Building on my first Article this month, there is pressure born from fundamentals. This pressure can be a light breeze or a devastating tornado, ripping through price barriers and expectations. As a pure technical trader, I like to anticipate fundamentals through technical data, rather than to analyze the fundamental data for clues. Here is my standing…
First Consideration :
Firstly, from my little experience, I have found that the fundamental data does not alter the actual technical trend. For example, if the price has bounced off a 4 Hour Bottom Bollinger some time prior to data, with the price not yielding, it is unlikely that the fundamental data will alter the fresh, long bias until it has reached a suitable resistance level. Depending on the data, the price might short to a nearby boundary but will find support easily and then continue long. If one is trading the news, then, as risk management, it is a suggestion to identify a reasonable boundary in strength counter-direction to the trend and to effect a stop-loss with some margin clear of it.
I was unable to post charts, however on 01/07/2014, on EUR/USD, we had USD economic news (ISM Manufacturing PMI) …
1- Trading as a performance activity It is important to consider trading as a performance activity that requires the same level of discipline and commitment as chess, professional sport or military training.
As Steenberger asserts, a trader should acknowledge the need for a "high ratio of time spent in practice/rehearsal relative to actual performance." Generally speaking, a trader should spend more time analyzing economic fundamentals or refining entries with historical data, than executing trades. They should also spend significant time testing strategies before taking them onto a live account.
Steenberger outlines further similarities with performance activities, such as the need for "rapid and comprehensive feedback to allow performers to learn from their practice/rehearsal and incorporate changes in future performances". There is also a need for "a teacher who guides rehearsals by creating demands sufficient to challenge the performer, but not so overwhelming as to create frustration and failure."
A trader can fill these voids by immersing themselves in a vibrant community in which to exchange ideas, and interact with successful and struggling traders who are undertaking …
I’ve written a lot about Carry, and its uses in trading FX recently. In this article, I will look at how most efficiently to structure a carry portfolio across the varying risk levels. A simple re-cap of what FX carry is, is that you buy high yielding currencies, while simultaneously selling low yield currencies, in order to receive the difference in interest. The idea behind this comes from interest rate parity pricing of forward FX contracts (I went into detail here), but basically, the future value of a currency should discount any interest rate difference. I.e. at its heart, when you buy a higher yielding currency, the main objective is not that the currency increases in value, just that it stays above the forward value of the currency so that you gain Carry. However these particulars are not too important, what is important is how we structure a portfolio to suit our needs most effectively.
As discussed previously, the generic go to carry portfolio for G10, is buying the top 3 yielding currencies, whilst simultaneously selling an equal amount of the 3 lowest yielding currencies.
As a reference point, here is a table of 2Y swap rates for the currencies with…
The EURUSD has been in an uptrend since July 2012. Recent monetary policy changes have triggered a sell off in the pair creating speculation that the uptrend has concluded, The reversal in progress, has the capacity to take the pair much lower, this article will shed some light on the catalyst required to drive the trend change, as well as a trade plan.
Disinflation remains a concern for the Eurozone. HICP is the measure of inflation used by the ECB. The most recent reading came in at 0.5%, while targets are to be as close to 2% without going over.
Figure 1.1 - HICP on steady decline after a high of 3% posted on September 2011
The ECB has several different tools for battling disinflation. In April, an attempt at verbal intervention was made. See my blog post from April 12 - Possible EURO sell off at Open for details. The results was a 20 pip gap down, followed up with a 2 day sell off taking the pair 90 pips lower. The method proved to be ineffective as buyers stepped in and did not allow the pair to close lower.
The ECB Press conference on May 8, however had a major impact when Draghi indicated a clear time frame for when action would be taken.
In last month publication I covered visual jforex strategy logic creation for creating and running strategy in demo account. It was just simple logic which allows opening of not more than 3 trades at a time and trying to benefit from small rate movements. But trading window and determination of trading window, i.e. finding of time when rate movements are really small was not covered and it is topic of present publication.
2. Determination of trade window principles
There are plenty of technical ways to determine trading window. One possibility is trying to analyze candles set different candle high or low targets and so on. Second possibility is to use various indicators and determine trading window based on these indicators values. As there is a lot of already existing indicators I decided this time try to use existing indicators by choosing their values for decisions when to open trading window and when to close it.
So firstly visual jforex logic should be organized so that during certain time it should run and during certain time not. For this purposed logic was split to two parts using Multiple Action block.
First output of Multiple Action block is directed to …
As far As I know, Dukascopy Community is only one which offer such wide variety of contests. It is a great and useful place for all real traders to test their trading ideas, to get, collect, share information, to improve knowledge and even try trading automation and create automated strategies. As I trade for several years in live and for the last few years I trade only currencies and only few pairs, I'm always thinking ( as I think all the others traders) how to improve my trading results and to get better profit from trading. In Dukascopy community I found very interesting contest for me, which gives me possibilities to search better trading ways. From the beginning I didn't know how to create automatic strategy, I only had an ideas. Step by step I learned to create simple robots, which fit my ideas. As I trade manually in live very simple, my automated strategy ideas are also very simple.
2. Strategy performance
I decided to share my automated trading idea about most popular pair EUR/USD. I am taking part with the same strategy for a few month, improved it a little, and for some time it gives quite good results.
Historically speaking when it comes to interest rates we are at historic low levels among developed economies, and not only that the rates are so low but recently ECB has surprised the market by going negative rates in an desperate attempt to force people to spend more and thus making inflation to pick up.This idea of negative interest rates is intended to reduce the incentive to save or park money in the currency or bank and as I said before to spend more.
In this environment it makes sense that investors who are chasing yield to rush in and park their money with the countries that are moving away from this easing cycle and are already starting to raise the main interest rates like RBNZ (Reserve Bank of New Zealand). But the market also moves in anticipation of as market expectation for hiking the rates by BOE, sooner than later, have gone up exponentially and that's one of the reasons why we see cable keep pressing higher.
In Figure 1 we can see the differences in real interest rates across developed economies and we can distinguish between high-interest-rate currencies and lower-yielding one.
Figure 1. World Central Bank Interest Rates[list][*]What…
In previous article series “Riding the Price action” I stressed that having right technical levels is not enough in order to successfully trade them. Risk-to-reward conditionality, dynamics of liquidity and money management comes to play. Risk and money management might sound boring and well over-escalated topic, but personally I found popular material about this topic all blurry, stereotypic and too formal.
Popularly accepted common approaches of sizing in/out of the total exposure in combination with entry and exit displacement, as risk and money management during the trade are left completely to subjectivity of a person’s choice to pick exact entry and exit points. And most importantly – additional entries after price travels notable distances after rejection/impulse point, generally are high risk in any context.
Actually one can google out more information about money/risk management in gambling context than in trading. If gamblers manage their way out with unfavorable odds, then with a proper technical analysis, trader should have some use out of these principles. Personally I use somewhat similar approach to D'Alembert’s betting system.
SERIES 1 No. 1 The four Pillars of a Trader By Gino Roverssi
It all began one normal day whenI saw an advertisement about forex “Learnto easily 500 USD a Day” Clearly, it captured my attention right away. Atthat time in the second year of an Economics degree. I was Young (18 years old) and reckless sothe “Easy” part was a done deal for me. The advertisement also came with an invite to a ‘Seminar “about this Gold Mine called the Foreign Exchange Market or FOREX for the most of us. It was the beginning of one of the wildest,intellectually hardest and emotionally painfully thing I have ever done in my life. Minutes became fifteen, fifteenbecame sixty…. Following the default settings of the time frame tab on most trading stations I realize my life was just another timeframe in this huge complex clock
THE FOUR PILLARS OF A TRADER
I do not have a ton of experiencein FX, however I’m 25 now and that’s about 7 years in this crazy journey. During this 7 years I learned many things, Iread a lot of books and read a lot of posts in many forums and also wrote a few around but nothing was so clear, simple and consistent as it is now. The four pillars of a trader, describe…
My first thoughts on Forex were that it is driven by hydraulics - pressure. I am a technical trader and have maintained this standing and built my practice around it. I am sure there are many theories on price movement, however, I shall share my personal view.
The best way to describe my opinion on price movement is through the analogy of a labyrinth of walls and mazes. To me, the price is not random but rather like a Bouncing Ball arcade game. Each wall offers a degree of pressure and drives the price in a direction. Some walls will offer a lot of pressure, some walls just a little. If the price is coming off a strongly pressurized wall, it might fly through a lesser wall. But mostly there will at least be a pause at a wall, no matter it's strength, although not always and often, if it has already bounced, it might pass through a second time without argument. As the price moves in a direction, it will bounce off many walls, back and forth, until it comes to rest against a support or resistance that is too strong. At that point, it will reverse and begin the process again.
The truly exhausting thing about Forex is that there are so many walls, from the…
Introduction : I've looked at the Carry trade in short bursts across previous articles, but I thought I should have a more detailed look at them this time around. Furthermore, I want to explore some other possibilities around the carry trade, such as the best way to bet against it and so on.
First of all though, we need to consider that carry is in fact a very powerful aspect, it really is. I will demonstrate this by first looking at the Argentine Peso. Now the ARS is no ordinary currency, sure. In fact it currently has a yield of around 32%! as shown by this chart.
We must remember that in late January this year, the ARS crashed 15% in one day. A huge move, something frankly unthinkable for a major currency such as the EUR or AUD. This huge volatility is why traders and investors demand such a high interest rate.
But even though the ARS had a devaluation event earlier this year, it is still positive YTD. That is, if you had bought the ARS on January the 1st, you would have made money.
This to me is an absolutely incredible reminder at how powerful carry is! As even after a currency crashes, the interest afforded to you still means you profit.
On Saturday July 5, the World Series of Poker begins it's annual tournament. Which inspired me to write this article. I had called my cousin, to wish him good luck in the tournament. He's flying out to Vegas to participate after successfully placing within the top 50 last year and taking home over $200,000!
In our conversation, we talked about his career as a professional poker player and I started noticing some major similarities to my top day to day priorities as an FX Trader. The intention of this article is to outline the distinctions, and ultimately point out the advantages the FX Trader has over a Poker Player!
The more challenging job of the Poker Player is constantly calculating what is referred to as "Outs". This term is used to described cards that can come on board to make a winning hand for the player, and the percentage chance the player has to catch that hand. Let's look at an example,
The Player's hand so far is not very strong, only a high card. But if another heart comes on board, the player will have made the top flush, and most likely have the winning hand.
So the outs for the player in this case is a heart. Keeping in mind we are alrea…
All new traders know that Forex brokers are a part of trading but with so many around and each claiming they are the best, it is beneficial that traders know where they stand with brokers and vice versa.
In simple terms, Forex brokers are the middle man between the trader and the market. That it, Forex brokers provides the trader with the ability to place an order into the market and take their order out of the market. Without the broker and the platform which they provide, trading would not be possible. There are still many ‘old school’ brokers around that offer tickets in and out of the market via telephone, but with the rise of the online Forex brokers, this may become a dying art someday soon.
Historically, it was only banks and hedge funds that could get access to the Forex market but again, the rise of internet and the surrounding technology soon eliminated this and enabled anyone with internet access to place a trade. Ironically, it is the banks and large hedge funds that provide currency prices to various brokers. They are a part of the Interbank market which includes a number of different banks and hedge funds where brokers hunt for best prices.
"If you fail to plan, you are planning to fail." Benjamin Franklin
After several months of trading in the forex market, I can confidently say that I have found a strategy which is to a large extent very reliable. The strategy is literally making me thousands of dollars in cash prize in the Dukascopy trader contest.
The last screenshot is for the month of June 2014. It has not yet been officially announced, but that third place position is looking very good.
Trading for me has been a very interesting learning process. It took me a while, but I finally found a trading strategy that I was comfortable with, and that was relatively profitable. This article is about my trading strategy and its performance during the month of June 2014.
It is a trend-following system that uses the 20-day Exponential Moving Average (EMA), 200-day EMA, 84-day (Commodity Channel Index) CCI and 18 -Time Period (Time Segmented Volume) TVS.
Long trade conditions:
Buy when the hourly candle closes above the 200-day EMA
The 20-day EMA is pointing upwards and below price
The TVS indicator is above the zero line
The 84-day Commodity Channel Index is above the zero line
When Satoshi Nakamoto posted his paper on the internet entitled Bitcoin:A Peer-to-Peer Electronic Cash System in November 2008 very few people gave the idea a chance. When the Bitcoin network was introduced in January 2009 most viewed the project as doomed with skeptics labeling it a Ponzi scheme or money laundering platform. Whilst Bitcoin has been banned in China, it has been embraced in Canada and USA, with the setting up of regulatory frameworks in progress. With its acceptability gathering momentum at a phenomenal pace, Bitcoin pauses regulatory challenges to authorities on how to treat the cryptocurrency for tax and accounting purposes.
In May 2014 the USA Internal Revenue Services, (IRS) issued guidance on the treatment of Bitcoin by taxpayers. The summary being that Bitcoin and other virtual currencies are not money but capital assets meaning that the capital gains rules apply to any gains or losses.
This article seeks to take an in-depth analysis into the Bitcoin world. What is Bitcoin?
Definition: Bitcoin is a type of digital currency or cryptocurrency in which encryption techniques are used to regulate the generation of units of currency and verif…