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Can a change in Greek Prime Minister really affect the EURO?

A historic day in Europe beckons today as it will decided whether the Greek Prime Minister, George Papandreou, will remain in office.  Papandreou is facing a confidence vote over his handling of the bailout plan. Failure to endorse his position is in a sense opposition to Greece cooperating with the bailout plan, at least in the short-term. Failure to cooperate with the bailout plan will cast serious doubt on outside funding which would place Greece is a position where it has a very real chance of bankruptcy.
The question remains as to whether or not the full extent of the Greek crisis is already reflected in the value of the Euro vs. other cross currencies. If you are a fundamentalist that believes in market efficiency, then you make well believe that more bad news out of Greece cannot have a significant impact on the Euro. After all, how much worse can things get? If, however, you believe that markets are inefficient and over-react to such news, then considerable fluctuations in the Euro are possible.
We at FX Strategy prefer to wait for significant evidence either way before moving into or out of a position. Our position is that we believe that the issues in Europe will continue to put pressure on the Euro. See our Euro Video which focuses on both the USD/EURO and AUD/EUR for more information. Until a decision is made in Greece we will all watch from a far (i.e out of the market).

article source: http://www.fxstrategy.com/articles/fundamental-articles/can-change-greek-prime-minister-really-affect-euro-86.html

Using a FX trading platform to hedge

Big business often require a foreign exchange hedging strategy in order to maintain earnings should foreign exchange rates move against them. I say big business, as generally hedging strategies are limited to big business as they operate in many countries simultaneously. Often manufacturing and mining companies are those most at risk. In the case of manufacturing, an increases in the cost of production or a reduction in the terms of trade, due to foreign exchange fluctuations, could have a devastating effect if a business is not properly hedged. Similarly, a mining company sells output on the open market, often in the domestic purchaser’s currency. A reduction in the terms of trade can be catastrophic. Finance companies also closely watch foreign exchange fluctuations especially if funds are sourced in one currency and lent out in another as is often the case.
Historically, big business has used traditional FX brokers to place such hedging strategies. Brokers have been seen as the only alternative to placing large scale trades in liquid markets. However, more and more companies are now using forex trading platforms in order to hedge as transaction costs can be much lower and there is more control in each trade as there is no middle man broker who needs to be consulted when making trades. The turnaround has come because the biggest FX trading platforms now have enough liquidity to deal with the large scale hedging transactions that are required. In some circumstances, big business will use a mixture of brokers and trading platforms in order to fill a position.
We predict that the roll of a traditional broker will diminish over time as more and more volume is placed through the online trading platforms.

article source: http://www.fxstrategy.com/articles/fundamental-articles/using-fx-trading-platform-hedge-88.html

Taking Responsibility for Your Actions - the Forex Way

By: Christopher Lewis
It is something we try to teach our children, but when it comes to trading there are plenty of traders that are not willing to do just this. Taking responsibility for your actions is one of the most important things a trader can do, mainly because it leads to real and true introspection. The trader simply has to be able to be honest with themselves as to what happened in a trade if they are going to learn anything at all by their losses.

The whole point of learning to trade is to understand what works, what doesn’t, and be able to adjust to changing conditions in order to come out ahead in your trading account. It is nearly impossible to do any of these things if you are not honest with yourself, and what actually happened during a trade.

When I speak to traders, I will often hear things like, “The broker decided to do a stop loss hunt.” I hear this one often enough to recognize it for what it truly is: A flat-out denial of responsibility in taking the loss. The big thing with this person is that they feel the need to be right 100% of the time. This is a person that is setting themselves up for failure as the pressure will be far too great for them to feel they can function in an efficient manner.

Another one I hear a lot is a variation of “Trichet came out and killed the trade.” I can assure you that the person that made the announcement wasn’t watching your position. Traders that get upset about this kind of event seem to suggest that the announcement was aimed directly at them, and not as a statement the central banker, politician, or whoever felt necessary to make. It is like anything else in life: things happen. Timing isn’t always going to work in your favor. Besides, the person who complains about this very thing thinks they are a trading genius when the announcement goes in their favor and they make large profits from it.

The main point is that you cannot fall into the “blame the other guy” trap I see so many others get involved with. It is a loser’s game that will only allow you to make the same mistakes over and over as you don’t look in the mirror for the answers to your losses. Also, I should mention that sometimes a loss is a fairly random thing. Sometimes, there is no real deep answer. The market ebbs and flows, and sometimes you are on the wrong side of it is all.

Either way, unless you are honest with analyzing yourself, you will never be able to analyze the market.

Want to learn more about Forex trading? Check out our Forex strategies articles for more Forex tips.

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

article source: http://www.dailyforex.com/forex-articles/2011/09/Taking-Responsibility-for-Your-Actions-the-Forex-Way/8887

Forex Trading Can Be Simple (If You Let)

By: Christopher Lewis
One of the biggest issues that can rear its ugly head in the world of the newbie trader is over complication. In fact, making things much more difficult than necessary is a staple of every budding trader’s early career it seems.

The biggest catalyst for this is twofold. The first issue is a lack of self-confidence. This makes sense, because by being new to the trading world it is easy to feel that you know almost nothing. The average new trader is constantly looking for “hints”, “tips”, and “tricks” when it comes to trading. This is easily understandable as they will know little about currency trading. After all, sound trading decisions are the result of experience, and they will have very little of that. What many people don’t understand is that experience is often the result of bad decisions!

The lack of confidence will lead to system-hopping, and the constant switching of indicators and timeframes. The thing that is risky at this point is the trader very rarely understands how an indicator works. They just simply know that you “buy when this line crosses the other one”, or something like that. The understanding of the mathematics involved makes using these indicators more effective in theory, because at least the trader knows what they are seeing. Of course, at this point in time, they may have several indicators on their charts and this can lead to what is known as “paralysis by analysis”, which leads me to the other catalyst.

The other catalyst is simply a fear or losing money. Most traders go into the Forex markets looking to get rich, and not understanding that you can’t always win. Yes, they understand that a 100% win ratio is a bit much to ask for, but they don’t emotionally understand that. It is one thing to understand something from an intellectual level, and quite a different one to understand it from a gut level. Taking a loss isn’t fun, but it is something we all do.

The “paralysis by analysis” syndrome comes about because of this. There is a point in the new trader’s career that they will pile on the indicators in order to “read the markets.” They may start with a moving average, and add an M.A.C.D. indicator as time goes on. Perhaps they have attended a webinar that featured the trader using the ADX and Keltner Channels. At this point in time, they are starting to add the indicators to the chart, and not seeing the most important thing: where price is going!

With a ton of indicators, it isn’t easy to understand where to go. You could have three indicators saying sell, while another two are saying buy. It is at this point the trader understands how difficult this is getting for them. They have made it overly complicated, and now it is getting to be frustrating – and that can lead to really stupid trading decisions over time.

Hopefully, they reach the point where one day they look at a chart and say something like, “Wow, if I only had sold USD/CHF over the last few years. It has gone straight down over that time.” While there are pullbacks, the trader sees that in general, they could have made a fortune selling this pair over the last several years. This is where the idea of trading with the trend comes into play. There are traders out there that will only trade in the direction of the overall trend, and refuse to take set ups in the other direction. Of course, this takes a bit of patience when the pullbacks come – but it does work in the end. While there are many different ways to trade, those who choose this method simplify a lot of the decisions they are forced to make as they already know what direction they want to be in. Their entries may vary from trader to trader, but they all tend to sleep a little easier at night as well.

There are those who will debate the whole “the trend is up on the 15 minute, down on the hourly, but also up on the weekly timeframes.” Nonsense. Currency pairs only have one trend, and that is the major one. The rest is noise, and if you focus on that – you can avoid a lot of trouble. If you are trying to figure out the trend, simply look at a weekly chart and see if the market is going from lower left to upper right. If it is, you are in an uptrend. If it is going from the upper left to the lower right, you are in a downtrend. Anything that isn’t easily identified isn’t worth bothering with, as there are plenty of pairs to trade.

By approaching the markets in this manner, trading really can be as simple as you let it be.

Want to learn more about Forex trading? Check out our Forex strategies articles for more Forex tips.

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

article source: http://www.dailyforex.com/forex-articles/2011/09/Trading-Can-Be-Simple/8738

How Forex Connects to Other Markets

By: Christopher Lewis

One of the most commonly overlooked places that a trader can find information as to the future direction of a Forex pair is in various financial markets around the world. Most Forex traders will simply stare at the currency pairs, completely oblivious to the world around them and the fact that it takes various reasons to move that money from one international border to another.

This is a very common problem with Forex traders, as they are brought into this world under the assumption that Forex is where all of their money will be made. They are often enticed by the fact that Forex offers the most leverage, and is supposed to be the most "simple" market out there. Because of this, they miss a lot of the more obvious signals that professionals around the world pay keen attention to.

By knowing some correlations, you can often see signals and other markets before you see them on your Forex terminal. As an example, the gold market is often either predictive more reactive of the Australian dollars moves. This is simply because Australia exports massive amounts of gold. If you think about it, it makes sense as companies will have to pay these Australian miners in Australian dollars. So as gold rises, as a general rule over time the Australian dollar will as well.

Another market the trader should pay attention to is the crude oil market. The futures market for crude can often have a massive effect on the Canadian dollar. This is because Canada exports so much crude oil to the rest of the world, with a special emphasis on the United States. Because of this, as the price of oil rises the value of the USD/CAD pair will fall - which of course signifies strengthen the Canadian currency. This is a double whammy of fact, has the oil markets are priced in dollars. So as the value of the US dollar falls, it will take more of them to buy those barrels of oil.

Quite often, the yen base pairs are a good proxy for risk. In other words, as the world's markets rise in value - which of course signals that traders are feeling like taking risk, the value the yen typically falls. The main reason for this is that a lot of large institutions will borrow their funding in Japanese yen, and invest abroad in countries that have higher rates of return. As these institutions feel more nervous about the markets, they will often bring money back to Japan in order to pay off these short-term loans. This is essentially what the so-called "carry trade" was about.

By knowing a couple of these correlations, you can often see an anomaly in one market ahead of the other one. For example, if you see gold breaking through resistance, there is a very good chance that you will see a rise in the value of the Australian dollar. Or perhaps you see crude oil falling in price. As it breaks through support, the US dollar will typically rise in value over the Canadian dollar. As you can see, these are trading signals in and of themselves but rather a good way to get a "heads up" on where to be looking for trade setups in the currency markets.

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

article source: http://www.dailyforex.com/forex-articles/2011/10/Forex-and-Other-Markets/9323

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