Trading on the News in the Forex World is Both Defensive and Offensive

Trading in foreign currencies is never an easy occupation.  The market is enormous, as is the stature and financial capacity of most major participants.  For a single retail trader to assimilate every bit of news and financial data and out-guess the “Big Boys” is often an effort in futility.  The exercise becomes more one of managing risks and searching for a strong trend to latch onto for an extended period of time.  Losses are inevitable, but if controlled, then one good trend can offset several losing trades and offer potential profits and the opportunity to utter that favored phrase, “The trend is my friend!”

One learns quickly that major news releases can be a “double-edged sword”.  If you are unaware of a pending major economic release, the subsequent volatility can wreck the most well-intentioned trading strategy.  Fundamental data releases from government agencies around the world influence stock, commodity, and currency markets daily.

However, the forex market tends to react more severely to these releases since the relative value, i.e., exchange rate, of a given currency pair is determined by the global consensus of traders’ evaluation of economic variables.  Typically, the forex market stalls before a major release, then an initial “head fake” ensues while analysts assimilate the data to form an opinion, and once an opinion is formed, the market moves quickly in one direction.  The resulting trend can last for hours, even days in some cases.

Employment data appears to be the largest market mover in this category.  The release of Non-Farm payroll data on the first Friday of every month by the U.S. Department of labor is a much-anticipated event.  The chart below is indicative of the unfolding events:

forex news trading

The market reaction of the “GBP/USD” currency pair is depicted for this previous Friday’s release, the first such release in 2011.  The data is generally released on the first Friday of every month at 8:30 EST, or 13:30 Greenwich Mean Time, GMT, as per the chart above.  As one follows the timeline from the left, the market anticipated good results in the data that would strengthen the Dollar, the “head fake” so to speak.  After recovering during the “assimilation period”, the market reacted in the opposite direction, a 120-pip move, as the employment data was not as strong as the market had believed that it would be.

“Trading on the news” is the moniker given to this short-term trading strategy.  It is often said that it is not for the faint of heart because market movements can be radical with many “head fakes” to deal with before the solid trend takes over.  The shear volume of trading orders also becomes problematic, often inundating the servers and switchboards of forex brokers, such that order execution becomes paramount and the responsibility for executing stop-loss orders is often exempted by your broker agreement.

For those traders that feel worthy of the task, it is highly recommended that you practice several times with your forex trading demo account before venturing into these volatile trading waters.  It is not necessary that you perfectly time the market or guess which direction will be the most likely to occur.  The objective is to grab onto the trend once it has formed which typically takes about forty-five minutes from the release point.

The British Pound pair is generally accredited with the most potential for movement.  In this case, the 120-pip move would have generated a 70 basis point return.  The comparable returns for the EUR, JPY or AUD were in the 55 to 60 basis point range.

Spot Forex Trading

There are several options available for the trader who wants to trade forex instruments. You have options, futures and not least forex spots which are the most popular type of forex instrument traded. They each hold their own unique advantages and negatives. The difference between them may not seem that big for the inexperienced trader, but it’s definitely there and the way your earn profits is also different. In this article we will look at how spot forex trading stands apart from particularly forex futures as these can easily be confused.
Let’s look at futures first. Futures where originally developed as financial instruments that commodity suppliers and producers could use to fix their prices ahead of delivery. A company that uses oil in production could fix their prices at a low point and save some money. A supplier could also fix the price to guarantee his income. A future is a contract obligating the buyer and seller of the underlying asset to buy and sell at an agreed price at a future time. So the deal is made at the point of the sale/buy of the future, but the actual exchange of the asset takes place in the future.

A spot on the other hand is a trade that is carried out when two parties agree to buy and sell. Theoretically a buyer and seller put their orders out on the market and waits for someone to agree to pick it up, but in reality all forex spot trades are filled instantly because the market is so liquid. This is of course an advantage of the forex market, which is 50 times larger than the stock market and 15 times larger than the bond market. To recap, forex futures are contracts that obligate two parties to buy or sell at some agreed time in the future. Forex spots are trades between a buyer and a seller and are carried out instantly.

Before the internet revolutionized forex trading, spots were the domain of big banks and corporations only, which needed quick access to foreign currency to carry out a trade or investments. Today, spot trading is done instantly such as when you go to a money changer and changes one currency into another. The spot market is now huge and growing by the day.

Spot trading holds some other measurable advantages over futures trading. As you may know, all futures are regulated and traded on the Commodity and Futures Exchange which is regulated by the National Futures Association. The NFA takes a fee for carrying out the trades. Spots are not regulated as they are traded on the interbank market, which is non-regulated.

Spots are also available at lower lot sizes than futures, particularly if traded trough an mini or micro account.

In conclusion, spot forex trading holds many advantages over futures. Forex spots can be traded on most forex brokers and platforms.

Forex Confidante Review

Forex Confidante is an exciting new forex trading program developed by a well known accredited forex trader in Thomas Strigano. Unlike many of the systems and programs online that seems to be developed by unknowns in the forex field, Forex Confidante holds some serious credibility as it’s developed by a former Italian Chief of Trading Operations, which is basically the top trading position in a bank.

Forex Confidante is not a forex robot. It’s not signal service or a charting software system. It’s not flashy or hyped up, but rather it’s a serious, professional forex trading system. A full on forex trading plan that will walk you from A to B and all the time making sure, that you are in the drivers seat. If you’re looking for a forex robot that will do all the hard work, then this isn’t for you. However, if you’re looking for a forex trading system that is developed by a pro and can be learned and used in relatively short time, then read on. Thomas Striganos Forex Confidante system is a breath of fresh air in the forex market. I have looked for something like this for a long time now.

Thomas Strigano is the former CTO of a large Italian bank. CTO is as I mentioned the highest trading position, it’s equal to other top management positions in a bank. Thomas was basically the one making the trading strategy and managing all the other traders. This guy has a well documented history of success. Thomas is something of an anomaly in the forex world in that he is easy to get in contact with and actually writes on several sites on the internet. When I was researching him for this review, I came across a negative post about him and his product on a forum. Thomas Strigano acually signed up and took time to explain why the poster was not making money and helped him learn. As the thread on the forum progressed, the negative poster admitted he was wrong and thanked Thomas for helping him out. I think that really shows some class and credibility. You can probably find that trhead yourself with a quick google.

Let’s have a look at what you get:

  • Forex Confidante System
  • Forex Confidante Ebook
  • Forex Confidante Video’s
  • Forex Confidante Support with Thomas Strigano himself

Forex confidante is a complete traning and trading system that will walk you trough everything needed to profit from the system. There’s a book and video included and they are both awesome, but there is admittedly a bit of a learning curve to some of the concepts. That’s because this material was not ghost written by a writer but rather written by Thomas himself, which means there is little fluff and all content. This course is packed full of inside secrets that you won’t find anywhere. It’s not basic stuff like watching moving average indicators, but rather systems and methods derived from years of real life trading experience. It also teaches you money management and a bunch of other things you need to succeed in forex.

What I liked:

  • Forex Confidante System (It’s awesome)
  • The Talks and Emails with Thomas
  • Professional Trading System

What I didn’t like:

  • Somewhat Steep Learning Curve.

Ok, on to my personal experience trading of trading with this system. I have traded this system for more than 3 months now and I really like it. I think it’s a very well though out, disciplined and impressive system plus it delivers in profits. I have personally made over 120 pips in two strategic trades in just one day, which is a personal record. It has also outperformed my other systems over a three month period. I recommend you check out his website.

=> Forex Confidante

LMT Forex Formula

LMT Forex Formula is a new forex trading system that is developed by forex whizkid Dean Saunders. Only 25 years old, Dean has already made a huge impact in the world of forex trading systems. LMT stands for Low Maintenance Trading which is a reference to the goal of the system: To minimize actual trading work while maximizing profits. I recently had the chance to test out Dean Saunders LMT Forex Formula for over two months and I have been very happy with it. Read on for the full review.

This system is very impressive and even more so because it’s developed by a young guy like Dean Saunders. Some people may be put off by taking advice from someone as young as Dean, but those people are the same who will never succeed in forex. Never mind, let’s take a look at what exactly LMT Forex Formula is. LMT is not a forex trading robot. I know some people who are a bit confused by this, because LMT Forex Formula does have some of the same qualities as a Forex EA,

in that the signals tells you exactly what to do and when to do it, but you will keep control of your trades and not have to worry about what your robot will do when you are not watching.

Ok, let’s have a look at what is actually included in the LMT Forex Formula:

  • LMT Forex Formula Manual – 47 page manual explaining his system and showing you exactly how to set it up and apply it. This is the core of your system and it will be your trading ‘bible’.
  • LMT Custom Indicators Software – This is the charting and signal software that will let you know when, what and how to trade.
  • LMT Forex Formula Videos – Videos showing you how the system works. It really helps to have videos in addition to the manual.

Earlier I mentioned that LMT Forex Formula is not a forex robot. That means you have to do the trades yourself. That may sound like time consuming work and it could be, but then this system wouldn’t be low maintenance. LMT Forex Formula only requires you to spend and average of 15 minutes a day. That’s not bad. But how can you make money from only 15 minutes of forex trading? The thing is, most forex robots and systems are basic scalping systems. Scalping is the type of trading where you make many small trades over the course of a day. This is very time consuming and requires constant attention and concentration. LMT Forex Formula uses a different approach. It’s all about making fewer but bigger trades. Trades that rake in more pips in one trade than a days worth of scalping. I hope that clears up some things.

In conclusion, how did LMT Forex Formula perform? Over these two last months of testing, I am looking at close to an astounding 400% annual profit. That’s going to turn my $10,000 initial investment into $40,000. That’s just remarkable. I don’t think these numbers are going to last though, but even so, I consider this program as one of the absolute best forex trading systems ever created.

=> LMT Forex Formula

Forex Ambush 2.0 Review

Forex Ambush is a forex signal service and provider that makes some pretty outrageous claims on their website. What do I mean by outrageous? For one they claim that their signals have a 100% success rate. That is, their signals are always accurate. Anyone with some experience in forex is going to be sceptical of such claims to say the least. Anyway, I was interested by the bold statements, so I guess the marketing worked. Let me say, it does set off some alarm bells when I encounter a site like this, because it’s so huped up, but on the other hand, I also realise that many of these sales pages are written by copywriters and not the creators of the product, so I am not going to judge a website by it’s cover.

Forex Ambush 2.0 claims a success rate of 100%, which means they claim their signals are always accurate and always profitable. That’s not going to happen. Let’s make that clear from the start. I will however be willing to test out, exactly how good their signals are. Forex Ambush 2.0 is a bit different from normal signal services in that they use artificial intelligence to measure the psychological effect on the market as well as the standard technical analysis. Forex Ambush has a good walktrough that helps you set up and get going with using their signals. I shows you everything you need, which platform to use and how to set it up.

Here’s what you get with their membership package:

  • Forex Ambush 2.0 Signals
  • Forex Ambush 2.0 Trading Guide and Walk trough
  • Forex Ambush Support and Newsletters

That’s about par for this type of signal provider. Their trading guide and walktrough offer some good insights for both beginners and more advanced traders.

What I liked:

  • Forex Ambush Signals (Profitable and Frequent)
  • Customer Support
  • Trading Guide

What I didn’t like:

  • Their Marketing!

In conclusion, Forex Ambush 2.0 need to fire their marketing department and their copywriter in particular. Reading the over the top sales letter made my eyes bleed but eventually I saw trough it and decided to give it a fair test. Even though there’s more hype surrounding this product than the “Yes, we can!” Obama campaign, their product is actually good and professional. As I expected, this is simply a case of a an overzealous copywriter.

Ok, their signals are not 100% accurate, but I didn’t expect that. I tracked them over 2 months and found them to be more like 89%-91% accurate, which is still in the absolute top of signal providers. I liked that I could get my signals delivered direct to my cell phone or PDA and that they send more signals than most other providers.

Their average profit rate ended up at something like 187% annually which is very good. I recommend this service for beginners, because it’s very easy to use and has a good walktrough that shows you exactly what to do. You’ll probably make some good money in the process as well.

PS. You can get a solid discount for Forex Ambush 2.0 on this page click => discount here!

Forex Option Trading

When most people think of trading currency they think of trading forex spots or currency pairs traded directly on the market. Not many people trade forex options, but they can actually be a very good method of either hedging your investment or outright speculating in them. An options is what the name implies: An option to buy or sell something at an agreed price sometime in the future. Now, you may think that sounds a lot like ‘futures’? That’s true, but not quite. An option is only that, the OPTION, to buy or sell something, while a future is a contract to do so, you must either buy or sell with a future. So with that out of the way, let’s look at options a little more closely and how you can make money from forex option trading.

Options are usually most discussed when talking about stocks and bonds, mostly stocks. I am sure you have heard of CEO’s and executives being given stock options, but ordinary traders also use stock options either on behalf of their companies or for themselves. Currency options are many times used by companies who do business abroad to hedge, or insure, themselves against currency risk. By having forex options they can offset some of the loss that a currency rate swings would mean. Options are essentially meant for this purpose, as a type of insurance used to deal with swings in the financial markets. Every portfolio of some size has options in it. But how can you use forex options to speculate and should you?

It’s not hard to trade options at all. There’s two types of options in general: Call and Put options or Buy and Sell. Call options are options to buy and Put options are options to sell.

Besides that there’s two sides of the Options market, the writers of options and the buyers of options. Remember that I told you how options where just options? That’s true if you’re a buyer of options. If you’re a writer on the other hand, then you must either buy or sell something if the buyer of the option wants too. This means that writers of options are usually only banks and big corporations.

Back to forex options. Forex option trading means trading long term. You buy an option to either sell or buy a currency in the future. Just like with futures you make money if the currency pair is worth more than what you agreed to (Call option) or less than what you agreed too (Put option). Or you can make money by selling your option before it expires. Option pricing is another much more difficult topic that we won’t go into here though!

Option trading may be for you,if you don’t want to spend every waking hour on the computer and prefer to think and trade longterm or you just want to hedge some other investments. If you’re looking for a more active type of trading, forex spots are probably more for you.

ECN forex brokers

What is an ECN forex broker? You don’t need to exert your imagination greatly to understand that without a good broker even the greatest forex trading strategy in the world is doomed to failure. Unless the software you use is up-to-date, stable and reliable, unless the information passed to you by the broker is timely, and correct, no matter how smart or deep your analysis is, the ultimate outcome is likely to be failure. In addition, regardless of your success or failure in trading, you have to compensate the broker for his services. You will pay him the spread when you make a profit, and also when you suffer losses. Clearly the broker is one of the most important variables in the profitability equation.

Traders who are weary of the broker approach, and who would like to test their talents in a different kind of relationship can try forex ECNs. The ECN (electronic communication network) is a kind of intermediary that is not a market maker. Its role is limited to passing the quotes supplied by liquidity providers to clients and charging a commission for this service. Unlike the broker, an ECN does not inflate the spread to compensate for its services. You are passed the exact same spreads as they are received from banks, and are charged a commission which can be larger or smaller depending on the size of the position opened.

The difference of the ECN forex broker approach should be obvious to most traders. The most striking difference is in the spread. Most traders, for example, complain that the broker artificially inflates the bid-ask spread at time of news releases in order to prevent traders from making profits, or for other reasons. This is never the case with ECNs, because first of all, the ECN software is not programmed to intervene in traders actions, and also because the ECN has nothing to lose from profitable trades of clients. Brokers, as market makers, hedge against client positions in order to net out their exposure to the banks. Brokers are the counter parties that banks deal with. ECNs, however, only convey information between traders and banks, and as such, do not have to counter trade their clients.

The cost of trading in with an ECN is the commission alone. You get bank quotes in their raw form, you can arbitrage them when there are short them imbalances, and all that you need to do is paying the commission, which is a reasonable amount in most cases.

We should add that a seasoned trader will ultimately observe little difference in practice between an ECN or a market maker (the broker). A competent broker does not inflate the spread artificially to make client trades impossible. As such, the commission and the spread are comparable to each other in the best cases. Although some traders habitually prefer ECNs over brokers, and admittedly the ECN forex brokers do possess some strong points, neither approach is a guarantee for profitability. The greatest burden and responsibility is on the shoulders of the trader, as it is always the case.

Forex Mini Account

Forex mini accounts are fully operational forex trading accounts, just with smaller requirements for deposits and trading size. They are very suitable for new traders and beginners, who want to trade with real money, but do not want to risk a lot of money. Normal forex accounts with established brokers usually require significant deposits, $1000,$2000 or more in order to open an account. Naturally, this isn’t necessarily the best choice for beginners or traders with smaller budgets. This is where forex mini accounts come in handy.

A forex mini account only requires you to make a small deposit, usually in the range of $100 to $200. With this deposit, you get a forex account with all the features that you would find in a normal account.

Forex is traded in fixed amounts called ‘lots’. A lot is usually 100,000 units of the traded currency with a normal account. Even with gearing and leverage, this means that you can trade a lot of currency with a small budget. Forex mini accounts have smaller lots, all the way down to 10,000 units. This means that you can trade larger amount of forex for a smaller sum. Why is this beneficial? Consider that the forex market is very volatile. If the forex market moves in the wrong direction for your trade, then with a lot size of 100,000, you could very fast be looking at a significant loss. With a smaller lot size, your overall portfolio won’t be affected as much. This is important because there is a great deal of natural variation in the forex market and to effectively deal with the normal swings you need to have enough money in your account so that one bad trade doesn’t wipe out everything.

If you don’t even have $100 or just don’t want to risk, but still want to trade real time with real money, then you could consider a Forex Micro account. Not all brokers offer these though. A micro account if the smaller version of the mini account. With a micro account, you can begin trading for no more than $25, I have even seen brokers that offered $5! You’re not going to make any money with a micro account, but you will get some experience with the platform and market.

Demo accounts are good and all, but they don’t give you the real experience of actually trading on the market with your own money. Forex trading is a psychological game and there’s a lot of emotion going on. Greed, panic, fear, it’s all something you will have to learn how to deal with, if you want to be a successful forex trader. With a mini or micro account you can learn how to control your emotions and not risk your house, and the first winning trade will feel much better than winning on a demo account. It should be said however, that demo accounts are still good for absolute beginners, just to familiarize yourself with the platform. It’s not good to be looking frantically for a button when there’s a trade to be made. You should know how to trade in theory before depositing any money into a forex account.

Forex Major Pairs

Foreign exchange is the trading of currencies on the forex markets around the world. Most people may be familiar with the other financial markets in the world: The stock market, the bond market maybe even The Commodities Market, but fewer people actually know that these markets are dwarfed by the forex market. Yes, that’s actually the case. The forex market is 50 times bigger than the stock market and 15 times larger than the bonds market, but if the forex market is so large, why haven’t you as an investor been told about it? There are a few reasons for this. First of all, the forex market was not easy to trade on just a decade or two ago. Unlike the other financial markets there is no centralised exchange like the stock exchange. Instead, the forex market is purely an electronic market and exists only when someone makes a trade, but that is all the time. This market is called the Interbank market, because it is the internal market for banks all over the world. This means that if you want to trade forex, you must have access to the interbank market. Brokers are companies who have access to the Interbank market and with the growth of the internet, more and more brokers have moved their business online. Today, there are more than 100 hundred brokers available for online trading.

This has opened up the opportunity for individual traders to make money from trading forex online trough an online platform offered by their broker. A platform gives you access to trade any of the hundreds of currencies around the world. Traders make money by speculating in price changes of currency pairs. A forex pair is simply two currencies that you simoultaneously sell and buy. You always sell and buy currencies in pairs, because currencies are always valued against another currency, which makes sense if you think about it. So as a trader you can make money by both selling and buying currency and you can make money on price rises and price drops. This means you can make money no matter the market circumstances.

As mentioned there are more currencies available for trading than you can get your head around, but that doesn’t mean you should trade all of them. Most traders choose one or two pairs that they focus their attention on, because they will then better be able to know everything about what moves those currencies. Of course you can easily trade more currencies, but you should probably start out by only trading one. There are some pairs that are traded more than others, significantly more actually. These are called the Forex Major Currency Pairs and most forex traders trade these. Those that don’t usually trade what is known as ‘exotic forex pairs’. Let’s have a look at the Forex Major Pairs:

  • US Dollar/Japanese Yen (USD/JPY)
  • Euro/US Dollar (EUR/USD)
  • US Dollar/Swiss franc (USD/CHF)
  • British Pound/US Dollar (GBP/USD)

You can see that the USD is a part of all these pairs, which is because of it’s status as reserve currency. Each major forex pair responds to different events and requires a unique approach and strategy.

Forex Trading Signals

In this article we are going to look at a vital part of forex trading: forex signals. Forex signals are an important part of any strategy or system. They’re the part of the system that spells out excactly what, where and when to trade. To use a sports analogy: If the forex strategy is the gameplan, then the forex signals are the individual plays.

Forex trading signals show in detail how to carry out the system. Where a strategy is a collection of macro strategies, such as either a daytrading, scalping or position trading, signals work on the micro level. They can best be thought of as sets of logical operaters. IF some event happens THEN trade this currency. That is why forex robots and forex expert advisors have even been able to trade. But signals are not just used by robots, but by human traders as well. Today, there is a lot of software that can keep a trader fed with signals. Many companies also offer this service and send signals daily trough email or even sms. If you want to subscribe to one of them, you should use some time researching their track records as most of them will probably use agressive marketing to try to convince you to sing up.

What is the best use for forex trading signals? Some websites will have you believe that forex signals are all that you need to succeed. Other cynical traders will tell you that these signals are worthless. I believe that forex signals are just one of several tools available to the resourcefull trader. You should combine forex signals with good charting software that uses and shows indicators, but not least you should have a sound knowledge of forex trading, so that you can make your own judgement of the suggested trades. I’ve seen a few systems and signals services stressing this part and those are the companies that I would feel most secure with and not the hyped aggressively marketed ones.

Let’s look at one example of what a signal may look like and how you use this information. Let’s assume you have signed up for a provider and they send you the first email. Your signal will consists of different info: It will tell you what currency to trade, for example USD/EUR, then it will tell you when to trade it, within 10 minutes or today at 11.40 am. Then it will tell you how to put your stop loss limits and when to take home profits.

But what do you do if the market decides to not agree with your signal prediction? When you choose a signal provider, be sure to understand what budget, or bankroll if you will, that the signal provider has in mind. Some strategies require larger bank rolls than others, so a stop loss limit recommended by a signal may be to large for you.

As you can tell, forex trading signals offer both positives and negatives. They are not meant to stand alone, but rather to be used in combination with other tools.