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Currencies tend to trend more and fluctuate less violently unlike stocks which behave pretty much the different way. The reason for this is not hard to understand. Currencies trend depending on the countries’ foreign and economic policies which are macro economic in nature and the currency pairs take fairly long enough time to react to any change in policies. Where as stock movements are more or less determined by microeconomic factors and market sentiments.

Euro/US Dollar: On Par at the Beginning
When Euro was brought into force its exchange rate was set officially at 1 USD a Euro. At that time there existed hardly any difference between the economies of US and the European Union. US had a GDP of $11.0 billion and European Union was pretty up close there at $10.5 billion. While US economy was growing at a good rate of above 3% per annum Europe was a bit sluggish and recorded slightly over 1.5%.

Gradual Shift In Favor Of Euro
But this was not coming in the way of Euro’s gradual march ahead of US Dollar. Look at other key economic factors for yourself. US had a deficit budget and the balance of trade was negatively skewed against US while the European Union had some of the seriously good parameters in exact contrast to that of the US’s. The trade balance sheets looked healthy and strong standing on the near equal GDP.

During this period India, China, Russia and Brazil were making big strides in economic growth and Europe was gaining position in their trade partnerships shifting the forex currency in Euro’s favor. At a time when their reserves were growing by leaps and bounds, US Dollar was sliding continuously which contributed to the conversion of their reserves into Euro, but partially.

How Does The Market React To This?
Euro/USD is by far the biggest forex pair which accounts for $1 trillion every trading day. With so many changes in the world economic scenario and the notional trades in between the two currencies still commanding 1/3rd of the currency market, the US dollar trended constantly over the years.

The firm trend may not be apparent in short term price charts but a relatively long period chart such as 2-3 years would clarify Euro’s constant gain against USD. Till recently cross currency payments were, say for Japanese payments to Germany, first by converting Yen into USD and then USD into Euro. Now such a necessity doesn’t arise for payments.

All these things mean that the trends are going to continue for long unless there is a strong reason.

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Im wondering whether the cross pair currency rates are determined by speculative traders or arbitrage trading computers. For example you have two liquid pairs:

EUR/USD
USD/CAD

and a cross rate

EUR/CAD

I figure, since most of the speculative trading is done on EUR/USD and USD/CAD, the EUR/CAD exchange rate is made by arbitrage traders adjusting the correct cross rate so there is no cross currency arbitrage. That means there are a lot less speculative trades on the EUR/CAD pair than on the EUR/USD for example, percentage wise that is, right? Given that, trading on the cross rate is alot harder, since the market psychology is made up of less traders and more arb, right?

You ARE overthinking it. All that arbs do is keep the three markets in relatiave alignment. And they could be active in any or all three.

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Duration : 0:15:32

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I have ample feedback in ebay etc and currency exchange forums which I can show as a good start to earning others trust, all personal details / login details would be included.
I would consider it a loan (compounded until doubled – then refunded) and would only be trading the 2 safe pairs (400:1 10%) no yen or gbp.
I'm well studied and have been running demos all year so I know what I'm doing.
Reply to VP: Thanks for your answer.
You are incorrect.
You only need to know how FR / FFS works and how to run with their programs before starting, it's not like normal FX Trading.
Demos with IBFX are the same as live trading.
You need more $s to hedge correctly.
Thanks, but you obviously havn't looked into the systems I mentioned.

Hi,

Do you think that it is enough your experience 1 year on demo account?
I don't thik so. 1 year in forex it is just a little small step. You didn't counted psychological factor when you start real trading. Also you should count that demo accounts and real accounts operates little different especially if you trade with market orders.
And never trade with borrowed money.

For mini fx account you need just US$250-300

Good luck!

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This is one method for analyzing the prices of the two. The other method is the fundamental analysis. These two approaches differ hugely in their approaches and scopes. Technical analysis basically deals with the previous price and volume changes and uses a set of statistical calculations to project the possible price trends.

Currencies tend to trend more and fluctuate less violently unlike stocks which behave pretty much the different way. The reason for this is not hard to understand. Currencies trend depending on the countries. foreign and economic policies which are macro economic in nature and the currency pairs take fairly long enough time to react to any change in policies. Where as stock movements are more or less determined by microeconomic factors and market sentiments.

Why Technical Analysis Is Critical For Forex Trading?
It is true that technical factors reflect changes to the fundamental parameters of a currency but but still technical approach to analyzing the movements of a forex currency grossly takes into consideration only the historic price and volume movements.

The following are the reasons for this intrinsic behavioral difference.
1. A trader may want to go short or long within the span of a day and cover up positions there by cashing in on the intraday fluctuations which are hardly affected by the economic and policy changes which are fundamental in nature.
2. Technical analysis stresses on the historical statistical data for projections which takes into consideration the short and medium term perspective which is a welcome factor for a trader who does not want to hold huge forex currency assets for longer periods.
3. Intra day fluctuations can be fairly well predicted and entry exit points, regardless of short or long positions, can be easily identified with technical analysis which is not the scope of fundamental analysis.

One question that arises in ones mind at this point is, if technical analysis steers out of fundamentals, then why is it so popular with so many traders? There are two strong arguments about its popularity.
1. Historical data are market’s future indicators as they give insights into the short term behaviors of markets.
2. Although the market trends are clearly the reflection fundamental changes a currency is undergoing, they sure are the results of collective intelligence and reactions of the whole market to affecting incidences including rumors.

What Approach Must A Trader Take With Respect To Technical Analysis?
Unlike the fundamental analysis which places heavy weightage onto the intrinsic values of currencies, technical analysis doesn’t do so. It is based on the price changes and volumes only and not why the prices have changed when they did. In short, it depends basically on the patterns of price behavior supported by some sophisticated mathematical paramenters.

Technical analysis of forex market has gained popularity with traders of late following the easy availability of sophisticated analytical softwares.

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