Correlation In Forex Trading and Profiting

Looking on the internet at comments about forex trading, one wonders how people expect to make money without having a basic grasp of the principles involved in trading. People tend to rush in, with promises of easy money, but they then discover that it is a lot harder than it looks. This article seeks to identify a fundamental principle that leads to creating a successful trading model, it is founded on the idea of correlation.Correlation exists where there is a mutual relationship of interdependence between two entities. Why is it that people feel so sure that they can earn money in forex? Surely the reason is that they immediately see that there are patterns, that is, correlation in the graph that can be exploited to make money. For example, consider AUDUSD (15 mins, 19th March) in the graph below:We can see that there is correlation between the graph and the yellow line and is is tempting to think that, as a consequence this can be easily traded. The problem is that there are too many unknowns. How could anyone foresee that the price would bounce off of this line? How can we know how high the price will bounce off the line? How can we tell when the price will stop bouncing?I would suggest that the reason that the majority lose money in currency trading is that although there is correlation in the graphs, yet people fail to realize that the nature of the correlation is very complicated. There is not only a relationship of interdependence between the price and the line on the graph above. Below is the graph with the inclusion of the stochastic (5, 3, 3) oscillator:We can see that there is correlation between these two graphs. Although the price doesn't move directly proportional to the stochastic graph, yet the former generally turns at similar times to the latter. The result is that we have another tool to contribute to our understanding of how the price moves.I would suggest that this is the nature of currency trading; it involves the accumulation of indicators that correlate with the price and as a consequence contribute to creating a successful trading method.

Forex scalping Success - 5 Key Facts You Need to Know

Forex scalping and day trading is more popular than ever and is the choice of most new forex traders but is it the right one and how do you enjoy forex scalping success - lets find out.1. Short Term Volatility is RandomMillions of forex traders trade trillions of dollars in currency each day and to say that you can measure what this diverse number of traders will do in a few hours, or a day is laughable you cant.2. Support and Resistance Levels are MeaninglessTo trade any market you need to have valid levels of support or resistance to key off however with all volatility being random in short term trading, prices can and do go anywhere and support and resistance cannot be used - as the data simply isn't valid.3. No Trading system Will WorkIt doesn't matter how good or well thought out the trading system is - if volatility is random and support and resistance not valid it wont work!In any financial market to win you need to trade the odds and if you cant, you are going to lose longer term. It's a bit like being in a casino - if you can count the cards in a game such as blackjack you win but in a game of pure chance like roulette, play long enough with the odds against you and your going to lose and it's the same in forex scalping.You cant get the odds on your side and you cant win - PERIOD4. Forex Scalping Systems Don't have Track RecordsYes they do many traders will say - I have seen them. Sure they have and written all over the track record will be "hypothetical" or "simulated" This means it wasn't traded in the market but done on paper knowing the closing prices!How hard is that?You could do it and so can I and even my 10 year old daughter could - but the markets don't work backwards its harder - You have to trade going forwards!5. Why is it So Popular?Because it makes a good story and vendors know this.Most of them have never traded in their lives - but the story of small regular profits and low risk is an easy one to sell, to naive or greedy investors who are looking for an easy way to get rich in forex.Of course there is no easy way to get rich in forex and you wouldn't expect there to be, with the rewards on offer.THE GOOD NEWS!The good news is you can make money in forex trading if you avoid forex scalping and concentrate on trading the odds. This means valid data where you can get the odds in your favour with your forex trading system and trade them for profit.You can swing trade, looking for trends of a few days to a few weeks, or trend follow looking for trends that last weeks, months or even years. In both forex methods you can trade the odds - the key to a successful forex trading strategy.Forex scalping is not the only myth in currency trading - but it's a popular one and you need to ignore it and concentrate on getting the right forex education to win.So leave forex scalping and day trading to the dreamers and greedy traders, who think forex trading is simply a walk in the park and concentrate on building your own forex trading strategy based around trading the odds.Learn the odds, learn how to trade them and there is nothing to stop you enjoying currency trading success.

Forex Fundamentals: Knowledge You Can Profit From

An in-depth knowledge of macroeconomics or international trade isn't necessary to trade the Forex. But knowing how these forces affect currency pairs can only make you a more savvy trader. Here are a few highlights.When a country raises its interest rates, often their stock market will go down as investors move their funds to greener financial pastures. This tends to weaken the internal economy of the country, but strengthens it in relation to other countries. Which effect will have the most impact on that nation's currency pairs is often discussed well in advance by the "talking heads," and each Forex trader has to decide for herself who to believe!Crude oilCanada is an oil-producing nation. Exporting crude oil raises their GNP and improves the balance of trade, strengthening their economy.As the price of crude oil goes up, the USD/CAD goes down. (That's because the Canadian dollar, the cross currency, has appreciated against the base currency, the U.S. dollar.) At this point, the Canadian dollar is almost at parity with the U.S. dollar, a situation not seen since the 1950s.As an interesting exercise, try laying the chart of the USD/CAD over the chart of crude oil prices for the same time period. The two charts are almost a flipped image of each other.Japan, on the other hand, is an oil-consuming nation, strongly industrial but with no real energy reserves of their own. Importing crude oil at increasingly higher rates to power their economy raises the cost of production and slows or reverses their economic growth.The change in the USD/JPY has not been as dramatic as that in the USD/CAD, and the correlation between the charts not as impressive, but that's because the cost of crude oil has affected the USD half of the equation as well as the JPY side.Precious metalsDuring troubled political or economic times, investors tend to move their capital from speculative investments to something more conservative and solid. Precious metals, particularly gold, tend to go up in value at these times. When the situation returns to normal, gold tends to decline as investors seek higher returns from their money.The Swiss franc, like gold, is considered a safe harbor for capital. As the U.S. dollar has depreciated (mainly due to the government deficit, a large trade deficit, and low interest rates when much of the rest of the world is raising theirs), investors have moved much of their capital to these harbors. Therefore, as the price of gold rises, so does the franc in relation to the dollar.Like the Canadian dollar discussed above, the USD/CHF (Swissie) has declined because of the pressure of the cross currency against the base. Again, lay a chart of the USD/CHF over one for gold with the same time interval, and see how one reflects the other like trees in a lake.Australia is a major gold and copper producer. Copper is not only a precious metal, it's also a substantial element in the housing market (copper plumbing, wiring, etc.). As demand for copper rises on both fronts, the Australian dollar climbs against the U.S. dollar. This is also a reflection of high Australian interest rates versus the low ones in the United States.

Forex Fundamentals: Knowledge You Can Profit From

An in-depth knowledge of macroeconomics or international trade isn't necessary to trade the Forex. But knowing how these forces affect currency pairs can only make you a more savvy trader. Here are a few highlights.When a country raises its interest rates, often their stock market will go down as investors move their funds to greener financial pastures. This tends to weaken the internal economy of the country, but strengthens it in relation to other countries. Which effect will have the most impact on that nation's currency pairs is often discussed well in advance by the "talking heads," and each Forex trader has to decide for herself who to believe!Crude oilCanada is an oil-producing nation. Exporting crude oil raises their GNP and improves the balance of trade, strengthening their economy.As the price of crude oil goes up, the USD/CAD goes down. (That's because the Canadian dollar, the cross currency, has appreciated against the base currency, the U.S. dollar.) At this point, the Canadian dollar is almost at parity with the U.S. dollar, a situation not seen since the 1950s.As an interesting exercise, try laying the chart of the USD/CAD over the chart of crude oil prices for the same time period. The two charts are almost a flipped image of each other.Japan, on the other hand, is an oil-consuming nation, strongly industrial but with no real energy reserves of their own. Importing crude oil at increasingly higher rates to power their economy raises the cost of production and slows or reverses their economic growth.The change in the USD/JPY has not been as dramatic as that in the USD/CAD, and the correlation between the charts not as impressive, but that's because the cost of crude oil has affected the USD half of the equation as well as the JPY side.Precious metalsDuring troubled political or economic times, investors tend to move their capital from speculative investments to something more conservative and solid. Precious metals, particularly gold, tend to go up in value at these times. When the situation returns to normal, gold tends to decline as investors seek higher returns from their money.The Swiss franc, like gold, is considered a safe harbor for capital. As the U.S. dollar has depreciated (mainly due to the government deficit, a large trade deficit, and low interest rates when much of the rest of the world is raising theirs), investors have moved much of their capital to these harbors. Therefore, as the price of gold rises, so does the franc in relation to the dollar.Like the Canadian dollar discussed above, the USD/CHF (Swissie) has declined because of the pressure of the cross currency against the base. Again, lay a chart of the USD/CHF over one for gold with the same time interval, and see how one reflects the other like trees in a lake.Australia is a major gold and copper producer. Copper is not only a precious metal, it's also a substantial element in the housing market (copper plumbing, wiring, etc.). As demand for copper rises on both fronts, the Australian dollar climbs against the U.S. dollar. This is also a reflection of high Australian interest rates versus the low ones in the United States.

Forex Trading - Blackjack and Poker Players Make Great Forex Traders Why?

There are numerous poker and blackjack players who have made the transition from professional card playing to forex trading and made millions. Why are they so successful? Because the skills needed are very similar.There is an old gamblers saying:"There's a time to hold them a time to fold them and there's a time to get out of town fast"If you think about this saying, it's the perfect introduction to succeeding in card playing and forex trading.Forget the gurus and the mentors (most who have never traded in their lives) who tell you that you can predict forex prices in advance or that they move to a scientific theory - they don't.Just like card playing forex is a game of odds not certainties - but just like the professional card player, you can play the odds and win."A time to hold them"By studying the cards that come out of the deck the successful card player knows the odds of the cards coming next, he's not certain but by counting the cards he knows the probability and this is true with forex.In card playing you hold and play in forex trading when the odds are in your favour you execute you're trading signal."A time to fold them"If a card player has junk hands, he folds and passes the hand by.Compare this to forex traders - many of them want to trade low odds scenario's because they think they will miss a move if their not in the market, while others trade when the odds are never in their favour i.e. day traders and they lose.The card player knows his winnings are not based upon how many hands he plays - but how good the hands are and how he bets only then and it's the same in forex trading.In forex trading you get paid for being right not how often you trade.When you feel you have a high odds hand - bet and bet big.You will see poker players back high odds hands with a cool head and large amounts of cash and you must do the same.Forget about the myth of betting small 2% per trade which is a common accepted figure - this is ridiculous!On 2% on a $10,000 account that's risking just $200.00!You won't win much doing that- bet 10 - 20% if you have the odds on your side and have the courage of your conviction."A time to get out of town fast"This applied to the old west and when your life was in danger - get out quickly!In forex trading to preserve your equity you need to cut and run.I heard a trader once say that if you want to win:"You need to bet but you can't, if you're not at the table"To stay at the table or trading, you have to preserve your equity.That means rigid stops preferably placed before you enter the trade - no hoping a trade will turn around - if you life or position are in danger get out!DISCIPLINEAll card players have this and you must to, as a forex trader.Even the greatest card players have to lose hands to win longer term.However if they can stay at the table and keep betting and play the odds, they can bet big on the high odds hands and win.Of course you can do this to as a forex trader.If you want to read an excellent interview with blackjack player come multi millionaire trader Blair Hull which expands on the above points get the excellent book "Market Wizards" By Jack Schwager which interviews Blair and a whole host of top traders - its essential reading for all forex traders.

Forex2u Forex Strategy On Successful Forex Trading

The essence of the FX2u Forex strategy is that it does not have any Forex trading system but could forecast the market trend accurately.Every set of Forex trading system available has its disadvantages. The market trend could not be forecasted. If the market could be forecasted, by depending on the RSI, PAR, MOM analysis techniques and some other theories, Forex traders could easily make a fortune.Many Forex traders could not obtain the anticipated outcome by using these analysis tools, and suffer huge losses. The main reason is relying on some imperfect tools to forecast the unpredictable market trend is just a waste of effort. Therefore the FX2u Forex strategy spirit is to abolish the entire subjective analysis tool.To survive in the market is to follow the market trend, following the market trend is the essence of the FX2u Forex strategy. By using the opposite theory to enter the market, will only lead to lost. The reason is that if the market rises, it may continue to rise. If the market drops, it may continue to drop. No one is able to forecast when the market trend will stop.By following the market trend, the market risk could be reduce to the lowest, the FX2u Forex strategy will advance the following the ten principles:fully understand the how market function and the market trend, else don’t tradeAfter entering the market, the Forex trader MUST immediately put a market stop.If the stop order has been hit it MUST be executed immediately, NEVER make changes by lowering the stop order price.If the forecast is wrong, Forex traders should leave the market immediately, then analyze again.If the forecast is wrong, Forex traders should stop loss and should not increase trading.Forex traders should admit mistakes, do not continuously make mistakes.All analysis tools are imperfect, mistakes could always occur.If the market rises Forex traders should buy, if the market drops Forex traders should sell, always follow the market trend.Forex traders should not forecast the market price because such forecast will not be as easy as forecasting the market trend.If the forecast is wrong, once the loss reach 10%, Forex traders must stop loss immediately, do not let it surpasses 10%, otherwise it would be difficult to recoup the capital again.