Investing money for a long-term trade is always more secure when one has an edge over the product.
I believe the South African Rand will continue to strongly depreciate over the next 10 years. Living in South Africa, one can see the demise on a daily basis. Here is a little insight into our currency :
Up to around 1982, the Rand was worth approximately $1.40. Today, it is worth approximately $0.10.
Our GDP hovers around an average of 3.6 % growth per annum with a total previous GDP of 351 Billion USD. We have a population of approximately 49 million. That calculates to around 7 Billion USD per million people. In comparison, the United States Of America has a previous GDP of 16800 Billion USD which equates to approximately 536 Billion USD per million people. Productivity in this country is not good.
Our unemployment rate stands at 25.2%. Only Greece has a higher unemployment rate, at 27.3%. The unemployment rate of the United States Of America is 6.1%. There is a culture amongst many South African’s to share the income, so the quality of nutrition and other educational tools is diluted considerably. I was at the supermarket the other day, around the 1…
In this article I will try to give the opinion on the psychology and features of Forex Trading.
Psychology is the most interested and important aspect of Forex trading.
Many of currency traders while in pursuit of the principle of how to trade, what to trade, are leaving behind one of the most important component of successful trading - Psychology. Market is illogical longer than you’re solvent, I’m sure, that following this rule as the main one will lead traders to stable profits. While trading the market, I have found a remarkable thing, many will be probably say that I’m wrong, But nevertheless I will remain unconvinced. Trader psychology plays more important role than the trading system.
The forex market is the vast array of information. Understanding it, make the right decisions of what when and how will anything affect a certain currency pair is very very much not easy. I have solved this problem for myself once., and created a rule of Three.
What we see more than often these days are Forex brokers offering advice and trading tips. They are beamed to us in forms of videos or written educational content that looks pretty good to a naked eye. On the odd occasion, we could even receive emails that provide fundamental or technical research which is backed up with historical facts and figures, further pushing the argument towards taking a trade.
Unfortunately, trading success cannot be achieved by tips, low grade research or a piece of advice. They certainly create a snippet of understanding but in no way do they contribute fully to the cause.
On top of that, there are hidden agendas behind this ‘friendly’ attempt to educate and help traders. That is to make us trade more. The more we trade, the more income we provide for the broker but unfortunately, the more ‘friendly’ and helpful they seem the more traders fall for it.
It is crucial that traders do not take advice from Forex brokers or from any broker for that matter. The reason why is that brokers are not traders. If they were any good at it, they would not be brokers. Trading on advice from a broker is exactly the same as taking advice from a person we don’t kn…
Abstract Commonly accepted rationale behind the recent interest rate cut is discussed. Its inconsistencies are demonstrated; unnoticed developments in repo market are exposed and alternative explanation of ECB action is proposed; possible outcome for the future of single currency is outlined.
The idea that the foremost important price for overall economy and financial markets is the price of borrowing funds is self-evident, non-controversial and needs no further elaboration. What is more controversial though are the explanations of the central bank actions offered by scholar economists, financial analysts and propagated by mass-media. The unanimously supported justification that ensued recent rate cut by ECB is a perfect example of such commonly held delusion.
In June ECB announced that refinancing rate and deposit rate would be lowered by 10 b. p. to 0.15 % and -0.1% correspondingly. The professional market observers were unanimous in their rationale of ECB action – it is meant to spur bank lending and revitalize economy. Albeit being plausible at first glance, this explanation proves to be inconsistent when more thoroughly researched.
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.