The Impact Of Global Forex Trading

Forex Market Trading Hours Video

Watch this video to understand the worldwide forex trading hours. You can trade forex almost 24hours a day, 6 days a week.

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Technical Analysis in Forex - The Good and The Bad

If you are considering forex trading, you will definitely want to take a close look at Technical Analysis. Technical analysis is a method of forecasting future price movements and market trends primarily through the use of charts. Technical analysis is only concerned with how the market has actually behaved, rather than what should happen, and takes into account the price of instruments and the volume of trading. Charts are then created from that historical data and used as a primary tool for analysis. One major advantage of technical analysis is that experienced analysts can follow many markets and market instruments simultaneously.

Three Principles of Technical Analysis:

Market action discounts everything!
This means that the actual price has already been determined by every bit of information that is known to the market. Hence, fundamental issues such as inflation, interest rates, public sentiment, market supply and demand, political factors will not affect the market prices.

Prices move in trends
Technical analysts believe that prices have to follow a trend, whether upwards, downwards or sideways. The Dow Theory of market price action states that the market cannot be manipulated. Once a pattern is created, there is a high probability of it producing an expected result. There are also recognized patterns that repeat themselves on a consistent basis.

History repeats itself
Technical analysts believe that investors collectively repeat the patterns of investors before them. That is to say, human psychology changes little over time. Since patterns have worked well in the past, it is assumed that they will continue to work well into the future. Because investor behavior repeats itself so often, it is possible to chart recognizable market patterns for analysis.

Disadvantages of Technical Analysis

• Critics of technical analysis include many well know fundamental analysts. Warren Buffet once said, "If past history was all there was to the game, the richest people would be librarians."
• The critics also claim that signals about the changing of a trend appear too late, often after the change had already taken place. Therefore, traders who rely on technical analysis will react too late.
• Technical analysis made in short time intervals may be exposed to noise, and this can result in erroneous reading of market trending.
• The use of most patterns has been widely publicized in the last several years. Many retail traders are quite familiar with these patterns and often act on them like a herd mentality. This creates a self-fulfilling prophecy, as waves of buying or selling are created in response to bullish or bearish patterns.

Advantages of Technical Analysis

• Many traders say that trading in the direction of the trend is the most effective means to be profitable in financial or commodities markets. Many famous traders have each amassed massive fortunes via the use of technical analysis and its concepts. George Lane, a technical analyst, coined one of the most popular phrases on Wall Street, "The trend is your friend!"
• Technical analysis can be used to project movements of any asset (which is priced under demand/supply forces) available for trade in the capital market.
• The technical approach concentrates on prices, which neutralizes external factors. Pure technical analysis is based on objective tools (charts, tables) while disregarding emotions and other factors.
• Signaling indicators can sometimes indicate the imminent end of a trend, before it shows in the actual market. With this, the trader can choose to take profit or cut losses.

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What is Forex? Video

Here’s a introductory video on spot foreign exchange market.

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Lack Of Forex Education A Major Cause Of Failure

Lack of thorough Forex education can be costly.

Some new traders open a mini-account and immediately throw $5,000 at it, jump in and get their feet wet. Within 3 months or less the account is finished.

What happened?

There is a lot of hype surrounding the Forex! The internet is full of claims that you can turn a few hundred dollars into tens of thousands within months or 1 or 2 years.

With the most rudimentary information, new traders are sometimes encouraged to begin trading long before they are qualified.

Regretfully, some get-rich-quick merchants merely teach a little technical analysis and basic concepts in the Forex education they offer and miss what amounts to the most crucial part of Forex education: Mental and emotional discipline.

Aspects Of Forex Education

So in brief, here is how the various aspects of a thorough Forex education could be prioritized in increasing order of importance:

1. Forex terminology and trading mechanics

2. Learning how to read charts

3. Learning how to use the online trading software

4. Learning a variety of technical indicators

5. Learning a handful of proven strategies employing those technical indicators

6. Practicing in a demo account

7. Opening a mini account (still viewed as a practice account)

8. Strict risk management

9. Developing mental discipline and control of emotions through experience

Let’s take a look at this list a little more closely.

Notice the items of lesser importance have to do with the mechanics of trading. Most Forex education packages spend ample time on the mechanics.

But the most crucial aspects, the factors that can make or break a Forex trader are the last two, items 8 and 9.

Risk Management

Forex education must include a detailed explanation of risk management rules to be of any value.

You need to know how to calculate risk reward ratios and which trades your equity will allow and which ones you need to avoid.

Estimates vary as to what is the optimal risk percentage on any one trade. Some very conservative traders may suggest no more than 1%. As a general rule, 2% seems to be a reasonable figure allowing for a series of losing trades without putting the account in jeopardy.

More liberal traders even suggest 5% but in my view that is dangerous. Image the hit on your mental energies if you get 5 or 6 losing trades in a row if you trade with that kind of risk.

An effective Forex education will devote a serious amount of time to discussing risk management.

Mental Discipline

There is a reason why this is the most crucial factor of all. Most traders fail, not because they don’t have a good trading strategy, but because they lack the mental discipline to follow it.

The Forex can take an undisciplined trader on an emotional merry-go-round and empty the account at the same time.

That is why any Forex educational package of value will spend considerable time offering strategies and guidelines on how to keep mental focus and emotions in check.

Some Forex education package are put together by individuals associated with online brokers who don’t actually trade themselves. Avoid them.

Go With Professionals

If you are going to invest in Forex education, go to the professionals. Do a little research and make sure the people teaching you are seasoned traders themselves, preferably with years of experience.

So when contemplating the Forex, don’t be in a rush. Take your time, research, identify a good mentor, and be thorough in your Forex education. Eventually, you may be in the small percentage of traders who make a substantial income from currency trading.

About the Author

If you are looking for a comprehensive Forex education with mentoring from professionals check this:
http://www.vitalstop.com/Forex/forex-education.html
http://www.vitalstop.com/Forex/Candle-Chart-Patterns

Best Time Of The Day To Trade Forex

Did you know that the EUR/USD currency pair is the most traded currency pair in the world? Of the 6 major currency pairs being traded, the EUR/USD accounts for almost 30% of the total volume transacted in the forex market. As a result of its popularity and high liquidity, the EUR/USD pair also has the narrowest spread, about 1.5 - 3 pips depending on your broker. The most active period of trading for the EUR/USD pair is the when Europe’s trading period overlaps with New York’s trading hours. This is from 11:00 am to 3.00pm GMT or UTC.
During this period, any positive US news or sentiment such as an increase in US GDP will cause the US dollar to strengthen against the Euro and vice versa. Typically, the daily trading range for the EUR/USD is around 100 pips.

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Other Factors That Move FX Rates - Pt 2

The other types of US economic data that move FX rates are the Producer Indices and Consumer Indices. The Producer Price Index, Purchasing Manager Index and Industrial Production Index all give an indication of the cost of producing goods in the US. A rise in the indices is indicative of a rise in the cost of producing goods. Such an increase results in higher inflation which may cause the Federal Reserve to adjust interest rates.

Most of us are probably familiar with the Consumer Price Index, Consumer Confidence Index and Retail Sales Index. The Consumer Price Index (CPI) measures how much a standard basket of goods costs to consumers. A rise in the CPI is associated with increased inflation. The Consumer Confidence Index (CCI) measures how confident consumers are in the US economy. A higher CCI is associated with an improving economy and hence a stronger US dollar. Finally, Retail Sales Index broadly measure consumer spending in goods and services. Higher retail sales would indicate confidence in the US economy as well.

I’ve listed a number of websites below where you can get a calendar listing the release of economic data for the weeks and months ahead.

1. http://www.bloomberg.com/markets/ecalendar/index.html

2. http://www.bloomberg.com/markets/ecalendar/index.html

3. http://www.gftforex.com/resources/calendar/calendar.asp

Other Factors That Move FX Rates - Pt 1

Other factors affecting FX rates movements are US economic data such as the non-farm payroll report and employment report. These reports are released on the first Friday of each month and details the number of jobs created outside the farming area as well as the level of unemployment in the US economy. More jobs created plus lower unemployment points to a stronger US economy. This will inturn lead to a strengthening of the US dollar. The US Gross Domestic Production (GDP) report is another important benchmark. It gives an indication of the strength of the US economy by reporting on the amount of goods and service produced in the US every quarter. Growth in the GDP indicates a strong economy and hence a stronger US dollar.

Continued in Part II ..

Choosing The Right Forex Broker

Nowadays, most FX brokers offer commission free trades. Instead they earn from the currency pair spread when you trade. For example, if the USD/JPY currency pair is quoted by your broker at 121.56/58, the spread is 2 pips, which is the difference between the bid and ask price. This means that if you were to buy JPY at 121.58, you immediately have an unrealized loss of 2 pips. The market has to move in your favor by more than 2 pips before you make a profit. Hence, when selecting an online broker, shortlist the brokers with the narrowest spread.

Then, check the amount of leverage offerred. Most brokers offer between 50:1 to 100:1 leverage. This means that by putting up a margin of US$500 allows you to trade up to US$50,000 worth of currency. High leverage allows you to maximise your profits against your own capital invested. Of course, the opposite is also true, so manage your risk and expectations prudently.

Next, check on the types of accounts available. If you are a newbie, look for a demo or game account when you can learn to trade with virtual money. Then upgrade to a mini account which requires about US$250 - 300 to open. Every broker will have a standard account which need about UD$2000 to open. These usually offer more leverage options and powerful trading and research tools.

Some other factors to consider in choosing an FX broker would be having a stable and reliable trading platform, technical analysis tools, real time charting capability and quality news information.

Some recommended brokers:

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