Fundamental analysis

Fundamental analysis is a method of forecasting future price movements of a financial instrument based on economic, political, environmental and other relevant factors, as well as data that will affect the basic supply and demand of whatever underlies the financial instrument. In practice, many market players use technical analysis in conjunction with fundamental analysis to determine their trading strategy.

One major advantage of technical analysis is that experienced analysts can follow many markets and market instruments, whereas the fundamental analyst needs to know a particular market intimately. Fundamental analysis focuses on what ought to happen in a market. Among the factors considered are: supply and demand; seasonal cycles; weather; government policy.

The fundamental analyst studies the causes of market movements, while the technical analyst studies the effect. Fundamental analysis is a macro, or strategic, assessment of where a currency should be traded, based on any criteria but the movement of the currency’s price itself. These criteria often include the economic conditions of the country that the currency represents, monetary policy, and other “fundamental” elements. Many profitable trades are made moments prior to, or shortly after, major economic announcements.

The 5 Laws of Highly Successful Traders

By: Aaron Stokes

When we follow the laws of the road and decide to drive within the speed limit we stand a better chance at avoiding mortal danger; effectively you are increasing the odds of an increased longevity. Similarly, there are beneficial laws in the world of trading. Few would argue following the laws of a successful trader is a bother when the end result may directly effect the balance in your account. I invite you to take a look at what these laws are, and how they might make a positive impact in your life as a trader.

Law #1: Know Yourself

To understand your strengths and weaknesses, taking a chance each day to look at yourself with complete honesty. To know yourself is to take a step away from the vast world of inner turmoil so many traders both expert and novice experience. To know practice knowing yourself will bring realization that regardless of what happens in the markets, you are still the same person. Often times one will experience confidence when winning, and a deflated sense of self worth when losing. This is the general result of not knowing ones self. When you know yourself you will be well aware that the person you are remains the same regardless of the wins and losses you may experience on a daily basis. To know yourself is to be free from the emotional turmoil often associated with day trading.

Law #2: Don't Rush In

If you've ever been in a rush you'll notice in hindsight that your powers of observation decrease. Without a moments notice the world goes passing by you. Most times when trading you may find that you're in a rush to catch the next big trade. More often then not rushing into a trade is the wrong course of action, for many reasons. The need to rush is an indicator that you are not well prepared, your disposition when trading should be like that of a Tiger laying in wait for its pray. However many people emulate the nature of a Rat scrambling desperately to capture its fair share of the cheese. When you feel comfortable and confident that you're strategy is well prepared then you may lay in wait. Opportunity will always come your way, but when you rush in there is a greater chance it will pass you by without a moments notice.

Law #3: Know The Future

Are we expecting too much of ourselves by demanding that we know the future? Some may say yes, however as a trader this should be one of your aspirations। Our goal is to bring future events to fruition. When we take on the task of knowing the future, as contrary as it may seem it's easiest to think big. For instance, setting a goal 1 year into the future and making it your prime objective to bring this goal to realization would be a good start. Making this goal reasonably difficult yet not necessarily an unrealistic task would be an even better start. Dedicate your efforts to achieving this one goal and put aside the trivial day to day goals that often distract so many traders from their primary objective. Accomplishing in the evening that which you've set out to do in the morning is knowing the present; accomplishing in 1-year that which you've set out to do today, is knowing the future.
Law #4: Find a Mentor

Be aware that you are not the only student of these laws, that there are others who may have already achieved excellence in the laws which you are presently attempting to master. Being aware of these individuals will afford you the opportunity to receive invaluable tips. The principles of these laws are exercised in many fields outside of trading, become a student of those who have come before you may cut a substantial lot of time from the learning curve of your professional career as a trader.

Law #5: The Market Is Your Friend

To imagining that you are waging war with the market day in and day out in order to achieve some level of financial gain may leave you feeling torn and tattered on certain days. The metaphor of war with the markets leaves you in a zone where you are surrounded by enemies with superior intelligence in a battle-field where the odds are always stacked against you. If you can learn to befriend the market then you'll find you've gained a valued friend and a great teacher. When you free yourself from the concept so many have of "war with the markets" you simultaneously free yourself from the feeling of "Winning" days and "Losing" days. In effect, you gain immunity from the feeling of being a loser. In it's place you've gained a friend that will always tell you where there might be room for improvement.

These 5 Laws should rather be labeled suggestions। Remember that success is an option, it is not a requirement. The most useful of tips will often be applicable to multiple areas of your life, it's popular often days to look at the markets as a reflection of the world we live in. Achieving proficiency as a trader will issue forth a ripple effect often effecting other areas of your life. My hope is that you enjoy these tips and the benefits they will render within and around your professional life.

Ranked in the Top 10 by Google as an International Forex Money Manager Aaron Stokes is a professional in the field of managed Forex accounts with an average of 10% growth per month on managed accounts. For details visit: http://www.forex-cipher.com

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Critical To Your Success In Forex Currency Trading

By: Angus O'shea

Regardless of the endeavor your pursue, isn't it critical to your success that you avoid costly mistakes?

Of course it is. Especially those mistakes that you could foresee.

It happens all too often in business and in trading, that people will make huge mistakes that have been made by others before them and they just didn't bother to discover them or to take steps to avoid them.

They simply let them happen and then wonder why they're not achieving the success that they dreamed of.

Now sometimes it's the case that a high failure rate exists for a long time not because people don't do their best.

Sometimes it's because the real reason hasn't yet been discovered and made known to everyone.

That's why the statistic of 90% of all traders losing their money has been true for decades and is still true today, even with all of the proven trading systems and technological advances.

For decades, there have been people like myself who have done everything we can think of to help new traders succeed in trading, but still the high "financial death rate" continues.

I recently came across a course called "The Subtle Trap of Trading" that I feel truly reveals the core reason why so many smart and successful people seem to have such a difficult time finding success in trading.

In "The Subtle Trap of Trading", Brian McAboy explains in detail what happens to traders that causes them to do things in their trading that they wouldn't do anywhere else, that keeps them from finding the success in trading that they've already known in their lives.

It's not because traders lack intelligence or the right characteristics before they got into trading, it's because of certain events that happen and circumstances that occur that puts the odds severely against new traders.

The course also offers a clear explanation as to why it takes most traders many years before they find consistent profits in their trading - because the traders are having to "undo" the effects of the trap and unlearn wrong habits and practices.

Doesn't this make perfect sense? If you take a person who has above-average intelligence and who has already found success in their life, shouldn't they be able to find success in a new endeavor in a fairly short period of time?

Not 10 years, but much quicker than that? Unless of course something happens along the way that disrupts this person's already established success-pattern! That's what the Subtle Trap is all about!

If you find that you too have been giving it your best, but are still struggling to find the success that you know you're capable of, this may just be the answer you've been looking for.

The course shows what went wrong along the way and walks you step by step through the process to get on the right track with your trading.

In terms of wise investments, those made in yourself have the highest rate of return, plus you benefit for the rest of your life. The Subtle Trap of Trading is a course that comes highly recommended by brokers, trading veterans and individuals.

Angus O'Shea is an individual trader and enthusiast of trading.

If you trade but are losing money and feel that perhaps you've been caught in this mental and emotional trap, check out The Subtle Trap of Trading at http://www.subtletrap.com

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Fibonacci Forex Trading – An Introduction

By: Monica Hendrix

Leonardo Fibonacci was an Italian mathematician, who lived in the 13th century and known for his world famous Fibonacci sequence, which many trader use to try and predict currency prices with greater accuracy. Let’s look at the Fibonacci number sequence and Forex trading.

The Fibonacci sequence was printed in the Liber Abaci, written by Leonardo Fibonacci in 1202. It introduced Hindu-Arabic numerals to replace Roman ones. The Fibonacci number sequence was devised to solve the following problem:

How many pairs of rabbits can be produced from one single pair, if each month each pair produces a new pair, which, from the second month, starts producing more rabbits?

The definition of the sequence is that it’s formed by a series of numbers where each number is the sum of the two preceding numbers; 1, 1, 2, 3, 5, 8, 13...

In forex trading what is important is - the Fibonacci ratios derived from this sequence of numbers, i.e. .236, .50, .382, .618, etc. These Fibonacci retracements many forex traders believe are tradable for profit.

The two Fibonacci percentage retracement levels considered the most critical are: 38.2% and 62.8%. Other important retracement ones are: 75%, 50%, and 33%.

So can the Fibonacci number sequence help you trade more successfully?

The answer is no.

In fact, its amazing that such a dumb theory is believed by so many traders, this is no disrespect to Leonardo Fibonacci who was a brilliant thinker, its just these levels have nothing to do with trading and the great man himself (were he alive today) would probably be bemused at the way his thinking has been hijacked by the far out investment community.

Many traders believe that Fibonacci levels are a natural law that re-occurs as human psychology is constant – but if you think about it, human nature is not predictable and NOT scientific.

Trading is an odds game.

Fibonacci traders are like the followers of Gann or Elliot, they all believe the market is scientific but if they were, we would all know the price in advance and there would be no market!

This is common sense to most people but not some traders, who constantly say it works when it doesn’t.

Sure, you can see the levels hold sometimes but pick any number you like and you will see that hold to sometimes!

If it’s scientific it should hold ALL the time, otherwise it’s NOT a scientific theory by definition – period.

Fibonacci numbers are a great story and vendors realize this and sell ridiculous systems based upon it, that don’t work. If you see one ask for the real time track record to prove this, you won’t get one.

You will get a simulated one done in hindsight but we can all do that – the problem with forex trading is you have to trade going forward not knowing the closing prices.

If you want to win at forex trading remember this:

There is no science involved and if anyone had found the secret of market movement they wouldn’t reveal it to you. OF COURSE Fibonacci numbers are available to all so why are the traders who use them not rich?

Well you already know the answer to that!

Forex trading is a game of odds, NOT certainties and there is no scientific formula or hocus pocus that makes them move on their own. They move due to what people do and how they see facts and humans are not predictable with scientific accuracy.

So leave the Fibonacci numbers to the dreamers and far out crowd and concentrate on a system that trades the odds.

Sure, you won’t win all the time, but if you know how to trade the odds you can make a lot of money.

BECOME A PROFESSIONAL TRADER On all aspects of becoming a profitable trader including: Free critical trader PDFS, and more FREE Forex Education visit our website at: http://www.learncurrencytradingonline.com/index.html

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Currency Swing Trading - The Perfect Method for Beginners

By: Monica Hendrix

Currency swing trading is a great way to make forex profits. Its easy to understand easy to apply and is a great way to make big profits. It's also a good method for novice traders to start with as it also requires less discipline than long term trend following - lets look at currency swing trading in more detail.

The problem for novice traders

Is they mostly lack discipline and getting discipline is hard especially if you want to follow long term trends, it takes a lot to follow a long term trend as open profits dip by sometimes thousands a day, sure you can hang on and win in the end - but getting the mindset right to do this is hard as you are always tempted to bank early.

Currency swing trading is the only short term method of trading that works and you are looking to catch trends of a few days to a few weeks maximum.

Swing trading is far better than forex day trading that simply doesn't work.

All short term daily fluctuations are random, support and resistance levels are meaningless, as volatility can and does take prices anywhere in a day session.

Swing trading on the other hand, takes advantage of over bought and over sold scenarios in the longer term trends and does work.

Currency swing trading is great for novices who want to be in on the action - trades come around frequently and profits and losses are banked quickly.

There are five golden rules for currency swing trading you must follow to be successful.

1. Trade Valid Support and Resistance

Generally 3 tests is the minimum, in two different time frames and the wider apart the tests take place in, the more valid the level is likely to be.

2. Confirm - Confirm - Confirm!

You don't just trade into support and resistance and hope the levels hold - you wait for confirmation. For this, you need to learn about momentum and use price momentum indicators.

If you don't know what they are or how they work, now is a good time to start.

A great indicator is the stochastic - there are many others just pick and choose 1 or 2 you like.

By using momentum, you are ensuring you are always trading with price momentum on your side - you are acting on the reality of price change and will have the odds on your side, rather than predicting or guessing which won't make you money in any venture.

3. Keep It Simple

Just support and resistance and a couple of confirming indicators are all you need. Simple systems are easy to understand, easy to apply and will be more robust in the face of ever changing brutal market conditions.

You can put together a simple currency trading system to swing trade in a couple of days - but that doesn't mean it won't be profitable - it will.

All the best forex trading systems are simple and yours should be to.

4. Take profits early

Have a target and get out early the closer the price moves to the next support and resistance, the more chance there is of a recoil against you which can eat into your open equity profit.

5. Liquidity

You should only trade volatile liquid currencies as spreads are tighter in these and the cost of doing business is less - so shop rates all forex brokers are not equal in this respect.

Currency swing trading is simple and it can be highly profitable in any forex trading strategy so try it.

Swing trading for beginners is ideal - its easy to learn, easy to apply and if you have a simple robust system, you can and will, make you big longer term capital gains.

Try currency swing trading and see for yourself how profitable it can be and you maybe glad you did.

NEW! PROFESSIONAL FOREX COURSE AND FREE TRADING PDF's For free trading guides and more on currency swing trading Course visit our website at: http://www.learncurrencytradingonline.com/index.html

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Forex Trading Success – Learn to Deal with Volatility or Lose Your Money

By: Kelly Price

If you want to enjoy forex trading success then you need to know how to deal with volatility and that means knowing and understanding standard deviation, - if you don’t know what it is you should it’s a key part of forex education and vital to achieve Forex trading success.

The Problem

Most forex Traders can spot long term trends but they cant profit from them because they get stopped out by volatile counter moves which clip their stop and give them a loss – then they see the currency go the way they thought and pile up huge gains.

If you want to win at forex trading then you need to deal with volatility. Let’s look at standard deviation and what is and how we can use it to help us deal with volatility.

Standard deviation is a statistical term that refers to and shows the volatility of price in any currency or financial instrument. Standard deviation measures how widely values are dispersed from the mean or average.

Dispersion is defined as the difference between the actual closing value price and the average value, or mean closing price.

The larger the difference between the closing prices from the average price, the higher the standard deviation and volatility will be. On the other hand, the closer the closing prices are to the average mean price, the lower the standard deviation, or volatility of the currency is.

Technical Calculation

Standard deviation the square root of the variance, and the average of the squared deviations from the mean.

High Standard Deviation is present when the price of the currency studied is changing volatile and has large daily ranges in reverse low Standard Deviation values take place in periods of consolidation i.e. when prices are more stable and range bound.

Keep This in Mind

Prices spike away from the average as the participants react to the emotions of greed and fear and then return to the average mean, when prices have moved to far to quickly.

A great tool for helping you understand standard deviation and picking areas to enter your trades with good risk / reward is the Bollinger Band.

Dealing With Volatility.

Key points to keep in mind are:

That strong trending moves will break back to the mid Bollinger band and this provides you with an area to target to get in on the trend. When the bands expand and volatility is high, prices will normally recoil back and you can take a contrary trade in the opposite direction, as prices return back to the mean.

Consider this equation:

Fundamentals (Long term average mean) + Investor perception (High volatility to Inner and outer bands) = price.

The price of anything tends to dip back to the mean or average - but investors will spike prices to far up or down along the way. This is a simplified version but its obvious how to trade this equation, as we have suggested above.

Always keep in mind that huge price spikes don’t last and the average in a strong trend is a value area.

Target these areas and use your technical tools on your forex charts to define entry.

Using Standard Deviation for Greater Profits

Standard deviation tells you how volatile prices are and a Bollinger band reflects this – it is not however on its own a signal to trade. By understanding volatility and how it occurs through standard deviation you will be able deal with volatility better and pick low risk / high reward exit and entry points.

If you don’t understand standard deviation and its impact day to day you won’t make money trading currencies so make it an essential part of your forex education. If you do it will help you on the road to currency trading success.

NEW! FREE TRADING PDF's PRO FX TRADING COURSE For free trading guides and an exclusive Forex Trading Course visit our website at: http://www.learncurrencytradingonline.com/index.html

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How to take a loss

Brett N. Steenbarger, Ph.D.

There are quite a few books written on how to make money in the market. Some of them are even written by people who have made money as traders! What you don't see often, however, are books or articles written on how to lose money. “Cut your losers and let your winners run” is commonsensical advice, but how do you determine when a position is a loser? Interestingly, most traders I have seen don't formulate an answer to this question when they put on a position. They focus on the entry, but then don't have a clear sense of exit—especially if that exit is going to put them into the red.

One of the real culprits, I have to believe, is in the difficulty traders have in separating the reality of a losing trade from the psychological sense of feeling like a loser. At some level, many traders equate losing with being a loser. This frustrates them, depresses them, makes them anxious—in short, it interferes with their future decision-making, because their P & L is a blank check written against their self-esteem. Once a trader is self-focused and not market focused, distortions in decision-making are inevitable.

A particularly valuable section of the classic book Reminiscences of a Stock Operator describes Livermore 's approach to buying stock. He would sell a quantity and see how the stock responded. Then he would do that again and again, testing the underlying demand for the issue. When his sales could not push the market down, then he would move aggressively to the buy side and make his money.

What I loved about this methodology is that Livermore's losses were part of a grander plan. He wasn't just losing money; he was paying for information. If my maximum position size is ten contracts in the ES and I buy the highs of a range with a one-lot, expecting a breakout, I am testing the waters. While I am not potentially moving the market in the way that Livermore might have, I still have begun a test of my breakout hypothesis. I then watch carefully. How are the other averages behaving at the top ends of their range? How is the market absorbing the activity of sellers? Like any good scientist, I am gathering data to determine whether or not my hypothesis is supported.

Suppose the breakout does not materialize and the initial move above the range falls back into the range on some increased selling pressure. I take the loss on my one-lot, but then what happens from there?

The unsuccessful trader will respond with frustration: “Why do I always get caught buying the highs? I can't believe “they” ran the market against me! This market is impossible to trade.” Because of that frustration—and the associated self-focus—the unsuccessful trader does not take any information away from that trade.

In the Livermore mode, however, the successful trader will see the losing one-lot as part of a greater plan. Had the market broken nicely to the upside, he would have scaled into the long trade and likely made money. If the one-lot was a loser, he paid for the information that this is, at the very least, a range-bound market, and he might try to find a spot to reverse and go short in order to capitalize on a return to the bottom end of that range.

Look at it this way: If you put on a high probability trade and the trade fails to make you money, you have just paid for an important piece of information: The market is not behaving as it normally, historically does. If a robust piece of economic news that normally sends the dollar screaming higher fails to budge the currency and thwarts your purchase, you have just acquired a useful bit of information: There is an underlying lack of demand for dollars. That information might hold far more profit potential than the money lost in the initial trade.

I recently received a copy of an article from Futures Magazine on the retired trader Everett Klipp, who was dubbed the “Babe Ruth of the CBOT”. Klipp distinguished himself not only by his fifty-year track record of trading success on the floor, but also by his mentorship of over 100 traders. Speaking of his system of short-term trading, Klipp observed, “You have to love to lose money and hate to make money to be successful…It's against human nature what I teach and practice. You have to overcome your humanness.”

Klipp's system was quick to take profits (hence the idea of hating to make money), but even quicker to take losses (loving to lose money). Instead of viewing losses as a threat, Klipp treated them as an essential part of trading. Taking a small loss reinforces a trader's sense of discipline and control, he believed. Losses are not failures.

So here's a question I propose to all those who enter a high-probability trade: “What will tell me that my trade is wrong, and how could I use that information to subsequently profit?” If you're trading well, there are no losing trades: only trades that make money and trades that give you the information to make money later.

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Brett N. Steenbarger, Ph.D. is Director of Trader Development for Kingstree Trading, LLC in Chicago and Clinical Associate Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY. He is also an active trader and writes occasional feature articles on market psychology for a variety of publications. The author of The Psychology of Trading (Wiley; January, 2003), Dr. Steenbarger has published over 50 peer-reviewed articles and book chapters on short-term approaches to behavioral change. His new, co-edited book The Art and Science of Brief Therapy is a core curricular text in psychiatry training programs. Many of Dr. Steenbarger's articles and trading strategies are archived on his website, www.brettsteenbarger.com

http://www.straightforex.com/howtotakealoss.html