Forex trading: Is it real?

Many people wants to know whether forex trading is real or not and the minimum amount one needs to start and whether there is any possibility of really making profit.

Forex trading is definitely real. Some of us are doing quite well, and living as if we do not work. Secondly, in forex you can start with as little as a dollar, depending on the broker. There are plenty of opportunities to make profit in forex, but there are also many more opportunities to loose money. What separates the chaff from the wheat is training and most importantly, experience

(a) How do I place a stop loss and take profit order?

(b) How do I prevent slippage while placing a buy or sell order?

(c) Must there be a specific time to trade daily or you can fix anytime that suits you?

First, I must say, you need proper training. You may read all you want to online, and learn ever so much online, but there is no substitute for practical demonstrations and learning from the experiences of others, except you are able to get that online also. It will be difficult to explain how to place a stop order because for one thing, it differs from platform to platform and I do not know which platform you are using. But try running a search on www.youtube.com for videos on how to “place a stop order” or something of the sort, download and watch the videos you find relevant.

You can not prevent slippage in forex. It is one of the risks of our business. All you can do is manage it. You can leave commands on the platform (depending on the platform) that mean “if the slippage is more than 2 pips (you decide how many pips), then do not trade”.

That way you manage your risk. But brokers differ in their willingness to honour that maximum slippage setting. Some will honour it, some will not, that is, some will take the trade anyway, regardless of your maximum slippage setting and leave you to bear the brunt of the results, after all, you decided to buy or sell at that volatile time. Some brokers do not even provide the maximum slippage feature.

Nevertheless one sure way to reduce slippage is to use pending orders but again this depends on your strategy. If you buy or sell through market orders, be very wary and conscious of slippage, as it is a constant companion of market orders. Pending orders are not subject to slippage as such but rather, can suffer from another phenomenon called “market gaps”.

This usually happens either at market openings after weekends or at the release of a volatile news report affecting the currency being traded. Brokers will not honour a pending order at a requested price if the market price “gaps” over it. This in reality means that there was no one willing to buy the currency from you or to sell the currency to you at your requested price due to the sudden revaluation of the currency as a result of the market moving event or report.

Brokers will usually fill your pending order at the next available price which may be miles (pips) away from where you intended to get in at, putting your trade in a potentially serious deficit.

For your third question I would say you should choose anytime that suits you, as long as there is an opportunity to make money at that particular time. “Forex is a 24 hour market” does not mean you should trade 24 hours, or sit glued to your screen all day and all night. You will break down sooner or later.

If you do not breakdown, your powers of reasoning, alertness and intuition will weaken considerably and you will wind up loosing money. The best times to trade differ from individual to individual and definitely from trading system to trading system.

FOREX-Dollar up vs euro on ECB view; risk aversion lifts yen

Dollar hit a one-month peak against the euro on Monday as investors braced for the European Central Bank to cut interest rates this week and Standard & Poor's announced a ratings warning for Spain.

The yen was stronger, hitting a three-week high against the dollar and a one-month peak against the euro as fear of a worsening global slump led investors to shun risk in favor of the low-risk and low-yield returns of yen-denominated assets.

Investor risk appetite, already dulled by declines in world equity markets, took another dive after S&P's outlook revision on Spain, which boosted worries about the euro zone outlook.

The news from S&P "is making people a bit nervous in terms of the sovereign risk in Europe," said Ken Landon, global foreign exchange strategist at JPMorgan Chase in New York. "Euro/dollar came off quite sharply after that, while the yen is benefiting as the usual safe-haven currency."

In late New York trading, the euro edged down 0.4 percent at 1.3380 after sliding to a session low of $1.3289 earlier. It also fell 1.6 percent to 119.23 yen , after hitting a low of 118.65 yen.

The dollar fell 1.3 percent to 89.10 yen , just above a three-week low and near December's 13-1/2-year trough just above 87 yen.

Global stock markets fell, with the U.S. benchmark S&P 500 .SPX on Monday capping its worst two-day stretch in a month.

"The yen is influenced by the external environment and the risk trade," said Win Thin, senior currency strategist at Brown Brothers Harriman in New York. "It's mostly safe-haven flows."

The high-yield Australian dollar fell 3.3 percent to $0.6797 and 4.5 percent to 60.64 yen , weighed down by risk aversion and lower commodity prices. Sterling was sharply lower, dropping 2.3 percent against the dollar to $1.4824.

WAITING FOR THE ECB

Markets expect the European Central Bank to cut key interest rates by 50 basis points to 2 percent on Thursday, according to a recent Reuters poll. Interest rate futures on Monday showed investors see a 75 basis point cut, though some were bracing for a full percentage point move. ECBWATCH

Data last week showed factory output collapsing across Europe, raising the prospect for a large rate cut by the ECB.

Dominique Strauss-Kahn, managing director of the International Monetary Fund, also said in a media interview on Monday that Europe was "behind the curve" on taking economic stimulus measures and he expected interest rates to decrease further in Europe. For details, see [ID:nLC240454]

"The fear among many observers is that by delaying the inevitable, the ECB may exacerbate the economic slowdown in the region, creating a disastrous contraction in demand," said Boris Schlossberg, director of currency research at GFT Forex in New York.

Forex Market Update: Dollar Gaps Higher on Renewed Risk Aversion

The dollar gapped higher at the Asian open on renewed risk aversion and global growth concerns in the wake of the U.S. job loss report on Friday. However, follow-through on currencies such as GBP-USD and EUR-USD was limited with trading thin due to the absence of Tokyo for a national holiday. EUR-USD fell from highs of 1.3475 to lows of 1.3373 and pivoted around 1.3400 much of the session with expectations of an ECB rate cut this week weighing on the currency. Cable opened at 1.5132, down from the NY close of 1.5150, and fell to lows of 1.5053 before pivoting around 1.5100 but remaining heavy. Dollar bloc currencies, AUD, NZD & CAD were under particular pressure, with AUD leading the move lower after gapping lower under 0.7000 at the open and continuing to fall to 0.6899. Asian stock markets were broadly lower, except China which was bolstered by government promises to speed up stimulus measures. Oil and gold were soft on global growth concerns.

New Zealand Weakness To Continue Before Short Reversal (Forex Hedging Strategy)

The beginning of October saw the Australian Dollar bullishly rebound from the kiwi’s buying spree. As the RBNZ aggressively slashed interest rates in an effort to pad its three consecutive quarters of negative growth, traders began selling the isle-nation’s currency. RBA officials too drastically cut overnight rates on fears that the slowing global economy would soon hit home. However, Australia has thus far been able to stay afloat as no quarterly period has been subject to negative growth. Furthermore, Bloomberg forecasts for at least the next four three-month periods call for continued, albeit slowing, increases in gross domestic product. Recent comments by New Zealand Prime Minister John Key have shed no positive light on his economy; he as stated that expansionary growth figures won’t be expected until 2010. With the fundamental picture heavily in favor of the Australians the prospects for a resurgence of New Zealand Dollar strengths are minimal.

For the time being, an opportunity to hedge one’s downside exposure is in the works. A buying trend shows multiple-top resistance in the near-future. The entry rate, 1.2260, has been a source of significant selling pressure, spanning from August of this year. As such, we may see a short-term retractive pullback that may lead the pair towards the bottom of the channel shown in the chart below. We will set our target at the intersection of channel support and the 23.6%, 1.2006, fib level of the 10/10-12/08 bull-run. Furthermore, we will set our stop-loss substantially higher than the multiple-top resistance level.

Hedging Strategy

Currency Pair: AUDNZD

Long Term Bias: Bullish
Long Term Position: Holding long
Short Term Bias: Bearish
Short Term Position: Sell above 1.2260, Target: 1.2006, Stop-Loss at 1.2421

Traders looking to protect their existing long AUNZD position or enter long at a favorable price may consider a hedge short AUDNZD above 1.2260 with a target at 1.2006. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should AUDNZD break out to the upside prior to the limit being hit. We will set a tight stop-loss near 1.2421, above multi-top resistance.

Why forex traders always talk about range trading

Written by Brendan Gunn, Sales Manager, GFT. What is range trading? And is this a way to make money on foreign exchange? What strategies do range traders use?

No, range trading doesn’t require you to use a laptop while you are in the saddle....it is a way of taking advantage of markets where a clear trend exists, and prices range up and down within a well-defined channel.

Range trading is a strategy that depends on selling highs and buying lows of a well-defined price channel on the charts.

The strategy typically works best in quiet non-volatile markets where prices meander aimlessly between clear levels of support and resistance. During range trading periods, indicators like Bollinger Bands tend to work well at identifying tops and bottoms and provide many opportunities for traders to book profitable trades.

Range trading however, can be a very dangerous strategy if traders do not employ reasonable stops. Once the range is broken to the upside or the downside, the momentum of the flow tends to create a massive trend move. This move might generate a huge drawdown for a range based trader and wipe out all of the previous profits harvested from selling channel highs and buying channel lows.

Success in range trading therefore depends not only on the ability to identify probable highs and lows, but also on the discipline of cutting one’s losses once the range boundaries are broken.

This is where different types of stop loss trading orders are invaluable.

A stop order closes a contract when the price reaches the specified point, enabling the trader to lock in a predetermined gain once the market reaches the designated point, or limit losses if the market moves against them rapidly and unexpectedly.

You might have a trailing stop linked to a contingent order. For example you might buy at $10 and set a trailing stop $2 below, at $8. If the price moves to your profit target of $15 the trailing stop will move up $2 beneath the market price and be removed once the parent stop order of $15 closes your trade. If the market goes against you before reaching your target and falls from $14 to $12, the trailing stop closes your trade, locking in the profit before the price falls further.

These risk control strategies do not eliminate risk, and a trader needs to be practiced in their use to take full advantage of them. One aspect to remember is to set stops and limits at realistic points, rather than regard them as last-ditch, fall-back positions. Don’t risk more than you are willing to lose.

Disclaimer: This article was written for informational purposes only, and is not intended to be used as advise. Trading is risky with or without the use of this information

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Gold pushes up India's forex reserves

India’s foreign exchange reserves rose by $627 million to touch $255.24 billion in a week ended January 02, 2008, predominantly due to increase in value of gold assets held by the Reserve Bank of India.

They (reserves) rose by Rs 26,626 crore, in rupee terms, to reach a level of Rs 12,47,495 crore, according to RBI weekly statistical data.

The foreign currency assets rose by just $ five million to $ 245.87 billion. The gold reserve moved up by $ 624 million to $ 8.48 billion. The reserve position with International Monetary Fund saw a decline of $ two million to USD 4.28 billion.

RBI’s reference rate for US dollar did not witness much fluctuation in the reporting week (December 29, 2008 -January 02, 2009). It moved between Rs 48.45 to Rs 48.89 to a dollar.

According to RBI data, country’s foreign exchange reserves have shown a declining trend in the second half of the 2008. Apart from current account deficit, outflows under foreign institutional investors (FIIs) were the other major sources contributing to decline in foreign exchange reserves during April-September 2008. The foreign exchange reserves have declined by an amount of $ 23.38 billion during April-September 2008 including the valuation effects as compared with an increase of $ 48.58 billion in April-September 2007.

On a Balance of payments basis BoP basis (excluding valuation effects), the decline in the foreign exchange reserves was $ 2.49 billion during April-September 2008. Valuation loss, reflecting the depreciation of major currencies against the US dollar, accounted for $ 20.88 billion in total reserves during April-September 2008 as against a valuation gain of $ 8.14 billion in the corresponding period of previous year.

The valuation loss explained 89.3 per cent of decline in reserves during April-September 2008.

Apart from current account deficits, outflows under FIIs were the other major sources contributing to decline in foreign exchange reserves during April-September 2008.

Hong Kong forex reserve hits US$182.5 bln

Forex update on china's market/hongkong.

Hong Kong's official foreign exchange (forex) reserve hit US$182.5 billion at the end of December last year, US$16.6 billion more than that of a month earlier, according to statistics released by the Hong Kong Monetary Authority (HKMA) on Wednesday.

At the end of 2008, the total assets of foreign currency reserve, including the unsettled forward contracts, amounted to US$184.8 billion.

Hong Kong ranks the eighth in terms of foreign exchange reserve after the Chinese mainland, Japan, Russia, China's Taiwan, India, Brazil and South Korea.

The current forex reserve is nearly eight times the currency in circulation.

In addition, the HKMA will issue forex funds worth HK$18 billion in January this year.