Thursday, October 27, 2011

Daily Technical Analysis Pre EU 28th October 2011

EUR/USD INTRADAY: THE UPSIDE PREVAILS.
Pivot: 1.403
Most Likely Scenario: Long positions above 1.403 with targets @ 1.426 & 1.4325 in extension.
Alternative scenario: Below 1.403 look for further downside with 1.3975 & 1.395 as targets.
Comment: Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.

Industrial Production


  Actual Consensus Previous
Month over Month -4% -2.3% 0.8%
Year over Year -4.1% -2.3% -0.8%
Released on 10/27/2011 23:50 for Sep, 2011
Definition
This indicator measures the physical output of the nations factories, mines and utilities. *Release time listed is for U.S. Eastern Time of the previous day.

Household Spending


Highlights
September household spending dropped 1.9 percent on the year after sinking 4.1 percent in August. The decline was led by a continued sharp drop in spending on automobiles and a pullback in spending on TVs. Many households had already bought new digital TVs ahead of July 24, when Japan terminated analogue broadcasting services. Transportation & communication spending slid 11.0 percent while fuel, light & water charges dropped 10.0 percent on the year. Spending on clothing & footwear dropped 5.0 percent. On the plus side, housing was up 9.9 percent and spending on furniture & household supplies was up 6.5 percent. Medical spending was up 2.3 percent.

Still many unanswered questions for Europe

European leaders finally thrashed out a comprehensive response to their sovereign debt and banking crisis which culminated in a detailed communiqué released this morning in Brussels. This is a summary of the key features of this document together with our assessment of its effectiveness:

CPI

Highlights
September consumer price index was unchanged on the month and edged up 0.2 percent on the year. This was the third consecutive annual increase mainly due to higher gasoline and utility prices. The core CPI which excludes fresh food was also unchanged on the month and up 0.2 percent on the year. Excluding both food & energy however, the CPI was unchanged on the month and down 0.4 percent on the year. Goods prices were up 0.4 percent on the month but down 0.4 percent on the year while services slid 0.3 percent but were up 0.4 percent on the year.
On the year, food prices were down 0.8 percent while furniture & household utensils slid 6.0 percent. Medical care costs were down 0.7 percent. However, transportation & communication prices were up 1.6 percent on the year.

Unemployment Rate

Highlights
September unemployment rate slipped to 4.1 percent from 4.3 percent in August as the number of employed increased from the previous month. The unemployment rate is the lowest since November 2008 when it was 4.0 percent. Effective with September data, the government released the national average unemployment rate based on figures from all the 47 prefectures, including earthquake hit areas that were previously excluded from the data. The adjusted number of unemployed was down by 30,000 to 2.67 million for the second consecutive monthly drop. The unadjusted number of employed people fell by 330,000 to 62.76 million on the year.
Actual   Consensus    Previous
 4.1%          4.5%     4.3%
Released on 10/27/2011 23:30 for Sep, 2011

Daily Technical Analysis Pre EU 28th October 2011

EUR/USD INTRADAY: THE UPSIDE PREVAILS.
Pivot: 1.3875.
Most Likely Scenario: LONG positions above 1.3875 with targets @ 1.402 & 1.4055.
Alternative scenario: The downside penetration of 1.3875 will call for 1.381 & 1.375.
Comment: The RSI has broken above a declining trend line, the pair remains on the upside and is challenging its resistance.
Trend: ST Consolidation; MT Bearish

Equities ignored amidst euro-focus

Such is the understandable focus on Europe right now that almost unnoticed this month has been the very powerful improvement in global equity markets. Just as well,

Chinese policy-makers are turning

Against the backdrop of slower growth in Europe and the rest of the world, and with the local economy clearly responding to the significant tightening in monetary policy,

Are the storm clouds clearing in the US as well?

Europe’s creditable crisis response has almost been matched by an encouraging report out of the US suggesting that the worst may be behind them, at least in the short term.

A Bank full of bears

Not one or two but three MPC members have offered a very downbeat assessment of UK economic prospects in recent days.

Daily Forex Brief London: Thursday 27th October 2011

  Getting there, but slowly
After an all-nighter in Brussels, European leaders have finally announced a package of measures which they hope will placate the concerns of investors and traders regarding the sovereign debt and banking crisis. The package has three major components ? the firepower of the EFSF has allegedly been raised to EUR 1.4trln, Greek debt-holders have apparently accepted a 50% haircut, and European banks are to be recapitalised. Also announced was a more significant role for the IMF (although exactly what that role will be is not yet clear), and the continued involvement of the ECB with respect to buying the bonds of troubled European sovereigns in the secondary market. These measures have literally just been announced in the last couple of hours and as a result, fuller analysis will follow over the course of the day. Suffice to say at this stage, European policy-makers appear to have done enough for now to encourage the belief that they are finally facing up to the true extent of their difficulties. In response, the EUR is up above 1.40, the dollar is weaker, metal prices are higher and Asian equities are up by more than 2%.

Wednesday, October 26, 2011

Europe likely to underwhelm once more. 27.10.2011

Given both the multitude and the complexities of the issues that Europe needs to address, expecting that all could be resolved by today was always an impossibility.

Monday, October 24, 2011

PRE US OPEN, DAILY TECHNICAL ANALYSIS, 24 OCTOBER 2011

Please note that due to market volatility, some of the below sight prices may have already been reached and scenarios played out.
EUR/USD INTRADAY: CAUTION.
Pivot: 1.381
Most Likely Scenario: Long positions above 1.381 with targets @ 1.3955 & 1.402 in extension.
Alternative scenario: Below 1.381 look for further downside with 1.37 & 1.365 as targets.
Comment: The pair is pulling back on its support, the RSI is mixed and calls for caution.
GBP/USD INTRADAY: THE UPSIDE PREVAILS.
Pivot: 1.5850
Most Likely Scenario: Long positions above 1.5850 with targets @ 1.6005 & 1.605 in extension.
Alternative scenario: Below 1.5850 look for further downside with 1.575 & 1.568 as targets.
Comment: The pair remains on the upside, the RSI is mixed to bullish.

Friday, October 14, 2011

How to start creating your own trading strategies?

According to opinion of many trader that For starting your own strategy you should have at least at least 2 years experience on forex market. Before that you are not ready!

I would disagree with that. A person might need 2 years to become profitable, but that's no reason to not try to develop your own strategy as soon as you get a general idea of how the market works.
You can only sit around reading what others have written for so long. At some point, you've got to try implementing ideas. These can be ideas from others, or they can be your own. Sitting around thinking "I haven't traded for 2 years, so I'm too ignorant to try anything on my own" isn't going to make you a successful trader.
What kills most people's accounts is poor risk management, not bad ideas on when to open and close trades.
Naturally, all new strategies, no matter what the source, should be tested on demo first.
Maybe I just missed smth - if we are talking about experimental strategies, you can start creating them on your first day of trading... but if we are talking about really working strategies (also with intelligent risk management) - they just cannot be generated without rich experience (it is just my opinion)

How much money do I need to start trading?

Depending on the amount your broker requires for margin, you can start trading with an amount as low as $500. Remember that starting out with low trading capital may put you at disadvantage because you will only be able to trade forex in small share lot sizes.
Howerver, don't wait until you have hundreds of thousands of dollars. First, trade a demo account or two (or three) until you are comfortable with the platform and can show at least some signs of being profitable. Then open an account with a broker that lets you trade microlots or nanolots. This will let you get live trading experience with less than $500 at risk.

How to instantly improve your forex trading performance and move it to the professional level

Group A (73%) Losing. Jumping from one forex robot to another, sometimes trying to trade on their own by following some complicated strategy, or even placing trades on a hunch...
Group B (16%) Somehow managing to break even. Using one or two strategies, however not enough confidence to follow the rules. As they claim "the strategies were not consistent enough" so they would sometimes "break a rule, here and there"...
Group C (7%) Placing long term trades, watching the news at all times, having trouble sleeping, as one economic report or change of goverment in some country would rapidly turn their forex position into a nightmare.
Group D (4%) Making consistent profits day after day. Losing days could be counted on the fingers of one hand. Following one strategy and never ever breaking a rule. Sleeping well at night knowing that the next day will be just as profitable as the previous one. Taking long vacations. Living a happy life...

Calculating Profit and Loss

Our online trading platform will automatically calculate the P&L of your open positions, but it is useful to understand how this calculation is made to understand your profit and loss potential on each trade.
To illustrate an Forex trade, consider the following two examples.
Let's say that the current bid/ask for EUR/USD is 1.4616/19, meaning you can buy 1 euro for 1.4619 or sell 1 euro for 1.4616.
Suppose you decide that the Euro is undervalued against the US dollar. To execute this strategy, you would buy Euros (simultaneously selling dollars), and then wait for the exchange rate to rise.
So you make the trade: to buy 100,000 Euros you pay 146,190 dollars (100,000 x 1.4619). Remember, at 1% margin, your initial margin deposit would be approximately $1,461 for this trade.
As you expected, Euro strengthens to 1.4623/26. Now, to realize your profits, you sell 100,000 Euros at the current rate of 1.4623, and receive $146,230
You bought 100k Euros at 1.4619, paying $146,190.
Then you sold 100k Euros at 1.4623, receiving $146,230.
That's a difference of 4 pips, or in dollar terms ($146,190 - 146,230 = $40).
Total profit = US $40.
Now in the example, let's say that we once again buy EUR/USD when trading at 1.4616/19. You buy 100,000 Euros you pay 146,190 dollars (100,000 x 1.4619).
However, Euro weakens to 1.4611/14. Now, to minimize your loses to sell 100,000 Euros at 1.4611 and receive $146,110.
You bought 100k Euros at 1.4619, paying $146,190.
You sold 100k Euros at 1.4611, receiving $146,110.
That's a difference of 8 pips, or in dollar terms ($146,190 - $146,110 = $80)
Total loss = US $80.

Reading a Forex Quote

Quoting Convention
Quotes in the currency market can be a bit confusing because any position you take in the market is actually two different positions.
In FX you’ll see currencies listed in Pairs. This permits you more options in FX then you get in other markets. For example, you may be bullish on Euro and will therefore buy want to buy the Euro. In FX, you can chose what you want to buy those Euros with. You can buy them with USD, or you can buy them with JPY if you prefer. You can buy Euros with a long list of other currencies that we offer.
So a currency pair will be displayed in this manner.
EUR/USD
The first currency listed is referred to as the “base currency”. The second currency listed is considered the “counter currency”. So for EUR/USD, the Euro is the base currency and the US Dollar is the counter currency. If the pair is trading at 1.4700, that quote tells us how much of the Counter currency it would cost to buy one unit of the base currency. So it would cost $1.47 US to buy one Euro.
When it comes to placing a trade, keep in mind that any time you take a position you are doing so in terms of the base currency. So if you buy a pair, you are buying the base currency. If you sell a pair, you are selling the base currency. Then it’s easy to keep in mind that you are always doing the opposite with the counter currency. So, if you buy EUR/USD, you are buying Euros and selling US Dollars.
If that is still a bit too confusing, you can think of it simply this way. Buy if you expect the rate to go up. Sell if you think the rate will go down. Simple as that!
You will always see a two-sided quote in FX. In your FXCM account you will always be shown a Buy price and a Sell price. They can also be referred to as the “bid” and “ask” respectively. The Buy price is the rate that you can buy that pair at, and the Sell price is the rate at which you can sell that pair. The difference between the two prices is called the “spread”. The spread is determined by the price providers and liquidity in the markets at that precise moment. FXCM has up to 12 interbank firms streaming prices into our platform. The platform filters those feeds for the best Buy price and the best Sell price, and passes them on to account holders with a small mark up.
A spread exists for all tradable instruments, stocks, bonds, futures, options, etc, it just isn’t always visible to the trader.
So now you hopefully understand how currency pairs are quoted and what you are buy and what you are selling when you place a trade.

Forex Market Hours

Given the global nature of currency trading, the market is open for business around the clock, 24 hours a day. It is important for the trader to know the times when the major markets are active and how this can be implemented in their trading.
As a general rule, a specific currency will usually be most active when that particular market is open. For example, the GBP and its related pairs, while active and tradable 24 hours per day, tends be most active and widely traded during the hours when the London market is open. Meanwhile the JPY and its related pairs will be more widely traded during the Tokyo business day.
The market hours for the major FX markets are as follows:
London – 3 AM through 12 noon Eastern time (~35% of total FX volume)
New York – 8 AM through 5 PM Eastern time (~20% of total FX volume)
Sydney – 5 PM through 2 AM Eastern time (~4% of total FX volume)
Tokyo – 7 PM through 4 AM Eastern time (~6% of total FX volume)
The above information can be utilized in several ways. The more trades that are being executed during a given time (all things being equal), the narrower the Bid/Ask spreads will be. Greater liquidity results in a narrower spread.
Also, we see that between the hours of 8 AM and 11 AM Eastern US time, the two largest markets (London and New York) overlap one another for about 3 hours. This represents a key trading time slot for many traders. Keep in mind that each trading day will be different from every other and there are no guarantees that this time frame will generate incredible trades on a regular basis. However, with the London and New York markets open and trading simultaneously, more trading opportunities often present themselves.
While we see an overlap between the trading hours of the Tokyo and Sydney markets, it is not as significant as the London and New York overlap due to the significantly lower overall trading volume.
Weekend Trading
While the FX market technically never closes, virtually all of the major banks and trading entities do close for the weekend. The volume over the weekend is so small that it tends not to offer much trading opportunity for traders. While some activity can occur depending on fundamental news that may occur over the weekend, generally any movement in the currency pairs is negligible, and trading liquidity is extremely thin, making trade execution difficult and spreads very wide. Hence, the FXCM Trading Station closes at 4 PM Eastern time on Friday and opens again at 5 PM Eastern Time on Sunday.
Given differences among traders, some will keep positions open over the weekend while others will close all open positions before 4 PM Eastern on Friday.
You should now have the information that you need to understand trading hours in the currency market.

Rollover

In this lesson we are going cover Rollover. We will start by explaining the concept of rollover then go into an example of how it is calculated. We will show you how to take advantage of rollover, as many successful traders make it an integral part of their trading strategy.
Rollover is the interest paid or earned for holding a position overnight. The target interest rate associated with each currency (generally set by that currency’s Central Bank) is listed on the home page of Dailyfx.com. Here is an example:

Thursday, October 13, 2011

Leverage & Margin - Trading on Margin

Leverage and margin is a very important concept to understand, because leverage can get you in trouble pretty quickly if not used properly. That being said, if leverage is applied properly, it can increase the profitability of your trading strategies.
Leverage trading, or trading on margin, means you aren't required to put up the full value of the position. As a result, you can open a significantly larger position that you would be able to if you needed to fund your trade in full. Trading on leverage increases your potential for profit, but also increases your risks.

Forex trading offers leverage up to 200:1, This means that for every £1 in your account, you can trade £200 worth of a position.

What's a pip?

Discover what a pip is, what its value is, and how it is used to calculate profit and loss, plus review examples of currency price movements to put it all in context.
Forex prices are generally very liquid, and are usually quoted in very small increments called pips, or "percentage in point". A pip refers to the fourth decimal point out, or 1/100th of 1%.
For Japanese yen, pips refer to the second decimal point. This is the only exception among the major currencies.
Pips
“PIP” stands for Point In Percentage. More simply though, a pip is what we in the FX world consider a “point” for calculating profits and losses. In a standard (10k) account, each pip is worth roughly one unit of the currency in which your account is denominated. If your account is denominated in USD, for example, each pip (depending on the currency pair) is worth about $1. In a micro account, each pip is worth roughly 1/10th the amount it would be worth in a standard account -- so about $0.10.

Understanding Forex Quotes

Find out how to read and interpret a Forex quote, the difference between base currencies and counter currencies and bid and ask prices.

Reading a foreign exchange quote is simple if you remember two things:
1. The first currency listed is the base currency
2. The value of the base currency is always 1.

Three easiest pairs are: EUR/USD, USD/JPY and GBP/USD

EUR/USD - most popular pair with the lowest spread. This pair is an ideal choice for beginners, since it responds quite well to basic technical studies and rules, which traders learn in the beginning. EUR/USD is not too volatile under normal market conditions and, thus, can be traded safely with lesser risks and closer stops.
From the fundamental point of view EUR/USD gets lots of global economic coverage, it is an easy to follow and monitor pair.

USD/JPY is another good currency pair. It often has the same low spread as EUR/USD, which makes it attractive to investors. USD/JPY pair features much smoother trends, comparing to other pairs; this makes trading USD/JPY during trends a real joy, not to mention the fact of earning profits alongside.

Which Currencies Can I Trade?

What is a currency pair? Which pairs are most frequently traded? Discover these answers and explore the differences between the major and the cross currency pairs.

What currency pairs to trade in Forex?
Although there is lots of currency pairs offered to Forex traders, if you are a beginner it is easier to start with major currency pairs:
EUR/USD
GBP/USD
USD/JPY
There are several good reasons for that:

Why trade Forex with us?

You Know:
Interest Free Accounts
Hedging Allowed
Spread as low as 1 pip
Leverage up to 1:500
No Commission
Accounts from $100
Free Trading Signals & Alerts
MT4 Trading Platform
So Why trade Forex with us?
FOREX — The currency market or  foreign exchange market or Forex is the market where one currency is traded for another. It is one of the largest markets in the world.