Forex Trading: 09/07/11

Wednesday, 7 September 2011

Winner: Best Forex Trading System of the Month for August Read more: http://www.babypips.com/blogs/espipionage/winner-best-forex-trading-system-of-the-month-for-august.html#ixzz1XIK7gdVw

Wow, this is a first! This month's Best Forex Trading System contest actually has two winners: salt-n-pipper's "Breakout System X-treme" and donnapinciotti's "The Trend is Your Friend" system. Let's take a look at each one.

Breakout System X-treme (BSX) by salt-n-pipper

BabyPips.com Forum user salt-n-pipper believes there are very few things that you can be certain in forex trading. Because of this, as traders, we should only take advantage of setups that are high probability. These high probability setups come in the form of breakouts after a long period of consolidation.

The BSX doesn't use indicators and relies heavily on simple price action. It's all about finding those days when price is ranging and then buying or selling on the break. Here's a neat chart with a sample setup:

To know more about the system, you can check out salt-n-pipper's discussion thread by clicking this link: Breakout System X-treme by salt-n-pipper.

The Trend is Your Friend System by donnapinciotti

Garnering the same number of votes is forum user donnapinciotti's "The Trend is Your Friend" system. This self-confessed newbie uses EMA and RSI to make the most pips from trends. If you ain't a big fan of jumping in on reversals, the system may just tickle your fancy!

Now, don't think that just because it's a trend-following system, you'll miss out on the excitement of catching a reversal. With the "Trend is Your Friend" set on the 1-hour timeframe, you don't have to worry about not getting your fair share of signals!

Donnapinciotti also takes into consideration candlesticks (i.e., price action) in her system. Find out how by checking out the thread!

Well, that wraps up another month of pure awesomeness with BabyPips.com forum users showcasing their brilliant trading systems. I can't wait to see what we have in store for us in September! Make sure you don't forget to send in your entries, ayt? Who knows, your system may just be the next big thing in the forex community!

If you don't have a system on hand yet, head on over to the School of Pipsology and learn which indicators would go well together to make up a piptastic system!

Source : Babypips.com

A Winning Forex Trading Philosophy

I'm starting to believe that being successful trading Forex has more to do with your philosophy than anything else.

You cannot trade based on how much money you want to make. You cannot trade based on how much money you need to make. This means that you can't push money into the market, desperately searching for opportunity, risking a large portion of your net asset value in the process.

You must trade lightly.

When you trade lightly, you simply let the market give you the returns that it is willing to relinquish to you. Quite simply, it is not a process of taking.

If you can change your mindset it will give you a lot of peace compared to the level of stress that many generate. Dip your toes into the market, following your strategy, with a level of investment that simply cannot begin to raise your blood pressure.

A little bit of market wisdom, developed with experience, combined with an appropriate philosophy will generate profits. I know that this is difficult to consider or even believe in today's rational calculating world, but the only way to win is to not fight the market. It is way too big for you.

Stop trying to generate winning positions and simply let the market give them to you.

Getting A Forex Education - Forex Books

How many of us in the Forex market simply jumped in the market and started trading? I know that was my path. I tossed a few dollars in an account and figured losing it would be a paid lesson in how the markets work.

I can't say that this hasn't been a valuable path. I've learned some good lessons along the way:

it's important to let go of losses early so you have enough capital to sink your teeth into an opportunity that does work.
No indicator or strategy has all the answers -- stop looking for the holy grail of trading
The market can easily whipsaw you to tears if you aren't careful
If you place close stops they will often be taken out before the market goes your way

Really, the list of anecdotal learning is endless and difficult to put into words. However, I recognize that this isn't enough to make me a successful trader, though from time to time I'm starting to taste success. It's finally time for me to bite the bullet and learn more about trading.

No, don't worry, I'm not going to buy some silly multi-thousand dollar Forex training course. That would be stupid. Forex trading is very related to trading in general and there is no shortage of information on either subject. To make a long story short I've purchased four books recently:

Currency Trading for Dummies
Swing Trading for Dummies
The 10 Essentials of Forex Trading
Technical Analysis for Dummies

All of these were available at a nearby bookstore -- so I didn't have to order something online and wait for delivery.

More importantly, let me list the credentials of the authors of the above books. Respectively, they are:

Mark Gallant: Chairman and founder, GAIN Capital Group. Brian Dolan: Chief currency strategist, FOREX.com
Omar Bassal, Head of Asset Management, NBK Capital
Jared Marinez, FXCHIEF and founder of The Market Traders Institute, Inc.
Barbara Rockefeller, International economist and trader

My advice? Never, ever, fail to look for the ideas of experts. Even if you don't agree with everything they say, which is appropriate, they should be able to increase your understanding and improve your own thinking.

I've had some days with a NAV appreciation of 10%, 20% or more. I'd like to have a lot more days like that... and I don't think that online sources created for the purpose of flogging affiliate commissions will do that for me.

Forex For The Small Speculator

Today was a banner day for me... trading the AUD/JPY with a return of more than 10% NAV. The market simply walked up and down my trend lines bringing me profits with every pass. How come this doesn't happen more often?

Anyway, as a small time speculator I thought I'd outline some issues that we face compared to some of the larger traders:

We trade in very small lot sizes
To make any meaningful revenue we may trade with a large percentage of our NAV.
Carry trading strategies may be meaningless

Each of these issues is something that we need to think about and potentially make some adjustments to compensate.

Small Lot Sizes
If you want to trade in small lot sizes you need to find a broker that doesn't charge you an arm and a leg for the privilege. I trade at Oanda and they let you trade with any lot size without any adjustment in spreads. I recommend them and I'd give a referral link if they had an affiliate program.

Trading Large NAV Percentags
There is nothing wrong with trading a large percentage of your NAV as long as you know what you are doing. It's a problem if you are trading this way because you keep acquiring positions as the market moves against you. It's okay if you take a measured defined risk because the market has entered a condition that you have decided represents an opportunity. It is very important to get out of losing positions once you know that your market position is unfounded.

Carry Trading Becomes Useless
If you only have hundreds of dollars in your Forex account, then there is no point trying to take advantage of carry trades. If the market didn't fluctuate so much it might be worthwhile, but in all likelihood you'll make a few bucks here and there and end up wasting your time. So what if you make 200% over a year, you still only have several hundred dollars in your account.

Concluding Thoughts
When you are trading relatively large positions relative to your account size, it can be exciting. You'll quickly win or lose tens of percentage points. If you are good you'll be able to build up a bit of a nest egg before too long and then start trading more appropriately for the size of the account you've built up. Quite simply, as your account gets larger the need for large risks dissipates.

Get out there, take your time, make sure the market sets itself up for you just right, and then stomp around and rip a few dollars out!

Forex Scalping Information

Well, I've been trying to find information on the resale of currencies and the pickings are slim Mightly done. In fact, the call information in the network is so bad that I will write a small post of my own ... I am sure if you found this page that is desperately looking for some real information.

What is Scalping ?
In short, very short-term trading.

Why Don't Brokers Like Scalping?

Well, some runners do not like scalping because of the way they are established. If you are unable to run their operations quickly or effectively enough, you risk being the source of their profits.

Does scalping work ?
I've seen some people say it works very well and others say it is impossible to do profitably. The reality is that if you can predict the direction in which capital a couple of moves, either up or down, then you can jump into the market and take a few pips when it happens.

How Easy Is It To Predict Equity Pair Price Changes?

Well, that's the million dollar question! I have no book to sell or anything, but a lot of people claim to have solutions for you. Personally, I think if he had really worked solutions that do not waste time telling you about it, which could be dealt with trade. However, in an effort to be informative, when they spend enough time looking at a market (which is pretty boring) may have an idea of its current state and how it is moving. Often, until conditions change, can be quite accurate with their predictions.

Can anyone do this?
If you find a market maker does not care about resale, you can try. However, you should know how to place stop orders and limit the trading platform. In particular, it would be nice if you could have someting called a trailing stop. So you have to understand the concept of leverage that is applied to a forex account. Basically, I'd suggest throwing $ 100 into an account holder and playing, carefully, until you have taken enough bad decisions to learn how things work. After that, you must have the tools to test different strategies.

How much effort is it?
Speculation is a long time. You have to spend much time watching the markets, to the point that it would be difficult to do well if you have an existing job full time. Moreover, the resale is very demanding from a psychological point of view, as will a large amount of capital available to start the game, but you may have to wait hours before you spot a good entry point. Then, upon entering, you may find you are back with a small loss in no time. Alternatively, you can get a small profit, take it, and then watch the market skyrocket after his departure. The shorter trade is the more attention it will take and the nerve to be more desperate.

Are you scalping ?
I'm thinking about it. I've been opening a network strategy to capture swing trades, but I've noticed that using half of the mentality of scalping to accumulate positions in the trends can have a significant positive impact on the results of me. I think I'll end up letting you know how things work.

More Bad Macroeconomic Data from UK, Pound Hurt

The British pound fell against the euro and the Japanese yen today, after economic data showed that industrial production slowed in July and house prices fell last month. Both results came as an unpleasant surprise to market participants.

Halifax index of home prices fell 1.2 percent in August on a monthly basis. The decline after three consecutive months of increases and traders had expected last month the rate would also increase. Industrial production, according to the government report, fell 0.2 percent in July compared to June. Economists predicted no change. The data reinforced expectations of further stimulus by depressing the central bank.

GBP/JPY fell from 123.72 to 123.24 today as of 10:23 GMT. At the same time, EUR/GBP traded at 0.8787 after jumping from 0.8779 to 0.8828, the highest level since September 1.

Aussie Gains as Australian Economy Grows

The Australian dollar recovered today, ending a three-day drop against the U.S. dollar after the report showed Australia's economy grew more than expected in the second quarter.

The Australian Bureau of Statistics reported today that Australia's gross domestic product expanded 1.2 percent between March and June, compared with the average forecast of 1.0 percent. The progress continued to fall 0.9 percent in the previous three months. Analysts predict that tomorrow's report on employment show an advance of 10,400 jobs.

AUD/USD climbed from 1.0488 to 1.0599 as of 9:40 GMT today and touched the intraday high of 1.0633. EUR/AUD dropped from 1.3338 to 1.3253.

Pound Falls as Retail Sales Decline. More Stimulus Ahead?

Great Britain pound fell today, dropping to its lowest level in almost two months against the U.S. dollar after the report showed that retail sales in the UK fell in August, spurring speculation that the central bank of Great Britain is required to stimulate the economy.

British Retail Consortium said today that values the UK retail sales 0.6 percent lower on a peer to peer basis from August 2010. The previous reading showed a growth of 0.6 percent. Helen Dickinson, head of retail at KPMG, commented on negative data:

The weaker sectors are really struggling. For non-food, the picture is disheartening with one of the worst monthly results of the year thus far — toiletries, cosmetics, and menswear the only sectors showing growth.

This week the reports were unfavorable macroeconomic traders speculate that the Bank of England will announce a quantitative analysis at its next meeting. Manufacturer of policy the Bank of England will meet on September 8 to discuss monetary policy and announce its asset purchase plan. The pound fell by 6 percent a year ago and was one of the worst performing major currency, exceeded only by the dollar fell 9.7 percent.

GBP/USD slumped from 1.6116 to 1.5936 as of 16:58 GMT today and touched 1.5920, the lowest price since July 13. GBP/JPY traded at about 123.59 after jumping from 123.87 to 125.05.

CAD Near Parity with USD

The Canadian dollar traded within a cent of parity with the U.S. currency as declining stocks and signs of global economic slowdown spurred speculation the central bank will reduce interest rates.

The Bank of Canada will announce its decision on future borrowing costs. Views of investors are divided almost equally between those who believe the bank will keep the key overnight interest rate unchanged at 1 percent and those who think that current economic conditions will force banks to reduce their rate target interest.

The Standard & Poor's 500 fell to 2.2 percent. The market's pessimism was tempered by the news of the U.S., Canada's largest trading partner. The services Purchasing Managers' Index of the Institute for Supply Management advanced 52.7 to 53. 3 in August, compared with the average forecast of 51.2.

USD / CAD traded at 0.9910 around 15:31 GMT from today after jumping from 0.9904 to 0.9963. EUR / CAD rose from 1.3960 up to 1.4100 before easing to 1.3871. EUR / JPY rose from 77.50 to 78.05.

Europe Weakens Asian Currencies, Malaysian Ringgit Down

The Malaysian ringgit fell today, along with other Asian currencies, as concerns about Europe's problems intensified after the vote the ruling party of Germany lost, reducing the prospects for Asian exports.

The MSCI Asia Pacific Index of shares fell to 1.4 percent, falling 5.1 percent in the last three sessions. The Bloomberg index, JPMorgan Asia dollar, tracking 10 most traded currencies in Asia excluding the yen fell to 119.21, its lowest level in over a week. The Stoxx Europe 600 index yesterday posted the biggest two-day decline since March 2009 on speculation about the disagreement among European leaders and the International Monetary Fund on the rescue of indebted nations of Europe.

USD/MYR advanced from 2.9790 to 2.9825 as of 13:03 GMT today.

Record Drop of Franc After SNB Pegs Currency to Euro

The franc fell today, recording the biggest drop against the euro at all times, after the Swiss National Bank decided to limit the appreciation of the franc against the euro.
Swiss central bank decided to act as a continuing appreciation of the Swiss currency, "poses a serious threat to the Swiss economy and carries the risk of deflation of development." As a result, the Swiss National Bank announced today:

The Swiss National Bank (SNB) is therefore aiming for a substantial and sustained weakening of the Swiss franc. With immediate effect, it will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20. The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities.

The Bank believes that even the rate set too high and the currency weakened further in the future.

USD/CHF jumped as high as 0.8509 as of 11:26 GMT today, following the surge from 0.7871 to 0.8573. EUR/CHF soared at 1.2044 after earlier it climbed from 1.1096 to 1.2190.