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.

How To Establish a Personal Strategy

Forex trading is one of the most versatile types of investments. You can profit from price movement in either direction. You can magnify your returns to almost any degree through high amounts of leverage. You can profit in the long-term scale or profitably work with trades that last only a few minutes. You can even expand into currency futures and add options trading.

However, this also means that the forex market involves lots of different trading strategies. For the sake of simplicity, we can say that these range from the short-term to long term strategies.

At the smallest time durations, scalping takes advantage of the micro-volatility a currency pair might experience. Most scalpers open at least a hundred positions in a single day and the majority of those trades stay open for less than five minutes. The focus is rarely on trends or the fundamentals behind the currencies as much as the quick jumps that are always happening.

Swing traders are more concerned with trends. As the name suggests, they usually open a trade at the top or bottom of a price trend, just as it reaches support or resistance. If all goes as planned, the currency will turn and they can profit from the next trend—hopefully closing the trade just as the price reaches new support or resistance.

Carry trades are inherently longer term because they rely on the underlying interest rates between currencies. For instance, JPY (the Japanese Yen) maintained rock-bottom interest rates for many years. At the same time, interest rates were much higher elsewhere in the industrialized world. So if you used yen to buy dollars, for instance, and held them for a certain period of time, your profit would be the difference between the two interest rates. Magnify this with leverage, and it might be significant.

Of course, the most basic type of trading is a medium to long-term strategy based on the fundamentals. Here, you simply evaluate where you think a given currency is going and try to find a pair with one currency headed up and another headed down. If your guess is right, holding the pair for an appropriate length of time can yield good profits.

So what is the best strategy? Like most questions in investment, this has no simple answer. Each strategy has pros and cons. The cons for scalping are the constant focus it requires, the temptation to raise leverage inappropriately, and the challenge of forex brokers that allow it. Swing trading requires a good sense of timing and facility with several technical analysis tools. Carry trades are often simple to research, but it is increasingly hard to find good pairs to use since most of the industrialized nations now have extremely low interest rates.

In general, the most versatile strategy and the most useful for beginning traders is day trading based on the fundamentals. A medium range is also helpful because it requires low capital with minimal risk. This simple method is also a good starting point. As you gain more experience you can specialize into other trading strategies.

If you are an experienced trader, try learning strategies you have never used before. The ideal is to have facility in all of the methods and be able to switch between them. Certain opportunities are ideal for certain strategies but not others. If you know how to use all of the methods, you can adjust quickly and maximize your profits at any one time.

So what is the best strategy? Here’s a simple answer—probably a hybrid form of them all!

Forex Trading – Sensible Method To Make Money With Forex Trading

The overseas currency exchange market has become widespread over the past few years. A part of the reason for its reputation amongst those who aren’t skilled traders is the benefit with which you’ll be able to enter and take part in the market. You possibly can enter it personally after learning the terms and charts that apply to the foreign money or commodity through which you’re interested.

At the other finish of the range is a managed account. In the sort of trading account, the broker or money manager does all the trades and makes all the decisions for you. Someplace in-between is an automated Forex trading robot. Each of those strategies can be utilized to earn a living Foreign currency trading system variations.

A robot makes use of mathematical calculations to determine when to enter and get out of a trade. The parameters could be designed by the traders or will be bought as a standalone software package. Some market gurus have made out there systems the place the clients are notified when a certain purchase or sell signal is received.The robotic methods can use numerous components and mixtures to resolve on the triggers. For example, it could be one or a mixture of or three features on the chart formations.

There are lots of indicators which might be offered freed from cost on the market platforms. You’ll be able to research the formations to find out which of them you need to use.The triggers is likely to be pushed by different options that can be seen on pairs charts. Volatility is among the measurements linked to how briskly the pairs worth is moving. The volume is one other measurement When there is lots of exercise in a specific pair, the value can improve or decrease very rapidly.

Throughout certain instances of the day, the triggers can range widely. Normally the busiest time is when the foremost markets are open. When you do not want to spend your entire time watching the charts develop, the robotic will watch the markets for you.As a result of there are so many pairs to observe and so many choices to select from, you could find a market that works for you. Often a robot can be set on essentially the most lively pairs. You may make the most of these mechanical aids to let you have the liberty to make the most effective decisions.

By utilizing an automatic Foreign currency trading robotic properly, you can also make cash Forex trading system signals. You don’t have to rely on a cash supervisor or broker. It is best to nonetheless know what you are doing so that you simply won’t be mystified by the transaction. I personally made greater than eight occasions on my money utilizing a Foreign exchange automated buying and selling robotic and would extremely suggest it.

To turn out to be successful at foreign currency trading, data is required. Before you possibly can come up with a workable buying and selling plan, you have to purchase the knowledge and expertise to implement what you learn. This web site is setup in such an approach that you’ll study, acquire data,implement the technique and grow your trading account steadily without worry of loss. That said, to inform you the truth, foreign currency trading is not for everyone. The uncooked emotions throughout live trading is just not simple for some to handle. So study who you are and how you handle these emotions. Everything you do during your training, should be intentional.

Forex Trading Tips

Aiming for solid income, you may even venture into margin trading for it offers more earnings especially when you trade amounts bigger than your deposit. Well, you can make a very good start but remember that margin trading is always about tripling your income which could be overwhelming. Humility then is necessary to keep oneself away from greed which may cause you business imbalance if you have little orientation about margin trading.

This business is not about a simple exchange of goods and money as forex trading play vital role in uplifting the economy. It is a matter of survival where someone like you should stay in the setting and earn more money. How is it to earn money in forex trading? Your investment is something you can never afford to lose. The basic understanding about this business is important as you could rely from news and events globally.

Helpful Hints In Forex trading

Forex trading follows a simple equation that would help you understand the nature of the market. When the market is at peak, then it is at peak. When the market is down, then it is down. A little discouragement can sometimes be a motivation to keep you going in the business. You can depend from a broker if you wish to be advised but never take much advises from plenty of sources as it would lead to losses.

There are a lot of means to uplift the economy but forex trading is not about the simple exchange of goods and money. If you wish to stay in the setting and earn money, the helpful tips in mind can help you keep going. How is it to earn money in forex trading? Always remember that your monetary investment is something which is very hard to lose. As you could rely from news and events globally, the basic understanding about this business is but important.

The simple exchange of goods and money is typical for business establishments but forex trading has a difference for it plays an important role in uplifting the economy considering global perspective. How is it to be successful in forex trading? The basic understanding about it is a must as news and events in international scene are reliable clues.

To stay in the setting and earn money, one should have several tips in mind to survive like allowing you to analyze historical trends looking for excellent results without being exhausted. You can never have all best information at one time. Taking steps slowly but surely is a big yes for this venture. Confidence is the best choice.

Forex trading shares view of a simple mathematical equation. When the market is strong, then it is strong. When the market is weak, then it is weak. Self-motivation is your key to keep the business going. If you want guidance, you can depend from a broker but never take a lot of advices from different sources to avoid losses.

Mediatory Services in Forex Currency Trading

Foreign exchange market (Forex) is the prime financial market in the globe. The overall funds in trade comprise of nearly trillions of US dollars in trade, which is a lot more than the entire amount of stock options and duties of the United States of America.

Forex is a non-stock exchange market that has no physical place. Forex is a banking network consisting of companies, forex brokers, private investors, integrated by one organization of information exchange.

As the Forex exchange trading does not rely on physical place, they trade internationally, all around the clock, with the exception of weekends for the time zone of the country dealing with it.

Foreign exchange covers up markets of most nations with universal platforms for foreign currency exchange trading functions in London, Tokyo and New York.

Major groups of Forex currency trading are:

Insurers – The major group is exporting and importing companies and some of the companies which consist of the few functions in foreign currency. For these partakers in forex, the main objective is to ensure loss minimization in a way keeping away from risks.

Speculators – Personal traders and corporations who are intended to trade foreign currency making profit from foreign currency exchange rates and short-term functions go to this category.

Arbiters – Investors of online forex trading who trade with big amounts of cash to invest and function on two or more markets at the similar time and generally they tend to make profit on the basis of foreign exchange rates.

Forex broker – These are brokers, banking establishments, currency dealers and companies who provide with electronic access to trading platforms and giving mediatory services in currency exchange deals.

Various Types Of Foreign Exchange Systems –Market Speculation

Flexible Exchange Rate System:

In a flexible foreign exchange rate system the financial power - the central bank - regulates the exchange rate to influence the supply and demand for foreign currencies.

Fixed Exchange Rate System:

In a fixed foreign exchange rate system, the currencies are not unpredictable; in its place they are set to each other at an exacting rate. This process ideally prefers the central bank to be stacked with a big reserve of equal valued domestic and the foreign currency.

Whenever, there is a leaning for the forex market price creating expectation of the foreign currency to better in value, the central bank should sell that foreign currency in quantities that can avoid the price raise.

On the contrary, if the leaning of the foreign currency is in the downward trend, the central bank will have to purchase the foreign currency in amounts that will prevent the decrease of the price. It is for this reason, a set exchange rate system, the central bank is set to purchase and sell its domestic currency at a decided price in terms of the value of the foreign currency.

A Foreign Exchange Market:

The Foreign Exchange Market, or “Forex” market, is the major financial market in the globe with a standard daily return greater than 2 trillion US dollars (2,000,000,000,000). There were different types of foreign exchange systems ideally most of stuff are now between the fixed and the floating system.

The Forex market is the ground where currencies are exchanged and traded. Investors from all over the world buy or sell one currency for one another by trying to make some profits in the minor deviations of price as a consequence of market speculation.

FX Trading Made Easy

Foreign exchange, sometimes called Forex trading or FX, is a multifaceted trading market for overseas currencies. As the world's currencies are traded against each other, their exchange values flucuate at different rates.

Whereas other markets have times when they stop trading, Forex operates endlessly, allowing rates to change at any certain time. Forex currency trading is handled by way of banks and other financial organizations that will all possess different rates.

The enormous, worldwide Forex market is vastly fluid and its size grows each day. The trades happen worldwide, with minimal regulation among countries.

In order to make a profit in this complex market requires nonstop monitoring of every aspect of the persistently varying data. It is all too easy to miss an imperative detail, which can result in significant losses to your forex account.

The complexities involved are forcing an rise in the amount of traders trying automated software, or Forex robots. These traders draw on the software to know for certain there is scrupulous monitoring of information, useful data collection, and actions made supported by solid figures, not on feeling.

Forex robots are intended to lessen, or even eliminate, mistakes that can easily be made by humans. The software can give a trader the complete numbers he or she needs, which helps reduce the stress connected with trading in the foreign exchange market. Even while a trader is doing other things or even resting, these robots will constantly watch the marketplace, choosing whether to sell or buy, based entirely on absolute logic.

Lately, there's been a lot of hype on the subject of Forex programs. Given numerous choices of software, each claiming to be the best at watching the market and choosing helpful trade decisions it can be extremely difficult to uncover which will be the generally effective. Will a robot actually be able to deal in a market as convoluted as this? 

About the Author

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What Kind of Stop-Loss Order Should a Trader Use?

The great headway of a non-numerical stop-loss order is its partial immunity to price swings. If the trader has confidence significance his analysis, and is satisfied that standing uncompromising in the face of market volatility is sensible further acceptable inured the major dynamics and currents clout the market, maintaining positions hush up non-numerical stop loss orders can act for advisable besides lucrative. In order to complete the inevitable great swings leadership account value, proficient managers will implement hedging strategies in addition to money management methods, to direct and minimize the volatility of the portfolio. Thus, even if the bonkers stop triggers a large drawn down in our position, we duty minimize the effect on the portfolio now diversifying further distributing the risk among various currency pairs.

A volatility stop depends on volatility indicators, such over the VIX for determining the annihilation speck for the trade. owing to such, market panics and shocks entrust set up the order to put on executed, but mere fee fluctuations in the currency market which loss their counterpart leadership other asset classes will be ignored for the most representation. The trader who utilizes a volatility stop expresses the opinion that unless a major, unexpected shock hits the market, his position should be constrained regardless of the behavior of the markets. This is a supplementary risky strategy than the justice stop, but can be profitable and valid depending on tout conditions and the economic environment. In general, evident is doubtful that a volatility stop can be plenty useful in a overly nervous further volatile market. But it could perform very helpful network maintaining a long-term position where venture perception is low.

Both the disadvantage, and the advantage of the equity stop is its inflexibility. The correction stop provides a very solid criterion over deciding on the success or failure of a different trade, over there’s no way of being deceptive about an account in the red. On the other hand, the same inflexibility may discourage the trade from functioning because expected. The markets are volatile, again a bag that has a totally valid cause behind it may yet be invalidated by the random fluctuations that are not predictable.
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Economic indicators

The Gross National Product (GNP). The Gross National Product measures the economic performance of the whole economy. This indicator consists, at macro scale, of the sum of consumption spending, investment spending, government spending, and net trade. The gross national product refers to the

sum of all goods and services produced by United States residents, either in the United States or abroad.

The Gross Domestic Product (GDP). The Gross Domestic Product refers to the sum of all goods and services produced in the United States, either by domestic or foreign companies. The differences between the two are nominal in the case of the economy of the United States. GDP figures are more

popular outside the United States. In order to make it easier to compare the performances of different

economies, the United States also releases GDP figures.

Consumption Spending. Consumption is made possible by personal income and discretionary income. The decision by consumers to spend or to save is psychological in nature. Consumer confidence is also measured as an important indicator of the propensity of consumers who have discretionary income to switch from saving to buying.

Investment Spending. Investment — or gross private domestic spending — consists of fixed investment and inventories.

Government Spending. Government spending is very influential in terms of both sheer size and its

impact on other economic indicators, due to special expenditures. For instance, United States military

expenditures had a significant role in total U.S. employment until 1990. The defense cuts that occurred at the time increased unemployment figures in the short run.

Net Trade. Net trade is another major component of the GNP. Worldwide internationalization and

the economic and political developments since 1980 have had a sharp impact on the United States' ability to compete overseas. The U.S. trade deficit of the past decades has slowed down the overall GNP. GNP can be approached in two ways: flow of product and flow of cost.

FOREX Internet Trade

A FOREX Internet trader does not have to speak with a broker by telephone. The elimination of the middleman (broker salesman) lowers expenses and makes the process of entering an order faster and has eliminated the possibility for misunderstanding.

Execution Costs: Unlike other markets, the FOREX does not charge commissions. The cost of a trade is represented in a Bid/Ask spread established by the broker. (Approximately 4 pips)

Trendiness: Over long and short historical periods, currencies have demonstrated substantial and identifiable trends. Each individual currency has its own “personality,” and each offers a unique historical pattern of trends, providing diversified trading opportunities within the spot FOREX market.

     

Focus: Instead of attempting to choose a stock, bond, mutual fund or commodity from the tens of thousands available in those markets, FOREX traders generally focus on I to 4 currencies. The most common and most liquid are the Japanese Yen, British Pound, Swiss Franc and the new EURO. Highly successful traders have always focused on a limited number of investment options. Beginning FOREX traders usually will focus on one currency and later incorporate one to three more into their trading activities.

Margin Accounts: Trading on the FOREX requires a margin account. You are committing to trade and take positions today. As a speculator trader you will not be taking delivery on your product that you are trading. As a Stock Day Trader, you will only hold a trading position for a few minutes to a few hours, and then you need to close out your position by the end of the trading session.

All orders must be placed through a broker. To trade stocks you will need a stockbroker and to trade currencies you will need a Forex currency broker. Most brokerage firms have different margin requirements. You need to ask them their margin requirements to trade stocks and currencies.

A spot transaction

A spot transaction is a straightforward exchange of one currency for another. The spot rate is the current market price, which is also called the “benchmark price”. Spot transactions do not require immediate settlement, or payment “on the spot”. The settlement date, or “value date” is the second business day after the “deal date” (or “trade date”) on which the transaction is agreed by the trader and market maker. The two-day period provides time to confirm the agreement and to arrange the clearing and necessary debiting and crediting of bank accounts in various international locations.

Leverage

Leveraged financing is a common practice in Forex trading, and allows traders to use credit, such as a trade purchased on margin, to maximize returns. Collateral for the loan/leverage in the margined account is provided by the initial deposit. This can create the opportunity to control USD 100,000 for as little as USD 1,000.

There are five ways private investors can trade in Forex, directly or indirectly:
• The spot market
• Forwards and futures
• Options
• Contracts for difference
• Spread betting

Prices, Quotes and Indications

The price of a currency (in terms of the counter currency), is called “Quote”. There are two kinds of quotes in the Forex market:

Direct Quote: the price for 1 US dollar in terms of the other currency, e.g. –Japanese Yen, Canadian dollar, etc.

Indirect Quote: the price of 1 unit of a currency in terms of US dollars, e.g. –British pound, euro.

The market maker provides the investor with a quote. The quote is the price the market maker will honor when the deal is executed. This is unlike an “indication” by the market maker, which informs the trader about the market price level, but is not the final rate for a deal.

Cross rates – any quote which is not against the US dollar is called “cross”. For example, GBP/JPY is a cross rate, since it is calculated via the US dollar. Here is how the GBP/JPY rate is calculated:

GBP/USD = 1.7464;

USD/JPY = 112.29;

Therefore:  GBP/JPY = 112.29 x 1.7464 = 196.10.

The “majors” and the “exotics”

In forex trading “parlance” there are 6 “major” trades, they comprise over 70% of trading:-

€ / US$; 28.2%

US$/ JPY; 16.7%

£ / US$; 13.8%

A$ / US$; 5.1%

US$/ C$: 4.4%

US$/ SwF; 4.0%

Other trades involving the US$ account for 16.5% of trading.

 “Minor” currencies are usually those of developing countries including Russia, Brazil, South Korea, Malaysia, Mexico. The annual traded volumes of these currencies are around 6-10x annual the respective GNP. 

“Exotic” currencies are currencies that are thinly traded outside their own countries. The Thai baht is a good example of a currency traded mainly between neighbouring countries reflecting physical trade in goods. The Thai baht considered exotic because it trades only low volumes in international markets.

The difference between trading the majors and the exotics is largely in the “spread”. For the very liquid majors, the spread ie the difference between the buying and selling price is very small. However for the exotics, the difference between buying and selling price can be quite large.

The size of the spread is a key factor. For an investor to profit, the position has to “get though the spread” i.e. move in the investors favour by an amount larger than the spread. Hence it is easier to profit from engaging in major trades than in the exotics.

What is “Forex trading”?

“Forex” (foreign exchange) is the buying or selling of overseas currencies. “Forex trading” can be an extremely lucrative business. Famously wealthy currency speculators include Joe Lewis and George Soros. These guys have made fortunes identifying currency trends and anticipating market movements! When we buy overseas goods in local shops, or buy petrol or go abroad, we are part of a currency exchange. The retailer has acquired goods from a wholesaler, who has acquired the goods from a local or EU distributor. Somewhere in this process of goods changing hands, currency trading has been employed as the tool of international trade. The management of currencies is the task of the country’s central bank and/or the Government. There are many forex market participants, including banks, brokers, multi-national companies and investment institutions. Since the relaxation of UK exchange controls in 1979 individuals have been active in the forex market.

Currency dealing or “forex” dealing/ trading takes place in every major city in the world. Major forex centres are London, New York, Tokyo and Sydney. London is the world’s biggest centre for foreign exchange trading worth $3,000bn per day. Forex dealing is popular because it is a highly liquid, transparent market open 24 hours and uses standard terms that are easily understandable. These days forex dealing is so easy you can trade from your own home computer! You can use leverage to increase your exposure to market movements. Forex dealing offers flexibility in that the investor is able to take a more intuitive approach.

What Is Hedging?

The concept of hedging is based upon the assumption that movement in cash and futures prices will parallel each other in movement after due allowance has been made for any seasonal or other trend in the cash market.

In essence, the goal of the hedger is to lock in an approximate future price in order to eliminate his risk of exposure to interim price fluctuations.  The best way to understand hedging and the futures market is by example.  I will assume that you have no understanding of the futures market.

The Components of a Complete System

A  Complete  Trading  System  covers  each  of  the  decisions  required  for  successful

trading:

•      Markets - What to buy or sell
•      Position Sizing - How much to buy or sell
•      Entries - When to buy or sell
•      Stops - When to get out of a losing position
•      Exits - When to get out of a winning position 
•     Tactics - How to buy or sell

Markets – What to buy or sell
The first decision is what to buy and sell, or essentially, what markets to trade. If you trade too few markets you greatly reduce your chances of getting aboard a trend. At the same time, you don’t want to trade Markets that have too low a trading volume, or that don’t trend well.

Position Sizing – How much to buy or sell
The decision about how much to buy or sell is absolutely fundamental, and yet is often glossed over or handled improperly by most traders. How  much  to  buy  or  sell  affects  both  diversification  and  money  management. Diversification is an attempt to spread risk across many instruments, and to increase the  opportunity  for  profit  by  increasing  the  opportunities  for  catching  successful trades.  Proper  diversification  requires  making  similar,  if  not  identical  bets  on  many different  instruments.  Money  management  is  really  about  controlling  risk  by  not betting so much that you run out of money before the good trends come. 
How  much  to  buy  or  sell  is  the  single  most  important  aspect  of  trading.  Most beginning traders risk far too much on each trade, and greatly increase their chances of going bust, even if they have an otherwise valid trading style.

Entries – When to buy or sell
The  decision  of  when  to  buy  or  sell  is  often  called  the  entry  decision.  Automated systems generate entry signals which define the exact price and market conditions to enter the market, whether by buying or selling.

Stops – When to get out of a losing position Traders who do not cut their losses will not be successful in the long term. The most important thing about cutting your losses is to predefine the point where you will get out before you enter a position.

Exits – When to get out of a winning position Many “trading systems” that are sold as complete trading systems do not specifically address the exit of winning positions. Yet the question of when to get out of a winning position is crucial to the profitability of the system. Any trading system that does not address the exit of winning positions is not a Complete Trading System.

Tactics – How to buy or sell Once a signal has been generated, tactical considerations regarding the mechanics of execution become important. This is especially true for larger accounts, where the entry and  exit  of  positions  can  result  in  significant  adverse  price  movement,  or  market impact.

Spot Trading

Currency spot trading is the most popular foreign currency instrument around the world, making up 37 percent of the total activity.

The fast-paced spot market is not for the fainthearted, as it features high volatility and quick profits (and losses). A spot deal consists of a bilateral contract whereby a party delivers a specified amount of a given currency against receipt of a specified amount of another currency from a counterparty, based on an agreed exchange rate, within two business days of the deal date. The exception is the Canadian dollar, in which the spot delivery is executed next business day.

The name "spot" does not mean that the currency exchange occurs the same business day the deal is executed. Currency transactions that require same-day delivery are called cash transactions. The two-day spot delivery for currencies was developed long before technological breakthroughs in information processing.

Dollar Would be the Primary Benefactor of Volatility or a Market-Wide Risk Reversal Next Week

The benchmark dollar has plenty of event risk over the coming week; but compared to some of the highlights on other dockets, its listings are far from critical. Even so, the greenback will remain at the center of any momentous changes in the FX market derived from underlying shifts in speculative expectations thanks to its principle role as the world’s most liquid currency and begrudgingly-accepted safe haven status. Taking stock of the pressure that has built up behind the capital markets in general; we find many pairs and assets closed this past Friday’s trading session on the verge of trend-defining reversals. Acting as the benchmark for the majors, EURUSD closed just above a well-worn pivot see at 1.35. If sentiment is at risk, then the threat of reversal on a nine-month bull trend for the yield-heavy AUDUSD and NZDUSD should come as little surprise. Yet, giving greater credence to the dollar’s own intrinsic strength; the safe-haven balanced USDJPY and USDCHF pairs are both standing at the threshold of another phase of its February rally. What decides whether this is a short-lived live FX-based correction or a true speculative reversal, though, is complicity from the other asset classes. The 10-year Treasury note looks ready to rebound from nine-month lows, the S&P 500 is well-passed overbought and even gold is looking dangerously speculative. What we need is a catalyst and conviction.

If we want a genuine and pervasive transformation in the backdrop for speculative appetites, the tipping point will most likely be a deterioration in confidence in Europe’s financial conditions, concern that China’s inflation fight will panic global speculators or that the Bank of England’s austerity experiment will prove an disastrous example to the rest of the world. Compared to these looming threats, the dollar’s qualities are relatively benign and its positive characteristics require outside encouragement. That said, the docket will offer a thorough update on the economy’s progress towards recovery. Retail sales, housing starts, industrial production and capital flows are all critical to economic performance. The CPI data will play a unique role in shaping expectations for the eventual rate hike, and potentially before that, the withdrawal of the economy’s record stimulus.

And, though there is a dense round of predictable event risk ahead of us to threaten a near-term drive in risk appetite trends; we should also keep perspective of those fundamental developments that are further down the road. Though largely overlooked on Friday, the Treasury released a report offering up the proposal to wind down Freddie Mac and Fannie Mae. Essentially inevitable, there are far deeper connotations to this eventual effort than just exit of a stopgap for future disruptions in the housing market. These two GSEs hold a tremendous amount of toxic mortgage-backed debt that the market seems to have believed simply disappeared after the worst of the financial crisis. When market participants start to speculate on the influence of this transfer of assets back to the public space, the effects could be crippling.