Forex trading or foreign exchange currency trading involves selling one currency to buy another. Some of the most commonly traded currency pairs are USD-CHF (US Dollar / Swiss Franc), EUR-USD (Euro / US Dollar), USD-JPY (US Dollar / Japan Yen), and GBP-USD (British Pound / US Dollar).
The main Trading centers of the forex currency trade are New York, London, Frankfurt, Tokyo, and Sydney. They are located in different time zones due to which the forex trade functions 24 hours a day.
There is no central exchange or location where the trading is conducted, and most trades are executed between two interested parties who use the phone or other electronic means to communicate.
The main market for forex currency trading is the inter-bank market, in which banks, insurance companies, corporations and other large institutions trade to manage the risks associated with fluctuations in foreign exchange rates.
The forex market is by far the safest trading market in the world. There are no corporate board rooms, CEO's, company directors or any one else that can take sensitive corporate information and pass it on to someone who could take part in Insider Trading. There is no way for that to happen in the Forex Markets.
Individual forex traders can trade in the over-the-counter (OTC) market, which does not have any exchange or clearing house, and has limited regulation. Individuals can also trade in forex futures and options at a regulated exchange like the Chicago Mercantile Exchange.
,b>Currency traders are no longer the preserve of large institutions. Anyone can learn how to trade forex, and do it from anywhere. Individuals can trade in the forex market from their homes by means of a high speed Internet connection.
To be successful, it is essential to have access to up to date information about the latest changes and trends in the forex market. You can sign up to get a forex trade signal via e-mail, SMS, or through software installed on your desktop.
EURUSD – Sharp declines in the Euro/US Dollar have been met by equally aggressive buying, giving us contrarian signal that the EUR/USD may continue its decline. The ratio of long to short positions in the EURUSD stands at 1.44 as nearly 59% of traders are long. Yesterday, the ratio was at 1.30 as 56% of open positions were long. Long positions gained 15.6% overnight, and they are 35.1% stronger since last week. By comparison, short positions are 4.2% higher than yesterday and 10.0% stronger since last week. The SSI is a contrarian indicator and signals more EURUSD losses. Our sentiment-based forex trading signals are accordingly short the Euro/US dollar through current price action.
USDJPY – Our contrarian forex trading strategies continue to sell the US Dollar/Japanese Yen currency pair, as forex trading crowds remain very bullish the USD/JPY. In fact, the ratio of long to short positions stands at 1.49 as 60 percent of traders are currently long. A 33 percent overnight jump in long positions signals that sentiment has become increasingly one-sided. Yet short positions are 19.3 percent higher—moderating our bias. The SSI is a contrarian indicator and signals more USDJPY losses, but we would ideally see more aggressive USD/JPY buying to forcefully call for subsequent declines.
GBPUSD – Forex positioning has taken a sharp turn in the British Pound/US Dollar pair, and our sentiment-based forex trading strategies recently flipped from long to short the GBP/USD. The SSI ratio is currently at 1.00 as positioning remains neutral. This represents a sharp shift from yesterday, when 58 percent of open positions were short the GBP/USD. Long positions have jumped 31.5 percent—giving us a clear contrarian bearish bias on the GBP/USD. Short positions are by comparison 6.4 percent lower than yesterday yet 60.2 percent stronger since last week. On balance this given reason to believe that the British Pound may continue its slide against the US Dollar.
USDCHF – Our forex positioning indicator recently flipped its bias on the US Dollar/Swiss Franc currency pair, as traders have now turned net long the USD/CHF. Indeed, the ratio of long to short positions in the USDCHF stands at 1.19 as nearly 54 percent of traders are long. Yesterday, the ratio was at -1.31 as 57 percent of open positions were short. In detail, long positions are 28.1% higher than yesterday and 29.1% stronger since last week. Short positions are 17.7% lower than yesterday and 7.6% stronger since last week. Open interest is 2.1% stronger than yesterday and 21.3% below its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses. As a result, our forex trading signals are currently short the USD/CHF.
USDCAD – The ratio of long to short positions in the USDCAD stands at -1.04 as nearly 51 percent of traders are short. Yesterday, the ratio was at 1.27 as 56 percent of open positions were long. In detail, long positions are 4.7 percent lower than yesterday and 4.9 percent weaker since last week. Short positions are 26.1 percent higher than yesterday and 26.8% stronger since last week. Open interest is 8.9% stronger than yesterday and 23.9% below its monthly average. The SSI is a contrarian indicator and signals more USDCAD gains. Tell us and other traders what you think in our forex forum.
How do we interpret the SSI? The FXCM SSI is based on proprietary customer flow information and is designed to recognize price trend breaks and reversals in the four most popularly traded currency pairs. The absolute number of the ratio itself represents the amount by which longs exceed shorts or vice versa. For example if the EURUSD ratio is 2.55, long customer orders exceed short orders by a ratio of 2.55 to 1. Conceptually similar to contrarian analyses using the CFTC IMM open position data or COT Report, the SSI provides an alternative approach that is both more timely and accurate in forecasting currency price movement. The SSI is a contrarian indicator that tells you how the market is weighted and where the trend may head. More long positions don't necessary suggest more confidence in the direction of the current trend. In general, when traders start having adverse movements against their position, many tend to increase the size of their position with the purpose to average down their entry price in one last attempt to recover from previous losses. However, the higher the number of short orders in a bull market the more dangerous is to take additional shorts because many of those traders who just entered the markets are also leaving their protective stop losses just above the current price action.
Technical view:
EUR/USD is at a major resistance zone (1.3189). Break possibility exists here, but I won't be betting on that today because of the oversold status of the currency.
Fundamental view:
A day with no major releases awaits for us, forex traders. Low volatility expected and no unexpected moves
Fed Governor Bies will speak at 2:30GMT, that might generate a bit of aggressive price movement.
Trading advice for today, 26 February 2007:
I'm expecting a downtrend today because of the oversold condition.
Trade suggestion:
Took a short (sold) EUR/USD @ 1.3190 with SL @ 1.3220 & TP @ 1.3130-1.3140.
Viewed by some as an upset in the forex market, U.S. currency almost hit a record low recently when compared to other major currencies. There still remains some pressure coming from China when reviewing recent comments that mention the possibility of the nation diversifying reserves separate from the American dollar.
The U.S. dollar hit a rock bottom record low of 1.4729 when put next to the euro, and 2.1070 when compared to the pound. This was only after Cheng Siwei, vice chairman of China's National People's Congress, mentioned that the nation may change to “stronger” forms of currency.
Jeffery Lacker, president of the Richmond Federal Reserve Bank, also made some comments that support the Reserve's choice to slash key Federal fund rates by 1/2 of a point. Lacker, who does not actively vote on the Federal board, mentioned that the Federal Reserve most likely “did the right thing” when referring to the recent rate cuts.
Thomson IFR Markets representative Rhonda Staskow mentioned that Lacker's remarks “also suggest that there is a great deal of uncertainty over the sub-prime/housing/CDO issue and how that will play out.”
Staskow also mentioned that, “A crisis of confidence of the dollar and over the asset levels of banks continues.”
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Une des méthodes les plus en vogue actuellement est sans doute la technique du Carry Trade. Cette technique principalement utilisée par les investisseurs institutionnels mais aussi par de nombreux investisseurs privés consiste à profiter des écarts de rendement entre classes d'actifs. Cette méthode d'intervention consiste à s'endetter dans une devise à faible taux d'intérêt et à placer ces fonds empruntés dans une autre devise à taux d'intérêt plus fort. Grâce à ce système, les investisseurs tirent parti d'un différentiel de taux d'intérêt.
Les positions de Carry trade sont généralement prises sur le yen (jpy). En effet, le taux directeur de la Bank Of Japan (BOJ) étant actuellement très bas (0.5%), les investisseurs vendent massivement le yen afin de profiter d'écarts de taux d'intérêt entre les devises. Les principales devises profitant de ce système de trading sont notamment le dollar us qui bénéficie d'un taux d'intérêt directeur à 5.25%, l'euro qui bénéficie d'un taux d'intérêt directeur à 4% et la livre sterling qui bénéficie d'un taux d'intérêt directeur à 5.50%. (chiffres de juin 2007). Ces taux d'intérêt directeur influence en partie les taux d'intérêt journaliers utilisés pour les opérations de swap.
Actuellement, la Bank Of Japon (BOJ) intervient sur le marché des changes en vendant d'importants montants de yen afin de garder un yen dévalué permettant aux entreprises japonaises exportatrices de rester très compétitives. D'autre part, les faibles taux d'intérêt mis en place par le comité monétaire de la banque du Japon participent au développement des entreprises qui peuvent ainsi s'endetter à moindre coût.
Durant les années 2 000, lors de l'explosion de la bulle internet la plupart des Etats du monde ont baissé leur taux d'intérêt directeur afin d'éviter d'amplifier la crise. Cependant contrairement à la large majorité des Etats qui ont remonté leur taux directeur depuis, la banque du Japon, bénéficiant d'une croissance importante, d'une réduction du chômage et d'aucune réelle tension inflationniste (période de déflation) n'a pas jugé nécessaire de remonter fortement son taux d'intérêt directeur.
Cette politique menée par la Bank Of Japon permet aux investisseurs de profiter des différentiels de taux d'intérêt entre la devise japonaise et d'autres devises comme l'euro, le dollar us, la livre sterling … Les décisions du comité monétaire japonais sont donc attentivement surveillées par les investisseurs utilisant la technique du Carry Trade.
La technique du Carry Trade quoique pouvant être très rémunératrice, notamment actuellement grâce à la dévaluation du yen comporte un risque important, en effet une valorisation de la devise japonaise entraînerait une clôture des positions de Carry Trade par une immense majorité des investisseurs car ces positions ne seraient plus intéressantes dans le sens où le gain réalisé sur le différentiel de taux d'intérêt ne serait plus assez fort pour couvrir la valorisation du yen.
Notons que les positions de Carry Trade entraînent une dévaluation importante de la devise asiatique étant donné les montants énormes des transactions effectuées grâce à ce système de trading, ce qui rend la méthode d'autant plus intéressante…
En 1998, le système a en partie explosé. En effet, en deux jours le dollar américain a perdu presque 20 figures (2 000 pips) . Cette dévaluation importante du dollar us entraîna de graves conséquences pour de nombreux investisseurs, notamment le fond spéculatif LTCM qui évita la faillite grâce à l'intervention de la banque centrale américaine.
Fin 2006, la banque Barclays Capital estime les positions nettes spéculatives de Carry Trade à plus de 30 milliards de dollar us. Le vice ministre des finances japonais Hiroshi Watanabe évoque, lui, des montants de l'ordre de 80 à 160 milliards de dollars américains.
Tant que le yen reste faible, le système tient, mais la clôture au même instant des positions de Carry Trade suite par exemple à un changement important de la politique monétaire japonaise pourrait avoir un grave impact sur le système financier international.
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Analyzing your actions is the best way to see if what you are doing needs to be improved or changed. Certainly, your account balance from month to month lets you know if what you are doing makes sense, but getting better is the key to successful trading and keeping a log of your actions and thoughts is the best way to be able to accurately analyze your actions as a trader. FOREXTRADEANALYST makes it easy.
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All successful traders have forex trading strategies that they follow to make profitable trades. These forex trading strategies are generally based on a strategy that allows them to find good trades. And the strategy is based on some form of market analysis. Successful traders need some way to interpret and even predict the movements of the market.
There are two basic approaches to analysing market movements, in both equity markets and the forex market. These are technical analysis and fundamental analysis. However, technical analysis is much more likely to be used by traders. Still, it's good to have an understanding of both types of analysis, so that you can decide which type would work best for your forex trading strategies.
In fundamental analysis, you are basically valuing either a business, for equity markets, or a country, for forex. If you think it's hard enough to value one company, you should try valuing a whole country. It can be quite difficult to do, but there are indicators that can be studied to give insight into how the country works. A few indicators you might want to study are: Non farm payrolls, Purchasing Managers Index, also known as PMI, Consumer Price Index, also known as CPI, Retail Sales, and Durable Goods.
Most traders in the forex market only use fundamental analysis to predict long term trends. However, some traders do forex trading strategies that trade short term on the reactions to different news releases. There are also quite a variety of meetings where you can get quotes and commentary that can affect markets just as much as any news release or indicator report. These meetings are often discussing interest rates, inflation, and other issues that have the ability to affect currency values.
Even changes in how things are worded in statements addressing these types of issues, such as the Federal Reserve chairman's comments on interest rates, can cause volatility in the market. Two important meetings that you should watch for are the Federal Open Market Committee and the Humphrey Hawkins Hearings.
Just by reading the reports and examining the commentary, forex trading strategies in fundamental analyst can get a better understanding of most long term market trends. Keeping up on these developments will also allow short term traders to profit from extraordinary happenings. If you do decide to follow forex trading strategies in fundamental analyst, you want to keep an economic calendar handy at all times so you know when these reports are released. Your broker may also be able to provide you with real time access to this kind of information.
Just like their counterparts in the equity markets, technical analysts in the forex market analyze price trends. The only real difference between technical analysis in forex and technical analysis in equities is the time frame. forex markets are open 24 hours a day.
Because of this, some forms of technical analysis that factor in time have to be modified so that they can work in the 24 hour forex market. Some of the most common forms of technical analysis used in forex are: Elliott Waves, Fibonacci studies, Parabolic SAR, and Pivot points.
Many forex trading strategies in technical analysts combine technical indicators to make more accurate predictions. The most common tendency is to combine Fibonacci studies with Elliott Waves. Others prefer to create entire trading systems in an effort to repeatedly locate similar buying and selling conditions.
Whichever form of forex trading strategies in any kind of analysis you choose, it's best to make sure you learn as much as possible about it and your market. Then you will be able to use you knowledge to create a trading system that will suit your needs, and help you to become a profitable trader in the forex market.
