The History of Forex Trading
Many centuries ago, the value of goods were expressed in terms of other goods. This sort of economics was based on the barter system between individuals. The obvious limitations of such a system encouraged establishing more generally accepted mediums of exchange. It was important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value. Coins were initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the Middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of today’s modern currencies. Before the first World war, most Central banks supported their currencies with convertibility to gold. Paper money could always be exchanged for gold. However, for this type of gold exchange, there was not necessarily a Centrals bank need for full coverage of the government's currency reserves. This did not occur very often, however when a group mindset fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called "Run on banks " The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability. In order to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility. Near the end of WWII, The Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis. The Bretton Woods system came under increasing pressure as national economies moved in different directions during the 1960’s. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970’s following president Nixon's suspension of the gold convertibility in August 1971. The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits. The last few decades have seen foreign exchange trading develop into the worlds largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.
In Europe, the idea of fixed exchange rates had by no means died. The European Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. This attempt to fix exchange rates met with near extinction in 1992-93, when built-up economic pressures forced devaluations of a number of weak European currencies. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002. Today, Europe has embraced the Euro in 12 participating countries. The physical introduction of the Euro on January 1, 2002 saw the old countries currencies made obsolete on July 1, 2002. In Asia, the lack of sustainability of fixed foreign exchange rates has gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable. While commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The size of the FOREX market now dwarfs any other investment market. It is estimated that more than USD 1,200 Billion are traded every day, that is the same amount as almost 40 times the daily USD volume on the American NASDAQ market.
Sunday, August 2, 2009
Saturday, July 18, 2009
Forex trading-different
If you’re wondering why there seems to be so much buzz these days about forex trading, you’re not alone. There are a number of reasons why forex trading is one of the hottest “new” investment opportunities for average folks. Fortunately, more and more information is surfacing about forex, making it a great time to start doing your research.
The purpose of this short article is to present a basic overview of key aspects which differentiate forex from other investment vehicles with which most of us are more familiar.
Today, the average person has a home computer with an internet connection. In addition, the number of people with a hi-speed broadband connection is rapidly increasing. This places a power and control in our hands that we’ve never before experienced. It’s no longer necessary to have to rely upon the technical infrastructure of banks, brokerage firms and mutual fund advisors. This is incredibly significant. The internet represents more and more independence and choice for the individual to handle investing activities.
The nature of forex fits right in with the independence and freedom of the having your internet connection. You can trade anytime from anywhere, starting with a very low investment; under $1000. There are no fees to pay and although the currency market is very liquid, it’s also very predictable. You can also make money whether markets are up or down. That’s why it works. The really fun thing is that you can get online and practice by paper trading and learn without any risk. Then, after gaining a better understanding of how it works, you can begin with a small amount and make it grow.
Previously, only the “big boys” and financial institutions were in-the-know about forex trading and very active in it as well. Seasoned investors have also been involved over the last few years. Experienced stocks and commdities traders have discovered the power of forex trading. The daily forex trading volume is said to be somewhere in the neighborhood of 1.5 trillion dollars., which is 30x the combined volume of all the US equity markets. That's some pretty tall talkin', but certainly worthy of your investigation. Now, because of certain regulatory changes that occurred in the late ‘90’s and the explosion of home computing & internet technology, forex has become an investment opportunity that most people can be involved with in the comfort of their home as they control their own investment strategies.
Like I said, this is really just a light overview, but I urge you to give some attention to forex trading and discovering more about it. You may find it quite rewarding.
The purpose of this short article is to present a basic overview of key aspects which differentiate forex from other investment vehicles with which most of us are more familiar.
Today, the average person has a home computer with an internet connection. In addition, the number of people with a hi-speed broadband connection is rapidly increasing. This places a power and control in our hands that we’ve never before experienced. It’s no longer necessary to have to rely upon the technical infrastructure of banks, brokerage firms and mutual fund advisors. This is incredibly significant. The internet represents more and more independence and choice for the individual to handle investing activities.
The nature of forex fits right in with the independence and freedom of the having your internet connection. You can trade anytime from anywhere, starting with a very low investment; under $1000. There are no fees to pay and although the currency market is very liquid, it’s also very predictable. You can also make money whether markets are up or down. That’s why it works. The really fun thing is that you can get online and practice by paper trading and learn without any risk. Then, after gaining a better understanding of how it works, you can begin with a small amount and make it grow.
Previously, only the “big boys” and financial institutions were in-the-know about forex trading and very active in it as well. Seasoned investors have also been involved over the last few years. Experienced stocks and commdities traders have discovered the power of forex trading. The daily forex trading volume is said to be somewhere in the neighborhood of 1.5 trillion dollars., which is 30x the combined volume of all the US equity markets. That's some pretty tall talkin', but certainly worthy of your investigation. Now, because of certain regulatory changes that occurred in the late ‘90’s and the explosion of home computing & internet technology, forex has become an investment opportunity that most people can be involved with in the comfort of their home as they control their own investment strategies.
Like I said, this is really just a light overview, but I urge you to give some attention to forex trading and discovering more about it. You may find it quite rewarding.
Fast vs Slow money
It is a known law of physics that an object in motion tends to stay in motion. Why then would a person expect that investing small amounts of money each month ever expect to receive the windfall profits they hope for? Small efforts produce small rewards. The rabbit will most often prevail over the tortoise in the game of life. That is why it is necessary to learn to use fast money instead of slow. That is the reason to trade the forex market.
The market is open Sunday afternoon until Friday at 4pm eastern. There are opportunities for profit at almost any time of day. No one is left out in any time zone.
The forex market is the best trending market in existence. Money is constantly changing hands. Trading opportunities abound day and night. Minimal investments can create large profits. With the proper use of leverage, a simple $300 investment can become a massive $30,000 in as little as six months.
Government data is released on a regular basis almost everyday. These releases can produce huge price swings which are easily tradable. Most notable is interest rate decisions, payroll data and speeches by the heads of individual countries central banks.
There are many resources for free charts and demo trading platforms available on the net. It is possible to have a firm grasp of the basics of trading forex in as little as 30 days. While it may not be possible to be master trader overnight, there are many who have achieved success in extremely small amounts of time. With the proper use of risk control and money management anything is possible.
The market is open Sunday afternoon until Friday at 4pm eastern. There are opportunities for profit at almost any time of day. No one is left out in any time zone.
The forex market is the best trending market in existence. Money is constantly changing hands. Trading opportunities abound day and night. Minimal investments can create large profits. With the proper use of leverage, a simple $300 investment can become a massive $30,000 in as little as six months.
Government data is released on a regular basis almost everyday. These releases can produce huge price swings which are easily tradable. Most notable is interest rate decisions, payroll data and speeches by the heads of individual countries central banks.
There are many resources for free charts and demo trading platforms available on the net. It is possible to have a firm grasp of the basics of trading forex in as little as 30 days. While it may not be possible to be master trader overnight, there are many who have achieved success in extremely small amounts of time. With the proper use of risk control and money management anything is possible.
Forex prices-influences on prices
This article will explain some of the differences between Technical Analysis and Fundamentals and explain a bit about each type of trading. Excerpts are taken from the best-selling book ‘Market Wizards’ where Jack Schwager interviews Ed Seykota and Bruce Kovner.
Ed is a trend trader (uses technical analysis) and also relies on hunches from 20 years of experience. He definitely emphasizes his reliance on technical analysis. While reading this, I liken, the ‘hunches’ to knowing the effect fundamentals can have on a market although I could be mistaken, they could be purely from reading lots of charts so well. Here are is exact words “Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them ‘funny-mentals.’ However, if you catch on early, before others believe, then you might have valuable ‘surprise-a-mentals.’”
Ed says his priorities when trading are the long term trend, the current charts and picking a good spot to buy or sell, in that order.
Bruce says technical is awesome and very useful but by no means disregards fundamentals.
It’s important to note that technical analysis is a critical method of understanding the history of market movements and hence useful to identify trends. It doesn’t actually tell us where the currency is going but analyses historical data. We then need to use our own intelligence to see what the activity of trading says about future trades.
Technical Analysis can be compared to taking a patient’s temperature. To ignore it is ignorance and it can tell you whether a market is active, or cold and dormant.
It also picks up unusual behaviour. Anything that creates a new chart pattern is something unusual. He also says “Studying the charts is absolutely crucial and alerts me to existing disequilibria and potential changes.”
It’s the fundamentals that will help to indicate whether a trading value will increase or decrease.
Everything that makes a country tick, in Forex terms. Consumer spending, government spending, employment cost index, government policy, political concerns and even an individual event can influence the market heavily.
In summary, the fundamentals will indicate the direction of a price but not exact prices. The chart analysis or technical analysis is better for that, so together you can really increase your chances of coming away with some pips.
The reason technical analysis is so emphasized is that many traders use charts to trade and at any given time, will be drawing the same lines of resistance and same lines of support. So if you can read the charts well, you have an awesome chance of predicting market movements. The best way to learn about the effect of fundamentals is to learn one piece of economic data at a time. This will help you make better-educated trades.
Ed is a trend trader (uses technical analysis) and also relies on hunches from 20 years of experience. He definitely emphasizes his reliance on technical analysis. While reading this, I liken, the ‘hunches’ to knowing the effect fundamentals can have on a market although I could be mistaken, they could be purely from reading lots of charts so well. Here are is exact words “Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them ‘funny-mentals.’ However, if you catch on early, before others believe, then you might have valuable ‘surprise-a-mentals.’”
Ed says his priorities when trading are the long term trend, the current charts and picking a good spot to buy or sell, in that order.
Bruce says technical is awesome and very useful but by no means disregards fundamentals.
It’s important to note that technical analysis is a critical method of understanding the history of market movements and hence useful to identify trends. It doesn’t actually tell us where the currency is going but analyses historical data. We then need to use our own intelligence to see what the activity of trading says about future trades.
Technical Analysis can be compared to taking a patient’s temperature. To ignore it is ignorance and it can tell you whether a market is active, or cold and dormant.
It also picks up unusual behaviour. Anything that creates a new chart pattern is something unusual. He also says “Studying the charts is absolutely crucial and alerts me to existing disequilibria and potential changes.”
It’s the fundamentals that will help to indicate whether a trading value will increase or decrease.
Everything that makes a country tick, in Forex terms. Consumer spending, government spending, employment cost index, government policy, political concerns and even an individual event can influence the market heavily.
In summary, the fundamentals will indicate the direction of a price but not exact prices. The chart analysis or technical analysis is better for that, so together you can really increase your chances of coming away with some pips.
The reason technical analysis is so emphasized is that many traders use charts to trade and at any given time, will be drawing the same lines of resistance and same lines of support. So if you can read the charts well, you have an awesome chance of predicting market movements. The best way to learn about the effect of fundamentals is to learn one piece of economic data at a time. This will help you make better-educated trades.
Benifits and advantages of FOREX
Many people are looking at getting into day trading, and start with studying the Stock Market, and the different stock exchanges. What many don’t realize is that there are different markets and financial instruments that one can profit from. One market that has recently become available to the public to trade is the Foreign Currency Exchange, the FOREX.
The foreign exchange market is the largest financial market in the world. It trades upwards of 2.5 trillion dollars per day, which is approximately 1000 times the volume of the New York Stock Exchange. Quite easily, the foreign exchange market dwarfs the stock market of any country.
So, where is the foreign currency market? Well, unlike the stock exchanges of the world. The foreign currency market is a virtual market that is connected by the internet, phones, and fax.
The advantage of having a worldwide currency market is that it is open 24 hours a day, 5 days a week. Living in the USA, one could trade 24 hours per day Sunday 5pm to Friday 4pm EST. One can only trade stocks during normal market hours, so for those that have jobs during the day, the FOREX market is much more accessible as trading can be done at night or early in the morning before going to work.
Other benefits of the foreign currency exchange include:
1. High Leverage: Currency brokers usually give their traders 100:1 leverage, meaning that if there is $1000.00 in ones account, they will let one control $100,000.00, which allows currency traders to reap large gains from relatively small price movements in the market.
2. High Liquidity: Because the currency market is the largest market in the world with huge daily volumes, one is always able to get in and out of trades as liquidity is never an issue.
3. Stops are always honored: Except in extremely volatile markets, which is rare, limits and stops are always honored. Because of the market’s liquidity and 24 hour continuous trading periods, dangerous trading gaps are eliminated altogether. Orders are executed very quickly, without slippage. In the stock market, it is much more frequent that stops get skipped over as stock prices plummet, but in the FOREX, one can be much more confident that the stops are honored.
4. Entry orders are instant: There is no lag time in placing an order. Orders are processed instantly at the current market price, or the price at which you set the order to enter the market in the future.
5. No Commissions: There are no commissions in currency trading, the broker just takes a small difference between the bid price and the ask price as its fee for the transaction.
As currency markets are some of the most volatile markets, many fundamental variables such as weather, and war affect the price of the currency, however, since there is no one apparent reason much of the time for price movement, the fundamentals get discounted and one can use an almost purely technical approach to trading. This is why the FOREX is considered one of the most predictable trending markets that follows technical analysis methods more than any other market.
As one can see, there are many great benefits to using the FOREX as a highly profitable financial instrument. One can trade from home in their spare time, but first it is important to get a solid education in learning specific FX trading methods. Before trading in a live account, it is important to first get educated using books, or online courses. There are many courses online selling for upwards of $3000.00, but it is not necessary to spend that kind of money to get a good education. Usually the expensive courses come with DVD’s and other expensive items that raise the price. Much of the time one can find a course for under $500 that teaches the exact same content for much less money.
Wishing You Success in Trading!
The foreign exchange market is the largest financial market in the world. It trades upwards of 2.5 trillion dollars per day, which is approximately 1000 times the volume of the New York Stock Exchange. Quite easily, the foreign exchange market dwarfs the stock market of any country.
So, where is the foreign currency market? Well, unlike the stock exchanges of the world. The foreign currency market is a virtual market that is connected by the internet, phones, and fax.
The advantage of having a worldwide currency market is that it is open 24 hours a day, 5 days a week. Living in the USA, one could trade 24 hours per day Sunday 5pm to Friday 4pm EST. One can only trade stocks during normal market hours, so for those that have jobs during the day, the FOREX market is much more accessible as trading can be done at night or early in the morning before going to work.
Other benefits of the foreign currency exchange include:
1. High Leverage: Currency brokers usually give their traders 100:1 leverage, meaning that if there is $1000.00 in ones account, they will let one control $100,000.00, which allows currency traders to reap large gains from relatively small price movements in the market.
2. High Liquidity: Because the currency market is the largest market in the world with huge daily volumes, one is always able to get in and out of trades as liquidity is never an issue.
3. Stops are always honored: Except in extremely volatile markets, which is rare, limits and stops are always honored. Because of the market’s liquidity and 24 hour continuous trading periods, dangerous trading gaps are eliminated altogether. Orders are executed very quickly, without slippage. In the stock market, it is much more frequent that stops get skipped over as stock prices plummet, but in the FOREX, one can be much more confident that the stops are honored.
4. Entry orders are instant: There is no lag time in placing an order. Orders are processed instantly at the current market price, or the price at which you set the order to enter the market in the future.
5. No Commissions: There are no commissions in currency trading, the broker just takes a small difference between the bid price and the ask price as its fee for the transaction.
As currency markets are some of the most volatile markets, many fundamental variables such as weather, and war affect the price of the currency, however, since there is no one apparent reason much of the time for price movement, the fundamentals get discounted and one can use an almost purely technical approach to trading. This is why the FOREX is considered one of the most predictable trending markets that follows technical analysis methods more than any other market.
As one can see, there are many great benefits to using the FOREX as a highly profitable financial instrument. One can trade from home in their spare time, but first it is important to get a solid education in learning specific FX trading methods. Before trading in a live account, it is important to first get educated using books, or online courses. There are many courses online selling for upwards of $3000.00, but it is not necessary to spend that kind of money to get a good education. Usually the expensive courses come with DVD’s and other expensive items that raise the price. Much of the time one can find a course for under $500 that teaches the exact same content for much less money.
Wishing You Success in Trading!
Forex-the future investment option
There are many many advantages over the various other ways of investing. First of all it is a 24 hr market, except for weekends of course. You have the US market then the European and then the Asian. One of the great times to trade is during the over lapping periods. The USA and European overlap between 5am & 9am eastern and the Euro & Asian between 11pm & 1am eastern. Usually the busiest time and best to trade.
The is also the risk factor for the accounts. With futures and options you can get margin calls that can wipe you out. If you get caught in a bad trade not only do you lose the money in the account but you may have to come up with a lot more from your pocket. It can be very risking. But not in Forex. Worst case scenario you could lose whats in you account. But you would have to do something really stupid. Like making a big trade on a Fundamental day and leave it alone. If market takes a bad move and you weren't there. OOOPS. But That wouldn't happen with a smart trader.
Then there are the demo accounts which is an account where you can trade using all the right things, platform, charts, and information. But you are using play money, or what we call paper trading too.
Plus with Forex you have a mini account. Instead of needing thousands of dollars to get into it. You can open an account with as little as $300.00. Now of course you will be trading at 1 tenth of a trade. IN other words you controling 10,000 instead of 100,000.00 These are call lots. Which also means you will only risk 1 tenth too!
So if you would love to learn to do investing and not have near the risk you really need to take a closer look at Forex trading.
The is also the risk factor for the accounts. With futures and options you can get margin calls that can wipe you out. If you get caught in a bad trade not only do you lose the money in the account but you may have to come up with a lot more from your pocket. It can be very risking. But not in Forex. Worst case scenario you could lose whats in you account. But you would have to do something really stupid. Like making a big trade on a Fundamental day and leave it alone. If market takes a bad move and you weren't there. OOOPS. But That wouldn't happen with a smart trader.
Then there are the demo accounts which is an account where you can trade using all the right things, platform, charts, and information. But you are using play money, or what we call paper trading too.
Plus with Forex you have a mini account. Instead of needing thousands of dollars to get into it. You can open an account with as little as $300.00. Now of course you will be trading at 1 tenth of a trade. IN other words you controling 10,000 instead of 100,000.00 These are call lots. Which also means you will only risk 1 tenth too!
So if you would love to learn to do investing and not have near the risk you really need to take a closer look at Forex trading.
Getting Started with 4x-market
I was first introduced to the FOREX (4X) market, the cash market for currencies, at a "4X Made Easy" seminar. The speakers made it sound easy to profit in the market using their trading systems and software, but I was discouraged by the high cost (several thousand dollars) to get started and the recurring monthly fees to continue using their systems and software, so I began to do some research of my own. With a little bit of searching, I found resources that were of little or no cost to get started. It took a little more time and effort, but I was able to gain the knowledge and information necessary to feel comfortable investing in the FOREX market. The purpose of this article is to share with you the resources I found so you can begin investigating this lucrative financial market as soon as possible.
I began my quest with an internet search using such key words as FOREX, FX market, FOREX trading systems, charts etc. This search pulled up a multitude of resources, many requiring and additional investment to access their knowledge, but many free resources were also revealed. One of my favorite sites that I frequent often is fxstreet.com. This site is mostly free giving one access to free live and delayed streaming quotes, free access to real-time charts, free education and training and links to many other sites that can help as well. They are also linked to many of the preferred trading sites that you can actually use to get your trading business started as well.
Before investing real dollars into this market, I would suggest doing two things first: 1) develop a trading system and plan that will allow you to get in and out of the market with the least amount of risk or loss possible; and 2) paper-trade the market to test drive your systems before you invest real dollars into the market. Unfortunately, most of the free information regarding trading systems is basic and introductory; you will have to invest in some training and courses to get started, but you do not have to spend thousands of dollars to get the information.
The 4X Profit Professor is one site that is dedicated to on-going 4X education at a fraction of the price other sites are charging. Many of the trading sites will provide you with free access to a paper trading account as an incentive to register with their site. I won't make a specific recommendation here, but browse through several of the links on fxstreet.com and find one you are comfortable with. Realistically, you should plan on paper-trading for three to six months before ever investing any real money into the market.
Many people ask, "Why would I want to invest in the FOREX market anyway?" To conclude, I would like to share with you some of the reasons I think the FOREX market is one of the best investment opportunities around today. 1) Easy of entry into the market. You can get started for as little as three-hundred dollars, where most other markets require an opening balance of five thousand or more to get started.
2) You can big money just working a few hours a week from you computer. You don't have to wait weeks and months for the investment to grow and give you a positive return.
3) The FOREX market is highly liquid with 1.8 trillion dollars exchanging hands daily, you can get in an out of a position at a fair price and have access to the market daily, 24x7, because there are markets open around the world, which you can easily access with an internet connection from you computer.
4) Because of the liquidity of this market, you can leverage your account 100:1 allowing you to invest smaller amounts (compared to stocks 1:1; commodities 15:1) and have higher returns quicker.
5) You can paper-trade the market first, without risking any of your own money, so you can develop the trading systems and plans that will work best for you. Technical analysis works very well in this market and you can make money whether the market is moving up or down, or not moving at all.
6) Finally, once you have a proven trading system down, you can supplement or replace your income, increase your savings and retirement accounts and retire from your regular job much sooner than you ever thought possible.
Take a serious look at the FOREX market. It is real. People are making a ton of money and so can you.
I began my quest with an internet search using such key words as FOREX, FX market, FOREX trading systems, charts etc. This search pulled up a multitude of resources, many requiring and additional investment to access their knowledge, but many free resources were also revealed. One of my favorite sites that I frequent often is fxstreet.com. This site is mostly free giving one access to free live and delayed streaming quotes, free access to real-time charts, free education and training and links to many other sites that can help as well. They are also linked to many of the preferred trading sites that you can actually use to get your trading business started as well.
Before investing real dollars into this market, I would suggest doing two things first: 1) develop a trading system and plan that will allow you to get in and out of the market with the least amount of risk or loss possible; and 2) paper-trade the market to test drive your systems before you invest real dollars into the market. Unfortunately, most of the free information regarding trading systems is basic and introductory; you will have to invest in some training and courses to get started, but you do not have to spend thousands of dollars to get the information.
The 4X Profit Professor is one site that is dedicated to on-going 4X education at a fraction of the price other sites are charging. Many of the trading sites will provide you with free access to a paper trading account as an incentive to register with their site. I won't make a specific recommendation here, but browse through several of the links on fxstreet.com and find one you are comfortable with. Realistically, you should plan on paper-trading for three to six months before ever investing any real money into the market.
Many people ask, "Why would I want to invest in the FOREX market anyway?" To conclude, I would like to share with you some of the reasons I think the FOREX market is one of the best investment opportunities around today. 1) Easy of entry into the market. You can get started for as little as three-hundred dollars, where most other markets require an opening balance of five thousand or more to get started.
2) You can big money just working a few hours a week from you computer. You don't have to wait weeks and months for the investment to grow and give you a positive return.
3) The FOREX market is highly liquid with 1.8 trillion dollars exchanging hands daily, you can get in an out of a position at a fair price and have access to the market daily, 24x7, because there are markets open around the world, which you can easily access with an internet connection from you computer.
4) Because of the liquidity of this market, you can leverage your account 100:1 allowing you to invest smaller amounts (compared to stocks 1:1; commodities 15:1) and have higher returns quicker.
5) You can paper-trade the market first, without risking any of your own money, so you can develop the trading systems and plans that will work best for you. Technical analysis works very well in this market and you can make money whether the market is moving up or down, or not moving at all.
6) Finally, once you have a proven trading system down, you can supplement or replace your income, increase your savings and retirement accounts and retire from your regular job much sooner than you ever thought possible.
Take a serious look at the FOREX market. It is real. People are making a ton of money and so can you.
Tuesday, July 14, 2009
MARKET INDICATORS
Market indicators add significant depth to techinical analysis because they contain much more information than price and volume. A typical approach is to use market indicators to determine where the overall market is headed and then use price/volume indicators to determine when to buy or sell an individual security. The analogy being "all boats rise in a rising tide," it is therefore much less risky to own stocks the market is rising.
Market indicators typically fall into three catagories: 1.Monetary 2.Sentiment and 3.Momentum
1.Monetary market indicator: Monetary indicators concetrate on economic data such as interest rates. They help you determine the economic environment in which business operate. These externel forces directly affect a business profitability and share price.
Exmples of monetary indicators are interest rates, the money supply, consumer debt, and inflation.
2.Sentiment market indicators: Sentiment market indicators focus on investor expectations often before those expectations are discernible in prices. With an individual security, the price is often the only meausre of investor sentiment available. However, for large market suc as the New York Stock Exchange, many more sentiment indicators are available. These include the number fo odd lot sales(i.e., what are the smallest investors doing?), the put/call ratio (i.e., what are the people are buying puts versus calls?), the premium on stock index futures, the ratio of bullish versus bearish investment advisors, etc.
3.Momentum market indicator: The third catogery of market indicators momentum, shows what prices are actually doing. But do so by looking deeper than price examples of momentum indicators include all of the price/volume indicators applied to the various market indices(e.g., the MACD), the number of stocks that made new highs versus the number of stocks making new lows, the relationship between the number of stocks that advanced in price versus the number that declined, the comparision of the volume associated with increased price with the volume associated with decreased price, etc.
A) The external monetary conditions affecting security prices, this tells us what security prices should do.
B) The sentiment of various sectors of the investment community. This tells us what investor expect prices to do.
C) The current momentum of the market. This tells us what prices are actually doing.
Market indicators typically fall into three catagories: 1.Monetary 2.Sentiment and 3.Momentum
1.Monetary market indicator: Monetary indicators concetrate on economic data such as interest rates. They help you determine the economic environment in which business operate. These externel forces directly affect a business profitability and share price.
Exmples of monetary indicators are interest rates, the money supply, consumer debt, and inflation.
2.Sentiment market indicators: Sentiment market indicators focus on investor expectations often before those expectations are discernible in prices. With an individual security, the price is often the only meausre of investor sentiment available. However, for large market suc as the New York Stock Exchange, many more sentiment indicators are available. These include the number fo odd lot sales(i.e., what are the smallest investors doing?), the put/call ratio (i.e., what are the people are buying puts versus calls?), the premium on stock index futures, the ratio of bullish versus bearish investment advisors, etc.
3.Momentum market indicator: The third catogery of market indicators momentum, shows what prices are actually doing. But do so by looking deeper than price examples of momentum indicators include all of the price/volume indicators applied to the various market indices(e.g., the MACD), the number of stocks that made new highs versus the number of stocks making new lows, the relationship between the number of stocks that advanced in price versus the number that declined, the comparision of the volume associated with increased price with the volume associated with decreased price, etc.
A) The external monetary conditions affecting security prices, this tells us what security prices should do.
B) The sentiment of various sectors of the investment community. This tells us what investor expect prices to do.
C) The current momentum of the market. This tells us what prices are actually doing.
Monday, July 13, 2009
INDICATORS
An indicator is anything that can be used to predict future financial or economic trends. For example, the social and economic statistics published by accredited sources such as U.S. government departments are indicators. Popular indicators include unemployment rates, housing starts, inflationary indexes and consumer confidence. Official indicators must meet certain set criteria; there are three categories of indicators, classified according to the types of predictions they make.An indicator is a mathematical calculation that can be applied to a security's price/or volume fields.The result value that is used to anticipate future changes in prices.
Lagging indicator: "Lagging" indicators are also known as trend following indicators. These indicators are superb when prices move in relatively long trends. They dont warn you of upcoming changes in prices; they simply tell you what prices are doing(i.e., rising or falling) so that you can invest accordingly, trend following indicators have you buy & sell late and, in exchange for missing the early oppurtunities, they greatly reduce your risk by keeping you on the right side of the market, trend following indicators do not work well in side ways market.
moving averages and the MACD are edxamples of trend following, are "lagging" indicators.
A lagging indicator is one that follows an event. Back to our traffic light example: the amber light is a lagging indicator for the green light because amber trails green. The importance of a lagging indicator is its ability to confirm that a pattern is occurring or about to occur. Unemployment is one of the most popular lagging indicators. If the unemployment rate is rising, it indicates that the economy has been doing poorly.
Leading indicators: "Leading" indicators help you profit by prediciting what prices will do next. Leading indicators provede greater rewards at he expence of increased risk, they perform best in side ways, "trading" markets. Leading indicators typically work by measuring how "overbought" or "oversold" the security is. This is done with the assumption that a security that is "oversold" will bounce back.These types of indicators signal future events. Think of how the amber traffic light indicates the coming of the red light. In the world of finance, leading indicators work the same way but are less accurate than the street light.
What type of indicators you use, leading or lagging, is a matter of personal preference. It has been my experience that most investors are better at following trends than predicting them.Sunday, July 12, 2009
TRENDS
A trend represents a consistant change in prices.Trends differ from support/resistance levels in that trends represent change,whereas support/resistance levels represent barriers to change.
RISING TREND:
A rising trend is defined by successively higher low-prices.A rising trend can be thought of as a rising support level-the bulls are in control and are pushing prices higher.
RISING TREND:
A rising trend is defined by successively higher low-prices.A rising trend can be thought of as a rising support level-the bulls are in control and are pushing prices higher.
FALLING TREND:
A falling trend is defined by sucessively lower high-prices.A falling resistance level-the bears are in control and are pushing prices lower.
TREND LINES:
Trends areoften measured and identified by"trend lines".A trend line is a sloping line that is drawn between two or more prominent points on a chart.Rising trends are defined by a trend line that is drawn between two or more troughs(low points) to identify price support.Falling trends are defined by trend lines that are drawn between two or more peaks(highs) to identify the resistance.
INTERPRETATION: A principle of technical analysis is that once a trend has been formed(two or more peaks/troughs have touched the trend line and reversed direction) it will remain intact untill broken.
That sounds much more simplistic than it is!The goal is to analyse the current trend using trend lines and then either invest with the current trend untill the trend line is broken,or wait for the trendline to be broken and then invest with the new(opposite) trend.
One benefit of trendlines is that they help distinguish emotional decisions ("I think it's time to sell...") from analyticaldecisions(I will hold untill the current rising trendline is broken").Another benefit of trendlines is that they almost always keep you on the "right" side of the market.When using trendlines,it's difficult to hold the security for very long when prices are falling just as it's hard to be short when prices are rising--either way the trendline will be broken.
Friday, July 3, 2009
SUPPORT AND RESISTANCE
Think of security prices as the result of a head-to-head battle between a bull(the buyer) and a bear(the seller).The bulls push prices higher and the bears push prices lower.The direction prices actually move reveals who is winning the battle.
Markets cycle between support and resistance. Support is a wall of buyers while resistance is a wall of sellers.
THE BATTLE BETWEEN BUYERS/SELLERS, BULLS/BEARS, SUPPORT/RESISTANCE, DEMAND/SUPPLY
A market goes up until it hits a wall of sellers. This wall is composed of people who bought the market before it went down, so they are losing money and are just waiting until the price comes back upto the price where they bought. When price comes back upto their buying price, they sell so they can break even. There are those buyers who bought at the lower price and wait for price to hit the wall of sellers so they can sell and take profits. The people who sell short at the wall, attempting to profit from price bouncing back down off the wall of sellers. In summery the wall of sellers is composed of three elements of traders those trying to break even, profit takers and short sellers.
A market goes down until it hits a wall of buyers. This wall is composed of people who sold short the market before it went up, so they are losing money and are just waiting until the price comes back down to the price where they sold short. When price comes back down to their selling price, they buy back their position so they can breakeven. There are those sellers who sold at the higher price and wait for price to hit the wall of buyers so they can buy back and take profits. The people who buy at the wall attempting to profit from price bouncing back up off the wall of buyers. In summery the wall of buyers is composed to three elements of traders those trying to breakeven, profit takers and buyers looking to profit from the upward bounce.
The foundation of most technical analysis tools is rooted in the concept of supply and demand.
Resistance is equivalent to "supply" line. When the prices increase, the quantity of sellers also increases, as more investors are willing to sell at these higher prices. When too much selling occurs, however, prices retreat. When this happens repeatedly near a specific price level, resistance forms at that price level.
Support is equivalent to "demand" line. When the prices decrease, the quantity of buyers increases, as more investors are willing to buy at lower price. When too much buying occurs, however, prices rise. When this happens repeatedly near a specific price level, support forms at that price level.
In a free market, support and resistance lines are continuously changing. As investor expectations change, so do the prices buyers and sellers feel are acceptable. A breakout above a resistance level is evidence of an upward shift in the demand line as more buyers become willing to buy at higher prices. Similarly, the failure of support level shows that the supply line has downward.
CHARTS
The foundation of technical anlysis is the chart.In this case,a picture is truly worth a thousand words.
A line chart's strength comes from its simplicity.It provides an uncluttered,easy-to-understand view of a security's price.Line charts are typically displayed using a security's closing prices.
BAR CHART: A bar chart display's a security's open?(if available),high,low and closing prices.Bar charts are the most popular type of security chart.the top of each vertical bar represents the highest price that the security tradednduring the period,and the bottom of the bar represents the lowest price that it traded.A closing tick is displayed on the right side of the bar to designate the last price that the security traded.If opening prices are available,they are signified by a tick on the left side of the bar.
CANDLESTICK CHARTS: Candlestick charts displays the open,low,and closing prices in a format similar to a modern-day bar chart,but in a mannar that extenuates the relationship between the opening and the closing prices.Candlestick charts are simply a new way of looking at prices;they don't involve any calculations.Each candlestick represents one period of data.
UPPAR SHADOW :The highest price
LOWER SHADOW :The lowest price
THE CENTER SECTION : real body
The opening or closing price,whichever is greater,The opening or closing price,whichever is less,depends on up/down or holow/filled candle body.
OTHER CHART TYPES: Security prices can also be displayed using other types of charts Equivalume,point and fingure,etc
PRICE FIELDS
- Technical analysis is based almost entirely on the analysis of price and volume. The fields that define a security's price and volume are explained below.
Open-- This is the price of the first trade for the period(e.g., the first trade of the day). When analysing daily data , the open is especially important as it is the consensus price after all interested parties were able to "sleep on it".
High-- This is the highest price that the security traded during the period. It is the point at which there were more sellers than buyers.(i.e. there are always sellers willing to sell at higher prices, but the high represents the highest price that buyers were willing to pay).
Low-- This is the lowest price that the security traded during the period. It is the point at which there were more buyers than sellers(i.e., there are always buyers willing to buy at lower prices, but the low represents the lowest price sellers were willing to accept).
Close-- This is the last price that the security traded during the period. Due to its availability, the close is the most often used price for analysis. The relationship between the Open(the first price) and the Close(the last price) is considered significant by most technicians.
Volume-- This is the number of trades/contracts that were traded during the period. The relationship between prices and volume(e.g., increasing prices accompanied by increasing volume) is important.
Open interest-- This is the number of outstanding contracts(i.e., those that have not been exercised, closed, or expired) of a future or option. Open interest is often used as an indicator.
Bid-- This is the price a market maker is willing to pay for a security(i.e., the price you will receive if you sell).
Ask-- This is the price a market maker is willing to accept(i.e., the price you will pay to buy a security).
These simple fields are used to create literally hundreds of technical tools that study price relationships, trends, patterns. etc.
Not all of these price fields are available for all security types.
FUTURES MUTUALFUNDS STOCKS OPTIONS
OPEN Yes No Often Yes
HIGH Yes Closed end Yes Yes
LOW Yes Closed end Yes Yes
CLOSE Yes Yes(*NAV) Yes Yes
VOLUME Yes Closed end Yes Yes
OPEN INT Yes N/A N/A Often
BID Intraday Closed end Intraday Intraday
ASK Intraday Closed end Intraday Intraday
Automated Trading
If we accept the fact that human emotions and expectations play a role in security pricing,we should also admit that our emotions play a role in our decision making. Many investors try to remove their investing by using computers to make decisions for them. The concept of "HAL" the intelligent computer in the movie 2001, is appealing.
Mechanical trading systems can help us to remove our emotions from our decisions. Computer testing is also usefull to determine what has happened historically under various conditions and to help us optimize our trading techniques. Yet since we are anlaysing a less than logical subject(human emotions and expectations), we must be carefull that our mechanical systems dont mislead us into thinking that we are anlysing a logical entity.
That is not to say that computers aren't wonderful technical anlysis tools-- They are indispensable. In my totally biased opinion, technical analysis software as done more to level the playing field for the average investor than any other nonregulatory event. But as a provider of technical analysis tools, I caution you not to let the software lull into believing markets are as logical and predictable as the computer you use to analyze them.
THE ROULETTE WHEEL
In my experience,only a minority of technicians can determine future prices consistantly and accurately.However,even if you are unable to forecast prices accurately.technical analysis can be used to consistantly reduce your risks and improve your profits.
The best analogy I can find on how technical can improve your investing is a roulette wheel.I use this analogy with reservation as gamblers have very little control when comparing to investors(although considering the actions of many investors,gambling may be very appropriate analogy).
A casino makes money on roulette wheel,not by knowing what number will come up next,but by slightly improving their odds with the addition of a 0 and 00.
Similarly,when an investor purchases a security,he doesn't know that its price will rise.But if he buys a stock when it is in a rising trend,after a minor sell-off,and when intrest rates are falling,he will have improved his odds of making a profit.That's not gambling-- it's intelligaence.Yet many investors buy securities without attempting to control the odds.
Contrary to popular belief,you do not need to know what a security's price's will be in the future to make money.Your goal should simply be to improve the odds of making profitable trades. Even if your analysis is as simple as determining the long,intermediate, and short term trends of the security,you will have gained an edge that you would not have without technical analysis.
Consider any of the chart,where the trend is obviously down and there is no sign of a reversal, While the company may have great earnings prospects and fundamentals,it just doesn't make any sense to buy the security untill there is some technical evidence in the price that this trend is changing.
Thursday, July 2, 2009
FUNDAMENTAL ANALYSIS
FUNDAMENTAL ANALYSIS
If we were all logical and could separate our emotions from our investment decisions, then fundamental analysis, the determination of price based on future earnings, would work magnificently. And since we would all have the same completely logical expectations, prices would change only when quarterly reports or relevant news was released. Investors would seek “overlooked” fundamental data in an effort to find undervalued securities.
THE FUTURE CAN BE FOUND IN THE PAST
If prices are based on investor expectations, then knowing what a security/currency should sell for (i.e. fundamental analysis) becomes less important than knowing what other investors expect to sell for. That’s not to say that knowing what a security/currency sell for isn’t important—it is. But there is usually a fairly strong consensus of a stock’s/currency future earnings that the average investor cannot disprove.
Technical analysis is the process of analyzing a security/currency’s historical prices in an effort to determine probable future prices. This is done by comparing current price action (i.e. current expectations) with comparable historical price action to predict a reasonable outcome. The devout technician might define this process as the fact that history repeats itself, while others would suffice to say that we should learn from the past.
If we were all logical and could separate our emotions from our investment decisions, then fundamental analysis, the determination of price based on future earnings, would work magnificently. And since we would all have the same completely logical expectations, prices would change only when quarterly reports or relevant news was released. Investors would seek “overlooked” fundamental data in an effort to find undervalued securities.
The hotly debated “efficient market theory” states that the security prices represent everything that is known about the security at a given momentum. This theory concludes that it is impossible to forecast prices, since prices already reflect everything that is correctly known about the security.
THE FUTURE CAN BE FOUND IN THE PAST
If prices are based on investor expectations, then knowing what a security/currency should sell for (i.e. fundamental analysis) becomes less important than knowing what other investors expect to sell for. That’s not to say that knowing what a security/currency sell for isn’t important—it is. But there is usually a fairly strong consensus of a stock’s/currency future earnings that the average investor cannot disprove.
Technical analysis is the process of analyzing a security/currency’s historical prices in an effort to determine probable future prices. This is done by comparing current price action (i.e. current expectations) with comparable historical price action to predict a reasonable outcome. The devout technician might define this process as the fact that history repeats itself, while others would suffice to say that we should learn from the past.
THE HUMAN ELEMENT IN TRADING
THE HUMAN ELEMENT AND EXPECTATIONS IN TRADING
The price of a security represents a consensus. It is the price at which one person agrees to buy and another agrees to sell. The price at which an investor is willing to buy or sell depends primarily on his expectations. If he expects the security’s price to rise, he will buy it; if the investor expects the price to fall, he will sell it. These simple statements are the cause of a major challenge in forecasting security prices, because they refer to human expectations. As we all know firsthand, humans are not easily quantifiable or predictable. This fact alone will keep any mechanical trading system from consistently.
Because humans are involved, I am sure that many of the world’s investment decisions are based on irrelevant criteria. Our relationships with our family, our neighbors, our employers, the traffic, our income and our previous success and failures all influence our confidence, expectations and decisions
Security prices are determined by money management and home managers, students and strikers, doctors and dog catchers, lawyers and landscapers and wealthy and the wanting. This breadth of market participants guarantees an element of unpredictability and excitement.
The price of a security represents a consensus. It is the price at which one person agrees to buy and another agrees to sell. The price at which an investor is willing to buy or sell depends primarily on his expectations. If he expects the security’s price to rise, he will buy it; if the investor expects the price to fall, he will sell it. These simple statements are the cause of a major challenge in forecasting security prices, because they refer to human expectations. As we all know firsthand, humans are not easily quantifiable or predictable. This fact alone will keep any mechanical trading system from consistently.
Because humans are involved, I am sure that many of the world’s investment decisions are based on irrelevant criteria. Our relationships with our family, our neighbors, our employers, the traffic, our income and our previous success and failures all influence our confidence, expectations and decisions
Security prices are determined by money management and home managers, students and strikers, doctors and dog catchers, lawyers and landscapers and wealthy and the wanting. This breadth of market participants guarantees an element of unpredictability and excitement.
Technical Analysis
Technical Analysis
Should I buy today? What will prices be tomorrow, next week or next year? Wouldn’t investing be easy if we knew the answers to these seemingly simple questions? If you are following this blog in the hope that my experienced technical analysis has the answers to these questions, I’m afraid I have to disappoint you early—it doesn’t. However, If you are following this Blog with the hope that my experienced technical analysis will improve your investing and in increasing your profits, I have good news-it will!
The term “technical analysis” is a complicated-sounding name for a very basic approach to investing. Simply put, technical analysis is the study of prices, with charts being the primary tool.
The roots of modern-day technical analysis stem from the Dow Theory. Stemming either directly or indirectly from the Dow theory, these roots include such principles as the trending nature of prices, prices discounting all known information, confirmation and divergence, volume mirroring changes in price, and support /resistance. And of course, the widely followed Dow Jones Industrial Average is a direct offspring of the Dow theory.
Dow’s contribution to a modern-day technical analysis cannot be understated. His focus on the basics of security price movement gave rise to a completely new method of analyzing the markets.
Should I buy today? What will prices be tomorrow, next week or next year? Wouldn’t investing be easy if we knew the answers to these seemingly simple questions? If you are following this blog in the hope that my experienced technical analysis has the answers to these questions, I’m afraid I have to disappoint you early—it doesn’t. However, If you are following this Blog with the hope that my experienced technical analysis will improve your investing and in increasing your profits, I have good news-it will!
The term “technical analysis” is a complicated-sounding name for a very basic approach to investing. Simply put, technical analysis is the study of prices, with charts being the primary tool.
The roots of modern-day technical analysis stem from the Dow Theory. Stemming either directly or indirectly from the Dow theory, these roots include such principles as the trending nature of prices, prices discounting all known information, confirmation and divergence, volume mirroring changes in price, and support /resistance. And of course, the widely followed Dow Jones Industrial Average is a direct offspring of the Dow theory.
Dow’s contribution to a modern-day technical analysis cannot be understated. His focus on the basics of security price movement gave rise to a completely new method of analyzing the markets.
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