Posts Tagged ‘mutual funds’

EUR/USD Currency Pair

January 12th, 2019 Comments off

EUR/USD is the most liquid and the most popular currency pair among the forex traders. Trading currencies can be exciting and lucrative. Its a great market because of the way politics affect the trends. Elections, strikes, and sudden developments, both good and bad, can lead to significant trading profits if you stand ready to trade the euro is a convenient currency because it encompasses the policies and the economic activity and political environment of a volatile but predictable part of the world: Europe. EUR/USD is the most heavily traded currency pair in the global currency markets at the moment.

In the United States, where the free-market approach and a usually vigilant Federal Reserve make more frequent adjustments on interest rates. France, Italy, and Germany, the largest members of the European Union (EU), normally operate under high budget deficits and tend to keep their interest rates more stable.

Fed changes its interest rates frequently keeping in view its inflation and unemployment targets. The general tendency of the Fed is to make the dollar trend for very long periods of time in one general direction. Here are some general tendencies of the EUR/USD currency pair on which you need to keep tabs aside from the technical analysis:

1) Given Germanys history of hyperinflation in the first half of the 20th century and the repercussions of that period, namely the rise of Hitler, the European Central Bank (ECB) is almost fanatical about inflation. That means that the European Central Bank raises interest rates more easily than it lowers them.

– The European Central Banks actions become important when all other factors are equal, meaning politics are equally stable or unstable in the United States and Europe, and the two economies are growing. For example, if the U.S. economy is slowing down, money slowly starts to drift away from the dollar. In the past that meant money would move toward the Japanese yen; however, because the market knows that Japans central bank will sell yen, the default currency when the dollar weakens is often now the euro.

– The flip side is that the market often sells the euro during political problems in the region, especially when the European economy is slowing and the economy in the United Kingdom (UK), which often moves along with the U.S. economy, is showing signs of strength.

As a word of caution, its okay to form an opinion and have some expectations, but the final and only truth that should make you trade is what the charts are showing you. As usual, you want to closely monitor major currencies and the cross rates. The direction that counts is the one in which the market is heading.

It is always best to choose only two or three currency pairs and become a specialist in them. Two currency pairs that I would recommend for you are the EUR/USD and the GBP/USD. Both these currency pairs are highly liquid and very popular among the currency traders. Fundamental analysis can help you determine the strong/weak currency pair. Use fundamental analysis to determine if USD is expected to lose value and EUR is expected to gain more strength that means that the currency pair EUR/USD is perfectly timed for swing trading. Use technical analysis to make the entry and exit decision. Combining fundamental analysis with the technical analysis can give you the edge as a forex trader. Sometimes there is a fundamental shift in the direction of a currency pair. As long as you are not following a currency pair like EUR/USD on the daily basis, you wont be able to understand what is happening.

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Flexible Forex Training

May 28th, 2017 Comments off

Only a few years ago, most of the people had never heard of trading the foreign exchange markets. Even now, many may not have heard of it. But so much information is available on the internet that you just have to type in the word forex training in a search engine and a mass of information is available for free.

Most people, new to trading begin learning on their own through a trial and error process of wins and losses. However, this is probably not the best or the right approach to getting good forex training. These seven forex training secrets, you should always keep in your mind when looking for good forex training:

1) Try to keep it simple. Develop a simple and practical approach to trading. Follow the rules of a simple trading approach.

2) You should also learn to accept responsibility for the personal decisions and actions you take while trading. No system and no methodology are responsible for your interpretation of the markets while trading.

3) Make sure, you trade a demo account successfully before moving into the world of live trading. Once you are ready to trade, only then consider first trading a mini account with a very small amount of margin to ease you into the world of live trading. Once you have achieved success on a mini trading account, you should consider moving to the standard account where risk and profits are higher.

4) You should do your due diligence in choosing a right forex broker. You should avoid brokers that like to play games such as holding trades in slow and fast moving markets to gain advantage at your expense. Establish a live account with a forex broker known for integrity. Choice of the right forex broker will determine whether you succeed in trading or not. Always plan a trade with more than a scalpers mentality of making 1-5 pips per trade. This way a broker has ample time to cover a submitted trade or pass it onto a clearing house.

5) Even when you have experience of trading other markets, invest in personal education when trading forex. The forex is a totally different industry. It has much more volatility than other markets. Make sure the mentoring person is walking the talk when selecting a mentor to assist you in developing the skills necessary to survive trading the forex and make profit.

6) Attitude is everything in the markets. Learn self discipline as a forex trader. The greatest distance to overcome in each trade is between the ears. Only disciplined traders succeed in the long run.

7) Dont give up! It is necessary to just hang in there even if it takes times to trade the demo account and a mini account. Persevere in the markets. All too often, traders go live way too soon and lose their money because they have skipped the necessary steps.

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Understanding MACD Divergence

April 15th, 2017 Comments off

Understanding how to interpret a MACD divergence can be very helpful for you in trading. Do you know what does a MACD Divergence means? Just that the current price trend is running out of steam. It soon may reverse direction. However, price reversal may not happen right away. But a MACD Divergence is a powerful hint. The market is changing direction. It is easy to spot MACD crossovers and dramatic rises. Not so a MACD divergence. Spotting a MACD divergence will only come after practice.

For example, if the price is making a series of higher highs and MACD is making a series of lower lows, something is wrong between the two. What you are looking for is when the price action and MACD do not agree.

MACD is seen as a sign that fewer and fewer traders are in the trend. No one is trading against the trend. Yet fewer and fewer traders are in the trend. Most probably the traders are getting nervous and slowly fading out of their trades.

The only traders in the trend are nervous. They are likely to exit their trade at the first sign of trouble. So if MACD is diverging from the bullish trend. As soon as the bears muster up enough guts to short, the bulls will exit and the bears will take over.

There are two powerful keys in locating times when MACD divergence is likely to represent a reversal in price. This is exactly why MACD is so powerful. It takes time to setup but when it works, it often works well.

Suppose the price action is at the double tops or double bottoms. MACD divergence can be powerful. You spot MACD divergence at this point. This is known as Exhaustion Pullback. You are making your trading plan based on the bounce/reversal or breakout of the support and resistance (S&R).

You should trade based on rejection reversal. What does this means? This means that the price action is running out of steam. This indicates that there are not enough committed traders to break the support and resistance (S&R). The price will reverse direction.

MACD is also used as an overbought/ oversold indicator. When you see that it has reached its overbought/ oversold range and the price action is turning normal, this is a signal that you should avoid trading at this time.

Dont think that the currency pair is overbought and everyone is buying. However, when the price reaches its extreme, you will see price exhaust and the MACD line drop back into normal zone. Dont confuse the overbought/ oversold MACD zones as trade opportunities.

It is also important to note that divergence can not only be found on the MACD line and the signal line, it can also be found on the histogram. These two situations along with your other technical indicators can provide excellent trading opportunities.

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How to Choose the Right Forex Broker? (Part I)

January 17th, 2017 Comments off

Almost 90% of the traders in currency markets are speculators. Most of the investors start forex day trading as a speculating venture to make capital gains. Once you have made the positive decision to start currency trading, you need to choose the right forex broker. The right choice will greatly influence the success of the whole enterprise.

These days, the market is overcrowded with companies and banks offering online brokerage services to individual traders and investors to access the currency markets. It is not easy to make the right choice without a certain set of criteria. These criteria will mostly depend on the interests, preferences and means of each individual trader depending on his/her trading strategies and tactics.

You may ask, what is the best way to choose the right broker? You should compose a list of questions to ask the forex broker before making a final decision. The following are some of the suggested questions that you should ask. You should ask these questions before making a final decision.

What is the amount of the interday and overnight margin and corresponding leverage? Many good online forex brokers offer margin between 2-5%. They provide leverage ranging from 20:1 to 50:1. Higher margin requirement means lower investment efficiency.

However, beware of lower margin. It means that most of the time the forex broker will be against you as a trader and will do everything possible to prevent you from winning. You will face many trading problems with such a broker. It will become difficult for you to work under such conditions.

What is the minimum contract size? Now days, the standard contract size is $100,000. This contract size is quite affordable and allows for reasonably effective money management with limited capital. This contract size also allows small individual investors to participate in currency speculation.

What are the requirements of minimum deposit? The investment and financial means of traders differ. It is common that many new traders dont have sufficient funds to open an account. In my opinion, the optimal minimum amount is $10,000 with 2% margin requirement. I think $10,000 is the required minimum amount corresponding to the forex market conditions.

What are the terms of setting and executing stop and limit orders by the forex broker? The ideal condition should be the execution of the stop and limit orders at the fixed price. This should be regardless of the market conditions, its speed and its direction. Some forex brokers provide this type of execution. Other brokers reserve the right to fulfill an order with slippage under unsteady market conditions mostly defined by the broker themselves.

The value of slippage depends on the current state of the market. It can fluctuate from a few pips to tens of pips. Although it is practically impossible to arbitrate the price received from the broker during the transaction. The slippage creates favorable conditions for the abuse of the trader by the broker.

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Following Gold in Currency Trading

January 4th, 2017 Comments off

Gold is the ultimate global currency. At one time US Dollar used to be pegged to gold. But with the collapse of the Bretton Woods System, US Dollar was unpegged from gold.

Now US Dollar is only backed by the full faith and credit of the US Government. Most of the currencies in the world are free floating now. Many countries are also purchasing gold in the open markets as a hedge of their foreign reserves most of which are in US Dollar. In the present financial crisis with the global economy in recession, many investors are trying to take refuge in gold as the ultimate safe haven of their wealth from financial turmoil.

Among the different currencies, the Australian Dollar (AUD) is known for its strong correlation with gold prices. Most of this correlation is due to amount of gold that Australia produces and exports. On the other hand, US Dollar has an inverse relationship with gold prices. When gold prices rise, US Dollar falls in value. This causes the currency pair AUD/USD to appreciate in value.

The opposite is also true. As the US Dollar gains value, gold usually loses value. So when gold prices are rising, we can execute long trades on AUD/USD. Likewise, when gold falls in value, we can sell short AUD/USD. This relationship provides us with a method to take advantage of the fundamental factors in forex markets. It may be due to the fact that gold is considered to be the ultimate safe haven by investors in times of financial crisis.

Entering a trade to follow gold is a three step process. We will use RSI (Relative Strength Index) as the technical indicator to trigger our trade. If you have read the previous article on following oil, we had used the CCI (Commodity Channel Index).

When both gold and oil are commodities, why dont we use CCI for gold as well? Why is that we are using RSI now? CCI gives a quicker signal. This is good for relatively less volatile pairs like USD/CAD. Whereas RSI gives slower signals, this is ideal for more volatile pairs like AUD/USD. It all depends on how quickly the two indicators react to volatility.

You should use a moving average to confirm if gold is in an uptrend or a downtrend. You will use the seven periods RSI on AUD/USD chart. Watch the RSI chart when it enters one of its reversal zones, then move back out of the reversal zone in the same direction as the gold is trending.

You need to enter a long trade on AUD/USD if the gold prices are rising with the RSI crossing back above the 30 line. On the other hand, you need to enter a short trade on AUD/USD pair if the gold prices are declining with the RSI crossing below the 70 line.

Set a limit order of 200 pips and a stop loss order of 50 pips for the trade. This gives a risk to reward ratio of 50/200=1/4. This risk to reward ratio is good. The chances are you are going to make 200 pips that means $2000 profit if the trade goes as you had anticipated. And if the trade does not go in your favor, 50 pips stop loss means a $500 loss. It is not uncommon to have a trade go against you only to find yourself right back in trade that goes your way after sometime.

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