Crude Rises on the Dollar’s Decline

The metals closed the New York trading day only marginally higher after Gold was unable to hold the magic $1000 level.v Despite the sharply higher Euro and a $3.00 jump in the price of Oil; the metals finished the day only a shade higher and well below the session highs.

Silver closed up 8 cents at $16.42. Gold finished at $997.00 up $1.10 per ounce. Palladium slipped $3.00 to $292.00. Platinum rose by $16.00 to $1280.00. Volume was moderate.

Over in the currencies the Dollar continued to weaken on fears of Chinese Dollar liquidations and growing concerns of U.S inflation. Last on the Euro $1.4504 up 1.69 cents against our Greenback.

Crude rose on the back of the weak Dollar gaining $3.38 per barrel to $71.40. Remember tomorrow’s OPEC meeting. Stocks are also well off the session highs with the Dow Jones industrial Average currently sitting at 9469 up only 27 points.

When we return tomorrow traders will have two fresh pieces of data to contend with. We get the Weekly Oil Inventories and the latest Fed Beige Book. The Beige Book; named for the color of it’s cover is an anecdotal compilation of business conditions in the 12 Federal Reserve Bank districts.

Tomorrow’s economic calendar:

RESERVE BANK OF NEW ZEALAND Rate Decision
OPEC Meeting
Weekly Oil Inventories
U.S. Fed Beige Book

Best FX Trading System – How to Choose

Forex traders are always looking for the most profitable forex or FX trading system. The truth is that no system is perfect and that is why there are so many of them out there. In fact, there are probably as many forex systems as there are traders. Even traders who buy a system to follow from the get go usually modify it to suit their own trading plan.

Here are three things to look out for in an FX trading system.

1. Strategies That Suit Your Trading Style.

The best forex systems will have a selection of different strategies that you can use in different market conditions. For example, long and short term trading strategies, or one strategy for a choppy market and another for a stable market. You need to check that they all (or most) suit the way that you want to trade.

One criterion here is the time that you have for trading. A day trading system may depend on you being online at certain hours or for a certain length of time each day. It may not suit you if you have a full time job. You would want instead a longer term trading strategy that you can set and forget.

2. High Rate Of Successful Trades.

The main reason why you want a high success rate (or rather, a low number of losing trades) is psychological. Some systems have a lower success rate but maintain profitability by winning a lot when they win or not losing so much when they lose. This is OK in theory, but in practice it can be very discouraging. You will frequently have 3 or 4 losses in a row, sometimes even more, or a period when you seem to be dropping more than you gain for quite some time. This can lead to losing faith in the system, which in turn leads to erratic trading, bad decisions and, of course, more losses. A high success rate can protect you from this and help you maintain the psychological edge that you need to be a successful forex trader.

3. Effective Training.

Most FX trading systems that are sold online come with training but this can vary in quality. You need to make sure that the training offered is step by step. Video is often the best way and this becoming more and more common. You can watch and see exactly what you need to do.

However, ideally you should also have the steps written down in an ebook. That way you can quickly refer back later when you need a reminder of something, without having to watch a whole video again.

If you pick out a good system according to these rules you will have no trouble trusting it. As we said earlier, having faith in your system will make it much easier for you to stick to it through thick and thin, giving you the best chance of making money with your FX trading system.

Secrets to Making Money with Foreign Currency Trading

There are thousands of new beginners coming into foreign currency trading all the time now and most of them are desperately searching for the magic system that will make them pots of cash. They think the system is the only important factor in working out the best way to make money.

Probably 90% of these beginners will fail, and not because they didn’t find a good system. There are plenty of good systems. No, they usually lose because they did not understand the importance of money management and planning.

Professional traders, on the other hand, know how vital this is, and that is a major part of why they succeed. Here are 3 top tips to make sure that you are among the winners.

1. Strictly Limit Your Risk On Each Trade

The amount of your funds that you risk on each trade can vary according to the system and the amount of your funds, but it should never be more than 5%. In fact 5% is very high. Unless you have a very small foreign currency trading fund that you want to build up fast and don’t care too much if you lose it, you would be better off sticking to around 3%.

When your funds are large you will probably find that you want to decrease the percentage risk. If you have hundreds of thousands of dollars in your account you want to make absolutely sure that you do not lose it all, even in the worst of losing runs. Most traders at this level will risk just 1% of their capital per trade.

3. Think About Your Risk To Reward Ratio

Something that many traders never even think about is the relationship of the risk that they are taking to the possible reward. Yes they keep their risk to a certain percentage but they only take small profits from each trade. They may even be risking more than they expect to profit (e.g. risking 60 pips to make 30).

Usually, this is not a successful strategy in the long term. It may work in theory if you have a system that makes a very high percentage of successful trades but the effect of having a few losses in a row will be devastating. Choose instead a system that has a risk to reward ratio of around 1:2 (e.g. risking 30 pips to make 60).

2. Do Not Open A Second Trade Until The First Is In Profit

However confident you are about your first trade, do not open a second position until the first is actually in profit and you have moved your stop up above the break even point.

There are two reasons for this. The first is that if your first trade suddenly takes a dive, you are in a stressful position and having to deal with a second position at the same time could lead to panic decisions.

The second reason is that with multiple unsecured trades you are very vulnerable to a sudden unforeseeable market event that could cause the prices to dive in the wrong direction and trigger all of your stops at once. So keep to the rule of trading your positions singly to make sure that you keep a good grip on your profits.

Observing these three rules is the best way to make money with foreign currency trading.

What is Your Currency Trading Strategy?

Every new forex trader hopes they will quickly find the magic currency trading strategy that will make them rich overnight. In their desperate search to make money fast, newbies tend to believe that every new strategy they encounter is the one that will make them a millionaire, so they immediately ditch whatever they were doing to follow the next new system. They never learn to apply any system profitably or even sort out the good systems from the bad. Inevitably they finish up by taking a loss.

Skipping around from course to course without delving deeply into any of them is, of course, is a surefire recipe for failure. So let’s take another look and see if we can construct a recipe for success.

Brace yourself for a reality check: there is no perfect forex system – gasp! No set of instructions to follow that will guarantee you make millions. What works in practice is sound analysis that enables you to spot a trend and then open an order to back it.

This is very different from trying to predict the market. If you trade on predictions you are effectively gambling on which way the market will jump. If you follow trends, you are waiting until a movement is clearly established before opening an order.

Of course you need to be sure that it is a solid trend and not just a momentary fluctuation that will soon go the other way. That is where the analysis comes in. Use indicators to give you a clear idea of whether the market is oversold or overbought so that when you see a movement in the right direction you can be fairly sure it will continue that way for long enough for you to profit from it.

This is the first step in setting up your successful currency trading strategy – identifying the emerging trend. It is something that will become easier with experience. In order to minimize your losses, you probably want to gain that experience in a demo account.

The next step needs to be taken as soon as you have entered the market, and it involves setting up a stop order. This is an order that will be triggered if the price goes against you and it prevents you taking a large loss. Never hang on to a losing order hoping that the movement will reverse. It probably will not, and you could be wiped out waiting. So get out, then take a good look at what went wrong. You should be glad to have losses like this in the beginning because you can learn a lot more from a mistake than from a winning trade.

Where to set your stop can vary according to your system and the risk that you are prepared to take, but 10% is a good working figure to start with. If you find that your stop is being triggered too often, move it out. Equally if you find that a shorter stop would have saved you money almost every time without being triggered by random fluctuations, you can move it in a little.

Does that sound too simple? Remember, the secret is not in the strategy itself but in how you implement it. That’s why it is pointless to hop from system to system. Develop your trading techniques and discipline, and you will soon be in a position to see that a successful currency trading strategy is very simple indeed.

When you know WHEN and WHERE the best times and places are to place your forex trades, there’s no need to waste your day (and your life) fumbling around with chart after chart.

Online Foreign Exchange Trading: Avoid These 3 Big Mistakes

Just about everybody who starts online foreign exchange trading is hoping to make big money. There are perhaps a few people who do it just for fun, but if they are at all successful they will soon start to think about turning that success into a money maker that could eventually change their lives.

However, a lot of forex traders see their big dreams come to nothing.

Mistake #1: Increasing The Risk

When you start out you will receive a lot of good advice about keeping your risk down around 2% to 5% depending on the size of your funds. Most people feel it’s OK to take a bigger percentage risk with smaller funds because they don’t care so much about losing the money. So you might be happy to risk 5% of a $1,000 starting balance (that’s $50) but you probably wouldn’t start out risking 5% of a $100,000 balance if you have it (that’s $5,000).

But after a while, the situation somehow becomes reversed and people who started out with a good small risk often find themselves increasing it. This can be either because their system has been consistently profitable and they think they cannot lose, or because they have had a few losses and they think they must be due for a winning run. Neither of these assumptions are true. Disaster can strike, often at the times that we are least prepared … i.e. when we just increased the risk.

Your percentage risk should decrease as your funds increase, not the other way around.

Mistake #2: Trying To Do Everything

Some inexperienced forex traders hop from system to system, abandoning every system whenever a new one comes along. Others try to cover all the bases, running three or four systems at the same time and trading on every currency pair that their broker offers. Both of these tactics are big mistakes.

The most successful systems are simple. Don’t try to employ every forex trading strategy that you can find online and don’t be drawn into thinking that if you combine the advice of all of the experts you will end up with the perfect system.

Trading systems do not mix well. Start with one. If it doesn’t give you enough trading signals so that you don’t have anything to do most days, you might want to add another, but be careful. Remember that if there is a sudden major natural disaster or terrorist attack, all your open trades could go west in a few seconds.

Mistake #3: Too Much Or Too Little Testing

You probably know that you need to test any system in a demo account before going live with it. However well the system is explained, you may be doing something slightly differently that will give you different results from the expected. It’s important to test enough that you have confidence in your system.

But at the same time, don’t test for too long. You need to know that the system works and then not be scared to switch it over to a real money account … without changing anything. Go back to the demo account any time that you think of an improvement. This will give you the best chance of making big profits with your online foreign exchange trading real money account.

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