Forex 447: 2011

Saturday 21 May 2011

Weekly Trade Reports

If you NEED trading to be complicated or complex, stop reading now and definitely don't come to one of my classes!” – Rick Wright
“If a strategy sounds complicated, it likely does not work.” – Sam Seiden
Hello:
It’s unthinkable that many traders use complicated methods to trade. Some traders combine several pieces of expensive charting software and indicators together, thinking that it would enable them to make more accurate trades. They forget that they’d hardly achieve over 50% accuracy on a long-term basis. A combination of several indicators and complicated trading ideas doesn’t improve the stats. This combination would only cause analysis paralysis. You might be deceiving yourself that you have a higher hit rate with your trading system. This is illusory. If a coin was tossed endlessly, the long-term share between heads and tails would be a well balanced 50/50. But there’ll be times when heads would remain ahead several months long or the other way round. You may get a head several times in a row, then a few times a tail, and then many times a head; making you to conclude that you got a better hit rate. But ultimately, the hit rate would level out at 50%
Each indicator has a different way of generating signals and when most of them finally agree, the winning edge is likely gone. Generally when you combine several indicators and look for a million reasons to enter a position, you’re making your trading life unnecessarily hard.
A single moment’s carelessness or psychological weakness on the part of a trader may ruin the work performed during an entire trading day or even a whole week. Basically a trader trades his account and not the market. Consequently, he should always keep an eye on the volatility of his account. During drawdowns position sizing must be reduced drastically. Only that way can a trader get through bad patches and ensure his long-term survival. This has nothing to do with how you make your trading decisions, but it has a lot to do with how you manage your risk.
How can a trader gain over 250% in a short time, only to have up to 85% drawdown in his trading portfolio within another short period of time? The answer is that the person doesn’t know about effective position sizing and risk management. Plus he/she may be using excessive leverage indiscriminately. Mike Kulej, a maverick of the financial markets, explains that brokers overplay the availability of leverage. They manage to point out advantages, but not the risks. Leverage itself will not make anybody better trader, it will only magnify losses and gains. In addition, trading with high leverage adds to the already highly emotional nature of this activity. It is natural that a trader wants to make as much money as possible, but before using leverage, one should prove it to him/herself that the account is actually growing.
I’d suggest trading with very small position size.
I once said that your chart needn’t look like a Michelangelo’s painting before you can make better trades. In one of my coming articles, I’ll show you how thousands of pips can be made from trading with only one indicator. I even know one popular and permanently successful funds manager who doesn’t use any indicators: he only follows the trend he sees on the charts. The truth is that it’s thru safe and sensible position sizing and risk management that we meet our trading objectives, not thru complicated analyses that supposedly give us entry signals.
Please clean up your charts, and thus make life considerably easier for yourself. If you need to know whether the market is moving up or down or sideways, simply look at your chart. You don’t need fancy indicators to tell you if a chart is trending or not, all you need to know is contained in the price action itself.
NB: Please watch out for my coming articles with these titles: ‘Worst-case Scenarios’, ‘Effective Swing Trading In Forex’, ‘Advanced Gap Trading’, ‘Resist The Lure Of High Risk (Part 2)’, ‘Developing The Right Attitude Towards Losses’, ‘3 Recent Gap Trades,’ ‘Trading For A Livelihood,’ etc.
I’d like to conclude this article with more quotes from Mike Kulej:
1. “Incidentally, all types of technical analysis will have good and bad times. Does not matter what indicator, pattern or charting method is used, nothing is 100% correct. The trick is to not to get discouraged during losing periods, which are sure to happen.”
2. “This may sound old and worn out, but always use stops. You will not get mega rich in a day, yet can go broke in one if, a stop is not in place… Preserve your capit
copied from http://www.fxstreet.com/technical/forex-signals/weekly-trade-reports/2011/05/02/02/

Forex Trading News – Euro rebounds off 6 week low as commodities gain

six-month low against the Dollar earlier. The Single currency bounced off 1.4122 to rise over 150 pips to 1.4275. The pair opened the Asian session at 1.4237 and hovered around that level, without much volatility.
The appreciation of the greenback was halted as oil bounced back today, influencing the dollar’s strength since the two usually have an inverse relationship.
“Commodity markets are in the driver’s seat for currency markets,” said Mary Nicola, a New York-based currency strategist at BNP Paribas SA. “We have seen a bounce back in oil today, and so that has affected dollar strength.”
Meanwhile, as investors continued to shed dollar-funded bets on riskier assets Thursday, the Euro seized its chance to edge higher against its main counterparts, even as concerns lingered about the debt crisis in the Eurozone’s fiscally stressed periphery.
However, hawkish comments from European Central Bank officials gave investors high hopes of possible higher rates to come, boosting demand for euros even on a day when demand for other risk-positive currencies was low.
Later in the day, GDP data from major euro zone members including could further boost the common currency.
The International Monetary Fund said on Thursday it still was willing to consider giving Greece more time to repay its bailout loan of 30 billion euros.

Most Read News

FOREX TRADING

FX MARKETS VS OTHER MARKETS

3 Forex Tips for Novice Traders

Last week, you learned that forex trading comes with a risk, which comes with any form of investment be it through stocks or securities. But the risk that comes with currency trading, as we have said, can be lessened through careful study and prudent analysis.

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Reuters

A sculpture showing the Euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt April 7, 2011.

Algorithmic trading fuels IT in forex: Study

In a new report, Technology Systems in the Global FX Market, Celent analyzes the electronification of the FX market and the growth in IT spending. Celent estimates that IT spending in FX was around US$1.2 billion in 2010. Algorithmic trading, a focus on latency and capacity building, growth of multiasset trading strategies, and enhancements in post-trade and STP will be key factors driving growth in e-FX spending over the next three years.
The success of FX is tied to higher IT spending. Competition for market share has resulted in larger banks scaling up their investments. Smaller banks have been pressed to come up with innovative approaches, and we see them moving towards providing niche offerings such as specializing in specific derivatives or currency pairs, or focus on specific segments of customers like hedge funds and asset managers.
Key findings of the study include:

In the pre-trade phase, the focus is on liquidity aggregation, enhanced analytics including complex event processing, transaction cost analysis, and better user interfaces. The increase in volume has made analytics even more sophisticated and important to the trade decision-making process. Increasing trade volumes and falling ticket size have put huge pressures on the handling of market data as well as intelligent usage of the data for valuable information.
Single-dealer platforms (SDPs) are gaining popularity, and this is mainly related to banks’ technology investments. SDPs are providing greater speed and reliability of trade execution, because they create fewer hops from execution and low-latency technology. In addition to research and analytics, SDP clients are also benefiting from superior post-trade processing capabilities and STP solutions that the banks are offering.
Unified post-trade STP solutions are in demand as trade size keeps falling and number of transactions keeps increasing. Cost reduction for the smaller players has driven demand for hosted-service models and shared services. Integration of back office in a multiprime scenario and multiasset context, while complex, is emerging as a reality and creating pressure for innovative solutions.

“In the D2C market, there is a wide spectrum of users with varied needs, and this is reflected in the solutions,” says Sreekrishna Sankar, Celent Analyst and coauthor of the report. “As the demands of the market have become increasingly sophisticated, solutions have evolved into two categories: front-to-back solutions and niche players focusing on specific aspects of the market.”
“There is heightened sensitivity to risk management across the front and middle offices. Spending on risk management solutions is rising, especially among corporations,” adds Muralidhar Dasar, Celent Analyst and coauthor of the report. “Firms are looking to gain a real time handle on portfolio topography measures, historical VaR figures, and elaborate P&L reporting.”
This report discusses trends in the global FX market and the role that technology will play in its future growth. The report analyzes the fragmented technology landscape in the market and addresses future focus areas.
copied from http://www.futuresmag.com/News/2011/5/Pages/Algorithmic-trading-fuels-IT-demands-in-forex-Study.aspx

MF Global's Kemp Sees Opportunities In Forex Market Evolution

Regulatory change is "democratizing" the global currency market and creating openings for challengers to the banks that dominate trading, the new head of global foreign exchange at MF Global Holdings Ltd. (MF) said Wednesday.
The appointment of James Kemp to lead its forex push is part of the effort by MF Global Chief Executive Jon Corzine to remake the futures brokerage into a full-scale investment bank within five years.
"Some of the smaller companies involved in FX now have the opportunity to find gaps where large institutions are not covering clients in the way that they want to be covered," Kemp said in an interview Wednesday.
Corzine, the former New Jersey governor and Goldman Sachs (GS) chief, has directed MF to take the other side of client trades in markets like foreign exchange and intends to weave currency trading capabilities into a planned global platform for retail investors.
Kemp previously was co-founder and partner of Cogence Capital LLC, a short-term quantitative currency trader, which he said gives him a view into the advent of electronic trading in the $4 trillion per day forex market.
"In some areas you can compete with the universal banks because of the greater access to prices that the growth of electronic access has brought along," he said.
Broader availability to credit via prime brokerage services has allowed smaller, electronic firms to compete for currency trades against much-better capitalized giants of the business, he said.
A crop of electronic venues for trading in the spot cash market, bolstered by the influx of new forex traders, has helped develop "a more level playing field than there used to be," according to Kemp.
Regulators in the U.S., the U.K. and Europe, Kemp said, are likely to align on new requirements for certain foreign exchange derivatives to be "cleared," or processed by central counterparties that reduce the risk of broad market upheaval if a major trading participant defaults.
"I'd be surprised if [U.S. and European regulations] are not very similar images of each other," he said, as authorities seek to guard against traders gravitating toward more lightly-regulated jurisdictions.
The U.S. Treasury last month said it intended to exclude many currency derivatives from clearing requirements, but customized foreign-exchange options, swaps and non-deliverable forward contracts wouldn't be exempted. The Bank for International Settlements this week estimated that the level of outstanding currency derivatives trades worldwide climbed to $57.8 trillion in the second half of 2010.
"If these products are centrally cleared, some of the control that the larger institutions have on that market is going to be broken down," Kemp said. "It gives other people an opportunity to participate in those more credit-intensive products."
Kemp's move to MF Global reunites him with Richard Moore, picked by Corzine last year to oversee European operations. Both previously spent more than a decade at Citigroup (C), and Kemp will report to both Moore and Corzine.
MF Global is due to report fiscal fourth-quarter earnings Thursday.
copied from http://online.wsj.com/article/BT-CO-20110518-710701.html

Forex Market: Spain’s Trouble Leads To Eerie Risk Aversion

Yesterday the market starts with eerie risk aversion momentum building because of the fear of the Spain’s banking trouble that are continuously suppressing the Forex trading market. We have noticed a lack of unity in the Euro zone member nation’s community as the German members are unhappy due to the joint EUR bond issue since it cause the nation to lead by using wrong policies. The euro zone financial calendar specifies about the increment of industrial orders to 5.2 percent along with ECB announcement of one week fixed term deposits.
FOMC minutes in US specifies about the favor coming from the three regional banks for the first rate hike to 1 percent as it helps to regain the past discount structure of interest rate. Although these are the concerns related to the economic recovery leads to the fear in the market but we know that there is a ray of hope in every dark night as this proves true by the consumer index as it gets the market into a surprise by reaching to the 63.3 level beyond the expectations of market.
US market equities after getting this news erased all its losses and closes at 0.4 percent at the late forex session. S&P also get a rise of 0.3 percent in this whole month. Where as the currency pair of USD/JPY also shown a high yesterday by reaching to 90 level. In UK there was a quarterly report release takes place yesterday which results shows a growth rate after the meeting. It also mentions about the cut in Government spending along with the public sector wages where as private consumption seems to be flat in the next quarter.
US labor market are seems to be in worry after the last week’s report of the US jobless claims that unexpectedly leads the sharp rise in the market. This news may rise a double dip recession if the US labor market seems to be stalled. The European country debt crisis was an obstacle for the US economic recovery and embeds the more concerns about the global economic recovery to the labor market in US. In the past US have made 500k jobs since market signifies that it may reflect the employment report improvement of BLS. Although we have noticed that the jobless claims had fallen sharply below the expectations eventually but the claim report still in the level above and would confirm that the US is still making more number of jobs than losing.
The Korean currency falls leads the Asian market fall yesterday. the trading in US dollars will remain instable from the morning session and the euro is also seen in the downtrend. The USD/JPY leads to Sterling currency under pressure after the drop down in yesterday market. Instead of all these things the EUR/GBP and GBP/JPY was seems to be a big mover of the day and reaches to the high level after crossing the four yen. These all happenings of Yesterday leads the market to the V variety across the board.
copied from http://forexmoneymaker.blog.com/

The Morning Forex Fake-Out Trade

Many traders are aware that when a market opens there are often whipsaw-like actions (or what some may call "fake outs") before a stronger trend emerges. With currencies the market is open 24 hours during the week, therefore many traders don't see the forex market as having an "opening" session. Yet this is not true. Banks in different parts of the world open for business, and with that, a larger volume enters the market. Therefore currencies are not immune from the morning "fake out." As stop levels are cleared on either side of the open price, a stronger trend will often emerge. This trend may not last, but by knowing there is often a fake out followed by a stronger move, traders can position themselves for taking advantage if they implement the proper strategy. Opens to WatchNot every currency's open is worth paying attention to. Ideally, traders will want to watch the most liquid currency pairs, and also look for pairs that see a large increase in volume/participants as the country/zone opens.
Because of how major market's business days overlap with one another, the European open is an ideal candidate for trading the open. One main reason for this is that pairs such as the GBP/USD or EUR/USD are not as heavily traded prior to the open, but when Germany opens followed one hour later by London at 3am EST (please be aware of impacts of daylight savings time) volume ensues. The yen is traded heavily in the Tokyo session but as London opens there is an overlap with the Tokyo session resulting in increased volatility for the GBP/JPY and EUR/JPY. The CHF/USD is also worth watching.
Therefore we have several pairs to watch starting at about 1:30 (pre-market open) till about 4am EST (one or two hours after the markets open) to watch for a set-up. Since not all signals will occur at the same time, several pairs can be traded.
The Set-UpPrior to a major market opening, forex pairs will often move within relatively small ranges. This is not always the case though. There may be a lot of movement prior to the European open, on days such as this the set-up will be harder to see (and may not exist), therefore caution is warranted on using this strategy on such days. The set-up should be watched for on a 15 minute chart.
1. We ideally want a calm pre-market, or one that has a definable pre-market range. This range will be marked on our chart pre-market and then we will watch for the European open to begin.
2. A breakout of that range is likely to occur. We do nothing as this is quite possibly a false breakout. Ideally we want this breakout to be small, 10-30 pips (or no more than one third of the daily average range).
3. We watch for an engulfing candle pattern (or any candle which shows a strong movement in the opposite direction over one or two bars) in the opposite direction of the original breakout (for example, if the range breakout was down, we watch for a bullish engulfing pattern).
4. We make a trade in the direction of the engulfing pattern.
5. A stop is placed just below the low (high) of the bullish (bearish) engulfing pattern.
6. Profit target(s) is based on average movement during the early European session or the daily average range (trades will generally take longer to exit if using the larger daily figure).
7. Similar to a trailing stop, a new engulfing pattern in the opposite direction of our trade can be used as an optional exit.
Potential IssuesBefore showing examples of the trades, there are several things traders should be aware of. No strategy is perfect, therefore the best outcome is to aim to maximize the good trades, and minimize the losing ones (because they will occur). Here are few guidelines which can be added to the system to aid in its effectiveness:

FORX TRAD : Forex International Trading Corp. Announces Conference Call to Review Q1 2011 Financials and Business Outlook

Forex International Trading Corp. (the "Company") (OTCBB:FXIT), today announced that the Company will report its 2011 first quarter financial results on Friday May 20, 2011.
The Company will also host a conference call to discuss its first quarter financials for fiscal 2011 as well as the Company's business outlook for the remainder of the year. The call will take place after the close of the market on Wednesday May 25, 2011 at 4:15 p.m. (EDT) and will be open to all shareholders and interested parties.
The conference call will be conducted by President and CEO, Darren Dunckel, "Our consolidated financials will show over $3 million in revenue in the first quarter. We look forward to discussing with our shareholders and the investment community the growth that we have experienced over the last year in the Forex market space and to discuss our current and future projects that we hope to accomplish this year."
This conference call will be available by dialing 712-432-0900. The conference ID number is 758771.
About Forex International Trading Corp.
Headquartered in New York, NY, Forex International Trading Corp. operates an offshore advanced online trading platform for Forex markets to non U.S. residents. The Company focuses on providing individual and institutional investors with a platform for buying and selling currencies, precious metals and commodity futures. The company's platforms allow self-directed, broker-assisted, and managed accounts. Through the platforms, customers have access to over 20 currencies and bullion deliveries. The Foreign Currency Market ("Forex" or "FX") is created by the global exchange of currencies. According to the Bank for International Settlements, the average daily turnover, or, volume in the Global FX market in April 2010 was $4 Trillion compared to only $1.2 Trillion in 2001 (Wall Street Journal, Sept. 1, 2010). Historically, access to the FX market was only available to governments, commercial banks, corporations, and other large financial institutions. The Company is now capitalizing on the growth of online currency trading through its state of the art web-based trading platforms.
For more information, please visit: http://www.forex-international-trading.com.
Forward-Looking Statements: This press release contains forward-looking statements, including expected industry patterns and other financial and business results that involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from results expressed or implied by this press release. Such risk factors include, among others, whether Forex International Trading Corp. can successfully execute its operating plan; its ability to integrate acquired companies and technology; its ability to retain key employees; its ability to successfully combine product offerings and customer acceptance of combined products; general market conditions; and whether Forex International Trading Corp. can successfully develop new products and the degree to which these gain market acceptance. Actual results may differ materially from those contained in the forward-looking statements in this press release. Forex International Trading Corp. does not undertake any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.
copied from http://www.4-traders.com/news/FORX-TRAD-Forex-International-Trading-Corp-Announces-Conference-Call-to-Review-Q1-2011-Financials-an--13631640/

WORLD FOREX: Euro Rally Fades Amid Pre-Weekend Jitters

-- Euro fails to sustain break above $1.43 against dollar
-- Talk of large euro sales overhang
-- Swiss franc reverses losses after mixed central bank messages

By William Kemble-Diaz 
   Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--The euro gave up its gains against the faltering dollar in European trading hours Friday, as talk of a large overhang of potential euro sales, and concern about anti-austerity protests in Spain, capped the common currency's rise.
Like other major currencies, the euro cranked higher against the dollar Thursday following soggy U.S. manufacturing data indicated persistent weakness in the U.S. economy. The pound and Australian dollar largely held onto those gains Friday.
But the Spanish protests reminded investors of the biggest potential domino should euro-zone policymakers fail to contain Greece's debt problems, and widespread talk of options barriers being fiercely defended at the $1.4360 area, capped the euro's rise.
More broadly, Kit Juckes, head of currency research at Societe Generale, said a weaker dollar bias was settling in because investors had downwardly adjusted growth expectations and were satisfied--at least for now--that the global economic cycle is passing through a soft patch rather than poised for a reversal, even as the end of U.S. quantitative monetary easing looms.
"The natural reaction of markets is to look for the floor once you've reached the ceiling in the growth rate," citing the drag on growth from Chinese monetary tightening, high oil prices, Japanese disasters, budgetary cutbacks and fading U.S. fiscal stimulus.
But that process of downward adjustment appears to have run its course, putting the attention back onto the ample liquidity sloshing around financial markets and encouraging investors to load up on riskier, higher-yielding assets.
"For currencies that really means... a returning theme of the yen, the Swiss franc and the dollar not being the world's favorite currencies," Juckes said. "So the euro can head back through $1.45 and toward $1.50 on that basis, the dollar can make it up to Y83 again, and even the Australian dollar can get back its mojo."
But he emphasised that a pre-weekend close in the euro above $1.43 against the dollar would be key, particularly with the $1.4360 option set to expire early next week.
A move out in Spanish bond spreads also showed fixed income investors were mildly unnerved by regional elections due at the weekend in Spain, against a backdrop of mounting political demonstrations, causing some strategists to curb their enthusiasm for the single currency.
"In the short term, the euro is more likely to push higher against the dollar, even though the news from the euro zone is not going to be great," said Steve Barrow of Standard Bank. "I'm not that sure we can get back above the highs again, back above $1.50-plus."
The Swiss franc provided some intrigue, cranking higher to reverse losses seen Thursday after the country's economy minister seemed to suggest that the Swiss central bank might take action against its strong currency.
However, while the pre-prepared text of his speech included this note, the speech itself did not, Dow Jones Newswires reported Friday. That revelation may have been a factor behind the franc's ascent in London trading hours Friday, Citigroup said in a note to clients.
The data calendar was quiet in European hours. Figures showing the euro zone's current account deficit narrowed in March had little impact on currency markets.
Up ahead is Canadian CPI data, with the market looking for some direction on the timing of the next Canadian interest rate hike and the Canadian dollar holding around CAD0.9653 against the U.S. dollar.
Among emerging market currencies, the South African rand extended its gains in the wake of regional elections earlier in the week in choppy trade to trade at ZAR6.884 against the dollar.
"There's a lot of noise but not really much direction, a bit like other currency markets," he said.
At 1144 GMT, the euro was trading at $1.4269 against the dollar, compared with $1.4312 late Wednesday in New York, according to trading system EBS.
The dollar was at Y81.57 against the yen, compared with Y81.59, while the euro was at Y116.42 compared with Y116.80, after the Bank of Japan left rates unchanged as expected.
The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was trading at 75.25 compared with 75.399 late Wednesday in New York.
A summary of key levels for chart-watching technical strategists is below:

Forex spot:       EUR/USD    USD/JPY    GBP/USD    USD/CHF 
 
Spot 1034 GMT     1.4274     81.56      1.6244     0.8810 
3 Day Trend       Bullish    Bullish    Range      Bearish 
Weekly Trend      Bearish    Bearish    Bearish    Bearish 
200 day ma        1.3808     83.49      1.5987     0.9514 
3rd Resistance    1.4389     82.23      1.6355     0.8947 
2nd Resistance    1.4360     82.05      1.6304     0.8880 
1st Resistance    1.4345     81.87      1.6285     0.8828 
Pivot*            1.4281     81.76      1.6203     0.8817 
1st Support       1.4245     81.46      1.6211     0.8779 
2nd Support       1.4236     81.39      1.6139     0.8764 
3rd Support       1.4206     81.25      1.6107     0.8695 
 
 
Forex spot:       EUR/GBP 
 
Spot 1034 GMT     0.8784 
3 Day Trend       Bullish 
Weekly Trend      Bearish 
200 day ma        0.8634 
3rd Resistance    0.8881 
2nd Resistance    0.8858 
1st Resistance    0.8840 
Pivot*            0.8816 
1st Support       0.8773 
2nd Support       0.8761 
3rd Support       0.8725

-By William Kemble-Diaz, Dow Jones Newswires; 44-20-7842-9347; william.kemble-diaz@dowjones.com
copied from http://online.wsj.com/article/BT-CO-20110520-705915.html