Foreign exchange traders, both seasoned and new, heavily focus their trading strategies on technical indicators – moving averages and trend lines– when trading the euro or British pound. And, they rarely take a look at other markets for additional hints in market direction. But, these other markets can sometimes hold the key to a profitable position or a losing trade in the foreign exchange market.

For years, professional money managers have looked at secondary markets for confirming a position. Using advanced charting programs, these professionals are able to see relationships between certain markets – revealing movements between investments in the same or different direction. Some of these correlations are commonly known to the market – crude oil and the Canadian dollar or gold futures and the Australian dollar. And, some are not so common – like the U.S. dollar/Japanese yen exchange rate and short-term rate on Japanese government bonds.

Let’s take a quick peek at some other markets that can offer insights into potential foreign

Look to Bond Yields
Believe it or not, currency and bond markets are very closely related.

The direction of both investment assets is widely dependent on a country’s economic environment and monetary policy. If an economy is showing strength, global investors will buy bonds that are being offered by a particular country – always looking for stable and high rates of return. This will cause demand for the country’s currency to increase, thus appreciating the value of the currency. Global investors interested in investing in the country (and its infrastructure) will always have to transact in the country’s currency. They go hand in hand.

Currency Futures
Derivative instruments – like currency futures – are also great in confirming short-term trends in foreign exchange rates.

In the equity markets, stock brokers and traders will look towards market volume in confirming momentum. Currency traders, instead, will use currency future open interest in gauging the market’s demand for a particular currency. This type of information can be used to predict the future demand not only for currencies, but commodities as well.

Credit Default Swap Markets
A relatively unknown market, credit default swaps or CDS instruments can be great in showing long-term sentiment for individual currencies.

Introduced and widely used in the last 14 years, credit default swaps are contracts protecting a buyer’s position against a potential credit event. For example, a money manager can insure the creditworthiness of $100 million in Japanese government bonds by paying an insurance premium. In the event of a default or debt crisis, the money manager would be able to recoup the value of their bonds. So, much like currency futures, credit default swaps are a great way of telling how bullish or bearish the market is on a particular currency.

Conclusion
When used correctly, these market indicators can add great confirmation to individual trades – boosting overall investment return. With the increased interconnectivity of the global markets these days, it pays to understand market relationships. And, it helps investors to profit greatly from them. (Many spot currency cross pairs are not traded against each other directly.

To read more on this subject please CLICK HERE! to go to Richard Lee at Investopedia.com

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

The price of commodities related to the value of the dollar and interest rates tends to follow the following cycle:

Interest Rates are Cut = U.S. Dollar is Pulled Lower = Gold and Commodity Index Bottom = Interest Rates Turn Up = Bonds PeakÞ Stocks Peak = Dollar Rises = Gold and Commodity Index Peak = Interest Rates Peak = Bonds Bottom = Stocks Bottom = Interest Rates are Cut = Cycle Begins Again

At times, however, this cycle does not persist and commodity prices do not bottom as interest rates fall and the U.S. dollar depreciates. Such a divergence from this cycle occurred during 2007-2008 as the direct relationship between economic weakness and weak commodity prices reversed. During the first five months of 2008, the price of crude oil was up 20%, the commodity index was up 18%, the metals index was up 24% and the food price index was up 18%, while the dollar depreciated 6%. According to Wall Street research by Jens Nordvig and Jeffrey Currie of Goldman Sachs, the correlation between the euro/dollar exchange rate, which was 1% from 1999-2004, rose to a striking 52% during the first half of 2008. While people disagree about the reasons for this divergence, there is little doubt that taking advantage of the relationship provides investment opportunities.

Profiting From the Falling Dollar
Taking advantage of currency moves in the short-term can be as simple as investing in the currency you believe will show the greatest strength against the U.S. dollar during your investment timeframe. You can invest directly in the currency, currency baskets or in exchange-traded funds (ETFs).

To read more on this subject please CLICK HERE! to go to Kristina Zucchi at Investopedia.com

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

Traders just starting out in trading the currency forex market are often looking for a trading strategy.

Below is an article written by Cory Mitchell at Investopedia.com. I believe Cory may shed some light on a Forex Currency Trading Strategy. A must read for beginning forex currency traders looking for a trading strategy.

If you’re tired of looking for the perfect strategy, and sick of your emotions getting in the way – exiting too early on your winners and not pulling the plug on the losers – it may be time to consider mirror trading. Having become extremely popular in the forex market, mirror trading is a way to mirror or mimic the ways of winning traders. Sounds simple and useful enough, but before a trader begins throwing real money at a live mirror trading strategy there are a few things that need to be considered.

Mirror Trading
Mirror trading is a method of trading in which a trader selects from a host of trading strategies and personally selects which of those strategies they wish to implement on their accounts. The program/method for the strategy is then placed/executed on the traders account, so the strategy is traded the way it is supposed to be traded. The trader will be able to potentially select some variables for the program, but the ultimate goal of mirror trading is take the emotion of a trading system and leave the potential profits (or losses) to a method that is objective. (Most investors buy high and sell low, but you can avoid this trap by using some simple strategies.

A trader may feel anxious about this approach, and program trading and auto trading can lead to apprehension. Yet, mirror trading is much more transparent than the traditional “trading bots” which generally scare retail traders.

The Advantages
Mirror trading is far more transparent than other automated trading methods. Some of the advantages include:

The trader selects a strategy, from potentially hundreds, which closely aligns with their goals for his accounts, retirement or financial ambitions.

Live results can be seen from the strategy before it is even implemented. People who sell these automatic trading bots will rarely release up to date performance summaries of their programs. Mirror trading strategies generally show updated performance daily, so the trader knows how a strategy has actually performed before using it. (Learn more about electronic trading in our Electronic Trading Tutorial.)

The trader can see additional criteria including what currency pairs are traded, how many trades the program has entered and exited (very important, because we want to see performance over many trades, not just a handful), the winning and losing percentage, how long the program has been live, average win and average loss. One of the most important stats is the maximum drawdown (in pips). This is the largest loss a trader would have experienced while using the program. This needs to be weighed against average wins and win percentage, as well as the amount of capital a trader has available. Traders must avoid systems where the maximum drawdown could wipe them out, no matter how good the other statistics look.

Emotions are taken out of the equation. A trader does not concern himself with when to enter and exit.

Generally (this may vary by broker and trading platform), trades are made whether the trader’ computer is off or on. Therefore, it is very important a trader is comfortable with the strategy (or strategies) that is selected. (Read What should I look for when choosing a forex trading platform?)

The trader can continue to make manual trades in addition to the automatic strategy which has been implemented.
When looking at the advantages, it becomes very important that the trader breaks down what each strategy can offer him, and what it can take away. This can only really be determined if there is a long history and a large amount of trades which have been completed by the strategy. The results must also be live, not on a demo account. And most importantly, the losing trades of a strategy must not wipe out an account, or even lose a large percentage of the account.

The Disadvantages
It seems like a dream to have a program make money while you sleep. But there disadvantageous a trader needs to be aware of.

Not all reported results are from live trading. It is up the trader to read carefully how the results were attained, and if all of the trades which the strategy had signaled are being reflected in the results.

Markets constantly change. If a forex pair has been in a range for a long period of time, and the pair begins to trend, the results may not reflect how the strategy will perform in a trending market. (If you are following a range-trading strategy, you’re better off with pairs that do not include the U.S. dollar. Find out why in Range Trade Forex With Non-U.S. Dollar Pairs.)

Results are generally based on the strategist account. A trader must be aware that if he is trading a much smaller account, he could be wiped out completely. Some will actually use this as a limit on the amount of money at risk. Still, several losing trades in a row may wipe out a small account, but only put a dent in a large account.

The strategy continues to operate until you choose to end it. This means a trader must be vigilant in watching in their account and performance.

Closed positions do not reflect the absolute risk to the trader. For instance, the maximum loss may be -100 pips, yet at one point a trade may have been offside 200 or 300 pips, for example. How much a strategy is willing to allow a trade to go offside is extremely important. (Learn more in The Stop-Loss Order – Make Sure You Use It.)

Summary results shown for a strategy are often inaccurate for live trading. Go through the trade history of the program to see which trades have actually been traded live. Dollar figure gains often include hypothetical gains accumulated during the initial testing or initial launch phase of the program.

To read this entire article by Cory Mitchell at Investopedia.com please CLICK HERE!

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

Retail traders just starting out in the forex market are often unprepared for what lies ahead and, as such, end up undergoing the same life cycle: first they dive in head first – usually losing their first account – and then they either give up, or they take a step back and do a little more research and open a demo account to practice. Those who do this will often eventually open another live account, and experience a little more success – breaking even or turning a profit. To help avoid the losses from hastily diving into forex trading, this article will introduce you to a framework for a medium-term forex trading system to get you started on the right foot, help you save money and ultimately become a profitable retail forex trader.

Below is an article written by Justin Kuepper at Investopedia.com. I believe Justin may shed some light on the three different Forex Currency Trading Methods. A must read for beginners and future successful forex currency traders.

Why Medium Term?
So, why are we focusing on medium-term forex trading? Why not long-term or short-term strategies? To answer that question, let’s take a look at the following comparison table:

Type of Trader Definition Good Points Bad Points

Short-Term (Scalper) A trader who looks to open and close a trade within minutes, often taking advantage of small price movements with a large amount of leverage. Quick realization of profits or losses due to the rapid-fire nature of this type of trading. Large capital and/or risk requirements due to the large amount of leverage needed to profit from such small movements.

Medium-Term A trader typically looking to hold positions for one or more days, often taking advantage of opportunistic technical situations. Lowest capital requirements of the three because leverage is necessary only to boost profits. Fewer opportunities because these types of trades are more difficult to find and execute.

Long-Term A trader looking to hold positions for months or years, often basing decisions on long-term fundamental factors. More reliable long-run profits because this depends on reliable fundamental factors. Large capital requirements to cover volatile movements against any open position.

Now, you will notice that both short-term and long-term traders require a large amount of capital – the first type needs it to generate enough leverage, and the other to cover volatility. Although these two types of traders exist in the marketplace, they are often positions held by high-net-worth individuals or larger funds. For these reasons, retail traders are most likely to succeed using a medium-term strategy.

The Basic Framework
The framework of the strategy covered in this article will focus on one central concept: trading with the odds. To do this, we will look at a variety of techniques in multiple time frames to determine whether a given trade is worth taking. Keep in mind, however, that this is not a mechanical/automatic trading system; rather, it is a system by which you will receive technical input and make a decision based upon it. The key is finding situations where all (or most) of the technical signals point in the same direction. These high-probability trading situations will, in turn, generally be profitable.

To read this entire article by Justin Kuepper at Investopedia.com please CLICK HERE!

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

TOP TEN REASONS MOST CURRENCY TRADERS FAIL IN THE BEGINNING!

Not properly set up to trade
Failure to plan before placing a trade
Setting expectations too high
Failure to use risk management
Lack of patience and discipline
Trading against the trend
Letting losing positions spiral
Hyper-trading and over-trading
Failure to accept responsibility
Lacking a big picture perspective

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

Any attempt to trade without analysis and studying the market is equal to Gambling. Gamblers need to go to a casino.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

FOREX CURRENCY NEWS, INFO, WEB SITE LINKS, EDUCATION & ECONOMIC CALENDARS all on one single easy to use convenient web page.

CLICK HERE! to go to the TradeCurrencyNow.com Forex Currency News Web Page.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

Trade with the trend to maximize your chances to succeed. Trading against the trend won’t kill a trader, but will definitely require more attention and your chance of losses will increase. In the end the trend will almost always be your friend.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

The difference between adding to a loser and scaling in is your initial intent before you place the trade. Adding to a losing position that has gone beyond the point of your original risk is the wrong way to trade. There are, however, times when adding to a losing position is the right way to trade. For example, if your ultimate goal is to buy a 100,000 lot, and you establish a position in clips of 10,000 lots to get a better average price, this type of strategy is known as scaling in.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

Never invest money into a real Forex account until you practice on a Forex Demo account! Allow at least 2 month for demo trading. Consider this: 90% of beginners fail to succeed in the real money market only because of lack of knowledge, practice and discipline. Those remaining 10% of successful traders had been sharpening and shaping their skills on demo accounts for years before entering the real market.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.