waves. With the exception of the triangle, corrective patterns consist of 3 waves. An impulse pattern is always followed by a corrective pattern. Corrective patterns can be grouped into two different categories:

1. Simple Correction (Zig-Zag)

There is only one pattern in a simple correction. This pattern is called a Zig-Zag correction. A Zig-Zag correction is a three-wave pattern where the Wave B does not retrace more than 75 percent of Wave A. Wave C will make new lows below the end of Wave A. The Wave A of a Zig-Zag correction always has a five-wave pattern. In the other two types of corrections (Flat and Irregular), Wave A has a three-wave pattern. Thus, if you can identify a five-wave pattern inside Wave A of any correction, you can then expect the correction to turn out as a Zig-Zag formation.

2. Complex Corrections (Flat, Irregular, Triangle)

Flat Correction - In a Flat correction, the length of each wave is identical. After a five-wave impulse pattern, the market drops in Wave A. It then rallies in a Wave B to the previous high. Finally, the market drops one last time in Wave C to the previous Wave A low.

Irregular Correction - In this type of correction, Wave B makes a new high. The final Wave C may drop to the beginning of Wave A, or below it.

Triangle Correction - In addition to the three-wave correction patterns, there is another pattern that appears time and time again. It is called the Triangle pattern. Unlike other triangle studies, the Elliott Wave Triangle approach designates five sub-waves of a triangle as A, B, C, D and E in sequence. Triangles, by far, most commonly occur as fourth waves. One can sometimes see a triangle as the Wave B of a three-wave correction. Triangles are very tricky and confusing. One must study the pattern very carefully prior to taking action. Prices tend to shoot out of the triangle formation in a swift thrust. When triangles occur in the fourth wave, the market thrusts out of the triangle in the same direction as Wave 3. When triangles occur in Wave B, the market thrusts out of the triangle in the same direction as the Wave A.

Conclusion

The premise that markets unfold in recognizable patterns contradicts the efficient market hypothesis, which says that prices cannot be predicted from market data such as moving averages and volume. By this reasoning, if successful market forecasts were possible, investors would buy (or sell) when the method predicted a price increase (or decrease), to the point that prices would rise (or fall) immediately, thus destroying the profitability and predictive power of the method. In efficient markets, knowledge of the Elliott wave principle among investors would lead to the disappearance of the very patterns they tried to anticipate, rendering the method, and all forms of technical analysis, useless.

Wave prediction is a very uncertain business. It is an art to which the subjective judgment of the chartists matters more than the objective, replicable verdict of the numbers. The record of this, as of most technical analysis, is at best mixed. Critics also say the wave principle is too vague to be useful, since it cannot consistently identify when a wave begins or ends, and that Elliott wave forecasts are prone to subjective revision. Some who advocate technical analysis of markets have questioned the value of Elliott wave analysis.

The Elliott Wave Principle, as popularly practiced, is not a legitimate theory, but a story. The account is especially persuasive because Elliott Wave has the seemingly remarkable ability to fit any segment of market history down to its most minute fluctuations. I contend this is made possible by the method's loosely defined rules and the ability to postulate a large number of nested waves of varying magnitude. This gives the Elliott analyst the same freedom and flexibility that allowed pre-Copernican astronomers to explain all observed planet movements even though their underlying theory of an Earth-centered universe was wrong.

Forex Trading Methods - Scalping

2009-08-05T01:00:00.000+06:00

What is Forex Scalping?

Forex scalping is the art of using high leverage and a large number of short term trades to steadily increase an account. Usually, only 1 to 5 pips are targeted for each trade. This type of trading appeals greatly to day traders and those looking to minimize the risk involved in trading currencies. Next to money management, “risk control” is the single most important trait to a surviving (and thriving) currency trader. The small amount of time that is spent in the market limits much of the risk in exposure in comparison to a longer term system. Also, the freedom involved in a speedy Forex scalping system in such a liquid market is a “magnet” that drives many traders from other markets to try their hand in currency. A disciplined and steady scalper could seamlessly double or triple an account, and spend only a fraction of the time in the market as a common day trader.

Forex Scalping - The Problem

Though Forex scalping may seem like a preverbal “holy grail” at first glance, there are still many unseen hurdles that surround the controversial method of trading. If you do wish to add scalping to your trading toolbox, it is extremely important to pick a broker who can support a scalpers’ system. You will quickly find that many brokers do not allow scalp trading, as the method of quickly entering and exiting trades may actually cause the broker to lose money at the dealing desk. Forex scalping also does not give the broker a means to trade against their clients which is a way of money making for them. Out of the hundreds of online Forex brokers, only a handful support scalping. It is a very thin line between scalping and short term trading. Generally if you hold trades for a minute or less, you may have problems with brokers. They could warn you and then if you continue shut down your account. However, if you trade in minutes or more, most likely you will not have problems with dealing desk brokers. Non dealing desk (ECN) brokers allow scalping where you can hold a position for seconds however the minimum to open an account is higher ($2,000 and above).

Forex Scalping Strategy

Effective Forex scalping strategies take advantage of extremely slight price fluctuations (sometimes only 1-3 pips) many times in order to steadily build an account. Because of the smaller number of pips gained per trade, larger than normal leverages play a key role in a successful Forex scalping strategy. By leveraging much more than a standard day trader in a liquid environment, a very skilled scalp trader is able to make just as much money as the day trader in a shorter period of time. However, this is an obvious double-edged sword. The market can just as easily move against you on a high leverage, which could produce substantial blows to your account.

Also, it is important to take into consideration the physical and mental speed of a trader who will only stay in the market for seconds to minutes. Executing a scalping strategy by hand can be extremely difficult considering the quick amount of time you must be in and out of the market for your strategy to be affective. Many successful Forex scalping strategies are built to be automated; the rules to the system are coded into a trading platform to automatically perform scalp trades around the clock. Though it is completely possible to trade a Forex scalping strategy manually, the majority of today’s traders would agree that automating the process based on a set of rules would be the best way to ensure speed and reliability. When choosing a platform to automate your scalp strategy, it is extremely important to stick with those platforms that allow the execution of your system on every tick (such as MetaTrader 4). This ensures that your entrances and exits will be on a per-tick basis, and will give you a much higher probable rate of success than those platforms who will execute your code more periodically.

To understand the full challenge of scalping as a trading style, consider this: hard work and small gains accumulated over a decent period of time could easily be wiped out with one large loss. Finding a balance between profit levels and size of acceptable losses presents the most difficult challenge to scalper’s strategy.
Forex scalping can be a good method of growing a managed Forex account quickly, but should not be looked at as the “holy grail” of trading. Most brokers do not support scalping, and a consistently profitable Forex scalping strategy can be very difficult to engineer. However, if much time and effort is spent in system optimization and setting up a good relationship with a scalp supporting broker, the benefits could be well worth the time spent.

Chilean Peso Climbs on Copper Price

2009-08-04T01:16:00.001+06:00

Chile’s is one of the world’s main copper producer and today this metallic commodity went up after a U.S. report, pushing the Chilean peso to higher levels as risk aversion declined among traders.

Canadian Dollar Declines on Stocks, Crude Oil

2009-08-04T01:10:00.000+06:00

The loonie posted the first losses against its U.S. counterpart as stock fell today and the crude oil barrel declined, affecting directly the Canadian dollar outlook.

Forex Trading Methods - Swing Trading

2009-08-04T01:00:00.000+06:00

What is Swing Trading?

Swing Trading sits in the middle of the continuum between day trading and trend following. Swing traders hold a particular stock for a period of time, generally between a few days and two or three weeks, and trade the stock on the basis of the general upward or downward trends.

Swing Trading takes advantage of brief price swings in strongly trending stocks to ride the momentum in the direction of the trend and combines the best of two worlds - the slower pace of investing and the increased potential gains of day trading. Swing Trading is not high-speed day trading. Some people call it momentum investing, because you only hold positions that are making major moves. By rolling your money over rapidly through short term gains you can quickly build up your equity.

What are the (dis)advantages of Swing Trading?

Swing Trading combines the best of two worlds - the slower pace of investing and the increased potential gains of day trading. It works well for part-time traders - especially those doing it while at work. While day traders typically have to stay glued to their computers for hours at a time, feverishly watching minute-to-minute changes in quotes, Swing Trading doesn't require that type of focus and dedication.

While day traders gamble on stocks popping or falling by fractions of points, swing traders try to ride "swings" in the market. Swing Traders buy fewer stocks and aim for bigger gains, they pay lower brokerage and, theoretically, have a better chance of earning larger gains. With Day Trading, the only person getting rich is the broker. "Swing traders go for the meat of the move while a day trader just gets scraps." Furthermore, to swing trade, you don't need sophisticated computer hook-ups or lightning quick execution services and you don't have to play extremely volatile stocks.

Of course, the problem with both swing trading and long-term trend following is that success is based on correctly identifying what type of market is currently being experienced. Looking back over the past few years, trend following would have been the ideal strategy for the raging bull market of the last half of the 1990s, while swing trading probably would have been best for 2000 and 2001. With the 2002 bear market, the best strategy would have been to follow the trend and short everything in sight. As economists and traders would agree, the most accurate insight into trends is viewed in retrospect.

There is a risk that prices will break the channel and that swing traders buy or sell at the worst time; thus losing invested capital. The 'preservation of capital' as a paramount consideration across all trading, and also applies when Swing Trading. Other risks inherent in equities or financial instruments trading exist, such as market risk, sector risk, and company risk.

How does Swing Trading work?

The basic strategy of Swing Trading is to jump into strongly trending currencies after its period of consolidation or correction is complete. Strongly trending currencies often make a quick move after completing its correction which one can profit from.

It should be noted that in either of the two market extremes, the bear-market environment or bull market, swing trading proves to be a rather different challenge than in a market that is between these two extremes. In these extremes, even the most active stocks will not exhibit the same up-and-down oscillations that they would when indices are relatively stable for a few weeks or months. In a bear market or a bull market, momentum will generally carry stocks for a long period of time in one direction only, thereby ensuring that the best strategy will be to trade on the basis of the longer-term directional trend. The swing trader, therefore, is best positioned when markets are going nowhere—when indices rise for a couple of days and then decline for the next few days, only to repeat the same general pattern again and again. A couple of months might pass with major stocks and indices roughly the same as their original levels, but the swing trader has had many opportunities to catch the short terms movements up and down (sometimes within a channel).

So, swing traders are not looking to hit the home run with a single trade—they are not concerned about perfect timing to buy a stock exactly at its bottom and sell exactly at its top (or vice versa). In a perfect trading environment, they wait for the stock to hit its baseline and confirm its direction before they make their moves. The story gets more complicated when a stronger up-trend or down-trend is at play: the trader may paradoxically go long when the stock jumps below its EMA and wait for the stock to go back up in an uptrend, or he or she may short a stock that has stabbed above the EMA and wait for it to drop if the longer trend is down.

When it comes time to take profits, the swing trader will want to exit the trade as close as possible to the upper or lower channel line without being overly precise, which may cause the risk of missing the best opportunity. In a strong market, when a stock is exhibiting a strong directional trend, traders can wait for the channel line to be reached before taking their profit, but in a weaker market they may take their profits before the line is hit (in the event that the direction changes and the line does not get hit on that particular swing).

Swing Trading, while a good trading style for beginning traders, still offers significant profit potential for intermediate and advanced traders. Swing traders can realize sufficient rewards on their trades after a couple of days, which keep them motivated, but their long and short positions of several days are of ideal duration so as to not lead to distraction. By contrast, trend following offers greater profit potential if a trader is able to catch a major market trend of weeks or months, but there are few traders with sufficient discipline to hold a position for that period of time without getting distracted. On the other hand, trading dozens of stocks per day (Day Trading) may just prove too great a white-knuckle ride for some, making Swing Trading the perfect medium between the extremes.

Chilean Peso Hits One-Week Low on Copper Prices

2009-08-04T00:59:00.000+06:00

The Chilean currency had a weakening performance today, as the copper, one of the main exports of the South American nation declined, damping demand for the peso.

Euro Rises on Manufacturing Report Figures

2009-08-04T00:58:00.000+06:00

The euro posted the first climb versus the U.S. in four days as this Friday a report indicated that the European manufacturing and services contracted at a slower pace, and German business confidence improved.

Mexican Peso Posts Second Weekly Gain on Economic Optimism

2009-08-04T00:56:00.001+06:00

The Mexican currency posted another week of gains versus its main trading partner’s currency, the U.S. dollar, as emergent-market currencies profited on higher confidence among traders.

Canadian Dollar Ends Week High on Government Statement

2009-08-04T00:55:00.001+06:00

The Canadian dollar ended another day gaining versus its U.S. counterpart, as government officials affirmed that the country may be already getting out of recession.

Euro Down as Risk Aversion Returns

2009-08-04T00:52:00.001+06:00

The euro is losing since yesterday versus currencies like the yen and the dollar, as a report yesterday showed a decline in consumer confidence in the United States, spurring demand for refuge currencies like the Swiss franc and the yen.

Brazilian Real Declines on Faltering Trade Surplus

2009-08-04T00:51:00.000+06:00

The Brazilian currency posted a second day of losses versus the greenback as the national current account showed worse than expected data for the month of June, damping demand for the real in international markets.

British House Price Data Influence Pound

2009-08-04T00:50:00.000+06:00

The Great Britain pound recovered from the two days of losses against the U.S. dollar and continued to gain against the euro today after the U.K. house prices data was released.

Is GDP Optimism Bad for U.S. Dollar?

2009-08-04T00:49:00.000+06:00

The U.S. dollar is falling against the euro for the second day today as the traders expect a decline in the contraction of the U.S. GDP for the second quarter of 2009.

Forex Trading - Moving Average Convergence Divergence

2009-08-03T01:00:00.000+06:00

Moving Average Convergence Divergence – MACD

MACD, which stands for Moving Average Convergence Divergence, is a trend-following momentum indicator that shows the relationship between two moving averages of prices. Developed by Gerald Appel, MACD is one of the simplest and most reliable indicators available. This tool is used to identify moving average which indicate a new trend, regardless of whether it is bullish or bearish. After all, the most important priority in trading is to find a trend, because the most money revolves around it.

With MACD chart, you'll usually see three numbers that are used to configure it:
1. First is the number of periods that is used to calculate the faster moving average
2. Second is the number of periods that is used to calculate the slower moving average
3. Third is the number of candles that are used to calculate the moving average of the difference between faster and slower moving average

The lines on MACD charts are often misunderstood, two lines that are drawn are not the moving average of prices. They are the moving average of the difference between the two moving average.

In our example, the faster moving average is the moving average of the difference between 12 and 26 periods of moving average. Slower moving average outlines a previous average of MACD lines. We calculate the average of the last 9 periods of faster MACD line, and outline it as a slower moving average. This moderates the original lines, giving us a more accurate chart.

Histogram outlines the difference between faster and slower moving average. If you look at the above chart you will see that when the two moving averages separate, histogram becomes greater. This is called divergence, because the faster moving average is diverging from the slower moving average.

When the moving average lines come closer together, histogram becomes smaller. This is called convergence, because faster moving average is converging, coming closer to slower moving average. This is why this indicator is called the Moving Average Convergence Divergence.

MACD Formula

The most popular formula for the "standard" MACD is the difference between 26-day and 12-day Exponential Moving Averages (EMAs). This is the formula that is used in many popular technical analysis programs and quoted in most technical analysis books. Using shorter moving averages will produce a quicker, more responsive indicator, while using longer moving averages will produce a slower indicator, less prone to whipsaws.

Of the two moving averages that make up MACD, the 12-day EMA is the faster and the 26-day EMA is the slower. Closing prices are used to form the moving averages. Usually, a 9-day EMA of MACD is plotted along side to act as a trigger line. A bullish crossover occurs when MACD moves above its 9-day EMA, and a bearish crossover occurs when MACD moves below its 9-day EMA. The histogram represents the difference between MACD and its 9-day EMA. The histogram is positive when MACD is above its 9-day EMA and negative when MACD is below its 9-day EMA.

MACD Bullish Signals

MACD generates bullish signals from three main sources:
1. Positive Divergence
2. Bullish Moving Average Crossover
3. Bullish Centerline Crossover

Positive Divergence

A Positive Divergence occurs when MACD begins to advance and the currency is still in a downtrend and makes a lower reaction low. MACD can either form as a series of higher Lows or a second Low that is higher than the previous Low. Positive Divergences are probably the least common of the three signals, but are usually the most reliable, and lead to the biggest moves.

Bullish Moving Average Crossover

A Bullish Moving Average Crossover occurs when MACD moves above its 9-day EMA, or trigger line. Bullish Moving Average Crossovers are probably the most common signals and as such are the least reliable. If not used in conjunction with other technical analysis tools, these crossovers can lead to whipsaws and many false signals. Bullish Moving Average Crossovers are used occasionally to confirm a positive divergence. A positive divergence can be considered valid when a Bullish Moving Average Crossover occurs after the MACD Line makes its second "higher Low".
Sometimes it is prudent to apply a price filter to the Bullish Moving Average Crossover to ensure that it will hold. An example of a price filter would be to buy if MACD breaks above the 9-day EMA and remains above for three days. The buy signal would then commence at the end of the third day.

Bullish Centerline Crossover

A Bullish Centerline Crossover occurs when MACD moves above the zero line and into positive territory. This is a clear indication that momentum has changed from negative to positive, or from bearish to bullish. After a Positive Divergence and Bullish Centerline Crossover, the Bullish Centerline Crossover can act as a confirmation signal. Of the three signals, moving average crossover are probably the second most common signals.

Bearish Signals

MACD generates bearish signals from three main sources. These signals are mirror reflections of the bullish signals:
1. Negative Divergence
2. Bearish Moving Average Crossover
3. Bearish Centerline Crossover

Negative Divergence

A Negative Divergence forms when the currency advances or moves sideways, and the MACD declines. The Negative Divergence in MACD can take the form of either a lower High or a straight decline. Negative Divergences are probably the least common of the three signals, but are usually the most reliable, and can warn of an impending peak.

Thee are two possible means of confirming a Negative Divergence. First, the indicator can form a lower Low. This is traditional peak-and-trough analysis applied to an indicator. With the lower High and subsequent lower Low, the uptrend for MACD has changed from bullish to bearish. Second, a Bearish Moving Average Crossover (which is explained below) can act to confirm a negative divergence. As long as MACD is trading above its 9-day EMA, or trigger line, it has not turned down and the lower High is difficult to confirm. When MACD breaks below its 9-day EMA, it signals that the short-term trend for the indicator is weakening, and a possible interim peak has formed.

Bearish Moving Average Crossover

The most common signal for MACD is the moving average crossover. A Bearish Moving Average Crossover occurs when MACD declines below its 9-day EMA. Not only are these signals the most common, but they also produce the most false signals. As such, moving average crossovers should be confirmed with other signals to avoid whipsaws and false readings.

Sometimes a currency can be in a strong uptrend, and MACD will remain above its trigger line for a sustained period of time. In this case, it is unlikely that a Negative Divergence will develop and a different signal is needed to identify a potential change in momentum.

Bearish Centerline Crossover

A Bearish Centerline Crossover occurs when MACD moves below zero and into negative territory. This is a clear indication that momentum has changed from positive to negative, or from bullish to bearish. The centerline crossover can act as an independent signal, or confirm a prior signal such as a moving average crossover or negative divergence. Once MACD crosses into negative territory, momentum, at least for the short term, has turned bearish.

The significance of the centerline crossover will depend on the previous movements of MACD as well. If MACD is positive for many weeks, begins to trend down, and then crosses into negative territory, it would be bearish. However, if MACD has been negative for a few months, breaks above zero, and then back below, it might be a correction. In order to judge the significance of a centerline crossover, traditional technical analysis can be applied to see if there has been a change in trend, higher High or lower Low.

Using a Combination of Signals

Even though some traders may use only one of the above signals to form a buy or a sell signal, using a combination can generate more robust signals which will increase your chances of catching a trend and generating a profit.

MACD-Histogram

In 1986, Thomas Aspray developed the MACD-Histogram. Some of his findings were presented in a series of articles for Technical Analysis of Stocks and Commodities. Aspray noted that MACD's lag would sometimes miss important moves, especially when applied to weekly charts. He first experimented by changing the moving averages and found that shorter moving averages did indeed speed up the signals. However, he was looking for a means to anticipate MACD crossovers. One of the answers he came up with was the MACD-Histogram.

Definition and Construction

The MACD-Histogram represents the difference between the MACD and its trigger line, the 9-day EMA of MACD. The plot of this difference is presented as a histogram, making centerline crossovers and divergences easily identifiable. A centerline crossover for the MACD-Histogram is the same as a moving average crossover for MACD. If you will recall, a moving average crossover occurs when MACD moves above or below the trigger line.

If the value of MACD is larger than the value of its 9-day EMA, then the value on the MACD-Histogram will be positive. Conversely, if the value of MACD is less than its 9-day EMA, then the value on the MACD-Histogram will be negative.

Further increases or decreases in the gap between MACD and its trigger line will be reflected in the MACD-Histogram. Sharp increases in the MACD-Histogram indicate that MACD is rising faster than its 9-day EMA and bullish momentum is strengthening. Sharp declines in the MACD-Histogram indicate that MACD is falling faster than its 9-day EMA and bearish momentum is increasing.

On the chart above, we can see that the MACD-Histogram movements are relatively independent of the actual MACD. Sometimes the MACD is rising while the MACD-Histogram is falling. At other times, the MACD is falling while the MACD-Histogram is rising. The MACD-Histogram does not reflect the absolute value of the MACD, but rather the value of the MACD relative to its 9-day EMA. Usually, but not always, a move in the MACD is preceded by a corresponding divergence in the MACD-Histogram.

1. The first point shows a sharp positive divergence in the MACD-Histogram that preceded a Bullish Moving Average Crossover.
2. On the second point, the MACD continued to new Highs but the MACD-Histogram formed two equal Highs. Although not a textbook case of Positive Divergence, the equal High failed to confirm the strength seen in the MACD.
3. A Positive Divergence formed when the MACD-Histogram formed a higher Low and the MACD continued lower.
4. A Negative Divergence formed when the MACD-Histogram formed a lower High and the MACD continued higher.The first point shows a sharp positive divergence in the MACD-Histogram that preceded a Bullish Moving Average Crossover.

Usage

Thomas Aspray designed the MACD-Histogram as a tool to anticipate a moving average crossover in the MACD. Divergences between MACD and the MACD-Histogram are the main tool used to anticipate moving average crossovers. A Positive Divergence in the MACD-Histogram indicates that the MACD is strengthening and could be on the verge of a Bullish Moving Average Crossover. A Negative Divergence in the MACD-Histogram indicates that the MACD is weakening, and it foreshadows a Bearish Moving Average Crossover in the MACD.

The best use for the MACD-Histogram is in identifying periods when the gap between the MACD and its 9-day EMA is either widening or shrinking. Broadly speaking, a widening gap indicates strengthening momentum and a shrinking gap indicates weakening momentum. Usually a change in the MACD-Histogram will precede any changes in the MACD.

Signals

The main signal generated by the MACD-Histogram is a divergence followed by a moving average crossover. A bullish signal is generated when a Positive Divergence forms and there is a Bullish Centerline Crossover. A bearish signal is generated when there is a Negative Divergence and a Bearish Centerline Crossover. Keep in mind that a centerline crossover for the MACD-Histogram represents a moving average crossover for the MACD.

Divergences can take many forms and varying degrees. Generally speaking, two types of divergences have been identified: the slant divergence and the peak-trough divergence.

Slant Divergence

A Slant Divergence forms when there is a continuous and relatively smooth move in one direction (up or down) to form the divergence. Slant Divergences generally cover a shorter time frame than divergences formed with two peaks or two troughs. A Slant Divergence can contain some small bumps (peaks or troughs) along the way. The world of technical analysis is not perfect and there are exceptions to most rules and hybrids for many signals.

Peak-Trough Divergence

A peak-trough divergence occurs when at least two peaks or two troughs develop in one direction to form the divergence. A series of two or more rising troughs (higher lows) can form a Positive Divergence and a series of two or more declining peaks (lower highs) can form a Negative Divergence. Peak-trough Divergences usually cover a longer time frame than slant divergences. On a daily chart, a peak-trough divergence can cover a time frame as short as two weeks or as long as several months.

Usually, the longer and sharper the divergence is, the better any ensuing signal will be. Short and shallow divergences can lead to false signals and whipsaws. In addition, it would appear that Peak-trough Divergences are a bit more reliable than Slant Divergences. Peak-trough Divergences tend to be sharper and cover a longer time frame than Slant Divergences.

Conclusion

One of the primary benefits of MACD is that it incorporates aspects of both momentum and trend in one indicator. As a trend-following indicator, it will not be wrong for very long. The use of moving averages ensures that the indicator will eventually follow the movements of the underlying security. By using Exponential Moving Averages (EMAs), as opposed to Simple Moving Averages (SMAs), some of the lag has been taken out.

As a momentum indicator, MACD has the ability to foreshadow moves in the underlying currency. MACD divergences can be key factors in predicting a trend change. A Negative Divergence signals that bullish momentum is waning, and there could be a potential change in trend from bullish to bearish. This can serve as an alert for traders to take some profits in long positions, or for aggressive traders to consider initiating a short position.

One of the beneficial aspects of the MACD is also one of its drawbacks. Moving averages, be they simple, exponential or weighted, are lagging indicators. Even though MACD represents the difference between two moving averages, there can still be some lag in the indicator itself. This is more likely to be the case with weekly charts than daily charts. One solution to this problem is the use of the MACD-Histogram.

MACD is not particularly good for identifying overbought and oversold levels. Even though it is possible to identify levels that historically represent overbought and oversold levels, MACD does not have any upper or lower limits to bind its movement. MACD can continue to overextend beyond historical extremes.

With the emergence of computerized analysis, it has become highly unreliable in the modern era, and standard MACD based trade execution now produces a greater distribution of losing trades. Some additions have been made to MACD over the years but even with the addition of the MACD-Histogram, it remains a lagging indicator. It has often been criticized for failing to respond in mild/volatile market conditions. Since the crash of the market in 2000, most strategies no longer recommend using MACD as the primary method of analysis, but instead believe it should be used as a monitoring tool only. It is prone to whipsaw, and if a trader is not careful it is possible that they might suffer substantial loss, especially if they are leveraged or trading options. Since Gerald Appel developed the MACD, there have been hundreds of new indicators introduced to technical analysis. While many indicators have come and gone, the MACD has stood the test of time.

Forex Trading - Bollinger Bands

2009-08-02T01:00:00.001+06:00

Bollinger Bands are a tool of technical analysis which was invented by John Bollinger in the 1980s. Having evolved from the concept of trading bands, Bollinger Bands are an indicator that allows users to compare volatility and relative price levels over a period time. Basically, this tool provides a relative definition of high and low. By definition prices are high at the upper band and low at the lower band. This definition can aid in rigorous pattern recognition and is useful in comparing price action to the action of indicators to arrive at systematic trading decisions. When the market is calm, the Bollinger Band lines get closer together and when the market was changing Bollinger Band line expand. The indicator consists of three bands designed to encompass the majority of a security's price action:

1. A simple moving average in the middle
2. An upper band (SMA plus 2 standard deviations)
3. A lower band (SMA minus 2 standard deviations)

Standard deviation is a statistical unit of measure that provides a good assessment of a price plot's volatility. Using the standard deviation ensures that the bands will react quickly to price movements and reflect periods of high and low volatility. Sharp price increases (or decreases), and hence volatility, will lead to a widening of the bands.

For easier understanding, see the following chart: when the price was calm, Bollinger Band lines were close to one another, but when the price jumped up, Bollinger Band lines are spread. The same would happen if the price fell.

Calculation

Upper = Average + 2*SD = X + 2*σ
Middle = Average = X
Lower = Average - 2*SD = X - 2*σ

Bollinger Bounce

The first thing you should know about Bollinger Band is that prices strive to return to the center of the Bollinger Bands. On the following chart you can see that the price has returned back towards the middle of Bollinger Bands.

What you just saw was a classic Bollinger Bounce. The reason why this “bounce” occurs is that Bollinger Band lines act like a level of support and resistance. The larger time period that you observe in the graph (H1, H4, D1), the stronger the Bollinger Bands get. Most traders developed systems that rely on the “jumps”. This strategy is best used when the market is in the range (ranging market) and while there is no clear trend.

Bollinger Squeeze

When the Bollinger Band lines get close together, it usually means that a break out will appear. If the candlesticks start to break out above the upper Bollinger Band line it is customary that the upward trend will continue, same thing is true for the downward trend.

If you look at the chart above you can see the Bollinger Band lines shrinking. Price is just beginning to penetrate upper Bollinger Bands lines and continues to go up. This is the way a typical Bollinger Squeeze works. This strategy is designed to catch a trend as soon as possible. This situation does not happen every day, but you can probably encounter it several times a week if you observe a 15 minute chart.

Interpretation

The use of Bollinger Bands varies wildly among traders. Some traders buy when price touches the lower Bollinger Band and exit when price touches the moving average in the center of the bands. Other traders buy when price breaks above the upper Bollinger Band or sell when price falls below the lower Bollinger Band.
When the bands lie close together a period of low volatility in stock price is indicated. When they are far apart a period of high volatility in price is indicated. When the bands have only a slight slope and lie approximately parallel for an extended time the price of a stock will be found to oscillate up and down between the bands as though in a channel.

As always, traders are inclined to use Bollinger Bands with other indicators to see if there is confirmation. In particular, the use of an oscillator like Bollinger Bands will often be coupled with a non-oscillator indicator like chart patterns or a trend line. If these indicators confirm the recommendation of the Bollinger Bands, the trader will have greater evidence that what the Bands forecast is correct.

Conclusion

Even though Bollinger Bands can help generate buy and sell signals, they are not designed to determine the future direction of a currency. The Bollinger Bands were designed to augment other analysis techniques and indicators. By themselves, Bollinger Bands serve two primary functions:

- To identify periods of high and low volatility
- To identify periods when prices are at extreme, and possibly unsustainable, levels

As stated above, currencies can fluctuate between periods of high volatility and low volatility. Being able to identify a period of low volatility can serve as an alert to monitor the price action of a currency. Other aspects of technical analysis, such as momentum, moving averages and retracements, can then be employed to help determine the direction of the potential breakout.

Remember that buy and sell signals are not given when prices reach the upper or lower Bollinger Bands. Such levels merely indicate that prices are high or low on a relative basis. A currency can become overbought or oversold for an extended period of time. Knowing whether or not prices are high or low on a relative basis can enhance our interpretation of other indicators, and it can assist with timing issues in trading.

Forex Trading - Moving Average

2009-08-01T01:00:00.002+06:00

What is Moving Average?

Moving average is one of the most popular and easy to use tools available for doing technical analysis. It means the average price of a currency over a specified time period (the most common being 20, 30, 50, 100 and 200 days), used in order to spot pricing trends by flattening out large fluctuations. Moving average data is used to create charts that show whether a currency’s price is trending up or down. They can be used to track daily, weekly, or monthly patterns. Each new day's (or week's or month's) numbers are added to the average and the oldest numbers are dropped, thus, the average "moves" over time. In general, the shorter the time frame used, the more volatile the prices will appear, so, for example, 20 day moving average lines tend to move up and down more than 200 day moving average lines. There are four different types of moving averages: Simple (also referred to as Arithmetic), Exponential, Smoothed and Linear Weighted. Moving averages may be calculated for any sequential data set, including opening and closing prices, highest and lowest prices, trading volume or any other indicators. It is often the case when double moving averages are used.

The only thing where moving averages of different types diverge considerably from each other is when weight coefficients, which are assigned to the latest data, are different. In case we are talking of simple moving average, all prices of the time period in question are equal in value. Exponential and Linear Weighted Moving Averages attach more value to the latest prices. The most common way to interpreting the price moving average is to compare its dynamics to the price action. When the instrument price rises above its moving average, a buy signal appears, if the price falls below its moving average, what we have is a sell signal. This trading system, which is based on the moving average, is not designed to provide entrance into the market right in its lowest point, and its exit right on the peak. It allows acting according to the following trend: to buy soon after the prices reach the bottom, and to sell soon after the prices have reached their peak. Moving averages may also be applied to indicators. That is where the interpretation of indicator moving averages is similar to the interpretation of price moving averages: if the indicator rises above its moving average, that means that the ascending indicator movement is likely to continue: if the indicator falls below its moving average, this means that it is likely to continue going downward.

Simple Moving Average (SMA)

Simple Moving Average is the simplest type of moving averages. Basically, SMA is calculated by adding the last number in the period from the closing price, and then dividing that number with a period. Let me explain in example, if you select SMA 5 on a 1 hour graph, add the closing prices for the last 5 hours, and then divide that number by 5. If you select SMA 5 on a 30 minute graph, you will add the closing prices for the past 150 minutes (30*5), and then divide that number by 5. In the same way you can calculate SMA for any time period.

Most of the trading platforms will make all these calculations for you. The reason why I am bothering you with this component of technical analysis is because it is extremely important to understand how to calculate the moving average. If you understand how every moving average is calculated, you can make your own decision, which type is the best for you.

Like any other indicator, SMA works with a delay. Because you observe the average price, you are actually looking at the "forecast" of future prices, not the concrete future. Here's an example of how moving averages reduce the price activity:

On the previous chart you can see 3 different SMA. As you can see, the bigger period SMA you take, the more it stays behind the more prices. You probably noticed that the 62 SMA is much further away from current prices then 30 and 5 SMA. This is because with 62 SMA you are adding closing prices from the last 62 periods and dividing it with 62. The higher the number of periods that you are using, the slower is reaction to the movement of prices. SMA on this graph shows the overall sentiment in the market in a given period. Instead of just looking at the current price on the market, moving averages provide a broader view, and give us the general prediction of prices in the future.

SMA = SUM (CLOSE, N)/N ; Where:
N = number of calculation periods

Exponential Moving Average (EMA)

Although SMA is an excellent tool, one major problem is associated with it: SMA is very sensitive to sudden jumps (spikes). By looking at the next example you will better understand what I mean:
Suppose that we draw a 5 SMA on the daily chart of EUR / USD and the closing prices for the last 5 days are as follows: 1st day - 1.2345, 2nd day - 1.2350, 3rd day - 1.2360, 4th day - 1.2365, 5th day - 1.2370. SMA would be calculated as: (1.2345+1.2350+1.2360+1.2365+1.2370)/5 = 1.2358. But what if the 2nd day price was 1.2300? SMA result would be much lower and you get the impression that the price is going down, when in reality, 2nd day may perhaps have been only one remote event (for example, reduction of the interest rate).

What I am trying to indicate is that the SMA may sometimes be too simple. If there was only a way to filter the jumps so that we do not get the wrong picture and make the most out of moving averages. It exists and is called the Exponential Moving Average (EMA).

EMA is a type of moving average that is similar to Simple Moving Average, except that more weight is given to the latest data. The Exponential Moving Average is also known as "Exponentially Weighted Moving Average". This type of moving average reacts faster to recent price changes than a Simple Moving Average. In our example above, EMA would put more weight on the 3rd-5th day, which means that jump on the 2nd would have a lesser value and would not influence so much on the moving average. It would put more emphasis on what traders are doing right now. While trading, it is more important to see what merchants are doing right now, not what they were doing last week or last month.

EMA = (CLOSE(i)*P)+(EMA(i-1)*(100-P)) ; Where:
CLOSE(i) = the price of the current period closure
EMA(i-1) = Exponentially Moving Average of the previous period closure
P = the percentage of using the price value

Smoothed Moving Average (SMMA)

A Smoothed Moving Average is sort of a cross between a Simple Moving Average and an Exponential Moving Average, only with a longer period applied. The Smoothed Moving Average gives the recent prices an equal weighting to the historic ones. The calculation does not refer to a fixed period, but rather takes all available data series into account. This is achieved by subtracting yesterday’s Smoothed Moving Average from today’s price. Adding this result to yesterday’s Smoothed Moving Average, results in today’s moving average.

In a Simple Moving Average, the price data have an equal weight in the computation of the average. Also, in a Simple Moving Average, the oldest price data are removed from the moving average as a new price is added to the computation. The Smoothed Moving Average uses a longer period to determine the average, assigning a weight to the price data as the average is calculated. Thus, the oldest price data points in the Smoothed Moving Average are never removed, but they have only a minimal impact on the moving average, which is similar to how an Exponential Moving Average places more weight on the more recent data.

The first value of this smoothed moving average is calculated as the simple moving average (SMA):
SUM1 = SUM(CLOSE, N)
SMMA1 = SUM1/N

The second and succeeding moving averages are calculated according to this formula:
SMMA(i) = (SUM1-SMMA1+CLOSE(i))/N ; Where:
SUM1 = the total sum of closing prices for N periods
SMMA1 = the smoothed moving average of the first bar
SMMA(i) = the smoothed moving average of the current bar (except for the first one)
CLOSE(i) = the current closing price
N = the smoothing period

SMA versus EMA

If you want a moving average which will match the movement of prices quite quickly, then the EMA with a short period (eg. 3, 5, 8) is the best choice for you. This may help to ''hunt down'' the trend in the early stage, which will result in higher profits. Specifically, the earlier you have caught the trend, the more you can ''ride'' through it, and you can make more money. The pitfall is that while using this type of moving average you can get a false signal which you won’t recognize and lose your investment. Since the moving average quickly matches the price, you can even think that a new trend is forming, but in fact it is just an abrupt jump, which returns to the starting position (spike).

With SMA the situation is completely opposite. If you want the moving average to respond more precisely and slowly to the price changes, then the longer period SMA is the best choice for you. Although slow responding to the price changes will save you from many possible pitfalls, the smaller SMA may also result in too much delay and missing of a good trade.

Uses for Moving Averages

There are many uses for moving averages, but three basic uses stand out:
1. Trend identification/confirmation
2. Support and Resistance level identification/confirmation
3. Trading Systems

Which is better?

Which moving average you use will depend on your trading and investing style and preferences. The Simple Moving Average obviously has a lag, but the Exponential Moving Average may be prone to quicker breaks. Some traders prefer to use Exponential Moving Averages for shorter time periods to capture changes quicker, while others prefer Simple Moving Averages over long time periods to identify long-term trend changes. In addition, much will depend on the individual security in question. Moving average type and length of time will depend greatly on the individual security and how it has reacted in the past.

The initial thought for some is that greater sensitivity and quicker signals are bound to be beneficial. This is not always true and brings up a great dilemma for the technical analyst: the tradeoff between sensitivity and reliability. The more sensitive an indicator is, the more signals that will be given. These signals may prove timely, but with increased sensitivity comes an increase in false signals. The less sensitive an indicator is, the fewer signals that will be given. However, less sensitivity leads to fewer and more reliable signals. Sometimes these signals can be late as well.

For moving averages, the same dilemma applies. Shorter moving averages will be more sensitive and generate more signals. The EMA, which is generally more sensitive than the SMA, will also be likely to generate more signals. However, there will also be an increase in the number of false signals and whipsaws. Longer moving averages will move slower and generate fewer signals. These signals will likely prove more reliable, but they also may come late. Each investor or trader should experiment with different moving average lengths and types to examine the trade-off between sensitivity and signal reliability.

Trend-Following Indicator

Moving averages smooth out a data series and make it easier to identify the direction of the trend. Because past price data is used to form moving averages, they are considered lagging, or trend following, indicators. Moving averages will not predict a change in trend, but rather follow behind the current trend. Therefore, they are best suited for trend identification and trend following purposes, not for prediction.

When to Use

Because moving averages follow the trend, they work best when a currency is trending and are ineffective when a currency moves in a trading range. With this in mind, investors and traders should first identify currencies that display some trending characteristics before attempting to analyze with moving averages. This process does not have to be a scientific examination. Usually, a simple visual assessment of the price chart can determine if a security exhibits characteristics of trend.

In its simplest form, a currency’s price can be doing only one of three things: trending up, trending down or trading in a range. An uptrend is established when a currency forms a series of higher highs and higher lows. A downtrend is established when a currency forms a series of lower lows and lower highs. A trading range is established if a currency cannot establish an uptrend or downtrend. If a security is in a trading range, an uptrend is started when the upper boundary of the range is broken and a downtrend begins when the lower boundary is broken.

Once a currency has been deemed to have enough characteristics of trend, the next task will be to select the number of moving average periods and type of moving average. The number of periods used in a moving average will vary according to the currency's volatility, trendiness and personal preferences. The more volatility there is, the more smoothing that will be required and hence the longer the moving average. There is no one set length, but some of the more popular lengths include 21, 50, 89, 150 and 200 days as well as 10, 30 and 40 weeks. Short-term traders may look for evidence of 2-3 week trends with a 21-day moving average, while longer-term investors may look for evidence of 3-4 month trends with a 40-week moving average. Trial and error is usually the best means for finding the best length. If there are too many breaks, lengthen the moving average to decrease its sensitivity. If the moving average is slow to react, shorten the moving average to increase its sensitivity. In addition, you may want to try using both Simple and Exponential Moving Averages. Exponential Moving Averages are usually best for short-term situations that require a responsive moving average. Simple Moving Averages work well for longer-term situations that do not require a lot of sensitivity.

Conclusions

Moving averages can be effective tools to identify and confirm trend, identify support and resistance levels, and develop trading systems. However, traders and investors should learn to identify currencies that are suitable for analysis with moving averages and how this analysis should be applied. Usually, an assessment can be made with a visual examination of the price chart, but sometimes it will require a more detailed approach.

The advantages of using moving averages need to be weighed against the disadvantages. Moving averages are trend following, or lagging, indicators that will always be a step behind. This is not necessarily a bad thing though. After all, the trend is your friend and it is best to trade in the direction of the trend. Moving averages will help ensure that a trader is in line with the current trend. However, markets, currencies spend a great deal of time in trading ranges, which render moving averages ineffective. Once in a trend, moving averages will keep you in, but also give late signals. Don't expect to get out at the top and in at the bottom using moving averages. As with most tools of technical analysis, moving averages should not be used on their own, but in conjunction with other tools that complement them. Using moving averages to confirm other indicators and analysis can greatly enhance technical analysis.

Forex Trading - Moving Average

2009-08-01T01:00:00.000+06:00

Why do Forex Brokers Pay or Take Overnight Interest?

2009-07-31T07:54:00.000+06:00

With most Forex brokers when you leave a currency pair position open over the night you’ll get a swap or an interest payment for it. It can be positive (you actually gain money) or negative (you lose money). That payment is usually very small and the majority of the beginning traders just don’t pay any attention to it, since their direct profit or loss from the trading is much greater than this rollover interest. But why do the brokers pay and take this overnight interest payment or swap?
And why do some brokers promote interest-free accounts?

The origin of the overnight interest is the fact that in the retail Forex market the physical delivery of the currencies is absent. If you buy €100,000 with your leveraged $1,000 the broker won’t transfer those €100,000 to your bank account. But you’ve paid $100,000 for those euros, even if you borrowed them from your broker. So, if the Forex broker doesn’t deliver the currency to you they technically borrow it from you. In the abovementioned example you borrow $100,000 from the broker and the broker borrows €100,000 from you. And where you have the debt and the loan, there you have the interest rates. The interest rates for the overnight interbank lending (and that’s what you are doing when trading Forex on leverage) are set by the central banks. For example, the rate that you pay for borrowing the dollars from your broker is set by the Federal Reserve System, while the interest rate that the broker pays to you for borrowing the euros from you is set by the European Central Bank. The difference between those two rates is the final overnight interest or swap rate.

Let’s look at this rate calculation. You buy a standard lot (100,000 units) of EUR/USD with your account being in the U.S. dollars with the leverage of 1:100. The current Fed rate is 0.25% and the current ECB rate is 1.5%:

1. You use $1,000 as the margin.
2. You borrow $100,000 from your Forex broker.
3. You buy €100,000 with the borrowed money.
4. You lend €100,000 to your broker (because it won’t deliver the currency to you, anyway).
5. You need to pay 0.25% yearly or 0.00068% daily for your borrowed $100,000.
6. Your Forex broker needs to pay 1.5% yearly or 0.00411% daily for its €100,000 borrowed from you.
7. In the end, the broker needs to pay the difference between €4.11 and $0.68 for each day that your position is open. That’s your positive swap or overnight interest.

What would happen if you didn’t buy that standard lot of EUR/USD but went short on it instead? You’d have to pay that difference to your broker.

The problem is that in reality brokers don’t pay or take the exact amounts for the overnight interest. They minimize the swap if they pay it out and maximize if you do. That way they try to avoid the risks. But that’s certainly not very fair.

Why do some of the brokers claim that they don’t pay or take overnight interest? Because the interest is viewed inappropriate by one of the most popular religions in the world — Islam. Some Forex brokers offer interest-free accounts by request and charge a fixed commission per trade to compensate their interest-based losses. Some brokers provide only interest-free accounts and usually don’t charge any commissions in that case.

How can you gain advantage from the overnight interest? First, you can use it for carry trade. When you feel that the currency pair with the big positive interest rate difference is going to remain stable or move in your favor for a long period of time you can use the broker’s leverage to receive some ridiculously high interest rate from the swaps only. Another way is to open an account with two brokers — one that offers no-interest policy and another — with the common Forex broker. This way you can hedge your positive interest rate difference position with the no-interest rate position on another broker. In this case you won’t be bothered by the market movement but at the same time you will gain advantage from the positive overnight interest. Of course, such practice is usually considered illegal by the brokers with no swaps, so, I wouldn’t recommend using it.

Recommended Forex Brokers

2009-07-30T07:52:00.000+06:00

FXOpen — one of the most popular MetaTrader Forex brokers with an easy entry limit and a really fast execution (they constantly invest into new trading servers):

* Welcome bonus system
* $1 to start trading
* WebMoney, LibertyReserve, CashU, E-Bullion and other payment options
* Traders’ contests with real bonuses
* 1-2 pips spreads on majors
InstaForex — known for their aggressive bonus and competition promotions, this broker offers extremely flexible leverage and has a very dedicated support:

* MetaTrader trading platform
* Flexible leverage — from 1:1 to 1:500
* WebMoney, Moneybookers, e-Bullion and other payment methods
* Starter’s bonus — from $30
* Open account with only $1

FXcast — Forex broker that is famous for its multi-national and multi-lingual team with a support available in almost any language spoken:

* MT4 trading platform
* Leverage up to 1:400
* No slippage during high volatility periods
* Start trading with $10
* WebMoney, c-gold, LibertyReserve, StrictPay and many other e-currencies

Forex4you — ultimate decision for small-scale traders. With Forex4you you can trade even with cents:

* Deposit with WebMoney, LibertyReserve and other ways
* Ultra-micro lots — 0.0001 of a standard lot
* MetaTrader platform for trading
* Get paid an interest on your account balance

NetSol, Chinese bank sign contract

2009-07-29T21:52:00.000+06:00

LAHORE: NetSol Technologies Ltd and China Minsheng Bank Corp Ltd have signed a contract for NetSol Technologies Financial Suite of leasing and finance products. The implementation will include NetSol Financial Suite s (NFS) Credit Application Processing (CAP) and Contract Management System (CMS) for retail business operations. The NetSol implementation with MSFL incorporates product licenses as well as customization, implementation, and data migration services. According to a statement issued here, Executive Vice President of Minsheng Financial Leasing, Ms Wong said they made the choice after careful evaluation of globally leading IT services vendors providing software in the finance and leasing space. We selected NetSol based on their impressive product strength and presence in the Chinese market. As we embark on this long-term partnership, MSFL is advancing its objective of becoming the largest finance and leasing company in China, she said, adding that NetSol s Financial Suite of products stand as a critical supporting factor in reaching this goal.

United Bank celebrates golden jubilee

2009-07-29T21:51:00.000+06:00

KARACHI: United Bank Limited (UBL) has produced an audio CD, comprising songs and narratives, based on selected works of Pakistan s revered national poet-philosopher Dr Mohammad Iqbal, to mark the bank s Golden Jubilee this year, it said in a press release. Incorporated on July 27, 1959, UBL started operations in November the same year. Its operations now extend to 11 countries outside Pakistan, through 17 branches, representative offices, subsidiaries and joint ventures apart from over 1100 domestic branches. Emphasizing the relationship between UBL s vision and Iqbal s ideals, President and CEO of UBL, Atif R Bokhari states: As fa progressive banking organization, UBL is aptly suited to embrace a national icon such as Iqbal, whose ideals embody the spirit of this institution. The CD contains original compositions of songs and narrations by some of the most outstanding composers, singers and artistes in the country. Introduced in UBL s Golden Jubilee year, this audio CD is a humble contribution towards propagating the message of Iqbal, particularly at a time when the nation needs his inspiration the most, and may be seen as a fitting tribute to the spirit of progressiveness, it added.

Yen Drops as Asian Stocks Rally

2009-07-29T21:49:00.001+06:00

The yen entered its eleventh day of losses versus most of the 16 main traded currencies as a rally in Asian stocks suggests that evidences indicating the end of the global slump are pushing investors to riskier assets, damping demand regionally for the Japanese currency.

U.S. Dollar Down Before Home Sales Report

2009-07-29T21:48:00.002+06:00

Canadian Dollar Hits 10-Month High on Improved Confidence

2009-07-29T21:48:00.001+06:00

The loonie reached the highest level since October as stocks and commodities rose, improving attractiveness for the Canadian currency.

Brazilian Real Continues Rally on Trade Surplus

2009-07-29T21:47:00.002+06:00

The Brazilian real continued to gain versus the greenback today as renewed demand for Brazilian products helped the national stocks to gain, adding confidence to the real’s outlook.

Australian Dollar Hits Year-High after Central Bank Statement

2009-07-29T21:47:00.001+06:00

The Australian dollar reached the highest level versus its U.S. counterpart today after the national central bank Governor affirmed that the current crisis in the country may not be as serious as considered previously.

Dollar Remains Bearish as Stocks Rally

2009-07-29T21:46:00.001+06:00

The U.S. dollar entered another day of losses versus most of the 16 main traded currencies as stocks worldwide continued to rally, raising investors’ confidence to purchase assets in emergent-markets and other higher-yielding options.

Crude Oil Decline Interrupts Canadian Dollar’s Rally

2009-07-29T21:44:00.000+06:00

The Canadian dollar lost today for the first time in more than a week as stocks and the crude oil had their first decline as risk aversion reappeared in financial markets worldwide.

Yen Rebound After U.S. Confidence Report

2009-07-29T21:43:00.000+06:00

The yen post the first significant gains in more than a week versus currencies like the pound and the euro after risk aversion returned to markets today, pushing investors towards the safety of the Japanese currency.

Dollar Rebounds Versus Euro on Reports Speculations

2009-07-29T21:42:00.000+06:00

The dollar reverted its trend of already two weeks losing versus several main traded currencies, after speculations that this week’s reports will post rather pessimistic figures, raising attractiveness for the safety of the greenback.

Euro Down as Risk Aversion Returns

2009-07-29T21:37:00.001+06:00

Forex Is About Trading...

2009-07-29T07:49:00.000+06:00

The truth is Forex is about trading. It is not something that you can sell. Now lots of people claims to have a good Forex system and selling it over the internet. Where is the logic in that.
Imagine you have a Forex system that consistently giving you wining trades. The probability is so high that you are willing to and have succesfully trade up to 50% of your capital. Because of its high winning ratio, your accout grows more than 100% a month. Would you sell that system or would you just keep it to yourself.

Would you go to the trouble of doing marketing, SEO, website, selling pages and payment processor? Is it easier to just trade it by yourself? Is it worth it to sell something that is a winning system?

In my hands I have a winning system. I am not willing to sell it or even to share it. I am however looking for 2 students whom I will teach the system and let them trade it. If the 2 students make profit, I am sure what I have now is a winner Forex system and it will be my best kept secrets. It will not be written anywhere but inside my head.

The next time you meet someone who claims to have a good Forex system and trying to sell it to you, maybe you can ask him the same question. Why sell it for money when the Forex system itself can generate money for you, lots of it forever.

What Forex Taught Me

2009-07-28T07:47:00.000+06:00

In my 1 year of trading forex I have learnt a lot about forex. There are some qualities that is needed in a traders. From my experience these are some of them:
1. No Ego
Ego is when you dont want to admit that you have made a mistake. In forex, mistakes are common. It is very hard to forecast something that has a lot of factors involve. If you have made a mistake, admit it and turn your position if you see fit. If you dont want to admit your mistakes, you will end up broke

2. The Future is unknown
That is the truth the hard truth. Unless you can see the future like the movie next we are all the same. There are some people with skills that can forecast the movement of forex and make money but the truth is, its too high of a risk. Better to trade based on price action

U.S. Dollar Down Before Home Sales Report

2009-07-27T22:34:00.000+06:00

The U.S. dollar started another week losing against currencies like the euro, as a report today is expected to show that home sales in the United States rose significantly, suggesting that the global slump is facing its final days, consequently attracting investors toriskier assets in stocks.

The dollar is entering the third week of losses today as multiple factors are pushing the currency down, from optimism in Asian stock markets, to concerns regarding the U.S. dollar as the main world reserve currency. A report to be released today in the United States is likely to indicated a sharp rise in the nation’s monthly home sales, which would prompt investors further to high-yield, since an improved scenario in the real estate market is a solid signal that the recession in ending in America and consequently in a global dimension.

The optimism is high, the questioning regarding the U.S. dollar as the main reserve currency, and speculations that foreign-exchange volatility will fall weighed altogether to create a negative outlook for the greenback in the beginning of this week. According to specialists its hard to say if the dollar will decline versus the euro to last year’s levels, when it hit $1.60, but certainly, with the current scenario we will be likely to see the dollar going further down.

EUR/USD traded at 1.4285 as of 11:53 GMT from 1.4215 in the beginning of the session. USD/CHF declined to 1.0661 from 1.0725.

If you want to comment on the U.S. dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.

Free Forex Signal 4

2009-07-26T07:42:00.000+06:00

Its been a while since I posted signal. Anyway here it is. Hope its good.

1. Short Aud/Usd @ 0.7905 or better. Target 0.7850, 0.7780.

2. Long Usd/Jpy @ 114.80 or better. Target 115.60, 116.70.

Happy Trading. Btw I cannot be held responsible for any loss from the signal above.

In The Land Of Forex

2009-07-25T07:40:00.000+06:00

In The Land Of Forex, Trend Is King

Those are the words i hold on to in forex. No matter what happen in technical or fundamental study. Always follow the trend.Trend is king. Follow the king and you will be rewarded handsomely.

Free Forex Signal 3

2009-07-24T07:39:00.000+06:00

Eur/Usd
Eur/Usd is currently at 1.2862. From my calculation Eur/Usd has an upper range of 1.2880 - 1.2950. Possible trade is short Eur/Usd @ 1.2880 or better.
Gbp/Usd
Gbp/Usd is currently at 1.9102. As stated in my other blog, possible trade is short Gbp/Usd @ 1.9100 or better wih upper range of 1.9100 -1.9150

Aud/Usd
Possible trade short Aud/Usd @ 0.7710 or better. Already gone down now. Btw i shorted from 0.7751. Its a good trade so far.

Advantages To Foreign Currency Trading

2009-07-23T20:43:00.000+06:00

Do you want to get into foreign currency trading, but aren’t sure how it can benefit you? There are many advantages to foreign currency trading. First, in the last few years, the spread rates have tightened a lot. Most of the online FOREX brokers today will offer you a five pips spread on EUR/USD. This is the most widely traded currency pair.

How Does Currency Trading Work?

2009-07-22T20:42:00.000+06:00

In the currency trading market you can buy or sell currencies. The whole point of it is to make a profit from your position. It is very simple to place a trade in the currency trading market. The mechanics of it are pretty much the same as those in other markets, thus making the transition for traders to go from one market to this one easy.

How To Get Started In Currency Trading

2009-07-21T20:41:00.000+06:00

If you want to get into currency trading, but are afraid of losing money, then you can open a Virtual Trading Account. You can find this option online. This will give you a no commitment and a no-cost option. A Virtual Trading Account has the same capabilities of a real account, but it gives you the option of learning about currency trading markets and allows you to test your skills without the risk of losing money.

Online Currency Trading

2009-07-20T20:40:00.000+06:00

Do you want to get into currency trading? Are you wondering if it is even possible that you can trade currency online? The answer is yes. It is entirely possible to conduct all of your currency trading business online. How can you get into online currency trading?

Quoting Conventions In Currency Trading

2009-07-19T20:39:00.000+06:00

In the currency trading market, currency trading is always done in pairs. Also, all trades are the result of the simultaneous buying of one currency and the selling of another currency. The “basis” for the buy or the sell is called the base currency. If it helps, you can think of the currency pair as an instrument that can be bought or sold.

What Is Currency Trading?

2009-07-18T20:39:00.000+06:00

Have you ever heard of currency trading? If not, would you like to know what it is? Currency trading is commonly called foreign exchange, Forex, or FX, for short. All the currency in the world has a value that is relative to the other currencies in the world. By currency trading, you are purchasing and selling large amounts of currency to leverage the shifts in relative value in order to make a profit.

What Is Rollover In Currency Trading?

2009-07-17T20:38:00.000+06:00

You’ve probably been learning a lot about the currency trading market. You may even have begun to invest in it, but what is rollover? How can knowing what a rollover is benefit you?

What Is The Margin In Currency Trading?

2009-07-16T20:37:00.000+06:00

Unlike in stock markets, the margin deposit isn’t a down payment on the purchase of equity. Instead, it is a good faith deposit. This margin allows the traders to hold a position much larger than their account value. If the funds in the account happen to fall below the margin requirements, then your broker may close some or all of your open positions. This will prevent your account from falling into a negative balance, even in a fast moving market.

Why Trade Currencies?

2009-07-15T20:37:00.000+06:00

You trade currencies for hedging and speculative purposes. During the regular course of a business day, corporate treasurers, private individuals, and investors have currency exposure. If you have bought Euros and you expect the exchange rate to go down, then you can sidestep your currency exposure by selling your Euros for the U.S. dollar.

Wireless Currency Trading

2009-07-14T20:36:00.000+06:00

Do you invest in currency trading? Would you like to take the currency trading market with you wherever you go? Then wireless currency trading may be the perfect solution for you.

Stock Investing

2009-07-13T20:35:00.000+06:00

The three largest stock exchanges by market capitalization are the New York Stock Exchange, Tokyo Stock Exchange, and NASDAQ. Through these stock exchanges, well over trillions of dollars worth of stock are traded on a daily basis. For stock and forex brokerages, the approach to investing is quite different than the stock investing practices that are accomplished by an amateur investor with a small nest egg.

Forex Trading - Technical Indicators

2009-07-12T20:33:00.000+06:00

Many of the common charts encountered in the toolkit of Forex traders are composed of a graphed series of technical indicators. So, in order to understand those charts, the student of Forex investing will do well to study those indicators.

Spreads and Investment Costs

2009-07-11T20:32:00.000+06:00

Novices considering currency trading will read that Forex brokers charge no commissions and cheer. But don't be fooled. Whether anything in life is truly free may be up for debate, but one thing is certain: nothing in investing is.