Forex Trading Profits Fom Calendar Patterns

Most traders have heard of seasonal patterns, something which is mostly associated with commodities. The foreign exchange market also has calendar patterns which influence trading, and just like in commodities, traders can take advantage of them to improve their odds for success and profits.
Monthly Patterns
Nearly all currency pairs have one or more months during which they have a directional tendency. There are three pairs in particular which have traded in the same direction during a particular month at least seven years in a row. AUD/JPY has risen in January, while USD/CAD has fallen in June and USD/JPY has dropped in August. In each case, the moves have been significant. Let's take a look at USD/JPY as an example.
On average, USD/JPY has declined over 325 points each year since 1999 in the month of August, which translates to 2.80%. While the percentage does not seem extraordinary, when one takes leverage in to consideration, it is a different story. Had one shorted 100,000 USD/JPY at the start of each August and closed that position out at the end of the month, the total profit would have been in excess of $20,000 (not taking in to account interest carry). That is an outstanding return considering the margin requirement for a position like that is only $2,000. And this does not even consider compounding!
Weekday Patterns
For the short-term trader, there are also patterns of behavior which are based on weekdays. It is a little more complicated, however, than just saying buy or sell on Monday, for example. A secondary condition must be applied, which can be accomplished using the month. The result is patterns which take place on certain weekdays during a given month.
An example of this kind of pattern is GBP/USD on Mondays in December. The pound has risen 73% of the time on Monday during the last month of the year since 1999 (31 observations). The average move has been 40 pips. Assuming a 5 pip spread, a trader who entered traded this pattern over the last seven years would have booked over 1000 pips in profits, which translates to more than $10,000 if one took positions of 100,000 GBP/USD each time.
Trading the Patterns
The examples outlined above are just a couple of the patterns which can be found in the forex market. There are many worth incorporating in to one's trading. Obviously, one strategy which could be employed is a simple enter-and-hold based on the pattern for a given month or weekday. That, however, does leave one open to the both in-trade draw downs, some of which can be substantial, and the simple fact that patterns do not always repeat every time, and sometimes change.
An alternative to enter-and-hold is to use calendar patterns to bias one's trading. For example, a day trader could look for opportunities to buy in to weakness in GBP/USD on Mondays in December. Similarly, a swing trader could use short-term breakdowns to enter in to short trades in USD/JPY during August.
The trader looking to employ forex calendar patterns must utilize the same good risk procedures as are always necessary. This applies regardless of the strategy employed.

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Vix And The Psychology Of Markets

We know that greed and fear rule the markets. But did you know that when investors gets too greedy, markets usually fall, and when investors are overcome with fear, markets usually rise. So how can when we monitor investors emotions and take advantage of investors emotional extremes?

Welcome to the world of investor sentiment analysis.

Investor psychology has been analysed for at least 250 years. Charles MacKay wrote his book, ?Extraordinary Popular Delusions And The Madness Of Crowds?, in 1841, describing, among other manias, the herd mentality that caused the South Sea Bubble. Since then, many academics have published financial theories based on the concept that individuals act rationally and consider all available information in the decision-making process. But real life frequently demonstrates that the behavior of equity markets is irrational and unpredictable. A field known as ?behavioural finance? has evolved over the years attempting to explain how emotions influence investors and their decision-making process. Studying human psychology helps predict the general direction of financial markets as well as many stock market bubbles and crashes. At the height of a period of optimism, greed moves stocks higher, ignoring business fundamentals and therefore creating an overpriced market. At the other extreme, fear moves prices lower, ignoring obvious opportunities and creates an undervalued market.

One important study, (?Aspects of Investor Psychology,? The Journal of Portfolio Management, Summer 1998) found that investors are much more distressed by prospective losses than they are made happy by equivalent gains. Some researchers theorize that investors ?follow the crowd? and conventional wisdom to avoid any regret in the event their decisions prove to be incorrect.

QUANTIFYING INVESTOR EMOTIONS OR INVESTOR SENTIMENT

When a stock or market index rises, we know that it means investors are more eager to buy than to sell. But how can we accurately gauge just how investors feel?

Most often, investors are somewhere between mildly positive and mildly negative, and only occasionally do they demonstrate the extremes of greed or fear. It is easier to detect emotion when it is close to either irrational exuberance or outright fear. When markets act this way, it becomes "news" and moves from the business section, to being featured at the start of the evening news, and on the front page of the daily newspaper.

The success of charting as a tool, depends on investors repeating their behaviour patterns. There is always a comfort factor in doing the same as others and generally an aversion to behaving differently. Investors display herding instincts in their behaviour and this has become particularly noticeable among institutional investors. In the early stages of a rising trend in a market, positive sentiment can act as a positive driving force as everyone rushes in to join the party. However, there comes a time after the trend has been in place, when this positive sentiment acts as a warning that the trend is nearing its climax. That's when smart investors will start switching to alternative investments.

The most sophisticated and active players in the market use derivative products to effect their transactions. These players tend to display earlier changes in emotion than most investors and normally their emotions run to greater extremes. So, derivative markets are a good source of data on investor sentiment. There are various options available on stocks, ETF's and indexes. By using an option pricing formula, we can extract a measure of how much investors are prepared to pay for the possibility of making a profit, or hedging against a loss. This is known as implied volatility, and it provides a mathematical valuation of investor emotion. Implied volatility tends to be high (the scale is inverted) when the market has had a sharp fall and this is associated with investor fear. At the other extreme, low implied volatility often occurs after a rise in the market and when investors are becoming complacent.

Implied volatility image

WHAT IS THE VIX?

VIX is the symbol for the Chicago Board Options Exchange's volatility index for the S&P 500 (SPX). It is a measure of the level of implied volatility and not historical or statistical volatility. A numerical value for the VIX has been published by the CBOE since 1993. The method of calculating VIX was changed in early 2003. Instead of using the S&P 100 (OEX) Index options, it is now calculated using the options on the S&P 500 (SPX). Also note that the VXN is the symbol for the implied volatility index of the NASDAQ 100 index.

The implied volatilities are weighted to give the VIX a value that in effect acts as the implied volatility of an at-the-money SPX option at 22-trading days to expiration. The VIX represents the implied volatility of a hypothetical at-the-money SPX option. If implied volatility is high, the premium on options will be high and vice versa. Generally speaking, rising option premiums reflect rising expectation of future volatility of the underlying stock index, which represents higher implied volatility levels. The higher the VIX, the more panic in the markets and the greater the chance that investors have given up hope, taken their money, and gone home.

Comparing the movement of the VIX with that of the market can quite often provide clues as to the future direction the market might move. The more the VIX increases in value, the more "panic" is an issue in the market place. On the flip side, the more the VIX decreases in value, the more complacency there is amongst investors. The psychological impact measured by a relatively high VIX is a clear indicator that tells traders markets are oversold. A historic example was displayed on July 23rd 2002 when the VIX shot over 55. That big move coincided with a significant low in the Dow Jones Industrial Average that was followed by a 1,034-point, six-day rally. That rally didn't stick and the market again re-tested its July low in October of 2002. But throughout this double bottom in 2002 the VIX accurately identified a major directional shift in the market. At its core, the VIX is a statistical measure of emotions, and emotions are a major factor signalling capitulation in the market.

Sample charts

INVERSE RELATIONSHIP

Extremely high readings of VIX indicate market bottoms, while low readings indicate market tops.

The VIX actually has an inverse relationship to the stock market. This is one of the first things you'll notice when viewing the VIX on a bar chart. When the VIX goes down the stock market moves higher. When the VIX advances, the stock market is headed lower. Generally speaking, a rising stock market is considered less risky by investors. On the other hand, a declining stock market is considered more risky. Therefore, the higher the perceived risk by investors the higher the implied volatility. This will make options, especially put options, more expensive.

When the phrase "implied volatility" is mentioned, keep in mind that it is not about the size of price swings. Rather it's the implied risk that is associated with taking a position in the stock market. When the stock market declines, the demand for put options usually increases. Increased demand means higher put option prices.

USING VIX to TIME the MARKET

One early study identified a VIX value of 25 as normal, and a value above 35 as high. Between October 1997 and May 2001 the VIX indicator went above 35 eleven times. In this study, the S&P 500 index as represented by SPY ETF. was purchased each time and held until the VIX retreated below 25. There were 9 profitable trades for an average gain of 3.1% and an average holding period of about one month. By using this VIX timing scheme you could capture 80% of total gains in the market, but your money is only at risk one third of the time.

Sample chart

Extremes in fear mark great buying opportunities.

Sample chart

THE CONTRARIAN VIEW POINT OF THE VIX

An extended and/or extremely low VIX suggests a high degree of complacency and is commonly considered bearish. From the contrarian view point ,many traders are of the opinion that if the VIX becomes low, they'll begin looking for a reason to begin selling stock. On the flip-side of the coin, a very high VIX can indicate a high degree of anxiety which often leads to panic among options traders. This action is often considered bullish by the contrarian, and they'll look for reasons to begin buying stock. High VIX readings usually occur after an extended or sharp market decline with investor sentiment still very bearish. Some contrarians view readings above 35 as bullish. Hence, they'll begin looking for a major market turn to the upside.

The VIX should be used in conjunction with "regular" analysis of price action on price charts. The wise trader will never make a purchase or sale based solely on the price level of the VIX. The wise trader will use the VIX (and its support and resistance levels) in conjunction with the price action of charts of the S&P 500, the Dow, and the NASDAQ.

Using the VIX with charts of these indices will help you get a good grasp of the current market psychology. Since market movements are based entirely on human emotions, it is important for traders to understand psychological indicators. When the VIX is used correctly it helps you stay on the right side of the market and make profitable trades.

SUMMARY
Understanding Investor Sentiment (or Investor Psychology) is by far the most powerful tool an investor can use to understand exactly where the stock market is, and where it is going. But it is often hard to digest, as it is counter intuitive to our human nature.

Here is a recent example that will help illustrate this point.

In September 2005, the TSX was making multi year highs. While the VIX Indexes was down near multi year lows. Standing back and looking at these two pieces of information, you might question the wisdom of adding long-term money to this market at this time.

You might, but human nature would not.

From GARY NORRIS
Canadian Press
Mon Oct 17, 3:58 PM ET

Canadians are shovelling money into mutual funds almost like it's 2001 again, with September purchases of $1.8 billion - up from net redemptions of $545 million a year ago.

The Investment Funds Institute of Canada said Monday that investments in long-term funds - equity, bond and other funds excluding short-term money market funds - topped half a trillion dollars for the first time. "This underlines the fact that investors are making long-term commitments to funds, and not simply parking their investments temporarily in money market funds," commented Tom Hockin, president of the fund industry association.

Sales in the first nine months of the year, net of redemptions and excluding reinvested distributions, totaled $18.4 billion, "the highest net sales figure since the same period in 2001," Hockin observed.

Yes, you read that correctly, Canadian have not been this enthusiastic since the last time the market was peaking.

TSX Sample Chart

Now we don't have enough data yet, but since Canadian Mutual Fund investors did their "extreme" mutual fund shopping last month, the market has already dropped 800 points.

Now ask yourself, if you were going to put money into this market, was September the best, low risk time to do so in the past 5 years? Were these investors thinking analytically, or did the emotion of greed cloud their judgments?

My guess is that this is what I like to call "Panic Buying", of Canadian Mutual Funds last month, will signal the very top of this market, and be the catalyst for a major sell off.

Only time will tell if I am right.

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The 40 Rules Of Consistently Profitable Commodity Futures And Option Traders, Part 6

Are you following these forty commodity trading guidelines? Follow them all and you have a better chance of becoming a consistently profitable commodity futures and options trader. Design your trading plan around these rules. Don't underestimate their value for your success.

We All View The Market Through Fuzzy Glasses

34) Be fully willing to change your mind. A flexible mind is a sign that?your ego is under control. Stay in the now moment and let the market unfold as it may. You should be simply watching for clues to make a decision. The commodity futures contract market doesn?t ?have to? do anything. Remember that everyone views the world through their very own fuzzy, distorted and colored glasses. There is a tremendous amount of information we miss.
It's like trying to watch a live football game through a soda straw. We see just a tiny bit of what's really happening. However, we think we are seeing the whole picture ? that's where we run into trouble. The good news is your competition is in the same boat. We need to be flexible and change our minds when we must. Our input of the world is too small, biased and inaccurate to be correct most of the time.

Know Your Trading Time Frame and Eliminate the Useless Noise

35) Pay attention to the time frame that is larger than the one you are trading. If you are trading five-minute bars, be aware of the 30 or 60-minute chart. If you are trading daily bars, then watch what the weekly futures chart has done. We are looking for clues. The balancing act is to take in just enough information that is important, but not too much.

Many futures and options traders have their charts loaded with too many things; redundant moving averages, momentum indicators, multi time frames, etc. These indicators are fine as long as they each add important information and you can digest them. In reality, all you really need is a few price bar chart time frames and a few personally developed indicators you trust to convey information that you cannot see otherwise. The brain receives information in a serial manner, meaning we take in data in a single, narrow stream, one idea at a time.

We should make our futures contract trading information unique and different, not redundant. Information overload is a big problem. Everyone goes though it. There should come a time when every good commodity trader cleans house and removes the useless accumulated junk on his charts. Keep your charts Spartan lean with as few competing indicators as possible.

Each one should sing for its supper and pull its own weight. Each one needs to tell you a story that cannot be seen in the price bars alone. That's what the computer is for. To have a 10-day, 20-day, 40-day, 100-day and 200-day moving price average is pure noise. There's much better stuff to put up there. I'm sure you get the picture.

Watch Out For Market "Scenarios"

36) Be careful when hanging your hat purely on fundamental commodity futures information. These are news events, supply and demand figures, etc. I've seen the biggest losses taken as a result of traders getting fixated on news. Their trading gets sloppy and a long haul stock investor mentality begins. What started out as a disciplined short term trade turns into a long haul trade, once the loss begins.

Recently, gold has been in a bull market. Traders were lining up and?pyramiding as prices went higher?from news of big India and China buying. Many commodity traders did quite well for a while as gold quickly moved from $500 to $750 an ounce. But then the correction came. Many were prepared for a nerve racking $30-50 slam. The gold gurus were warning of it. It corrected as expected and many bought more gold and talked about the same bullish news.?Buy alas,?the gold market continued down into the low $600 area. This was a devastating correction for many. In reality, this was just a normal correction when compared to many other commodity futures or stock markets.

For example, stocks often run up to 75 and correct to 62 (same percentage) as well as pork bellies, and other commodities. But because many of these traders were fixated on the news and then pyramided, they got caught badly. I heard stories of $100,000 accounts going to less than $10,000 even after the first $50 gold correction. Most were wiped out way before the full $200+ correction. Being vulnerable and inflexible is a dangerous game. Don?t'swing on just one branch of a tree.

Part Seven of Seven, Coming Next!

There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.

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The Best Time To Trade Forex

Selecting the correct day and time to trade can play a major role in your forex success. Although forex market seems to be available 24/6, not all the days of the week will bring profits. A trader not only has to choose the right day to trade, but also know the best hours. When not to trade? What is the absolute best time for forex? When can you get most earnings?

Let's go over the basics ? 3 major forex trading sessions:

1.New York market opens from 7:00 AM to 4 PM
2.Japan/Australia market opens from 7:00 PM to 3 AM
3.London market opens from 3:00 AM to 11:00 AM

Seems like forex market never sleeps, however the trading volume and price movements are not the same during all the mentioned sessions. There are times when you should jump in and there are times when it is better to keep out.

The main idea is to get involved when the forex markets are the busiest. Each currency reacts differently during each session. For example:

During London market - Euro, US dollar, British Pound and Swiss Franc are most active currencies involved.

During New Year market ? Us dollar, Euro, British Pound, Australian dollar, Japanese Yen, Canadian dollar and New Zealand dollar are the most active currencies.
A great time to trade is the first 3-5 hours of each opening session mentioned above, especially when your fundamental analysis points on new economic releases. However, the best time to trade is between 3 AM and 11 AM.

The overlap between New York and London markets (3 AM ? 11 AM) creates an intense trading momentum full of trading opportunities enhanced with frequent price movements, and therefore is the best time to make money. With the right trading plan, money management and system, you can make thousands of dollars within minutes.

The currency pairs that are most active during the overlap are:

1.USD/ CHF
2.GBP/USD
3.EUR/USD
4.USD/JPY

Many economic releases are made around 8:00 AM, therefore the 3 hours between 8 AM and 11 AM are extremely profitable for very quick and significant profits.

Keep in mind that volatility is very fast and if you aren?t careful, instead of making money, you can lose most of it! Therefore, the use of stop/loss and the discipline are crucial for you success. Also, don?t cry over the spilled milk ? if you missed a trend, get over it. There will be more opportunities, trust me!

Now, when is the best day to trade? Which days should be avoided? Although the market is available 5 days a week, there are certain days which are better avoided:

1.Fridays should be AVOIDED, since the end of the week is extremely unpredictable.
2.Sundays should be AVOIDED, since there is almost no action in currency rates.
3.Holidays should be AVOIDED, since the market is in most cases motionless.

The BEST days to trade are Tuesday and Wednesday, since the peak of trades happen during this time of the week.

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Winoptions Review

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Online Trading: Choosing A Broker

Depending on the type of investing that you plan to do, you may need to hire a broker to handle your investments for you. Brokers work for brokerage houses and have the ability to buy and sell stock on the stock exchange. You may wonder if you really need a broker. The answer is yes. If you intend to buy or sell stocks on the stock exchange, you must have a broker.

Stockbrokers are required to pass two different tests in order to obtain their license. These tests are very difficult, and most brokers have a background in business or finance, with a Bachelors or Masters Degree.

It is very important to understand the difference between a broker and a stock market analyst. An analyst literally analyzes the stock market, and predicts what it will or will not do, or how specific stocks will perform. A stock broker is only there to follow your instructions to either buy or sell stock? not to analyze stocks.

Brokers earn their money from commissions on sales in most cases. When you instruct your broker to buy or sell a stock, they earn a set percentage of the transaction. Many brokers charge a flat ?per transaction? fee.

There are two types of brokers: Full service brokers and discount brokers. Full service brokers can usually offer more types of investments, may provide you with investment advice, and is usually paid in commissions.

Discount brokers typically do not offer any advice and do no research ? they just do as you ask them to do, without all of the bells and whistles.

So, the biggest decision you must make when it come to brokers is whether you want a full service broker or a discount broker.

If you are new to investing, you may need to go with a full service broker to ensure that you are making wise investments. They can offer you the skill that you lack at this point. However, if you are already knowledgeable about the stock market, all you really need is a discount broker to make your trades for you.

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Do You Understand The Unknown Facts About Trading For A Living

If you are one of those people that do not normally trade to make a living then the first question you will put to someone that does is how they succeed in trading for a living. Of course, others might argue the fact that what constitutes a living for one person may not be the same for another person. For example, for many of us making a living would mean earning fifty thousand dollars a year while for others it could mean earning ten times that amount.

So, before you get an answer to the question as to how you can succeed in trading for a living it is necessary to identify the amount of money you have available and also how much you wish to earn. What's more, there are some traders that are ready to risk all of their money to earn the same amount while other people would risk less money and expect to earn less.

When it comes to understanding how to trade to make a living you need to also understand that sometimes you might lose money and other times you will make money. Even the most experienced traders lose money; so, it would be wrong to expect that you will always succeed in making profits year in and year out.

The real crux of the matter is that you need to identify what making a living means to you and also whether you have a system that you can put to use in order to achieve your goals. Provided you act with discipline and remain committed and you persevere there is no reason why you cannot learn to make a decent amount of money out of trading.

The trouble is that most people do not have the required discipline to remain focused on their objective for a time span of five or ten or even twenty years and so will give up if things do not work out right for them. To succeed you need to behave like a person trying to win an Olympic gold medal or become a world renowned surgeon or even a Kirov ballerina.

Even if you do behave like a would-be Olympic champion there is still no guarantee that you will succeed because even a single mistake at any time can put paid to all your efforts and causes a huge loss of money to you.

There are fortunately a few systems that have been developed by people that have indeed succeeded in earning a good amount of money from trading. If you spend a little money you can make use of such solutions that help you understand market forces (to a certain degree) and in this way you can learn how to make a profitable deal.

Most people that have succeeded in trading for a living have realized that they do not need to monitor the market on an hourly basis. What is required is managing their trades for between ten to sixty minutes on a daily basis. But remember what an old adage says and that is that you may be able to do anything in your life; just don't attempt to do everything because that is a surefire means of inviting failure instead of success.

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History of The Shanghai Stock Exchange

The Shanghai Stock Exchange is now one of the biggest in the world and is growing all the time. It has an interesting history which has included it being halted during World War 2 and it being suspended for over forty years after the communist revolution.
The first stocks were traded in Shanghai in 1866, but it was events two decades later that was really the beginnings of a stock market in the city. In the late 1880's the Chinese mining industry boomed, something that was further boosted by mining stocks being launched by provincial governments. The Shanghai Sharebrokers Associations was established in 1891 by foreign businessmen, and this became China's first stock exchange of sorts. This mostly dealt with the stocks of local companies.
Between 1889 and 1891 there was a boom in real estate companies, and in 1910 a boom in rubber plantations. ??The wave of confidence in these areas was partly due to cheap credit being offered by banks, something that eventually ended in bust.
The Shanghai Stock Exchange did not open until 1929. At the beginning of the 1920's the Shanghai Securities and Commodities Exchange (1920) and the Shanghai Chinese Merchant Exchange (1921) were both established. During this time over 140 stock exchanges started up in Shanghai, all but twelve of which had disappeared by 1922. In 1929 the Shanghai Securities and Commodities Exchange and the Shanghai Chinese Merchant Exchange combined to officially form the Shanghai Stock Exchange. Rubber was the prime stock and foreign companies, especially Japanese companies, started to take control of the stock exchange.
By the 1930's the Shanghai Stock Exchange had become the financial centre for the region and was trading in stocks, shares, government bonds and futures.
The Shanghai Stock Exchange ceased operation during World War 2. In 1941 Japan invaded and the stock exchange closed down. When the war ended it opened again but only for a short period. When the communist revolution took place in 1949 the stock exchange was again closed and remained so for forty-one years.
There was no trading in stocks in China for over two decades until the cultural revolution of the 1970's. Initially this was only open to the Chinese, with it opened to foreign investors from 1978. Companies began to trade securities with foreign firms and this caused a surge in the economy. The modern Shanghai Stock Exchange was eventually opened in 1990, forty-one years after it was closed during the Communist Revolution. Another stock exchange was also opened in Shenzhen, which dealt with technology and government securities.
In 1997 the Hong Kong Stock Exchange was implemented into the Chinese system.
The Shanghai Stock Exchange was the sixth biggest in the world in 2010, behind New York, Tokyo, the NASDAQ Stock Exchange, the Euronext Stock Exchange and London. It is run by the China Securities Regulatory Commission as a non-profit organisation and trades in stocks, funds and bonds. It is continuing to grow and could well complete with New York and Tokyo as the world's biggest over the next few years.
Andrew Marshall ??

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Trading With Root Cause Analysis

If you have read my article on Pareto charts this will probably make more sense to you.

Root cause analysis is another tool that traders could benefit from. I know that some of these things do not seem trading related, but you can improve results with them. When all is said and done results are what matter anyway.

On your pareto chart you have identified weaknesses in your trading style. Root cause analysis is how you start to fix them.

First we need to identify the most prominant cause of failed trades. Once this is identified you will need to write it at the top of a separate sheet of paper. Below this you will ask a question. What caused this reaction? Then you list the answer. Now ask yourself the same thing about this new answer. List it. You will continue to ask yourself this for each new answer, until you cannot come up with an answer. Generally, you will only be able to go about 3-5 levels deep. This is your root cause. This is the start of the path that leads to the losing trade.

When you have reached the root cause you have one more question. How do I avoid this root problem.

If it is a emotional problem maybe, you need to work to become more self aware of the feeling that starts a process of bad decisions. When this feeling starts to erupt, just exit your positions and and stop trading for the day. It is better not to trade, than trade and lose.

If the problem is psychological, maybe you need to find a routine that works for you.

A good example of this is a baseball pitcher. A major league pitcher has all the physical requirements, or he would not be in the majors. Some pitchers have been known for having quirky routines they go through on each pitch. There are some pitchers who have had terrible seasons because they lost something in their routine. Their physical attributes have not changed, only their mindset. Their routine is only psychological, but the results of it being off are all to real.

Of course, if it ends up being the system the fix is obvious, scrap it.

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Forex: Starting Your Own Trading

The presented article is intended for those who just turned their eyes toward FOREX. Beginning traders who are still learning the basics of the foreign exchange market may also find something of interest here. While experienced traders won?t gain anything worth their time reading this article.

Basically there are 4 steps which can be defined as ?must do? for those who wish to start trading FOREX. Though, their order is not particularly important, the more important part is their content, to which the great attention and responsibility must be paid.

First step is finding a right FOREX broker which will be your main tool in trading. You can have a great strategy, good technical analysis skills or an outstanding intuition but you will eventually fail if you choose a bad broker. A good FOREX broker is one that will not still your money, will be doing real trading with your positions, supports your preferred deposit/withdraw methods and has fast and helpful user support service. It is nice if a broker is registered with some sort of governmental financial commission. One of the most important aspects of the broker is it's trading platform ? but for a new trader this part is not so important as for expert traders. Still you'll probably want to trade with some powerful and informative platform as a MetaTrader or its analogs. For new traders the more important is a demo account which can be used to trade virtual money while you are training your FOREX skills. If you are new trader, start only with the demo account! Don?t lose your money on your first mistakes!

Second step is learning the basics of FOREX trading. If you already found your FOREX broker, you will easily get all information from its website or user support. There are many articles and websites dedicated to FOREX basics in the World Wide Web. All you need to do is just google for ?forex trading basics? and you'll find everything you wanted and even more. This step shouldn?t be underestimated, because trying to trade without even understanding how the market works is not only very risky, it will also become boring very soon.

Third step is about education. FOREX trading education is not similar to any other education you probably have got in your life. FOREX market is very chaotic, so is the education ? there are no fixed rules and all time laws, it is unstable and dynamical. So, to be on the top you must learn new things about FOREX regularly and constantly. Try to read as many books, articles other traders? opinions as you can. The more you learn, the more educated you will be. And with good FOREX education you will be able to create very sophisticated and effective trading strategies.

Fourth step is a final one; at least I consider it to be a final one. To achieve the successful results in the FOREX market you need to develop your own strategies. While you are learning you'll be satisfied with known strategies and probably even FOREX signals. But true goal which leads to successful FOREX trading is to develop your own strategies. Not one strategy, but to follow the market day by day, developing new strategies and improving those which began to fail. And this comes not only to the trading strategy (this part is obvious), but also to the money management strategy (this part is often underestimated). While you gain experience in trading you'll inevitably build such strategies that will fit your trading style, you character and your life as best as they can. And after that, trading will become a real pleasure, which will eventually lead to your financial freedom.

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Options For Refinancing Your Mortgage

If you don't want to give a continuous monthly payment for your house and want to save money, you can do it by refinancing your home. If you get a refinance mortgage loan you can easily save your money without paying monthly payments. Under a mortgage refinance plan, your present deal is reinstated with a different deal. It supplies its borrowers with many benefits. It decreases the house payment and releases some of the equity built in a lump sum payment or installments.

Mortgage refinance refers to changing the current loan with some other loan. It is capable of giving a positive edge if your credit history is not up to the mark. Your personal lender must be knowledgeable of your history and can suggest you favorable terms of refinance mortgage loan.

There are various types of refinance mortgage loan which you can find in the market. Through these loans you can refinance your mortgage.

1. Fixed Rate: Here, the interest rate on the base amount is fixed through out the years of the payment of the loan.

2. Adjustable Rate: This type of loan has changing interest rates depending on the market condition. In this type of refinance mortgage loan, there is generally an introductory rate period where the interest rate is fixed for a few years (3 and 5 years are common) at a very low rate. After this introductory period has passed, the rate becomes a true variable rate, focused on the rates of the market.

3. Fully-amortizing loan: Through this loan the monthly payments are changeable with interest rates, and towards the balance.

4. Balloon Home Loan: The interest rate here is fixed for a set period of time. Afterwards, it works as an adjustable interest rate.

5. Home Equity Loan: This is a fixed rate loan allowing you to tap into your equity while giving you a fund to spend. This type of loan is ideal for mortgage refinancing only if you have enough equity in your home to pay off your original mortgage lender.

When applying for a refinance mortgage loan you need to be careful and to be fully informed. You should know that whether it beneficial for you or not:

- While applying a refinance mortgage loan you must understand about that loan and do some research on it. - You must have a full control over your debts, and there is no hidden cost. - Make sure that your repayments will be reduced and not increased. - Your lenders fully inform you about the consequences of the steps you are taking. - You are better off as a result of the solution you have chosen.

Several mortgage companies can be able to assist you through relationship with lenders with a mortgage refinance loan. But make sure about the company's performance.

Whatever refinance mortgage loan you have chosen, with fixed interest rates or with variable interest rates, you have to study all the related data to avoid errors which may lead to the loss of real estate. It is also important to find appropriate mortgage loan rates and interest rates among an enormous variety of mortgage loan companies and lenders.

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Key Levels For The Major Indices

Much has been made about the Dow Jones Industrial Average (DJIA) touching the key 7,500 level this week. Why is this level considered important from a historical and technical basis? And what are the other major indices, such as the S&P 500 Index (SPX), NASDAQ 100 Index (NDX), and NASDAQ Composite Index (COMP) showing on a long-term basis?

As you can see in the following chart, this area on DJIA marks the previous lows from November 2008 and 2002-2003 and was also an important technical level in 1997-1998, so it can be considered a strong support level. As you can see the following chart, if we do break sharply below 7,500, we are basically going back to mid-1990s levels in the Index.

The S&P 500 Index (SPX) has breached the 800 level which was significant in the past, but the 750 area is perhaps more important, and we have not yet touched that level this month. We are currently about 5% above that level.

The NASDAQ 100 Index tracks the performance of the biggest NASDAQ stocks -- this Index almost touched the key 1000 level in November 2008, but currently is about 15% above that level, due to the recent general outperformance of NASDAQ stocks. Some of this is due to the lack of Financial and Energy weighting in NASDAQ Indices.

The NASDAQ Composite encompasses almost 3,000 NASDAQ listed stocks. The COMP is the Index that famously hit 5,000 in March 2000 at the height of the parabolic uptrend now known as the "Internet Bubble". This Index bottomed around 1,100 in 2002/2003, and thus far we have remained above that level, both currently and in the November 2008 plunge. We currently stand about 25% above 1,100 on the COMP.

The bottom line is that we are dangerously close to making 12 year+ lows on two of the most widely followed indices, the DJIA and the SPX. However, we do we established support around and just below the current levels which one would anticipate is likely to hold (at least for a trading range consolidation). The NASDAQ indices have withstood the 2008/2009 drop much better ... but from the bearish perspective, they indicate a potential 15% to 25% more downside to their key levels. Of course, these are very long-term charts -- within the big picture multi-year trends are many short-term great trading opportunities on both sides of the market for option traders.

Moby Waller,
BigTrends Portfolio Manager & Analyst

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Advantages Of Forex

You may have heard of FOREX. It's the largest financial market in the world, handling $1.5 trillion every day. The combined American stock exchanges only handle about $100 billion. Every day, people are making money in the FOREX market, buying and selling foreign currencies. But what advantages does FOREX have over the stock market?

Liquidity - As stated above, the FOREX market handles $1.5 trillion worth of transactions every day. That's a huge volume. What this means, is that there are always buyers and sellers for any type of currency. So when you want to buy, there's always a seller, and when you want to sell, there's always a buyer.

No Insider Trading - The constant fluctuations in the value of the various currencies is caused by changes in a nation's economy. In the stock market, some people may get news regarding a corporation before others, causing them to buy or sell, to take advantage of the news before others get it. In FOREX, any news about a nation's economy is available to everyone at the same time, so no one has an inside advantage over anyone else.

Accessiblitiy - The stock market has limited trading hours. It's only open for a few hours a day. FOREX, on the other hand, is open 24 hours a day, 5 days a week. Trading begins on Monday morning in Australia, and continues until Friday afternoon in New York. Trades can be made any time during this period.

Predictiblity - FOREX is more predictible than stocks. Stocks don't always follow trends. FOREX does. FOREX follows well established trends.

Smaller Investment - FOREX doesn't require large investments. A mini account can be set up for just a few hundred dollars. FOREX also allows high leverage, around 100:1 as opposed to 2:1 in the stock market. This means that you can control assets that are worth 100 times your investment.

No Commissions - Unlike stocks, there is no commission for trading FOREX. Brokers earn their money by setting a spread. The difference between the buying and selling prices.

Now that you know some of the advatages that FOREX has over the stock market, isn't it time for you to look a little closer at FOREX investing?

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Introducing Options Strategy ? Vertical Spread

There are more than 20 options strategies can be applied, but one of my favorite is Vertical Spread. The meaning of vertical spread is that you purchase and sell options of the same type (same stock symbol) with same expiration date but with the different strike price.

In Vertical spread, you can choose to apply bull put spread, bear call spread, bull call spread and bear put spread. Bull put spread or bull call spread can be applied when you think that the stock is bullish, that's what the bull word imply. And if you think the market is bearish, use the otherwise strategies (bear call spread and bear put spread) which have the bear word in it.

When the option sold is more expensive than the options bought, there is a net credit, this strategy call vertical credit spread. Both Bull put spread and Bear call spread are credit spread. Therefore, without fail you have the money in your pocket immediately after the button click on screen.

The benefit of using Vertical Credit Spread is that you can limit your loss due to the spread. Take an example, if your spread difference is $5, your limiting lost will be $500 (every option contract = 100 stock, therefore multiply by 100). The smaller the spread, the better chance to win as you minimize your risk.

My preferred strategy is using 2.5 spread, for example, sell/buy a pair of options strike price of 25 and 22.5, the difference is the spread which is 2.5 in this example.

On the other hand, selling a spread is normally better than buying a spread. Becoming the seller makes you have the advantage of the time value of the options. As you know that when option price is decreasing when close to the expired date, like a water fall pattern, time is on your side.

For an example, if you are selling QQQQ strike price 45 and buying the strike price 43, you have 2 dollar spread. Selling $0.8 option of the strike price 45 and buying at $0.3 option at 43 strike price make you have the credit of $0.5. If QQQQ hovers above 45 until the expiry date, you earn the credit of $50 ($0.5 x 100) by letting both of the options becoming worthless.

Nevertheless, set the stop loss at the level of the sold option minus the credit earn, if you use the above example, the stop loss should be at 44.5. Never allow the stock price drop further than the stop loss target, if it does, buy back the sold leg and let the bought leg run.
If you really want to play safe, cut the loss and close the position when the stop loss is triggered.

Doesn?t it sounds too simple to be truth? Find out more from options trading Academy.

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Emotions Can Ruin Your Trading

Implementing proper trading psychology is a crucial step if you want to achieve success in the markets. Psychology is the factor that separates the fairly good trader from a great one who amasses fortunes. Normal human psychology usually is unsuited for trading success. It takes special behavior modification to become a trading master.

Fear is a major emotion in trading. The fear of losing money and being wrong. This typically is caused by someone trading with money they simply can not afford to lose. This psychological barrier can take hold of a trader and cause him or her to close out positions too early, without good reason to do so. If you want to make a lot of money, you must let your profits run. Following up with a stop loss to protect your profits as they grow is a sound trading principle.

Another major emotion in trading is greed. Greed has caused many traders to lose most or all of the money in their accounts. It can mean taking too many positions, for your account size, at one time. The trader who gets swallowed up with greed wants to get rich quick, which causes him or her to over-trade, and not follow sound money management. The key to overcoming greed is discipline, and the ability to follow a solid trading plan.

Trading psychology is certainly a major key to success in the markets. Many traders do not understand the impact. They believe all they need is a good trading method. A good trading method makes a difference. It would be wise to never underestimate the importance of trading psychology. If you can eliminate emotions, use a proven trading plan, and implement strict money management, you could make a fortune trading the markets.

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The Market Can Stay Irrational Longer Than You Can Stay Solvent

It was John Keynes, the influential British economist, who once said 'the market can stay irrational longer than you can stay solvent', and it's an observation that is equally true in the present day. So what does this phrase actually mean?

Well in stock market terms it basically refers to the fact that the markets are not always rational and therefore there are times when the market undervalues companies and overvalues companies. It is for this reason that you are sometimes able to pick up bargains on the stock market and sell short companies that are clearly overvalued. You will often find that in bear markets nearly all companies will see falls in their share prices, even top quality profit-enhancing companies which creates good opportunities to pick up some bargains.



However what John Keynes was saying was that these irrational markets, which do not accurately reflect the true values of companies, can stay irrational for long periods of time. Whilst value will usually win out eventually, in the shorter term they could fall even further in a bear market and vice versa in a bull market.

Therefore if you are looking for short-term profits by finding undervalued companies to invest in in a bear market, or overvalued shorting candidates in a bull market, you may well lose money if the markets stay irrational in the foreseeable future.

In this day and age when there are lots of short-term methods of trading such as spread-betting and options trading this idea that the markets can stay irrational longer than you can stay solvent is as true now as it's ever been, particularly if you are trading on margin. Therefore if you are a short-term trader looking for contrarian trades in bullish or bearish markets, you have to take steps to protect your capital. This means using tight stop losses and either taking your profits while they are there or letting your winning trades run.

If you are an investor this isn't so much an issue. However you should still invest wisely. In this current climate there are a lot of bargains out there but it's important that you take a long-term view of the markets and only invest in quality companies that ideally pay dividends and are well placed to grow their profits in the coming years. You don't need to throw your money into the markets either. A better approach is to drip-feed your money into these quality companies when the opportunity presents itself.

The point is though that the market can indeed stay irrational longer than you can stay solvent and you should always bear this in mind when investing in shares, and certainly if you are trading on a short-term basis using leverage.

Next article: Instant Payday Loans For Those Hard Times

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Read More

The Market Can Stay Irrational Longer Than You Can Stay Solvent

It was John Keynes, the influential British economist, who once said 'the market can stay irrational longer than you can stay solvent', and it's an observation that is equally true in the present day. So what does this phrase actually mean?

Well in stock market terms it basically refers to the fact that the markets are not always rational and therefore there are times when the market undervalues companies and overvalues companies. It is for this reason that you are sometimes able to pick up bargains on the stock market and sell short companies that are clearly overvalued. You will often find that in bear markets nearly all companies will see falls in their share prices, even top quality profit-enhancing companies which creates good opportunities to pick up some bargains.

However what John Keynes was saying was that these irrational markets, which do not accurately reflect the true values of companies, can stay irrational for long periods of time. Whilst value will usually win out eventually, in the shorter term they could fall even further in a bear market and vice versa in a bull market.

Therefore if you are looking for short-term profits by finding undervalued companies to invest in in a bear market, or overvalued shorting candidates in a bull market, you may well lose money if the markets stay irrational in the foreseeable future.

In this day and age when there are lots of short-term methods of trading such as spread-betting and options trading this idea that the markets can stay irrational longer than you can stay solvent is as true now as it's ever been, particularly if you are trading on margin. Therefore if you are a short-term trader looking for contrarian trades in bullish or bearish markets, you have to take steps to protect your capital. This means using tight stop losses and either taking your profits while they are there or letting your winning trades run.

If you are an investor this isn't so much an issue. However you should still invest wisely. In this current climate there are a lot of bargains out there but it's important that you take a long-term view of the markets and only invest in quality companies that ideally pay dividends and are well placed to grow their profits in the coming years. You don't need to throw your money into the markets either. A better approach is to drip-feed your money into these quality companies when the opportunity presents itself.

The point is though that the market can indeed stay irrational longer than you can stay solvent and you should always bear this in mind when investing in shares, and certainly if you are trading on a short-term basis using leverage.

Read More