Forex Systems - Always Test the System First Before You Trade

Learning how to trade forex can be beneficial and exciting. However this type of online business involves a series of steps that must be fulfilled progressively. Among the preliminary stages is the selection of a forex trading system from experts who have plenty of experience. Aspiring investors must never overlook the importance of choosing the right system.

Forex software systems and beginner forex trader's success depends wholly on the type of system they choose. Before shopping, a trader should consider a number of factors, such as reading reviews of trading systems. if they aim at working casually or permanently. Secondly, they need to decide if they need a manual Forex trading system or the type that generate instructions for the user.

Currency is key in the money markets and the system can either include one or many where the former is profitable but very risky. Above everything else, traders should focus on buying a consumer friendly system, that is also consistent with the changing Forex Market trends. In this business, the individual that selects systems that are susceptible to high risks also invite a probability of high returns on investment.

After finding an ideal Forex trading system, the next step should be assessing it. Many investors based on historical data often prefer back testing for their currencing trading systems. A trader performs a sequence of simulated steps of decisions making an order placement. At the beginner level, it is important to work with dummies because they do require any money commitment to execute an instruction.

Some people choose to do paper trading before shifting to the manual or automatic Forex trading system testing. Learning Forex trading and testing techniques is very easy and free online. Search for free Forex Testers that are downloadable and use them first. They can accelerate or decelerate rates of currency exchanges and operate like the real software products.

Exchange Currency Trading

It is really a surprising thing that as the number of opportunities on the internet is increasing so is increasing the number of people who have failed to profit from it. Online money making seems so lucrative that most of us spend time on the internet searching for one such scheme that could succeed. But it is always easier said than done.

The secret to online success or for that matter success anywhere is in finding the one field which suits your strengths. But what is happening is that most of the people who are trying to engage in working from home are not financial wizards or even someone with know-how of the field. So, they end up wasting time and money on things that are not worth a dime.

But there is one field that doesn’t make you sell or find others to join any scheme. It is the field of exchange currency trading. And if you have never heard of it, well it is a platform that you could use to build your financial portfolio with the help of a system which is highly complex encompassing thousands of people exchanging dollars with electronic currency.

And yes, exchange currency trading has two sides-the portfolio side and the console side.

You can begin by creating a portfolio. With that you would receive about one and a half percent to four percent returns on the money in the portfolio per day.

So, an investment of $1000 would bring $4 at a rate of 4% in a day. This money gets added everyday. Making $1000 yield in a month is quite common. It is all about giving it time and you can earn a lot.

After three months in the exchange currency program if your portfolio reaches the $5000 mark, you can apply for a console. And what does getting a console means? Well, it simply means that people can now come to you with requests of converting their dollars to e-currency or vice versa.

And what would be your gain? Well, console holders are given a percentage on the amount exchanged. You could easily reinvest the profits to increase the amount in your portfolio.

Well, if it is so good, what stops most from making a kill here? Complexity is the biggest problem with exchange currency system. Without someone guiding you at first, you would find it very difficult to make anything out of it.

It is a common thing for people to make an entry in exchange currency trading and then coming out within a few days because they don’t understand the process. But this could easily be remedied. There is no dearth of learning material. You just need to make an effort to learn how exchange currency trading works.

Forex History - The Evolution OF FX Markets

In 1967, a Chicago bank refused a college professor by the name of Milton Friedman a loan in pound sterling because he had intended to use the funds to short the British currency. Friedman, who had perceived sterling to be priced too high against the dollar, wanted to sell the currency, then later buy it back to repay the bank after the currency declined, thus pocketing a quick profit. The bank’s refusal to grant the loan was due to the Bretton Woods Agreement, established twenty years earlier, which fixed national currencies against the dollar, and set the dollar at a rate of $35 per ounce of gold.

The Bretton Woods Agreement, set up in 1944, aimed at installing international monetary stability by preventing money from fleeing across nations, and restricting speculation in the world currencies. Prior to the Agreement, the gold exchange standard--prevailing between 1876 and World War I--dominated the international economic system. Under the gold exchange, currencies gained a new phase of stability as they were backed by the price of gold. It abolished the age-old practice used by kings and rulers of arbitrarily debasing money and triggering inflation.

But the gold exchange standard didn’t lack faults. As an economy strengthened, it would import heavily from abroad until it ran down its gold reserves required to back its money; consequently, the money supply would shrink, interest rates rose and economic activity slowed to the extent of recession. Ultimately, prices of goods had hit bottom, appearing attractive to other nations, who would rush into buying sprees that injected the economy with gold until it increased its money supply, and drive down interest rates and recreate wealth into the economy. Such boom-bust patterns prevailed throughout the gold standard until the outbreak of World War I interrupted trade flows and the free movement of gold.

After the Wars, the Bretton Woods Agreement was founded, where participating countries agreed to try and maintain the value of their currency with a narrow margin against the dollar and a corresponding rate of gold as needed. Countries were prohibited from devaluing their currencies to their trade advantage and were only allowed to do so for devaluations of less than 10%. Into the 1950s, the ever-expanding volume of international trade led to massive movements of capital generated by post-war construction. That destabilized foreign exchange rates as setup in Bretton Woods.

The Agreement was finally abandoned in 1971, and the US dollar would no longer be convertible into gold. By 1973, currencies of major industrialized nations floated more freely, as they were controlled mainly by the forces of supply and demand. Prices were floated daily, with volumes, speed and price volatility all increasing throughout the 1970s, giving rise to new financial instruments, market deregulation and trade liberalization.

In the 1980s, cross-border capital movements accelerated with the advent of computers and technology, extending market continuum through Asian, European and American time zones. Transactions in foreign exchange rocketed from about $70 billion a day in the 1980s, to more than $1.5 trillion a day two decades later.

The Explosion of the Euromarket

A major catalyst to the acceleration of Forex trading was the rapid development of the eurodollar market; where US dollars are deposited in banks outside the US. Similarly, Euromarkets are those where assets are deposited outside the currency of origin. The Eurodollar market first came into being in the 1950s when Russia’s oil revenue-- all in dollars -- was deposited outside the US in fear of being frozen by US regulators. That gave rise to a vast offshore pool of dollars outside the control of US authorities. The US government imposed laws to restrict dollar lending to foreigners. Euromarkets were particularly attractive because they had far less regulations and offered higher yields. From the late 1980s onwards, US companies began to borrow offshore, finding Euromarkets a beneficial center for holding excess liquidity, providing short-term loans and financing imports and exports.

The Foreign Exchange Market

The Foreign Exchange Market goes by many names—Currency Exchange, Foreign Exchange, Forex, FX—but no matter the term, it is simply the trading of one currency against another. Currencies are traded in the form of currency pairs with pricing based on exchange rates and spreads established by participants in the forex market.

History

The FX market is an inter-bank or inter-dealer network first established in 1971 when many of the world’s major currencies moved towards floating exchange rates. It is considered an over-the-counter (OTC) market, meaning that transactions are not conducted on an exchange like some equity stock markets such as the New York Stock Exchange (NYSE) or the Chicago Options Board Exchange (CBOE) where options and futures are traded. OTC trades exist as agreements made between two parties that agree to trade via telephone or electronic network.

As FX trading has evolved, several locations have emerged as market leaders. Currently, London, England contributes the greatest share of transactions with over 32% of the total trades. Other trading centers—listed in order of volume— are New York, Tokyo, Zurich, Frankfurt, Hong Kong, Paris, and Sydney.

Because these trading centers cover most of the major time zones, FX trading is a true 24-hour market that operates five days a week. For example, as a trader in New York, you have access to the FX market starting Sunday evening when the market opens in Sydney for the start of the trading week. Trading centers around the globe then come online until New York closes at 4:30 PM EST. Of course, by this time, Sydney will have reopened for the next trading day so you can continue to trade around the clock until the New York close on Friday.

Why Do We Need to Exchange Currencies?

Individuals and organizations exchange currencies whenever they require foreign goods or services. A trading market has developed around these needs, and hedging practices refined.

Historically, the forex trading market centered around central banks, commercial financial institutions, and multinational corporations. However, with the advent of web-based trading applications such as OANDA’s FXTrade, small retail traders and even individuals now participate directly in the forex market on equal footing with these large institutions.

Forex Market Size

The FX market has become the world’s largest financial market, and it is not uncommon to see over $3 trillion US traded each day. By contrast, the NYSE— the world’s largest equity market with daily trading volumes in the $60 to $80 billion dollar range—is positively dwarfed when compared to the FX market. Even when combining the US bond and equity markets, total daily volumes still do not come close to the values traded on the currency market.

The Most Commonly Traded Currencies

The sheer volume of trading completed every day in the FX market makes it by far the most liquid and most efficient market available. Because of the magnitude of the volumes traded, it is virtually impossible for individuals or companies to influence the exchange rate of the more commonly-traded currencies through any form of open market operations. No single individual has the resources required to manipulate pricing through targeted buying or selling on the market.

There are many currencies which you can trade and OANDA currently supports more than thirty currency pairs. The vast majority of trades however consist of pairs involving just these seven currencies (based on 2006 figures):

Who Uses Forex?

Consumers and Travelers

Consumers typically come into contact with currency exchange when they travel or purchase items from foreign vendors.

Travelers must go to a bank or currency exchange bureau to convert one currency (typically, their "home currency") into another (i.e., the currency of the country they intend to travel to) so they can pay for goods and services in the foreign country. Travellers need to be aware of exchange rates to ensure they receive a fair deal. OANDA.com provides various conversion tools to help them.

Consumers may purchase goods in a foreign country or via the Internet with their credit card, in which case they will find that the amount they paid in the foreign currency will have been converted to their home currency on their credit card statement.

Although each consumer currency exchange is a relatively small transaction, the aggregate of all such transactions is significant.

Businesses

Businesses typically need to convert currencies when they conduct business outside their home country. For example, if they export goods to another country and receive payment in the currency of that foreign country, then the payment must typically be converted back to the home currency. Similarly, if they have to import goods or services, then businesses will often have to pay in a foreign currency, requiring them to first convert their home currency into the foreign currency.

Large companies convert huge amounts of currency; for example, a company such as General Electric (GE) converts tens of billions of dollars each year. The timing of when they convert can have a large affect on their balance sheet and "bottom line, and many businesses use hedging strategies to ensure they do not incur losses over time due to currency market volatility.

Investors and Speculators

Investors and speculators require currency exchange whenever they trade in any foreign investment, be it equities, bonds, bank deposits, or real estate. For example, when a Swedish investor buys shares in Sun Microsystems on the NASDAQ, she will have to pay for the shares in U.S. Dollars and likely have to convert Swedish Krona to U.S. Dollars. Similarly, a Japanese real estate investor who sells a New York property may want to convert the proceeds of the sale in U.S. Dollars to Japanese Yen.

Investors and speculators also trade currencies directly in order to benefit from movements in the currency exchange markets. For example, if an American investor believes that the Japanese economy is strengthening and as a result expects the Japanese Yen to appreciate in value (i.e., go up relative to other currencies), then she may want to buy Japanese Yen and take what is referred to as a long position. Similarly, if an American investor believes that the Euro will go down over time, then she may want to sell Euro to take a short position. Interestingly, investors and speculators can profit equally from currencies becoming stronger (by taking a long position) or from currencies becoming weaker (by taking a short position).

Speculators are often day traders, trying to take advantage of market movements in very short time periods; buying a currency and then selling it again within hours or even minutes. They are attracted to currency trading for numerous reasons, including (i) the size and daily volatility of the market, which provides some individuals with an unparalleled level of excitement, (ii) the almost perfect liquidity of the currency exchange market, (iii) the fact that the currency exchange market is "open" 24 hours a day, and (vi) the fact that currencies can be traded with no brokerage charges.

Commercial and Investment Banks

Commercial and investment banks trade currencies as a service for their commercial banking, deposit and lending customers. These institutions also generally participate in the currency market for hedging and proprietary trading purposes.

Governments and Central Banks

Governments and central banks trade currencies to improve trading conditions or to intervene in an attempt to adjust economic or financial imbalances. Although they do not trade for speculative reasons—they are non-profit organizations—they often tend to be profitable, since they generally trade on a long-term basis.

Do you understand your market?

In a previous articles, I described developing a trader's mindset and putting together a mission statement.

Now we need to consider the next three aspects of building a trading business.

1.What online broker to use.

2.What size account we need to fund.

3.What markets or currency pairs we want to trade.

Since this series of articles is focused on the Forex markets, we need to examine and understand the role of the online retail market makers, and how we as traders, interface with them.

Online Brokers

Online brokers are companies that have relationships with a select number of banks. Based on their own capitalization and credit worthiness, they are able to establish lines of credit with these banks that then provide them with access to their bid and offer prices. A good online market maker will aggregate a number of bank quotes and then offer the average bid and offer price to their own customers, after adjusting the spread they receive, to allow for some profit for themselves. The bigger the volume they can trade, the better the spreads they receive from their banks. It's a numbers game. But for the online trader, the counterparty to his trade is his market maker and not the banks directly.

So when opening an account with an online market maker a trader needs to be aware of the financial standing of the brokerage, whether they are in any way regulated by the CFTC, (Commodity Futures Trading Commission), an indication of good business practices, their policy and methodology of managing trades and stop losses, their margin requirements, whether they have a dealing desk in case your internet connection goes down, and so on. You must read your online broker's client agreement thoroughly.

The purpose of this brief overview of the online market maker's role is to bring your attention to the fact that choosing the right market maker is very important in terms of your ability to execute and manage your trading risk.

In summary, you want to be sure that you have an account with a reputable market maker who will provide you with the best possible execution; at the prices he posts and without re-quoting after you make the trade.

Proper Capitalization

Having a properly capitalized account is a very important consideration. Even though it is possible to open an account with an online broker with as little as $250 dollars, you have to ask yourself, Does this make sense?

If you have any understanding of the Forex market at all, you know that the smallest move a currency can make is one pip. (Actually some online market makers are now offering fractional pips). But for practical purposes consider a pip as the smallest possible move.

If the spread is typically between three to five pips per trade one way, then it will cost at least six to ten pips to open and close a position. If the value of a pip is $1, which is the case when trading dollar quoted currency pairs, such as EURO/USD and in a lot size of 10,000 units, then you have to wonder where you would have to place a stop loss order so that you don't lose 10% of your capital in the first trading loss you make.

One needs to take a realistic view of the actual currency pairs range of movement each period to see what range the currency will trade between the high and low and if entering a trade, how far away the stop loss order would have to be placed to give the currency enough wiggle room without getting stopped out for no real reason.

In the chart example below, a five minute chart of the USD/JPY (dollar-yen), a trade opportunity to go long the dollar is taken at 99.60, and the stop loss order is placed at 99.43. The risk in this trade is 17 pips. If you get stopped out of this trade, your cost will be the 17 pips.

From the perspective of this one trade, you are actually risking $17/$250 or 6.8% of your capital. If you funded your account with say, $5000 then you would be risking only .34% of your capital, about a third of 1%. You can see then that a well capitalized account is a far better cushion of protection than a skimpy $250.

Because you may be able to leverage your position 100:1, you will have to put up about $100 of your $250 capital to take this trade of 10,000 units. If you lose 17 pips, your capital will be reduced to $223.

Remember that as you reduce capital through a string of losses, your ability to margin different currencies becomes severely limited. Some currencies like the GBP/USD, require a much higher margin. If you want to buy or sell the gbpusd, and say it is trading at 2.0000, your margin requirement would be about $200.00.

In other words, you cannot really make money in Forex by being undercapitalized. Sure you can play for a few trades, but inevitably you will not be able to accomplish your goals of making reasonable money as a trader. In fact the odds are that you will probably dwindle away the $250 until you either have to top up your account or you quit altogether.

Which Forex Pairs to Trade

Finally, it is very important to understand the different trading patterns of each currency pair. Some currencies are less liquid, and therefore you will be faced with wider spreads, and possibly execution away from your desired level.

Some currency pairs tend to back and fill more, requiring that you place your stops out of harm's way but yet close enough to protect you in case of an adverse market move. By back and fill I mean the up and down movement in one bar or candle period. If you measure the high to low of each candle or bar and average these, you will find that many currencies have a range of 30 to 75 pips. If you place your stops too tight, the market will seem like your enemy every time.

Conclusion

As you can see, trading in the Forex markets takes some careful thought. Not only do we have to learn about the market and what causes currencies to move, but we have to set up our business so that we have a proper chance to execute our trades efficiently and manage our risks accordingly. I am sure you will agree with me that all the components discussed so far, namely a trader's mindset, good trading habits, a well thought out-mission or long-term strategy, a suitable and well respected broker who offers all the tools and access you need to have a properly funded trading account are the primary requisites for successfully building a Forex trading business.

Canadian Forex/Bond Review: C$ Weakens

The Canadian currency late in the afternoon was quoted at C$1.0700 (93.45 US cents). This compares with Thursday's late North American quote of $1.0633 (94.04 US cents).

Losses in global crude oil futures helped to undermine the value of the Canadian dollar as did losses in the North American equity sector.

George Davis, chief foreign exchange technical analyst with RBC Capital Markets indicated that t6he easing of the Canadian dollar was also tied to an increasingly illiquid year-end trading environment.

Activity in the currency market next week was expected to become increasingly illiquid and subject to exaggerated volatility, given Thursday's US market close for Thanksgiving.

Canadian bonds finished higher along the yield curve Friday with some safe-haven plays by investors behind the strength, market watchers said. Activity was on the lighter side given the absence of fresh economic news.

Bond prices stayed in fairly narrow ranges much of Friday, rising early as equity markets slumped and risk sentiment stayed guarded, brokers said.

Supply pressures helped to limit the upside potential, analysts said.

Paramount among these challenges will be pressure from supply as the US Treasury prepares to auction a cumulative $118 billion of two-year, five-year, and seven-year paper from Monday to Wednesday.

Next week features September retail sales figures on Monday and Friday's release of third-quarter current account balance statistics.

Is Forex Trading for you?

Years ago, I was introduced to the Forex markets by a very savvy friend who extolled the benefits of trading or speculating in currencies. My question to him was, how could a private person trade in currencies and why would he or she even want to?

His answer was illuminating to say the least. First of all he explained that in the forex markets, buying or selling made no difference because you would always be trading in a pair of currencies. At the time, he was trading the US Dollar vs the German Deutche Mark. If he thought the Dollar was going to strengthen he would buy the Dollar, which automatically meant he was selling the Deutche Mark. If he wanted to change his mind, he simply sold the dollar, which meant he automatically bought the Deutche Mark. I was fascinated.

"How is it possible to trade in currencies?", I asked. "Just open an account with a bank that has a foreign exchange trading department", he answered. I thought about his suggestion for a while and then a flood of questions came to me, which led me to a complete change of attitude toward trading or investing in anything from then on.

I would like to share with you, my revelation about the financial markets, especially the currency markets.

I soon discovered the benefits of trading in the forex markets as compared with the stock and bond markets and even the futures and option markets.
The prime benefit is the huge liquidity in forex, which means that it is very easy to get into and out of a position with very little slippage, and in an instant!

In the stock market and the futures markets, it is possible to have a position move after the markets close resulting in a gap down or up the next day when the markets reopen. Traders can get caught on the wrong side of these gaps and accordingly face larger than expected losses.

Another benefit in trading the forex markets is in the fact that one can go long or short with no restrictions. There is no rule against short selling, such as upticks etc. as there are in the stock market.

In addition, because of the large leverage, one can control a large amount of money in a trading position with just a small deposit or margin. Of course this can be a two edged sword. Leveraged positions must be managed if one does not want to face large draw downs when the market moves against them. Forex is one of the best trading environments for a trader who is properly disciplined.

Before you decide that you want to trade, be sure you are comfortable that you have a foundation, which you understand well, and on which you can build your skills. What I soon learned is that to be successful as a trader, one needs to have four mental qualities sown up. These attributes are: patience, discipline, objectivity and a proper expectation of what is possible. Some traders "get" it quickly but many don't.

I believe that success in trading is directly proportional to the skill set built on the above four attributes.

Forex News Trader

How do the majority of profitable Forex traders truly profit in the FX market? One way… they trade the news!

Forex News Trader was developed to give traders the edge they need to learn how to trade based on economic news events from around the world. The same edge the institutions use to make hundreds of millions and even billions of dollars in profit each year.

Forex News Trading will provide you with the information you need to give you a true insider’s understanding of the Forex markets. You will feel confident in your trading, and never doubt your trades again.

Does this mean you will win every trade? No, of course not, but armed with the knowledge Forex News Trader will provide you, you will never be afraid to take that next trade – as the odds will now be tipped in your favor.

Each and every month there are a tremendous number of news releases for the Off Exchange Retail Foreign Currency Market (FOREX). Many of these events and announcements move the markets considerably. But how do you properly capitalize on these moves? Get it wrong and you could be wiped out. Get it right and you can be in a small group of trading elite, consistently pulling pips out of the market each and every week.

Our Forex Trading goal is to provide our visitors with the best trading strategies available. We work exclusively with Forex brokers who specialize in news trading, and also include extensive reviews on the best in the business. Any relevant and helpful information related to Forex news trading can be found on this site.

There are many trading methods that exist to help you succeed as a trader, but there also many factors you need to consider before you execute your trades. Each news event moves differently. What we do is provide you with techniques and systems on how to trade these major news events. How can you maximize your gains and limit your loses? Not easily done, unless you truly know what you are doing.

Forex News Trader will teach you the moves you need to make. In volatile or fast moving markets, such as news trading events, it is imperative to be completely focused and on top of your game. You need to constantly learn new styles and techniques if you want to stay ahead.

Whether you profit, or end up like the other 95% of traders, depends on your ability, knowledge, patience, and how the market moves that day. With such a large world market there are numerous opportunities to pull profits on a consistent basis.

If you’ve spent thousands of dollars to learn strategies that do not work – you are not alone. In fact, in a recent poll of over 5,000 active traders, the majority have spent over $3,500 on education. Some people drop more money into Forex courses then into their own trading account. We offer insider strategies that will give you a huge edge to succeed in the Forex market. You can also learn our Forex Trading Systems and expand your wealth even further. Here is a look at one of our Forex trading videos on YouTube.

Forex Signals

Whether you are a beginner or a seasoned trader, we have a service to fit your needs. Do you have a hard time understanding when to get in the market, or is your exit points that need help? There are hundreds of forex signals services on the market, but most are not worth a dime. We only work with the best. We screen them with the strictest parameters – ensuring their performance is real.

These signal providers may send signals by e-mail, voice, cell phone, or a live trading room. We will provide you with a list of the best Forex services available to best suit your trading needs.

Some traders prefer an auto trade type of system which does the trading for you, like FX-System Center, an excellent way to go. We work with a number of providers of auto-trade services which include state of the art software that will execute trades in the Forex market for you. You can learn to trade many different styles throughout the trading day. You can join live chat sessions with live calls in voice chat rooms with professional traders and learn how to trade the Forex market yourself. The options are all available, and now you know where to look.

Forex Brokers

Finding the right Forex Broker may be the difference in coming out ahead in the long run. FX brokers are your sole connection in this huge market and you have to put a lot of faith in them. We provide you with the top and broker reviews to help you decide during this selection process. A new broker we want you to consider is which puts a whole new feel on the Forex Broker business.

Forex Rebates

What are Forex Rebates? FX Rebates are a payout for the volume of trading you run through your Forex Broker. These rebates can add up to a significant amount capital if you are trading in the Forex Market. If you are going to trade, you might as well get paid to trade. You are going to pay a spread or commission either way you look at it, so it only makes sense to earn as you continue your trading.

Weekly Forex News

Using the videos created by FXDD, we will try to provide you with weekly videos of future events as well as provide you with the daily events when necessary. This will give you, the trader more information to help you. Each video will represent a week or day depending on which is available. At least this way you can come back to one spot for all.

FOREX-Dollar falls after APEC, risk demand rises

* Dollar slips, APEC offers limited FX direction

* U.S., China fail to agree on currency position

* Dollar index hovers near 15-month low

By Naomi Tajitsu and Jamie McGeever

LONDON, Nov 16 - The dollar weakened on Monday as traders took a lack of agreement on currencies among Asian and U.S. leaders as a cue to sell the greenback, particularly against more freely floating currencies like the euro.

The dollar also came under selling pressure with European shares rising 1 percent and gold hitting a fresh record high, suggesting an increase in risk appetite.

The United States and China failed to reach an agreement over currencies at a summit of the Asia Pacific Economic Cooperation forum in Singapore at the weekend, resulting in the omission of a reference to "market-oriented exchange rates" from the communique. [ID:nSP43459]

Analysts said traders took the removal of the currency reference from the statement as a green light to keep the dollar's downtrend intact on the view that U.S. interest rates will stay low as those in other countries eventually rise.

"Chinese currency policy is unchanged, which means that they'll still be forced to accumulate and swap more and more dollars for euros," said Neil Mellor, currency strategist at Bank of New York Mellon in London.

The disagreement between Washington and Beijing comes as U.S. President Barack Obama visits China this week. The yuan's peg to the dollar keeps the Chinese currency weak against its U.S. counterpart, and any yuan appreciation is seen weakening the dollar.

By 1245 GMT the dollar index, a measure of its value against six major currencies, was down 0.5 percent at 74.95, near a 15-month trough of 74.774 hit last week.

The euro was up 0.4 percent to $1.4975, just shy of its $1.4994 session high reached before a quasi-official entity sold ahead of the psychologically key $1.50 level, also a level where options are set to expire Monday.

The dollar slipped 0.3 percent against the yen to 89.47 yen .

Traders offered only a limited reaction to data showing Japan's economy grew at the fastest pace in more than two years in the third quarter.

Dollar/yen trading was hemmed in narrow ranges on Monday, but the market was on the lookout for yen outflows from Japanese investment trusts launching on Monday and Tuesday, as well as possible yen repatriation from U.S. Treasury coupon flows.

NET DOLLAR SHORTS INCREASE

The dollar has been battered in past months on speculation that U.S. rates will stay at virtually zero until well into next year, keeping the return on U.S. assets lower than those in other countries including Australia and Norway, where interest rates have already started rising.

Analysts expect the euro to climb above $1.50 in the near term, despite two failed attempts to make a sustained break above the level in the past month. A climb above $1.5064 -- last month's peak -- would mark its highest in 15 months.

Traders continue to bet on more weakness in the dollar, with data on speculator positioning shows net short positions in the U.S. currency rising against the euro, the yen and the Swiss franc last week.

"Despite the failure of euro/dollar to break meaningfully above $1.50, long euro positions have been extended -- albeit remaining well below the crowded levels seen in early October," analysts at Danske said in a research note.

With little in the way of economic data or events in the European session, analysts said the market would be watching U.S. retail sales due later in the day. A strong reading may boost risk demand and push the dollar lower, they said.

how to choose an Automated Forex Trading System

Automated Trading is the next revolution in trading: a system that can trade Forex and other assets automatically by sending forex trading signals directly to your forex account. The good thing is there are a lot of forex Automated Trading systems available and more on the way. On the other hand, there are a lot of bad systems available. Here are ways to find the best.

Things You’ll Need:

• forex Trading account that allows forex automated trading
• Risk tolerance
• Basic math skills

Step 1

Go to a automated trading exchange, like Collective 2 or Strategy Exchange and review the systems.

Step 2

Pick forex systems that have long-term success. Anyone can develop an automated trading strategy that makes money for a month and then blows up.

Step 3

Find a forex system with small rates of slippage. Slippage is when a system loses money before it starts to gain. Too much slippage can wipe out your account.

Step 4

Avoid excessive trading. A forex system that produces solid returns but conducts a high amount of trades is likely to lose money, or limit your return through trading fees and commissions.

Step 5

Check volatility. If a system’s swings scare you on the chart, imagine what it will do to you in real life. You’ll be spending just as much time watching the trades as you would if you were making the calls yourself.

CURRENCIES: Dollar Edges Down Vs. Yen After Japan Data

The dollar edged down against the yen in the Asian session Wednesday after better-than-expected Japanese machinery orders data, but was nearly flat against other major rivals.

The dollar bought 89.75 yen, down from 89.81 yen in late North American trading on Tuesday.

Japanese government data released early in the session showed the country's private-sector machinery orders -- viewed as a key leading indicator for corporate capital outlays -- rose for a second straight month in September. Core machinery orders rose a seasonally adjusted 10.5%, far more than the 3.2% gain predicted by economists surveyed by Dow Jones Newswires and the Nikkei.

The euro was buying $1.4975, nearly flat from $1.4976 late Tuesday, and the British pound bought $1.6733, just a few ticks above $1.6731 late Tuesday.

U.S. Treasury Secretary Timothy Geithner, visiting Tokyo, said Wednesday he deeply believes a strong dollar is "very important" for the U.S.

China released a mixed bag of economic data for October on Wednesday, and the disappointing details helped support the greenback. Robust domestic consumption continued to drive the nation's economic recovery despite an anemic demand for its exports.

Data released separately by the People's Bank of China showed banks' new loans dropped in October to their lowest monthly level this year, suggesting that authorities were scaling back a key source of stimulus for the economy.

"The barrage of Chinese data caused a minor blip, with some disappointment over China's new loan growth...and weaker export and import growth," said Sue Trinh, senior currency strategist at RBC Capital Markets in emailed comments.

On Tuesday, the dollar bounced off a 15-month low and gained back some ground against major currencies, as concerns over the U.K.'s sovereign rating prompted some demand for the safe haven of the U.S. unit.

A series of speeches by senior U.S. Federal Reserve officials showed policymakers are still more worried about recovery prospects than inflation risks, and think the central bank needs to keep interest rates near zero because the outlook for the U.S. labor market remains grim.

Forex: AUD/USD consolidates gains and trades at 93.06

FXstreet.com (Sydney) – The Aussie consolidated gains against the dollar and is now trading at 0.9306. The pair continues to rise on the strength of the Aussie finding support at 0.8915 and resistance at 0.9335.

The Sydney Morning Herald reports that it was the anticipation of profit taking that saw the AUD rise another half cent after a quiet session on offshore equity markets. The Aussie jumped to 0.9305 from yesterday’s close 0.9257. Proft taking is likely to see the AUD trade around 0.9200 pending unemployment figures to be released in Australia later this week. If there is much deviation from the expected 5.8% the currency may experience some volatility.

• AUD/USD

AUD/USD (Nov 11 at 08:55 GMT)

0.9331/33 (0.30%)

H 0.9343 L 0.928

S3	S2	S1	R1	R2	R3
0.9264	0.9287	0.9310	0.9330	0.9353	0.9376

[?]Trend Index	[?]OB/OS Index
Slightly Bullish	Neutral
Data updated on Nov 11 at 08:25 (15-minute timeframe)

Asian markets advance on economic data; Dollar consolidates lows

FXstreet.com (Barcelona) – Stock markets in Asia are rising today's session on the back of Japan and China better than economic data, commodities are rising, pushing pressure to the Greenback, which is consolidating low levels.

Japan machinery orders index has climbed strongly 10.5% between September and October, beating 4.2% increases expected by experts and well above 0.5% rises posted in the previous month. South Korea unemployment has fallen and industrial production in china has accelerated.

Nikkei 225 index is trading almost flat so far today, with just 0.055 daily increases, but Hang Seng index is reaching 1.10% advances to consolidate its index above 22,500 level. S&P/ASX 200 index rises 0.50% on the day.

Dollar is consolidating low levels, against the Euro, pair is trading just below 1.5000 key level after testing 1.5015 as intra-day high. GBP/USD consolidates levels above 1.6700, trading currently around 1.6720/30. USD/JPY has been rejected by the 4-week low at 89.30 to trade back close to 90.00.

• EUR/USD

EUR/USD (Nov 11 at 08:47 GMT)

1.5036/37 (0.29%)

H 1.5045 L 1.4966

S3	S2	S1	R1	R2	R3
1.4940	1.4978	1.5016	1.5044	1.5082	1.5120

[?]Trend Index	[?]OB/OS Index
Slightly Bullish	Neutral
Data updated on Nov 11 at 08:25 (15-minute timeframe)

The MACD

One of the most commonly studied technical indicators is
the MACD. This indicator (Moving Average Convergence / Divergence) reflects a
difference between moving averages and refers to the ascendancy or not
of the mid-term relative to the short term.

The considered average lengths are respectively 26 days
(0.075 exponential coefficient) and 12 days (exponential coefficient
of 0.15).

Moreover, to estimate the variations of the trend, an
auxiliary indicator (named signal line) is formed. It is based on a new
exponential average on 9 days (0.20 coefficient).

The advantage of this indicator is triple: absolute
position of the MACD, relative position to its signal line and existence of
divergences.

From the first point of view, oversold and
overbought situations can be identified. Thus, a strong rise of the MACD
indicates that the 12-day moving average is more rapidly rising than the 26-day
one, thus showing a stronger volatility in the short term. Then, the crossing
of the zero level should be considered with special caution.

From the second point of view, one of the most relevant
invitations to buy is the crossing up of the signal line by the MACD,
especially when it occurs on up reversing levels for the MACD (cf.
graph).

From the third point of view, divergences can be
identified between the MACD trend and that of the stock price on a given period.
This phenomenon is marked by the more than proportional increase or decrease of
the MACD compared to the stock variation (cf. graph).

Moving averages

The most simple trend indicators are moving averages.
They simply correspond to an average calculated on an evolving time
scale: every day, the oldest value (often taken at the close) in the average
calculus is replaced by the value of the new session.

Consequently, the predictive interest of this
indicator is nil (since it represents prices evolution with a certain
delay). Still, it enables one to determine trends of mid or long term,
stronger and stronger as the average direction is steady.

In spite of the simplicity of this indicator, the length of
averages used should be handled with caution. Indeed, analysts prefer using
two moving averages simultaneously, with quite different lengths to
forecast possible trend reversals. Thus, one will often jointly use moving
averages calculated on 20 and 50 days, or on 50 and 100 days…

In particular, this simultaneous use makes it possible to
determine buying signals. These occur whenever a short term moving
average (e.g. 20 days) crosses a longer term moving average (e.g.
50 days) coming from beneath and thus comes above. This expresses the
tendency of the stock to have its most recent prices at a level higher than
older prices, thus showing a bullish trend.

Reciprocally, a selling signal occurs whenever a short term
moving average crosses down (i.e. from above) a longer term moving average and
thus comes beneath.

Overall, the interest of moving averages is to avoid
going against the market trend when it follows a strong move.

Doubles tops and double bottoms

The preceding figures are all related to trend lines so as to
delimit them. Still, other figures exist, called formal figures, which
are defined by their sole appearance.

They then are reversal figures: the stock trend is
reversing on these levels. The most significant of these figures is the
double top (on the upside) and the double bottom (on the
downside). As shown below, these formations correspond to two
consecutive tops (or bottoms).

These figures are often characterized by lower volumes
during the second extreme, showing the decreasing interest of investors and
the expectation of a trend reversal.

In terms of target, it can be found by moving the
height of the double top (or bottom) figure itself at the level of the
end of the figure (cf. graph).

Oblique resistances and supports: the basis of trends and channels

Though such figures are quite easily recognisable on an
horizontal level, since often corresponding to psychological or technical
thresholds, this is not the case for oblique supports and resistances,
i.e. trend lines.

Indeed, it is often possible to have oblique lines appear,
on which the stock bumps (resistance) or rebounds (support), as
shown by both graphs opposite. The predictive interest of trend lines lies in
the ability to thus determine targets on the up and down sides and to
optimise one’s timing.

It is even possible to identify parallel combinations of
these lines, forming channels, heading up or down (cf. graphs). The
price thus comes bumping under the upper part of the channel and landing on
its lower part.

These trends are often extremely strong and express the
memory of markets, as channels can be valid simultaneously on the short and
long terms. The power of these trends explains that, whenever they come to
an end (we say that the channel is “broken”, often down for an upward channel
and up for a downward channel), a strong volatility occurs, which can lead the
stock to enter a reverse trend. This situation can be preceded by the evolution
of the stock in intermediary zones or channels of the channel, thus suggesting
that the tendency is about to be invalidated (cf. graph).

Though it is quite difficult, when there are no obvious signs
(horizontal resistance, intermediary channel, …), to forecast the moment the
price will exit the channel, it is still possible to estimate the extent of
the following move. The occurring principle is simple: just move the
channel width where the price exited the channel in the exit
direction.

Channels can also be found in a horizontal
configuration; then they are called “range”. These figures indicate a
little enthusiastic market concerning the variation direction of the
stock or the index.

This latter is then evolving around a horizontal mid level.
Whenever these ranges are broken (and it is then less obvious to determine the
new direction compared to the case of a tendency channel), the target is defined
as other channels, by moving the channel width at the exit point in the
direction the stock took.

Symmetric triangles

Apart from channels, it is important to notice that trend
line associations are not necessarily parallel. It is possible to have other
significant figures appear, the most common being triangles. These do not
constitute trend figures, but consolidation ones.

Symmetric triangle figures (cf. graph below) are the most
frequently used. They are formed by a downward resistance line and an
upward support line. The spot price thus comes bumping against the upper
line and landing on the lower line, in smaller and smaller moves due to the
crossing of both trend lines. The more often the price comes on both lines, the
more valid the figure is (the minimum being of course two impacts so as to
determine the lines orientation).

This figure is quite common in the case of long term
trends. That is, the exit direction when the figure is broken is in
the continuation of the entry direction. This exit normally occurs before
the top of the triangle, usually near three quarters of its length
(measured from the impact on the second trend line). The form of the figure
itself, getting narrower, explains that the power “accumulated” by the stock
suddenly appears at the end of the figure, the share moving considerably, often
with much higher volumes.

With this formation too, it is possible to determine
targets. Indeed, it is often standing, in the case of an upward
consolidation, on the parallel line to the support line going through the first
impact point (resistance line). Another target corresponds to the triangle
height used at the exit point. In both cases, this level has to be reached
before the date corresponding to the top of the triangle (cf. graph)

Horizontal resistances and supports

The notion of supports and resistances is one of the key
points of technical analysis. It is mainly based on the idea that buying and
selling decisions are partly due, on both the individual and market levels, to
psychological reasons.

Thus, thresholds effects can be very effective. A
level is considered as a support if, every time a stock tries to break
this threshold down, the stock does not achieve that and heads back up. If
we take the example of Vivendi (cf. graph), we can see that the stock came on
the 100 EUR level several times in April and May, therefore 100 can be
considered as a support.

We also can find psychological levels on the upside,
preventing the stock from rising above certain levels: they are then called
resistances. We can for example identify a resistance in the 100 EUR area
for Casino, as shown opposite.

However, these levels, once tested, can be crossed up or down
and thus get the opposite function. For example, on the Alcatel stock, the 50
EUR was used to constitute a resistance. Still, it was finally crossed and
turned into a support.

L’existence de telles figures tient lui aussi au principe
de mémoire des marchés. En effet, les investisseurs se souviennent des
points de retournement antérieurs et sont ainsi en mesure, à l’approche de ces
niveaux, de se positionner en conséquence. Ces anticipations deviennent de la
sorte auto-réalisatrices, et renforcent un peu plus la valeur du seuil, support
ou résistance. Dans le cas d’un support, ce sont les acheteurs qui exercent leur
mémoire et prennent le dessus, tandis que ce sont les vendeurs qui l’emportent
dans le cas d’une résistance.

Three Simple Rules Of Winning Traders

About two weeks I went on CNBC and predicted that range will rule the currency markets for the foreseeable future. The price of EURUSD at the time of broadcast? 1.2630. The price of EURUSD at close of trade today? 1.2590. So range reigns in the currency market as every rally fails and every decline proves false breaking the hearts of both bulls and bears and that dynamic will probably last for the rest of this year. Thus with little new to say and holiday shortened week ahead of us I thought we'd change the format this week and skips the price action review concentrating instead understanding the basic building blocks of successful trading.

This past week in Kuwait I gave a presentation titled "3 M's that Drive the Currency Market". It showcased a simple analytical framework created by K and I to explain most of the price movement in currencies. The 3 M's stand for Macro - broad economic and political themes, Micro - day to day economic releases and Monetary - for monetary policy of the G-10 nations. The 3M's model, though relatively straightforward, does a very good job of encapsulating virtually all of the catalysts in the FX market.

As I was flying back to US, my thoughts drifted to the 3M idea and I realized that trading itself can also be summarized in a 3 variable model - a model I call the Three Simple Rules Of Winning Traders.

Rule 1 - Develop an opinion.

Whenever I hear traders tell me, "I don't have any opinion, I just trade price action." I always smile ruefully and think to myself that the trader is both an idiot and a liar. The fact of the matter is that every time you enter the market you are implicitly rendering an opinion on the future movement of price. The difference between those traders who do so implicitly versus those who put forth an explicit reason for their trade is that the former have no clue of what they are doing while the later at least try to figure out the story behind the trade.

It goes without saying that I have little respect for traders who mechanically follow price action like mindless robots. In trading you get paid not for what is happening now, but for what will happen in the future and if you cannot figure out what is likely to drive price towards your target you are just a lemming in the market. Right or wrong, developing an opinion is the cornerstone of a winning strategy.

Rule 2 - Let Price Confirm Your Thesis

To politely paraphrase a very crude Wall Street saying, opinions are like faces - everyone has one. Developing an opinion even one that is ultimately correct is utterly worthless if the market happens to disagree with your assessment. The history if trading is littered with brilliant analysts who were absolutely correct on their calls and yet were bankrupted by the vagaries of price action before they were ever proven right. Your opinion may be dead on, but as traders it is price movement, not opinion that we are trading. Until and unless price corroborates your opinion you have no entry signal for your trade.

Rule 3 - Manage Your Trade

More than anything else great traders are good money managers. I've always believed that you can put two great traders on the opposite side of a position and often both of them will wind up making money. On the other hand put two novices in the same spot and they will more than likely both lose. Trading above all the art of managing the unknown. Let's say you own a sandwich shop in some strip mall in Nebraska. Most likely you would know to within 10 or 20 sandwiches how many customers you will have every single day of the year. Now imagine that sandwich shop was the FX market. The day to day variance would drive most sandwich shop owners insane. Some days you may sell 500 sandwiches, other days you may have to dump all your food supplies into the garbage as no business came through your door. That's why trading at its core is always about managing risk. Every time you trade the operating principle is - Hope for the Best Prepare for the Worst.

The only way we've been able to control risk and at the same time participate in the market is by always cutting our position in half once a short profit target is met. No matter what anyone tell you, there is simply no way to know a priori if any given trade will be successful. At BKT we really believe that half a loaf is better than none. Success in trading is contingent not only on your analysis but on your ability to properly manage your position. That is why the game is hard. To be a winning trader you must be both - a good analyst and an an excellent risk manager..

BID & OFFER RATES (BID/ASK)

The FOREX market quotes dealable real-time bids and offers for each currency pair. For example, say that USD/JPY is currently quoted as 106.05/106.08. The first quote is the bid (the price at which someone is currently willing to buy dollars against the yen) and the second quote is the ask (the price at which someone is willing to sell dollars against the yen).

A trader who wants to buy dollars against the yen at the market must deal at the offer of 106.08. This is referred to as "lifting" or "paying" the offer. The trader will do this if he believes that USD/JPY will increase, say, to 106.75 (i.e. the dollar will strengthen against the yen). All orders to buy, whether a market, stop or limit order deal on the offer.

If a trader wants to sell dollars against the yen at the market, then he must deal at the bid of 106.05. This is referred to as "hitting" the bid. The trader will do this if he believes that USD/JPY will decline, say, to 105.45 (i.e. the dollar will weaken against the yen). All orders to sell, whether a market, stop or limit order deal on the bid.

The difference between the bid and offer is referred to as the "spread" and represents a cost of transacting in the FOREX market. The more liquid is a particular currency pair, the smaller will be the spread and hence, the cost. All other financial markets - bonds, equities, and futures - also have a spread, so this is not something particular to the FOREX market.

FOREX bids and offers are "dealable" meaning that a trader can almost always transact at the quotes shown. (During very volatile times, there may be some discrepancy.) This price transparency is a great advantage of the FOREX market as the trader knows with almost certainty the price at which a trade can be done.

The minimum fluctuation of an exchange rate is referred to as a "pip". For USD/JPY and EUR/JPY, a pip is equal to 0.01 and for the other exchange rates, a pip is equal to 0.0001.

FOREX APPROACH

Fundamental vs Technical Analysis
Fundamental Analysis is a method of forecasting the future price movements of a financial instrument based on economic, political, environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument.

Technical analysis is a method of predicting price movements and future market trends by studying charts of past market action which take into account price of instruments, volume of trading and, where applicable, open interest in the instruments.

In practice, many market players use technical analysis in conjunction with fundamental analysis to determine their trading strategy. One major advantage of technical analysis is that experienced analysts can follow many markets and market instruments, whereas the fundamental analyst needs to know a particular market intimately.

Main differences between the two types of analysis

Fundamental analysis	Technical analysis
Focuses on what ought to happen in a market	Focuses on what actually happens in a market
Factors involved in price analysis:	Charts are based on market action involving:
1. Supply and demand 2. Seasonal cycles 3. Weather 4. Government policy	1. Price 2. Volume 3. Open interest

The fundamentalist studies the cause of market movement, while the technician studies the effect.

Analysis of Foreign Exchange Markets
Foreign exchange traders base their decisions on technical analysis and fundamental analysis. Technical traders use charts, trend lines, support and resistance levels, mathematical models and other means to identify opportunities and drive trading decisions. Fundamental traders identify trading opportunities by analyzing economic information.