I like to imagine I am in tune with the markets. My trading record may not agree with this minor flight of fancy, but nonetheless, it's much more rewarding to have a feeling of control.This morning, waking up much earlier than normal, I thought I'd take a look at the section of the Forex world that I follow... the AUDJPY.Aha, not only did we have a nice rally -- an echo of the DOW futures up by

As if things weren't confusing enough. Now we have various types of aid programs starting to impact the credit markets. No, the TARP program doesn't seem to be rolling just yet, but commercial paper facilities and other programs are now active.What does all this mean?To me, it means this. If the world collapses your money doesn't mean squat anyway. We'll all be living off of mushrooms grown

We're down below 63.00 in the AUDJPY market (as I type -- it may bounce).This appears to be a test of the 5+ year low for this pair... google charts. Are we ready for a bounce and the much awaited eventual upward trend?Obviously, I have no idea. However, you can be sure I'm sitting here watching the price action as I type.Right now, we've bounced a bit and are setting up for a possible "tweezer

Many beginning Forex traders wonder how the Forex brokers earn their money on the common traders, if they are not casinos. Understanding the basic principles of the brokers’ economics will help traders to distinguish real Forex brokers from the «bucket shop» scams and the ethical companies from the unethical. Here is the list of the most common ways for the Forex broker to earn money:

• Currency pair spreads. The largest source of income for the Forex brokers, spread is the difference between the Bid and Ask rates. Broker can execute your orders without a spread or with a minimal spread, earning the money that you lose for the spread.
• Leveraged spreads. Spreads alone would be too small to be a significant earning source for the brokers. So, brokers offer high leverage. Of course it’s a great tool for multiplying your profit (and also losses), but the spreads are also leveraged. With 1:100 leverage, broker earns 100 times more on spreads than it would without the leverage.
• Overnight swap spreads. Brokers pay the overnight swaps to the trader if the difference between the currency’s interest rates is positive in the trader’s position and get paid from the trader’s account if that difference is negative. But those payments are not symmetrical and they are changed so that the Forex broker would always get the advantage. When someone is selling 1 lot of EUR/USD and another trader is buying the same amount of that currency pair, the latter is earning money on overnight swaps, but the first one is losing the amount that is enough to compensate the second one’s earnings and to «feed» the broker.
• Payment processing commission. On-line Forex brokers don’t charge commission per trade (except Islamic accounts) and often advertise that as a feature. But some brokers charge payment processing fees — they are deducted only when you deposit or withdraw money and usually are quite small and fixed in currency units, not percentage points. Of course, such commissions are too small to be a part of the broker’s profit, but they are enough to compensate at least a part of the broker’s expenses.
• Trading against the trader. The most despised and unethical way the Forex broker can make money is to trade against its customers. And that’s the most profitable way too. Avoid the brokers that earn when you lose. If the spreads are too low, the leverage is insignificant, the overnight swaps are fair and there are no commissions (for payment processing and trading) then the broker is certainly trading against you to make money.

Well, with commodity prices spiraling down the toilet, it's a good time to be short of the AUDJPY.Look, put an SMA 20 on your AUDJPY chart. Load up the 1HR or 3HR chart. What direction is the simple moving average going?That's the trend.So, if the trend is your friend, what's the best direction to play?You guessed it in one... down!If you know how to draw a resistance line, or to put something

Things are looking much more even-handed today than I've seen in a while.In fact, I was so impressed by the fact that the AUDJPY was following my charts again that I decided to do some trading today. While my account is very small, allowing me to be a bit risker with my trades, I did manage to scoop in about 3.5% of my account's NAV (Net Asset Value) by catching some nice movements.Why am I

Be warned that for some reason I remain a perennial optimist.It strikes me that a lot of the current analysis is based on credit spreads and other esoteric measurements with an eye towards what current values would have implied during past periods.I'm not saying that this analysis of fundamentals is wrong, but consider this for a moment. Every time something surprising happens we end up looking

Keeping everything simple is a nice strategy in almost all types of activities. Sometimes, simplicity is the only way to become profitable in the Forex trading. Of course, not everyone likes to keep everything simple and not everyone should do that. But simplifying some basic aspects of the Forex trading will help you to avoid unnecessary problems and complications:

1. Simple trading strategy can be as profitable as some really complex systems. By keeping your strategy simple you make it easier to follow and execute it. Adding complexity in the future can be your next level, but trading with a simple strategy is a very good way to start trading on Forex for real.
2. Try to follow a simple money management system — trading with a fixed percentage of your account equity is easy and effective. Martingale system isn’t simple and leads to losses. So, with money management simple is almost always good.
3. Fundamental analysis is a nice tool, but it’s better to avoid reacting on all fundamental news you hear. Keep it simple — select only really important releases or indicators and monitor them when you trade.
4. One of the best ways to simplify your Forex trading is to hold the open positions for a fixed amount of time. This way, your positions are limited not only with the stop-loss and take-profit levels, but also with the time limit. I prefer limiting them to 30, 60, 360 minutes and 1 week periods, depending on the particular strategy.
5. Try not to trade on currency pairs with the base currency different from the one, in which your account is founded. For example, if you trade USD/JPY, while your account is founded in USD, your profit or loss can’t be adequately measured, because it inversely depends on the USD/JPY rate.
6. Look for a Forex broker with the fixed spreads, because trading with the variable spreads can’t be easy. You can’t rely on your strategy, especially if it’s a short-term strategy, if you don’t know the spreads values for sure.
   

Some traders adore simple approaches to the market, while others hate everything that’s easily understood by high-school graduate and prefer complexity. If you think that you are the one from the first group, then this list will probably help you. If you know some other ways to simplify Forex trading, please, leave a comment to this post.

With some major changes happening on a global basis it's just possible that the forex markets will return to rationality.For example, the Yen crosses (the carry trades) have been taking off like a shot today. I know I've been mooing about a possible bottom here and there in the face of mass panic and extreme volatility as indicated by the VIX.Was that it?I hope so, but at the same time there is

Knowledge can make miracles happen, especially when you endeavor to succeed in the Forex market trading. And what is the second best source of knowledge (with the first best being your experience)? Books! Learning to trade is an easy, interesting and organized process, if you study the right books. Here is the list of the trading related books that will help you develop your skills and increase your confidence in the markets:

1. School of Pipsology by BabyPips.com — it is the best Forex trading study manual as of now. And it’s also completely free. It’s written in a very easy language and offers a lot of explanations that are vitally needed by the beginning traders.
2. Reminiscences of a Stock Operator by Edwin Lefevre — this book is based on the biography of the legendary stock trader Jesse Livermore, who is often seen as an icon of the financial trading success. It’s a good half-fiction read that will provide with some interesting thoughts on trading.
3. Emotion Free Trading by Larry Levin — Forex trading is a very stressful activity with a huge part of your success depending on your emotional control. This book will try to teach to control your good and bad emotions and trade based solely on your strategy rules.
4. Trade Your Way to Financial Freedom by Van K. Tharp — the author of this book is a financial genius, whose developments in the money management of the financial trading can be applied in any market and will open your eyes on some aspects of the money management that are usually hidden from the beginning Forex traders.
5. Position-sizing Effects on Trader Performance: An experimental analysis by John Ginyard — it’s a pretty long scientific paper that describes and analyzes the experiments on position-sizing effects. If you lack the hard evidence of the most common money management rules — read this and you’ll have it.

There many other interesting books that are worth reading if you are seriously trading on Forex or any other financial market. But these listed are the marvels of the trading literature, in my opinion. If you don’t have enough time to read them all, try to read at least several pages of them and, probably, you’ll find them to be more important than something else.

Did I mention the VIX was high yesterday?I meant that it seemed to be getting a bit heated.Today the VIX is high.Tomorrow? You tell me.

I noticed something in a news item that I read today that I thought I'd share.While the big news is focused on the coordinated drop in central bank rates, the ECB did something else. They also eliminated their auction system. No, no, they haven't stopped providing liquidity, they are just doing it a different way than the standard auction process.What now?They are making unlimited amounts

So, we didn't have any type of bounce off the AUDJPY recovery support trend line. If you were watching the DOW or the NIKKEI you knew what was happening.At the same time we have a new high water mark in the VIX. Look at that thing. I mean, seriously?The only thing I can really point to that may be encouraging is that these higher VIX levels don't seem to be equating to lower lows in the

In my last post I’ve described the best advantages of the automated Forex trading. But, of course, I understand that the trading using the expert advisors isn’t always something good. Everything has its own pros and cons; so the automated trading has its own disadvantages and I’ll try to describe them in this article:

1. No intuition to help your trading. Computers and programs simply don’t have anything similar to that mystical human feeling. While some traders don’t think that the intuition can be helpful in trading, others rely on it — such traders probably won’t be pleased with the automated trading.
2. Smooth trade execution and uninterrupted run-time of the expert advisors is critical with many trading systems. Unfortunately, it’s something very hard to achieve running EA from your home or work PC. That means that you’d require some dedicated server to run your automated trading.
3. Some types of strategies are simply impossible to implement into the real expert advisors. The chart pattern or wave analysis and fundamental analysis are extremely hard to code in the trading program. At the current level of the AI development these tasks are better performed by he live trader manually.
4. The expert advisors should be made quality or otherwise their trading results will disappoint you. Unfortunately, not all expert advisors handle errors and other unexpected events correctly — sometimes this can lead to the huge losses. Moving your working EA from one broker to another can also be a problem, since broker servers differ and what works perfectly on one broker can stop working on another.
   

As you see, nothing is perfect in this world and, while being the extremely interesting and popular tool, automated Forex trading has its own problems. The wise decision here, in my opinion, would be using both types of trading to your advantage. The systems that can be easily implemented as the expert advisor and are too hard to be traded manually are better to be automated, while the simple systems that involve chart pattern and fundamental analysis are better left for the manual trading.

I'm looking at my AUDJPY trend line.We've seen some good movement, recovering from the recent meltdown in short order... probably due to the coordinated rate changes.While I like the move I think we're getting to the top of our current trading channel. How we handle the reversal, assuming there is soon to be one, will set the tone of the next couple of days.If we bounce back up on or before the

Did you see the carry trades collapse today?Neither did I.In fact, things looked downright orderly. Nay, they looked rational. Is this a trick or have all the truly skittish abandon ship at this point?Be warned, I'm almost always too quick to look past current issues, discounting the ability of the current situation to cause additional convulsions before passing. However, with that said, I'm

Oi, Oi, Oi.Yeah, okay, it's a big honking rate cut.Scuttlebutt has it that there might be some coordinated activity in the works, which this RBA rate cut is a sign of.I'm a bit skeptical of this, but you never know.However, with their rate now down "all the way" to 6.00 percent, a very high employment rate and a huge public works infrastructure project in the pipeline, funded by recent record

Well, it's been an interesting 24 hours on the Forex markets.I'd like to say I was on top of everything and made a boatload, but instead I have to admit this has been a lesson style experience. My stops were hammered mercilessly and then the markets dumped me unceremoniously on the pavement. So to speak.I guess the theme of the day is weakness in Europe. Another theme might be strength in

Trading with the expert advisors is seen by many (especially newbie) traders as the «holy grail» possibility. Such traders expect from each EA they find or buy the fast and risk-free profits. Of course, expert advisors are not the «holy grail» in Forex trading. Automated Forex trading is just another tool that can make the trader’s life a bit easier and sometimes even more profitable. Here is the list of the advantages of trading Forex with expert advisors:

1. With expert advisors you can trade during the time you can’t trade manually. You can set up an expert advisor to trade for you when you are asleep, when you are away or when you are too busy to be involved in the market. Of course, you can hire someone else to trade for you, when you are away, but that’s rather ineffective decision.
2. Strict following the trading system is another advantage of the automated Forex trading. If you have a strategy implemented in the expert advisor it will trade according to that strategy without any deviations. If you find it hard to follow your own system without modifying it constantly, try using an EA that would do all the work.
3. Automated trading excludes any emotions form your market behavior. Computers and programs don’t have any emotions and won’t overtrade if they lose. If you are not very good at holding your emotions down, automated trading will definitely help you.
4. Complicated strategies are not a problem for the expert advisors. For the live trader it’s not an easy task to monitor a dozen of indicators and compare each of them to the entry conditions, whereas expert advisors can do that easily and in no time at all.
5. «Errare humanum est» said the Roman stoic; that means that despite your experience in Forex trading, you’ll make a lot of stupid mistakes through your trading career. Computers are not human, and if programmed without errors, expert advisors won’t make any errors during the trading.
6. There are many things a live trader just can’t do — trading on multiple strategies, timeframes and currency pairs simultaneously is one of them. If you want to use your system on several currency pairs and timeframes — use expert advisor. If you want to test several systems at the same time — also use the expert advisor.
7. The time of reaction, analysis and decision making can be critical in many Forex trading systems. Where manual trader just can’t do it fast enough, automated systems will work fine.
   

Perhaps, I’ve missed some important advantages here, but this list looks quite impressive to me. Of course, there are certain disadvantages in the automated Forex trading, but they will be a subject of my next post.

Now that the US bailout package has been passed the question on everyone's mind is what happens next?Nobody knows. Conversely, everyone knows!Once the question of government action has been answered we know that the currency markets will move either up or down. Basically, the only time they are in near stasis is when speculators and investors need the next piece of information in order to

Okay, so it doesn't look like anything at all is happening as of yet. Personally, I'm scalping the EURUSD on the 1 min chart this evening.It seems that nobody is willing to assume that the house will pass the bailout bill this time around. So, once again, we find ourselves in a state of financial stasis. In fact, given the rise that occurred on the original announcement, it may just be that we