Spot Currencies

OVERVIEW

Foreign exchange is the simultaneous buying of one currency and selling of another. Currencies are traded through a broker or dealer and are executed in pairs, for example, the Euro and the U.S. dollar (EUR/USD) or the British pound and the Japanese yen (GBP/JPY). The foreign exchange market (Forex) is the largest financial market in the world, with a volume of over $2 trillion daily. This is more than three times the total amount of the stocks, options, and futures markets combined.

Unlike other financial markets, the Forex spot market has no physical location, nor a central exchange. It perates through an electronic network of banks, corporations, and individuals trading one currency for another. The lack of a physical exchange enables the Forex to operate on a 24-hour basis, spanning from one time zone to another across the major financial centers. This fact has a number of ramifications that we will discuss throughout

this book.

A spot market is any market that deals in the current price of a financial instrument. Futures markets, such as the Chicago Board of Trade (CBOT), offer commodity contracts whose delivery date may span several months into the future. Settlement of Forex spot transactions usually occurs within two business days.

CURRENCY PAIRS

Every Forex trade involves the simultaneous buying of one currency and the selling of another currency. These two currencies are always referred to as the currency pair in a trade.

BASE CURRENCY

The base currency is the first currency in any currency pair. It shows how much the base currency is worth, as measured against the second currency. For example, if the USD/CHF rate is 1.6215, then one U.S. dollar is worth 1.6215 Swiss francs. In the Forex markets, the U.S. dollar normally is considered the base currency for quotes, meaning that quotes are expressed as a unit of US$1 per the other currency quoted in the pair. The primary exceptions to this rule are the British pound, the Euro, and the Australian dollar.

QUOTE CURRENCY

The quote currency is the second currency in any currency pair. This is frequently called the pip currency, and any unrealized profit or loss is expressed in this currency.

PIPS AND TICKS

A pip is the smallest unit of price for any foreign currency. Nearly all currency pairs consist of five significant digits, and most pairs have the decimal point immediately after the first digit; that is, EUR/USD equals 1.2812. In this instance, a single pip equals the smallest change in the fourth decimal place, that is, 0.0001. Therefore, if the quote currency in any pair is USD, then one pip always equals 1/100 of a cent. One notable exception is the USD/JPY pair, where a pip equals US$0.01 (one U.S. dollar equals approximately 107.19 Japanese yen). Pips sometimes are called points. Just as a pip is the smallest price movement (the y axis), a tick is the smallest interval of time along the x axis that occurs between

two trades. (Occasionally, the term tick is also used as a synonym for pip.) When trading the most active currency pairs (such as EUR/USD and USD/JPY) during peak trading periods, multiple ticks may (and will) occur within the span of one second. When trading a low-activity minor cross-pair (such as the Mexican peso

and the Singapore dollar), a tick may occur only once every two or three hours (Figure 1-1). Ticks, therefore, do not occur at uniform intervals of time. Fortunately, most historical data vendors will group sequences of

streaming data and calculate the open, high, low, and close over regular time intervals (1, 5, and 30 minutes, 1 hour, daily, and so forth).

BID PRICE

The bid is the price at which the market is prepared to buy a specific currency pair in the Forex market. At this price, the trader can sell the base currency. The bid price is shown on the left side of the quotation. For example, in the quote USD/CHF 1.4527/32, the bid price is 1.4527, meaning that you can sell one U.S. dollar

for 1.4527 Swiss francs.

ASK PRICE

This ask is the price at which the market is prepared to sell a specific currency pair in the Forex market. At this price, the trader can buy the base currency. The ask price is shown on the right side of the quotation. For example, in the quote USD/CHF 1.4527/32, the ask price is 1.4532, meaning that you can buy one U.S. dollar for 1.4532 Swiss francs. The ask price is also called the offer price.

BID/ASK SPREAD

The difference between the bid price and ask price is called the spread. The big-figure quote is a dealer expression referring to the first few digits of an exchange rate. These digits often are omitted in dealer quotes. For example, a USD/JPY rate might be 117.30/117.35 but would be quoted verbally without the first three digits as 30/35. The critical characteristic of the bid/ask spread is that it is also the transaction cost for a round-turn trade. Round turn means both a buy (or sell) trade and an offsetting sell (or buy) trade of the same size in the same currency pair. In the case of the EUR/USD rate above, the transaction cost is 3 pips (Figure 1-2).

FORWARDS AND SWAPS

Outright forwards are structurally similar to spot transactions in that once the exchange rate for a forward deal has been agreed, the confirmation and settlement procedures are the same as in the cash market. Forwards are spot transactions that have been held over 48 hours but less than 180 days when they mature and are

liquidated at the prevailing spot price.

Forex swaps are transactions involving the exchange of two currency amounts on a specific date and a reverse exchange of the same amounts at a later date. Their purpose is to manage liquidity and currency risk by executing foreign exchange transactions at the most appropriate moment. Effectively, the underlying

amount is borrowed and lent simultaneously in two currencies, for example, by selling U.S. dollars for the Euro for spot value and agreeing to reverse the deal at a later date. Since currency risk is replaced by credit risk, such transactions are different conceptually from Forex spot transactions. They are, however, closely linked because Forex swaps often are initiated to move the delivery date of a foreign currency originating from spot

or outright forward transactions to a more optimal moment in time. By keeping maturities to less than a week and renewing swaps continuously, market participants maximize their flexibility in reacting to market events. For this reason, swaps tend to have shorter maturities than outright forwards. Swaps with maturities of up to one week account for 71 percent of deals, compared with 53 percent for outright forwards. For additional information, see www.aforextrust.com/spot-forex-forex-forwards-forex-swaps.htm.

Currency Futures

FUTURES CONTRACTS

A futures contract is an agreement between two parties: a short position, the party who agrees to deliver a commodity, and a long position, the party who agrees to receive a commodity. For example, a grain farmer would be the holder of the short position (agreeing to sell the grain), whereas the bakery would be the holder of the long position (agreeing to buy the grain). In every futures contract, everything is specified precisely: the quantity and quality of the underlying commodity, the specific price per unit, and the date and method of delivery. The price of a futures contract is represented by the agreed-on price of the underlying commodity or financial instrument that will be delivered in the future. For example, in the preceding scenario, the price of the contract is 5,000 bushels of grain at a price of $4 per bushel, and the delivery date may be the third Wednesday in

September of the current year. The Forex market is essentially a cash or spot market in which over 90 percent of the trades are liquidated within 48 hours. Currency trades held longer than this normally are routed through

an authorized commodity futures exchange such as the International Monetary Market (IMM). IMM was founded in 1972 and is a division of the Chicago Mercantile Exchange (CME) that specializes in currency futures, interest-rate futures, and stock index futures, as well as options on futures. Clearinghouses (the futures exchange) and introducing brokers are subject to more stringent regulations from the Securities and Exchange

Commission (SEC), Commodity Futures Trading Commission (CFTC), and National Futures Association (NFA) than the Forex spot market (see www.cme.com for more details). It also should be noted that Forex traders are charged only a single transaction cost per trade, which is simply the difference between the current bid and ask prices. Currency futures traders are charged a round-turn commission that varies from brokerage house to brokerage house. In addition, margin requirements for futures contracts usually are slightly higher than the requirementsfor the Forex spot market.

CONTRACT SPECIFICATIONS

Table 2-1 presents a list of currencies traded through the IMM at the CME and their contract specifications.

CURRENCY TRADING VOLUME

Table 2-2 summarizes the trading activity of selected futures contracts in currencies, precious metals, and some financial instruments. The volume and open interest (OI) readings are not trading signals. They are intended only to provide a brief synopsis of each market’s liquidity and volatility based on the average of 30

trading days.

U.S. DOLLAR INDEX

The U.S. Dollar Index (ticker symbol DX) is an openly traded futures contract offered by the New York Board of Trade (NYBOT). It is computed using a trade-weighted geometric averageof the six currencies listed in Table 2-3.

IMM currency futures traders monitor the U.S. Dollar Index to gauge the dollar’s overall performance in world currency markets. If the U.S. Dollar Index is trending lower, then it is very likely that a major currency that is a component of the U.S. Dollar Index is trading higher. When a currency trader takes a quick glance at the

price of the U.S. Dollar Index, it gives the trader a good feel for what is going on in the Forex market worldwide.

For traders who are interested in more details on commodity futures, we recommend Todd Lofton’s paperbound book, Getting Started in Futures (Wiley, 1993).

Getting Started in Forex-Dompyong Wetan

Getting started in forex, If you are new to Forex trading, there are several key pieces of information

you need to know:

• How and where to open a Forex trading account
• Demo trading and when to go “live”
• Essential reading material for your growth as a trader
• Money management and leverage, stop losses and targets
• How to read a candlestick chart

We will go through these items for the benefit of new traders. If you are an experienced trader already, please skip these pages and go straight to the page headed “G7 System”

How and where to open a Forex trading account This depends a lot on how much capital you have to start with your trading. We highly recommend that all new traders “demo” trade for at least 1-3 months before committing real money to the account. There are now literally 100’s of Forex brokers available to the retail trader, but we must warn you that not all of them are “above board” We have had experience with several brokers and can recommend the following: (Please note that our recommendation does not in anyway endorse these brokers, only that we

have had good experience with them in the past) www.oanda.com This broker allows traders with smaller accounts to trade extremely small lot sizes thereby minimizing the risk of losses for beginners. They allow micro-lots which move about $0.10 per pip www.fxcm.com FXCM is one of the largest brokers and allows mini lots which move about $1.00 per pip. More information on Forex trading in general can be obtained from the two websites above and from other sites such as www.forexnews.com and www.fxstreet.com

Forex Trading Course-More On Market Mechanics-Dompyong Wetan

Forex Trading, More On Market Mechanics-Dompyong Wetan.

Spot Forex is traditionally traded in lots also referred to as contracts. The standard size for a lot is $100,000. In the last few years a mini lot size has been introduced of $10,000 and this again may change in the years to come. As we mentioned on the previous page currencies are measured in pips, which is the smallest increment of that currency. To take advantage of these tiny increments it is desirable to trade large amounts of a particular currency in order to see any significant profit or loss. We shall cover leverage later but for the time being let's assume we will be using $100,000 lot size. We will now recalculate some examples to see how it effects the pip value.

USD/JPY at an exchange rate of 116.73 (.01/116.73) X $100,000 = $8.56 per pip

USD/CHF at an exchange rate of 1.4840 (0.0001/1.4840) X $100,000 = $6.73 per pip

In cases where the US Dollar is not quoted first the formula is slightly different. EUR/USD at an exchange rate of 0.9887

(0.0001/ 0.9887) X EUR 100,000 = EUR 10.11 to get back to US Dollars we add a further step

EUR 10.11 X Exchange rate which looks like EUR 10.11 X 0.9887 = $9.9957 rounded up will be $10 per pip.

GBP/USD at an exchange rate of 1.5506 (0.0001/1.5506) X GBP 100,000 = GBP 6.44 to get back to US Dollars we add a further step

GBP 6.44 X Exchange rate which looks like GBP 6.44 X 1.5506 = $9.9858864 rounded up will be $10 per pip. As we said earlier your broker may have a different convention for calculating pip value relative to lot size but however they do it they will be able to tell you what the pip value for the currency you are trading is at that particular time. Remember that as the market moves so will the pip value depending on what currency you trade. So now we know how to calculate pip value lets have a look at how you work out your profit or loss. Let's assume you want to buy US Dollars and Sell Japanese Yen. The rate you are quoted is 116.70/116.75 because you are buying the US you will be working on the116.75, the rate at which traders are prepared to sell. So you buy 1 lot of $100,000 at 116.75. A few hours later the price moves to 116.95 and you decide to close your trade. You ask for a new quote and are quoted 116.95/117.00 as you are now closing your trade and you initially bought to enter the trade you now sell in order to close the trade and you take 116.95 the price traders are prepared to buy at. The difference between 116.75 and 116.95 is .20 or 20 pips. Using our formula from before, we now have (.01/116.95) X $100,000 = $8.55 per pip X 20 pips =$171 In the case of the EUR/USD you decide to sell the EUR and are quoted 0.9885/0.9890 you take 0.9885. Now don't get confused here. Remember you are now selling and you need a buyer. The buyer is biding 0.9885 and that is what you take. A few hours later the EUR moves to 0.9805 and you ask for a quote. You are quoted 0.9805/0.9810 and you take 0.9810. You originally sold EUR to open the trade and now to close the trade you must buy back your position. In order to buy back your position you take the price traders are prepared to sell at which is 0.9810. The difference between 0.9810 and 0.9885 is 0.0075 or 75 pips. Using the formula from before, we now have (.0001/0.9810) X EUR 100,000 = EUR10.19: EUR 10.19 X Exchange rate 0.9810 =$9.99($10) so 75 X $10 = $750. To reiterate what has gone before, when you enter or exit a trade at some point your are subject to the spread in the bid/offer quote. As a rule of thumb when you buy a currency you will use the offer price and when you sell you will use the bid price. So when you buy a currency you pay the spread as you enter the trade but not as you exit and when you sell a currency you pay no spread when you enter but only when you exit.

Forex Trading Course-Market Mechanics-Dompyong Wetan

Forex Trading, Market Mechanics-Dompyong Wetan.

So now we know that the FX market is the largest in the world and that your broker or institution that you are trading with is collecting quotes from a centralized feed or individual quotes comprising of interbank rates. So how are these quotes made up. Well, as we previously mentioned currencies are traded in pairs and are each assigned a symbol. For the Japanese Yen it is JPY, for the Pounds Sterling it is GBP, for Euro it is EUR and for the Swiss Frank it is CHF. So, EUR/USD would be Euro-Dollar pair. GBP/USD would be pounds Sterling-Dollar pair and USD/CHF would be Dollar-Swiss Franc pair and so on. You will always see the USD quoted first with few exceptions such as Pounds Sterling, Eurodollar, Australia Dollar and New Zealand Dollar. The first currency quoted is called the base currency. Have a look below for some examples. Currency Symbol Currency Pair 

When you see FX quotes you will actually see two numbers. The first number is called the bid and the second number is called the offer (sometimes called the ASK). If we use the EUR/USD as an example you might see 0.9950/0.9955 the first number 0.9950 is the bid price and is the price traders are prepared to buy Euros against the USD Dollar. The second number 0.9955 is the offer price and is the price traders are prepared to sell the Euro against the US Dollar. These quotes are sometimes abbreviated to the last two digits of the currency such as 50/55. Each broker has its own convention and some will quote the full number and others will show only the last two. You will also notice that there is a difference between the bid and the offer price and that is called the spread. For the four major currencies the spread is normally 5 give or take a pip (we will explain pips later). To carry on from the symbol conventions and using our previous EUR quote of 0.9950 bid, that means that 1 Euro = 0.9950 US Dollars. In another example if we used the USD/CAD 1.4500 that would mean that 1 US Dollar = 1.4500 Canadian Dollars. The most common increment of currencies is the PIP. If the EUR/USD moves from 0.9550 to 0.9551 that is one Pip. A pip is the last decimal place of a quotation. The Pip or POINT as it is sometimes referred to depending on context is how we will measure our profit or loss.

As each currency has its own value it is necessary to calculate the value of a pip for that particular currency. We also want a constant so we will assume that we want to convert everything to US Dollars. In currencies where the US Dollar is quoted first the calculation would be as follows.

Example JPY rate of 116.73 (notice the JPY only goes to two decimal places, most of the other currencies have four decimal places) In the case of the JPY 1 pip would be .01 therefore USD/JPY: (.01 divided by exchange rate = pip value) so .01/116.73=0.0000856 it looks like a big number but later we will discuss lot (contract) size.

USD/CHF: (.0001 divided by exchange rate = pip value) so .0001/1.4840 = 0.0000673

USD/CAD: (.0001 divided by exchange rate = pip value) so .0001/1.5223 = 0.0001522

In the case where the US Dollar is not quoted first and we want to get to the US Dollar value we have to add one more step.

EUR/USD: (0.0001 divided by exchange rate = pip value) so .0001/0.9887 = EUR 0.0001011 but we want to get back to US Dollars so we add another little calculation which is EUR X Exchange rate so 0.0001011 X 0.9887 = 0.0000999 when rounded up it would be 0.0001. GBP/USD: (0.0001 divided by exchange rate = pip value) so 0.0001/1.5506 = GBP 0.0000644 but we want to get back to US Dollars so we add another little calculation which is GBP X Exchange rate so 0.0000644 X 1.5506 = 0.0000998 when rounded up it would be 0.0001.

By this time you might be rolling your eyes back and thinking do I really need to work all this out and the answer is no. Nearly all the brokers you will deal with will work all this out for you. They may have slightly different conventions but it is all done automatically. It is good however for you to know how they work it out. In the next section we will be discussing how these seemingly insignificant amounts can add up.

The Forex Trading Course

A self-Study Guide to Becoming A Successful Currency Trader.

ver 30 years ago, Abe Cofnas was a student of mine at the University of California at Berkeley. At the time, I am certain to have delivered a long-held admonition: 95 percent of what you read in economics will be either wrong or irrelevant. I am pleased to report that The Forex Trading Course falls into the 5 percent residual category of materials that are worth reading.

In addition to satisfying those with a healthy obsession to work on improving their professional skills, The Forex Trading Course will force readers to think outside the box and to develop an appetite for the pursuit of knowledge about trading. This, of course, is the most important aspect of the book and reminds me of an observation made by Sir Hugh Rigby, surgeon to King George V. Sir Hugh was once asked, “What makes a great surgeon?” He replied, “There isn’t much to choose between surgeons in manual dexterity. What distinguishes a great surgeon is who knows more than other surgeons.” The same can be said for traders.

In the interest of putting the reader a leg up, an understanding of the structure of exchange-rate regimes is essential. There are three distinct types of exchange-rate regimes—floating, fixed, and pegged—each with different characteristics and different results.

CHAPTER ONE - Background

We're going to start by debunking a bunch of myths.

First off, you don't have to understand a lot about the currency markets. Most of us know there is a different in then exchange rate if we take a trip to Canada or Mexico or Japan or Dompyong. hehehe

If you were to go to Japan right now, a dollar would buy about 110 Yen. You go to a kiosk or money changer, perhaps at the airport, and purchase whatever amount you think you’ll need. That’s easy enough. But what if you’re a large bank doing business overseas. Your client has just purchased 1,000 new Toyota’s and they need to be paid for with Yen. That’s not so easy. That’s why the Forex markets exist.

Rather than try to teach you all about the Forex business in this guide, simply go to http://www.foreignexchangetrading.info and click on all the items on the left side. It’s a free site and well worth visiting. Or, if you prefer, download this excellent publication: http://www.forex-trading-made-ez.com/power_forex.pdf

Now for some facts. The market is huge. More money changes hands each day than nearly all the stock exchanges combined. That’s not that important to us as traders because we can trade with as little as $100.

There’s no commission charged, as there is at a stock exchange. That’s good. We don’t have to worry about paying extra if we get stopped out of our trade. (I’ll explain later what that means if you’re not an experienced trader.)

Instead of a commission, a small spread between prices is leveled just like when you change money at the airport. For example, my pizza trade entry price was actually 1.33562. I had to make slightly more than $10 dollars to net ten. 

The most important thing I want to impress upon you at this time is risk control.

You’re going to make money. But you’re also going to lose money. How much you lose will determine your net profit. Always keep that in mind. You must control your losses if you expect to make the kind of money we discussed earlier.

Lastly, this is a “hands-on” trading manual. I’m going to train you to make money the same way I trained many pilots to fly jetliners. That’s right. For many years, as an airline captain/instructor, trained by Boeing, I taught other airline pilots how to fly jetliners.

So what’s that got to do with trading? Just this. When it comes to flying airplanes, you want to do it in the safest way possible. And the same thing is true when trading! You want to do it in the safest way possible. Much of the material will be very specific. Much of it will be repetitious. But that’s how you learn. Don’t try to outguess the strategy. Everything you’ll learn has a purpose.

Keep an open mind and you’ll do just fine. You don’t have to be smart. You don’t have to have a degree in rocket science. You just have to follow the rules and procedures. Just like flying a jetliner!

History of Forex Trading As Dompyong Citizen

History of Forex Trading!!!

The origin of forex trading traces its history to centuries ago. Different currencies and the need to exchange them had existed since the Babylonias. They are credited with the first use of paper notes and receipts. Speculation hardly ever happened, and certainly the enormous speculative activity in the market today would have been frowned upon.

In those days, the value of goods were expressed in terms of other goods(also called as the Barter System). The obvious limitations of such a system encouraged establishing more generally accepted mediums of exchange. It was important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value. Trade was carried among people of Africa, Asia etc through this system.

Coins were initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the Middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of today's modern currencies.

Before the First World war, most Central banks supported their currencies with convertibility to gold. However, the gold exchange standard had its weaknesses of boom-bust patterns. As an economy strengthened, it would import a great deal from out of the country until it ran down its gold reserves required to support its money; as a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities had hit bottom, appearing attractive to other nations, who would sprint into buying fury that injected the economy with gold until it increased its money supply, drive down interest rates and restore wealth into the economy.. However, for this type of gold exchange, there was not necessarily a Centrals bank need for full coverage of the government's currency reserves. This did not occur very often, however when a group mindset fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called "Run on banks " The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability. The Great Depression and the removal of the gold standard in 1931 created a serious lull in FOREX market activity. From 1931 until 1973, the FOREX market went through a series of changes. These changes greatly affected the global economies at the time and speculation in the FOREX markets during these times was little.

In order to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility.

Near the end of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis.

The Bretton Woods system came under increasing pressure as national economies moved in different directions during the 1960's. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970's following president Nixon's suspension of the gold convertibility in August 1971. The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.

The last few decades have seen foreign exchange trading develop into the world's largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.

The European Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002. London was, and remains the principal offshore market. In the 1980s, it became the key center in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading

position in global finance.

In Asia, the lack of sustainability of fixed foreign exchange rates has gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable.

While commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The FOREX exchange market initially worked under the central banks and the governmental institutions but later on it accommodated the various institutions, at present it also includes the dot com booms and the world wide web. The size of the FOREX market now dwarfs any other investment market. The foreign exchange market is the largest financial market in the world. Approximately 1.9 trillion dollars are traded daily in the foreign exchange market. It is estimated that more than USD 1,200 Billion are traded every day. It can be said easily that FOREX market is a lucrative opportunity for the modern day savvy investor.

Four Hour Forex Simple System for Beginner

4 hour Forex Simple system for beginner. If you are beginner you must read this article or if you are broker you must read this article.

Setup: 

100 Simple Moving Average

Damiani Volatmeter

MACD-15,26,9

4 hour chart-EURCHF

The 100 Simple Moving Average serves as a support/resistance line as it is known to be used by major banks and  financial institutions, a self-fulfilling prophecy, so to say.

System Rules

Long: Take a long trade when price closes above 100 SMA and MACD histogram goes above 0 line.

Short: Take a short trade when price closes below the 100 SMA and MACD goes below0.

Re-entry: When the price, once has given a long or short signal, retraces back to the 100 SMA, re-enter the direction you went the first time. It is recommended to do it the first 2 times the price hits the 100 SMA and keep a watch thereafter. 

Retrace entry: When a bar is over 100 pips, wait for a retracement to occur towards the 100 SMA line and then enter. This will save you from unnecessary draw down. 

Exit rule

Scaling: I personally take 3 positions per trade. I set my first TP to 40, 2nd TP to 70 and let the third position run with Stoploss at breakeven.

As an example, once my trade hits the first target, I moved the second position to breakeven and leave the third as it is. When the 2nd position is hit, I move the 3rd to breakeven, giving the trade enough room to breathe. I then look for the price to come back, to add to the position, if it is open. At times, when price comes back to the 100 SMA, I get stopped out at breakeven, giving me 100 pips on 2 positions.

This is a trend following system, and has it's bad days. To avoid getting trapped in a range, I use the Volatmeter indicator. It is, so far the best indicator I have seen that helps detect a ranging a trending market.

I will try and attach a couple snapshots of past trades, so the whole idea becomes clear. The blue box is the main entry and the yellow, you can see, is the re-entry. Attached Images

This is the continuation of the first re-entry. Notice a second re-entry. There is a third box I have drawn. It is a false signal.

Note: I take only one position while trading re-entries.
Attached Images

How Does The Broker Get The Money From Forex ?

How does the broker get the money??? Consider this post !

The forex market is a huge international exchange where different currencies are traded, i.e. both bought and sold. It is estimated to be the largest financial market in the world, and is not governed by the rules of any one country. In addition to this, while it is open from Sunday to Friday, it is a 24 hour market and does not experience a daily closing like a traditional stock market. It is, thus, not regulated and there are no international panels to settle disputes nor are there any clearing houses to stand as guarantors of trades on the exchange. There is nothing more binding than a credit agreement between the buyer and seller in the forex market, and it works.

While this seems very nebulous to most stock market investors, forex traders are forced by competition and the need for cooperation to remain honest. There is no way for a trader to survive in the forex market unless he or she keeps up their end of the deal. Most countries will have their own body or association that serve to regulate the forex traders or brokers in that country and ensure that clients' rights are protected. This association will insist on its members accepting the decisions of their arbitration panel in case of disputes. In the United States, this organization is generally considered to be the National Futures Association or the NFA.

Another important aspect of the forex market to keep in mind is that on the market itself, there are no commissions, and thus it works on principal amount only. The so called forex brokers make money not by taking a commission from the trading parties, but by facilitating the trade itself and making their bit on the bid ask spread, i.e. the difference between the selling and buying prices. The implication is that they are not brokers in the traditional sense of the word, but more like forex traders themselves.

The single most attractive aspect of the forex market is that it is practically impossible for any investor, group of investors or financial institutions to misuse it. It is such a large market, with money flowing through it daily in estimated trillions of dollars, that no single entity, however large, can gain a statistically significant control over the forex market. This means that it is completely free of any influences, beyond the true fundamental driving forces that move it. The implication here is that this market offers every investor the same opportunity, regardless of size or influence, making it a free and fair market place, possibly the only one in the world. This aspect is very attractive to small investors in particular, since they are often the ones to suffer the most from stock market scams and fraudulent activity.

While these factors make the forex market more appealing to invest money on, it is also hard to make money on this market due to the fact that the forex trader has to always do better than the bid ask spread, which makes the opportunities for arbitrage profit limited. However, with no extra commissions and charges, the forex trader is left to enjoy every last bit of profit that he or she does make, once they are past the bid ask spread mark. Overall, the forex market is the place for a smart, vigilant and well trained investor.

Andrew Daigle is the owner, creator and author of many successful websites including ForexBoost, a free forex training resource for the novice and advanced forex traders and DXOut.com [http://www.dxout.com], a free DXSynergy e-currency exchange training site and many more.

Types of Forex Trading System

How many types of forex ??? Types of Forex Trading System :

1. Forex Profit System
2. Scalp Trading the 1 Minute Chart System
3. Moving Average Intraday System
4. The  Day Trade Forex System
5. Micro Trading the 1 Minute Chart System
6. Tom Demark FX System
7. The Forex News Trading System
8. The CI System
9. Forex Intraday Pivot Trading System 

Helpful Information for all Forex Trading Systems

Building blocks that I believe to be foundations to the Forex Profit System.

Foundation #1: I highly recommend that you follow 1 or maybe 2 major currency pairs. 

It gets far too complicated to keep tabs on all four. I also recommend that traders choose one of the majors because the spread is the best and they are the most liquid. I personally follow only USD/CHF because it moves the most every day.

Foundation #2: Follow and understand the daily Forex News and Analysis of the professional currency analysts. 

Even though this system is based solely on technical analysis of charts, it is important to get a birds-eye view of the currency markets and the news that affects the prices. It is also important that you know and understand what the key technical ‘support’ and ‘resistance’ levels are in the currency pair that you want to trade. Support is a predicted level to buy (where currency pair should move up on the charts), resistance is a predicted level to sell (where the currency pair should move down on the charts). Fortunately, all the best Forex news and analysis is offered free on the Internet. Here is what you should do first:

*While you are reading the daily news and technical analysis, write down on a piece of paper what direction the analysts are

saying about the major currency pair you are following and the key support and resistance levels for the day.

A. Go to forexnews.com and you will find 24hr news and analysis on the spot FX markets. The site will give you the big picture of how the economic calendar and central banks affect the currency markets. A great resource.

B. Then go to fxstreet.com and click on the ‘Top Forex Reports’. Here there is a wonderful listing of all the major daily currency analysis and forecasts with support and resistance and direction forecasts.

C. Click on currencypro.com and go to ‘Today’s Market Research’ and there you will find more excellent analysis on the Major Currency pairs. Another great Forex Portal.

D. www.moneytec.com

E. Free Forex trading forum: www.forexdirectory.net

F. Comprehensive listing of everything, related to the Forex Markets:  ww.mgforex.com/resource/glossary.asp

Foundation #3: Only get into a trade when the FPS technical indicators say when. 

Always trade with stop losses! It is important when you are trading Forex, to be disciplined and to stick to a plan. Don’t just trade your ‘gut’ feeling. Use the technical indicators outlined and always enter in stop losses on every trade.

Foundation #4: Practice makes perfect. 

As they say, there is no substitute for hard work and diligence. Practice this system on a demo account and pretend the virtual money is your own real money. Do not open a live trading account until you are profitable trading on a demo account. Stick to the plan and you can be successful.

Foundation #5: Trade with a DISCIPLINED Plan: 2

The problem with many traders is that they take shopping more seriously than trading. The average shopper would not spend $400 without serious research and examination of the product he is about to purchase, yet the average trader would make a trade that could easily cost him $400 based on little more than a “feeling” or “hunch.” Be sure that you have a plan in place BEFORE you start to trade. The plan must include stop and limit levels for the trade, as your analysis should encompass the expected downside as well as the expected upside.

Foundation #6: Cut your losses early and Let your Profits Run:

This simple concept is one of the most difficult to implement and is the cause of most traders demise. Most traders violate their predetermined plan and take their profits before reaching their profit target because they feel uncomfortable sitting on a profitable position. These same people will easily sit on losing positions, allowing the market to move against them for hundreds of points in hopes that the market will come back. In addition, traders who have had their stops hit a few times only to see the market go back in their favor once they are out, are quick to remove stops from their trading on the belief that this will always be the case. Stops

are there to be hit, and to stop you from losing more then a predetermined amount! The mistaken belief is that every trade should be profitable. If you can get 3 out of 6 trades to be profitable then you are doing well. How then do you make money with only half of your trades being winners? You simply allow your profits on the winners to run and make sure that your losses are minimal.

Foundation #7: Do not marry your trades

The reason trading with a plan is the #1 tip is because most objective analysis is done before the trade is executed. Once a trader is in a position he/she tends to analyze the market differently in the “hopes” that the market will move in a favorable direction rather than objectively looking at the changing factors that may have turned against your original analysis. This is especially true of losses. Traders with a losing position tend to marry their position, which causes them to disregard the fact that all signs point towards continued losses. Foundation #8: Do not bet the farm Do not over trade. One of the most common mistakes that traders make is leveraging their account too high by trading much larger sizes than their account should prudently trade. Leverage is a double-edged sword. Just because one lot (100,000 units) of currency only requires $1000 as a minimum margin deposit, it does not mean that a trader with $5000 in his account should be able to trade 5 lots. One lot is $100,000 and should be treated as a $100,000 investment and not the $1000 put up as margin. Most traders analyze the charts correctly and place sensible trades, yet they tend to over leverage themselves. As a consequence of this, they are often forced to exit a position at the wrong time. A good rule of thumb is to never use more than 10% of your account at any given time.

What is Forex Trading ???

What is Forex Trading? Forex Trading is trading currencies  from different countries. Forex is acronym of Foreign Exchange. For Example, in the United States the currency circulation is called US Dollar. But not available in Indonesia such as Rupiah.

As we know, Forex trading is typically done through a broker or market maker. As a forex trader you can choose a currency pair that you expect to change in value and place a trade accordingly. For example, if you had   purchased 6,000 Euros in March of 2011, it would have cost you around $7,200 USD. Throughout 2011 the Euro’s value vs. the U.S. Dollar’s value increased. At the end of the year 1,000 Euros was worth $1,300 U.S. Dollars. If you had chosen to end your trade at that point, you would have a $100 gain.

Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds.