It seems that everyone wants to bombard you with his or her favorite Forex trading system these days. There is obviously some need for a systematic method of evaluating these various systems. The alternative would be rather chaotic and expensive.

There are ways to technically evaluate a Forex trading system, but these often go beyond the skills of many beginning traders. How does someone with limited technical experience go about evaluating the claims and/or effectiveness of the various systems that are presented?

While not entirely conclusive, I believe that a useful evaluation of a trading system can be done on a non-technical basis. And in fact, it is the first evaluation that I do, before I look more closely at the technical aspects of the system. After all, I don’t want to waste my time if there are obvious problems that show up in this initial evaluation.

The first thing I look at is the presentation of the trading system. If it is presented through a web site, does the site have a professional appearance, or does it look like an amateur who couldn’t be bothered to pay attention to details threw it together? I also pay attention to the grammar and spelling on the website as well as any other advertising materials.

Now that may seem petty and unfair. But if the grammar is poor, and there are misspelled words, it is another indication that there was not a lot of attention paid to detail. That fact could indicate problems with the actual system being presented.

Next, I evaluate the credibility of the claims that are made concerning the system. One of the ways I do that is by looking for any disclaimer or admission of fallibility on the part of the system designer. It is not only the presence of a disclaimer that is important. The quality of the disclaimer is important as well.

I saw one web site that claimed I could make 20% or more per day, and they all but guaranteed that fact. There was no sign of a disclaimer. There obviously was a credibility problem, and I never gave their offer a second look. Evaluating credibility is definitely an important step in the overall evaluation process.

After all that, I look for something that indicates the basic premise that the system is founded on. I don’t expect a developer or vendor to give away their whole secret at this point. But if a system developer or vendor is willing to reveal their basic premise in even a limited fashion, that is a good sign, in my opinion. And then I ask myself if their premise makes logical sense. If it is something that makes logical sense to me, then I am willing to look even closer.

I once saw a trading system that was based on the premise that the markets move up and down along with the cycles of the moon. Now that is an example of a system that makes no logical sense to me. I do not mean to offend you, if you believe that the moon has anything to do with the movements of financial markets. But I would not be comfortable trading a system like that, because the underlying premise is not logical to me.

Those are some of the ways that I evaluate a Forex trading system on a non-technical basis. While this method of evaluation is not 100% conclusive, I find that I generally do not go wrong if I follow my gut instincts with those questions in mind.

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Jerry Brunet is a Forex trader, and software developer. He is the developer of a software program called The Forex-Backtester, which can be found at http://www.forex-backtester.com

Did you find this article helpful? Subscribe to Jerry Brunet’s free “Trade While You Sleep” Newsletter at http://www.forex-toolbox.com

By Nicky Burridge, PA

The losses faced by taxpayers on the part-nationalised banks have widened to £26 billion, it was reported today.

The figure is considerably higher than the £18 billion hit the National Audit Office calculated the taxpayer was nursing on Royal Bank of Scotland and Lloyds Banking Group shares on 27 November, according to the Guardian.

The increase has been driven by the dire performance of the banks’ shares during 2009, with RBS the worst performing company in the FTSE 100, while Lloyds Banking Group was the sixth worst performer.

RBS, in which the Government now holds a stake of around 84 per cent, accounts for the majority of the loss after the shares lost 40 per cent of their value during the year.

The group’s shares ended 2009 at just 29.2p, well below the 50p level needed for the Government to break even.

Shares in Lloyds did not do much better, closing the year at 50.69p, well down on the 74p which the National Audit Office believes was the average “buy in” price paid by the Government for its 43 per cent holding.

Overall, the taxpayer is currently nursing a £20 billion loss on the RBS shares and a £6 billion one on its holding in Lloyds Banking Group.

But the situation could be worse, with RBS shares sinking to a low of just 10p at one point in 2009, while Lloyds has also endured a volatile year.

However, there was also a brief period during the autumn when the taxpayer had made a nominal profit, after RBS shares rose to 58p and Lloyds’ touched 111.3p.

The National Audit Office has calculated that every 10p rise in RBS shares translates into a £9 billion gain for the taxpayer, while a 10p move in Lloyds ones increases the value of the taxpayers’ stake by £3 billion, the Guardian said.

The National Audit Office has previously said the Government was right to bail out the banks, because it was difficult to imagine the consequences for the economy and society if a major institution had collapsed.

But it added it remained to be seen how much the bailout would cost the taxpayer.

A Treasury spokesman said: “The Government will sell its shares in the banks at a time that ensures the best possible return for taxpayers.

“We estimate that any eventual losses to the taxpayer from overall support for the banking system will be less than £10 billion.”
source

I’m going to take the time to share with you some need to know forex information that can really help improve your trading skills and your profits. This is a great market with a lot of potential to profit, but the problem is there is so many little things you have to learn that people end up losing money. By tackling these little issues, you can really start to increase your profits. I’m going to share a few of the little things that I’ve faced and tell you how you can solve it.

One of my biggest problems were the simulated results in the demo platforms. I’d try out a strategy and it would work out perfectly. Than I’d take it to the real market and it failed miserably. It took me a while to really get it, but I was using the demo wrong. You don’t use it to test out the next get rich strategies. They always work in demos. You have to use demo as a tool for developing mentally. You use it to expand on your routine tasks of making trades. It will also help you develop an instinct for trades.

If you’ve been in this business for any period of time, you would have noticed that the industry standard for viewing currency graphs is in the candlestick format. This is about the most clean looking and contains the most information. The problem is that most people memorize these specific scenarios for understanding them and never really “get it”.

The best thing you can do is Learn how to read candlesticks. It’s much easier to understand when you can look at any graph and understand where it is expected to go in the future.

Check out Forex Candlesticks Made Easy.

There are many types of brokerage services available. Even the average investor will use a broker to handle his stock market transactions. Some brokers will even give advice about which stocks to buy and sell based on their market trend research.

Obviously these tips are not free. In fact, full service brokers will charge the highest commission rate in the industry. Your choice of broker should depend upon your knowledge of the stock market and how regularly you trade.

Going to “discount brokers” will help you save on commission fees while still using a brokerage. The commission rates are so low because these brokers do not offer advice or analysis. Using a discount broker is perfect for investors that like to make their own trading decisions.

The cheapest brokerages will be online companies. Some of these operate exclusively online, so it helps them offer you lower rates. Some full-service and discount brokers even offer discounts for placing orders online. The process is the same, regardless of which broker you choose. The first step is opening an account. You need to be familiar with all the fine print and understand all the fees involved.

Typically, you are required to maintain a certain account balance, which varies from broker to broker. Some brokers charge when your account balance falls below the minimum. Others charge an annual maintenance fee regardless of the balance.

There are two types of brokerage accounts, and the one you choose depends upon your goals. “Cash accounts” offer no credit. So when you purchase stock, you are paying the full amount of the stock price. On the other hand, the “margin account” allows you to buy stock “on margin.

Margin fluctuates between brokers, but it always has to be protected by the value of the client’s portfolio. Unfortunately, if the portfolio falls between a certain amount, the investor would have to add more funds or sell some stock. These margin accounts are desirable because they allow people to buy more stock with less cash. This creates great gains but unfortunately greater losses, as well. Obviously, these margin accounts can be extremely risky, so they are not recommended for inexperienced traders.

The broker that you choose depends on your needs as an investor. Specifically, it depends on if the investor wants to receive advice about stock to purchase and whether or not the investor is comfortable making trades on the Internet. If the investor is nervous about trading, going with a full-service broker would make it much easier. Otherwise, if you are technology savvy and have the knowledge and confidence in your stock trading, a discount broker will surely save you money.

Make sure to compare a few competitors after you choose. There can even be significant cost differences between the same type of broker. You also need to make some final decisions on your account. After you choose a brokerage type, it is important to shop competitors of a few brokerage firms. But first you need to gather some information to take them. You need to estimate how often you will be trading and how much cash you will deposit into your account. You also need to decide between a cash account and a margin account. Deciding on all of this information early will allow you to accurately compare competitor’s pricing.

Learn successful stock and Options Trading with our exclusive tips, tools, and techniques. Start Trading Stocks profitably with our no cost stock trading report for traders of all skill levels. Get your free copy at http://www.StockTradingReview.com today.

Here is an automatic currency trading system, that’s been used by some of the world’s best traders and its totally free for you to use. Take a look at how it can lead you to currency trading success. Everything you need to know about it is enclosed…

The History

This currency system dates back to the late seventies, when trading legend, Richard Donchian noticed a reliable 4 week cycle in commodity markets and while designed to trade commodities, it works on any trending markets and as we all know – currencies offer great trends.

The System

You won’t find a simpler system than this. Its based on one rule only and you don’t even need a computer to do the calculation, you can do it on paper – here it is:

Buy a new 4 week high in a currency and reverse the position to a short, on a 4 week low. Keep an open position in the market at all times and keep reversing from a high to a low and vice versa, on the next 4 week high or low – that’s the rule.

Its simple – but it works and will continue to work for the following reasons:

Why it Works

It works because it’s based on sound market logic that never changes which is:

Currencies will trend for long periods and they will invariably start new trends and continue them, from breakouts to new market highs or lows.

All the best currency trading systems are simple.

There is no correlation between complexity and success. Despite the fact that it makes money (test the rule and you will see how much), most traders simply won’t or can’t follow it.

Why Most Traders can’t follow it

Most traders like to believe all the over the top copy from the junk robot vendors, that have never made any money – but claim to do so. They base their claim upon back tests and simulations knowing the closing prices, which obviously means nothing, in terms of what a user will make.

They like the trendy names and the idea of profits with no drawdown (dream on!) and dismiss this one as to crude and to simple – despite the fact it makes cash and that’s what a system should be judged on.

Others simply can’t stick with it because, it’s so long term and is not to bothered about prediction (traders love to try and hit pinpoint market tops and bottoms even though it’s impossible) and simply cannot execute the signal which is totally objective.

Big Long Term Profit Potential in 15 Minutes a Day

If you are not worried about a fancy name, a glossy pack and promises which are based on hype, this automated currency trading system can give you the potential to, seek long term profits in around 15 minutes a day.

Take a closer look at the system, its simple to understand, makes money, has been used by savvy traders for a quarter of a century, will never go out of date and best of all – its free! Take a look at what it can do for your currency trading strategy and you will be pleased you did.

FREE ESSENTIAL FOREX TRADING PDF’s!

For 2 essential free trading Pdf’s and an essential FREE Currency Trading System and an exclusive Currency trading Course visit our website.

Why Canada?

The United States and Canada share the longest common border between any two nations in the world – a border that spans more than 5,000 miles with 140 border crossings, and offers access to most of Canada’s 33.5 million inhabitants, who live within 160 miles of the border. Our combined trade in goods, services and foreign direct investment adds up to a trillion dollar economic partnership.

This geographical proximity coupled with common free market values, language, business practices, and a similar standard of living – where U.S. goods and services account for approximately 60 percent of purchases – make Canada our most important export market in the world, and an ideal market for U.S. companies wanting to make their first export sale. And thanks to the North American Free Trade Agreement (NAFTA), there are no tariffs on industrial and most agricultural products imported from the United States.

Map of Canada
Map of Canada

Canada’s Economic Outlook

Canada had strong economic growth, historically low unemployment, and financial stability through 2007. However, the recent drop in global trade and production adversely affected the country due to its strong international trade linkages. Canada’s exports have fallen, domestic demand has shrunk, and unemployment has risen. However, the economic strain felt in other countries is markedly less serious in Canada.

Canada’s real estate markets has fared much better that in other major countries, and the financial sector remains stable with solid credit growth. The fiscal stimulus incorporated in the 2009 federal budget will ameliorate the downturn in tandem with the Bank of Canada’s aggressive easing of monetary policy.

Canada continues to be the most receptive market in the world for U.S. goods and services, as companies and consumers are always interested in high quality, competitive products that will improve market competitiveness and quality of life. Now is the time for U.S. small and medium-sized firms to enter the Canadian market with the help of the U.S. Commercial Service in Canada in order to position themselves for the economic recovery ahead.

Best Prospects in Canada

U.S.-Canada bilateral trade presents opportunities in a wide range of industries for U.S. exporters, including in these best prospect sectors:

Medical Devices

Safety and Security Equipment

Agricultural Machinery and Equipment

Aerospace and Defense

Consumer Electronics

Travel and Tourism

Automotive Aftermarket Parts & Accessories/Service Equipment

Computer Hardware

Telecommunications Equipment

Computer Software

Oil and Gas Field Machinery

Electrical Power Systems

There are also many major projects in Canada that present new export opportunities for U.S. firms. Details on projects, such as the ones listed below, are available in our Market Research Library.

Alberta oil sands development

Atlantic Canada renewable energy projects

Ontario energy sector and Canada power projects

British Columbia construction and port development projects

Security projects for maritime and ports

Ontario highway infrastructure projects

Canada’s strong defense budget

Image of Toronto Skyline
Toronto Skyline

Doing Business in Canada

Canada is consistently rated as one of the best places in the world for business. However, doing business in Canada is not the same as selling in the United States. Canada has its own customs regime, bilingual labeling and packaging requirements, as well as federal and provincial sales taxes. Canada’s trade rules and regulations are transparent and relatively easy to comply with given the support and guidance that is readily available from the U.S. Commercial Service, as well as from many international business professionals and service providers.

The North American Free Trade Agreement (NAFTA) also makes trade easier and more lucrative for U.S. firms. Since NAFTA came into force in 1994, the United States and Canada have progressively eliminated tariff and nontariff barriers to trade in goods, improved access for services trade, established rules on investment, strengthened protection of intellectual property rights, and created an effective dispute settlement mechanism. In January 2008, Canada eliminated tariffs on all remaining industrial and most agricultural products imported from the United States. Today, over 95 percent of all trade passes across the border without incident or controversial trade restrictions, as a result of increased and continuing U.S. and Canadian harmonization of product standards.

Another tip for U.S. companies is to consider registering as a non-resident importer in order to replicate domestic sales transactions to the extent possible, and expand export sales in Canada.

Special Events

The U.S.-Canada Cross Border Initiative helps prospective U.S. exporters identify opportunities and address challenges for small and medium-sized firms. As part of this initiative, the Canada First Webinar Series will feature 10 programs on the nuts and bolts of doing business in Canada, beginning in the Fall of 2009. Topics include market opportunities in the different Canadian regions, NAFTA documentation and how companies can take advantage of the Non-Resident Importer Program. For more information, visit our website or contact CS trade specialists Eric Hsu or Tracey Ford.

RepCAN 2009 is our flag ship trade promotion event that provides U.S. small-to-medium sized, export-ready companies with an efficient, cost-effective opportunity to enter the Canadian market by finding prospective agents, distributors, end-users and joint venture partners. U.S. companies can participate in one or all three of the multi-sector matchmaker/exhibit stops – Toronto, Ontario on September 29; Montreal, Quebec on October 1; and Vancouver, British Columbia on October 6. Please visit our site for more information and to register by July 31.

Image of President Obama with Royal Canadian Mounted Police – White House Photo
President Obama is welcomed to Canada
by Royal Canadian Mounted Police

One Company’s Success in Canada

Erda Leather is a Maine manufacturer of fabric and leather handbags. Recently, owner Patti Dowse decided to expand her business into the Canadian market and contacted CS Portland for assistance. Our CS Portland trade specialist worked with his colleagues in Vancouver and Calgary, Canada to arrange a matchmaking service. CS Canada conducted a search for qualified sales representatives and scheduled appointments for Ms. Dowse with several potential partners in British Columbia. One of the appointments was with Winning Edge Sales (W.E.S.), a company that supplies a large number of gift stores, resorts, ferry terminals and galleries throughout Western Canada.

As a direct result of Commercial Service support, Erda Leather signed a sales representative agreement with W.E.S. for Western Canada and wrote that: “We have tried before to open new marketing territories, and expect it to be a fairly lengthy process. By opening a few accounts on our own in the territory, to help establish some credibility, we knew we were ready to approach a representative. But, it would have taken us days or weeks to find the appropriate one. With [CS Canada’s] help, we did it in two days! We look forward to great success in our new territory!”

Canada at a Glance

Population: 33.5 million

Area: 3.8 million square miles

Capital: Ottawa, Ontario

Other major cities: Toronto, Ontario (5.1 million); Montreal, Quebec (3.6 million); Vancouver,

British Columbia (2.1 million); Calgary, Alberta (1.1 million); Edmonton, Alberta (1.0 million); Quebec City, Quebec; Winnipeg, Manitoba; and Hamilton, Ontario

Government Type: Federation, Parliamentary Democracy and Constitutional Monarchy

Country Subdivisions: 10 provinces, 3 territories

GDP: $1.1 trillion in 2008

Real GDP growth rate: 0.7% in 2008

Per capita GDP: $38,435 in 2007

U.S.-Canada Two-Way Merchandise Trade: $597 billion in 2008

U.S. exports to Canada: approximately 20 percent of total U.S. exports

U.S. Share of Canadian Import Market: nearly 70 percent

Natural Resources: petroleum and natural gas, hydroelectric power, metals and minerals, fish, forests, wildlife, abundant fresh water

Primary Industries: motor vehicles and parts, machinery and equipment, aircraft and components, other diversified manufacturing, fish and forest products, processed and unprocessed minerals

U.S. merchandise exports to Canada: $261.4 billion in 2008 (5% more than in 2007) – motor vehicles and spare parts, industrial and electrical machinery, plastics, computers, chemicals, petroleum products and natural gas, and agricultural products

Market Research

CS Canada produces market research reports to help U.S. companies determine market potential, market size and potential competitors. Visit our site to access our reports, including the latest market research reports about:

Electrical Power Systems

Water Filtration Equipment Industry

Canada: Home Care Market

Ski and Snowboard Market

Canada Aircraft and Aircraft Parts

Upcoming Events

May 13 – Canada Regional Webinar Series – Quebec

May 16 – 19 – U.S. Embassy Delegation from Canada to the National Restaurant Association (NRA) Show in Chicago, IL

May 27-28 – Americas Business Forum in Los Angeles, CA

June 9-11 – GO-EXPO 2009 in Calgary, AB

June 15/17/18 – U.S. Master Franchise Promotion 2009 in Vancouver, BC; Montreal, PQ; and in Toronto, ON

June 17-19 – U.S. Embassy Delegation from Canada to InfoComm09 in Orlando, FL

Fall 2009 – Canada Regional Webinar Series – Ontario

September 9-10 – Trade North America Conference in Detroit, MI

September 17 – U.S. Information Technology Security Software Seminar in Ottawa, ON

September 29 – RepCAN 2009 Business Matchmaking Event in Toronto, ON

October 1 – RepCAN 2009 Business Matchmaking Event in Montreal, PQ

October 6 – RepCAN 2009 Business Matchmaking Event in Vancouver, BC

Image of President Obama with Canadian Prime Minister Stephen Harper – White House Photo
President Obama with Canadian Prime Minister Stephen Harper

Contact Us Today to Connect with a World of Opportunity

In 2008, the U.S. Commercial Service helped 92 companies export over $22 million of goods and services to Canada. We are located in major cities across Canada in order to better assist your company. Visit the CS Canada website to learn how we can help you today!

Key Contacts:

Ottawa: Lucy Latka, Senior Commercial Specialist
Montreal: Pierre Richer, Senior Commercial Specialist
Toronto: Madellon Lopes, Senior Commercial Specialist
Calgary: Crystal Roberts, Commercial Specialist
Vancouver: Cheryl Schell, Senior Commercial Specialist

More Information

Other Resources Available to You

Country Commercial Guide

CIA World Fact Book

U.S. Department of State Background Notes

Canadian Trade and Industry Associations

Aerospace Industries Association of Canada (AIAC)

Canadian Manufacturers and Exporters

Automotive Industries Association of Canada

CATA Alliance (Canadian Advanced Technology Association)

Canadian-American Business Council

The Canadian Association of Importers & Exporters

Canadian Franchise Association

Canadian Marketing Association

Information Technology Association of Canada (ITAC)

Canadian Association of Defence and Security Industries (CADSI)

Federal Canadian Government Contacts in Canada

Canadian Federal Departments and Agencies Portal

Department of Agriculture and Agri-food Canada

Foreign Affairs and International Trade Canada

Industry Canada

Public Works and Government Services Canada

Canada Revenue Agency

There may be dozens of strategies in Forex trading. Let’s just talk about the roots.

Nature Of Market:Every thing in the universe has its NATURE. So is Forex market. So is every currencies pair in this market. For example, GBP/JPY always moves faster, and its wave range is longer than other pairs, such as a hundred pips during a day or even a hour. EUR/GBP generally waves narrowly several pips only within a day. For American, EUR/USD and GBP/USD like to sleep in day and dance at night. AUD/USD and NZD/USD look like twin, they commonly act in the same style, if one of they goes north, another one does not like to go south. But EUR/USD and USD/CHF are doomed to be enemy, while one of them flies up like a hydrogen balloon, the counterpart mostly will drop like a lead ball. And so on, so on.

Once we find this kind of “Nature of Market”, we can develop and figure out some strategies for particular currencies pairs, just follow their nature, predict their moving direction and range. Then we will get our own trading strategy and system.

Fundamental Trading:In Forex market, many professional analysts like to use a kind of method to predict the future. It is so-called “Fundamental Analysis”. Based on this method, they develop many kinds of strategies to trade Forex. These are strategies of forecasting the future price movements of currencies based on economic, political, environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the foreign currencies.

If you like to try Fundamental Trading, you need learn and understand a lot of finance knowledge. Actually, not only finance knowledge, you need to be interested at many things of this world, including politics, economy, geography, culture, diplomacy, even military affairs. And you need to study the core underlying elements that influence the economy of a particular entity. For example, when the USA’s GDP or employment report is strong, you begin to get a fairly clear picture: the general health of America’s economy is good. So the US dollar should be stronger than other currencies. But how far can the US dollar go? Fundamental Trading may not answer this question very accurately. You may need to come up with other precise tools as to how best to translate this information into entry and exit points for a particular trading strategy.

Hedge:In finance, a hedge is an investment that is taken out specifically to reduce the risk in another investment. Hedging is a strategy designed to minimize exposure to an unwanted business risk, while still allowing the business to profit from an investment activity.

In FOREX, there are two kinds of similar “hedging” strategies:

1, Buy and Sell the same currencies pair, same lots, same timing. Then let it go. While one of those orders goes north, the counterpart will go south. After the winner takes profit, we can wait for the loser turning around. In a yo-yo market, this method works well.

For example, buy 2 lots GBP/USD at 2.0003, at the same time sell 2 lots GBP/USD at 1.9997. While the rate rises up to 2.0053, we close the buy order and take profit 50 pips. Now, the sell order will draw down around 50 pips. Let’s wait for the rate falling down, it will fall down usually, especially in yo-yo market environment. If the rate drops down to 2.0037, close the sell order, the sell order will lose 40 pips. Does it hurt? No. Don’t forget the 50 pips we have taken at the buy order. Totally, we can get 50-40=10 pips. Furthermore, if the rate keeps falling, let’s say down to 2.0027, we can take 50-30=20 pips, etc.

Some people would doubt it… doesn’t this “strategy” sound like hedging flat for nothing, just paying double spread? Why bother? Well, they are right, because we forgot mentioning the key point: timing of closing orders. When to close the winning order to set a foundation and when to close the losing order to lock the profit, there are some tricks inside. Experienced traders use technical analysis skills to decide this vital timing. Believe it or not, those experienced traders say that this method helps them screening false signals out.

This kind of “Yo-Yo Hedge” can work at any currencies pair.

2, Buy (or sell) unequal lots of special currencies pairs and buy unequal quantities of another kinds of currencies pairs which usually move in the opposite direction. This seems a “Semi-Hedge” trading strategy. It is created based on “Correlation” between some particular currencies pairs. So it is not suitable for every currencies pair.

Actually, this kind of hedge has another feature: earning SWAP! You earn interest daily on the held position which can yield up to 50% per year of your full account balance.

There are several pairs can do it. Such as EUR/USD Vs. USD /CHF, GBP/USD Vs. USD/CHF, AUD/USD Vs. NZD/USD, EUR/JPY Vs. CHF/JPY, GBP/JPY Vs. CHF/JPY.

Let’s take the EUR/USD and the CHF/USD pairs.

These pairs are historically negatively correlative 93-98% of the time. That is when one pair goes up the other goes down, and vice versa, up to 98% of the time. In a high leverage account (as high as 400:1 or 500:1), you could earn 50% SWAP interest in a year. How? Let’s say you have $5,000 in your account and a 10% risk margin set. If the net interest we receive is 1.25% annually, this 1.25% interest will be enlarged to 50% per annum, by the 400:1 leverage.

And, this return does not include the buy low/sell high profits.

But, if the base of this kind of hedge collapses, it means the “Correlation” does not exist any more, for example the “Correlation” drops under 50% or lower, there will be a disaster.

Arbitrage:Some people call “Arbitrage” as a risk free strategy. But other people call it as a trick which looks like the cat pawing chestnuts from a fire. But in theory, its risk is minimum in deed. We introduce three types of arbitrage strategies here:

1, Triangle Arbitrage: Searching for two highly fast-moving pairs (like EUR/USD and USD/JPY), the price of a not-so-fast moving pair like EURJPY should always be derived by multiplying (or dividing, etc) the fast-moving pairs. So for example, if EUR/USD is 1.4871 and USD/JPY is 108.24, the logical price of EUR/JPY should be 1.2 x 120 = 160.96. But at the same time, the real EUR/JPY rate is 160.90. The slower moving pair lags behind the logical price, then profit opportunity comes.

In practice currencies are quoted with a bid ask spread, so a trader should be careful that he is actually buying at the quoted ask price, and selling at the quoted bid price. Other transaction costs, such as commissions, might also invalidate the apparent free lunch.

More pairs:

AUD/CAD CAD/JPY AUD/JPY

AUD/CAD GBP/CAD GBP/AUD

AUD/CAD USD/CAD AUD/USD

AUD/CHF CHF/JPY AUD/JPY

AUD/CHF GBP/CHF GBP/AUD

AUD/CHF USD/CHF AUD/USD

AUD/JPY EUR/JPY EUR/AUD

AUD/JPY GBP/JPY GBP/AUD

AUD/JPY USD/JPY AUD/USD

AUD/USD GBP/USD GBP/AUD

AUD/USD USD/CAD AUD/CAD

AUD/USD USD/CHF AUD/CHF

AUD/USD USD/JPY AUD/JPY

CAD/JPY EUR/JPY EUR/CAD

CAD/JPY GBP/JPY GBP/CAD

CAD/JPY USD/JPY USD/CAD

CHF/JPY EUR/JPY EUR/CHF

CHF/JPY GBP/JPY GBP/CHF

EUR/AUD AUD/CHF EUR/CHF

EUR/AUD AUD/JPY EUR/JPY

EUR/AUD AUD/USD EUR/USD

EUR/AUD GBP/AUD EUR/GBP

EUR/CAD AUD/CAD EUR/AUD

EUR/CAD GBP/CAD EUR/CAD

EUR/CAD USD/CAD EUR/USD

EUR/CHF AUD/CHF EUR/AUD

EUR/CHF GBP/CHF EUR/GBP

EUR/CHF USD/CHF EUR/USD

EUR/GBP GBP/AUD EUR/AUD

EUR/GBP GBP/CAD EUR/CAD

EUR/GBP GBP/CHF EUR/CHF

EUR/GBP GBP/JPY EUR/JPY

EUR/GBP GBP/USD EUR/USD

EUR/JPY GBP/JPY EUR/GBP

EUR/JPY USD/JPY EUR/USD

EUR/USD GBP/USD EUR/GBP

EUR/USD USD/JPY EUR/JPY

GBP/JPY USD/JPY GBP/USD

2, Hedging Arbitrage:

This technique is the safest ever, and the most profitable of all hedging techniques while keeping minimal risks. This technique uses the arbitrage of roll over interest rates (SWAP) between two brokers.

One broker which pays or charges roll over interest at end of day, and the other should not charge or pay this kind of roll over SWAP interest. The main idea about this type of Hedge Arbitrage is to open a position of currency (Fore example, the highest SWAP GBP/JPY) at a broker which will pay you a high interest for every night the position is carried, and to open a reverse of that position for the same currency with the broker that does not charge interest for carrying the trade. This way you will gain the interest or SWAP that is credited to your account, risk-free.

3, Netting Arbitrage:

The main idea behind the strategy is, using differences between cross rates (such as EUR/USD, GBP/USD, and EUR/GBP) at different markets.

For example, suppose you had opened the following positions:

buy 1 lot EUR/USD at 1.4867;

sell 1 lot EUR/GBP at 0.7600;

and sell 0.76 lot GBP/USD at 1.9586.

The netting/clearing gives the following results:

Long EUR from the first pair and short EUR from the second pair gives zero exposure in EUR.

Long position in GBP from the second pair and short position from the third pair gives zero exposure in GBP.

Short position from the first pair ($148,670.00) in USD and long position from the third pair ($195,860.00*0.76) in USD gives you $183.60 profit without open positions and exposures.
Simple? Not really for small traders, may be for those “big brothers” only. Because it is really hard to play spread, slippage, stop loss hunting or so on games against brokers.

Carry Trading:Carry trading is a well known trading strategy which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. Then this investor can make profit from the difference of these two interest rates.

JPY is currently considered to be the most popular currency to use as the low interest yielding currency in the carry trade, because its interest rate is the lowest of the world almost at 0. And GBP is currently considered to be the high yielding currency. So are NZD and AUD.

When we buy these currencies pairs: GBP/JPY, AUD/JPY, GBP/CHF, USD/JPY, or EUR/CHF;

Or sell: EUR/AUD, EUR/GBP, AUD/NZD;

Both actions can yield positive SWAP roll over interest. If combining with some kinds of hedge trading, we can make as high as 100% profit annually and keep the risk low.

The big risk in a carry trading is the uncertainty of exchange rates. Also, these transactions are generally done with a high leverage, so a small movement in exchange rates can result in huge losses unless hedged appropriately.

Martingale:Originally, martingale referred to a class of betting strategies popular in 18th century France. In Forex trading, the strategy let the trader double his/her order lots after every loss, so that the first win would recover all previous losses plus win a profit equal to the original investment. In the example below, you bought 1 lot EUR/USD at 1.4650. Unfortunately, the rate drops. You play it in martingale way, “double down”, buy two lots, you need the EUR/USD to rally from 1.4630 to 1.4640 to break even. As the price moves lower and you add four lots, you only need it to rally to 1.4625 instead of 1.4640 to break even. The more lots you add, the lower your average entry price. Even though you may lose 100 pips on the first lot of the EUR/USD if the price hits 1.4550, you only need the currencies pair to rally to 1.4569 to break even on your entire holdings. Once the rate goes up one more pip, you will win a lot.

EUR/USD Lots Average or Breakeven Price

1.4650 1 1.4650

1.4630 2 1.4640

1.4610 4 1.4625

1.4590 8 1.4605

1.4570 16 1.4588

1.4550 32 1.4569

The Martingale strategy needs a very strict money management and you must understand that in the beginning money will be coming slowly, but if you lose the patience and raise risk level up to much, you may not hang on to the end to see the turn-around.

Anti-Martingale:The anti-martingale strategy is the opposite of the better known martingale approach. This approach instead increases order lots after wins, while reducing them after a loss. Using an anti-martingale risk management scheme will increase profits during time periods when a trading approach is working well, while automatically decreasing exposure during portions of the cycle where trading is unprofitable. This is believed to decrease the risk of ruin for trading.

Grid:Basically the trader sets a series of entry limit orders X pips from the current price, for example 15 pips. Some experienced traders like to use the Fibonacci Series Numbers (0, 1, 1, 2, 3, 5, 8, 13, …) or Golden Section Numbers to make this grid. Once price hits the level the limit order is executed. Then every 15 pips there is another order at limit price executed. And so on. In a yo-yo market, while the price moves up or down, there always be some limit orders executed. Once the order is taken profit, and the price moves to its original level again, a new limit order shall be executed again, then repeat the same process. Just open orders and take profits in a set of “grid”. It is simple and easy, but hard to deal with when and how to close all orders, especially the Stop Loss. Some experts say we do not need stop loss, but will you take the chance to hold your all positions till “Margin Call?”

Day trading:This refers to the practice of buying and selling currencies pairs such that all positions will usually be closed within the same Forex the trading day. The day trading idea comes from stock market. Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits. Day trading is extremely risky and can result in substantial financial losses in a very short period of time. Under the rules of NYSE and NASD, customers who are deemed “pattern day traders” must have at least $25,000 in their accounts and can only trade in margin accounts.

But in Forex market, every one can be a day trader to do day trading. Actually, more than day trading, they can do “scalping”.

Scalping:Scalping is a trading style where small price gaps created by the bid-ask spreads are exploited. It normally involves establishing and liquidating a position quickly, usually within minutes or even seconds. It means trying to get a few points (1~3 pips only, no greed, no long term) off the market every time. This strategy is based on a fact: approximately 70 to 80% of the time, the market is in a consolidation pattern. What this means is that for the majority of time the market is not making significant moves. For example, after the USA market is closed and before the Europe market is open, the Forex market tends to range in a consolidation channel for hours at a time before making another significant move in one direction. This kind of market behavior pattern is ideal for Forex scalping. Every time you enter the market, wait 10 or 20 minutes, once you have several pips gain then cash it and go.

Scalping has some features:

1, Lower exposure, lower risks. Scalpers are only exposed in a relatively short period.

2, Smaller moves, easier to obtain. The normal wave of the market will give you several pips easily.

3, Large volume, adding profits up. Since the profit obtained per share or contract is very small due to its target of spread, they need to trade large in order to add up the profits. Scalping is not suitable for small-capital traders.

But be careful, not every broker welcomes this kind of scalping strategy. If you scalp it too quick and thin, let’s say you just hit 1 pip every 2 or 3 minutes then run, and repeat it again and again within a day, every day, you must feel high, eh? But the broker may be not happy and bans you. You will be kicked out because of your successful scalping!

Break-Out:Using the Bollinger Bands indicator on a chart, we will find every Forex currencies pair is waving in a “band”, or a channel. By finding major support and resistance levels with technical analysis, a Break-Out strategy trader will buy this pair at the lower level of support (bottom of the band/channel) and sell them near resistance (top of the band/channel). Till now there is not a Break-Out yet.

Once the price breaks the upper range line with larger-than-average volume, or the opposite: the price breaks the lower range line with larger-than-average volume, the chance is coming. The idea of this strategy is that when a currencies pair breaks out of the channel, it usually experiences a large price movement in the direction of the breakout. So buy it at the price breaks the upper range line and continue to hold it until the rate has risen a distance comparable to the height of the range. If it goes down instead, stop losses as it penetrates the upper range line. Or, sell it at the price breaks the lower range line, and continue to hold it until the rate has fallen a distance comparable to the height of the range. If it goes up instead, stop losses as it penetrates the lower range line.

Pivot:Besides Support and Resistance levels, many foreign exchange traders like to use another indicator to analyze and predict currency pairs’ price changes, it is so-called: the Pivot Point. To calculate and analyze pivot is a subset of technical analysis, with this bench mark, traders can locate the rotation point of the trend, and this is very helpful for deciding when and where to buy or sell.

Classical Pivot Point, Support and Resistance Formulas are as follows:

Look at any one chart, the pivot is an average of the previous bar’s high, low, and closing prices. In the following formula, “H” represents the previous bar’s high, “L” represents the previous bar’s low, and “C” represents the previous bar’s closing price.

Current Bar’s Pivot Point (P)=Previous Bar’s (H+L+C)/3

First level of support and resistance can be calculated as follows:

First Resistance Level (R1)=(2*P)-L

First Support Level (S1)=(2*P)-H

Likewise, the second level of support and resistance:

Second Resistance Level (R2)=P+(R1-S1)

Second Support Level (S2)=P-(R1-S1)

Since many currency pairs tend to fluctuate between Support and Resistance levels, and these levels are calculated based on Pivot points, so when a trend or breakout trader knows where the pivot point is, it will enable him/her to find out key levels that need to be broken for a move to qualify as a breakout.

News Trading:The system is developed based on economic news events from around the world. Nearly half of those announcements have moved the market significantly. Before a big news is coming, we can buy and sell some currencies pairs at the same time, same lots, set stop loss prices for them. After the news is released, especially for the big one, both sides of buy order and sell order will jump significantly. No matter which order is a winner, just let it go. And the loser will hit the Stop Loss, just let it be. The winner’s gain minus the loser’s loss, it is your news trading profit. For example, Non-Farm Payrolls/Employment Report – The NFP is the most influential news release of every month. It’s announced on the first Friday of the month at 8:30am EST for the prior month. We can put a buy order and a sell order at market prices for GBP/USD, at 8:29 am EST. Don’t forget, set 30 pips Stop Loss level for them. Wait 2 minutes only, the news is announced, it is a big one! Then the sell order jumps over 100 pips, and the buy order drops like a brick. The brick hits the Stop Loss and the pain is over. Totally, your gain could be 100-30=70 pips. Quick and easy, cool enough?

Trend Following:It is so simple, just follow the trend. Buy it is the most difficult strategy because no one can tell you 100% for sure what is the right TREND. Go to look at a weekly chat of USD/CAD, if you had shorted this pair in September 2001 and held it till September 2007, you know what the trend means.

The most famous trend analysis tool seems the Wave Principle. In the 1930s, Ralph Nelson Elliott discovered that stock market prices trend and reverse in recognizable patterns. Elliott isolated five such patterns, or “waves,” that recur in market price data.

Another trend analysis guru should be W. D. Gann. In 1908, Gann discovered what he called the “market time factor”, which made him one of the pioneers of technical analysis. To test his new strategy, he opened one account with $300 and one with $150. It turned out to be wildly successful: Gann was able to make $25,000 profit with his $300 account in only three months; meanwhile, he made $12,000 profit with his $150 account in only 30 days! After his results were verified, he became famous on Wall Street as one of the best forecasters of all time.

Back to the chat of USD/CAD, now, please tell me, how to follow the trend? Will USD/CAD continue the trend which is going south further to 0.6000, or, another trend going north reversely back to 1.6000?

If you would like to find out more about Forex trading, come and visit us at http://www.vdux.com

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In the development of your forex strategy do you wonder how you can trade the non-farm payroll report?

Seeing this is one of the most, if not the most, volatile announcement during the month (first Friday in every month) newer traders watch the huge movements and wonder how to make money from all that volatility.

The answer given below you may not fully appreciate until some explanation is offered.

Question

“How do I trade the non-farm payroll report?”

Answer

“You DON’T!”

Or to put it another way, “By maintaining a neutral position!”

The market is far too volatile at this time to expect a high probability trade. There may be some gamblers out there who relish the thought of ‘placing a bet’ to go long or short. But serious traders know better.

Actually, the professional traders I know all say the same thing: “Stand aside and wait for the market to calm down.”

This may take between 30 to 45 minutes in some cases and even then the direction of the market may be uncertain.

Some suggest you can trade volatile market movers such as the non-farm payroll report by waiting for the first leg of the move, up or down, then wait for price to pull back 10 or 15 pips, then enter a trade to catch the second leg of the move which often follows.

That’s one possibility but still high risk. Personally I prefer to base my forex strategy on sound market assessment and carefully researched trades.

Trading The Aftermath

However, while many professional traders sit out the non-farm payroll report, that doesn’t mean they don’t trade afterwards.

After the market has made a violent move in one direction you sometimes see price stalling and then give a clear signal that it’s momentum is exhausted.

Look For Combination Factors

This may be in the form of a candle pattern such as a hammer with a very large shadow which also happens to be on a key support or resistance level.

Now you can enter a trade with a small level of risk as you place your stop just above the high or low of the candle signal.

By applying a number of technical indicators to the chart pattern after a non-farm payroll report, you may see a point where a previous support/resistance level convergences with a Fibonacci retracement or extension, or the 200 EMA (Exponential Moving Average), or a pivot point.

If a distinctive candle forms at that level also you can expect a reasonable price bounce and extract a number of pips from the market.

This advice applies to all fundamental announcements which are considered ‘market movers’.

By developing a cautious forex strategy based on sound trading principles, you will enjoy this business and get the satisfaction of seeing your account equity steadily growing.

Get a useful free tip on how to use the MACD indicator for safe trading here:

http://www.vitalstop.com/Forex/Advisor/forex-strategy-MACD-save-anxiety.htm

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