Forex


Trading Forex Using Currency Correlations

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Defining correlation trading?
Correlation is when a number of markets, or, in the forex market, a number of currency pairs, trend together: a positive correlation is when they move in the same direction, and a negative correlation is when they diverge to identical degrees. By identifying which markets have a robust negative or positive correlation, forex traders can envision future changes in price, as well as cash in on when correlations fail. In the currency market, the EUR / USD and GBP / USD have a strong correlation. Generally they trend in the same direction, though the GBP / USD can be more erratic than the EUR / USD. In the meantime, the USD / CHF currency exchange pair has a negative correlation with the EUR / USD; when one trends up, the other often trends down.
The US dollar also has a powerful correlation with gold, as well as with US Treasury Bonds. The USD and gold have a tendency to have a negative correlation; when the US economy is performing well, the dollar will customarily benefit from capital flowing into US bond certificates and shares, while gold is less attractive in comparison. This also makes US Treasury Bonds go up in value as that is where the capital is flowing. When the American economy is feeble, or global political and economic eventualities are uncertain, traders and investors have a tendency to sell bond certificates and stocks and invest in gold as an alternative.
Outside of the US, the CAD / JPY forex pair has a powerful correlation with the cost of oil; as Canada is a major oil exporter, and Japan is a major oil importer, the price and supply of oil affect both economies. Likewise, as Australia is among the world's major gold producers, and the US is among the world's major gold buyers, the AUD / USD correlates with the cost of gold. Also, due to New Zealand's strong relationship with Australia, the NZD / USD also correlates with gold costs. And, the CAD, AUD and NZD, all being commodity currencies, have a tendency to move in the same direction against the USD. So all three currencies rise and fall in tandem when paired with the US dollar.
So what about when markets don't correlate?
Markets that generally correlate do it because their movements are backed by real market forces; in the case of the EUR / USD and CHF / USD, both currency pairs are impacted by the European and US economies. However, as correlations are identified by examining changes in price overtime, it does not mean that robust correlations are continued.
Breaks in correlations are known as cracks, and forex traders can use these. As fx traders know that unusual circumstances stop correlating markets behaving the way they should, thus the markets should begin to correlate again as market conditions return to normal. Being able to foretell this future direction ( the return to correlation ), traders can make significant profits. That being said, open positions must be actively monitored, as correlations between markets, whether or not they are currencies, commodities or indices, are not a precise science.
Remember that CFDs and forex are leveraged products and can result in losses that exceed your first deposit. CFD trading may not be appropriate for everyone, so please make sure that you understand completely the risks involved.     
Article Source: http://EzineArticles.com/6447719


Forex Traders in Their Pursuit of Profits

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Forex is the short form of foreign exchange. The primary purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency. The foreign exchange market determines the relative values of different currencies. The foreign exchange market is the most liquid financial market in the world. Traders include large banks, central banks, institutional investors, currency speculators, corporations, governments, other financial institutions, and retail investors. Forex trading is typically done through a broker or market maker. Forex trades can be placed through a broker or market maker.
ForexPro is the brand name of FxPro Financial Services Limited an online retail trading broker. ForexPro UK Limited acts as an introducer to its parent company. It does not provide any brokerage services or hold client money only acts as an introducer of UK clients to its parent. Forexpro has 8 different trading platforms bit it operates mainly in two platforms such as metatrader 4 and c trader. FxPro uses the metatrader 4 system to trade over single or multi client terminals, web-enabled mobile phones and PDAs whereas c trader operates in an ECN environment, connecting the buy/sell side together via a FIX protocol. Forex Factory supports Forex traders in their pursuit of profits.There were several international companies that support forex trading. The iforex is an international Forex Trading company which was founded in 1996 by a group of ex-bankers. The iforex website provides currency traders the choice of two user-friendly online trading platforms.
The foreign exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country's currency in terms of another currency. Conversion rate of currencies of different countries will be different. The Currency trading market is a multi trillion dollar market where world currencies are exchanged back and forth on a daily basis. Retail currency trading is typically done through brokers and market makers. Traders can place trades through their brokers and they will in turn place a corresponding trade on the interbank market. The present business society rates forex as a very important matter.
 The exchange rate history of the nineteenth century highlights the importance of the gold standard in that era. The method of determination of the exchange rate had to be reassessed when the gold standard was suspended during World War I. The historical period divides to three sections.First from 1914 - 1944, the second from 1944-1971,the third floating system after 1973. Trading Currency means the simultaneous buying of one currency and selling of another.This process is carried out on the foreign exchange market, which is an electronic market that exists between a network of banks and not an actual market in the physical sense. Foreign currency exchange rates are mainly meant for a forex trader. When forex rates go up and down, forex traders all over the globe make and lose fortunes on the slightest changes. Forex rates is what tells traders when to open a position and when to close it. The main activity line of the international Forex brokers is rendering first-grade investment services aimed at speculative profit making from operating in the worldwide financial markets. At present the clients of several companies use the leading-edge technologies in the online-trading and they have an access to news and informational resources submitted by the major information agencies.
Forex Macro on WN Network delivers the latest Videos and Editable pages.
Article Source: http://EzineArticles.com/6450018


Forex Trading - 3 Mistakes To Avoid

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Forex trading can be a very profitable feat. Every year, there are more and more people getting rich from the Forex markets. If you take your time and work hard at learning the skill of trading, there is a very good chance you can become one of these people and become financially independent. It is not a get rich quick market however. It actually does take time and hard work to master the skill. This is a disappointing fact to many newer traders, but if you avoid the following mistakes, you can potentially cut years off of your learning curve.
The first mistake that many new traders make is not testing out their Forex trading strategy. They read about a system on some forums and decide that it's the right system for them and start trading real money with it. Unfortunately, even if the system is profitable, it will be very hard to have the confidence to make intelligent decisions once in the trade if you have not tested it out for yourself. If you read about a trading method that you are interested in, you need to do your due diligence and test it for yourself. Once you can see that it is in fact profitable, your confidence in that method will increase tenfold and even if you take a couple of losing trades it will not bother you because you have proven in your testing that it works!
Another mistake that traders make is that once they have a losing trade or a string of losing trades, they ditch their current strategy to look for a "better" one. This ties back into the previous point. If you have proven to yourself that the method is profitable, then why would you look for another method? The fact is that every system or strategy will have losing trades. It is bound to happen. Just because this occurs does not mean that you need to change strategies! You need to give your method time for its edge to work out. Some traders do this for years searching for the "perfect" system. Unfortunately they will eventually realize that they have wasted a lot of time that they could have been using to become profitable with a single trading strategy.
One more very common mistake among many traders is that they risk too much per trade. They have read about a system and feel that they understand it completely so then they jump in the market risking 10% or more of their account hoping to strike it big. Again, trading does not work like this. Imagine the emotions you would go through if you lost 10% of your account on a single trade. Not to mention the nervousness you would feel while you are in the trade, whether or not it's losing. This is simply too much risk to place on a trade. Most professional traders don't place anywhere near that amount of risk. Professionals typically risk 1 to 3% on their Forex trades. If professionals who have been doing this for years risk just 1 to 3%, then you would be wise to do the same!
There can be a large learning curve to Forex trading. However if you avoid these mistakes from the beginning, you will be able to cut that learning curve down significantly and be trading profitably much faster than the average person. Treat Forex trading like a business and you have a good chance of becoming profitable.
My name is Shawn, and I have been a Forex trader since 2007.
It has been a long journey to becoming a profitable trader. Along the way I realized there were many ways I could have cut the learning curve in half! There is a lot of Forex junk out there and you would save a lot of time by avoiding all of it.
Forex trading is my passion and is something that I will be doing for the long haul. I would love to help any aspiring traders reach their dreams as well so visit my site and check out my Forex trades. If you have any questions about anything, just leave a comment or send me an email and I will be more than happy to help!
Article Source: http://EzineArticles.com/6449969

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