This is the first in an occasional series of posts featuring the best and the worst in Forex services, services that would help you as a trader or just make it more fun and services that would waste your time. Got a nominee? Drop us a line!
This month’s best service award goes to Olsen Scale.
Olsen Scale was developed by Richard Olsen, the founder of OANDA, is a nice way to look at the global market at a glance and provide a high level view of which currencies are currently in an unstable situation – “Similar to the Richter scale which measures the release of seismic energy during an earthquake, the SMQ relates excessive pricing along various price and time scales to historical data by assigning a single number to it. On a constant basis, the scale therefore characterizes the state of the market.”
How to use it? – Other than being a pretty cool presentation of information if you are a volatility junkie then you can easily see which pairs are unstable and therefore present some short time scalping opportunities, if you like the trends and long term trading then adding this scale to your technical and fundamental analysis could prove to be very useful.
FXstreet have integrated Olsen Scale into their economic calendar – nice work guys! though I would argue that the information should be more prevalent.
Forex Factory has proved again that they don’t really know anything about trading and which tools traders really need. Lets start with the fact that 4 digit trading is so 2005 – all of the brokers today support fractional pips, perhaps ForexFactory would have paid attention to this if they haven’t deleted half of the Forex News that bloggers submit to them. And even if it was accurate, what are you seriously expecting from me as a trader to do with this primitive chart that provide prices that no broker has?
What should ForexFactory do with this functionality – I guess the only thing to do is to have more ads on this page to justify the development time.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
“I don’t get what we are trying to accomplish here by lowering this to 10 to 1,” said House Agriculture Chairman Collin Peterson (D., Minn), saying the proposal appears to put investors’ money even more at risk. “Who are you trying to protect here?”
“If our leverage rules are 10-to-1 and leverage rules elsewhere are 100-to-1, the business is going to move elsewhere. Investors could be even less protected if business moves to a country with lax regulations.”
Now how can Gary Gensler have missed these basic points while drafting his proposal? I can only guess that he probably doesn’t understand the benefits of trading and the adoption of retail Forex as a legitimate asset class.
Thanks for all the traders that have sent comments to the CFTC. Your voice is heard!
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
While the CFTC is recommending a reduction in the leverage allowed in Forex trading to just 10:1 – a rule change that we at Currensee strongly oppose – I’d like to suggest a more scientific approach as to how calculate the ideal leverage that should be offered in spot Forex. You can read all 50 pages of the CFTC’s proposed rule change in this PDF from their site and make up your own mind. See below for how to let the CFTC know what you think.
The main purpose of the leverage limit is to ensure that customer funds are secure and that broker can sustain extreme market events while retaining the ability to clear customer positions without defaulting. If customers would trade with higher leverage the broker is more exposed to the market and it can reach a scenario where there is not enough capital at the broker to cover all open positions – This scenario only applies to brokers that are market makers as ECN brokers do not carry any risk on behalf of their customers.
If we take a look at the past two years the only market that didn’t default is spot Forex, and during most of that time, the maximum leverage was over 100:1. While the stock markets across the world have collapsed, spot Forex remained significantly less volatile and showed tremendous market efficiency – this is largely due to the fact that most brokers have migrated to an ECN model and the others have increased the capital holding thus avoiding such situations.
So according to market efficiency theories the existing leverage is absolutely fine.
If you want to protect customers from over-leveraging themselves and blowing up their accounts, which in my opinion is not the responsibility of any regulatory body, then the process to determine leverage should be this simple: start at the current leverage and see what percent of the accounts blow up, then reduce the leverage to 80:1 and see what change it made in the blow up percentage. Wash, rinse and repeat by moving the leverage down. This takes the leverage down in a more scientific way based on what it actually happening in customer accounts versus just reducing it to 10:1 with no back-up or rationale.
I’d like to see the CFTC assess leverage differently and perhaps this, more scientific approach offers a new perspective. If you agree, please let the CFTC know your views. You can email your comments on this rule change to secretary@ftc.gov with the subject line “Regulation of Retail Forex” and the ID number RIN 3038-AC61 in the body of the message. You can also fax them at (202) 418-5521 or send paper to David Stanwick, Secretary, Commodity Futures Trading Commission, 1155 21st Street NW, Washington, DC 20581. Note that all the comments the CFTC receives will be posted to their website, including any personal information you provide them
We all have a voice and need to share it.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
I am happy to announce that we’re the first and only social network to have an agreement with OANDA to properly support their traders via direct and real-time API access. We’ve had overwhelming response from OANDA traders who want to join Currensee but couldn’t…until now.
Starting today, OANDA traders can join Currensee for free, link their real Forex trading accounts and enjoy all the benefits that we provide our traders – sharing real positions in real time with other community members, leveraging the strategies to create an electronic trading journal, tweeting trades in real time, using social indicators to make more informed decisions and other free features. As Paul Jeszenszky, the Head of Marketing at OANDA said:
“OANDA believes Forex traders benefit from the power of online communities and open access to information. Currensee has shown a commitment to both and we’re glad our clients now have access to their platform.”
OANDA provides a transparent and very innovative service to their traders and we’re happy to have them join the Currensee revolution as a partner. We welcome OANDA traders to join currensee today at www.currensee.com/oanda.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
The new regulations the CFTC is looking to impose on the Forex industry in the US has been the center of attention in many Forex-related publications lately especially the leverage restriction which is in my mind the least of the issues this bill suggests and draws the attention to the wrong items.
So before I get to the main issues I want to say one thing about the leverage issue – I talk to a lot of traders and the professionals rarely leverage themselves more than 10:1 I have talked to a few very successful traders that use no leverage at all and still make very good money so this restriction will not prevent people from making money and it may help some traders that unknowingly over leverage themselves – this is just my personal opinion and I appreciate the fact that there are plenty of traders that do look for higher leverage when they trade. If I can appreciate the desire for different levels of leverage by different traders, why can’t the CFTC?
So what are the more critical issues?
When I read the proposed regulations there is a major difference from the regulations that are in place on the Futures industry, which is also regulated by the CFTC, and the spot Forex industry – here are some examples:
1) Leverage – I know I said that 10:1 is not that bad but why the Futures industry that is way less liquid than spot Forex can offer almost 50:1 leverage?
2) Hedging – it’s allowed to hedge in a Future contracts but not allowed on spot Forex – the regulators opinion is that because spot Forex has daily rollovers you can find yourself having a fully hedged position but still lose money every day not being aware of the rollover – Seriously – wouldn’t it be just simper to control rollover?
3) FIFO rules – as you can probably guess you can open and close positions in any order in the Futures or even the Equities space – so why restrict it in Forex? The regulators view is that money managers keep losing positions for a long time and thus hiding their losses and showing only their profits to prospective customers – wouldn’t it just be easier to mandate a comprehensive way for presenting historical performance – the CFTC should take a look at what the SEC has enforced on Mutual Funds disclosure restrictions if they can’t figure out the math on their own.
4) Introducing Brokers – Introducing brokers are individuals or companies like Currensee that offer a free service to traders and fund it by a commission that is being paid by the brokers for the introduction of new business – the proposed regulation would restrict IBs to only work with one broker a restriction that would significantly restrict that business – as you probably have guessed Introducing Brokers in the Futures industry are permitted to work with multiple brokers.
So why is it that the one regulatory body chose to regulate one industry in a completely different way than the other? Especially since instead of trading spot FX I can trade FX future with none of these silly restrictions – can this be because the CFTC, which was originally selected to regulate the Futures industry, is trying to relieve the pains that the Futures industry suffered from the introduction of spot Forex?
How will this end – In my opinion this is highly depends on the brokers – if they can unite and have enough money they will probably start lobbying or even open a legal procedure against the CFTC in a similar manner that the Hedge Fund industry has managed to push regulators off their lawn. If they don’t I would guess that they would probably start offering FX Futures in the US, which are BTW more expensive to trade, and offer spot FX outside the US.
As for the retail traders – they will be forced to do business outside the US which at the end of the day makes them more vulnerable to fraud so by overprotecting the traders the CFTC is actually exposing them even more.
We are working with our legal team to draft a response to the CFTC, if you are an IB or a broker and would like to participate in our response please email us at opposeCFTCregulation@gmail.com to get involved – it’s more likely that the CFTC would listen to us if we unite together.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
In response to demand of traders we’ve just implemented connectivity between Currensee and Twitter allowing traders to automatically Tweet their positions. The way the service works is that once you link your Twitter account you can chose which one of your brokers accounts you’d like to Tweet and we are automatically Tweeting on your behalf whenever you open or close a position. Since Currensee is the only platform that is connected in real time to more than 50 brokers the moment you execute the order we would Tweet on your behalf in real time. For those who are running business via Twitter we’ve also added the ability to Tweet only when positions are closed and thus attract customers.
One great service that can be along side with Currensee’s functionality is StockTwits and since we see the great value for our traders delivering the transparency we strive to into StockTwits we’ve implemented our Tweets using the same format that will be picked by StockTwits allowing traders for the first time to really Tweet what they do in their live accounts.
Currensee members who link their Twitter account are also going to be awarded 5 Currensee Bucks.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
A big trend right now in the industry is automated Forex trading of signal providers. Most of the Forex brokers today offer their own proprietary solutions and there are various independent providers like Zulutrade, collective2 and others that offer the ability to automatically execute signals.
I’ve spent some time over the past few months looking at these automated trading solutions and, as a trader I have to tell you, I don’t see how anyone will be able to make money with these platforms, as the lack of transparency and accountability is astonishing. I’ve looked at a few leading signal providers and they trade without stops, keep losing positions open forever and hide poor performing months under different names. Also, the lack of properly presented performance information makes it impossible for the educated investor to reach an informed conclusion that will make him money.
The main problems these platforms have, are that they 1) rely on trading signals that are executed in demo accounts and 2) don’t rely on a specific trader that manages real money. In these scenarios, replicating a signal lacks the most important components of trading, which are money and risk management and trading on a demo account versus a real account. This simulated trading style relieves the trader from worrying about his losing positions as it’s not real money anyway and the market will eventually turn around.
We see a change in this market of traders following with the launch of Covestor’s and Kaching’s new services. Here at Currensee, we’re working on an innovative way to give our members the ability to follow real trades made by real people with real names and real performance using a real Forex trading account. We call it full transparency and are seeding this change and will be the first company to offer such capabilities in the Forex space.
If you are a consistently good trader and you are interested in learning more about how you might participate in this new service, we’d love to hear from you!
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
The people that thought it should move in a certain direction realized that they were wrong.
If everyone were right all the time the market would never move. That would be very boring indeed.
Support and resistance points are the points are the battlefield points in this market, if you’ve seen any movies like “Braveheart” or “Gladiator” you probably remember the military battlefields where the British fought the Scottish or the Romans fought the rest of the world. I have to say that it has always fascinated me – how do you get so many people from opposite sides to show up at the same location in the same time thousands of year before Twitter?? But getting to the point these ancient battlefields are the perfect example of support and resistance. These points have no significance other than the decision of many traders that something should happen there.
How are traders communicating between themselves on these battlefields? Well, they don’t actually communicate, all they do is rely on similar analysis. For example one of the most common way to draw support and resistance points is based on pivot calculation, and anyone who knows that math behind it can tell you that it presents no significant insight at all.
So all the people that believe the market is either “Long” or “Short” will bring their soldiers (money) to these points and have a battle. Whoever wins this one can continue to the next battlefield (the next support or resistance point), and the losing team will collect their wounded (the people who were smart enough to put stop losses in place) and bury their dead (the people who got a margin call and will not return to fight today) and continue to the next battlefield. Surprisingly enough (or not so surprisingly) the winners of the last battle are happier and less reluctant to fight, while the wounded only want to get their dignity back. And this is why after breaking the first support or resistance it’s more difficult to break the second or the third one. Now just imagine what happens if the pivot soldiers have accidentally identified the battlefield in the same place as the Fibonacci soldiers and the moving average soldiers – It’s almost like the Scottish bringing the Irish to help them and the British bringing the French to help – we get an even bigger battle.
So what can Social Indicators do for you? Since the Forex market is driven by what Forex traders want it to do, it’s important to identify these three things:
Where is the battlefield?
Who has the strongest army?
Which side has more wounded in it?
We’ll be covering more of the specifics of these questions and their answers in future posts.
See you on the battlefield.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
It is known that the majority of traders in the Forex market are using technical analysis as their only trading technique. Perhaps it’s too difficult to track the GDP, interest rates and unemployment of every country. But it’s very easy to simply follow rules – “if the MACD is above 0 and the SMA of 50 crosses the SMA of 23 then buy” – even a caveman can do that.
The problem is that most Forex traders don’t even spend the necessary time to learn the meaning of these technical indicators, what mathematical basis they rely on, what is the meaning of the parameters in them and who the heck this Fibonacci guy was. (That’s him on the right) As in the example above SMA and MACD are very closely related and they are both rely on a crossover of Moving Averages.
As a result of this Forex traders don’t develop themselves as traders they merely replicate a “system” and might I add “A bullet proof system that works in every market condition” and are extremely surprised when their precious system is not predicting the market as they had hoped.
There is also an inherent problem in Technical Analysis, namely that it relies on a single source of information, historical prices. Since many technical indicators rely on similar mathematical bases, they often generate the same prediction of the Forex market. And this makes traders even more excited because as they say, “all my indicators are pointing in the same direction.”
The biggest problem in technical analysis is not the actual analysis but the way Forex traders implement it.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
A friend referred me to this video on CNN where a TV host is trying to convince a caller that his parents are being taken in by financial scam after someone offered them to double their money every month by trading Forex. The financial world in general and the Forex space in particular is very appealing to people’s weaker impulses when they hope to achieve the dream of making money without working. It’s a lot like those express diets that attract the people who want to lose weight without breaking a sweat.
So here is a little shot of reality: Professional traders in banks or other funds usually go through at least one year of training before they are allowed to touch the bank’s or its clients’ money. So don’t expect to master the domain in a shorter or even similar time frame. A very high return from any sustainable investment activity is never over 3% a month, which annualized is about 42% and also means that you are doubling your money every two years – which is beyond excellent return.
Assuming you need $100k a year to live you would need to trade with a $250k Forex account. If you want to get to a $250k account and you are starting with a $10k account, it will take you nine years to get there, assuming nine years of consistently high returns. Anyone else who says differently is either lying or trying to sell you something. Maybe both.
A good rule of thumb in life and in Forex markets is that if something sounds too good to be true, it probably is.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
Currensee is the first social network for forex traders. We bring Forex traders from around the world together to make trading decisions in real time using live trading data.
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