Hello everyone. This is my first post so let me introduce myself first and I will outline the structure of my articles.

I have been trading demo successfully for a while, then I decided to open a real account with my personal saving. Unfortunately, I lost all of my saving after a couple of weeks. Reasons for my loss are simple: I did not learn enough and I was too confident. I then came back to trade on the demo account however I take it more serious, read more books and did my homework, aka analysis, more carefully. It took me awhile to not losing in the FX market and now I am on my journey to seek for profits.

I just knew about this contest a couple of months ago and I thought it was a great opportunity to share and learn. Therefore I signed up for this contest and I want to write about my own story to help you better understand the market and later on make profits for your self. I was thinking about the structure of my article and I decided to come up with this idea: I will divide my article into 3 parts. The first part of my article is for FX 101 in which I will explain basics of the Fx market, the mechanism of  the market and the relationship between FX and other markets. The reason I do this is because we have many readers that have different backgrounds. It would be nice if I leave some space to help you understand the market and then I will take you to the second part which is Tips and Tricks. In Tips and Tricks, I will write about my own experience. No matter how much knowledge you learn from books, if you do not practice and learn from your and others mistakes, you will be less likely beat anyone in the FX market. Therefore I think sharing my own experience is going to help you much more than just telling you the "theory". The third part of my article is my own forecast. I will share my forecast and view about the market. I want to share my own forecast and signal in order to receive feedback and comments about trades that I am taking or will be taking. That will help me learn more and improve myself. Okay, let's moving on to my first article.

Part 1: FX 101

In my first article, I want to talk about the fundamental of the FX market. The trading of currencies and banks deposits is what makes up the foreign exchange market. Therefore, transactions conducted in the fx market determine the rates at which currencies are exchanged, which in turn determine the cost of purchasing foreign goods and financial assets. This is the definition of the FX market, however I will keep it short and move into the part that you may be interested in: What factors cause the exchange rates up and down?

Factors affect the exchange rate can be classified as short term factors and long term factors. If you are a trader who looks for long term trade opportunity, you should focus on the Domestic Price Level, Productivity and Level of interest for domestic/ foreign goods. I am not trying to bore you with all of these term therefore I will just explain the Price level, one of the most mentioned term in FX. Consumer Price Index (CPI) is the most common price level index. "As prices rise (inflation), or fall (deflation), consumer demand for
goods is also affected, which leads broad production measures like gross
domestic product (GDP) higher or lower
" (Investopedia). Whenever you anticipate a rise in the domestic price level, you should short the domestic currency since it values is depreciate. For instance, if the price level in the U.S rises comparatively to the price level in the Europe, one would buy the EUR/USD. The reason is because if the price level increase, you should pay more in order to buy the same goods as before, therefore the domestic currency will be depreciate. This is one of the most important factors that drive the exchange rate.

While in the short term, since the exchange rate is nothing more than the price of domestic bank deposits in terms of foreign bank deposits, the fluctuation in the FX market is driven by the expected return. The expected return is driven by the interest rate differential. Does this sound familiar to you? (ie: carry trade.) I guess most of traders in the FX market care about what is the rate in the next FED meeting, right? If the FED announces a 25 basis point hike interest rate, you may predict the USD will rise relatively than other currencies. However, it is not that simple. If the rate hike is because of the rise in the inflation, USD will not appreciate as you may expect. Instead, it may even be depreciate if the FED said that the hike rate is because of the inflation. Therefore, it is important to analyze carefully the reason behind the rate hike. Do not be fooled by the movement right after the announcement. So that is basically what I want to write about the FX 101. I will dig into this topic in later articles.

Part 2: Tips and Tricks

My first advice in Tips and Tricks part is: Never ever make a trade just because someone else does it, even that person is a TV guest or she/he is a super star at Goldman Sachs. If you wonder why, let me tell you about this: this market is totally a zero sum game. You got that? It means when you make money, someone will lose money. You and I may be not to be here to hunt for others blood but Investment Banking and Hedge funds out there are doing that everyday. Oh by the way, IBs does issue recommendations frequently but keep in mind that they serve many clients, which have different goal and objective, at the same time. Therefore, a recommendation may be in favor for one client but not for the others, or even just for their favor. It sounds like I am an IB hater but I did lose a lot by just following their recommendation trades blindly. I am not saying that ignore those guys' advices and recommendations, however make sure that you take the advices with your own risk. Therefore, do  your homework before you throw your money out.

Let me give you an example: Thomas Stolper. This guys is the Goldman Sachs Head of FX Research. Some of his latest recommendation include: longing EURUSD and got stopped out for a 4.2% loss (yeah without leverage, if you take leverage in, it theoretically is 420%); longing EURUSD at 1.3715 and got stopped out at 1.40. You can find out more here. These are just some example how those guys will beat you to dead with their recommendation. Again, before you follow recommendations or advices, make sure that you really do the homework to analyze those trade and assess the risk of that position. If you can not handle the risk, do not follow. Simple and easy.

Part 3: Forecast

Wait, I just mentioned that do not take anyone's advices or recommendations blindly but I am offering my own forecast here. Right, I want to share what I am thinking about the market or a particular currency pair here so that I can receive feedback from you. That will definitely help me adjust my position or review it for a better outcome or just to minimize my risk. WIN-WIN!!!

Today I want to bring you here me forecast for the EUR/USD. The EUR/USD is really choppy since both the US and Europe have their own fundamental problems. Any of their problems can make the headline and drive the market nuts. It may be not the best pair to trade right now however I am quite bearish on this pair since the problem in Europe is not fully solved and in the short term, it seems that there is no solution for the EUR. I suggest you to look carefully the low level at 1.2857. As you can see on my chart, EUR/USD is forming Wave 3 in daily chart and in both hourly chart and 4h chart, when the EUR/USD break the low level of 1.2857, it will confirm a wave 3 or wave c development. I am quite bearish on this setup but the ideal trade is below 1.2857, says 1.2835, I will be short EUR/USD if it travels to the south of that level. My target is above 1.25 figure.

ps: I could not attach multiple charts so I put them into 1 picture, hope you do not have hard time to see these charts.
Translate to English Show original