Author Bio

As you may have read in the press release, Currensee is one of the charter members of IBcoalition.org, a group of independent Introducing Brokers united to fight a proposed rule change by the CFTC that threatens our businesses and our ability to serve our customers.  As CEO Dave Lemont and Co-Founder Asaf Yigal have blogged before, Currensee opposes proposed CFTC regulations that would reduce Forex leverage to 10:1 and force Introducing Brokers (IBs) to align themselves with just one Forex broker.  IBcoalition.org is focused on the latter issue:

The IB Coalition recently submitted a 10-page letter to the CFTC and, among other points, suggested the following changes to the proposed rulings

• First, the IB Coalition urged the CFTC to revise the proposed rules to permit a Forex IB to operate either as an independent IB subject to the same minimum capital requirements that apply to a futures IB or as a guaranteed IB.
• Second, the IB Coalition asked the CFTC to undertake a study of the retail Forex markets to assure that the rules it ultimately adopts are based on a solid factual understanding of the markets and are tailored accordingly.
• Third, the IB Coalition proposed the CFTC defer to NFA to set appropriate leverage restrictions as it relates to the proposed 10:1 leverage. An onerous leverage restriction, such as this, creates opportunities for unregistered fraudulent schemes to exploit U.S. customers is contrary to the public interest.

If you’re an independent IB in the US or just an interested party – everybody who trades Forex in the US or has a Forex-related business that does business in the US is potentially affected – please visit IBcoalition.org to learn more about the issue and make your voice heard.

=====

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.

Author Bio

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.

This month’s worst service award goes to Market data provided by ForexFactory.

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.

=====

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.

Author Bio

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.

======

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.

Author Bio

If you happen to be keeping a journal on foreign exchange and are about to label this past February you may only be using one word, Greece. Not many would argue with you either. It seemed that it was a ‘Greece this’ and ‘Greece that’ type of month. The correction in the Euro is because of Greece and any rebound was hope that a neighboring country would come to Greece’s rescue.

There were other events though including the FOMC’s discount rate hike which was followed a week later by Chairman Bernanke promise to have policy remain accommodative foe an extended period.

All these events in the Euro Zone and the US and yet two currencies that saw some of the biggest moves this past month were the CAD and the GBP. Hung Parliament in the UK, Olympic Gold and an employment report showing part-time job creation in Canada. Not exactly the interest-rate sensitive headlines that one would expect to cause sizable moves in the Pound and the Loonie.

Everyone is probably familiar with the US and Greek headlines but how many profited on them? If so congratulations. Looking at the Market Watch table on Currensee shows that traders are currently (as of March 1st) having the highest percentage of success in Yen pairs. That is being short AUDJPY, CADJPY and CHFJPY. What happened in Japan and/or the Far East this past month? Lunar New Year celebration, Toyota recalls and traders anticipating their fiscal year-end which normally entails a perception that the Yen should weaken.

Thus to mark February down purely as the month that was dominated by Greece may not tell the full story. Trading the headlines may have yielded some trading income but understanding which currencies would benefit the most during periods of risk-aversion in FX would have yielded better returns.

February turned into the reverse of the carry trade. The carry trade was easy in hindsight as risk was put on globally which forced the Yen to weaken with their 0% interest rates. Last month saw just the opposite as the Yen made steady gains on risk aversion. CHFJPY enjoyed a nice downward move as investors flocked to safe-havens while AUDJPY and CADJPY saw more cyclicality. Your favorite indicators may have helped catch some of these swings too. MACD in EURJPY would have produced a sell signal in mid-January at 130 and a take-profit signal at 124.

Missed those moves? No reason to worry, one of the beauties of foreign exchange is that there are so many pairs to trade and so many hours to trade them. Find the right strategy that works for you and develop a plan to succeed. Speaking of news events and how will they impact the markets, what are you expectations for the upcoming employment report in the US? Do they match the consensus (see the Economic Calendar on Currensee) or do you expect a stronger report that will force the Yen to back-peddle once again? Not to mention, will the initial move after the release be the right move or will waiting provide better opportunities to enter a trade? Finally will the US Dollar be the currency that moves the most after the release or will another currency see a greater reaction and be the currency to trade in March, 2010?

This report is for your information only and does not constitute investment or business advice or an offer to buy or sell securities.

======

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.

Author Bio

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.

=====

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.

Author Bio

As if yesterday’s funding announcement wasn’t excitement enough, Team Currensee is pleased as punch to present a Webinar with popular CNBC and Fox guest analyst Bob Iaccino this Friday, February 26 at 8:00am New York time.  Bob is going to talk about the business of Forex trading – not business as in being a professional Forex trader, but business as in being businesslike in your Forex trading, no matter your level of expertise, interest or financial commitment.

Please join us  for this unique opportunity to hear Bob Iaccino discuss his trading philosophy and take your questions live. Bob will teach you about:

• The behavioral psychology of Forex trading
• Defining a “good trade”
• The trap of being “right”
• Writing and using a Trading Plan
• Understanding loss as a business expense

Webinar: Currensee presents Bob Iaccino and “The Business of Forex Trading”
When: Friday, February 26, 8:00am US Eastern time (1:00pm London, 9:00pm Singapore)
Cost: $10 Blog special: $7 – seats are strictly limited
Register: on EventBrite

BONUS: all webinar registrants will receive a free week of Bob Iaccino’s Daily Trader Webinars, a plain English daily guide to Forex trends and trades.

See you at the Webinar and on Currensee!

=====

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.

Author Bio

A momentous week for Forex as the market was shocked by the Fed’s move to raise rates in the Discount window. This is the rate with which funds can be traded with the Fed, and it was the first time I can remember that this rate was shifted and the Fed Funds rate did not move at the same time. This caused the Dollar to surge and that is not surprising. History tells us that once a change in trend in interest rates begins it is a long time before it shifts back the other way. America now joins Australia in a tightening bias and for the former this has some important underlying dynamics.

For some time now the Dollar has been the primary beneficiary of what is called the Carry trade. This involves borrowing money cheaply here and using it to buy assets elsewhere. This is fine as long as the currency borrowed does not significantly appreciate. We now have the situation where the outlook for cheap borrowing can shift and provides two arguments for further Dollar strength. Firstly, if the carry continues it is more likely that traders will look to hedge the risk of Dollar appreciation by buying Dollars on the forward market, thus creating a powerful underlying bid. Secondly, any further strength opens up the possibility that existing carries can be unwound, or further hedging is needed in order to continue to hold the position. It is also worth noting that the Dollar has been rallying in spite of other news that showed that China was a net seller of U.S Treasuries in November. Whilst this is some way back in history it will become very instructive to the size of the Dollar bid if this trend continued in December and January and is something I will watch closely.

Technically the Dollar slumped alarmingly late on Friday and highlights another market dynamic I look at closely. Moves right at the end of the week are always treated with suspicion due to thin conditions and day traders being forced to exit. This means that Monday’s price action will be very instructive in whether the move was true or false. Compounding the importance is the fact that the EUR/USD settled directly at the point of most time in its downtrend that began is January. When price ends the week at the ultimate point of fair value, it dictates that the market is at a pivotal time and must make a decision on its next trend. It means watching 1.3840 on the upside and 1.3559 on the downside.

=====

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.

Author Bio

The other day I started reading Curtis Faith’s new book Trading From Your Gut. Faith was one of the original Turtles. A few years ago he wrote a book titled The Way of the Turtle about his experience as a Turtle and discussed trading system design and development at length (see my review). On my daily commute this morning Faith was speaking very directly on the subject of win rate and good trading. This is something I’ve commented on before myself, but is always worth speaking to as it trips up a great many traders in their development.

Here’s the deal. Developing traders, and even sometimes more experienced ones, get overly hung up on being right and having a high win %. This comes from two primary underlying causes. One of them is the fear of being wrong. The other is the belief that they need to have more winning trades than losing ones to be a profitable trader. Both are problematic and will cause issues.

The Need to be Right
The need to be right is something which kills traders. As Faith puts it, the whole being right thing is for forecasters and prognosticators, not for traders. Those who fixate on being right end up making bad decisions – ones that can blow up their account. They are the traders who hold losing positions way too long in hopes they’ll come back because they can’t handle the idea that they were wrong and will be forced to take a loss. Of course that often leads them to eventually panic at some point and bail on a trade at exactly the worst possible time (as many stock investors did in March 2009).

The need to have a high win rate also encourages such silly trading behavior as “hedging” in the forex market. I’ve heard many traders justify doing so as allowing them to stay in the trade so it can eventually turn back in their favor. They seem to be ignoring the fact that all they’ve done when putting on a “hedge” is lock in their loss. Like I said, poor choices – ones based on emotion rather than rational decision-making.

Odds and Expectancy
Then there are those who think that in order be a profitable trader you must have more winners than losers. Of course this is true if your winning trades are the same size as your losers. If, for example, each trade will either be a $100 gain or a $100 loss, then you need to win more than 50% of the time to expect to come out ahead in the long run. It’s a straightforward mathematical relationship. If you win 51% of the time then the expectancy for your trades is $2 ($100 x .51 – $100 x .49), meaning that on average you would expect to make $2 for each trade you do.

We can use the same math to demonstrate how you can also be profitable in the long run with a much lower win rate. Let’s use 25% as an example.

Keeping the same $100 gain/loss as above, we come up with a -$75 expectancy ($100 x .25 – $100 x .75). Not good. What if we change from a 1:1 winner-to-loser ratio to a 5:1 ratio, though? Let’s call that $500 for the winning trades and $100 for the losers. Running the figures we get an expectancy of $50 ($500 x .25 – $100 x .75). Not bad at all.

In general terms trend trading methodologies are the ones that tend of have low win % but high winner/loser ratios because they have a lot of small losses thanks to whippy, trendless markets but relatively large winners. Other systems go the other way, with lots of small winners and only occasionally a loser, but a big one.

Even for those with no real issue with being “wrong”, however, low win rate systems can be a challenge. They are subject to lots of big equity swings because the high number of losers creates lengthy drawdowns. Those can be very hard to ride out, especially for someone who hasn’t developed confidence in their system.

Focus on Good Trades
The bottom line is that you should be focused on making good trades not on making winning trades. Good trades sometimes lose money, but if you keep making them within the scope of a positive expectancy system or methodology you’ll end up ahead in the long run. Getting caught up in trying to make winning trades will almost certainly end up leading to disaster.

=====

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.

Author Bio

New York, New York, it’s a helluva town, the Euro’s up and the Dollar’s down.  Or something like that.  Anyway, while the Currensee brass are hobnobbing with the Forex elite at the International Traders Expo down in NYC, the rest of us pips are hard at work, snowed in at Currensee towers, crafting our product and bringing you more free Forex education!

Please join Currensee and SpyGlass Trading Solutions tomorrow, Wednesday, February 17 at 7:30am ET for a special free live trading event: watch Mike Baghdady trade the New York open live.

Join this very special event and see Mike Baghdady – winner of the World Trading Championship Frankfurt 2009 – as he trades the SpyGlass live money account on the New York session. Mike’s trading desk open days are among the most popular in the world today, attracting hundreds of traders worldwide.  Mike will demonstrate his Price Behaviour methodology and take your questions live.

Webinar: Trade The New York Session LIVE with Mike Baghdady
When: Wednesday, February 17, 7:30am US Eastern time (12:30pm London, 9:30pm Tokyo)
Cost: FREE but limited to the first 100
Register: https://www2.gotomeeting.com/register/123133235

=====

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.

Author Bio

The International Traders Expo opened last night at the Marriott Marquis in Times Square and the Currensee Trade Leader superheroes were flying out of our booth (#5610). Literally.  Really, they can fly.

You see the show is all about the Currensee Trade Leaders Program and getting the word out to successful Forex traders about the program, how they can do what they always do – trade – and how they can realize a new revenue stream with no hassles and no headaches. In just the few hours the show was open last night, we talked to many a Forex trader. Traders of all different levels – many who have been trading for years and were interested in the program.

I was showing one FX trader the Trade Leader program and he said “Are you serious? I just trade and that’s it? I’m in!” That pretty much says it all. If you haven’t heard the details about the Trade Leaders program yet, check out our FAQ page and sign up.

As for the Trade Leader superheroes? Well, who doesn’t want to be a hero? That’s how we see our Trade Leaders and we are excited to send our army of Trade Leader heroes out into the world of Forex to save the day.  And remember, when you’re trading Forex on Currensee, your trading friends can see your trades, but nobody can see if you’re wearing tights and a cape.

More to come from the Traders Expo NYC.

=====

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.