Forex: EUR/USD capped at 1.3700, dips to fresh lows

FXstreet.com (Barcelona) - Euro reversal from 1.3935 high last week has extended to 13645 in Asia, with the pair weighed by renewed concerns about Greece, where the pair found support to bounce up at European opening, although, capped at 1.3700, the pair has turned lower again, dipping to fresh lows at 1.3630.

On the downside, the pair might find support at 1.3590 (Sept 14 low) and 1.3555 (Sept 13 low) before facing 1.34954 (Sept 12 low). On the upside, immediate resistance lies at 1.3700/05 (day highs), and above here, 1.3730/50 (broken trendline support) and 1.3795 (Gap from Sept 16 closing price).

On the long-term, the downtrend from 1.3940 remains active, heading to 1.3555 and 1.3240 says Stoyan Mihaylov, analyst at Deltastock: "The downtrend from 1.3940 is still intact, targeting 1.3555, en route to1.3240. Initial resistance is projected at 1.3750 and crucial on the upside is 1.3800."

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President Obama to seek a new tax rate for wealthy

The proposal would be included in the president's proposal 

for long term deficit reduction that he will announce Monday.

President Barack Obama is expected to seek a new base tax rate for the wealthy to ensure that millionaires pay at least at the same percentage as middle income taxpayers.

A White House official said the proposal would be included in the president's proposal for long term deficit reduction that he will announce Monday. The official spoke anonymously because the plan has not been officially announced.

Obama is going to call it the "Buffett Rule" for Warren Buffett, the billionaire investor who has complained that rich people like him pay a smaller share of their income in federal taxes than middle-class taxpayers.

Buffett wrote in a New York Times op-ed piece last month that he and his rich friends "have been coddled long enough by a billionaire-friendly Congress."

The measure would be in addition to £283 billion ($447 billion) in new tax revenue that Obama is seeking to pay for his short-term spending and tax cutting plan to jump start the economy.

Republican House of Representatives Speaker John Boehner said Thursday he would oppose tax increases to reduce the deficit. Boehner has urged Congress' deficit "supercommittee" to lay the groundwork for a broad overhaul of the U.S. tax code.

The panel has almost unlimited authority to recommend changes in federal spending and taxes and is working against a deadline of Nov. 23.

Boehner said the panel has "only one option, spending cuts and entitlement reforms," a reference to massive federal benefit programs such as Social Security, Medicare and Medicaid.

Any broad compromise that clears the bipartisan committee is almost certain to require Democratic agreement to savings from programs such as the Social Security pension program, along with Republican acquiescence to additional revenues, although any such trade-offs are rarely discussed openly until the last possible moment in negotiations.
Obama's new tax proposal was first reported by the New York Times

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Types of Forex Trading and Strategies

The foreign exchange market, or forex, being the largest financial market in the World has been the domain of government central banks as well as for commercial and investment banks in a scandalous manner and it exists wherever one currency is traded for another. But recently more numbers of individuals are handling the forex market as it offers trading 24-hours a day, five days a week, and the daily dollar volume of currencies traded in the currency market that exceeds $1.9 trillion daily, making it the largest liquid market in the world.


"Foreign Exchange" is the place where the money of one nation is traded with the other nation. The most popular pair of exchange in the forex market is "Euro Dollar". You can view these pairs in all forex display screens as "EUR/USD". Forex trading strategies are the key to triumphant forex trading or online currency trading. The management team of One World Capital Group bid proficiency in both Forex trading and internet technologies and proven track records that deals with large, global trading and brokerage operations as well. Forex made easy is as simple as you would want it to be.


Forex trading is different from trading in stocks entirely and it uses Forex trading strategies that will give you lot of advantages as well as help you to comprehend greater profits in the short term. There are wide ranges of forex trading strategies that are available to investors. It is one of the most useful of these forex trading strategies called as leverage. Knowledge of these Forex trading strategies can imply the difference between profits along with a loss and so it is essential that you fully grasp the strategies that are being used in Forex trading. The world of Forex trading is highly complicated and success requires education and familiarity with terms, charts, signals and indicators.

As you can be able to access it from home or office from any parts of the country, Global Forex trading is the most profitable and attractive internet income opportunity. And you do not need to do anything or there is no need of internet promotion for getting succeeded. Forex Capital Markets are nothing but foreign exchange markets where the currencies are been bought and sold continuously for profits. These capital markets of forex are present globally and their transactions are always non-stop in this forex cash market. A managed Forex account is forex made easy. Many different companies offer these accounts to their clients. The foreign exchange market is a worldwide market and as per to some estimates is almost as big as thirty times the turnover of the US Equity markets. 

By: usharani

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Is Forex A Part of Your Investment Portfolio?

FOREX is the abbreviation for the Foreign Exchange market. The main principle of Forex is converting one currency into another. As far as the freedom from any external control and free competition are concerned, FOREX is a perfect market and is also the world's biggest financial market. In many investment portfolios, you will find FOREX more and more since the currency exchange realm has opened up to the small investor. In its simplest form, Forex is transaction of monetary funds from one government to another or business associates of different countries. There are substantial earnings to be made in the foreign currency market, but trading in the Forex is for the well-informed. In addition, forecasting Forex is not easy, as Forex is a fast moving market where several changes occur in the fraction of seconds.

Trading Forex works remarkably easy and is convenient since the currency exchange market is open 24 hours a day 7 days a week, providing plenty of trading opportunities. You can get started trading the (spot) FOREX with little money and there are many brokers on the internet that will allow you to make paper practice trades for up to 30 days, free of charge, to see if Forex is for you. They have guides that show techniques for day trading as well as mid-term Forex trading (one to seven days). Trading currency with tighter spreads can improve your trading profits, and you can see for yourself how taking short-term trading positions can be exciting. Low spreads and high volatility is a very popular way of trading on Forex, and is known as day trading.

The foreign exchange (currency or Forex or FX) market exists wherever one currency is traded for another. Trading Foreign Exchange currency in the global Forex trading system market can make you money. Very often currency pairs are closely related to one another - and this is something that can be used to the Forex Traders advantage. There are Consumer Alerts, however, and you should beware of Foreign Currency Trading Frauds. You should educate yourself first in all areas relating to currency trading. It's a great way to get comfortable with a currency trading system and to develop a successful Forex trading strategy. Use the currency forecasts to set profit points and maximize your return. You can make significant earnings in the foreign currency market, but trading in the Forex is for the well-informed and you should take advantage of advice from a reputable broker.

A broker is any person or firm that charges a fee in exchange for executing trades for a trader. When it is time to find a broker, there are several factors to consider. Assuming you are dealing with a reputable broker, there are still risks to FOREX trading. But inexperience is not the only broker reason to consider using a Forex broker to trade in the high risk international currencies market. Most traders find that it is necessary to utilize a broker when making transactions on the FOREX exchange and this has created a market demand for an online Forex broker, Forex dealers and a currency exchange service. As an example, your Forex currency broker is able to purchase $100,000 with only a deposit of $1,000, as the rest of the amount is leveraged to you by your Forex broker. With this type of account, your broker/dealer basically trades your money on the Forex market for you, and will always show the highest bid and the lowest offer.

In simplest terms Forex can be as simple as you would want it to be. Managed Forex is an area of Forex trading that's continuing to grow. FOREX is a somewhat unique market for a number of reasons... Forex is maximum liquidity; FOREX is real trade, in term of business. Basically, Forex is transaction of monetary funds from one government to another or business associates of different countries. For the astute investor, Forex is better than the stock market and every other money-making opportunity. Since Forex is entirely electronic and the liquidity and size is so much larger, it tends to be easier and more efficient to do a Forex transaction. 

By: Gust Lenglet

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Installing Metatrader 4 under Linux

There is a lot of interest out there in running Metatrader 4 on the Linux platform, however until Metaquotes does a native Linux version, the only option if you want to do it is to run it under WINE emulation.

What follows is a step by step guide to installing MT4 in Linux. I have used the excellent Ubuntu distribution for this task though you may adapt it your distribution easily. This also works on Gentoo for example.

Anyway...

1) Install WINE if it's not already installed.

sudo apt-get install wine

Once WINE is installed you need to configure it. This is pretty easy. As a normal user (Not Root!) run winecfg from a terminal and it should set itself up. If you want to do any more configuration or tweaking, have a look around the tabs, but for now I suggest keeping it as default.

2) From a valid windows installation, copy over all the fonts into your wine installation. It also assumes you told Ubuntu to mount your windows partition in /windows.

cp /windows/WINDOWS/Fonts/* ~/.wine/drive_c/windows/fonts/

3) Copy 2 needed DLL files from your valid windows installation.

cp /windows/WINDOWS/system32/mfc4* ~/.wine/drive_c/windows/system32/

4) Download mt4setup from your favourite broker, or one of the broker suggestions on rebatefx.com.

5) Install MT4.

wine mt4setup.exe

6) You should now have an icon on your Desktop and a working install of MT4 under Linux! Double click it to launch. Don't be alarmed if it takes a while to run first time.

There are some small problems at the time of writing though. This is to be expected when emulating software written for another platform. These problems may include (They don't happen to everyone), not being able to place limit or stop orders due to an invalid parameter error, not being able to change the width of trend lines, and indicator lines, and in some cases the Meta Editor will refuse to run without a copy of Internet Explorer 6 or better being installed also. While it's no guarantee to fix the problem it's useful to have Internet Explorer installed for those web pages that insist on you using it or for web page development.

To install ie6 you can use the excellent ies4linux package. The following commands should get ie6 installed on your linux machine.

sudo apt-get install cabextract
wget http://www.tatanka.com.br/ies4linux/downloads/ies4linux-latest.tar.gz
tar xzvf ies4linux-latest.tar.gz
cd ies4linux-*
./ies4linux

So there you have it. Metatrader 4 working in Linux. Well, mostly ;)

It's not perfect, but it's a workable solution if you trade by entering at market prices. It's certainly good for news trading when an unexpected virus check or annoying windows update popup steals the focus from the trading terminal losing you precious seconds which may mean all the difference between making a lot of money or just a little. Even worse, losing your chart setups or even your whole account to a virus or keylogger attack.

Good luck and Happy Trading!

By: Jafar Calley

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Strategy 3: CounterTrend 1 (“Gann OFR”)

Trading against the trend is difficult and risky, and yet, when properly controlled, can be profitable. That is why the setup for a Gann OFR trade requires several conditions. First, price must be testing key support or resistance. A pattern used in the “OFR 30” system needs to develop, then price must break the Gann HiLo line. When a position is taken, Gann OFR employs two profit targets as well as a trailing take-profit stop.

Gann OFR uses these Indicators on the 30-Minute Chart:

Pivot Calculator - Daily
FXS Adaptive Mvg Avg (5,2.0,0)
Gann Hi/Lo Activator - Gann HiLoA(7)

Chart 1: This CounterTrend Strategy uses three indicators.

Trend

An UP Trend is shown when price stays above a rising black Gann HiLo line, testing the Hi Band and sometimes exceeding it.

A DOWN Trend is shown when price stays below a falling black Gann HiLo line, testing the Lo Band and sometimes dropping below it.

Trade Entry

The steps for a Gann OFR buy or sell trade are listed below. Trade entry occurs when the currency retests the Gann HiLo line. After buy entry conditions occur, Gann OFR will buy if the market drops to the Gann HiLo line. When sell entry conditions occur, then GannOFR will sell if the market rises to retest the Gann HiLo line.

CT1 Gann OFR Buy Entry Rules:

1. Price tests key pivot support level and
2. Closes outside of the Lo Band and
3. Followed by a Close back inside the Lo Band.
4. Price must then close above the Gann HiLo line.
5. Buy on a retest of the Gann Hi Lo line.

In Chart 2, on October 10th a Sell Entry occurs at #5 in the EURJPY at 166.13.

CT1 Gann OFR Sell Entry Rules:

1. Price is trading near key pivot resistance and
2. Closes outside of the Hi Band and
3. Followed by a Close inside the Hi Band.
4. Price must then close below the Gann HiLo line
5. Sell on a retest of the Gann HiLo line

Trade Exit

It is not possible, in advance, whether a small or larger profit will develop. So two profit targets are used. Half profit can be taken at or beyond the FAMA Band (Hi Band for Buy Trades; Lo Band for Sell Trades). The second profit target is the next key support or resistance beyond the FAMA Band. The Gann HiLo line is used a trailing stop to keep losses small and also to let profits run, per below exit rules.

Profit Targets

1st Profit Target: Opposite FAMA Band
In a buy trade, exit half the position at the FAMA Hi Band or above.
In a sell trade, exit half of the position at the FAMA Lo Band or below.

2nd Profit Target: The Next Key Pivot Line
A buy trade can target the next key Pivot Resistance above the Hi Band.
A sell trade can target the next key Pivot Support below the Lo Band

Price Closes beyond Trailing Stop

The Gann Hi/Lo Activator (‘Gann HiLo’) is used as a Trailing Stop. If the strategy position is long, then the strategy exits if price closes below the Gann HiLo line. If the strategy is short, then it exit the position if price closes above the Gann HiLo line.

Chart 3. A Sell Trade takes half profit at the Lo Band, then exits the other half on a strategy Buy signal.

The example in Chart 3 shows a sell trade at 166.13, near R2(Daily) Resistance. Half profit was taken at 165.63, at the Lo Band. The second half of the position was closed at 165.61, when a Gann OFR buy trade occurred. Profit on the trade was 51 pips (166.13-165.62 [average exit price]).

Gann OFR Buy Exit Rules:
Exit a BUY Position if

1. A Profit Target is reached OR
2. Price closes below the Gann HiLo line

Gann OFR Sell Exit Rules:
Exit a Sell Position if

1. A Profit Target is reached OR
2. Price closes above the Gann HiLo line

Initial Stop Loss Order:
Controls trade risk. Establish before the trade. (See "Risk Controller".)

Risk Control

Go to Risk Controller. Input risk preferences to determine:

1. Stop Loss Order
2. Maximum Position Size

Use the Trade Strategy Worksheet to control, monitor and record the trade.

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Strategy 2: Two Timeframes ("TC Experts")

This strategy uses the TC Expert indicator in Two Timeframes. The 1-Hour TC Expert is used to determines trend. The TC Expert on a 10-Minute Chart is used for Trade Entry and Exit.

When the 1-Hour TC Expert is bullish, for example, then Trend is UP, and the strategy will buy when the 10-Minute TC Expert turns bullish. The strategy exits a buy trade when the 10-minute Expert turns bearish, or when price closes below a Gann Hi/Lo line that is used as a trailing stop.

Indicators used in this strategy & their inputs:

1-Hour Chart: TC Expert (7,18,36,7)
10-Minute Chart: TC Expert (7,18,36,7)
Gann Hi/Lo Activator - Gann HiLoA(7)

Chart 1. The TC Expert is composed of two separate indicators.

Trend

Trend is the direction of the TC Expert on the 1-Hour Chart. When the Schaff TC Expert is applied to the chart, two indicators appear, both a black Schaff Trend Cycle (‘STC’) and a green Schaff Trend RSI (‘STR’).
Chart 2. Trend changes are highlighted by the the red and blue vertical lines, after which the TC Expert indicator turns bearish and bullish, respectively.
Trend is UP when the TC Expert is bullish. The TC Expert is bullish when both the black STC and the green STR are rising above the lower red-dotted Buy line shown in Chart 2.
Trend is DOWN when the TC Expert is bearish. The TC Expert is bearish when both the black STC and the green STR are falling below the upper red-dotted Sell Line.

Trade Entry

The strategy uses the TC Expert and a Gann HiLo line on a 10-Minute Chart to time when to enter a trade. When Trend is UP the strategy will buy when price is above the Gann HiLo line and the 10-Minute TC Expert turns bullish. If Trend is DOWN the strategy sells when price is below the 10-Minute Gann HiLo line and the 10-Minute TC Expert turns bearish then the strategy sells.
Chart 3. With a DOWN Trend in place, a Sell Entry occurs on the 10-Minute Chart at 9:20 at 2.0387.
TC Expert Strategy: Buy Entry and Sell Entry rules:
BUY when 1-Hour Trend is UP and

1. The 10-Minute TC Expert turns bullish and
2. Price is above the Gann HiLo line

SELL when 1-Hour Trend is DOWN and

1. The 10-Minute TC Expert turns bearish and
2. Price is below the Gann HiLo line

Trade Exit

Various exit tactics are used, depending on how price could develop.
Trend Indicator Changes Direction
If the 1-Hour Trend changes direction then exit the trade.
Trade Entry Indicator Changes Direction
If the 10-Minute TC Expert changes direction then exit the trade.
Price Closes beyond Trailing Stop
The Gann HiLo line is used as a Trailing Stop on the 10-Minute Chart. If the strategy position is long, then exit if the 10-Minute price closes below the Gann HiLo. If the strategy is short, then exit if price closes above the Gann HiLo.
The chart below follows the GBPUSD trade shown in Chart 3.
Chart 4. The sell position exits when the 10-Minute TC Expert turns bullish.
The sell trade entered on October 3 at 9:20, at 2.0387, exited at 16:40, at 2.0313, when the 10-Minute TC Expert turned bullish (with both the STC and STR rising above 25). The result is a profit of 74 pips.
TC Expert Strategy: Buy Exit and Sell Exit rules:
Exit a BUY Position if one of the following situations occur

1. Trend changes to DOWN, or
2. The 10-Minute TC Expert turns Bearish, or
3. Price closes below the Gann HiLo on the 10-Minute Chart.

Exit a SELL Position if one of the following situations occur

1. Trend changes to UP or
2. The 10-Minute TC Expert turns Bullish or
3. Price closes above the Gann HiLo on the 10-Minute Chart.

Initial Stop Loss Order: Controls trade risk. Establish before the trade. (See "Risk Controller".)

Risk Control

Go to Risk Controller. Input risk preferences to determine:

1. Stop Loss Order
2. Maximum Position Size

Use the Trade Strategy Worksheet to control, monitor and record the trade.

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Strategy One: Momentum 1

Momentum 1 is a short-term trend momentum strategy. Short-term means that this strategy can enter and exit several trades a day. It is a trend momentum strategy because it buys only when the Schaff Trend Cycle (‘STC’) is rising and sells only when the STC is falling. The strategy exits a trade when trend or price momentum slows down.

For example, MOM 1 will buy into an uptrending market as it accelerates. And it will exit that trade when the speed of the uptrend slows down. The reverse holds true for a sell trade. MOM 1 will sell into a downtrend as it accelerates. It will exit a sell trade when the speed at which prices are falling slows down.

Indicators used in this strategy & their inputs:

Schaff Trend Cycle - STC(5,7,13)
Simple Moving Averages – Two Lines, SMA(3) and SMA(5)
FXS Trend Oscillator - TrendOscl(2)

Trend

This strategy uses a fast moving Schaff Trend Cycle (‘STC’) on a 1-Hour Chart to indicate Trend. The STC moves between 0 and 100. Trend is the direction of the “fast” STC.

UP: Trend is considered to be UP when the STC is rising or at 100.

Chart 1. Momentum 1 uses three strategy indicators.

DOWN: Trend is DOWN if the STC is falling or is equal to zero.

Trade Entry

The strategy uses two fast moving Trade Entry indicators to fine-tune when to buy or sell: Simple Moving Averages – Two Lines and the FXS Trend Oscillator (‘TrendOscl’).

The moving averages are considered bullish when the faster black SMA(3) is rising and above the green SMA(5), and bearish when the SMA(3) is falling and below the green SMA(5).

FXS Trend Oscillator crosses above and below zero. The green ‘TrendOscl(2)’ line is bullish when it is above zero and rising. It is considered bearish when it is below zero and falling.

Chart 2. A Buy Entry occurs at 1.4186, at 8:00, when all three strategy indicators became bullish.

Here are the Buy Entry and Sell Entry rules:
BUY when Trend is UP and:

1. The black SMA(3) above the green SMA(5) and
2. The green Trend Oscillator line is above zero and rising

SELL when Trend is DOWN and

1. The black SMA(3) is below the green SMA(5) and
2. The green Trend Oscillator line is below zero and falling

Trade Exit

Various exit tactics are used, depending on how price could develop.

Profit Target:

1. Exit Buy Position if price trades at Key Resistance target and TrendOscl crosses below zero.
2. Exit Sell Position if price trades at Key Support target and TrendOscl crosses above zero.

Strategy Indicators Changes Direction:

If the Trend Indicator changes direction then exit the trade. If both of the Trade Entry indicators change direction then exit the trade.

Chart 3. Buy Trade exits after Trend changes to DOWN.

Exit a BUY Position if

1. Trend changes to DOWN
OR
2. Both Trade Entry indicators change to Bearish

Exit a SELL Position if

1. Trend changes to UP
OR
2. Both Trade Entry indicators change to Bullish.

Initial Stop Loss Order: Controls trade risk. Establish before the trade. (See "Risk Controller".)

Risk Control

Go to Risk Controller. Input risk preferences to determine:

1. Stop Loss Order
2. Maximum Position Size

Use the Trade Strategy Worksheet to control, monitor and record the trade.

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Forex Trading Strategies And Systems

I've been trading the forex markets for several years now so I've developed quite a few different systems in my time. However there are some that are more profitable than others, so let me share you with you some of my most profitable forex trading strategies.

4 Hour Trading Strategy

I created this trading strategy myself and have been using it for several years now. This one system has generated more profits that any other system I have ever used, and yet it's surprisingly simple.

I simply look at the daily trend for a particular currency pair (usually the GBP/USD, EUR/USD or USD/JPY pair) using a very simple but effective technical indicator, then I wait for two EMAs (exponential moving averages) to cross over in the same direction on the 4 hour chart.

I will then enter a position (usually after a slight pull-back) and will employ a two-part exit strategy to maximise my profits. One half of the position will be closed out early for a safe profit, and the other half will be left to run for as long as possible in order to capture those really big price moves.

As I say, this particular forex trading strategy is highly effective, as regular readers of my blog will know because I share my trading results every week in my 'Weekly Trading Updates'.

Anyway if you would like to read all about my 4 hour trading method, you can access it (for free) by filling in the short form to the right and subscribing to my newsletter.

The only problem with trading this strategy is that there will always be quiet periods and particular days where you know you are not going to get any set-ups on any of the major currency pairs. Therefore at times like these I will often employ some of the other trading methods that I keep in reserve:

CCI Divergence Trading System

This is a forex system that I've recently created and it basically uses the popular CCI indicator with two different settings. The key here is to wait until there is divergence between both of the CCI indicators at the same time because this will give you a set-up with a very high success rate.

You don't get that many good set-ups per day using this trading strategy, but when you do, you are likely to make some decent profits because it is a very high probability set-up.

I have discussed this particular strategy elsewhere on this blog so please click here if you want to find out more about this CCI Divergence Trading System.

Forex Income Engine 2.0 Methods

At the time of writing (20 June 2009) I've just started using the three day trading methods included in the Forex Income Engine 2.0 course as well. I've always been quite sceptical about many of the short-term forex methods that I come across, but I've been very impressed with these three methods so far because they do actually produce some very good returns.

Anyway if you would like more details about each of these methods you can read all about them on my Forex Income Engine 2.0 review page.

Forex Nitty Gritty Method

This trading method was included in the Forex Nitty Gritty course and although it is a very basic method, it is actually surprisingly effective. The goal is to look for pairs that are in strong upward or downward trends, wait for a pull-back, and then enter a trade if the trend continues.

I've been using this method on the 15 minute charts for quite a while now and it has always performed well for me because these continuation trends occur all the time.

Again if you would like to find out more about this particular trading method, you may like to read my full review of Forex Nitty Gritty.

Long-Term Trading Strategy

I'm not really a long-term trader but I do occasionally open a position if a good trading opportunity arises. I will usually use the daily charts for these trades and will look at a variety of indicators such as the 200 day moving average, the supertrend indicator, established support and resistance levels, fibonacci levels if applicable, and Marketclub's excellent trading signals.

I will regularly post my long-term analysis of the various currency pairs on this blog, but I will only follow this up with an actual trade if I'm really confident about my predictions.

Other Forex Trading Strategies

Finally as well as all of the trading systems and strategies listed on this page, I also have a few breakout strategies that I like to use when a good opportunity presents itself. I'm also constantly testing out new ideas and reviewing the various trading systems that I get sent regularly by product owners who want me to promote their product.

However for the most part it's my 4 hour trading strategy that I spend most time on because this is my core system which generates the most consistent and reliable profits. All of the other forex trading systems are used to boost my trading pot during the quieter periods of the week.

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EUR/USD likely to remain under pressure

EUR/USD is likely to remain under pressure and the US Dollar expected to remain bid during the week amid signs of waning market confidence according to the Brown Brothers Harriman, Global Currency Strategy Team. “The EUR/USD, in particular, is expected under pressure across as the combination of a potential Greek default, a shift in ECB posture, divisions between policy makers over how best resolve the ongoing debt crisis and funding worries about European banks continue to rattle markets.”

“With the CDS market pricing in an imminent default of Greece amid talks that the German government may be discussing an orderly restructure and press reports over the weekend suggesting that some large European financial institutions are facing the prospect of a credit downgrade due to their exposure to Greece, we suspect that the euro and broader market sentiment are likely to deteriorate further yet,” analysts affirmed at BBH and point out that a break of the EUR/USD below 1.3430 (February lows) could open the door for 1.3360 “and roughly a full retracement of the year’s entire move.”

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Fundamental Factors Behind Major Currencies

Every Forex-traded currency is influenced by  a range of internal macroeconomic conditions in its country of origin, as well as by and the global market situation. Economic Indicators (GDP growth, import/export trade accounts), social factors (unemployment rate, real estate market conditions) and the country’s central bank policy are the factors that determine the currency value in the foreign exchange market. Each one of the six major currencies has its particularities, and we are going to analyze the fundamentals that drive the currencies individually.
The US dollar (USD) is the most traded currency in the Forex market. It is also used as a measure to evaluate other currencies and commodities. The USD dominates the foreign reserves held by  all nations – it composes about 64% of the world reserves. Globally speaking, there are several fundamentals that drive the U. S. dollar. Since the largest amount of metallic commodities and the oil are mostly traded with prices denominated in USD, significant supply/demand fluctuations in these markets will have an immediate impact on the currency value, as it  has happened in 2008 when, largely due to the oil prices collapse, the EUR/USD reached 1.60 rate. The dollar also benefits from its status as a safe haven, as investors run to it when economic conditions deteriorate. As a result of a reserve currency status sometimes, USD sometimes profits from problems in the US itself. As for domestic factors, the Federal Reserve and its main interest rate has a tremendous influence on the currency. Decisions of the Fed about the benchmark rate are influenced by inflation, employment and GDP, thus the dollar is also influenced by these factors. Other important factors for USD are the trade balance and the national debt of the US. Usually, a higher trade balance deficit and a growing national debt reduce attractiveness of the US currency. Yet sometimes the opposite can happen as high trade deficit and debt may drive investors to the perceived safety of the dollar.
The euro (EUR) is by far the newest currency traded among the major pairs on Forex markets. It is used by 17 members of the European Union. The fundamental factors that move the euro are often based on the strongest economies using the new common currency, such as: France, Italy and, mainly, Germany. The main factors for performance of EUR are inflation of consumer prices and the target lending rate set by the European Central Bank. The countries’ indicators of the export trade and the unemployment rate also tend to have a high impact performance of the shared currency, considering that countries such as Germany are large exporters of manufacturing goods and technology. Europe still remains an energy dependant from the Russian gas and the Middle Eastern oil, making higher demands for these commodities to have a negative reflect on the EU currency. Another problem for the euro is the difference between its economies, made apparent by the debt crisis in 2011. It’s hard for the EU leaders in times of troubles to find solutions that are equally benefiting to the major economies and the weaker ones. EUR was considered as an alternative reserve currency to USD until the sovereign debt crisis. Unfortunately, the problems with the peripheral economies of the EU undermine the confidence in the euro.
The pound sterling (GBP) is the national currency of the United Kingdom, and the fundamental factors that move it are as complex and variable as the British economy itself and its global influence. The London can still be considered as a world’s financial capital and its commodity market plays a fundamental role in GBP trends. Inflation and GPD tend to influence the pound by the biggest degree, while the housing market is also important for Britain’s currency. Recently, the UK economy was constantly showing signs of weakness, reducing appeal of GDP. Despite that fact, traders sometimes use the sterling as an alternative for the euro in times when problems in the European Union become too severe. GBP also tends to be influence by political event, including elections. Usually, the currency reacts negatively to events that cause uncertainty, like the parliamentary elections in 2010 that resulted in hung parliament.
The Japanese yen (JPY) is the strongest and by far the most traded currency in the Asian market. Japan’s economy is mainly geared towards industrial exports. JPY is greatly valued by traders as a safer currency in periods when risk aversion sentiment hits markets, but also used by carry traders in times of risk appetite. Low interest rates in Japan allow such traders to borrow the currency and invest in countries with higher rates. Japan’s close proximity and tensions with China sometimes has a great impact on the yen. The problems for JPY are constant devaluation in Japan and interventions of the nation’s central bank. The Bank of Japan is concerned that excessive appreciation of the yen (and Japan’s currency tends to gain a lot at present because of economical uncertainty) may hurt nation’s export-oriented economy and, as a result, constantly attempts to weaken the Japanese currency. Deflation has hit Japan in early 1990s, following the burst of the real estate bubble in 1980s, and remains one of the greatest threats to Japan’s future. Growing number of old people compared to youths as well as increasing worries about the future makes it hard for the government to deal with the deflation.
Switzerland is a small country located in the European Alps, yet, its strong international trade and money influx, made the Swiss franc (CHF), one of the main currencies traded on Forex. CHF is another currency that is preferred during risk aversion as Switzerland’s robust economy and huge gold reserves (the country’s reserves is seventh biggest in the world, despite Switzerland’s small size) add to credibility of the currency. Similarly to JPY, CHF suffers from constant interventions of the central bank. The Swiss National Bank has gone as far as pegging CHF to EUR on September 6, 2011, thus creating constant downward pressure for the currency.
The Canadian dollar (CAD) is considered a “commodity currency” as Canada’s economy is export-driven. Most of its exports Canada sells to the USA, making the Canada’s economy and the currency dependent on the nation’s southern neighbor. The main export commodity is crude oil and CAD depends on the price moves of crude as well. The global economic growth and resulting advance of commodities tend to make CAD attractive to investors. On the other hand, problems with the global and the domestic economy can hurt CAD.

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Top 10 Myths about Forex

Forex is a market where exchange of one currency with another currency takes place. It’s the market which provides accessibility and liquidity to the traders to buy and sell one foreign currency in exchange of another.

Forex traders seek profit in buying currencies low and selling them high. This kind of trading became more popular with the widespread of the on-line Forex brokers. There is a lot of information available about Forex on the web. However there also many myths surrounding the foreign exchange market:

1. Forex trading is easy. Many people that want to dive into the world of the foreign exchange market believe that the Forex trading is easy — you just read a book or two and then you will be able to earn daily profits with just 2-3 hours trading daily. Others think that they can buy a profitable strategy and it will make them rich in Forex. In reality that’s just a myth. Succeeding in Forex isn’t easier than mastering any other profession — it takes time, money and a lot of practice.
2. "I will make money in Forex, if I can trade stocks successfully." Success in stock market doesn’t imply that you will get success in Forex market — there are many differences between trading stocks and the spot currencies. First of all, Forex market requires a lot of hard work and dedication as this market is open for 24 hours a day. You cannot just sit in front of your computer for the whole day and night, so the best way is that you should find the most suitable time periods for trading. Second, “buy&hold„ strategy simply won’t work in Forex market. Third, you don’t have that much information about currencies as you can get from the companies’ reports and statistics.
3. "I can make profit whenever I want if Forex market is open 24 hours a day." Once again, you won’t be sitting in front of your PC for the whole day to be able to trade 24 hours. You’ll have to develop automated trading software to get the advantage of 24 hours a day working schedule.
4. "I can be a successful Forex trader just following someone else’s signals." Many beginning traders get burned by the blind signal-following. That’s like putting away the whole responsibility for your actions to someone else. That may sound cool, but in reality you end up with the huge losses. Learn to rely on your own knowledge and skills. Remember that there were no great signal-followers in any financial market.
5. No commission is to be paid in Forex market. You only have to pay the spread, but you don’t have to pay the commission. And what’s spread? It is the difference between the buy and sell price of the currency pair at the same moment. You may end up with the major part of your profits in the broker’s hands if you plan to rely on the short-term trading.
6. Forex is a scam. Some skeptics and disappointed traders think that Forex is just some new fad to scam people for their hard earned money. Although there are many scams that are hiding behind the "brand" of Forex, that doesn’t mean that the Forex itself is a scam. There are many institutional Forex brokers, regulated Forex account managers and other solid companies in the market to whom you can trust.
7. "I need to exactly predict the market outcome to be profitable in Forex." There is no scientific method to know something in advance in the market with a 100% certainty. There would be no Forex market if you could know the exact currency rates beforehand. Trading is not the game of certainties; it’s a game of odds. One of the first things that new traders learn is to think in the terms of probabilities and risk-to-reward ratios.
8. "I need to use a very complex strategy to be successful in Forex." It’s a popular myth, in which many on-line sellers would want you to believe. The main requirement to be successful in Forex is a self-discipline and money management. There are many traders that make consistent profits with rather simple and old strategies.
9. "I need to have a lot of starting capital to get profit in Forex." Big capital investment won’t help you in Forex. You don’t need a lot of money to diversify in currencies and you can’t move the currency rates with your trading orders (you’d need billions of dollars to do that). Actually you can trade with a very a little capital, because Forex trading is almost always leveraged with the broker’s money.
10. Forex is gambling because it’s completely random. Although there is no certainty in Forex (as in any financial market) it doesn’t mean that it’s completely random. And it’s certainly not a gambling, since your success in this market depends mostly on your skills and experience, not on your luck.

Knowledge is power — so it’s better for you to learn distinguishing some stereotypical myths from the real thing. Don’t fall for the promises of getting some easy profits in Forex, but don’t be afraid of the market just because some people think it’s not possible to earn there. Be rational — this quality will help you either if you are going to trade in Forex or not.

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