trading forex long term

July 2nd, 2010 by admin


I have learned loads about trading forex longer term in many live forex trading rooms, see links at the bottom of this post to see where.

However I have found for me the holy grail of trading that suits my stress levels and trading mentality perfectly. It isn’t scalping but it is short term trading (5 minute charts) where you never risk more than 1% of your capital per trade and you can often get two or three trades a day and grow your account 2 – 10% per day, 20 days a month.

Vantages entries combined with 2b reversals is becoming the safest and most consistently profitable way to trade forex I have found to date. It is also the simplest by far. No indis, no moving averages just pure candlestick analysis, trend analysis and price action at support and resistance.

Every evening now I just take a quick flick through a number of hourly charts looking for potential reversal setups, or areas that might act as support or resistance the following morning.

Then another quick flick through in the morning to see if we have an H1 reversal, if we do just drop down to the m15 and then m5 and wait for the lower high or higher low. Use the vantage entry and the low or high of the 2b reversal swing one for the target. SIMPLES.

This mornings EJ trade,

confirmed on the m15 chart below

and the H1 chart below

this is a perfect example of a counter trend trade confirmed in two higher timeframes (trading the retracement in the uptrend). We may get a decent long entry off this if we get a similar set of signals for an H1 reversal north. NFP so care needed.

Just under 2% profit with 1% risk. Cool.

I post this stuff because it helps me learn. Checkout the links below if you want to learn to trade forex too. Strats thread is free so make the most of it. Anders Baard Larsen is a brilliant trader and a lovely guy. The fx500club is also filled with a great bunch of trader teachers. Zulutrade is proving to be a useful place to use as well. Checkout all the links below.
 
HAPPY TRADING 

I also learned how to trade forex and would wholeheartedly recommend the fantastic team at the www.fx500club.com They have a live forex chat room and share their charts so that you can watch them find potential trades in real time.

They also have a school for learning how to trade longer term charts at www.fxmonkeyschool.com.

The fx500club and fxmonkeyschool, forex trading school don’t just trade charts and indicators alone, they teach us to use correlation of the whole market before entering a trade. It truly is the best place to learn how to trade forex properly, safely and profitably. It’s all about the pips and about protecting your capital.

Click Here to get a FREE days entry into the fx500 club live trading room

Always Remember.

Keep your risk as a percentage of your capital low (1%), equals stress free trading.

Always work out potential losses before potential profits.

We are paid to take risks, if you aren’t in a trade you cannot win a trade!!

Buy off support and sell off resistance.

Bank partial profits early and move your stop loss to break even as soon as you can.

CLICK HERE To join my mailing list where I will be sharing my extensive result from trading with the fx500club and Zulutrade automated trading and other Expert Advisors automated trading systems

Click Here to get a FREE days entry into the fx500 club live trading room

2b reversal and 123 reversal trading instructions

Managed forex accounts with no fees  Zulutrade

I have now managed to find a few Zulutrader signal providers that are trading for me profitably, sign up for a demo account using my link above then contact me at info @ forex-experts.co.uk so that I can verify your email, I will then contact you with the traders details.

Strats free guide to Stress Free Trading the very best free place to learn to trade forex

Strat will teach you how to trade candlestick patterns at support and resistance, STEVE NISON also has some brilliant products that will help you become a protitable home day trader.

Click here to vist Steve Nisons website or

Click here to signup to his Free Newsletter Signup

Published by admin on Jul 2, 2010 under Uncategorized | Post your comment now

Long Term forex trading

April 28th, 2010 by admin


Trading forex longer term on the daily weekly monthly timeframes is one of the least stressful ways to make money trading forex.

You can learn to trade forex using long term timeframes for free os strats stress free trading thread.

Wow what a day today has turned out to be so far, quality trend trades within h4 swings all over the place, I wanted to take all of them but money management and common sense only allows me to risk 2% of my relatively small account per trade. I traded gbp/jpy and swissy (usd/chf) but there were valid trades on almost all the currency pairs I trade.  Most are retracements on the H4 charts against the daily trends, I am loving those H4 charts more and more these days.

I called these swing trades because they are high probability , mostly counter trend trades against the daily trends. I learned to trade forex like this in a live forex trading school.

gj trade below. Nearly 200 full fat pips on that one.

Update on gbp/jpy 300 pips from my entry and still falling. see below

Swissy trade below. banked 50 pips so far hoping to add on a pullback.

Today was one of those days where trades jumped out and screamed trade me please lol.

Watch that Aussie dollar though and don’t get caught into shorting it, buy on these pullbacks if PASR looks good.

I post this stuff because it helps me learn. Checkout the links below if you want to learn to trade forex too. Strats thread is free so make the most of it. Anders Baard Larsen is a brilliant trader and a lovely guy. The fx500club is also filled with a great bunch of trader teachers. Zulutrade is proving to be a useful place to use as well. Checkout all the links below.
 
HAPPY TRADING 

Click here for a free weeks trial in Anders Larsens live Trading room

I also learned how to trade forex and would wholeheartedly recommend the fantastic team at the www.fx500club.com They have a live forex chat room and share their charts so that you can watch them find potential trades in real time.

They also have a school for learning how to trade longer term charts at www.fxmonkeyschool.com.

The fx500club and fxmonkeyschool, forex trading school don’t just trade charts and indicators alone, they teach us to use correlation of the whole market before entering a trade. It truly is the best place to learn how to trade forex properly, safely and profitably. It’s all about the pips and about protecting your capital.

Click Here to get a FREE days entry into the fx500 club live trading room

Always Remember.

Keep your risk as a percentage of your capital low (1%), equals stress free trading.

Always work out potential losses before potential profits.

We are paid to take risks, if you aren’t in a trade you cannot win a trade!!

Buy off support and sell off resistance.

Bank partial profits early and move your stop loss to break even as soon as you can.

CLICK HERE To join my mailing list where I will be sharing my extensive result from trading with the fx500club and Zulutrade automated trading and other Expert Advisors automated trading systems

Click Here to get a FREE days entry into the fx500 club live trading room

2b reversal and 123 reversal trading instructions

Managed forex accounts with no fees  Zulutrade

I have now managed to find a few Zulutrader signal providers that are trading for me profitably, sign up for a demo account using my link above then contact me at info @ forex-experts.co.uk so that I can verify your email, I will then contact you with the traders details.

Strats free guide to Stress Free Trading the very best free place to learn to trade forex

Strat will teach you how to trade candlestick patterns at support and resistance, STEVE NISON also has some brilliant products that will help you become a protitable home day trader.

Click here to vist Steve Nisons website or

Click here to signup to his Free Newsletter Signup

Published by admin on Apr 28, 2010 under Uncategorized | Post your comment now

Profitable Trading School

April 17th, 2010 by admin


I learned to trade forex using live forex teachers like the ones in the fx500club live forex school and academy. Don’t stop reading now! all it will take you is two or three months at just £97 a month, you can even earn while you learn in their online forex school. The earning potential ounce you have learned to trade forex is limitless, anyone can do it, ladies , men, old or young everything you need to trade can be found for free online. The fx500club are a very profitable trading school and are averaging 5% per week profits 52 weeks per year.

Friday is here and yesterdays 0.5% risk  long order on gbp/chf kicked in hopefully it will go to 1.6473 and make a brilliant end to my week. I also have a small position left on this usd/jpy short trade. Stops all at break even (BE) so profits locked in and free trades now.

A friend alerted me to this short trade on usd/jpy yesterday so I pulled up my charts and drew a few trendlines on it. I don’t really use trendlines to trade but they are useful for spotting possible targets or support and resistance levels that may interfere with a trade.

These trendlines affected the price so much I just had to post the chart images this morning…..then I am taking myself and my dog off to the coast for the day. It always sets me up for a nice long weekend to recharge the batteries ready for an exciting weeks trading next week.

I always start my chart analysis from the higher timeframes down, monthly, weekly, daily, h4, h1, 15 minute.

The h4 is shown below. I draw my trendlines and then zoom in and drop to the lower timeframe to tighten the preciseness.

H4 chart zoomed in a bit below to show the trendlines clearer.

H1 chart below showing the trendlines and how the price reacted to them in better detail, remember I drew the llines YESTERDAY BEFORE the price reacted to them.

15 minute chart is below. How amazing is that set of trendlines?

I took a chance and shorted uj off the descendning h1 trendline at 3pm yesterday from 93.35 with half my normal position size my first target was 92.68, as I mentioned a few posts back this could still go to 90 so I will leave 25% of this trade on and see what happens.

Trading trendlines, we also had a perfect channel and a couple of pretty good looking triangle (breakout formations),  I must look into this more closely, perhaps it works best with a few chosen pairs. The beach is calling me!!

I post this stuff because it helps me learn. Checkout the links below if you want to learn to trade forex too. Strats thread is free so make the most of it. Anders Baard Larsen is a brilliant trader and a lovely guy. The fx500club is also filled with a great bunch of trader teachers. Zulutrade is proving to be a useful place to use as well. Checkout all the links below.

Strats free guide to Stress Free Trading the very best free place to learn to trade forex 

HAPPY TRADING 

Click here for a free weeks trial in Anders Larsens live Trading room

I also learned how to trade forex and would wholeheartedly recommend the fantastic team at the www.fx500club.com They have a live forex chat room and share their charts so that you can watch them find potential trades in real time.

They also have a school for learning how to trade longer term charts at www.fxmonkeyschool.com.

The fx500club and fxmonkeyschool, forex trading school don’t just trade charts and indicators alone, they teach us to use correlation of the whole market before entering a trade. It truly is the best place to learn how to trade forex properly, safely and profitably. It’s all about the pips and about protecting your capital.

Click Here to get a FREE days entry into the fx500 club live trading room

Always Remember.

Keep your risk as a percentage of your capital low (1%), equals stress free trading.

Always work out potential losses before potential profits.

We are paid to take risks, if you aren’t in a trade you cannot win a trade!!

Buy off support and sell off resistance.

Bank partial profits early and move your stop loss to break even as soon as you can.

CLICK HERE To join my mailing list where I will be sharing my extensive result from trading with the fx500club and Zulutrade automated trading and other Expert Advisors automated trading systems

Click Here to get a FREE days entry into the fx500 club live trading room

2b reversal and 123 reversal trading instructions

Managed forex accounts with no fees  Zulutrade

I have now managed to find a few Zulutrader signal providers that are trading for me profitably, sign up for a demo account using my link above then contact me at info @ forex-experts.co.uk so that I can verify your email, I will then contact you with the traders details.

Strats free guide to Stress Free Trading the very best free place to learn to trade forex

Strat will teach you how to trade candlestick patterns at support and resistance, STEVE NISON also has some brilliant products that will help you become a profitable home day trader.

Click here to vist Steve Nisons website or

Click here to signup to his Free Newsletter Signup

Published by admin on Apr 17, 2010 under Uncategorized | Post your comment now

Trading forex longer term

March 11th, 2010 by admin


Time and time again I see the importance of trendlines for use as support and resistance on the higher timeframes, especially now I am spending my days listening to a trader that discounts technical trading as total balderdash, don’t get me wrong fundamental trading is absolutely brilliant but combined with technical analysis it it utterly astonishing.

I just had to post this incident almost caught me out and that will have caught so many other traders out. The h4 buob ( bullish outside bar ) marked by the white question mark is the point I considered going long.

However the solid red sr line was old resistance that had the potential to become new support which led me to believe the price would return to that as a test, as mentioned in previous posts, the ascending trendline and the dotted red daily 20 moving average represented another support level that had the potential to be tested.

Profit taking was rife and buyers piled in after they had allowed sellers to test those levels; all fascinating stuff for me as always. The daily charts show that whole move as a hammer candle.

It just all goes to  show the power of candlestick charts, trendlines, and the daily charts.

I post this stuff because it helps me learn. Checkout the links below if you want to learn to trade forex too. Strats thread is free so make the most of it. Anders Baard Larsen is a brilliant trader and a lovely guy. The fx500club is also filled with a great bunch of trader teachers. Zulutrade is proving to be a useful place to use as well. Checkout all the links below.
 
HAPPY TRADING 

Click here for a free weeks trial in Anders Larsens live Trading room

I also learned how to trade forex and would wholeheartedly recommend the fantastic team at the www.fx500club.com They have a live forex chat room and share their charts so that you can watch them find potential trades in real time.

They also have a school for learning how to trade longer term charts at www.fxmonkeyschool.com.

The fx500club and fxmonkeyschool, forex trading school don’t just trade charts and indicators alone, they teach us to use correlation of the whole market before entering a trade. It truly is the best place to learn how to trade forex properly, safely and profitably. It’s all about the pips and about protecting your capital.

Click Here to get a FREE days entry into the fx500 club live trading room

Always Remember.

Keep your risk as a percentage of your capital low (1%), equals stress free trading.

Always work out potential losses before potential profits.

We are paid to take risks, if you aren’t in a trade you cannot win a trade!!

Buy off support and sell off resistance.

Bank partial profits early and move your stop loss to break even as soon as you can.

CLICK HERE To join my mailing list where I will be sharing my extensive result from trading with the fx500club and Zulutrade automated trading and other Expert Advisors automated trading systems

Click Here to get a FREE days entry into the fx500 club live trading room

2b reversal and 123 reversal trading instructions

Managed forex accounts with no fees  Zulutrade

I have now managed to find a few Zulutrader signal providers that are trading for me profitably, sign up for a demo account using my link above then contact me at info @ forex-experts.co.uk so that I can verify your email, I will then contact you with the traders details.

Strats free guide to Stress Free Trading the very best free place to learn to trade forex

Strat will teach you how to trade candlestick patterns at support and resistance, STEVE NISON also has some brilliant products that will help you become a protitable home day trader.

Click here to vist Steve Nisons website or

Click here to signup to his Free Newsletter Signup

Published by admin on Mar 11, 2010 under Uncategorized | Post your comment now

Long term forex trading

January 23rd, 2010 by admin


Trading forex long term is far more relaxing than trying to trade the lower timeframes. Take this oil trade on the daily chart for example. The hammer candle was clear to see.

This oil trade was worth 280 pips profit and it was a very simple trade taken using the break of a hammer candle.

All I had to do was draw a resistance line at the top of the daily hammer and a support line at the bottom of the hammer then trade the price break of either level.

Hammer candles on a daily chart are very strong trading signals, you can place orders, place your take profits and stop losses and close your trading platform for the rest of the day. 

Trade long to the previous high or short to the previous low. It really is that simple.

I personally learned how to trade across all time frames with the help of the fantastic team at the www.fx500club.com They have a live forex chat room and share their charts so that you can watch them find potential trades in real time.

They also have a school for learning how to trade longer term charts at www.fxmonkeyschool.com.

The fx500club and fxmonkeyschool, forex trading school don’t just trade charts and indicators alone, they teach us to use correlation of the whole market before entering a trade. It truly is the best place to learn how to trade forex properly, safely and profitably. It’s all about the pips and about protecting your capital.

Click Here to get a FREE days entry into the fx500 club live trading room

Always Remember.

Keep your risk as a percentage of your capital low (1%), equals stress free trading.

Always work out potential losses before potential profits.

We are paid to take risks, if you aren’t in a trade you cannot win a trade!!

Buy off support and sell off resistance.

Bank partial profits early and move your stop loss to break even as soon as you can.

CLICK HERE To join my mailing list where I will be sharing my extensive result from trading with the fx500club and Zulutrade automated trading and other Expert Advisors automated trading systems

Click Here to get a FREE days entry into the fx500 club live trading room

2b reversal and 123 reversal trading instructions

Managed forex accounts with no fees  Zulutrade

Published by admin on Jan 23, 2010 under Uncategorized | Post your comment now

Currency Trading Signals Service

January 14th, 2010 by admin


Finally I have found a Zulutrade signal provider that makes consistent profits.
 
After 9 months of testing 100′s of Zulutrade signal providers I can finally announce that I have so far found just one trader I am happy to allow to trade my real funded account, yes that’s right not a demo account but real money for real profits and in what I consider to be a safe and consistent way.
  • 5.5% – 12% profits per month (based on last years performance)
  • that’s equal to 63% to 120% profit per year (compounded)
  • Minimal drawdown (about 20 pips per trade)
  • 95% winning trades
  • only 1% risk to capital per trade
  • I have done all the hard work
  • Read on to see how you can benefit for FREE
  • No commission fees or charges It’s totally Free!!

 
For this month this zulutrade signal provider has won 95% of his trades, 40 winners and 2 losers, 268 pips profit and as per my own money management rules I have only risked 1% of my trading account per trade.268 pips represents $2680 on this 50K demo account that’s about 5.5% in a month. If you compound that and continue to increase you lot size in
order to stay at 1% risk per trade your account will grow by roughly 63% in a year.That’s about $6300 profit on a $10,000 initial account size.December was a quiet month for this trader what with all the holidays etc, I am expecting nearer 500 – 600 pips a month or in excess of 10% a month profits about 120% a year if compounded.

I was so impressed with the way this zulutrade signal provider trades that I started trading my own LIVE FUNDS, REAL MONEY halfway through this demo accounts testing period.

I have not done all this hard work for nothing though, in order to get the details of this zulutrade signals provider for FREE you will need to signup to zulutrade using my link here When you have signed up to zulutrade via my link please contact me by email at ” info @ forex-experts.co.uk ” supplying the email address details that you
used when joining zulutrade, I will need this to verify that you signed up using my zulutrade link.

Once you are verified I will send you details of this profitable zulutrade signal provider along with the settings I use in order to trade in the safest possible way.

signup to zulutrade using my link here then contact me giving me your details. I will then contact you to let you know who to trade with and what settings I use. info @ forex-experts.co.uk
RISK DISCLAIMERYou trade forex at your own risk, I am not recommending that you trade live funds with zulutrade or any other forex broker or signal provider. You must do your own due diligence and demo test my recommendations, if you choose to trade live funds it is your own decision.
 

Published by admin on Jan 14, 2010 under Uncategorized | Post your comment now

Relaxed Profitable trading using daily timeframes

October 26th, 2009 by admin


I apologise for not having posted anything recently, this is because I have been learning to trade a much more profitable method, taking far less of my time and producing much better profits.

 I now trade using the daily and weekly charts for major price movements. This is such a relaxed way to trade, you already have all the old major levels of support and resistance drawn on your charts, a few hours work a week amending daily charts and the same at the weekend studying the weekly charts is all the work you need to do.

The added bonus for me is that I don’t get anxious about missing trades like I used to on the lower timeframes. In addition I am often taking cheeky trades using the lower timeframes and using the directional bias / knowledge gleaned from daily tf analysis, win win.

Here is a very basic example of how a chart may look, I didn’t take this eur/cad long trade but my notes were made and left on my chart on the 18th of october. This note for example “18th 1.5449 long to 1.6000″ means the price was at 1.5449 at the close of that weekly bar and I assessed it would go to next resistance / significant number 1.6000 at least.

ecadwkly

The long tailed weekly candle resembles a hammer with the long tail signaling that sellers moved in but buyers entered the market to push the close of the bar back up to old support of 15360. At this point I would move to the daily chart to look for candlestick price action to indicate a long trade.

ecaddly

To confirm a possible long trade I needed a close above the high of the red candle marked with the red x, this makes that a confirmed low at support and validates the ascending trendline. Notice also that the huge green candle of the 15th is a buob and bueb, bullish outside bar and bullish engulfing bar. This indicated that buyers had moved in in strength at old confirmed support. As often happens with these larger daily candles you get a 50% ish retrace, patience and discipline would get you in with a safe and profitable trade at 1.5360 stop below 1.5200 target 700 pips away at old major res 1.6100.

Notice also that after that buob/bueb of the 15th we had two indescision bars, the green doji 16th and the red inside bar of the 17th a close below would have invalidated the long, a close above would be a signal that buyers had won the battle and the price would continue up.

The hourly chart below clearly shows how 1.5360 was a significant level of old support August 24th , became new resistance and then support again.

ecadhrly

There is no easy way to learn to trade forex, no substitute for 1000′s of hours of studying price action at old levels of support and resistance. The only holy grail of trading is your eyes and Price Action at Support and Resistance. Learn it and prosper. Good Luck.

One last note, have a look at how clearly resistance became support at 1.5360 on the four hour timeframe. Notice also how the salmon 20 ema crossing up through the pale blue 50 sma helped confirm the safe long entry. This happens alot, they are a very important moving average crossover to observe. See the earlier crossovers at point 1 and 2, remember these red supp/res levels are on the charts well before the price gets there, all you need to do is watch and learn how to interpret the price action at these levels to trade them profitably.

ecad4h

Hindsight is a brilliant thing I know but with practice and study confidence grows. It may take you a year or five years to crack it. Winners never quit. The charts don’t lie, these patterns have been occuring and working like clockwork for hundreds of years. That’s more than enough data to give me the confidence to realise I was on the right track.

I am not trying to teach you how to trade the daily timeframe rather I am trying to alert you to what I believe to be the best  and least stressful way to trade.

You can learn how to trade classic support and resistance with price action at support and resistance FOR FREE by searching for all the forex forums online.

I personally learned how to trade across all time frames with the help of the fantastic team at the www.fx500club.com They have a live forex chat room and share their charts so that you can watch them find potential trades in real time.

They also have a school for learning how to trade longer term charts at www.fxmonkeyschool.com.

The fx500club and fxmonkeyschool, forex trading school don’t just trade charts and indicators alone, they teach us to use correlation of the whole market before entering a trade. It truly is the best place to learn how to trade forex properly, safely and profitably. It’s all about the pips and about protecting your capital.

Click Here to get a FREE days entry into the fx500 club live trading room

Always Remember.

Keep your risk as a percentage of your capital low (1%), equals stress free trading.

Always work out potential losses before potential profits.

We are paid to take risks, if you aren’t in a trade you cannot win a trade!!

Buy off support and sell off resistance.

Bank partial profits early and move your stop loss to break even as soon as you can.

CLICK HERE To join my mailing list where I will be sharing my extensive result from trading with the fx500club and Zulutrade automated trading and other Expert Advisors automated trading systems

Click Here to get a FREE days entry into the fx500 club live trading room

2b reversal and 123 reversal trading instructions

Managed forex accounts with no fees  Zulutrade

Published by admin on Oct 26, 2009 under Uncategorized | Post your comment now

Profitable Forex EA – Profitable Forex Expert Advisors

September 13th, 2009 by admin


This forex ea really is profitable see the live trading statement below Finally an Expert Advisor that is profitable and safe to use with real money.

I have finally found a forex expert advisor that seems to be making consistent profits over a sensible period of time. The only live trading (real money) results I have found are an Australian lady’s’ results. She has made $8000 in 7 months trading with an account started with $10,000 and has been consistently profitable since Feb 2009, very promising indeed. I will add my own live trading results once I have forward tested this EA on demo for a few months first.

I have done and continue to do extensive research about this profitable forex expert advisor and all my findings are so far very good. I have managed to find another person ( professional forex trader ) trading real money using this expert advisor and in her own words “I am very happy with this forexgoldmine profitable EA, it trades very conservatively and protects your capital at all times, I am very happy to be trading a substantial amount of my money using this Forex Goldmine EA”

Checkout the live trading results for Forex Goldmine below

Profitable expert advisor live trading results 1 

at just $39.99 a month  for this Profitable forex ea, this is one of the few profitable forex Expert Advisors I have come across

I have only just come across this expert advisor and will be forward testing it myself and will post the results here ASAP

Here are my first 3 weeks demo trading results for forexgoldmine.

Forexgoldmine results demo account 1 Click here

Forex Goldmine demo trading results account 2 Click here

Click here for a free demo account and also visit a active forum where you can see other peoples trading results

Forex Goldmine is being used by professional forex traders that really know what they are doing when it comes to trading forex for a living. The two ladies that I have managed to find results for by searching online that are genuinely trading forex for a living are both trading forex manually and making a profit. As you know this is very hard to do and usually takes people years to perfect. They are currently using Forex Goldmine to supplement their income from trading, something I intend to do also. Spread the risk and have a Stress Free forex trading lifestyle is what we are all about.

I am continually doing extensive research looking for and testing profitable expert advisors, for FREE unbiased up to date information and regular expert advisor automated forex trading reviews and results please join my mailing list. Click here

Disclaimer

you trade forex at your own risk, it is a high risk financial instrument, if you get it right you can make a fortune if wrong you will lose a fortune. Never trade with money you cannot afford to lose, Always demo trade every strategy , expert advisor or trading system before using real money. Good Luck.

Published by admin on Sep 13, 2009 under Uncategorized | Post your comment now

How Forex Brokers Work – Learn to trade forex daily timeframe

May 22nd, 2009 by admin


Default The Structure of Forex Brokers
There has been much discussion of late regarding broker spreads and liquidity. Many assumptions are being made about why spreads are widened during news time that are built on an incomplete knowledge of the architecture of the forex market in general. The purpose of this article is to dissect the market and hopefully shed some light on the situation so that a more rational and productive discussion can be undertaken by the Forex Factory members.

Unlike the various bond and equity markets, the Forex market is not generally utilized as an investment medium. While speculation has a critical role in its proper function, the lion’s share of Forex transactions are done as a function of international business.

By and large, businesses don’t much care about the intricacies of exchange rates, they just want to make and sell their products. As a central repository of a company’s money, it was only natural that the banks would be the facilitators of these transactions. In the old days it was easy enough for a bank to call a foreign bank (or a foreign branch of ones own bank) and swap the stockpiles of currency each had accumulated from their many customers.

Just as any business would, the banks bought the foreign currency at one rate and marked it up before selling it to the customer. With that the foreign exchange spread was born. This was (and still is) a reasonable cost of doing business. Mitsubishi can pay its customers and the banks make a nice little profit for the hassle and risks associated with moving around the currency.

As a byproduct of transacting all this business, bank traders developed the ability to speculate on the future of currency rates. Utilizing a better understanding of the market, a bank could quote a business a spread on the current rate but hold off hedging until a better one came along. This process allowed the banks to expand their net income dramatically. The unfortunate consequence was that liquidity was redistributed in a way that made certain transactions impossible to complete.

It was for this reason and this reason alone that the market was eventually opened up to non-bank participants. The banks wanted more orders in the market so that a) they could profit from the less experienced participants, and b) the less experienced participants could provide a better liquidity distribution for execution of international business hedge orders. Initially only megacap hedge funds (such as Soros’s and others) were permitted, but it has since grown to include the retail brokerages and ECNs.

Market Structure:

The top tier of the Forex market is transacted on what is collectively known as the Interbank. Contrary to popular belief the Interbank is not an exchange; it is a collection of communication agreements between the world’s largest money center banks.

To understand the structure of the Interbank market, it may be easier to grasp by way of analogy. Consider that in an office (or maybe even someone’s home) there are multiple computers connected via a network cable. Each computer operates independently of the others until it needs a resource that another computer possesses. At that point it will contact the other computer and request access to the necessary resource. If the computer is working properly and its owner has given the requestor authorization to do so, the resource can be accessed and the initiating computers request can be fulfilled. By substituting computers for banks and resources for currency, you can easily grasp the relationships that exist on the Interbank.

Anyone who has ever tried to find resources on a computer network without a server can appreciate how difficult it can be to keep track of who has what resources. The same issue exists on the Interbank market with regard to prices and currency inventory. A bank in Singapore may only rarely transact business with a company that needs to exchange some Brazilian Real and it can be very difficult to establish what a proper exchange rate should be. It is for this purpose that EBS and Reuters (hereafter EBS) established their services.

Layered on top (in a manner of speaking) of the Interbank communication links, the EBS service enables banks to see how much and at what prices all the Interbank members are willing to transact. Pains should be taken to express that EBS is not a market or a market maker; it is an application used to see bids and offers from the various banks.

The second tier of the market exists essential within each bank. By calling your local Bank of America branch you can exchange any foreign currency you would like. More then likely they will just move some excess currency from one branch to another. Since this is a micro-exchange with a single counterparty, you are basically at their mercy as to what exchange rate they will quote you. Your choice is to accept their offer or shop a different bank. Everyone who trades the forex market should visit their bank at least once to get a few quotes. It would be very enlightening to see how lucrative these transactions really are.

Branching off of this second tier is the third tier retail market. When brokers like Oanda, Forex.com, FXCM, etc. desire to establish a retail operation the first thing they need is a liquidity provider. Nine in ten of these brokers will sign an agreement with just one bank. This bank will agree to provide liquidity if and only if they can hedge it on EBS inclusive of their desired spread. Because the volume will be significantly higher a single bank patron will transact, the spreads will be much more competitive. By no means should it be expected these tier 3 providers will be quoted precisely what exists on the Interbank. Remember the bank is in the business of collecting spreads and no agreement is going to suspend that priority.

Retail forex is almost akin to running a casino. The majority of its participants have zero understanding how to trade effectively and as a result are consistent losers. The spread system combined with a standard probability distribution of returns gives the broker a built in house advantage of a few percentage points. As a result, they have all built internal order matching systems that play one loser off against a winner and collect the spread. On the occasions when disequilibrium exists within the internal order book, the broker hedges any exposure with their tier 2 liquidity provider.

As bad as this may sound, there are some significant advantages for speculators that deal with them. Because it is an internal order book, many features can be provided which are otherwise unavailable through other means. Non-standard contract sizes, high leverage on tiny account balances, and the ability to transact in a commission free environment are just a few of them…

An ECN operates similar to a Tier 2 bank, but still exists on the third tier. An ECN will generally establish agreements with several tier 2 banks for liquidity. However instead of matching orders internally, it will just pass through the quotes from the banks, as is, to be traded on. It’s sort of an EBS for little guys. There are many advantages to the model, but it is still not the Interbank. The banks are going to make their spread or their not go to waste their time. Depending on the bank this will take the form of price shading or widened spreads depending on market conditions. The ECN, for its trouble, collects a commission on each transaction.

Aside from the commission factor, there are some other disadvantages a speculator should consider before making the leap to an ECN. Most offer much lower leverage and only allow full lot transactions. During certain market conditions, the banks may also pull their liquidity leaving traders without an opportunity to enter or exit positions at their desired price.

Trade Mechanics:

As we covered earlier, each bank lists on EBS how much and at what price they are willing to transact a currency. It is important to note that no Interbank participant is under any obligation to make a transaction if they do not feel it is in their best interest. There are no “market makers” on the Interbank; only speculators and hedgers.

Looking at an ECN platform or Level II data on the stock market, one can get a feel for what the orders on EBS look like. The following is a sample representation:

You’ll notice that there is open interest (Level II Vol figures) of various sizes at different price points. Each one of those units represents existing limit orders and in this example, each unit is $1mil in currency.

What would have happened if someone placed a market sell order for 2mil just 1 millisecond after that 38.4 mil order hit? They would have been filled at 1.5630 Why were they “slipped”? Because there was no one to take the other side of the transaction at 1.56320 any longer. Again, nobody was out screwing the trader; it was the natural byproduct of the order flow.

A more interesting question is, what would happen if all the listed orders where suddenly canceled? The spread would widen to a point at which there were existing bids and offers. That may be 5,7,9, or even 100 pips; it is going to widen to whatever the difference between a bid and an offer are. Notice that nobody came in and “set” the spread, they just refused to transact at anything between it.

Nothing can be done to force orders into existence that don’t exist. Regardless what market is being examined or what broker is facilitating transactions, it is impossible to avoid spreads and slippage. They are a fact of life in the realm of trading.

Implications for speculators:

Much has been made of late about how it is immoral, illegal, or downright evil for a broker, bank, or other liquidity provider to withdraw their order (increasing the spread) and slip orders (as though it was a conscious decision on their part to do so) more then normal during these events. These things occur for very specific reasons which have nothing to do with screwing anyone. Let us examine why:

Leading up to an economic report for example, certain traders will enter into positions expecting the news to go a certain way. As the event becomes immanent, the banks on the Interbank will remove their speculative orders for fear of taking unnecessary losses. Technical traders will pull their orders as well since it is common practice for them to avoid the news. Hedge funds and other macro traders are either already positioned or waiting until after the news hits to make decisions dependent on the result.

Knowing what we now know, where is the liquidity necessary to maintain a tight spread coming from?

Moving down the food chain to Tier 2; a bank will only provide liquidity to an ECN or retail broker if they can instantly hedge (plus their requisite spread) the positions on Interbank. If the Interbank spreads are widening due to lower liquidity, the bank is going to have to widen the spreads on the downstream players as well.

At tier 3 the ECN’s are simply passing the banks offers on, so spreads widen up to their customers. The retailers that guarantee spreads of 2 to 5 pips have just opened a gaping hole in their risk profile since they can no longer hedge their net exposure (ever wonder why they always seem to shut down or requote until its over?). The variable spread retailers in turn open up their spreads to match what is happening at the bank or they run into the same problems fixed spreads broker are dealing with.

Now think about this situation for a second. What is going to happen when a number misses expectations? How many traders going into the event with positions chose wrong and need to get out ASAP? How many hedge funds are going to instantly drop their macro orders? How many retail traders’ straddle orders just executed? How many of them were waiting to hear a miss and executed market orders?

With the technical traders on the sidelines, who is going to be stupid enough to take the other side of all these orders?

The answer is no one. Between 1 and 5 seconds after the news hits it is a purely a 1 way market. That big long pin bar that occurs is a grand total of 2 prices; the one before the news hit and the one after. The 10, 20, or 30 pips between them is called a gap.

Is it any wonder that slippage is in evidence at this time?

Conclusions:

By focusing on slippage and spreads, which are the natural byproduct of order flow, one is not only pursuing a futile ideal, they are passing up an enormous opportunity to capitalize on true inefficiencies. News events are one of the few times where a large number of players are positioned inappropriately and it is fairly easy to profit from their foolishness. If a trader truly wants to make the leap to the next level of profitability they should be spending their time figuring out how identify these positions and trading with the goal of capturing the price movement they inevitably will cause.

Nobody is going to make the argument that a broker is a trader’s best friend, but they still provide a valuable service and should be compensated for their efforts. By accepting a broker for what it is and learning how to work within the limitations of the relationship, traders have access to a world of opportunity that they otherwise could never dream of capturing. Let us all remember that simple truth.

Each tier of the Forex market has its own inherent advantages and disadvantages. Depending on your priorities you have to make a choice between what restrictions you can live with and those you cant. Unfortunately, you can’t always get what you want.
Trading has been characterized as a zero sum game, and rightly so. If trader A sells a security to trader B and the price goes up, trader A lost money that they otherwise could have made. If it goes down, Trader A made money from trader B’s mistake. Even in a huge market like the Forex, each transaction must have a buyer and a seller to make a trade and one of them is going to lose. In the general realm of trading, this is materially irrelevant to each participant. But there are certain situations where it becomes of significant importance. One of those situations is a news event.
Using this information, if a market sell order was placed for 38.4mil, the spread would instantly widen from 2.5 pips to 4.5 pips because there would no longer be any orders between 1.56300 and 1.56345. No broker, market maker, bank, or thief in the night widened the spread; it was the natural byproduct of the order that was placed. If no additional orders entered the market, the spread would remain this large forever. Fortunately, someone somewhere will deem a price point between those 2 figures an appropriate opportunity to do something and place an order. That order will either consume more interest or add to it, depending whether it is a market or limit order respectively.

It is convenient to believe that in a $2tril per day market there is always enough liquidity to do what needs to be done. Unfortunately belief does not negate the reality that for every buyer there MUST be a seller or no transaction can occur. When an order is too large to transact at the current price, the price moves to the point where open interest is abundant enough to cover it. Every time you see price move a single pip, it means that an order was executed that consumed (or otherwise removed) the open interest at the current price. There is no other way that prices can move.

Now that we have established why the market exists, let’s take a look at how the transactions are facilitated:

 

The guy who buys a shiny new Eclipse more then likely will pay for it with US Dollars. Unfortunately Mitsubishi’s factory workers in Japan need to get their paychecks denominated in Yen, so at some point a conversion needs to be made. When one considers that companies like Exxon, Boeing, Sony, Dell, Honda, and thousands of other international businesses move nearly every dollar, real, yen, rubble, pound, and euro they make in a foreign country through the Forex market, it isn’t hard to understand how insignificant the speculative presence is; even in a $2tril per day market.

We will begin with an explanation of the purpose of the Forex market and how it is utilized by its primary participants, expand into the structure and operation of the market, and conclude with the implications of this information for speculators. With that having been said, let us begin.

Published by admin on May 22, 2009 under Uncategorized | Post your comment now

Trading Forex Daily Charts

May 22nd, 2009 by admin


Gone back to trading the Daily
I came here because I wanted more action than I was getting trading the Daily and soon found out that the action I got (pressure) was way more than I could handle.

I learned that I am more suited to doing a 20 minute analysis over 10 pairs after 2pm (PST, when NY closes) and placing limit/stop orders and letting them run, than I am doing my head in watching M15 charts all day, which also requires me to be awake and alert at non – social hours (11pm and 5am PST). Plus I can go back to doing other things during the day while my trades are working. Yes, you do need wider stops and therefore a larger account or smaller contract size.

I have just closed my Daily short GBPUSD trade at the close (1.3874) after entering at 1.4788 for a nice 914 piparoonis in 3 days.

I have now placed an order to go long at 1.4029, a couple of pips above the high of the hammer bar with a SL at 1.3615, a couple of pips below the low.

Again, I take my hat off to you guys (and Pip Queen Nicola) that can profit from these short time frames. Keep on doing what works for you.

Rock n Roll,
Strat

Published by admin on May 22, 2009 under Uncategorized | Post your comment now