Forex is All About Time
Does it matter when I trade?
Traders spend a lot of time and money trying to figure out HOW to trade.They expend an enormous amount of their resources on systems,methodologies, techniques, and strategies that ultimately will give them only half of what they need. The secret the professionals don’t want you to know, however, is WHEN to trade. After all, they are on the winning side of every one of your losing trades.
Even though the Forex is open twenty-four hours a day, there are times when the market for a given currency pair is highly active, other times when it is moderately active, and times when there is no activity at all.
While you can make money whether the market is moving up or down, it’s extremely difficult to make a profit when the market is moving sideways.
And since the market for a particular currency may spend 60% to 75% of its time moving sideways, it is very important to know WHEN the trending activity is most likely to occur. It’s also easy to enter the market at the tail end of a trend and not know, except in hindsight, that the end was so near. After all, the indicators were telling you the trend was still going strong—so if you don’t know that this particular pair makes seven-bar moves, you go ahead and enter on the sixth bar of the trend. Two bars later, your trade is heading south in a hurry. It’s critical to know how many bars a trend is likely to last before there is a retracement or consolidation period, given the day of the week and the hour of the day the trend first began. Exiting too late is another common experience many traders share. At 6 AM, you place a contingent (IF THEN) order with your entry price and your stop loss, and head off to work. At noon, you check your trade and find out that by 11 AM the market had moved 90 pips in your favor. But in the last hour the price dropped 65 pips. The next time you’ll be able to check your trade is after work, so rather than tighten your stop loss to break-even in the hopes of a rally, you exit the trade at market for a 25-pip gain. That’s certainly better than nothing, but if you had known how many pips this currency pair was likely to move given the day of the week and hour of day the trend began, you could have set a target to exit with an 85-pip profit. Thus, if you know for a given currency pair the best days and hours to trade, the likely number of price bars the move will cover, and the number of pips this pair will most probably move, you would have to agree that you would possess some very powerful knowledge.
What does a typical 24-hour Forex trading day look like?Before we get into WHEN to trade, let’s take a closer look at a typical day in Forex time. This information is generally available on the Internet, but has been compiled here for your convenience.
Technically, the Forex operates on a global time scale, twenty-four hours a day, seven days a week, with no start or end time. Given that no one stays awake 24 hours a day and that very little trading takes place on theweekend (from Friday at 13:00 PM US EST to Sunday at 17:00 PM US EST), the Forex trading day naturally breaks itself down into three major trading sessions:
1. the Australasian session (New Zealand, Australia, and Tokyo)
2. the London session, and
3. the New York session.
It’s interesting that these sessions just happen to coincide with the opening and closing of their associated stock markets.The first thing you probably noticed is that from the New Zealand open to the New York close, the entire 24-hour day is covered. What’s more, you can see that the Australasian session has three stock markets open at the same time, with the last hour of the Australian and Tokyo sessions (3:00-4:00 AM US EST) coinciding with the opening hour of the London session.Furthermore, the London and New York markets share the hours between 8:00AM US EST and 13:00 US EST. In other words, from 19:00 US EST to 4:00 US EST and from 8:00 AM US EST to 13:00 PM US EST, two or more markets lap. In fact, the areas highlighted in yellow represent the Forex market’s busiest fourteen hours. This is because when two or more markets share the same hours, there are more traders to drive volume and volatility up.
What you have just seen is the general foundation for WHEN to trade.However, as important as this information is, you should know that each currency pair has its own unique set of “habits” that make up the key to its individual WHEN. And some of those habits run counter to the chart above. Without that specific knowledge, you’re still trading blindfolded.
This is probably a good place to share a story about Robert. He does pretty well in real estate, but wants to get into trading full-time. He’s busy with his current job, and even though he works his own schedule, he doesn’t have a regular time to sit in front of a computer for several hours. In spite of this, he has invested a good deal of cash in all kinds of trading systems. More than once, he has lost most of the money in his account, but he keeps coming back.At some point, he came across the information outlined in the sessions chart above. In his haste to make a success of himself as a trader, Robert took a one-size-fits-all approach as he applied this newfound knowledge to his trades. He followed a simple rule: if his system gave him a solid signal, as long as two or more markets were open at the same time, he would enter the trade. And guess what? A remarkable thing happened! He started hitting a few winning trades now and then, and he’s now able to stay at right around break-even. While this may be a great improvement, he is still far from his goal. He’s trading with a shotgun, armed with only a part of the knowledge he needs, and what he doesn’t know about WHEN is robbing him of his profits. If I’m trading the 4-hour bars, when are trends most likely to occur within the Forex trading day?
What you are about to read next will make a great difference in your trading. This is some of the information that the pros hope you never discover. for more detail and a free ebook on how to trade the forex send an email to info@siscocommunications.com
Also you can see the video related to general forex
www.dbfx.com Learn how trade with advanced order types using dbFX, Deutsche Bank’s online margin forex trading platform for individuals and small institutions. MARKETING MATERIAL. This video has been approved and communicated by Deutsche Bank AG London in accordance with appropriate local legislation and regulation. Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin – Federal Financial Supervising Authority) and regulated by the Financial Services Authority …
Here some answer the question about general forex
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October 25th, 2009 at 10:23 pm
The word FOREX is derived from Foreign Exchange and is the largest financial market in the world. Unlike many markets the FX market is open 24 hours per day and has an estimated $1.2 Trillion in turnover every day. This tremendous turnover is more than the combined turnover of all the wordls' stock markets on any given day. This tends to lead to a very liquid market and thus a desirable market to trade.
Unlike many other securities (any financial instrument that can be traded) the FX market does not have a fixed exchange. It is primarily traded through banks, brokers, dealers, financial institutions and private individuals. Trades are executed through phone and increasingly through the Internet. It is only in the last few years that the smaller investor has been able to gain access to this market. Previously the large amounts of deposits required precluded the smaller investors. With the advent of the Internet and growing competition it is now easily in the reach of most investors.
You will often hear the term INTERBANK discussed in FX terminology. This originally, as the name implies was simply banks and large institutions exchanging information about the current rate at which their clients or themselves were prepared to buy or sell a currency. INTER meaning between and Bank meaning deposit taking institutions normally made up of banks, large institution, brokers or even the government. The market has moved on to such a degree now that the term interbank now means anybody who is prepared to buy or sell a currency. It could be two individuals or your local travel agent offering to exchange Euros for US Dollars. You will however find that most of the brokers and banks use centralized feeds to insure reliability of quote. The quotes for Bid (buy) and Offer (sell) will all be from reliable sources. These quotes are normally made up of the top 300 or so large institutions. This insures that if they place an order on your behalf that the institutions they have placed the order with is capable of fulfilling the order.
Now although we have spoken about orders being fulfilled, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words the person or institution that bought or sold the currency has no intention of actually taking delivery of the currency. Instead they were solely speculating on the movement of that particular currency.
Source: Bank For International Settlements http://www.bis.org Extract From The Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity
Currency19891992199519982001
US Dollar9082.083.387.390.4
Euro….37.6
Japanese Yen2723.424.120.222.7
Pound Sterling1513.69.411.013.2
Swiss Franc108.47.37.16.1
As you can see from the above table over 90% of all currencies are traded against the US Dollar. The four next most traded currencies are the Euro (EUR), Japanese Yen (JPY), Pound Sterling (GBP) and Swiss Franc(CHF). As currencies are traded in pairs and exchanged one for the other when traded, the rate at which they are exchanged is called the exchange rate. These four currencies traded against the US Dollar make up the majority of the market and are called major currencies or the majors.
Market Mechanics
So now we know that the FX market is the largest in the world and that your broker or institution that you are trading with is collecting quotes from a centralized feed or individual quotes comprising of interbank rates. So how are these quotes made up. Well, as we previously mentioned currencies are traded in pairs and are each assigned a symbol. For the Japanese Yen it is JPY, for the Pounds Sterling it is GBP, for Euro it is EUR and for the Swiss Frank it is CHF. So, EUR/USD would be Euro-Dollar pair. GBP/USD would be pounds Sterling-Dollar pair and USD/CHF would be Dollar-Swiss Franc pair and so on. You will always see the USD quoted first with few exceptions such as Pounds Sterling, EuroDollar, Australia Dollar and New Zealand Dollar. The first currency quoted is called the base currency. Have a look below for some example.
Currency Symbol Currency Pair
EUR/USDEuro / US Dollar
GBP/USDPounds Sterling/ US Dollar
USD/JPYUS Dollar / Japanese Yen
USD/CHFUS Dollar / Swiss Franc
USD/CADUS Dollar / Canadian Dollar
AUD/USDAustralian Dollar / US Dollar
NZD/USDNew Zealand Dollar / US Dollar
When you see FX quotes you will actually see two numbers. The first number is called the bid and the second number is called the offer (sometimes called the ASK). If we use the EUR/USD as an example you might see 0.9950/0.9955 the first number 0.9950 is the bid price and is the price traders are prepared to buy Euros against the USD Dollar. The second number 0.9955 is the offer price and is the price traders are prepared to sell the Euro against the US Dollar. These quotes are sometimes abbreviated to the last two digits of the currency such as 50/55. Each broker has its own convention and some will quote the full number and others will show only the last two. You will also notice that there is a difference between the bid and the offer price and that is called the spread. For the four major currencies the spread is normally 5 give or take a pip (will explain pips later)
To carry on from the symbol conventions and using our previous EUR quote of 0.9950 bid, that means that 1 Euro = 0.9950 US Dollars. In another example if we used the USD/CAD 1.4500 that would mean that 1 US Dollar = 1.4500 Canadian Dollars.
The most common increment of currencies is the PIP. If the EUR/USD moves from 0.9550 to 0.9551 that is one Pip. A pip is the last decimal place of a quotation. The Pip or POINT as it is sometimes referred to depending on context is how we will measure our profit or loss.
As each currency has its own value it is necessary to calculate the value of a pip for that particular currency. We also want a constant so we will assume that we want to convert everything to US Dollars. In currencies where the US Dollar is quoted first the calculation would be as follows.
Example JPY rate of 116.73 (notice the JPY only goes to two decimal places, most of the other currencies have four decimal places)
In the case of the JPY 1 pip would be .01 therefore
USD/JPY: (.01 divided by exchange rate = pip value) so .01/116.73=0.0000856 it looks like a big number but later we will discuss lot (contract) size.
USD/CHF: (.0001 divided by exchange rate = pip value) so .0001/1.4840 = 0.0000673
USD/CAD: (.0001 divided by exchange rate = pip value) so .0001/1.5223 = 0.0001522
In the case where the US Dollar is not quoted first and we want to get to the US Dollar value we have to add one more step.
EUR/USD: (0.0001 divided by exchange rate = pip value) so .0001/0.9887 = EUR 0.0001011 but we want to get back to US Dollars so we add another little calculation which is EUR X Exchange rate so 0.0001011 X 0.9887 = 0.0000999 when rounded up it would be 0.0001.
GBP/USD: (0.0001 divided by exchange rate = pip value) so 0.0001/1.5506 = GBP 0.0000644 but we want to get back to US Dollars so we add another little calculation which is GBP X Exchange rate so 0.0000644 X 1.5506 = 0.0000998 when rounded up it would be 0.0001.
By this time you might be rolling your eyes back and thinking do I really need to work all this out and the answer is no. Nearly all the brokers you will deal with will work all this out for you. They may have slightly different conventions but it is all done automatically. It is good however for you to know how they work it out. In the next section we will be discussing how these seemingly insignificant amounts can add up.
More On Market Mechanics
Spot Forex is traditionally traded in lots also referred to as contracts. The standard size for a lot is $100,000. In the last few years a mini lot size has been introduced of $10,000 and this again may change in the years to come. As we mentioned on the previous page currencies are measured in pips, which is the smallest increment of that currency. To take advantage of these tiny increments it is desirable to trade large amounts of a particular currency in order to see any significant profit or loss. We shall cover leverage later but for the time being let's assume we will be using $100,000 lot size. We will now recalculate some examples to see how it effects the pip value.
USD/JPY at an exchange rate of 116.73
(.01/116.73) X $100,000 = $8.56 per pip
USD/CHF at an exchange rate of 1.4840
(0.0001/1.4840) X $100,000 = $6.73 per pip
In cases where the US Dollar is not quoted first the formula is slightly different.
EUR/USD at an exchange rate of 0.9887
(0.0001/ 0.9887) X EUR 100,000 = EUR 10.11 to get back to US Dollars we add a further step
EUR 10.11 X Exchange rate which looks like EUR 10.11 X 0.9887 = $9.9957 rounded up will be $10 per pip.
GBP/USD at an exchange rate of 1.5506
(0.0001/1.5506) X GBP 100,000 = GBP 6.44 to get back to US Dollars we add a further step
GBP 6.44 X Exchange rate which looks like GBP 6.44 X 1.5506 = $9.9858864 rounded up will be $10 per pip.
As we said earlier your broker may have a different convention for calculating pip value relative to lot size but however they do it they will be able to tell you what the pip value for the currency you are trading is at that particular time. Remember that as the market moves so will the pip value depending on what currency you trade.
So now we know how to calculate pip value lets have a look at how you work out your profit or loss. Let's assume you want to buy US Dollars and Sell Japanese Yen. The rate you are quoted is 116.70/116.75 because you are buying the US you will be working on the 116.75, the rate at which traders are prepared to sell. So you buy 1 lot of $100,000 at 116.75. A few hours later the price moves to 116.95 and you decide to close your trade. You ask for a new quote and are quoted 116.95/117.00 as you are now closing your trade and you initially bought to enter the trade you now sell
October 25th, 2009 at 10:29 pm
Xelam has given a good answer. You can always go online and check out forex articles.
The risk is making wrong entry and exit points resulting in loss. As such, if you start forex like a lot of new comers to forex, without managing your risk, you can get burnt.
I believe managing the risk is most important. Don't take risks that you can't afford to take.
However, nowadays for new comers there are many new software systems that make it easy for those with no experience to trade and manage their trading.
Do you mean broker when you say investing company? So far, I've only used Easy Forex.
October 26th, 2009 at 6:26 am
I would chech out http://www.elance.com or the MetaTrader forum at http://www.forexfactory.com
Good luck
October 26th, 2009 at 1:50 pm
Currency trading is risky business, but you can make money with it. You just need to trade smart.
Before you start trading, you should learn as much about forex as you can to prepare adequately. Many websites will advise you to trade with leverage to increase your profit. Leverage is ratio between lended capital and invested capital. For example if brokers offers you leverage of 100:1, it means that if you invest $100 you will be able to trade with $10.000. While leverage can bring you higher profits, you can also lose all your invested money very quickly.
Most brokers have automated systems that can issue a stop order to some trades to protect their interests, so you can never lose more than what you invested, but it is also possible that some brokers don't have these systems and in that case you can be responsible for losses that outweight your investment. That is why you should always read brokers margin agreement.
My advise is that you ALWAYS trade with leverage 1:1 and NEVER trade beyond 10:1, no matter how good you become at trades. People who make money with forex never trade with more leverage than 10:1.
Also as a beginner, you can use some trading platform like Metatrader 4 that offers demo account with virtual money. It allows you to try out forex trading without any risk and that way you can see whether you can make money on forex or not.
Just remember greed is your enemy No.1. Also don't expect high profits with forex. People who make money on forex are doing it slowly. If you expect a return of 200% within a week, or month, than forget it and try something else.
October 26th, 2009 at 3:45 pm
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Forex Avenger will teach you how to preserve your capital. It will show you how not to lose money.
Forex Avenger will give you the ability to follow a proven plan. It will also give you the ability to be focused and disciplined.
October 27th, 2009 at 12:24 pm
October 27th, 2009 at 5:12 pm
If you had an EA that was widely distributed and millions of traders use them 2 things would happen:
1 – The EA himself would become a profitable EA for some time, not because this EA has some value itself, but because lots of people were using it, and were all buying and selling the same currencies cornering the market (or almost manipulating the market).
2 – If this EA gets too widely distributed it will certainly stop working. First of all the market is now different with all of the buys and sells at the same time made by the EA. So, since the market is radically different, the EA won't be able to spot the same quality of trades that is used to. Besides this most of the people are usually wrong and lose money, so if you have millions of traders following an EA, you can be sure it won't work anymore. The EA will probably lose all the money it made on the previous years.
October 29th, 2009 at 3:10 am
I have three methods I use to "go back in time" to test a strategy:
(I use Metatrader 4 – Which is free)
1) Manual Backtest with signals based on closed candles – This is very rudimentary but works great for those systems that have entry signals based off closed candles. I simply scroll my chart back to the date where I want to start, place the first candle in the set on the far right of my screen so that it is the only candle I can see, and slowly scroll one candle at a time forward as if it were live.
2) Manual Backtest with signals not based off closed candles – When I have a system I want to test that takes signals NOT based on closed candles I use Metatrader's 'strategy tester'. What I do, is I open the strategy tester, place whatever EA is available, the currency pair, and date range that I want to test. I then check the 'visual mode' box. As soon as you click 'start' a new chart will open and candles will begin to form. The chart runs just as if it were trading live. You can speed up, slow down, or pause the chart. This is a very good way to practice as if you were trading live.
3) Finally, You can test your strategies by programming them into auto traders (EAs) and using the 'strategy tester' on Metatrader to test their effectiveness.