Forex: April 2009

Winning Strategies in Forex Trading

By: Mr. Ken Windle

There are many strategies employed in forex trading. The first strategy I would like to discuss is a longer term one, in the time frame of a few weeks to a few months. This strategy exploit the fact that a country currency value will appreciate with a hike in the interest rate and vice versa. Based on the macro economic conditions of a country, the central bank shall decide which of the two, inflationary pressure or market downturn (credit crunch, poor employment data) is of a greater concern to the economy of the country. If the concern on high prices outweighs bad economic situations, then the central bank will hike the interest rate. If the central bankers are more worried about the credit crunch in the markets than inflation, then the central bank shall go into rate cutting exercise. Normally, central bank will have the same bias in a direction for at least a few weeks or months. The central banks of most countries would not be changing its bias abruptly once a decision is made and announced to the world. Therefore, a central bank will continue to raise it interest rate in a row. The opposite is true for a rate cutting exercise.

So the strategy is to look for a country that are in rate hiking direction and another one in a rate cutting direction. Then long (buy) the currency of the country having the rate hiking tendency and short (sell) the currency of the country having the rate cutting tendency. Beware that this strategy is for longer term, therefore, it is prudent to use extremely low leverage or no leverage at all. The advantage of this strategy is that a trader does not need to monitor the market every single minute other than keeping abreast about the relevant countries monetary / fiscal policy may be once a day.

Observe the rise in rate of Euro against USD in the chart below while USA FED was in the rate cutting mode and then European Union Central Bank was in rate hiking mode in the chart below. European Union Central Bank started the rate hiking exercise from 6-Dec-2005, raising the interest rate from 2.00 to 4.25 on 9-Jul-2009. Also, observed the drop in Euro Dollar against USD when Euro Union Central Bank announced the possibility of rate cutting while US FED has almost done with its rate cutting exercise, in the same chart. European Union Central Bank eventually cut its interest rate from 4.25 to 3.75 on 8-OCt-08 and cut again to 3.25 on 6-Nov-08.

What if now all countries are in rate cutting mode? How can this strategy work? The exchange rate is determined by the relative value of each currency. Therefore, a potential twist to this strategy is to determine which country is having higher interest rate now, and therefore having the higher potential of bigger cuts than those having low interest rate. The strategy is then to short (sell) a currency with higher interest rate, where the country is likely to cut interest rate (again) and long the currency having low interest rate. One good example (for discussion purpose only and not a recommendation for trade) of country having high interest rate is New Zealand. It started rate cutting on 23-Oct-08, from 7.5% to 6.5%. If credit crunch is getting worse in New Zealand, the potential of big rate cut is obviously higher than Japan that is having an official interest rate at 0.3%.

If you are interested to explore other winning strategies, try this one or explore this site.

About the author:

Mr.Ken Windle is a professional stock and forex trader. His has been highly successful in stock, options and forex trading in a few major global stock markets and forex market. For details, visit his website.

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Precautions About Using Forex Trading Software

By: Paul R. Wilson Jr

Everyone should read quite a bit about the Forex market before beginning to trade using some Forex trading software. I understand that you all are pretty excited about trading and ready to get started. Knowledge is power and with that you can develop your own strategies and perhaps have some Forex trading software created for you.

I'm not trying to say its all pie in the sky, you have to be careful what you do. Trading on the Forex inherently involves some degree of risk. The key to making it is to trade smart. Go for the big picture and take small consistent gains over time.

Risk management is not to be overlooked. With risk management capable of being addressed in Forex trading software, with the fact that it must be set up correctly. Risk management may save you from making several mistakes.

With that also comes capital management. Think of the long term, big picture. Forex trading Software affords us the opportunity to set it up with our money management goals in mind, and go on about our daily business.

As a caution to new traders getting involved, it's a great idea to take some time, spend some money on some books and books about Forex trading software. It will save money in the long run and more than pay its weight in gold.

Extensive use of demo accounts is highly recommended. You really have to test, test, test things out before you dive in to minimize your risk.

You must be aware of the fact that there is always the risk of loosing on a trade even if it does not appear to be a looser. Getting complacent with Forex trading software is not something you should do. You have to be prepared for times when a trade turns against your favor. You'll find this out when you trade on the demo accounts.

When participating in trading it's a good idea to make use of all the trading tools available. If you are new to Forex trading, I would highly suggest reading more books and articles to gain more knowledge about the Forex market.

Getting experience on some demo accounts with various online brokers, trading what they have to offer to get knowledge and learn strategies that you can use to gain returns on your investments. You have to know where to place stops and cope with market volatility. It's never a good idea to rely too much on market indicators. And keep an eye on the trading activities that Forex trading software does for you.

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Distinguish A Forex Scam From The Real Deal

By: Christopher Lee

The thing is, Forex scams are pretty easy to sniff out once you know what to look out for, and make no mistake, there are thousands of websites that are waiting to take your money for no other reason than they can. Scammers and charlatans are aplenty when it comes to the internet and Forex is one of the ways that they rope eager, naïve investors in with wild promises, take your money - supposedly to be placed in a brokerage account. What happens to your money is it usually gets wired to several international accounts under false names and gets withdrawn within moments of your deposit. These scammers are sometimes operating worldwide, which means that they are some times quite impossible to trace.

What happens is that they will set up bank accounts in countries with loose financial laws or with a banking infrastructure or security measures that have not been fully developed. These include many third world countries in African states as well as parts of South America. They will then set up various accounts across the world under false names, in small banks that are connected to the international economy. PayPal does not have the necessary distinguishing tools and it normally acts as a financial middleman between the consumer and the merchant - routing the money from the internet credit transaction to the bank account of choice. All the scammers have to do is pay the nominal fee for the online banking charges and sit back and wait for the money to come rolling in.

When the money comes in, there is a tracking system within their website that alerts them of a sale and they send a single representative to withdraw the money immediately, making sure that the transaction is quick. In a matter of a few weeks or even days, the account is sometimes either left dormant or even closed - in sync with the closure of the website or service that they provide. Then the cycle happens all over again to someone else.

A new website is set up in some remote ISP, and bank accounts are then created. It is quite easy to spot a scammer's website from the real deal and because of their modus operandi, one check on the length that their website has been up is a good way to sniff them out. Make sure you check their company names; sometimes reliable companies do set up satellite websites to increase their internet coverage on the web, so make sure you do not confuse the two.

These websites also make unrealistic guarantees about your investments; and if it seems too good to be true, it usually is. There is no magic formula for you to make millions overnight, if that were the case, why are these people setting up a website instead of investing themselves? These are some of the ways to distinguish a Forex scam from the real deal and as you can see, it is pretty easy to spot them out. The internet and its own review system are there for a reason - to ensure that these scammers do not last long.

About the author:

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Currency Calculator - Small part of the big picture

By: John H. Anderson

When utilising the Forex marketplace, there are specific instruments that you can include to make use of to craft your speculation decision and one of them, an essential tool, is of course a legal tender converter. The legal tender converter assists you to describe the swap rates on the currencies that you are dealing with on the paper traffic. In fiscal terms, the exchange rate, which is also recognized as the foreign exchange rate, identifies how to a great extent a single legal tender is valued when compared to additional based on monetary and pecuniary situations.

The currency calculator will purely just decipher one currency's price to a different one, and from that computation you are capable to outline how much your product is valued and how greatly you want to operate. Let us chatter a fragment further on exchange rates, which shape the foundation for the currency converter. In quintessence, it is the worth of a nation's legal tender and it is the figures you perceive on cash converters, depositories and public houses all over the globe.

But this of course is just a small part of the big picture, as the Forex market is a large arena of dynamic factors and principles that you need to know about when trading. One of things you need to know about is the Global Markets Number Currency, a very important part on calculations and finding the right integers necessary for you to gain a foot hold in the market. One of the most important things you also need to understand is how investors all over the world leverage the market, and the basic integer of this is the initial margin that the Forex broker has given you.

This can be anywhere from 10 to 100%, and some financial institutions and specialised banks will even offer you a higher margin. This is the leverage that you get to play around with the market at length. And this is what separates the Forex market from other commodity markets all over the world. The stock market only gives about a 1:1 margin ration and the equity market is only double them. Only in Forex market can you receive a real high margin, which allows you control a lot of currency on the paper trade but with little cash. And the good thing is , you do not risk anything more than your initial margin.

The Forex market is all about awareness and the thing is, many investors are woefully unarmed when it comes to knowing the market. You need to be able to understand and dive into the market psychology and with this you will be able to aptly predict market movements and where currencies are going. Learn and study the market and all the factors you need to know; including fundamental and technical analysis necessary to manipulate the load of information coming through the market. With this, and basic items like the currency calculator, you can make informed decisions and corner the market.

About the author:

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Forex Signals - Red Flags You Should Look Out For

By: Christopher Lee

Do not be a victim of Forex scams, which can be described as schemes and trading positions that individuals use, advertised and leveraged to trick traders into believing that they can gain a monster profit over night by buying into their brokerage or their online systems. Michael Dunn of the US Commodities Futures Trading Commission has said that the currency market is rife with many nefarious individuals who would seek to take advantage of the vulnerabilities of new and budding investors to turn a quick profit.

There have been thousands of fraud cases and even more have cropped up online, ever since the internet was paired with Forex, and many online brokerages popped out. The average Forex trader who has been netted in by these scams have been known to lose more than $15, 000 dollars. One of the red flags you should look out for are websites who promise an insane amount of money in profits, guaranteeing overnight profits with an initial investment of a few thousand dollars. Typically, these 'investments' you need to give out would typically be in the $1, 000 to $5, 000 range. The money that you invest will seem to be deposited into a brokerage account, but in actuality, is diverted into many several small accounts across the world where a withdrawal will be immediately made some few thousand miles away.

Although there is a special taskforce that has been setup to rid the internet of these Forex scams, there are still hundreds of them online, and the ease of the internet has allowed them to plant themselves on several different hosting sites and maintain their liveability online. Another one you should look out is the sale of Forex software. There are literally thousands of Forex based software and programmes available online, and only a small percentage of them are considered to be developed by legitimate sources. The rest are just rehashed Forex software or low quality programmes that have no use whatsoever. They often make sweeping statements in regards to the quality of these programmes and offer outrageous claims and money back guarantees. In reality, these software programmes or even e-books, are just simply scams for networks of people to make money.

Charging up to and over $40 USD per transaction, they are able to collect thousands of dollars within a month, disappear and then set up a different website under a different name. Their web sites are pretty polished and they often look quite credible. Always read what they have to offer and investigate their website a little bit deeper. It is actually quite easy for you to spot out a red flag in these Forex signals and when you do, report it to the local hosting service and of course the authorities. Forex scams are rampant all over the internet and you need to be aware of these signals before you commit your money. If you do need to invest, just use a well known brokerage and get advice from them on the steps you need to take.

About the author:

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Why Do Most Forex Traders Fail -A first-hand experience?

By: dudu tounane

In Foreign exchange (shortened to FOREX) currency trading business that is usually done online, one thing you need to realize is the great potential it has to make you wealthy and rich. Equally, you should be aware of the great risk attached because you could get to lose any amount of money traded badly.

In spite of the unexpected change in times, world economy and reverse in earnings from financial investments made across the globe you may be part of the minority few who is presently considering other alternatives and means by which money can be made trading locally or going international by using the internet.

There are many result yielding, additional or residual income generating business online that you can be engaged in to make a honest living off the internet. There are enough genuine and legitimate businesses and opportunities that are rewarding for any effort made on your part.

Forex trading may just be one good and recommended place to start.

Just before you run off like many others to get started, you must realize that in the same way you can make a fortune trading Forex considering that more than US$3 Trillion dollars is always at stake (being the amount traded daily when the Forex market is active), you can also lose all your money invested.

Most Forex Traders fail for a number of reasons but three of these will be shared with you. Armed with this information and taking the necessary precautions when trading Forex you can be guaranteed of success.

1. Inability to predict correctly Forex market trends and changes daily. The profit is in the trends and changes no matter how small this may be. You need to know when to enter a trade or when to exit.

Any trade is based on luck and guesswork which is made evident in your correct analysis and interpretation as you observe and monitor the manner in which the market is either progressing or retrogressing. One is an indicator to buy while the other is another indicator to sell.

The difference translates into the number of points (or PIPS) you have either gained or lost. 2. Greed. Before you start Forex trading, determine beforehand your limits. You must decide on how much you want to trade with because when you trade and make profits (which is certain to happen) the temptation is there for you to place higher bid values based on the success you are recording and the profits you will be making.

Eagerness to strike it rich quick has led many Forex traders to outbid themselves out of their capital invested or money traded with. Rather than win and make more money or profits they lost and away went their money leaving them impoverished.

3. Lack of time. Trading Forex successfully requires time. This you must have in abundance as a Forex trader. The Forex market is open 24Hours daily and 5days in a week (Mondays through Fridays), as a result you will need to BABYSIT your computer all day to be able to monitor the trends and discover any changes. WHY? Because you need this information to be able to decide on when to enter a trade or exit a trade.

With family, work, business, friends, leisure and entertainment, sleep, etc to distract it becomes challenging to stay glued to your PC all day.

You may be quick to note and equally ask -How does anybody expect to make money with these tough challenges to overcome? This is SIMPLE -make use of a FOREX TRADING ROBOT.

Ships and big ocean liners traverse the waters and the high seas securely. Airplanes fly with their human cargo safely across the skies. With the use of Cell phones you readily stay in touch with loved ones no matter how far apart you are.

A Forex trading robot can trade 24 hours daily and 5 days in a week. It can monitor and correctly predict market trends and small changes observed. It can look for profit opportunities and promptly respond. At the end, you only have profits to record in addition to keeping your capital or initial investment intact, get more than sufficient time to enjoy yourself and attend to other matters or events.

About the author:

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