Getting started with Forex trading means that you will have to choose either the fundamental method of the technical method. Many people use one method or the other and are able to get the profit they want for either system. This means both methods will work, it may just depend on what kind of person you are or what you prefer. Here are some things about the fundamental and the technical methods that will help you decide which one is better for your Forex trading.

Fundamental Method Requires Greater Amount Of Research

The fundamental method is the older of the two and has been relied on by many through the years. It will also mean that you will need to do more research.

Your research will provide you with a lot of general information about the news and other worldwide events that may affect world economies. You will also need to keep an eye on political events that may shake up economies, and actions of large corporations and central banks. Economic trends, such as are shaking up national currencies now, also definitely play a factor in Forex predictions.

Technical Method Relies On Charts

The technical method, on the other hand, uses charts. These charts are indicators of various factors that play a part in understanding what may be happening to national currencies in the past hours, days, weeks, etc., so that trends are revealed. By looking at what has been happening to a currency, you can often tell when something may occur that will indicate the desired market fluctuation that will result in profit for you.

The idea behind the technical approach is that everything you need is right there in front of you. By studying charts of the past, and looking to see when desirable fluctuations occurred, you should be able to see when it will happen again.

One reason that more people may rely on the technical approach is because it takes less effort to see what they want to know. It is all right there on the charts. This certainly keeps it simple. They only have to go one place.

The Algo Method May Even Be Better

A rather new method, called the algo (short for algorithmic) or black box method, uses computer generated methods to determine when market fluctuations are about to occur. More and more people are switching to this method and it seems to be working for them.

Basically, you learn to rely on the black box rather than having to learn or know about events or situations leading up to possible profit. It seems like it does all the work for you. This could be good, but changing the method and factors you use may be out.

Some Traders Use Some of Both

A number of Forex traders actually rely on both methods, with a possibility of leaning more toward one than the other. Their thinking is that the fundamental approach will reveal places to look, and then the technical approach will indicate the time - quite possible. You will need to learn the ins and outs of both before you decide which approach you want.

You may also want to keep in mind that the software at different Forex trading Web sites is different. This means that as you learn which method is better for you that you will want to try out the software at different Forex Dealers Web sites because it may offer more calculations put into their charts, or other data that may be useful to you.

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If you plan to invest your money through FOREX trading robot, you need a big sum money to start. Some FOREX trading robot charges you around $65 per month to use their program. Other than that, minimum investment of $10, 000 is required to participate in forex trading robot. However, FOREX trading robot can reduce risk and improve overall system performance. So, it is up to you to decide by evaluating the pros and cons.

If you think forex trading robot is not suitable for you, you can always go for FOREX trading platform which you will trade independently without any help. You’ll have to monitor the trading yourselves. Here are 5 tips to choose a platform.

1. You must get large FOREX trading platform instead of the small ones. Many of the better online FOREX trading platforms exchange information and have great tools and resources to help you trade. And generally they give all these tactics to trade at no cost. Most FOREX trading platforms are also in Windows or Java system; some even have both versions.

2. There are many important factors you need to know when choosing for a great FOREX trading platform. Prefer FOREX trading platform online that enables users to start immediately. If likely, there will be no download of soft wares necessary and you can execute the trading immediately without any obligation to learn the features and functions of these soft wares.

3. Prefer a FOREX trading platform that gives you the possibility to Freeze the Buy or Sell rate that you see for few seconds. That means that the rate you see and froze is the rate you will get if you want to make it a deal. During those “FREEZE” seconds, the FOREX market could change, however - you are guaranteed to get the rate you have frozen, in case you want to get the deal. But under uncommon conditions, this will not be guaranteed.

From what you have read so far, determine if this article has answered any of the questions that you had on this complicated subject.

4. Make definite sure you elect a good FOREX trading platform. Some platform has a lot of buried expenses and charges you high pips when you buy a pair. So, you’ll spend money before you even gain it.

5. Also, some platform has features and functions that are very hard to understand. You’ll take masses of time to learn about these things. These will generally take you days or even weeks to learn all these. Choose FOREX trading platform wisely before you begin trading or you’ll lose both of your money and time.

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Please be reminded that trading forex involves risks.

The chapter’s abstract: a trader attains much greater success at FOREX unless he is reading analytics by non-trading economists. Here’s some information for meditation below:

What useful can one be taught by FOREX reviews, cooked up by analytical economists, who are incapable of teaching themselves to be FOREX successful?

FOREX economic indicators (released news statistics) are compiled the way required to be interpreted by analysts, who, by the end of the day, may explain any rates travel as the only naturally determined one.

Important objective economic indicators (GDP, Balance of payments, etc.) are leveled up with the subjective ones (University of Michigan, Chicago sentiment, etc.) which in no way may be checked up.

Economic statistics is frequently forged even at the supreme level.
Here is my attitude as a trader towards FOREX fundamental analysis and to its impact upon exchange rates dynamics.

At the outset, we’ll get to scrutinize the gambling done by FOREX analytical economists, who are striving to convince traders in exchange rates being tied up to some ersatz fundamental analysis data, viz. to economic indicators being released under daily streaming news.

We will also present technique background used by the banks’ Consortium to manipulate news and forecasts the way to vector the rates as any certain day requisite.

The earlier example dated April, 01, 2005 (when the trend has reversed against the logics of all the news released that day). The situation is an absolutely typical occurrence at FOREX, where in 50% cases rates are going DOWN the news vector while in 50% cases - AGAINST the news released. Any analysts’ venture to far-fetch the fundamental analysis to FOREX rate quotes has long caused me nothing but smile.

The FOREX analysts’ logics is as follows: as soon as the rates reverse against the news, next day they have the explanation that nothing unexpected has occurred with the market having already been anticipating the news, and these news have already been accounted for by traders in current quotes.

Or, else, the market (or traders or other) spotted in the news release not at all what it has read earlier in the streaming news. As a result, the rates by, normal logics, staged a sharp swivel to move in sort of a wrong direction.

But, my God, are traders really in need of the above analysts’ para-economic freaks on fundamental or other analysis, once THE RATES HAVE ALREADY MADE THEIR WAY in the said wrong direction?

And why, during uptrend, no analyst has recommended going short on a currency instead of going long in case actual news is superior to the estimate? I have never come across the case.

Analysts should have better derived a simple mathematical formula (hopefully they did have studied at universities) as to a FOREX pair average points travel prior and post critical news (National Bank percent rate hike, Balance of payments, etc.).

By virtue of this formula we, traders, could do some calculations to estimate whether either everything is already accounted for in the current rates or further 100-200 pts grow/decline is to be expected.

But there’s nothing of the kind!

And now, here’s my standpoint as a FOREX trader on why traders will never end up by being supplied with the above mathematical prognosis formula by analysts. I will also provide backgrounds of when pro-news and counter-news entries should be effected.

Fundamental Analysis CRITERIA BIASED INOBJECTIVE NATURE. Fundamental Analysis BEING ABANDONED IN FAVOR OF DAILY NEWS SUBSTITUTE.

1. All the Fundamental Analysis economic indicators are made a muddle of. See, for instance, 54 US economic indicators, ABC-arranged by analysts instead of being USD importance-rated http://www.forexite.com/forex_for_ beginners/us_economic_indicators.html

2. No difference is made between Fundamental Analysis, the state monetary policy and ersatz fundamental data-related current news (viz.: Chicago business activity index, Michigan University consumer sentiment index, National Managers’ Association business activity index, etc.). But, in what way is the Michigan University consumer sentiment index relevant to the US economy Fundamental Analysis? Is there any other name to be applied to this index besides the name of an ersatz Fundamental Analysis?

3. A portion of economic indicators organic to the above ersatz Fundamental Analysis evoke my personal uncertainty as regards their figures’ objective nature and as regards not being tailored to order of those supplying quotations to the FOREX market.

Let us go attentively once again look into these indices with the view to clarify their manipulation capability with no exposition danger.

- PHILADELPHIA FED INDEX constitutes the polling results of Philadelphia manufacturers as to their sentiment towards the current economic situation:

- Why Philadelphia, not California or Texas.

- May there be any difference in obtained figures depending upon the type of manufacturers being interrogated?

- Is there anyone in position to verify and confirm the above manufacturers’ polling results?

- Consumer price index (CPI), reflects consumer price level per a “basket” of goods and services. But the CPI may be properly built up, if prices differ supermarket to supermarket, from supermarket to conventional shop, from shop in the center and shop in an outskirt, from shop in a capital to shop in a province, from sell off period to new articles presentation period, etc.?

Is it imaginable, how figures can be manipulated in favor of those, requiring them so badly? Or is there anyone to convince me that it’s very hard to change 0.4% into 0.2% or 0.6% depending upon a customer’s demand at any given moment?

- Michigan consumer sentiment index constitutes the results of customers’ polling on current economic situation confidence. No comments, since it looks like interrogating no-one-knows whom on a no-one-knows subject.

- Consumer confidence. A doubtful attempt to measure consumers’ optimism.

-NAPM (National Association of Purchasing Managers) services index is representative of service managers polling results, purported at estimation of in-branch changes taking shape. Very often this index is dictated rather by psychological factors, than by actual state of affairs (???).

- Chicago PMI index. It is closely tracked due to being released shortly prior to NAPM. The index exerts strong authority over the market by prompting a real NAPM value to be released. Please, refer to NAPM above.

- Atlanta Fed index presents polling results of Atlanta industrials on current economic situation (???).

As understandable, the list of these ersatz Fundamental Analysis economic indicators may go on along with buildup of questions and doubts.

4. There’s a so-called factor of anonymous economists’ estimates in relation to economic indicators preceding values.

I wonder WHO are these anonymous economists, each time allegedly interviewed by Dow Jones on their expectations from news to be released the following calendar week? And WHY is THEIR opinion exactly presented to be the whole market’s anticipation of THAT data exactly, but not any other? Below are some sample potential manipulating the world traders’ opinion, frequently encountered by myself:

a frankly superior estimate leading to benign actual data being inferior to the prediction (I repeat, a no-one-knows whose prediction) and resulting in a sharp rates reversal by “disappointed” traders as later on indicated by analysts.
a frankly inferior estimate leading to malignant actual data being superior to the prediction, thus pushing the rates forward with no other market’s objective grounds.
TO SUM IT UP, leveled with objective economic indicators (GP, etc.) are ersatz Fundamental Analysis ones, manipulation by virtue whereof creates simulacrum of the rates being tied up to daily news and the state’s Fundamental Analysis. With prediction manipulation capability added hereto, it turns feasible to faultlessly project traders’ activities throughout the world. But is it accidental or not that worldwide traders’ training programs are as similar as 90-95% losers figures?

FUNDAMENTAL ANALYSIS CLASSICAL MACROECONOMIC INDICATORS

A true Fundamental Analysis, based on leading world economies comparative macroeconomic characteristics as well as on their currencies power/weakness, may be experienced not through indices of universities and various US managers’ associations, BUT through economic indicators, recognized by all the world leading economists. These are:

- GROSS DOMESTIC PRODUCT (GDP), the principle national economy condition reflector. According to economy development Keynesian model, GDP=C+ I + S + E - M, where: C is consumption, I is investments, S is state expenditures, E is exports, M is imports. GDP is expressed on terms of an index in relation to a previous period.

- STATE BUDGET, constituting a correlation between state’s incomes and expenditures.

- BALANCE OF PAYMENTS, correlating the country’s incoming and outgoing payments and falling into three major components: trade balance, balance of services and non-commercial payments (invisible transactions balance) and balance of capitals and creditors flow.

- UNEMPLOYMENT RATE in the country, being a 3D structure of:

frictional unemployment, related to higher remuneration job hunting or expectation after layoff (not a negative factor, since it leads to more rational labor resources allocation);
structural unemployment, emerging from labor demand decline in any industrial branch due, for instance, to technological development or change on consumer demand structure;
cyclic unemployment, arising during overall economic recessions.
- MONEY SUPPLY INDICES (M0, M1, M2, M3). M0 = cash circulation; M1 = M0 + cheque deposits; M2 = M1 + cheque less saving accounts + money market deposit accounts + minor deposits (less than USD100K) + money market mutual funds; M3 = M2 + large deposits (in excess of USD100K). These are practically no market influential.

- NON-FARM PAYROLLS.

- GOLD AND CURRENCY RESERVES, being a state’s gold and currency backup stored in central bank and in financial institutions, as well as state’s gold and currency assets with international creditors.

- NATIONAL DEBT, constituting state liabilities to physical persons, legal entities, foreign countries, international institutions and outstanding international law subjects.

- REFINANCING RATE, being percent rate utilized by the central bank in granting credits to commercial banks on a refinancing basis, etc.

MACROECONOMIC INDICATORS MANIPULATION ATTEMP AT FOREX.

Macroeconomic indicators are of objective nature, thus being “uncorrectable”, the way it may be done to various Chicago, Atlanta and Michigan indices.

That is why at FOREX we often come across surprising interpretations of the above objective indicators, recognized by the world’s leading economists.

1. Macroeconomic indicators are leveled with ersatz Fundamental Analysis ones, viz.: the University of Michigan one, as above indicated.

2. Absolutely in objective criteria are selected to estimate macroeconomic indicators. For instance, weekly number of jobless claims is released instead of its monthly fluctuation dynamics analysis per its three aspects (frictional, cyclic and structural). This data s released on Thursdays, 08:30 EST, New-York with a disclaimer that “the figures are not always reflective of the actual situation”. The data is under frequent perversion due to short-term factors such, as federal or local holidays. The question is WHAT IS IT ALL FOR?

3. The macroeconomic indicators role is being undermined in every manner. See below:

State budget exerts but an insignificant authority over the market (?!). Curious to know WHY? Is it that the UMich index is more important in understanding the US economy prospects and its perspective currency rating?

http://www.forexite.com/forex_for_beginners/us_economic_indicators.html

Balance of payments is of limited influence on the market (??).

http://www.forexite.com/forex_for_beginners/us_economic_indicators.html

4. Totally different indicators are being quoted when analyzing the leading economies’. See:

the USA: M1, M2, M3 money supply, whereas M3 only for Germany with no indicator as such for the UK; the UK: PPI output, PPI input with no indicator as such for other countries.
RELATION BETWEEN Fundamental Analysis MACROECONOMIC INDICATORS AND FX RATES

Certainly, the relation between Fundamental Analysis and current FOREX rates does exist, however it is greater in depth and mediation, than presented to traders by the majority of analysts, starting from dealers’ basic training.

In my opinion, this DIRECT relation between Fundamental Analysis and FOREX trending finds manifestation on W1 and MN charts only.

Those, supplying us with FOREX quotes, may be “playing” and “fooling” traders within H1 and even H4. But changing trend at W1 and MN timeframes in favor of the USD and establishing the EUR price, say, cheaper than that of the USD in 2005 means going AGAINST depth fundamental data. Those will never be off to commit sort of a thing.

A currency price and that level of fundamental data are permanently coincident. This is not at all the ersatz Fundamental Analysis, whereto the Consortium has schooled the majority of traders (not the University of Michigan index, not the Chicago Managers Association index, not the last month Consumer Confidence index (?!), etc.), and by virtue whereof the aforesaid traders majority have got completely confused in a seemingly elementary issue of entry in favor of the news and against the news.

Hence, below is the USA and Europe macroeconomic indicator related PRACTICAL CONCLUSION for traders: data as of early summer, 2005 are definitely indicative of the incapacity of the long-term USD downtrend change for its uptrend (W1 and MN charts) within the year relative to the EUR, the GBP and outstanding “allies” (See chapter on “Which FOREX indicator is the most impartial and accurate. Ally and adversary currencies”).

Thus, following each short- or medium-term EUR’s recess, its new growth will be witnessed with earlier historic peaks potential breakthrough. The contrary option of the EUR being cheaper than the USD is a NO-NO, exactly due to fundamental macroeconomic indicators, where under European economies enjoy faster development than the USA.

RELATION BETWEEN ERSATZ Fundamental Analysis AND FOREX QUOTES.

Any ersatz Fundamental Analysis indicator data release (UMich, Chicago indices, etc.) is but the GROUND to urge currencies up-down reciprocation, as a function of tactical objectives of those supplying FOREX quotes.

A PRACTIAL CONCLUSION for traders: I claim no relation between ersatz Fundamental Analysis and FOREX quotes from the intraday trading standpoint.

Upon the above news the banks Consortium may drive the rates in any direction, whereas FOREX analytical economists will snatch on You proving and explaining that there is no unexpected occurrence and that the market with proper advance account has been long anticipating the news released, etc., etc, see aforesaid.

That’s the reason for no analyst to venture to recommend entry against the news prior to its release. NO ONE knows in advance where the rates will travel under the Consortium’s will after the news.

This is the level of technical analysis, not that of Fundamental Analysis.

Being a trader, I observe 3 rules when jobbing on news:

exit all positions prior to the news release; if not - then place pending orders behind resistance and support levels to be a stop-loss “safety cushion” as per B. Williams.
don’t enter upon the first candle after the news release;
enter immediately after the Consortium has definitely indicated the way it interprets the news released (see “Entry and exit manual” on entries and exits under the news released).
IN CONFIRMATION OF MY CONCLUSION ON POTENTIAL CURRENT NEWS AND OTHER STATISTIC DATA FORGERY, I refer to “Dawn of dollar empire and end of “Pax Americana”" by A.B. Kobyakov and M.L. Khazin, (”Veche” publishing house, 2003, 368 pages), see on http://paxamericana.narod.ru/book/paxamericana.zip.

The authors thereof have arrived at conclusions still more aggravating for traders and quoted facts on STATISTICAL DATA FORGERY AT THE LEVEL OF THE USA STATE STATISTICS, see CHAPTER V. STATISTICS AT CURTESY OF ECONOMICS:

“The earlier published data summary maintained, that during seven years from 1995 to 2001 inclusive, the USA boasted positive balance of payments of USD203.2 BN, while the revised data uncovered negative balance of payments of USD89.8 BN (chart 24) within that period. With the account to Q1 2002 the above deficit amounted to USD100 BN already.

EVERYONE IS FREE TO READ IT IN GREATER DETAIL AND TO DRAW UP ONE’S OWN DEDUCTIONS!

A serious Russian “Novaya Gazeta” newspaper (08.09-11.09.2005, in “Writings on the water”, see p. 15) has reiterated on another stock market vivid instance, where for the sake to meet some national (or, probably, SOMEBODY’S) interest, the US governmental circles and information agencies have set on a worldwide advertising of a “greatest modern discovery of nanotechnology: a single-molecule transistor”.

The newspaper quotes: “Prospects were breath-taking. The “fourth wave” subject attained unusual fashion and attraction for investments. Nanotechnologies fell under the US government strictest attention being the issue of strategic importance. Hardly imaginable was the fact that all the sensation would end up in a classic “panama” or a shady enterprise similar to our default. Scientific companies share prices skyrocketed off-scale, whereas 30-yo Jan Hendrik Shone, the main publications author has been thought to be next year’s Noble Prize nominee. It all would have been sliding on smoothly, unless the results of over 100 Shone’s articles turned out to have not obtained confirmation. Tampering has been proved as regards three key reports on single-molecule transistor.

As a result Shone faced being fired along with sharp decline in scientific companies share rates. The companies have been stung for USD100BN approximately, the amount being suspiciously close to the Iraqi war (started only 3 months later) US government expenditures.

An infinite number of similar sample situations may be drawn, with statistics turning into a falsifier.

Hence, the question is natural: what’s the way of a trader using Fundamental Analysis statistics to build up FOREX strategies, provided that at least part of data is forged to someone’s benefit?

I don’t hold it reasonable to go deeper into the issue. A FOREX trader’s gains may not be facilitated by this issue’s deep study.

To get a comprehension of FOREX currencies logics, the simple knowledge is indispensable of WHO, HOW and BY WHAT REASON supplies FOREX quoted to traders. By far we have but only answered WHO are those Internet users to furnish quotes to traders.

Identically, no use sinking into the “BY WHAT REASON” the quotes are supplied at FOREX. Please, attempt yourself to answer by virtue of a counter-question: if You (not the Consortium) have invented a financial result-oriented game with clients - WHO IS SUPPOSED TO BE THE WINNER (the game organizer or clients)?

Hopefully, I have beaten off some green traders’ lust for instant gains at FOREX. You are facing a professionals market and becoming a profi yourself is the only way to earn money at this market.

The underlying chapters are concentrative of the attempt to elucidate the core question: HOW are the FOREX quotes presented, to enable the extra-exchange FOREX market traders to attain steady gains.

Below I will purportedly and repeatedly resort to examples from books by Viktor Suvorov (”Ice-breaker” et al.). Our target at FOREX is a twin sister of V. Suvorov’s one in history: to use official sources (i.e. absolutely verifiable materials) in legal understanding of what is camouflaged by the world’s richest market half-truth and falsehood in Fundamental Analysis and Technical Analysis methods, in published FOREX literature, in websites analytics and predictions, in actions of dealers making millions USD by means of their client traders’ accounts, etc.

Now, please, find below an intermediate conclusion being the starting point in understanding of currencies quote logics as well as in pinpointing of CORRECT and ERRONEOUS method of operation at FOREX proposed by Bill Williams and other scholars:

A trader is to be aware of one single thing - as different from stock markets, FOREX traders are not opposing each other, but they fight against the almighty FOREX Game Organizer - the world banks Consortium being capable of swiveling any national currency to any direction and at any moment by way of using numerous economic indicators, news releases, whose authenticity is not doomed to ever be verified by anyone.

Thus, how is one to realize, at a trend beginning, but not by its end, WHAT FOR and BY HOW MANY POINTS the Consortium is pushing currency rates?

Bearing the above in mind we will dedicate the following book chapters and the Masterforex-V Academy training to this issue exactly.

If you wish to be trained on Trading System Masterforex-V - one of new and most effective techniques of trade on Forex in the world visit http://www.masterforex-v.su/

Vyacheslav Vasilevich (Masterforex-V)

Professional Trader from 2000 year.

President of Masterforex-V Trading Academy

Author of Books:
1. Trade secrets by a professional trader or what B. Williams, A. Elder and J. Schwager not told about Forex to traders.
2. Technical analyses in Trading System MasterForex-V.
3. Entry and Exit Points at Forex Market

href="http://www.masterforex-v.su">http://www.masterforex-v.su
href="http://www.masterforex-v.org">http://www.masterforex-v.org

Currencies exhibit trends we all know this and some of these trends can last for months or years, yet most novice traders make a fundamental error when trying to turn these trends into profit.

What is it? Read on and find out.

Most novice traders are right about market direction in FOREX trend following, but then end up losing, because they simply cannot accept huge gains!

Sure, all traders want them, but most traders can’t accept them, this will become clearer with a little more explanation.

One of the most important rules of trading is run your profits to cover your inevitable losses.

Most traders fail to do this.

In my experience I have seen traders who are great at getting trend direction right - Yet they end up getting bumped out of the longer term trends.

They bank a $1 or 2,000, when they could have made $10 - 20,000!

When they get a profit their delighted.

The bigger the profit gets, the more inclined they are to take it (even though the market is going their way) in the end they snatch it and bank a minor profit.

Why Traders Cant Follow Trends

The reason they do this, is simply they can’t accept that in any long term trend volatility will eat into open equity on pullbacks.

This causes emotional turmoil and the thought of losing a profit, means they are grateful for any profit they get.

You must maximize Your Winners

If you are FOREX trend following then you need these trades to pile up huge gains and only exit when your system tells you to.

Look at the Big Picture

It takes courage and discipline to hold a trade when you see a few thousand dollars lost on a pullback, but that is what you have to do.

If you are FOREX trend following try this way of trading:

1. Only trade significant breaks of important market highs or lows - These normally become the big trends of the year.

2. Place stop below the breakout point - Do NOT trail the stop to closely give the market room to breathe.

3. Set a profit target based upon your study of price history.

4. Only exit when your system tells you to.

You can make huge profits if you do this.

The big trends last a long time

Keep in mind significant breaks of support or resistance coincide more often than not with economic conditions changing in the country of origin and these can last for months or years.

Accept big drawdowns in open profit - Their normal

Stick with the big trends and you will be rewarded longer term with your FOREX Trend following method.

FREE ESSENTIAL TRADER PDF’S AND MUCH MORE

On all aspects of becoming a profitable trader including features, downloads and some great FREE Trading PDF’s visit our website at http://www.net-planet.org/index.html

The best trades very often tend to be the most uncomfortable.

Buying significant breakouts works, but you never get in at the bottom (and let’s face it we all want to buy low and sell high) but “buying high and selling higher” is much more profitable if, supported by price momentum.

Most novice traders hate doing this.

They miss the trade because they want to buy the bottom, then want to wait for the pullback to get in.

In most cases this does not yield an entry with the best risk to reward.

Most major moves start from market highs NOT market lows.

If you don’t grit your teeth and learn to buy them, you will simply miss out on most of the best trends.

When you have significant resistance broken and price momentum on your side the odds are very much in your favour if you enter the long side.

Sure, you miss some of the move but odds are the move will continue when important resistance is broken.

By not predicting and acting on confirmation, you will enjoy some great profits with breakouts.

So how far will the pound go up?

No one knows or can predict, so look at the charts and look for clues.

The pound could drop when the RSI peaks and the stochastic lines cross to the downside and point down with bearish divergence.

These indicators are great for getting into trades and their both great indicators to take profit with as well.

Watch them closely and act on confirmation.

Trading online FOREX is all about getting the odds in your favour.

If you trade important breaks of resistance and support with price momentum on your side, you will make some great profits.

If you read my articles regularly you will know we give live trade set ups for you to look at and tools you can apply to spot and enter trades in live situations.

The British Pound set up worked well and a great profit has unfolded, but there is an important lesson I wanted to share with you here.

FREE ESSENTIAL TRADER PDF’S AND MUCH MORE

On all aspects of becoming a profitable trader including features, downloads and some great FREE Trading PDF’s visit our website at http://www.net-planet.org/index.html

Let us imagine a city where the only living accommodation is a standard apartment. Every unit is identical, and there is no difference in their values.

Suppose that the current value of the apartments in January, 2007, is $500,000 and that the value fluctuates with market conditions in the normal way.

You can enter a contract to buy or sell an apartment whenever you wish, but the City Fathers have decreed that contracts can only have an completion date on the 3rd Friday in March, June, September, or December each year.

If it is currently January ‘07, you can enter into a contract for completion in March-07, June-07, Sept-07, Dec-07, March-08 etc.

Any citizen of the city can take either the buy or sell side of the contract. Assume there is a very liquid market for the apartments, so citizens can choose to buy or sell contracts whenever they wish (prior to the contract expiry date).

Now, let us assume that the contracts themselves can be bought and sold in a market place, with the contractual obligations being instantly transferred to the new “owner”.

It is not hard to see that if I hold a contract to purchase an apartment at $450,000 in March-07, and the current market value in Jan-07 is $500,000, I should be able to sell this contract to another trader in the market for roughly $50,000, less discount. (You might get less if the market expects prices might drop back a bit before March, or more if the market expects prices to continue rising.)

Alternatively, I might hold a contract entitling me to sell an apartment for $585,000 in June-07. Clearly this contract has value because the current market price has now fallen to $500,000. I should be able to get approximately $85,000 for it, less discount. (Again, you could get less if the market expects prices to bounce back up before June, or more if the market expects a further decline.)

Our final assumption in this hypothetical scenario is that you are required to pay a performance bond, which we call the “margin”, whenever you enter an open position by buying or selling a contract. For example, you might be required to put down 10% of the full price ($50,000) to guarantee that you will meet your contractual requirements.

Note that you are allowed to enter a contract to sell an apartment even if you do not currently own one! Thus you could enter a contract to sell an apartment for $530,000 in June-07 (6 months from now) even though you currently own nothing.

If you hold the contract to expiry, you must deliver on your commitment. You can do this by, say, building a new apartment in the interim, or by planning to buy an apartment just before you are required to sell. Obviously, you hope that the market price will decline before you make your purchase, so that you make a net profit.

What I have described is a Futures Market in Apartments. There are three groups of people who might be interested in using this market.

Commercials

The first group is the genuine participants - people who are actually looking to buy or sell an apartment. In a Futures market this group is called the “Commercials”.

Say you want to buy an apartment a year from now, and you fear prices will shoot up during the year. You enter a contract to Buy at an agreed price of $500,000 a year from now. This locks in your purchase price, and you will only lose out if prices actually fall during the year.

Conversely, you may be a developer planning to have new apartments for sale eighteen months from now. Your budget is based on selling the apartments at the current market price, but you fear a sudden drop in market prices could take away all your profit. You could enter contracts now to sell apartments for $500,000 in June-08, thus guaranteeing the price you will receive at that time. Of course, you lose out if the market rises during that period, but you are protected against a disastrous market crash.

The original futures markets were in agricultural products. The Commercials were (a) farmers growing crops and (b) organisations purchasing the crops. For example, coffee growers in Brazil and Starbucks are Commercials in the coffee markets.

Farmers sell futures contracts to achieve guaranteed prices for the coming harvest crops, even though they may not have planted them yet. The organisations buy futures contracts to guarantee the prices they will pay for the harvested crops.

Both sides benefit by getting certainty in their businesses, aiding planning and budgeting. They can continue their business operations knowing they are protected from the vagaries of wild price swings.

Hedgers

The next group is known as the “hedgers”. For example, you might be a landlord who owns 10 apartments. This is $5,000,000 of capital value, and you are worried that it is going to be eroded during a market downturn which you anticipate will hit over the next 9 months.

You sell 10 contracts at $500,000 and plan to buy them back just before contract expiry in Sep-07. If you are right and the market price drops to $460,000 by then, you will make $40,000 profit per contract, or $400,000 in total. This exactly offsets the decline in the capital value of your 10 units which are now only worth $4,600,000.

However, if you were wrong and market prices actually rise to, say, $530,000, you will be buying the contracts back for a $30,000 loss per contract, $300,000 in total. This exactly offsets the increase in capital value of your properties which are now worth $5,300,000.

In other words, the hedger sets up a futures trade which is neutral whether the market rises or falls. The hedge protects against a potential disastrous loss of value, but at the same time it gives up the opportunity of windfall profits if the market moves in your favour.

A very common hedge occurs in currency markets when a company agrees to make a major purchase some time in the future in a different currency. The risk is that the exchange rate will move against the company before the delivery date, meaning that the price will be significantly higher in the company’s own currency than it had budgeted. (Conversely, the rate could move in its favour and the price in local currency would be cheaper.)

The company can set up a hedge in currency futures which guards against an adverse move in the exchange rate, but sacrifices windfall gains if the rate moves favourably.

Speculators

Reverting back to our hypothetical scenario, the final group of people is the one I belong to - the “Speculators”. We have no interest in buying or selling an apartment, have nothing to hedge, but just want to make money.

A speculator generally takes a view of the market - expecting it to either rise or fall - and buys or sells futures contracts accordingly. The speculator may hold the contract for years, months, weeks, days or minutes! The speculator never holds a contract to expiry because s/he does not want to have to get involved in actually buying or selling a physical apartment.

Some people see the Commercials and Hedgers as the legitimate players in the Futures markets, with the speculators being looked down upon as mere gamblers who don’t create or contribute anything. However, it turns out that the speculator makes an extremely important contribution to the market by providing liquidity.

If the market place were confined to Commercials and Hedgers, then they might well find that when they wanted to buy or sell, there would be no market participant prepared to take the other side of their contract. Speculators, who are prepared to assume risk in return for the chance of profits, fill this gap. Never be ashamed of being a Speculator!

Examples

#1 Let’s consider an example of entering a contract to Buy (known as going “Long”). It is now Jan-07 and we go long a June-07 contract at $500,000. A few weeks pass by and the City Fathers publish a report about a predicted property shortage which causes the market price to move up to around $530,000. We decide to take our profit and sell our contract in the Market. Since our contract gives its owner the right to buy an apartment with a current market value of $530,000 for just $500,000 we can sell it and expect to make a profit in the vicinity of $30,000.

#2 Now an example of entering a contract to “Sell” (known as going “Short”). It is Jan-07 and we go short the March-07 contract at $500,000 in anticipation of some bad economic news. Sure enough, the very next week, the City Fathers front up with the bad news that unemployment is gathering pace and the economy is turning sharply downwards. There is a bit of upheaval in the markets, and overnight the value of an apartment drops to $440,000. We now hold a contract guaranteeing a price of $500,000 in March for a commodity valued at $440,000. We go to the market and buy a contract at $440,000 to offset our short contract, taking a profit of about $60,000.

Leverage

One vitally important concept I haven’t mentioned yet is “leverage”. Remember I said that you have to pay a deposit, or margin, whenever you buy (go long) or sell (go short) a contract. Suppose the margin is $500,000 - the full purchase price. Then in example #1, we pay $500,000 margin and make $30,000 profit (6% return). This is a conventional transaction with no leverage.

If the margin is reduced to $50,000 then the $30,000 profit represents a 60% return on the capital invested! We now have 10-1 leverage on our investment. Suppose that in #2 above, the margin is $40,000. Then the $60,000 profit is a return of 150% When you consider that such returns may have been achieved in just a few days, then the annualized profit potential is enormous.

However, never forget that leverage is a double edged sword! Suppose that in example #2 the market did not plummet as you had hoped. In fact, the price of an apartment rises to $560,000 and when we buy it back we realize a loss of $60,000. Now we have a negative 150% return.

What is worse, we have lost more money than we invested! When there is no leverage, you cannot lose more than you invest even if the price of the underlying commodity falls to zero. In a leveraged investment, you can lose much more than you invest if you don’t manage your trade properly.

Summary

- There must be an underlying commodity which is absolutely standardized. e.g. 5,000 bushels of soybeans of a specified grade; 5 times the value of the Dow Jones Industrials stock price index; 100 troy ounces of refined gold. There are literally hundreds of commodities traded in the world’s futures markets.

- Participants can enter a contract to puchase the underlying commodity at an agreed price on some future date. This is known as buying a contract, or going Long.

- Participants can enter a contract to supply the underlying commodity at an agreed price on some future date (even if they don’t own the commodity now). This is known as selling a contract, or going Short.

- There must be a market where contracts can be freely traded. The contracts are not personalized, so their obligations and benefits are immediately transferable to a new owner.

- As the market price of the underlying commodity fluctuates, the value of contracts changes accordingly. People who buy (go Long) make money when the underlying commodity price rises, and lose money if it falls.

- People who sell (go Short) make money when the underlying commodity price falls, and lose money if the price goes up.

- Participants gain control over the full quantity of the underlying commodity when they buy and sell contracts. Because they only need to deposit the contract margin, this provides a leveraged investment.

David Bennett is an independent Futures Trader. He lives on the Gold Coast of Australia, trading financial and grains futures contracts in Chicago. Visit http://12oclocktrades.com for more articles.

We said on Sunday that a big profit opportunity would present itself in the British Pound and the currency has soared to new 2 year highs, yielding a great profit for those who followed our trading methodology

So what is the outlook now? Let’s take a look.

When we outlined this trade on Sunday, we said that prices could go either way and were at a critical juncture.

We actually favoured the downside, but price action gave us a long signal, so we went with it.

By waiting for confirmation and letting price action tell you where prices are going to go is always better than trying to predict and removes the emotion from trading.

So where is the Pound going next?

Let price action confirm again and don’t anticipate.

We have a breakout to the upside and would now look for a weakening of momentum to take profit.

This would be signalled by:

1. A cross in the stochastic with bearish divergence
2. A weakening RSI

When you make a great profit in a short period of time it is tempting to take it, our view is normally to put half in the bank (which we are doing) and let the other half of the position ride and exit on weakness when it occurs.

KEEP IN MIND

As anyone who reads our articles knows and our main contention is anyone can make profits from currency trading with a simple system.

You don’t have to pay a guru and all the information is FREE on the net.

All you have to do is learn it.

We also like to demonstrate our methods with live examples (unlike many gurus or self proclaimed experts) and the above is yet another live profit.

If you want to make money in FOREX trading you can do so by applying a simple system similar to the one we used for this trade.

If you are novice trader:

Learn simple technical analysis - Support and resistance levels and look out for valid ones.

Then learn a

Breakout methodology

Finally, get some timing indicators to gauge momentum ( we use stochastics and RSI ) but you can pick ones that are logical and your comfortable with.

YOU CAN DO IT!

FOREX trading is essentially simple and if you learn the above ( FREE on the web) you can soon be making some great high reward low risk trades and the good news is you can do it all on your own.

Good luck!

FREE ESSENTIAL TRADER PDF’S AND MUCH MORE

On all aspects of becoming a profitable trader including features, downloads and some great FREE Trading PDF’s visit our website at http://www.net-planet.org/index.html

Many people are looking for a way to get rich overnight. That there are many scams out there that continually lure people in with wild promises of instant wealth is easily demonstrated by watching television or checking the bulk folder of your email account. While there are some people that attempt to make ridiculous promises about the money to be made in currency trading, the fact is that for many it is just like any other type of work. You must be prepared to put in your time, have some success
and also experience some failures now and then. If you are looking for instant success and have visions of spending the rest of your life on the beach after making a killing with currency trading, then you need to do some serious rethinking.

In like manner, you will need to posses the attribute of patience if you are to get anywhere with currency trades. While you may indeed experience incremental success with your transactions, your gains will come over time and usually will be rather small in and of themselves. You may need to hang on to a currency for a period of time rather than trading it off, with an eye to the way you believe things will look a week or a month from now. Make sure you can keep your cool and allow your
better judgment to come into play. Patience tends to be rewarded handsomely.

The state of your finances also is a big factor when it comes to making a decision about getting involved with currency trading. As with any type of investment, you need to make sure you can afford to lose what you invest without creating any problems with maintaining your current standard of living. While some people like living on the edge, the fact is there is no glory in going for a deal and ending up having to sell the house in order to cover what turned out to be a bad deal. If you are not able to keep your head when it comes, to only using your disposable resources, to fund your currency trading,
then you need to rethink the whole idea.

There is a lot of money to be made with currency trading. However it is not a venture that is right for everyone. If you are looking for a get rich quick scheme, have a problem thinking decisions through with a cool head, or have a tendency to not take care of your basic financial needs before you invest, then Forex currency trading is not the right choice for you.

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One of the first things you will want to look for in any broker you hire to help you with currency exchange would be queries.The whole point of having the broker is so you have an expert who is able to interact with you on what currency to buy and to sell, and when. A broker that considers their time too valuable to spend with you is not a broker that you need to do business with.

An attribute that you want to seek out is that of being a partner in a financial venture. The bottom line is that if you are not making money, then your broker is not likely to be doing all that well either. And if you eventually lose your shirt and have to drop out, then the broker has lost a client. It is in the best interests of both you and your broker to make sure you are making money and increasing your portfolio. Interestingly enough, not all brokers have this mind set. Look for the ones that are interested in seeing your assets grow over the long haul and stay away from the ones that are looking to make
a quick buck with you before moving on to the next person.

Accountability is another trait you want to look for in your broker. When making a recommendation to buy or sell a particular currency, a broker with this attribute will be able to articulate to you all the reasons why this would be a positive move for you. While “trust me” may be all you need if you are playing a board game with a friend, it is not enough when you are talking about your money. A solid reputable broker will know that and always has some very good reasons for the advice he or
she gives you.

Essentially, a great deal of what you are looking for is simply honesty, integrity, and an obvious knowledge of how currency trading works. When you are able to find someone who exhibits all these characteristics, as well as being dedicated to making money with the customer, not off the customer, then you have found a Forex broker that is worth doing business with.

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Today, well over 1 trillion dollars per day is traded on the currency exchange market. This amounts to roughly one thirteenth of the US GDP. This amount absolutely dwarfs what is traded on equity and commodity markets on a daily basis.

So why is exchanging currency so popular? Why do more people want to trade on the currency exchange market than on markets for commodities and equity? Well, to give a simple answer: many of the people in the market for Foreign exchange aren’t investors. For instance, some of the biggest players in the money exchange market are multi-national corporations, who need to constantly swap currencies, so they can purchase inputs or finished products from producers in other countries. Other
major players in the foreign currency exchange market include federal governments. They will often purchase other currencies to stabilize their own currency in relation to another. For instance, if the US Treasury or the Federal Reserve System were to purchase Euros (and subsequently take them off the currency market), the value of the Euro would increase in relation to the dollar. This would stimulate European demand for American imports while decreasing American demand for European imports.

While the above partly explains why the demand for exchanging money is so great, it does not do so completely. One other reason why the demand for foreign exchange is so great is because it is the most liquid investment vehicle available. While selling stocks and bonds may take a while and may be dependent on market conditions, selling currencies is usually quite easy. In fact, most online brokers allow you to trade with “no slippage,” which means that the second you click “sell,” you actually sell the currency you’re holding at the exact swap ratio listed on the trading platform. This means that you don’t need to worry about getting stuck with a currency that is rapidly declining in value. Rather, you can sell quickly and get out at any moment.

One last factor that has perpetuated the growth of the money exchanging market is international bank holdings. Not only do banks often exchange currencies for their business account holders when they make transactions, but they also sometimes offer to hold deposits in banks overseas or in different currencies. This can prove to be quite advantageous for depositors. For instance, if the value of the dollar is climbing rapidly in relation to the yen, Japanese banks may start to put some deposits into dollars. After the value of the dollar has appreciated significantly, depositors will be able to exchange the dollars for yen, getting back more yen per dollar than was initially deposited.

As you have read, money exchanging is a massive market, which influences the decisions of governments, businesses, banks, and individuals. Not only does Forex allow each of these players to make an extremely liquid investment, but it also makes foreign transactions easier.

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