Duration : 4 min 40 sec

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The way the markets move and how to spot big trending moves is not as easy as it first appears and many traders simply have no idea of what really moves prices and how to take advantage.

Let’s look at this in more detail and show you how to spot the big moves.

1. The market

Like any market we have buyers and sellers millions of them trading trillions of dollars a day.

They all have different objectives. Some are hedging and some are trying to make money. There are many different groups from the central banks down to small speculators.

2. How is value determined

Of course value is determined by the participants and all their opinions come together to give us the market price.

The facts are there for all to see, but all the participants see them in a different way and that’s why currency markets are so hard to predict.

Well that all sounds chaotic, so how on earth can you predict or even try to predict where prices will go?

In the short term in the period of a day for example it cant be predicted ( that’s why day traders always lose ) but in the longer term they can by a study of:

Human psychology.

Humans determine the price of anything and they will always push prices to far up or down.

Humans are emotional as well as logical beings.

It’s these spikes in human emotion when greed and fear push prices to far up and down, that you can trade for big profits.

Consider in an example we all are familiar with that happened recently.

Crude oil spiked up to $80.00 a barrel and people predicted it would go to $100.00.

The supply and demand fundamentals pointed to no shortage of oil but greed and fear took hold and pushed prices way above fair value

What happened next?

It dropped to the $50.00

This happens all the time in ANY market, to varying degrees.

Human emotion pushes prices to far and then they return to realistic levels of value.

Sentiment indicators

Charts give you a great view of human psychology and there are some good indicators to help you spot that are sentiment based.

The fact is if you can sell into mass greed and buy into mass fear you can get some of the best risk reward trades around.

Discipline and the right tools

Its not easy to do. With the news and everyone else opposing you, but if you can get a method and stay disciplined then you will end up winning and winning big in forex trading, or any other market you wish to trade.

In part two of this series, we will look at some tools to help you achieve this and become a contrary trader earning big profits from the big moves

If you want to take advantage of currency price movements and predict where prices might go you need to know what moves prices and why they occur.

This may sound obvious but many traders simply don’t know and lose.

Lets find out exactly what moves prices and why and how you can take advantage.

Understand the following equation

Supply and Demand Fundamentals + Trader Psychology = Price movement

Prices are not simply a tug of war between supply and demand. As humans we put a value on the market and this is the unpredictable part of the equation.

When considering trader psychology keep in mind that it is humans that determine the price of anything, based upon how they see the facts.

Why is this important?

It’s important because its humans that drive prices, with the emotions of greed and fear to the fore. It is the human element that you need to consider when trading the markets.

So how do you do it?

The obvious answer in FOREX trading is to use a system based upon technical analysis, simply follow charts and let them tell you which way prices will go.

As with today’s fundamentals are instantly discounted in the price the news and data wont help you – understanding trader psychology will.

Technical analysis acts as a way of studying the fundamentals, as it assumes that all the fundamentals are discounted by the market and will show up instantly in price action.

Charts do something much more – they show up the long term repetitiveness of human nature.

Unpredictable in the short term, but over the longer term certain reliable chart patterns can be spotted that are a reflection of repetitive human psychology.

Now consider this:

Each trillions of dollars are traded in the markets, by numerous participants and while in the short term these participants can be unpredictable, in the longer term human nature is constant and chart patterns repeat.

How to trade

When trading don’t fall for the day trading story.

All short term moves are random and you can prove this by asking any day trader for a long term track record of REAL profits made in trading.

Ask for one and you won’t get one.

Many new traders try and trade short term but as you can see above its why they lose.

You need to trade longer term and we would suggest using the weekly chart to spot the long term trend ( currency trends tend to last for months or even years) and then time your entry on the daily chart.

If you understand what we have just discussed you will see that a long term technical approach to trading is the best way to make long term profits from Forex trading.

Duration : 10 min 8 sec

Technorati Tags: forex

I have been giving some live trades to show how a simple system can make big profits. We have done 2 live trades and made two great profits.

We did the same last year we did 5 trades live and won on all of them!

Now that does not make me a genius, but I want to share something with you that I have learned over 25 years as a trader.

The Best Methods are SIMPLE

I have tried just about every way of trading from using artificial intelligence to neural networks and some methods overloaded with indicators and I can tell you the best methods are simple.

The method I use is simply this:

1. Look for significant levels of support and resistance

2. Use a breakout methodology

3. Use stochastics to time entry

4. Use Bollinger Bands for targets and RSI as contrary trading indicator

That’s it.

People think the harder they try or work on a method the better it will work but this is not true.

You get nothing extra for effort in the FOREX markets.

There are many smart traders out there who build incredibly complex systems and are dismayed when they collapse in the brutal world of trading.

The problem with complex systems is there are to many elements to break.

My system above works on any market not just currencies and its logic is sound.

It works makes money and only takes 30 minutes or so a day to execute and there is also no intra day monitoring as it works off daily closes..

It Does However Need:

The trader to spot and filter the set ups. This means YOU pull the trigger not a computer.

Many traders don’t like doing this but the fact is:

We can think computers cant and I personally like the responsibility of making the trade. If you want to delegate totally to a computer then this system may not be for you but I am always more comfortable pulling the trigger myself.

So there you have it a simple system that makes money and I have given you the logic and components for free.

I hope you like it and its of as much use to you as it is to me – after 25 Years I am still using it and it is still making money which is what forex trading is all about.

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Forex currency trading is a zero sum game and those with a trading plan and the necessary discipline to stick to it will succeed over those that trade without one. If you want to be on the positive side of this game start with your trading plan – it is your most important weapon against your opponents. Here is an example of what a Forex Trading Plan should look like:

Goal

My goal is to make 20 ticks or $200 per day over the 20 day trading period.

Market

My target market is the EUR/USD spot market. Trading style is day trading with all trades taking place between 8:30 am and 11:00 am on class days. On certain occasions I will attempt to start trading at 7:20 am due to the fact that a majority of economic data is released at 7:30 am CST. All positions will be closed at the end of class.

Research and Fundamentals

Each day before trading I will fill out a trading plan for the day. I will also research fundamental data related to the markets before I start trading. This is to get a market feel such as overall macro trends, world events, upcoming economic data. I will also look into technical data over the past several days to figure out what technical movement has been present.

Charts

Candlestick charts are important for day-trading. I will use two charts; 5-min and 4 hr. I use the 4 hr charts to identify the major trends and the 5 minute chart to get minor trend timing.

Strategy

Before anything else I need to establish the minor trend. Although I will look at the 4 hr chart to get a broader view of the market, given the amount of time I have to trade, I feel it is more important to focus on the short term trend. If there is consolidation or any other non-committal movement on the minor trend, then I will stay out of trading until a trend presents itself. I will use western technical analysis (DailyFX resistance/support, Moving Averages) to get a general feel of which direction the market is going and eastern technical analysis to time my entry and exit points. Although technical analysis is the basis for my trading, if there is fundamental information that comes out that clearly swings the market against the trend I will go with the strength of the reaction towards the fundamental data.

1. The first step I will take is to determine whether the short term trend is bullish or bearish

2. I will check to see if there are any key psychological numbers and support/resistance points in the near future

3. If there are none, I will go long or short depending on the short term trend

4. If there are, I will wait until the market reaches those numbers to look for a reversal

5. I will trade against the trend if I find a candlestick reversal pattern with confirmation (Bullish Engulfing, Hammer, Morning Star, Shooting Star)

6. When trading against the short term trend, I will set my limit at the 50% fib retracement level

Rules of the Plan

1. Never trade during consolidation

2. ALWAYS close out a trade if the MAs cross against a position

3. Try to achieve 10 tics on every trade, 1 lot = 10 tics, 2 lots = 5X2 etc.

4. Stop set at 40 tics

5. Momentum should correspond with short term trend when looking for entry point into a trade

6. Get out of a trade before major economic data is released

7. Don’t make a trade within 10 mins of class ending

8. Always get out a trade the second you think it is going against you

You don't worry is someone is going to "work" with you, you take the golden opportunity and run with it. If you think traders are going to hold you hand and spend time teaching you better not take the job. You learn by doing, by following, by listening, and paying attention.

All traders have the some abilities, personalities & traits, some a little more servere than others. Traders are above average intelligence (you would know most of the time) quick thinking, good a math and have out going personalities and most importantly are not wrapped too tight.

I've been on the floor of most exchanges, including the options. equities and commodities and a trader is a trader is a trader. A good floor trader (and most inhouse) can trade anything with a very short indoctrinization period

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A meeting point is a form of conventional information, and one that is highly stable once established. People come to the market because they know that others will be there as well, and these are there for the same reason.

Once players have agreed to come to one place, it is simpler to come to that place than to try and organise a new place, which everybody must agree to and which all occasional players need to be informed of. Just like DKos is now THE main meeting place for the progressives, the existing oil bourses have an massive advantage over any new one in that they already exist. London has remained the main trading place for a surprising number of commodities despite the British Empire being long gone and the US having replaced it as the largest economy – simply because the infrastructure was there, and the people with the competences to play there were still around.

Windows is unassailable on desktops despite being obviously inferior in quality to some alternatives, simply because there is a real advantage for everybody to use a common standard, even if it imperfect. A bourse is a standard on where and how to trade.

There is no compelling reason to move from London or New-York to Iran to trade oil. Iran only has 5% of world production and is in no position to impose anything. Network effects paly massively against a switch.
•it's a place that allows a price to be set for the transaction. That means that you want many buyers if you're a seller, and many sellers, if you are a buyer. It provides liquidity.

This is linked to the above point: liquidity exists when you have a deep market, i.e. many buyers and many sellers. That comes from having a place where everybody comes, and a place that everybody trusts because it works. "Don't fix it if it ain't broke" applies here. Again, this is a compelling argument against Iran. Iran can potentially act as a seller, but would will ensure that there are buyers on that particular market?
•the other item related to price is that a bourse needs to provide a single price to act as a universal reference for everybody – a market standard, both in terms of the quality of the product, and the currency it is expressed in. This allows for historical data to be expressed consistently, and for market players to have useful references and background to do their trades.

For oil, that currency is and has always been dollar, as a widely stable, universally accepted monetary unit. There is no market and no liquidity in any other currency. It is at least conceivable that the euro could be used as it is similarly stable and acceptable to all, but it has no history as an oil trading currency, and thus market players would naturally convert any price in euro into a price in dollars to see what it means (try switching from degrees Celsius to Farhenheit or from centimeters to inches to know why this matters). Again, there would need to be an overwhelming reason to force all market players to make the switch (and to do it all at the same time), which Iran does not provide.
•a bourse is a place that provides security for the transactions. Buyers know that they will get their purchase delivered, and sellers know that they will get paid in a timely fashion. It provides clearing mechanisms.

Do you expect other producers to rely on Iran to ensure timely payment of their sales? Do you intent to rely on Iran, an untested bourse, to be responsible for delivery by other parties?
•it's a place that provides rules and enforcement of these rules for the proper functioning of the market, i.e all the above: who can participate, how prices are formed, how the clearing is organised, and how disputes are settled. It needs to be a neutral arbiter, uninvolved in the actual trading.

Again, this plays against Iran, who is too small a player to impose rules to all, but too big to be seen as a neutral player by other sellers. And do you really want to take the risk that the religious authorities in the background or any other Iranian politician come and start meddling with the ongoing trades?
•as rules will ultimately be set by public authorities overseeing the bourse, and disputes will ultimately be decided by courts of that place, it needs a consistent regulatory and legal framework.

There's a reason why most commodity bourses are in Western countries. They provide the rule of law, a predictable set of rules, and a capacity to enforce these rules in an effective and market-neutral way. and they have a long track record of doing so. Iran? Not so much.
•in today's world, a bourse is essentially a big IT operation, with systems able to provide complete market information to all participants in real times, treat operations as they are decided, and provide an unambiguous audit trail to all interested parties to a transaction.

Again, that requires a lot of specialised competences on the ground: programmers, developpers, consultants to install them, the specialist hardware providers, etc… all people that need some (or a lot) of understanding of what's going on in the market. That's highly specialised knowledge, which is, naturally concentrated in the few places that carry bourses, i.e. a few large cities in the West. Iran will be hard pressed to attract such people to Tehran or thereabouts.
•finally, the oil bourse is only a small part of the trading that goes on around oil. Most of what takes place are financial transactions: spot sales, forward sales, swaps, various hedging instruments, short term financing, long term financings. All these transactions rely on the underlying oil market, and significantly expand it. If you take out the oil market, or change its rules, standards, references, clearing mechanisms and enforcers, you kill the associated financial markets, which are vital to the world economy and underpin a large chunk of our industrial activity and energy needs.

Do you really expect the financial markets to move to Tehran, which has neither the infrastructure, the competences, the legal framework or the stability to host them? Even a switch to the euro would need a massive reorganisation of the financial markets, which are exclusively geared to dollar transactions. This only amplifies the arguments made above about the sole oil market with respect to liquidity, standards and the like. And the legal and regulatory questions are even more important. Do you really want billions of euros of daily financial flows to be ultimately controlled by the Iranian Central Bank? It would basically take the outright destruction of the existing markets to provide any incentive to try to rebuild them differently, and Tehran would not be their first pick to do it…

:: ::
So, say that Iran decides to sell its oil in euros. Fine. Both the Iranians and their clients will determine the price for the transaction in dollars, on one of the established markets, and will trade these dollars for euros for the actual payment operation. It will give banks active on the forex markets a little bit of income, but will change nothing to how oil is traded.

If they open a bourse, who will come? The answer is, no one, unless it is nothing more than the new place to buy oil from them and the transaction, whether in euros or in any other currency, will be negotiated in dollars, using existing market standards expressed in dollars, because there is no way that anybody will be able to express and clear the transaction in any other way.
:: ::
So please, let's stop the fantasies, or the conspiracy theories about a switch to euros or a new bourse. If any transaction, whether by Saddam, the Iranians or anyone else is expressed in euros, it is purely cosmetic. The underlying market is in dollars, and will remain that way.

Those who poste these stories or push them are badly undermining their credibility and engaging in silly scaremongering.
Article taken from energy bullitin magazine.

Jerome a Paris is an energy banker in Paris and has a regular column at Daily Kos.
Open your eyes: 83000000 bpd worldwide production, 4000000 bpd, Iran production, do the math. 4.8% share, but we call it 5%. They want to increase to 7million bpd by 2015. So if monkey twaddle means the numbers are right I guess it's monkey twaddle.
Mental mickey, Iraq switched your right, did the economy crumble, no if fact it was in excellent shape, it was nothing more than a blip. He changed it back, wouldn't you, especially after the european oil for food scandal. "IF" OPEC, that's the linch pin word, of the 12 OPEC countries 10 are allies, 2 are enemies. China has little interest in seeing the dollar collapse, they have billions of dollars in reserve, why would they want to lose out.
Paul D, no they don't, Canada has the 2nd largest oil reserves, Iran is 4th, unless you mean natural gas, then yes they are second. But very little of that is tapped, and they don't have any infrastructure or foreign investment, due to imbargos and lack of stable government.
misty, 3 years is quick is it.
openyoureyes: seeing as you are on here by noon everyday I would say you probably don't even have a job, I've been in the business for 20 years, how about you, have you even been alive that long.
Paul D. I won't say it won't have any impact, but although the sum seems large, it's really just a drop in the bucket, not to mention if the oil price goes down, they lose out, Currently Iran spends over 4 billion a year on refined fuel imports, and even that is not enough, they need more, to keep the fuel ration rioters at bay. This will only increase in the future, so are they going to shoot themselves in the foot by having to buy back refined fuel in Euro's or will they wish to trade in the weak dollar then.
Jack, they already trade outside the US dollar, but the price still fluctuates based on the dollar. How anyone thinks that moving trillion of any currency into an unstable ICB with a poor economic record, no infrastructure, and run by religious zealots is a smart move, is bewildering.
James, the US economy has been in recession before. This is no different, a few months does not give an accurate forecast of things to come.

Openyoureyes: Petty insults, invalid statements, and droll clichea's do not equate deconstruction of an argument, the just illustrate your limited intellect.

How many barrels can they sell?
Convert it back to us dollars.
How many barrel short?
Thought they were good with science and mathematics.
Simple calculation also don't know?
Is that what the glorious past civilization were all about in short-changing themselves?
Luke 9.25,55-56,60
What do you think?

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Duration : 50 sec

Technorati Tags: forex