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mardi 5 avril 2011

Winning strategies with Forex Charts

As you read forex charts, remember that the two
fundamental approaches for online forex trading:
fundamental analysis and technical analysis.
Fundamental analysis doesn’t rely on forex charts. It
scrutinizes political and economic indicators to determine
trades. Charts here are deployed as used as a secondary
reference.
Technical analysis on the other hand, attempts to predict
price swings by analysis of historical price activity. Those
who use technical analysis study the relationship between
price and time.
The most actively traded pair of currencies is the Euro and
the US dollar, so we will use them in our example. The
dollar is on the right hand side of the chart and the Euro is
on the left hand side. The currencies are expressed in
relationship to each other in pairing. Forex charges will
always display how much of the currency on the right hand
side is necessary to buy a unit of the currency on the left
side. Looking at the typical EU-USD, chart you will notice
the last price displayed per given date. This number is
always emphasized. The time is tabbed horizontally across
the bottom of a chart and the price scale is displayed
vertically along the right hand edge of the chart. The time
and the price are set in all caps to help the trader remember
that technical analysis rests upon the relationship between
time and price.
The trader observes the price and time movement on a
chart. These include bars, lines, point and figure, and
Japanese candle sticks-- the most favored method. With
the candlestick method there is a large, red section that is
the body of the candlestick. Lines protrude from the top
and bottom and they are the upper and lower wicks. When
you look at all the candles on a chart it is apparent that
bodies come by difference sizes. Sometimes no body exists
at all.
The same is true with wicks. Candle wicks come by many
difference sizes; there may be no wick at all. The length of
the body and the length of the wick are determined by the
price range for the candle. Longer candles will have had
more price movement during the time that they were open.
The top of a candle wick is the highest price for that
currency while the wick’s bottom is the lowest price. A
currency is bullish when the close of the candle is higher
than the open. In simple terms this means that there were
more buyers than there were sales during the opening time
period. Sometimes the candles will not have wicks. The
price opened and it dropped off until it closed.
Forex charts don’t offer bullet proof trading hints, but they
can help a trader. Past trends do have their place in forex
trading as most traders will admit, and using the charts to
track historical trends can assist a trader in making a snap
decision.
The online investor typically joins a service that provides
realtime charts that updates on currency activity. Charts
can be checked on a minute to minute basis. For those who
primarily do their trading based on historical accuracy this
can ease the burden of prediction.
Most forex traders however use a combination of
fundamental and technical analysis. They may chart
historical trends, but they will also pay close attention to
political, cultural and economic indicators within a region.
They might use charts and other techniques to check
correlation between political climate and currency
fluctuations. But even the most sophisticated technical
analysis software or tool has its limitations. A trader must
be prepared to take risks… and invest money that is not
needed for the immediate future.

Eight Key Aspects in Selecting Your Forex Broker

As you decide upon a forex broker there are many factors to
take into account.
Trust
Experience
References from past clients
Level of success
Amount of advice to be given
Convenience
Amount of margin offered
The aforementioned are important. In any financial
transaction it is important to trust the broker you work
with. This trust is garnered by the experience level the
broker has. Of course there are some new brokers starting
out who are quite trustworthy, but most people would
rather work with an experienced broker. For that reason
most new brokers attach themselves to a firm where they
can be mentored and gain experience.
References from previous clients are vital. If your broker
has helped someone else is successful in the past and that
person is willing to speak up for him that says a lot. You
can gage the level of success your broker has had by
speaking with past clients and seeing how well they did
working with this broker. Next, take a look at the amount
of advice your broker is willing to give you. Of course, you
make your own decisions and will never take another
person’s word for everything, but it is good to have
knowledge to work with, and advice from an experienced
broker is key information to factor in. Convenience is also
impotent. If you live in California then an Ohio broker
might not be the best choice. But in the age of the internet
that factor has become less relevant. With fax and email
where you and your broker live has become less important.
Pay attention to the margin offered. Margin is used to
leverage your money. A broker who gives you a 50 to one
margin is more valuable than one who gives you 20 to one.
And of course speed. Is your broker quick? Does he return
phone calls and emails promptly? If so, perhaps you can
work with him.
Remember that the broker serves as a trusted advisor and
someone that you may be working with for years to come so
choose the relationship carefully. Ask friends and
acquaintances who are active in forex trading what broker
they use and how they met. It is quite possible that you can
get a referral from a friend or acquaintance you trust and
acquire a good forex broker that way.
An alternative method to find a forex broker is to go online.
There are message forums, chat rooms, and email groups
through portals like Yahoo, Google and MSN that contain a
wealth of information. Getting onto one of these online
communities and asking other people for advice is the way
that many people found their broker. If a broker has
several clients in an online community who are happy with
what he has accomplished for them, then that is a good
indication that you might be happy with him as well. Take
advantage of the number of people who are on the internet
and join some of these online communities. Ask question
and you’ll probably learn a great deal from the experiences
that other people have had. Also find trade journals,
magazines and ezines to subscribe to. Read as much as you
can about the subject of forex trading before going into it.
Become a smart shopper and smarter trader.
Locating a superb forex broker is a job in itself. When you
visit with a forex broker you are in essence conducting an
employment interview to determine if this is the broker you
wish to handle your financial affairs, so be thorough. Ask
plenty of questions. Ask for references. Don’t be shy. Also
check with other people in the office of the broker and see if
you would trust them to fill in for your broker if he were not
available. And, see if the broker is willing to offer you a
demo account to use to get in some practice before you
actually make an investment. If the broker is able to do so
and encourages you then it means that the broker wants
educated clients and is not just out for the quick buck. See
what kind of training and tutoring the broker is willing to
offer. A good broker will offer to answer your questions
and help you through the learning process.
Speed

Earn Thousands Hourly (with a Forex Simulator.)

Test-driving an online forex demo account is the preferred
method of potential traders to minimize risk. A demo
account readily allows a cautious person to go online and
observe exactly how a paid account would work. Think of it
like playing the popular wargame Command and Conquer:
you send in the troops (gobs of fictitious money), make a
few tactical maneuvers (invest in speculative exchanges)
and conquer territories (reap profit).
It can be addictive. Without investing and risking any real
money, the investor plays with ghost money in an account
and initiates buys and sells the same way it would be done
in reality. The software used for these demo accounts
parallels what the real trading platform does. Real figures
are pulled from exchanges, trend charts are generated, and
profits are calculated from buy/sell maneuvers., A trader
sees at the end of the day the net loss or gain should real
money had been used in the transactions.
Even a novice can trade. Let’s assume an investor pretends
to open a margin account with ten thousand dollars. He
watches trends in the currency markets and believes that
the dollar will go up in value against the British pound. The
demo software empowers him to purchase at a ten to one
margin; he then authorizes a buy of one hundred thousand
dollars of dollars and sells one hundred thousand dollars of
Pounds. There will be a spread, or difference, which
accumulates to the gains, or “profit”.
Why invest time with demo accounts? Simple. It’s safe to
learn the currency trade without having real money to lose.
Think of it like crashing your car in driving simulators or
doing crazy rolls in an F-14 - on a Playstation. You stretch
your creativity, test your reflexes and build your skills all
behind the safety of a highly immersive computer screen.
Your mind gets a full reflex workout without incurring
damage to property and incurring lawsuits!
The same holds true for forex trading. Spending time with
a demo account allows the potential trader to gain skills
and learn the ins and outs of the game and the market
place. A person is then able to see if they truly have the
instincts necessary for the market and have sufficient
knowledge to “play with the big boys.”
Almost all online companies involved in forex trading offer
demo accounts, sometimes free and sometimes for a small
fee. Even if a fee is paid, it is usually worth it because a
forex trader can flex his skills and knowledge for vast
profits after spending some time practicing with the forex
demo software.
Setting up a demo account requires nothing more than a
valid email address and your name. Upon activation, you
will have access to the usual charts, graphs, ordering
system and even prediction tools. The latter are quite
interesting, particularly predictive implements based on
Fibonnacci… but take care that such tools can never predict
swings in the market. Too many social, political and
environmental variables cause erratic fluctuations and no
software can ever take those into consideration.
Richard Peyton, my good friend, benefited from a forex
demo account. After months of study of the forex market,
Jackson was convinced that he could make a go of it as a
day trader in the forex market. His girlfriend, however
wasn’t convinced and feared the inherent risk. She
considered forex nothing more than sophisticated
gambling.
Richard went to a brokerage company online that he felt
held good reputation. He set up a demo forex account and
began to make trades as though he were using real money.
After several days, on paper, Richard garnered consistent
profit. He continued learning and his confidence increased
that he grew anxious to open a real forex account and invest
a percentage of disposable income. His girlfriend also saw
how on paper he had made a nice profit and relaxed,
withdrew her objections.
Today Richard and his family do very well financially
through forex trading, With a demo account, he leapt into a
world of vast financial potential and built a fortune. He
retired his day job.

Foreign Exchange Markets – A General Overview

In the beginning countries would trade with each other
using the barter system. If one nation needed lumber but
had cattle, they would trade one product for another. This
was pure trading. This type of economy has many
limitations, but served mankind well for many centuries.
However, nations quickly saw the benefit of having a
system of exchange, and while some cultures used pretty
rocks, or animal teeth, precious metals quickly became
established methods of exchange. God and silver were the
most popular. Initially gold and silver coins were used, and
in fact the name of the British standard currency, the
pound sterling, came from the Hasterling region where gold
coins were made, and originally meant coins of the
Hasterling’s. Up until World War I most nations had
central banks that supported the value of their currencies
and most used gold as the standard. Paper money was
printed and it legally could be exchanged for gold but this
did not often happen. Since it was rarely converted, some
banks and some nations believed they no longer needed to
keep reserves of gold in their vaults, as the US once did
with Fort Knox. Inflation then occurred.
Near the end of World War II a conference known as
Bretton woods had many nations reach an agreement on a
reserve currency system based on the US dollar. The World
Bank and other organizations agreed, and a fixed exchange
rate system was reached. The value of the dollar was fixed
on a certain amount of gold, and other currencies were
fixed on value to the dollar. Currency trading after this
however has evolved and currencies have grown in value,
and gone down in value, leading to fluctuation.
Today traders take advantage of the fluctuation in value
among currencies through the forex or foreign currency
markets. It is quite common to see a trader who suspects
that the value of the Euro will go up against the yen or the
dollar and follow the old axiom of “buy low and sell high.”
On of the ways this is done is through margin trading. With
margin trading a trader doesn’t have to have all the money
in an account that is being traded. If a trader has 10,000
and works with a one percent margin, he is able to trade
$100,000 in currency. This adds great leverage to the trade
and makes forex trading very attractive to many who are
looking for a large and quick return on their investments.
Forex traders are also attracted to the low costs associated
with trading since most trades are without commission.
The fact that there is a 24 hour trading cycle is also
attractive to many. Traders have opportunities for large
profit, but they also have risk inherent. An aggressive
trader may experience profit and loss swings of up to 30%
in a day. This can be 30% to the good, or to the bad, so
forex trading requires education and courage as well as
capital. However there are no daily limits and no
restrictions on trading hours other than the weekend when
markets are closed. For this reason there are always
opportunities. Money will always be made.
Much of the forex trading that occurs however is not with
individual investors or speculators. Many commercial
organizations have currency exposures that are created due
to import and export activities. This is reason enough for
many to engage in forex trading. However, financial
institutions remain the biggest players in the forex market.
Banks, brokers, mutual funds and other major financial
institutions are actively involved in forex trading.
Some nations in the past have complained about hedge
funds and other large institutions involved in forex trading,
saying that they have intentionally devalued their
currencies to make quick profits. George Soros, the famous
billionaire who is involved in politics, has been accused of
this practice by the government of Indonesia. Whether it is
true or not, and if true whether it should or should not be
done is not for this article. However, when institutions
control such large amounts of money, the chance of
manipulation does exist. As long as foreign currency is
traded, there will be such accusations. However, the forex
market remains a way to achieve substantial financial gain.

Money Management Basics for Forex Traders

Money management in the foreign exchange currency
market requires educating yourself in a variety of financial
areas. First, a definition of the foreign exchange currency
or forex market is called for. The forex market is simply the
exchange of the currency of one country for the currency of
another. The relative values of various currencies in the
world change on a regular basis. Factors such as the
stability of the economy of a country, the gross national
product, the gross domestic product, inflation, interest
rates, and such obvious factors as domestic security and
foreign relations come into play. For instance, if a country
has an unstable government, is expecting a military
takeover, or is about to become involved in a war, then the
country’s currency may go down in relative value compared
to the currency of other countries.
There are five major forex exchange markets
in the world,
New York, London, Frankfurt, Paris, Tokyo and Zurich.
Forex trading occurs around the clock in various markets,
Asian, European, and American. With different time zones,
when Asian trading stops, European trading opens, and
conversely when European trading stops, American trading
opens, and when American trading stops, then it is time for
Asian trading to begin again.
Most of the trading in the world occurs in the forex
markets; smaller markets for trade in individual countries.
Simply put forex trading is the simultaneous buying of one
currency and selling of another. Over $1.4 trillion dollars,
US of forex trading occurs daily and sometimes fortunes are
made or lost in this market. The billionaire George Soros
has made most of his money in forex trading. Successfully
managing your money in forex trading requires an
understanding of the bid/ask spread.
Simply put the bid ask spread is the difference between the
price at which something is offered for sale and the price
that it is actually purchased for. For instance, if the ask
price is 100 dollars, and the bid is 102 dollars then the
difference is two dollars, the spread. Many forex traders
trade on margin. Trading on margin is buying and selling
assets that are worth more than the money in your account.
Since currency exchange rates on any given day are usually
less than two percent, forex trading is done with a small
margin. To use an example, with a one percent margin a
trader can trade up to $250,000 even if he only has $5,000
in his account. This means the trade has leverage of 50 to
one. This amount of leverage allows a trader to make good
profits very quickly. Of course, with the chance of high
profits also comes high risk.
People who do forex trading do so because they are
attracted by 24 hour trading days, by strong liquidity –
unlike stocks, buying and selling is almost instantaneous –
and the fact that forex trading usually occurs without
paying commissions.
Like many other speculative investments, a key part of
money management for the forex trader is only using
money that can be put at risk. It is wise to set aside a
portion of your net worth and make that the only money
you use in forex trading. While the chances of good profits
are there, if you should have a problem and get wiped out,
you’ll only have a limited amount of money placed at risk.
Also remember that the market is n constant motion.
There are always trading opportunities. If a currency is
becoming stronger or weaker in relation to other currencies
there is always a chance for profit. For instance, if you
believe that the Euro is gong to become weak compared to
the US dollar then selling Euros is a good bet. If you
believe that the dollar is going to become weaker than the
yen, or the pound sterling, then selling dollars is wise.
Staying current on the news and current events in the
countries whose currency you hold is a smart move. Many
people reach points where they can predict currency
changes based on political or economic news in a given
country. Remember though that forex trading is
speculation, so be careful when managing your funds and
only invest what you can afford to risk.

Forex for Absolute Dummies

Forex (foreign exchange) refers to the foreign currency
exchange market, the world’s largest financial trading
market. Pass yourself as a forex expert with these buzz
words:
Bid – to buy
Ask – to sell
Liquidity – financial ease of transaction, i.e. cash
Trading volume – the amount traded
buying price and the actual selling price
Bid/ask spread – the difference between the proposed
OTC – over the counter
for instance, a Canadian dollar is valued at .86 of a US
dollar
Exchange rate – the difference between currency values;
control vast amounts of money and are able to
manipulate the value of a currency through speculation
Hedge funds – large mutual funds companies that
usually exerts control over the value of that currency
Forex trading is the investment in the currency of one
nation. Multinational Corporations doing business across
national boundaries find value in keeping their cash
reserves in a variety of countries, and holding their funds in
a myriad of ways. For example, a UK corporation may hold
a percentage of its working capital in UK pounds, but if it
does quite a bit of business in USA it may also maintain a
percentage of its money in dollars, in US banks. Individual
investors over the decades have discovered that there is
profit to be made in investment and speculation in the
currency markets.
Take the case during the 70’s when the German DM swung
rapidly in value. It was worth anywhere from 1.2 marks
the US dollar to 3.5 US marks to the dollar. When the mark
was worth 2.5 it was beneficial to spend dollars buying
marks, since the mark would buy more goods or services at
that rate. As the mark bottomed out 1.7 to the dollar there
was less incentive.
Surprisingly, the forex market itself is not unified. One can
find many small forex markets specializing in trading
various currencies. The most commonly traded currencies
in forex speculation are the US dollar, the Australian dollar,
the British pound sterling, the Japanese yen, and the
European Euro. Currency values vary depending on the
market in which an investor is speculating, so there is really
no such thing as a single, unified dollar rate, but instead
there are multiple dollar rates, which vary according to the
market where the trade is occurring.
The major cities in which trades occur include New York,
London, and Tokyo. It’s a 24 hour process. When Asian
trading ends, European trading commences, and when
European trading ends, then American trading opens.
Naturally, when American trading ends, it is time for Asian
trading to open house once more… and so on.
Currently, the most actively traded currency is the US
dollar, involved in 90% of all trades. This is followed by the
Euro involved in 36% of all trades, then by the yen in 20%
and the pound in 17%.
Our fastest rising currency in trade is the Euro, however the
US dollar is still the favored anchor point-- and the
currency watched so as to judge how others will react.
Differences in value of currencies come from the current
events. GDP growth, inflation dips, interest rate swings,
budget and trade deficits, surpluses and other economic
conditions all shift currency values. Investors, for this
reason, follow the news very closely. There are 24 hour
cable news channels and many web sites devoted to news
that aid currency speculators.
The forex market is highly susceptible to rumors. In fact
the central banks of countries frequently manipulated local
currency value by sowing rumors about interest rate hikes
and other economic propaganda that impacts the value of
the domestic currency. When this news is false it is called a
dirty float- and it dismays the market.
Central bank – the national bank of a nation, which

Trader or gambler

If reading the above phrases did stimulate your mind so much that you feel
sympathy with them, forget about trading.
Buy a lottery ticket, so that you won’t be one of those people who say you cannot
make money trading.
The attitude to trading cannot be the same as the attitude to gambling.
Traders would not be successful people if they believed they were lucky or if they
approached this profession like you approach a casino.
I understand that these simple observations could seem stupid, but the failure of a
trader often stems from exactly this sort of thing.
These are the same phrases and slogans that attract gamblers and stimulate the
minds of those starting up in trading.
So be careful and try to understand if your approach is the one of a trader or rather
that of a gambler.
My advice for those starting, and for those who have
already started
Believe in the fact that trading is a profitable activity.
Believe in yourself.
Look for an intelligent trading method, test it and start believing in the method itself.
Once you overcome those three steps, start trading and never, for any reason,
doubt yourself or trading.
Only in this way will you belong to the group of people who have achieved success
with trading, without paying any attention to the people who told you to be careful or
laughed at you because you chose to become a trader.

Earnings, losses and emotions

“If you don’t scratch you don’t win”.
- What do you feel reading this phrase?
Maybe the push to try and win, too?
“The pleasure of an easy win”.
- What do you feel reading this phrase?
Are you already feeling lust for the possession of money?
But not the money you sweated for and worked for, the money you got without
doing anything and that has an immeasurable value.
The money that falls at your feet and you did not have to commit for.
The money that changes your life in a moment because fortune choose you.
“Do you feel lucky today?”
- What do you feel reading this phrase?
If you wake up in the right mood and you go to have breakfast in a café, would you
not invest at least 10 € on a lottery ticket?
If it is luck and the feeling of it being "the right moment" which is driving your
choices, you will probably have disappointments of huge proportions.
It is through emotions that people choose, but you do not have to confuse emotions
with luck.
“Win for life, happy and lighthearted”
- What do you imagine reading this phrase?
Not having problems any more?
Not depending on anything or anybody?
Not needing money any more?
You can win all your life at a cost of only 1 €.
It really seems that with the financial crisis, the income from lotteries and gambling
has increased out of all proportion. If the probability of winning is very low and the
money usually ends up in the hands of the Government, why then do so many
people decide to gamble even if they know they will be throwing their money away?
This is the reason why the slogans I reported above are the true luck of the
marketing companies that look after the lotteries and the gambling industry’s ad
campaigns, and especially the Government’s coffers.
If this phenomenon did not constantly increase, the Government probably would not
be able to keep its public debt at an acceptable level.
Money coming from gambling actually represents capital which the Government
cannot give up without having to create new taxes or new more restrictive
measures.
If, starting tomorrow, “everybody would stop” gambling and the Government then
decided to increase taxes to compensate for lost revenue, a “civil war" would
probably break out.

Daily and monthly balance

I understand perfectly that closing every daily or weekly trading session in profit is
difficult.
For this reason, above all if the operativity is not intraday based but on a multiday
base, the balance has to be done monthly or quarterly.
If the quarterly balance is negative you need to ask yourself some questions about
the method or your personal discipline in trading.
If the problem lies in the method, because it is unable to perform in that particular
market phase, obstinacy is the worst path to follow.
If the problem is lack of discipline, I suggest you take a holiday.
These moments, when you lack results and you need a break, are the most difficult
to face because at this precise moment of wanting redemption and recovery, the
trader should stop.
At this point ego and obstinacy come into the game and the trader would like to
continue on his nerves.
Stopping could be seen as fear and the trader does not want this for him- or herself:
fear is unacceptable.
In reality a degree of humility never hurts and a break to reflect could be more
valuable than any other solution.
The backtest simulation, like a demo trading account, is a very good solution to
regain confidence and to keep on training or to test your own method during an
unsuccessful phase of the method itself.
To simulate without money allows you to draw more reasonable conclusions about
the operativity, exactly when the results are not those you were expecting and the
loss of money could invalidate your rationality in analysing the problem.

Everybody makes mistakes with operations

If the trader trades, he or she will inevitably have right and wrong operations.
To admit one’s faults is a sign of maturity and to understand that faults are part of
the way to success is an unavoidable step for the trader’s career.
The most interesting observations we should make are about the emotions felt after
a losing operation.
The first losing operation is normal, the second is annoying, the third makes you
angry and after the fourth, you start losing confidence in the method or in yourself.
And it is at exactly this point that the desire comes to recover the losses, maybe
with only one right operation.
From the probability point of view, you put yourself in a situation which is more and
more uncomfortable and difficult to satisfy.
If the fifth consecutive loss also arrives, usually the extent of this last one is bigger
than the sum of the previous ones, because of the higher amount of money you
invested or the higher risk situation you exposed yourself to, in the hope of
recovering the first four losses.
The fifth loss exceeds the stress levels that the trader had fixed in advance and
furthermore it goes against the estimated acceptable risk ,because the trader was
not prepared to accept that fifth loss.
At this point the trader goes into shock and stops for a few days before regaining
confidence or before being simply drawn back by a dependence on the “gaming
table”.

How a successful trader does face difficulties

A successful trader is, above all, a successful person.
Achieving success in life at a certain level is never due to fate.
And I’m not talking about being the first in sport or in a particular profession at world
level.
I’m simply talking about achieving results above the average or at an unusual level.
Average people get scared, feel fear, anxiety and frustration.
Successful people feel the same emotions, otherwise they would not be people.
The difference lies in the fact that facing the same feelings, successful people do
not give up.
Often people confuse enthusiasm for reaching a goal with a consciousness of the
result.
If I’m conscious of the result and of the goal I want to reach, I will remain focused on
it even in difficult moments when enthusiasm decreases.
If I live pushed by enthusiasm and not by determination and consciousness of the
result, a gust of wind coming from a failure or from any kind of problem will be
enough to shake my certainty together with my enthusiasm and everything that
follows.
Success is not 100% enthusiasm, and even successful people experience
discouragement but they do not give up disheartened in the face of an obstacle.
There are no obstacles that can stop successful people, and maybe this is the only
difference between a successful and an average person.
The approach of “start with a loss”
When I open an operation I do not expect to earn.
When I do open an operation I ask myself what I will feel if this operation loses and I
decide to accept this feeling from the beginning.
In this way I become conscious of the risk and I accept it.
The perception of risk is always higher than the real risk.
When a person is “risking”, he or she experiences feelings of “fear” that link the risk
to the conscious and unconscious memory.
For this reason, if I risk being knocked down by a car I experience a temporary
shock which, after the event, leaves me completely immobilized or makes me feel
sick with fear.
The “fear” remains and over time it will influence my future behaviour in relation to
similar situations, when it comes back to me or when I live through it again in the
future.
When you lose or risk losing, you also experience a “fear” that will go with you in
your conscious and, above all, unconscious memory.
You will live through this uncomfortable feeling again every time you risk losing
money and this quite heavy, unpleasant feeling could provoke a reaction of refusal
to trading, where every day and in every single operation you risk losing money.

The model of the successful trader

No trader has been trading all his or her life
I started trading in 1997.
So I cannot state that I have been trading all my life, as I believe nobody can.
There is always a beginning, and when you start you are exactly like anyone else
starting something: doubtful, confused, maybe a bit clumsy, and if you add some
insecurity, the recipe is made.
By 2009, in the 12 years since I started trading, I had seen at least 3 important
crashes on the stock exchange: the one on the Japanese market, the 9/11 crash
and, finally, the one that involved the whole financial world and is still having an
impact today (2010) all over the world.
The beginning is the first phase, the one that is for brave, passionate or simply
curious people, but the results fill the white pages of your own story only because
you started one day.
All traders have had some difficulties
All the jobs in the world and all the professionals face some difficulties in their
careers, why should a trader not face any?
The first difficulties are those that define the boundary between earning and losing
money.
If we think about this, these are the most important difficulties and those which will
determine whether the trader succeeds or quits.
The trader who quits is the one who is tired of frustrations and failures or the one
whose capital has been reduced to zero by the number of failures .
But there also are traders who operate for years and then, facing a long-lasting
period during which they lose or do not perform, prefer to quit because they have
lost confidence in trading or in themselves. Losing confidence in oneself or in the
trading world is the biggest reason for failure for those who have achieved some
results over a long or short period. But then fall out of love with trading when facing
a difficult test. The thing is, those people did not think they would still have to face
such a trial after quite a long successful period in trading.
Difficulties have existed, do exist and will always exist even in the life of a super
trader who has faced the market for years and managed any amount of money.
We cannot know what we are not prepared for until the day when, unexpectedly, it
turns up at our door.

The trader’s goal is to “last”

Joe Ross has surely seen more than I have on the markets.
His fame and his mature age make him one of the best known traders in the world.
The other day I was surfing on Facebook, I was looking for some well-known name
in the trading world, and you know what? Joe Ross is on Facebook.
What do I do?
I send him a Friend request.
The next day I receive his confirmation: I am a friend of Joe Ross on Facebook!
But that’s another story. What I want to tell you here is a phrase that a trader told
me some days ago: “the trader's goal is to last”.
This trader did courses with me and then after 3 years of study finally started
operating with real money.
In 3 years he had not even opened an account.
He studied all sorts of books and collected all the information he could find on the
web.
I remember the hours spent coaching him, discussing all the details of optionstrategies
and even the most useless and hidden curiosities of trading.
I sincerely thought that for him trading was a fascinating subject to study with an
academic approach.
Even if rare, his was not the first case I saw of a person who, after having attended
a course and traded virtually, did not start operating in real money after having
passed the critical limit of 6 months. By this time more or less everyone starts
trading, even the most risk averse, with the desire of challenging their own goals.
Well this person, who is now a friend of mine, comes into my office for a talk, after I
had not heard from him for a while,.
We meet and we discuss the latest trading news and what do I find out?
He started trading.
With an account of $100, you will think.
Absolutely not.
His first account was $100.000 and his profit in the first 3 months $30.000.
I have always told people to start trading virtually, with paper money, and then to
open a small account and then, goal by goal, to increase the managed amount.
In any case, starting is very important, once you feel ready, to get a feeling for the
market.
He did virtual trading for more than 2 years, he carefully consolidated his knowledge
and he started without losing 1 dollar.
His first quarter has been a very good one for a beginner, not only because he has
proved that he can manage risk emotionally, but also by because he has gone on
the market with a such a significant amount of money for his first options account.
I strongly recommend not opening such a big account, during the first few months of
operations, but his story has been a lesson for me.
Just thinking of the number of books about trading he suggested I read, in only one
evening, his study time has not been too long or too short.
I also told him I would read them but I do not think he believed me, as I did not write
down one title or author he told me about.
This has been a period for him when he gained awareness of the risk and he
worked out his identity as a trader.
The job was so well done that when he started, he started with the confidence that
only a trader with at least 1 year’s experience on the markets could have had.
When you work with different people, you understand that what you can teach them
is simply the beginning.
After a while, you will definitely learn far more from each of them.

Maximum duration of losses in time

If the method you have spent so long looking for and that has worked for a period is
not working anymore, whose fault will this be?
whoever taught you the method ?
your emotions?
your lack of discipline?
Wake up!
The market could simply have changed and the moment has come for you to adapt.
When the system is not performing anymore, the only responsibility you have is to
notice it before having lost your entire capital and having given it away to whoever
was already ready to receive new money, yours!
Number of consecutive losses
The maximum number of consecutive losing trades is a bother.
If you lose for 5-10-20 consecutive times, troubles will start.
You start losing your trust in the method, and then you start doubting the market
moment, and in the end you lose trust in yourself as a trader and as a person.
When you reach this stage, the first instinctive reaction is one of discomfort, then
the feeling grows and starts taking on the look of frustration, and then sadness
amplifies the feeling of frustration.
At this point, if you want to get out of the “corner” and not go k.o. you decide to quit,
looking for an alternative that justifies the fact that trading does not suit you, or
,simply that trading is a tool with which it is impossible to earn and in doing so you
feed the legend that “with trading people do not earn money”.
I decided that I would definitely stop trading when in only 6 months I managed to
accumulate a small fortune that allowed me to buy my parents' house in cash. At
that time those were modest dreams: I lost the same amount of money in around 3
months.
The feelings I felt were so strong for me, that a wave of pure ammonia in a closed
elevator would have been nothing in comparison, even if the wave went on for 1
hour.
At that point I decided to definitely stop trading.
To rebuild the “neuronal” journey that allowed me to accept the loss and to start
facing the market again has not been easy.
It was like after the first free fall parachute jump , the emergency landing near a tree
made me completely forget the idea of carrying on jumping, and years later a
partner of mine suggested I try again.
Well, at that time I was already conscious that I wanted to trade again and I was
already earning money with it, which made it seem easier for me to do another
parachute jump.
That's how I got my parachutist’s licence.

The trading method

The method’s ups and downs
I went through phases when opening a calendar spread was a free meal in 80% of
the cases. I remember when this happened between 2005 and 2006.
I bought butterflies without an afterthought in the first part of 2007, when the market
went down without a hitch and I was earning from volatility, time or from direction,
but it was not difficult to bring money in, taking well judged risks.
I saw the break-even points of my options strategies fly from one side to the other
during the crashes of 2007, whatever the underlying.
I then decided to operate buying monsters and gianty swaps, as we called them, to
earn from volatility without taking a risk on direction even when the market went on
moving violently and did not seem to want to stop.
I operated with options on the Vix, to earn rapidly during market crashes, with an
underlying that was maybe even more volatile than the market itself, simply
because the Vix represents the measure of the market's volatility.
I have been able to create, with the help of expert scalpers, an unshakeable
operating strategy for the Forex.
Besides all this, I had to face difficult, non-profitable or even loss periods.
But above all, why did I go on changing strategy if I had a strategy that worked?
The method is useful to understand how a determined strategy has to be applied.
In any case, you cannot think that the strategy you use is the only one for your
entire life.
Your ability as an experienced trader will allow you to understand the conditions in
which to use one strategy or the other.
No business lasts forever without innovation.
Trading needs to travel step by step with evolutions in the market.
The application method of a strategy can last for 6 months, a year or maybe 2
Then this method will end up in the drawer to make room for a new method, waiting
for one you used for the previous 2 years to come back into fashion.
And when your method ends up in the drawer, what do you do?
The method is not wrong.
What is wrong is to always go on using the same method, at any cost.
The true method is the one of knowing how to recognise the method that works in a
defined, longer or shorter phase of the market, and to know that if you do not know
the right method, it is better not to risk your own money.
I expose myself to risk when I’m conscious of having the chance of earning a profit
and definitely not when I‘m at the mercy of risk.

95% of the losses end up in the hands of 5% of the rich

But who is this 5%?
Who are these people?
Let’s say that if the strong hands are able to move the market with some efficiency,
and to be a significant counterpart to the equivalent value exchanged, maybe those
strong hands will be a big part of this 5%.
This reduces the chances of us being elected to the 5% of profitable traders even
more.
The simplest thing to do, I think, is to follow the moves of those who definitely have
the cards, whether legitimately or not, to play the game.
That is why simply watching the price and reading the tracks left by the big
operators is an inescapable necessity for the trader.
The trader is “the little fish” that swims under the “shark”.
The shark moves and looks for its prey to eat, and by remaining under the shark’s
belly the meal is guaranteed, and if nothing else, we also avoid becoming the
shark’s dinner.

Who has money, decides

Usually money can make the difference in the decision process.
Useless to say that, being able to change the rules of the game is a winning hand in
any activity.
In trading this is only possible at the very highest levels.
Levels of power that are in the hands of a few.
Who has power, has money
The figures of power who hold important political and financial roles have access to
unobtainable information and are even able to create such information, not just
modify the rules of the game.
To know that the market can be manipulated and that this ability is in the hands of
the few, makes us conscious of the real risk, that of the impossibility of predicting
the price.
If anytime you enter the market, you are conscious of the fact that you can lose In
spite of your trading system, you can think of making this fascinating job part of your
future.

Money moves the price

Many people think that trading is a war to be fought against the market.
The market satisfies the demand and supply of those who place orders to buy or
sell, and that’s all.
If the price rises, your order has contributed to that movement, just as it has when
the price falls.
It is simply a matter of understanding whether there are people able to “manipulate”
the price or not.
In any case we will not be those people, and we have to accept this fact.
In any case, if a character exists who "manipulates” the market, (usually called a
“strong hand”), it would be interesting to understand what logic this character
adopts and what moves he/she makes, so that we can be on the right side of the
market.
I have never found the phone number of someone who could keep me updated
about the intentions of the “strong hands”, but what I have identified is the “track”
that those “strong hands” leave when they move.
This particular detail warrants consideration in this e-book, which does not intend to
explain direction as the result of a technical observation, but simply as the result of
the circulating money flows.
To know where the money masses are directed gives us the chance to be on the
side of those who earn simply because they have enough capital available to
influence the rules.

Automatic systems

In the era of the iPod, palm and laptops, which are forever getting smaller, we have
the feeling that everything can be automated.
In trading, the “robot” that imitates human abilities without emotions is one of the
frontiers in the top ten interests for newbies and professionals.
I have heard a lot of talk amongst professionals on this subject.
A lot of talk amongst traders new on the scene, who already want a trouble free life.
A major split has emerged between those who consider the trading system as the
only way to success, and those who consider it as the surest way to a guaranteed
decline in performance and capital in the medium term.
The Holy Grail
When the moment comes that you are consistently earning more money than you
budgeted when you started trading, you will know for sure that you have earned the
results with commitment and you will certainly not believe that you have found the
Holy Grail
it with consistency and passion.
but of have simply learnt a profession after having committed yourself to

Oscillators

Oscillators are definitely a taboo subject.
People say that oscillators do react late in relation to the price, that they give a more
immediate and filtered reading of the price and that they therefore reduce the
information it gives.
Of course, a line drawn with a mathematical formula can not, at any time back up
my personal decision about the risk I want to take.
A very interesting observation came from a pleasant chat with a directional trader
recently...
When stock exchange traders were
computers and could not calculate the MACD or stochastic value at any moment of
the day.
Traders knew the prices of the previous stock exchange session and they could
mark with a pencil, in a notebook, the prices of the trading day that were shown on
a luminous strip display.
These traders managed enormous capital and represented the interests of
institutions that definitely did not trade on the stock exchange to lose their money.
Today, computers allow us to automate complex formulae in a second and this
allows analysts and private traders to go crazy using indicators and "magic
formulae", which have nothing to do with the price, other than as the basis for a
calculating model that tries to explain what the price already says.
The more you move away from the pure price, the more you go towards something
that does not represent the price at all.
In any case, I want you to remember that what we buy and sell is always a price,
never one of its derivatives, the stochastic is not on sale
.
floor members they certainly did not have

The price moves without reason

2.1. Technical analysis
This is my strongest position.
There is no technical analysis that can predict price.
Technical analysis is a very good discipline for describing and justifying the past,
but definitely not for earning money operating on the market in the present.
Directional traders often support this. What also helps me here, are the completely
informal conversations I have had with traders who live from trading on the stock
market or on the Forex and who have spoken to me about how their strategy, is
based on studying the price but also takes into consideration previous key levels,
and only works because of the care taken to enter into the position at the right
moment and only earns because of care with risk management.
When I talk about risk management in my courses, the audience only pays attention
because of the word “risk”, and all the rest is just boring as people want to hear
about profits, and definitely not about how to manage their own operational plan:
management does not fascinate anybody.
In this book you will learn that technical analysis is the result of the amount of
money operators put into the game and not the opposite.
A resistance does not only form because the price reacts psychologically to a
specific past price level.
If no money was involved, the price would not go anywhere.
A level of support results if money flows in the market but the fact that those
movements correspond with a support, does not tell us if it will be a support, or a
“broken support”.
What should I do when I read about the presence of a support on a chart? Do I buy
it, thinking that it works as support, or do I sell it, thinking that there will be a
breakout?
Is this not the same thing as deciding to buy or to sell at any time?

What do people starting out in trading think

Simple: they are buying a dream.
The dream of freedom, wealth and prestige that everybody would like for
themselves and for the people close to them.
The chance to say “go to hell” to their boss or colleagues.
The wish to find an ability in themselves to be successful challenging the market,
through their own strengths and maybe only in their spare time.
Does anybody ever asked themselves whether a commitment at the highest level is
necessary in order to achieve excellent results?
What I think
For me, money is only real if it comes from the market.
My identity as a trader is very strong and I would never be able to justify not being
able to make a profit from the market.
I have had periods of low profitability, or no profitability at all, even after having
acquired a lot of experience and ability.
I’m not afraid of being compared with others, or of admitting this important truth.
What I do not accept is giving up a job like this, that defines me as person.
I believe that often even the best trading methods, and I have discovered and
invented hundreds of them, have varying periods of inefficiency or inactivity.
I think this is normal, I do not believe that is good business to sell ice to Eskimos,
and in the same way to do options’ calendar spreads in the middle of the storm of
the financial crisis, or to buy call and put, in a
other than a “crime”.
range market, cannot be anything

What the traders think

Traders embrace this profession for several reasons, but in first place is always the
desire for high profits and independence.
Traders win above all because they risk their own capital, they enjoy the chance of
working anywhere in the world and they earn sums of money that most people
cannot even imagine.
Traders believe in themselves and in their trading system.
After a long time researching, they land on a suitable trading system and as far as
they are concerned, there cannot be another system that lets you earn as much as
theirs does, or even that lets you earn anything at all.
Why do successful traders not believe that another trader can earn money with a
different trading system?

What the managers think

Managers who work for institutional investors, or directly for their own customers
are able to achieve positive performance in the long run, but without avoiding
periods of loss of varying length.
The manager profile is that of a professional starting out as a private trader or as a
trader working at the desk of one of the main managing banks, who decides to offer
his or her own consultancy to certified managing companies, or to open their own
company betting on their own abilities as a manager and a trader.
One of the phrases that most impressed me and that best sums up and describes
collective opinion, is the following:
“it does not matter if you earn or lose, what matters is how you earn or lose”

What the institutional investors think

I have had the opportunity of speaking to institutional investors, that is funds’
managing companies or in general to people whose job is to select managers for
funds’ funds.
Here things become interesting because the manager's goal is to
select other managers able to do this for him or her, in order to satisfy a clientele
who will then be willing, too, to entrust them with their own savings and capital.
The war of the managers, in this case, is divided into two sides: one side is looking
for the best performance and the other is looking for the best product package.
You know that even managing is selling a product.
In this case, you should measure the quality of the product by its return over a
period of time, in proportion to risk.
The product package is important in every case: just think about the amount of
money that has been raised from the introduction of capital-guaranteed products
after the stock exchange crashes of 2001.
In this case the product’s success does not come from the performance promised,
but from the feeling of “safety” generated by the product.
Some years later you would have discovered that nothing was guaranteed by those
products, as the risk assumption made during subscription was based on bonds
issued by certain banks that wrote the history of finance and today do not even
have an official web site.
perform, or to

Is it possible to earn money on the

1.1. What the brokers think
Over the years I have talked to several brokers who have sight of their customers’
accounts.
What people say in the trading rooms and at business dinners is that very few
accounts operate in the black and many of them are not destined to be profitable in
the long term.
These observations certainly do not encourage anyone to start out or to continue as
a trader.
It is often commission that makes a trading model inefficient, or over rigid automatic
systems, or the emotions of the trader who uses his discretion. However you look at
it, it seems there is always something that goes wrong, for the majority of
professionals, private individuals or for the often ill-prepared people camping in the
land of gold, on planet trading.

Why am I saying all this?

To be free, in peace and in tune with the world!
I have met more than 5000 people and I felt good with all of them … isn’t that
fantastic?
I want each of you to receive these few lines and to be able to read them, as if I had
written them by hand and addressed them personally to you.
In the following pages you will discover a part of the experience I have gained in
trading, but what you will not discover is the person I am and this is the reason I
wanted to tell you something personal about me.
When you read the book, I wouldn’t want you to think that it’s the stuff of genius and
therefore is in some way unachievable for the majority.
I’m an average person.
So make good use of the information and understand that the result will always and
only depend on the person you are, or decide to be.
At this point, it is appropriate for me to thank all the people who made it possible for
me to live the first 34 years of my life in the best way possible.
Starting in chronological order, my first thanks go to my brother, with whom I’ve had
a lot of fun from when we were kids, and who taught me patience, a virtue of which
he is so full that many would be ready to make him a “saint” immediately.
To my mother and father, who have always lived a life devoted to sacrifice and
honesty, which is not a small thing, and always tried to instil those values in me.
To my childhood friends, “those you never forget”, with whom I discovered the world
step by step.
To Claudio, who for years “freaked me out” with his talks on philosophy, leaving a
sharp and indelible mark on my youth.
To Lina, who dedicated an entire life to others and never got tired of passing on the
message of charity.
To my high school mates who completely changed my diligent self at school,
making me forget about the school uniform and the “good guy” hair cut.
To Valentina, who spent 16 years of her life beside me and gave me trust and
unshakeable respect.
To Andrea Cesarano, friend and brother, who taught me how to sell under the
pretext of teaching me how to live with an awareness of the possibilities open to me
To all those to whom I owe my success at Investing People.
To Stefano De Carlo, who was the first person to arrive in the office and who has
shown heart and enthusiasm for himself and for everything around him over the last
3 years.
To Mirko Masoni, Stefano Gianti, Valerio Maggi, Salvatore Lo Voi and Gianluca
Landini, inveterate traders who have experienced in their life what it means to leave
a safe job and to live only from trading.
Monica, Valentina, Fabio, Alessandro, Stefanny, Elisa, Francesca and Felipe who
dedicated time, passion and enthusiasm, both when working for us and during
moments of fun or difficulty.
Again thank you to Stefano De Carlo, Daniele Repossi, Alessandra Chirizzi, Andrea
Mereghetti and Alessandro Bonetti, who share the challenges of trading with me
every day, having this as their only profession.
To the woman I never thought would arrive in my life but who, in answer to a simple
request to Baby Jesus, just arrived like an angel, and gives me tenderness, love
and enjoyment every day of my life: Alessandra, for our friends
Thank you, thank you, thank you to over 5000 people who I have met in these 5
years of on and off stage training and who are still reading my words today, in this
book.
Cina.

This is the way my story starts

The part everyone knows is the part which starts in 1997, when I started trading on
the Stock Exchange and in 2002, when I started trading with options.
But my story really starts on the night of the 23rd to the 24th of October 1975, when
I was born for the first time.
Yes, for the first time, because since then I have been born again at least 6 times.
The first time I was born the same way as everyone else, from my mothers’ womb,
under the sign of Scorpio.
I’ll spare you the other 6 times, but the thing to know is that I have always been a
shy person.
One of those people always appreciated for his kind heart, but so shy that he could
make even the most introverted person in the group feel uncomfortable.
Yes, because when you are shy, not only do you not strike up conversation with a
stranger, but you are quite capable of silencing even the leader of a high school
class, who has no time to waste on someone who doesn’t speak.
I know this seems incredible to those of you who met me in my “dominant stage
animal” persona, giving the audience shows and emotions together with amazing
creative inventions for trading strategies.
Coming onto the stage, to the Rolling Stones’ music, in front of more than 500
people, like a rock star, and certainly not like the trader in a necktie you are used to
seeing at an average financial presentation.
But why am I telling you all this?
Usually people make themselves seem important by talking about their successes
and how they made millions.
When I went on stage for the first time, I was in front of 9 people.
I remember that during the coffee break I dissolved into tears with my friend
Andrea, because I believed I was not able communicate, my heart and my passion
to all the people there, together with the information they came for.
After the break, I understood something had changed …
The people there were participating, smiling, enthusiastic and became an active
part of the show, while they were learning.
In other words, they were with me, accepting me as if they wanted to consume me
and I did nothing other than give them all of myself, my heart and my spirit, along
with information and entertainment.
When I found myself in front of more than 500 people, who were all there for me, 5
years on from that first time, it was simply extraordinary.
I do not usually prepare an opening speech or a rigid programme for my
presentations.

I always improvise and try to develop the presentation according to the make-up of
the audience.
Basically, the audience loves me, it seems to need to meet me.
In reality, all this comes from the fact that when I’m on stage I give them my heart
and I lay myself bare to everyone.
Yes, because if you remember what you read up to this point, I was born shy!
When people think they are getting a lot from me, they do not know how much I am
getting from them.
Being accepted for what you are is the best satisfaction for a shy person, and every
person in the room was a big vote of confidence to me!
Maybe this is the reason why I never became bigheaded in front of all those people,
and I never will.
Heart for heart!
People always gave their heart to me and I always gave them mine back in return...
With time I learned to accept myself fully and to give people back the gift they gave
to me: acceptance.
I’m not writing these words for myself. It is beautiful to say all this things to the
people around you who sometimes see you as an example.
Many people think I’m really someone … to put it briefly, I eat and drink, have fun
and get angry like everybody else in the world. I have my fears even if I have learnt
to give less importance to fear and more emphasis to important things so that I do
not lose the important things out of fear, as often happens .
I do not even believe I am “talented”..
I owe everything that I have achieved to my heart, to perseverance and to some
flash of “genius” but to nothing unique.

Mergers and Acquisitions

Mergers and acquisitions are relevant indicators, though perhaps not as strong as the
others discussed here.
However, mergers and acquisitions between large, multinational companies can and do
have an impact on currency values for the short-term. The reason should be fairly clear
when you think about it.
In order to complete an acquisition, for example, the corporation that is attempting to
purchase a corporation based in another country must enter the Forex market to purchase
the corresponding currency.
During the window of time that the acquisition is pending, it is not unusual to see a spike in
currency value on both sides.
Trade and Capital Flow
Countries may be said to be dependent on
either trade flow or capital flow.
A country dependent on
or exports with other countries.
Some examples of trade flow dependent economies include:
trade flow brings in the larger part of its income from by its trade
Canada - oil exports
Australia - precious metals exports
New Zealand - agricultural exports
Each of these countries depends largely on their foreign exports for economic growth.
Remember when Japan's economy was booming due to all the cars and electronics they
were exporting across the world?
A country dependent upon
foreign investments. The
dependent countries.
This is because the financial investment markets, on the whole, are very large and highly
liquid in these countries. They draw in a steady pool of investors both from within and
without, but are particularly reliant on the influx of capital from foreign investors.
Take from this another set of potential Forex signals to watch:
capital flow brings in the bulk of its income by attracting outside,U.S. and Great Britain are primary examples of capital flow
Any event impacting the flow of trade
And keep in mind that these events may be something more than new trade agreements or
faltering investor confidence. Natural disasters, for example, can have an impact on trade
dependent countries that rely on agriculture for their exports.
Any event impacting the flow of capital
Geo-Politics
Unlike stocks, currencies are quite sensitive to events in the political sphere. In a way,
currencies are a lot like “flags”
country they serve.
It is not unusual for foreign investors to devalue currencies intentionally as a way of sending
a message about a country's politics. It is also quite common for adversarial governments to
take actions towards devaluing the currency of an 'enemy' or problem country.
One needs to look no further than the current controversy surrounding the United States'
war effort. The Dollar has taken a beating along with the U.S. in terms of image.
Many countries are now threatening to denominate their oil exchanges in currencies other
than the U.S. Dollar (which has been standard since the 1970s'), as well. If that occurs, the
almighty Dollar may crash farther than it has at any time in history.
So, pay attention to politics as much as you can!
Any time a major political player does something to indicate a vote of confidence (or lack
thereof) in his own country or another, you're sure to see a corresponding change in
currency value.
- they may represent everything good and bad about the
Japan - electronics and automotive exports

Forex 102: Factors Affecting the Global Currency Market

Many people find the 'predictions game' the most enjoyable aspect of Forex trading. In order
to develop solid mid-range and long-range trading strategies, you have to acquire a fairly
sophisticated knowledge of economics.
So, you ask, which factors most influence the global currency market?
There are 5 key areas you need to pay attention to in order to become a top-notch Forex
investor:
Interest Rates
Economic Growth
Mergers and Acquisitions
Trade and Capital Flow
We'll take a look at each area now, and how you can take advantage of these factors.
Geo-Politics
Interest Rates
The Forex market allows you to profit from differences between the interest rates of different
countries. Interest rates on a currency from a given country are set by that country's central
bank.
In general, you want to purchase low interest rate currencies first, and use these to finance
your purchase of high interest currencies or other instruments. This tactic is known as
generating
A second tactic involves generating income from
observed that a rise in a country's interest rate usually triggers a corresponding rise in
currency value.
The main thing to understand about
shift in interest rates presents you with an opportunity to play interest rate differentials
against each other.
The corresponding rise and fall in currency values means that interest rates make for
powerful and generally very reliable Forex indicators.
interest income.capital appreciation. It has beeninterest income and capital appreciation is that any
Economic Growth
Positive economic growth is strongly tied to a rise in currency value. Why?
When an economy is in a growth period, inflation tends to follow. What do the central banks
do when the threat of inflation is looming ahead? Typically, they raise interest rates in order
to slow down the economic boom just a bit.
Now, when interest rates go up, investors - especially foreign investors - start putting more
money into the economy. More investors mean more demand for the currency. So, the value
of the currency goes up.
Likewise, a slow in growth or even a significant downturn will cause the reverse of this chain
reaction to take place. Central banks tend to cut interest rates to give sluggish economies a
shot in the arm.
However, lower interest rates mean lower returns for investors. They respond by pulling out
of the market. This results in less demand for the currency, followed by a drop in currency
value.

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