Author Bio

This past Monday a financial channel was discussing the currency markets. They were running a bearish story on the euro and highlighted how one particular fund manager was expecting EUR/USD to start heading towards parity. One manager alone doesn’t stand out in the largest market in the world, but the thrust of the report was focused on the challenges that the Euro Zone was going to face and had to be considered bearish.

On Tuesday, that same financial channel ran another story on the currency markets. This time they catered to the euro bulls, stating that most currency traders were expecting the US dollar to stem its gains and start to reverse course. Did this financial channel bother listening to their report on Monday? One of their reports has to be right, right?

This is no way to enter a trading day. Certainly markets will zigzag throughout a trading day, leading to counter-trend trades but understanding the underlying market trend should prove to be helpful as you enter each day. Conflicting information will often times lead to poor decision making.

Let’s return back to Tuesday morning: there was a story on the wires that the Confidence Board revised lowered their April economic reading for China. This is no small deal; in fact, didn’t China just come back from the G-20 meetings touting their strong growth strategies? The Shanghai Composite lost 4.3% on Tuesday and global equities all followed lower. It seems as if Tuesday had turned into thought-reversal day.

Wait though, because there was yet more to come on Tuesday. A meeting with the boss should be no big deal. A meeting with the boss who proclaims afterwards that things are OK is a worrying sign. Apparently President Obama receives a daily update from Ben Bernanke on the state of the US economy. But on Tuesday, after the meeting President Obama, found it necessary to state that things are OK in front of the microphones. Just making sure that we all heard him in case you missed the FOMC or G-20 meetings last week, where both individuals were telling us how good things are right now.

This also happened to be approximately 72 hours before the US NFP report is to be released. Expectations are still for a loss of 110k jobs. The last time the president spoke ahead of a NFP report, he stated how “strong” it would be and then we were all left with crumbs – the creation of forty one thousand private sector jobs to be precise. If I can read between the lines here, it seems as if the president received the jobs number on Tuesday (the BLS takes the surveys in the week of the 12th each month and tabulates the figures in the days that follow) and it was not good.

Americans do not agree that the US economy is OK right now. This was evident in the June Consumer Confidence reading that came out on Tuesday. The Present Index fell to a miserable 25.5 reading. Not good.

Nobody said that currency trading would be easy, especially when you hear flip-flopping information on economies of China and the US, not to mention that the financial channels delivering the news are anything but consistent as well. Understanding the underlying trend will help you become a more consistent currency trader. After all, we need someone to be consistent around here.

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

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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.

Author Bio

The question of whether someone really should not be a Forex trader is one that’s not often brought up in discussions between market participants. It’s almost as if the baseline assumption is that the sole criterion is that you want to trade. While I’m a believer in the view that just about anyone can learn, there are limits to that. Ignoring the obviously physical and mental disabilities, here are the ones I think are most important.

Lack of Impulse Control
If you cannot keep yourself from acting on impulse – meaning making snap decisions without a plan – then you’re likely not going to do well in trading. Successful trading means applying a consistent edge. That, in turn, requires a plan that is being followed, not making random trades when the mood hits.

There is probably some confusion here when the subject of gut instinct comes into play. Here’s the deal, though. If you’ve only just started trading, you have no gut instinct. That comes from long experience. If you’re a rookie making gut trades, for your own good you should stop now. Any success you’ve had to this point is almost certainly a function of luck, not skill.

A Troubled Emotional State
We all go through periods when we’re in a mixed up emotional state. It could be relationship issues, family difficulties, the death of a loved one, stress at work, or any number of other things that put you off your game. These are not good times to trade. Granted, trading can be an escape from the emotional strains in some cases, but that’s only if the trader can consistently execute their normal work and strategy without it being impacted by what’s going on in the rest of their life.

Trading has a way of really exposing emotional problems, even among the most stable of individuals. If you’ve already got some mental strains going on, trading is likely to either make it worse, or to see you feed on that emotion in destructive ways – like trading angry. It is best to stay clear of the markets when these sorts of things happen if there’s any chance of spill-over or distraction.

Looking for a Quick Buck
Trading is not a get rich quick program. Any systems or broker ads that lead you believe otherwise are being deceptive. As any trader who’s been around more than a year will tell you, trading is a marathon, not a sprint. If you come into the market looking to make a fast killing you are almost certainly going to blow your trading account up because you’ll end up taking much too much risk. Basically, you’ll be a gambler rather than a trader.

I could probably toss in “those who think trading is going to be easy”, but that might rule out almost every new trader.

That all said, though, the things I’ve noted above can all be viewed as changeable. Lives can calm down. People can learn to follow a plan rather than just do whatever occurs to them at a given time. The gambling impulse can be replaced by a more long-run view. That means there’s hope for just about everyone, so long as they do right by their expectations.

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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.

Author Bio

There has been a lot of discussion of late on Currensee about trading and more specifically what the keys are to successful trading. Many involved in the discussion would love to trade for a living. Some involved in the discussion are actually doing it, while others would like to be, and still others dream to be trading fulltime. Do you have what it takes to not only be a successful trader, but to trade for a living?

As you might imagine, there is a huge difference between a successful trader and one that trades for a living. One trait that is necessary is belief in a strategy that you have tested out and are comfortable with in different environments. That means not only in volatile and oscillating markets, but also in the trading environment that you are exposed to. The latter may be more important; for example, do you trade in the same room as your friends or spouse? If you are losing money will you be harassed? Do you have to be somewhere at 2pm just when you should be putting a trade in?

Even if the above factors are not obstacles to your trading, and you have enough capital, are you able to overcome the usual psychological obstacles that inhibit many traders? For example, you just went short EUR/USD at 1.2070. It has traded down to 1.2050, but your T/P level is 1.2015. Just like that it has popped up to 1.2085, so what do you do? You put the trade on because you thought it was going down, which it did, but now you are in the red on this trade. This also happens to hurt all your trading performance statistics if you are trying to build a track record. Most traders – I should know, as I have sat next to many who think that they can trade over the years – say, “When I’m back in the money I am going to close this trade.” It goes back to 1.2065 and, as expected, you close.

Now, was this the right thing to do? I mean, since all trades go from Point A to Point B in a straight line, of course it was the right thing to do! Not. You walk away, then come back a few minutes later and EUR/USD is 1.2015. Not good. You lose 50 pips on your next trade, and you keep wondering what is going wrong.

Well, first of all, less than .01% of all trades move in a straight line. You picked out 1.2015 for a reason. It’s basically the same thing that an Olympic skier does before a race – they envision the course, they conquer the obstacles, and they succeed in going down the mountain in Olympic form. If you picked 1.2015 and didn’t get stopped out, then you need to stick to that trade unless conditions change. Don’t get me wrong, sometimes the market will never hit that 1.2015 mark, like Olympic skiers missing a turn, but at least you have the opportunity to adjust as compared to a skier that misses just one turn.

If you have a strategy that you are comfortable with, then you need to let your trades play out. We’ll revert back next week with a follow-up post on the psychology of trading.

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

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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.

Author Bio

Now that May is near the end it may be time to look back and see how your trading performance was for the past month. Or not! Some will surely want to forget this month and for those who do it should be noted that this was no ordinary month. Who will ever forget the swings on Thursday, May 6th! If you had capital at risk you certainly will not. EURJPY’s move from 122 all the way down to 110 and back to 116 in the same afternoon reflected what had to have been the most volatile period in the currency markets in recent times. I can only wish that you were on the right side of the trade.

That said one day does not make a month. Although there is a high degree of uncertainty in all markets at the moment I would not expect this past month to be repeated often in the months ahead. I say often since I’m not discounting the potential of another crazy summer, in other words “all traders off the beach!”

Whether you are creating profits or still using demo accounts you can always stand to learn more about the markets. In many cases you will find that the ones who do the most research happen to be the ones with the most experience.

This Thursday there is a webinar on Currensee titled “Using Elliot Wave analysis for Forex trading setups”. It is being presented by Lara Iriarte. The webinar is free for Currensee members. Lara analyzes patterns to help determine the most probable direction for her clients and trades forex using a pure Elliot Wave perspective.

Whether you trade EURUSD, Gold or S&P e-mini’s this webinar should add to your knowledge base of the markets. For example the moves in the currency markets this past month are well known. The image below shows hourly charts on EURUSD and EURJPY since early May.

EURUSD is on the left and EURJPY is on the right.

Chart is courtesy of Boston Technologies MT4.

Despite both pairs having Euro as the base currency and being traded against ‘safe-haven’ currencies their moves were far from identical. EURUSD found a bottom towards May 17th which would be well ahead of EURJPY. It also weathered a sizable rebound around May 20th while EURJPY would whip around before creating a lower-low for itself.

Point being that understanding the bigger picture and knowing when a security has reached its short, medium or long term target may help you create more trading profits. Trading separate securities identically may not be the way to go. All the more reason to expand your knowledge base when you have the chance and put the work in to help you become a better trader in the days ahead.

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

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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.

Author Bio

I was speaking to an investor in Dubai the other day and he clearly stated that his investments are for the long term. No interest in selling because of market turbulence. The US and other Western countries are known for focusing on the short-term. The real dilemma here is what happens when challenges that are considered long-term in nature all of the sudden impact today’s market and therefore the long-term outlook of your investment?

This appears to be what we are experiencing right now. If you talk to a market bull they usually point to strong corporate earnings especially those in the US and many Pacific Rim countries. Risk-taking should bounce back because of this which bodes well for stocks and the Euro. Looking at the US for example apparently 15% of the S&P 500 company revenue is derived from Europe. This is the minority of their revenue and even with a 15% depreciation in the Euro market bulls should be salivating at valuations right now. Bears seem to be salivating for another reason. They are the ones in command right now. Their calls for a correction were eventually correct and to them the question for the Euro and other securities is how low they will go.

The crash that occurred two weeks ago, or ‘flash crash’ as people are now calling it, has to remind those experienced enough of October 1987. Back then one-third of the Dow Jones value was wiped out in just a few trading sessions. Program trading was tainted as the cause and the bears claimed victory. Less than 2 years later though those losses were erased and the Dow Jones had regained its prior status above 2,700. Those that focused on the long-term ended up doing quite well.

How may have you seen that crash coming? Yes, it is easy to say in hindsight but have a look at the US Dollar. The monthly chart in USDCHF shows that this pair fell from a high of 2.84 in 1984 to 1.26 in 1987. USDJPY fell from 264 to 120 over that time. Talk about an impact on corporate earnings! By the time that October 1987 had come around the depreciation of the US Dollar was near the end. The damage had already been done. As we’ve discussed before not all the markets had priced this in. The US Dollar was certainly overvalued back then just as the Euro has been overvalued more recently.

Certainly the recent correction in USDCHF or USDJPY are not on the same magnitude as what we saw in the ‘80s but those focused on the long term may have seen this signal of turbulence in the markets. I’m sure today’s traders wish they were around for the volatility of ‘80s but there should be enough right now to trade with. The good news for short and long term investors alike is that the US Dollar will probably set the tone for the next upward trend in risk-taking before another correction occurs. If and when history repeats long term investors watching the currency markets will be prepared for the turbulence that follows.

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

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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.

Author Bio

Earlier in the year the currency markets were lacking a bit of volatility. In fact more than a few markets were grinding away with volatility on the low side. The last 3 weeks that has all changed. Volatility is skyrocketing and traders in currency, commodity, equity and fixed income markets are all being presented with opportunities each and every day. Currency traders have certainly been active as just recently Currensee went over the 1m trades mark. Have you missed out on some of that volatility? If so then I would not worry, my guess is that there is plenty more to come.

Why? There continues to be a divergence in the amount of risk-taking that is being placed on the markets. Equity markets for the past year have been rebounding as economic growth rebounds in the G7 nations. We saw last Friday how the utilization rate in the US increased to its highest level since 2008. This week the ZEW and IFO surveys will be released in Germany. They represent business confidence in Germany and although it would not come as a surprise if they regress with the ongoing Greece saga overall they have rebounded quite convincingly over the past year. IFO reported a reading of 101.6 for April which is higher than the levels that it was reporting for German business confidence in the last ‘90s when the markets were in a very bullish mood.

On the flip side a combination of events which started with the credit crises have kept yields at incredibly low rates. Among the 5 top industrialized nations only the UK had its 10 year yield close above 3.5% on Friday; and that was at a paltry 3.7%. This is keeping the carry trade on the sidelines right now. Commodities are caught between safe-haven status (how many times have you heard about fiat money being questioned of late?) and that rebound in business confidence.

Have a look at the chart below. Once the global economies emerged from the 2002 recession both equities and the Euro, or in this case EURUSD, made significant gains. In 2007 they no longer moved in tandem they way they had the prior few years. Fast forward to today and there still is a sizable difference in the pricing in of risk in both markets.

Right now you are hearing a lot of calls for Parity in EURUSD and for good reason. The currency markets continue to price the Euro at a premium even with the problems with the PIIGS as the twin-deficits in the US continue on. Whether or not we hit Parity is a call that I am not going to make but I’m pretty sure that we will not be hovering 1.25 for all too long.

What is moving the markets right now? Is it growth rates or central bank policy? Or are the markets readjusting their expectations on poor fiscal policy decisions and risk-taking in general? In the end if are you worried that you missed out on some of the recent market moves I would not worry as there should be plenty more volatility ahead for traders in all markets.

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

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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.

Author Bio

The rout in the markets yesterday (Thursday, May 6, 2010) will not soon be forgotten. At one point the Dow Jones had fallen 998 points or just shy of 1k. Risk aversion was in full force in all markets including in currencies where EURJPY went from approximately 120 to 110 in one afternoon. At one point it even gapped down an entire big figure.

As an investor this has to shake your confidence in the markets. It was just a few years ago that the markets dropped half their value and it hasn’t take long for the next shake-up in the markets to occur. As a trader you have to be careful for many reasons. One be sure to write down the handle of your execution, not just the “54”, but 114.54 since these markets are basically wild right now. Second you can certainly make incredible sums in a short span but losing money can not only put a major dent in your principal but also shake your confidence as well. If you want to be a trader for the long-term then survive these markets.

Now was it a computer glitch that caused the excessive reaction in the markets? Was it a fat finger? One can argue all they want about how automated the markets have become but at the end of the day it is still humans that compile these programs and write the instructions. Were we due for a correction? Technicians have been calling for one for a few weeks as the upward move in risk was on light volume. Or has the markets just had enough of Southern Europe, notably Greece, especially as protests have become deadly? In truth it was probably a combination with other factors contributing as well.

Ironically today we saw the strongest employment reports in a few years out of both the US and Canada. Economic growth is more sustainable today than it was when the markets collapsed in ‘07/’08. Interest rates around the globe are at arguably absurdly low levels. Yields in emerging markets in many cases hover 5% (is that worth the risk for an emerging market?) and G7 countries appear to be in no rush to raise rates.

While the next few days will likely see continued excessive volatility the question has to be asked, does the current situation present an opportunity for traders and investors? Remember the crash of 1987, how long did markets stay down in 2001/02 and even 2007/08? Markets each time were met with extraordinary trading circumstances that we’ll never forget but the smart investor understood that the potential for gains when risk-taking emerged would present itself. It may be too early to state that the time to reinvest is now but markets will return to normal, traders will trade and one day we will remember where we where when the market crashed on Thursday, May 6, 2010.

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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.

Author Bio

There are a lot of fairly extreme positioning situations out there among the major currency pairs at this point – positionings which could impact on market performance in the weeks to come. With that in mind, I thought it worth comparing how the Currensee is currently positioned compared with the data from the most recent futures Commitment of Traders report. Granted, the later is about a week old at this point, but we tend not to see big changes happen super rapidly, so it should be an interesting comparison.

It’s worth noting that only in the case of the JPY and the CHF is the Currensee community positioned the same way as the futures market. In the EUR, GBP, and CAD it is positioned in the opposite direction. This is something really interesting because it indicates pretty clearly that retail forex traders and the small futures specs (speculative traders) cannot be necessarily considered the same group as many would probably tend to do given their normal trading size.

It is also interesting because the large spec have a strong tendency to be on the right side of the trade. For example, in the EUR futures they got short in December and have only been getting generally more short ever since as EUR/USD has fallen.

This is not just a EUR thing. The large specs have been building their shorts in GBP over the same timeframe and we all know that cable has been pointed lower since December. They were their most long the JPY in the September to December period when USD/JPY was tumbling to 85, they were increasingly more long the CHF over the May to December period when USD/CHF was falling from 1.12 to parity, and they have been long the CAD since about this time last year, a span which has seen USD/CAD plummet from near 1.25 to near parity where we are today.

In other words, it looks like the Currensee community is currently mostly on the wrong side of things where the bigger picture trends are concerned – the ones to which the COT data relates. This could work out to the community’s advantage if there’s a sudden turn in the positioning of the large futures specs, but otherwise indicates that the retail trading collective is acting mostly in a counter-trend fashion.

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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.

Author Bio

The team here at Currensee towers was pleased to see  John Forman from Thomson Reuters IFR Markets writing on DailyForex this morning about yesterday’s Currensee blog post by Tim Mazanec.  Both wrote about volatility in the Forex market.  Tim was seeking a way to find a currency pair ready to break out of a narrow range, and he looked to the Community Historical Volatility widget for some clues.  John added some thoughts – and some charts – on using Bollinger Bands and Average True Range (ATR) to spot developing trades.

A look at the Historical Volatility widget for NZD/USD shows that the first support level (0.68918) and first resistance level (0.70118) are about 120 pips apart. That’s not quite so narrow as spread between the S3 and R3 levels Tim mentioned, but combined with the other volatility readings noted above, it definitely gives us something to think about.

Be sure to check out the full post over at DailyForex where you can also read a review of Currensee.  You can read more of John Forman’s Forex posts here, and more from Tim Mazanec here.  John’s blog is called The Essentials of Trading and Tim writes at HedgeForward.  Both Tim and John are members of Currensee.

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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.

Author Bio

A new trading week has begun and some great questions are being asked on the ‘Hot Topics’ discussion board on Currensee. Many of the questions allude to ‘ok, US Payroll gave a lift to risk-taking with the Yen being sold off and equities surging on Friday, but what will be the next big move and which currency pair should be traded’. This isn’t just currency traders too as one look at the sideways trade in equities on Monday shows that traders in multiple markets are asking that similar questions.

One thing I did on Monday to try and answer that question was to take a look at the ‘Community Historical Volatility’ widget on Currensee. This widget displays key levels based on points of historical volatility from within the Currensee community. My goal was to find a currency pair that has seen its volatility per the community diminish significantly. This could lead to a potential break-out if my assumption is right. You can then cross that pair with technical analysis to see if the charts agree and hopefully there would be a fundamental reason or economic release that serves as a catalyst for that break-out.

For example the first pair that I viewed was EURUSD and the corresponding 3rd level support and 3rd level resistance points enter at 1.3597 and 1.3667. That is only a 70 pip spread between the top and bottom support and resistance levels. Remember that these are weighted averages, but with such a small spread between so many resistance and support levels this is exactly what I am looking for. If those numbers were say 1.35 and 1.45 then I’d presume that the current trend is strong with a potential bias for maturation. With the 70 pip spread one look at the daily chart shows that EURUSD has been consolidating the last 2 weeks as the Greece saga rolls on. It may be Greece or it may be US retail sales that serves as a catalyst but to me this will be one pair to watch for a potential break-out over the coming days.

Another pair that shows a tight spread is AUDJPY. With 94% of the community Short AUDJPY (by volume) there are only support levels listed on the ‘Community Historical Volatility’ widget but the idea still holds true. The spread between the 3 support levels is only 20 pips, very tight. Compare this to USDJPY which has a 140 pip spread or EURJPY which has a 130 pip spread and that is only looking at resistance points. AUDJPY outperformed its peers last week as the RBA hiked to 4%. This week it may be the Australian employment report or even the neighboring RBNZ decision (potential for a surprise in the decision or the Statement) that could serve as a catalyst for an extended move in AUDJPY.

An example of a currency pair with large spreads that I’d probably not trade and expect consolidation this week would be EURGBP. The spread is just shy of 440 pips. Again Greece and all have helped put the ‘vol into this currency pair but last week’s outcomes by the Bank of England and European Central Bank were about as exciting as watching paint dry. Add to the fact that this is the most expensive currency pair and for my money this pair is ‘yours’.

My goal is here to find a currency pair that will break out of its narrow range and begin a new trend or renew a prior one. Whether you are a scalper or prefer trends have a look at the ‘Community Historical Volatility’ widget to help you maximize opportunities.

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

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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.