Futures Contracts

A futures contract is an agreement (contract) to buy or sell an underlying asset on an agreed future date and for a price fixed in advance. The underlying asset of a futures contract can be a commodity, foreign currency, equity, interest rate , real estate or any other asset class and the contract are traded exclusively on exchanges, with standardized contract specifications and in a regulated environment. Buying or selling futures contract is not a physical transaction. The contract allows you to buy or sell the underlying physical product at a later date in the future.  The value of the futures contract can rise or fall and is bought and sold on a futures exchange. 

Forex: Technical analysis vs Fundamental analysis

The technical analysis is a method based on the study of charts which get attention to the price of the instruments, the volume of the trading and, when that is possible, open interest of the instruments. The fundamental analysis is a method founded on economic, political, environmental factors and any other factor.

In practice, much of actors of the forex market use the technical analysis in conjunction with the fundamental analysis to determine their strategy in forex trading.

One of the principal advantages of the technical analysis is that the experienced analysts can follow several instruments of market, whereas the fundamental analyst needs to know narrowly a market in particular.

The Indicators used on Forex Trading Charts by Technical analysts

The index of relative force (RSI):

This index is the most popular indicator of the Forex Market. The RSI measures the report/ratio of the upward trends compared to downward trends and standardizes calculation so that the index is expressed by a figure between 1 and 100. If the RSI is 70 or superior then the instrument is perceived in overbought (a situation in which the prices increased well beyond the expectations of the market). A RSI lower or equal to 30 announces an instrument in a position of oversold (a situation in which the prices fell much more than the market expected it).

Moving Average Convergence Divergence (MACD):

This indicator consists in tracing two lines of momentum. Line MACD is the difference between two moving average exponential and the line of signal which is an exponential moving average of the difference. If line MACD and the line of signal cross, this is regarded as a sign of very probable change of tendency.

The theory of numbers - Fibonacci:

Fibonacci list numbers (1,1,2,3,5,8,13,21,34.....) is built by the addition of two numbers to get a third. The proportion of any number compared to the following is 62 %, which is a popular figure of fold of Fibonacci. The reverse of 62%, which is 38%, is also used in Forex Trading like a figure of fold of Fibonacci (used with the Theory of the Waves of Elliott)

The theory of Elliott Waves:

The theory of Elliott Waves is an approach with the forex market research which bases on the repetitions of patterns waves and on the Fibonacci theorie. An ideal pattern of vagueness of Elliott comprises five followed rising waves of three declining waves.

The Gann angles:

W.D. Gann was a trader in stock and values who worked in the Fifties and which would have made more than 50 billion dollars on the market. It made fortune by using methods that he developed as tools of trade based on the relations between the movement of price and the time, known as a price/time equivalences. There is no simple explanation for the methods of Gann: it used the angles in the graphs to define the zones of supports and resistances and to predict the moments of future changes of tendencies. It used also lines on the graphs to define the zones of supports and resistances.

Gaps

The gaps are the spaces left on the histograms where no trade took place. A up-gap, or ditch of rise, is formed when the price low of a day of exchanges is higher than the highest price of the previous day. A down-gap, or ditch of fall, is formed when the price highest of a day is lower than the price low of the previous day. A up-gap is generally a sign of force of market, whereas a down-gap is a sign of weakness of market. A gap or ditch of rupture is a ditch of price which is constituted when a pattern important price is supplemented. This announces the beginning of a movement of important price. A gap or ditch of exhaust is a ditch of price which generally occurs about the middle of an important tendency of market. For this reason, it is also called a ditch of measurement. A gap or ditch of breathlessness is a ditch of price which occurs at the end of an important tendency and which announces that the tendency arrives at its end.

Which is the right Forex trading strategy?

Learning Forex trading is not a simple task, but in no way it is difficult either. Forex trading is all about regulation, will power and determination. Leveraging your strength could be extravagant by organizing the apt Forex trading strategy. You may find hundreds and thousands of Forex trading strategies out there. Logic would tell us that there is a foreign currency strategy out there which leverages our strengths. All forex trading strategies use a variety of indicators and combinations. These indicators and studies are just calculating support and resistance and trend in the Forex trading market.

Which forex trading strategy actually works?

First, we should know who we are as forex traders. Does our character fit the pip sniper mode or does our nature draw us more towards swing forex trading. Finding your trading character would simply mean studying and practicing the different time frames and related with Forex trading strategies. Over time you might also notice a higher level of achievement and/or ease trading one style over others. You need to pay attention! The forex market is uttering you where your cleverness is more competent of extract reliable profits for the market. This is why journaling is so imperative to your every day forex trading.

Secondly, if in case you are using somebody else’s forex strategy, a most of us are, organize this strategy with no change until you fully and totally recognize all aspect of the strategy through back-testing and as well with some real life experience. Don’t fall into entrap of jumping from one strategy to strategy or mixing different strategies when the one you are using does not lead to instant success. This is only a guideline for disaster.

Take the time to actually understand the forex trading strategy. Study the components independently so a deeper understanding of the strategic mechanisms would be mastered. If you recognize the components, internalize its use, and make consistent profits into your forex trading account, then you have your own Forex trading strategy. It does not really matter what the professionals say, your account balance is the final judge and judges for your Forex trading strategy

20 Golden Rules for Forex Trader

Here is the list of rules for a Forex Trader to become a successful trader.

1. Forget the news, remember the chart. You're not smart enough to know how news will affect price. The chart already knows the news is coming. If you are believe in Fundamental analyze then forget this rules.

2. Buy the first pullback from a new high. Sell the first pullback from a new low. There's always a crowd that missed the first boat.

3. Buy at support, sell at resistance. Everyone sees the same thing and they're all just waiting to jump in the pool.

4. Short rallies not selloffs. When markets drop, shorts finally turn a profit and get ready to cover.

5. Don't buy up into a major moving average or sell down into one. See #3.

6. Don't chase momentum if you can't find the exit. Assume the market will reverse the minute you get in. If it's a long way to the door, you're in big trouble.

7. Exhaustion gaps get filled. Breakaway and continuation gaps don't. The old traders' wisdom is a lie. Trade in the direction of gap support whenever you can.

8. Trends test the point of last support/resistance. Enter here even if it hurts.

9. Trade with the TICK not against it. Don't be a hero. Go with the money flow.

10. If you have to look, it isn't there. Forget your college degree and trust your instincts.

11. Sell the second high, buy the second low. After sharp pullsbacks, the first test of any high or low always runs into resistance. Look for the break on the third or fourth try.

12. The trend is your friend in the last hour. As volume cranks up at 3:00pm don't expect anyone to change the channel.

13. Avoid the open. They see YOU coming sucker

14. 1-2-3-Drop-Up. Look for downtrends to reverse after a top, two lower highs and a double bottom.

15. Bulls live above the 200 day, bears live below. Sellers eat up rallies below this key moving average line and buyers to come to the rescue above it.

16. Price has memory. What did price do the last time it hit a certain level? Chances are it will do it again.

17. Big volume kills moves. Climax blow-offs take both buyers and sellers out of the market and lead to sideways action.

18. Trends never turn on a dime. Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise always finds sellers.

19. Bottoms take longer to form than tops. Greed acts more quickly than fear and causes stocks to drop from their own weight.

20. Beat the crowd in and out the door. You have to take their money before they take yours

Notes to the Forex Traders

As forex traders, we are constantly looking for any edge we can get in the marketplace.  Using the charts is one way that traders look for predictive behavior in the price action of any currency pair.  But sometimes, there are more simplistic tactics that can provide equal results.

Case in point, today’s action on GBP/USD.  This is one of the most simplistic “plays” in the market and can sometimes provide low-risk opportunities.  Today’s market action is called “No news is good news”.  This was one of the first tactics I learned when I made the transition to forex and it can be used over and over again.

Earlier this morning, the British pound rose some 80 pips from yesterday’s low volume session.  One might think that there was some “good news” driving the Pound higher, or perhaps there was some bad news about the other currency in the pair. Since the US market hadn’t opened yet, one might naturally conclude that there was good news in the UK then.

Not only was there not good news, there was NO news at all as the UK markets are closed today.  But the forex market trades 24-hours around the clock.  Without the possibility of bad news, the market saw the opportunity as good news and therefore pushed the Pound higher.  In other words, with the threat of negativity removed, you could have had an easier move higher!

Sometimes we see this type of action with the changing of the trading sessions.  Have you ever noticed, especially lately, that the markets seem to drift higher once the European market closes?  This happens because the risk coming from Europe is great right now so if we make it through a European session without negative news, the market sees it as a positive!

Of course it is still import to use support and resistance levels, and in the Pound earlier today that support level was at 1.56 providing a low-risk, high return short-term trade.  So trade the path to least resistance and you may see moves similar to this one today!

The History of Money

World War I (1914-1918

The Germans borrowed money from the German Rothschilds bank, the British from the British Rothschilds bank, and the French from the French Rothschilds.

American super banker J.P. Morgan was amongst other things also a sales agent for war materials. Six months into the war his spending of $10 million a day made him the largest consumer on the planet.

The Rockefeller's and the head of president Willson's War Industries Board, Bernard Baruch each made some 200 million dollars while families contributed their sons to the bloody front lines, but profit was not the only motive for involvement.

Russia had spoiled the money changers plan to split America in two, and remained the last major country not to have its own central bank.

However, three years after the start of the war the entire Russian Royal Family was killed and Communism began.

You might find it strange to learn that the Russian Revolution was also fuelled with British money. Capitalist businessmen financing Communism?

The Dollar as the World’s Reserve Currency

The one advantage that the United States has over every other country is the dollar. It is the world’s reserve currency, what does that mean? Well, it means that every currency is “pegged” to the dollar. We price oil, cotton, and other commodities to the dollar. This advantage allows the the Federal Reserve the ability to continue print money, while keeping the interest rates down. This is what is happening now with the series of QE’s. We are now in the middle of QE2 or Quantitative Easing 2 where the Federal Reserve is buying U.S. bonds or buying the U.S. debt. This QE2 action devalues the dollar and monetizes the debt, something Federal Reserve Chairman Ben Bernanke said he would not do, but in reality is doing.

When a country continues to print money this causes inflation. The price of commodities rises because the value of the currency is decreasing. We are starting to see this happen in markets today. Look at the price of corn, cotton, sugar, oil, gold and silver as they are skyrocketing. As long as there is Quantitative Easing, these commodities will continue to rise. I believe we will see QE3 in the future because the government cannot stop printing money. If they stop printing the money, you will see the U.S. spiral in a “great depression” as never seen before.

The Federal Reserve is also keeping interest rates at or close to 0% and has been doing so for the past couple of years. This action cannot continue as the printing presses print money out of control. One day, the interest rates are going to have to rise to keep inflation in check. How much will they rise? I don’t know, but it will be noticed by all. We are following the same path as the Wiemar Republic in Germany, and just recently Zimbabwe. Inflation will sooner or later catch up to the actions of the Federal Reserve.

If the dollar loses it’s standing as the world’s reserve currency, it would be a disaster for the United States as this is the only reason that printing can continue without more destruction to the economy. Recently, there have been actions to decouple the dollar as the reserve currency. China and Russia decided to start trading in their own currencies, instead of the dollar when buying and selling from one another. And recently the “economic minds” met at Bretton Woods to discuss future economic plans. This summit held by billionaire philanthropist George Soros is focusing on the future of the world economic prospects, and one topic of discussion was the dollar as the world reserve currency.