Monday, September 10, 2007

Forex Investing and Trading for Newcomers

The foreign exchange market, or forex market, is becoming increasingly popular in a wide variety of applications. Everyone knows that countries have currencies and they are traded against one another, but few realize the economic significance of these markets in their daily lives, and also there are many myths and rumors surrounding the forex market. In addition, few realize how to get involved in the forex market, and become discouraged when getting the wrong answers.

The forex market by nature is de-centralized because there is no official currency exchange such as for equities or commodities. On some exchanges, such as the CBOT, forex futures are traded as commodity contracts. However there is nothing stopping any bank from trading currency with another bank, with the CBOT, or with retail customers. There are no rules or regulations, and thus, there are many different opinions and packaging surrounding forex markets that are always disputed. The regulators in the US markets, such as the NFA, have stepped into take action involving forex trading, and provide limited rules to follow. It should be noted however that these regulators are involved only when you accept funds from the public. If you are a bank and have no customers, there are no regulations to follow regarding how to trade currency. The regulators are concerned only how you raise money from the public. Forex strategy Many people think that to trade currency you need to evaluate a countries economic performance, interest rate policy, and other macro-economic and geopolitical factors. While this no doubt influences the forex market, it is no longer the base of many traders strategies. A new kind of trading is quickly evolving, based on mathematical analysis of prices, called indicators. If you have ever traded you are probably aware of common indicators such as RSI, MACD, Moving Averages, and Bollinger Bands. But programmers have expanded on this to create their own custom indicators, and some strategies monitor a plethora of indicators creating a super-indicator, which generates buy / sell signals. These strategies are very effective because traders can do an extensive amount of testing before trading live money on them. Finally, when live money is traded and it has a track record, the system can be easily replicated.

One popular platform, Meta Trader, allows anyone to download a demo version of their software which is 100% free. There are nearly 200 brokers in the world using this software platform, so if you find a technique which is working, you can open an account at one of these brokers and implement it with few problems. That means also that a programmer can code a strategy and use it at any of the brokers using Meta Trader platform. Strategies are compiled in files called Expert Advisors and can be implemented by clients without programmer or trader intervention. Due to the lack of restrictions and cost, there is a growing international community working on strategies for trading. Of course most of these people are amateurs, but not all of them. And in this case, being an amateur can be an advantage, because you have time to dedicate to the strategy (which requires a high degree of concentration) and possibly money to invest. Also you do not have rules imposed on you by a company or a market; it is a free development environment.

A further extension to these types of strategies and their implementation is seen in technology called Trade Robot. The robot collects buy / sell signals from hundreds of providers, and creates a signal database which includes auditing and tracking. After years of performance data, the robot knows what systems are profitable, and specific trade statistics such as length of trades typically seen by a system, and drawdown ratios. A drawdown is the calculation of loss when an account is losing. No strategy is perfect, even the best are subject to drawdowns, so when the sophisticated investor evaluates a system he is concerned less about absolute returns and more about drawdowns. For example if a system makes 200% with a 50% drawdown that means you are risking 50% of your capital to achieve a 200% return. Usually high yielding systems are very risky and have deep drawdowns, sometimes as much as 20% or more. What is a pip?

In forex a pip is the smallest unit of measurement. In the EUR/USD 1 pip =$1 on a 10k contract. If the EUR/USD is 1.3448 the 8 represents 8 pips, if the EUR/USD moves from 1.3448 to 1.3449 that would be a 1 pip move. The value of 1 pip depends on the size of contract traded and the base currency, in this case USD. EUR/USD means that 1 Euro = 1.3448 USD. As this rate changes, your open position will have a profit or loss. How does one get into forex?

Anyone who is new into forex should find someone in the profession who they can trust and can consult with. It is a small world and a trader likely knows a good broker and so on. We do not recommend investing a large amount of money into an account that you will trade, until you have learned the forex market well. There is no reason to drop your account by 50% as a learning curve open a managed account. There are many successful forex managed programs that you can invest in while you learn. Then when you are ready to trade for yourself (if you want to) then open a mini-account for self-trading and leave money management to the pros. Of course there is a high degree of risk involved in any forex account, but in evaluating the best placement of the capital of a novice investor in the forex arena, it is best placed with someone with experience and track record. Novice mistakes

If you are new to forex, there are many well produced educational courses you can take which will explain the details of forex trading and investing. However taking one of these courses will not make you an expert, nor will it give you the experience you need to trade as well or better than a seasoned veteran. It is recommended that while you are learning, you work with professionals who can guide you through initial stages of forex. If you dont want to know the details, thats fine too, but you should understand the nature of the market before even investing. Forex is a unique market and there are many features of forex investing that are not available in other markets, such as:
You need only $1 to open a forex trading account at some brokers
Many brokers will allow traders as much as 400:1 leverage, meaning with only $1,000 in your account you could trade up to $400,000 in currency!
Forex is available in many shapes and sizes, there are few standards for trading and software
The forex market is the most liquid in the world, with over $3 Trillion USD exchanged daily Accounts and Brokers

A forex trading account is much like other types of accounts you may find at stock brokers or commodity brokers. Usually there are no commissions involved in forex trading, as brokers are compensated through the bid/ask spread. Although brokers offer tight spreads on forex contracts, as little as 3 pips on the EUR/USD for example, with large volume that can add up to substantial revenue for the broker.

A managed account is structurally the same as a self-traded account, except clients sign a Limited Power of Attorney giving a professional money manager access to trade their account. Traders have trading authority only, they cannot deposit and withdraw funds. The account is always in the name of the client, never give funds to a non-registered individual. Any professional would never accept client funds directly, funds are always handled by registered institution. Common misconceptions

When you are investing in forex funds are not leaving the country! You are trading on the interbank market (or off-exchange market) in either case, brokers settle their aggregate positions end of day in a similar method to stock exchanges, debiting and crediting profit and loss to client accounts. It is not as if your funds are being wired out of the country and back.

The forex markets are some of the most technologically sophisticated in the world due to their simplicity. In forex there are less issues relating to execution, auditing, and clearing, which enable the software to be designed small and simple. For trading for profit, or for designing automated trading systems, forex is clearly the superior market.

Elite E Services

Forex Trading and Pricing Explained

I received the following question from one of my list members today:

"... you referred to the currency exchange cash market and the fact that this is basically a market between banks across countries. Does this mean that, for example, the EURO/USD exchange rate is set between the Federal Reserve and the ECB? Is that how a price is established without the benefit of any trading on any listed exchange anywhere else? Thanks for the brief education on this particular point." - Stan Z.

The forex spot market is primarily an "interbank" market. That means the majority of the trading volume is done bank-to-bank such as between Citibank and Goldman Sachs, for example. This trading is generally done on behalf of banking customers such as multinational corporations, though the banks also trade with each other both to hedge their currency exposure and to take on trading positions.

This sort of market structure is the same as the one for most cash market government debt trading, such as that for US Treasury Bonds and the like. You can think of it like the over-the-counter market for stocks. Those trades don't go through an exchange, but are done directly broker-to-broker.

In both forex and fixed income there are big players like hedge funds that take part along with the commercial and investment banks. The world's central banks are also major participants at this level in their attempts to influence exchange rates (forex) and/or interest rates (fixed income).

The transaction sizes in the interbank market are large - generally $5 million and up. Obviously, the average individual trader is not going to be trading anywhere near that big. That's where the online brokers and forex dealers come in to play. They allow small traders to do transactions in significantly lower amounts. In fact, there is at least one which will do trades as small as $1.

Here is where some folks get a bit nervous. Many of these forex dealers actually act as market makers with their clientele. By that I mean they take the other side of the trades that are done by their customers. This is something which can sometimes happen in the stock market as well, especially with OTC stocks. The concern that folks have with this is the implied conflict of interest in terms of price execution that creates. Is a dealer who will be taking the other side of your trade going to be acting in your best interest when you put on a trade?

While it may be true that some unscrupulous dealers may take advantage of their customers in that way, I am quite confident that most of them are not acting against their customers. They simply provide liquidity to the market and earn the spread to do so. When they have an excessive exposure to any particular currency, they offset it by hedging in the interbank market or with another dealer. That's basically the same as a floor trader on any exchange.

Getting to the question of how prices get set, the market does that, not the central banks. Each individual bank and dealer is actually setting its own price. That might sound a bit strange in that it would create different rates all over the place. The fact of the matter is, however, that prices between dealers and banks are almost always going to be very, very close. There are services such as Reuters where dealer prices are aggregated and presented in data feeds, allowing everyone to know the current (and historical) market rates. Arbitrage trading keeps dealers from quoting prices too far away from each other.

There is also trading in the futures market, and the relatively new currency exchange traded funds (ETFs). The activity there, while only a small fraction of the global market volume, also contributes to keeping prices in line across the board.

John Forman is author of The Essentials of Trading (Wiley - April 2006), and a near 20 year veteran of trading and analyzing the markets. For more information on forex trading, check out John's free forex guide which will answer your questions about the currency market.

British Pound - Shorting Opportunity Bears Poised To Take Currency Lower?

In two previous articles have looked at the potential for the British Pound from the sort side and it looks just about set to fall lets take a look at the bearish argument and why it is a low risk high reward trading opportunity.

To look at this trade you will need a chart service with the indicators were going to look at and a good one is so lets take a look.

This report is written at 9AM CET on Tuesday 24th July.

This trade is against the general consensus and has the opportunity to take advantage of a washout of specs, for a quick profit with low risk.

The first starting point is the psychology of the market and its obvious that the currency is extremely bullish - in fact too bullish.

The Net Traders positions show that speculators hold a record number of longs and the % bullish (a poll of people in the market who have an opinion on the currency) shows that we are at bullish extreme.

With this market it appears that most of the short term bullish news is factored in and a break is anticipated, to correct the overbought position.

Now lets look at the chart and indicators.

Pull up the chart and the following indicators stochastic Relative Strength Index, RSI and Bollinger Band

The RSI - Is in overbought territory and we sold on waning of momentum after first high (80.00 level) and we are now seeing a push higher again.

We would expect a double top on the RSI at 80.00 (also see the high in RSI Dec 2006) so this represents firm resistance.

The stochastic After pointing down after RSI made high and dropped.

Now its trying to move to the upside again, but should turn down if you were looking at new positions you would wait for this and RSI to give you the trade and a cross of the stochastic at the same time. were in already so we will wait.

Our stop would be on a close basis 2.07.

We would expect the currency to lose momentum here and the speculators to be washed out and see prices go to target the middle of the Bollinger band.

The currency is over bought and the set up looks a good one to focus on from a bearish point of view.

Right or wrong, this is good risk reward trade and has solid reasons for looking at the short side after great run to the upside the market is now due a shakeout to correct the over bought situation.


More on becoming a profitable trader some critical FREE Trader PDF's and more FREE Forex Education visit our website at

Wall Street to Main Street: News, Views and Commentary: May 26, 2006

Its Friday May 26, 2006, and its the last day of the trading week and the beginning of a three-day weekend for the market. First and foremost we want to remind everyone to lower their flags to half-staff in memory of the soldiers that have fallen in battle to keep the United States of America free. We also want to send our thoughts out to all the families of fallen soldiers of the most recent war that is taking place in Iraq.

Now lets get down to business, history was made yesterday and some justice was served in a Texas Courtroom, as Ken Lay and Jeff Skilling were found guilty. This is the pair that single handedly forced the Sarbanes-Oxley Act or SOX to be established following the collapse of Enron that left many people without pensions to fall back on. So this is a little retribution as the pair could spend the rest of their lives in prison. They will appeal to verdict but it may do them no good, as they will just delay the inevitable a few more months or so. I dont think that anyone was really shocked by the verdict but the families of the defendants, as Lay and Skilling pleaded the It Wasnt Me defense. So lets hope that they are supplied with soap on a rope.

Now what this pair did is a far cry from a stock options issuance, but the stock options probe still continues and is growing. There are companies being dragged into this probe that are actually good companies and have done well for investors, companies such as UnitedHealth (NYSE: UNH) and Power Integrations (NASDAQ: POWI) which we happen to like but this probe is a dark cloud over both of these companies. Now what all of this scrutiny may actually do is deter good CEOs from running public companies and push them into the private sectors.

The NAMC Newswires Wall Street to Main Street segment in its entirety is only available to subscribers. Dont miss out and Keep in mind that all subscriptions are free and will remain that way. All that you need to do is go to and add your email address to receive the full segments. We value your privacy and all email addresses are only used for NAMC related items and not shared with any third parties. Your subscription allows you to participate in the newly added investor commentary, this is where we will be giving the floor to investors each day.

Next weeks investor commentary topic on Wall Street to Main Street will be Gold, Oil and Gas Prices, just chime in and tell us what you think. You can either call us toll free at 888-463-9237 between the hours of 6:30pm and 12am EST weekdays or shoot us out an email using our contact form on our website at Make sure to include your name and state in the email or in the audio, you need to be a subscriber to the text version of WSMS to participate. If you as a subscriber have a topic suggestion then we want to hear from you as well, dont be shy, we want WSMS to have more interaction with subscribers

Remember that you can always listen to the NAMC Radio on, the leader in financial podcast. and is also available on iTunes.

As you know, Wall Street to Main Street is issued only once a day and due to numerous requests we found that it may be a good idea to initiate stock alerts via email to our subscribers. So this is the plan, we will begin to alert subscribers of various stock trading opportunities that are presented through out the week. Subscribers will receive a few possibilities; we will show the trend and our thoughts. Because there are times that a stock is in motion during the day and we may know about it but that doesnt do anything for our subscribers.

The NAMC Newswire in the coming weeks will be launching a new Stock Alert program where subscribers to Wall Street to Main Street will also receive

Tid Bits

Michael Dell or Dell, Inc (NASDAQ: DELL) has been awoken, and when you awaken a sleeping giant things do begin to happen. Dell has inked a deal with Google (NASDAQ: GOOG) to have Googles software bundle in millions of new Dell computers coming out of the factory. So this is just another step for Dell as their next step is the retail sector.

Yahoo (NASDAQ: YHOO) has found synergy with eBay (NASDAQ: EBAY) as the companies team up in a multiyear partnership that will draw on the strengths of both Yahoo and eBay in online advertising, payments and communications so they can connect with even more Web surfers than they already do. This is a strategic move for both companies as they band together to combat the mighty Google.

As we anticipated Las Vegas Sands (NYSE: LVS) beat the competition and has won the bid to build Singapore's first casino this morning. LVS is the largest casino operator in the world and this entry into Singapore is a big step for the company as the profit margins in Asia for casinos are much higher than in the United States so you can expect Las Vegas Sands to easily traded above its 52 week high of $73.14, as investors and institutions begin to realize their future potential. This company could actually bring in more revenue than ever once this casino is completed.

Movers and Shakers

Some major movers in yesterday trading session include Stone Energy (NYSE: SGY) which traded up $9.19 to close at $49.95, the run up is due to a buy out offer from Energy Partners Limited (NYSE: EPL) of $2 billion, Big Lots (NYSE: BLI) traded up $2.80 to close at $16.31 due to a better than expected earnings forecast, this pushed Big Lots to a two-year high, Companhia Energetica (NYSE: CIG) traded up $5.22 to close at $41.05, J2 Global Communications (NASDAQ: JCOM) traded up $3.20 to close at $28.15, eBay (NASDAQ: EBAY) traded up $3.68 to close at $33.88, United Natural Foods (NASDAQ: UNFI) traded up $3.31 to close at $33.72 and Geoglobal Resources (AMEX: GCR) which traded up $1.07 to close at $6.32.


Due to market conditions we found it necessary to make our readers/listeners aware of companies that have been taking a little spanking, some of these stocks may be at a discount but you need to do your research, look at the charts and make sure that nothing fundamentally has changed with the company and whether it is just being dragged by the market or not. There are companies that are actually a slave to the Dow and present buying opportunities.

Some stocks that traded down yesterday include Joy Global (NASDQ: JOYG). Now this is a stock that was ripped apart in yesterdays trading session and it was most certainly overdone. They reported that their profit doubled but that was due to improved margins, something that would not be repeated in future quarters. So the sellers came out in force and smaller investors followed. The stock went as low at $45.77 before institutions rolled in at about 2:30 pm EST give or take a few minutes, and started to buy cheap stock. As an investor you need to seek out oversold situations like Joy Global because as quickly as they come down in a trading session as they could easily bounce back up once the bleeding stops. This is why we are going to initiate stock alerts on the NAMC Newswire for our subscribers..

Here we go again, another situation that was oversold, the China based online game operator and developer, The9 Limited (NASDAQ: NCTY) dropped down $3.55 to close at $23.72, the stock dropped as low as $21.89 before the bleeding began to stop. They missed the mark with their earnings this is what dragged the stock down, So you have either a flood of shorts diving in or a few institutions unloading shares, either way it puts the stock on a downward pattern, investors panic and start to unload and in certain cases forces the stock to break certain levels on the charts which trigger even more selling. But then you have bottom fishers that are looking for situations like this and they usually profit nicely from it.

Now lets look at a company called Libbey (NYSE: LBY) it has been climbing down the mountain after a couple of attempts of making upward movement. The stock broke a one-month low and could fall lower but this isnt a mass sell off, the stock is just gradually breaking down on the chart. It traded down 86 cents to close at $11.38 yesterday and could continue that downward movement as the next support level is in the $9.50 range. At that level you may find an entry point but not before then,

Other stocks that traded down yesterday include Lyon Williams Homes (NYSE: WLS) which traded down $9.05 to close at $122.00, Genesco (NYSE: GCO) traded down $2.00 to close at $36.55, Omnicare (NYSE: OCR) traded down $3.54 to close at $44.46, Blue Coat Systems (NASDAQ: BCSI) traded down $3.91 to close at $15.65, MWI Vetinary Supply (NASDAQ: MWIV) traded down $2.99 to close at $30.19, Books-A-Million (NASDAQ: BAMM) closed down $1.22 to close at $14.13 and KongZhong (NASDAQ: KONG) which traded down 95 cents to close at $11.55.

Analyst Upgrades/Downgrades

Recent Analyst upgrades include Joy Global (NASDAQ: JOYG) the oversold stock was upgraded to a Buy from a Neutral by UBS, Superior Bancorp (NASDAQ: SUPR) was upgraded to a Buy from a Neutral by FTN Midwest Research, Volt Information Sciences (NYSE: VOL) was upgraded to a Buy from a Neutral by Sidoti & Co, Alkermes (NASDAQ: ALKS) was upgraded to a Buy from a Neutral by Pacific Growth Equities, Arrow Electronics (NYSE: ARW) was upgraded to a Buy from a Neutral by Merrill Lynch, Electronic Arts (NASDAQ: ERTS) was upgraded to a Peer Perform from Under Perform by Bear Stearns, and SkyWest (NASDAQ: SKYW) was given an upgrade to a Strong Buy from an Out Perform by Raymond James.

Recent Analyst downgrades include XM satellite Radio (NASDAQ: XMSR) which was downgraded to a Market Perform from a Out Perform by Barrington Research and to a Under Perform from a Out Perform by Bear Stearns, Blue Coat Systems (NASDAQ: BCSI) they were downgraded to a Market Perform from a Market Outperform by JMP Securities and Dollar General Corp (NYSE: DG) which was downgraded to a Neutral from a Out Perform by Credit Suisse.


This is the Fifth of our Furious Five companies that we see excelling in their industry in 2006. Today we are featuring Coldwater Creek, Inc (NASDAQ: CWTR) it trades on the Nasdaq under the symbol CWTR.

For our outlook, and other vital information on the companies that we feature as the "FURIOUS FIVE" on Wall Street to Main Street just subscribe for FREE at

We cannot stress enough that investors need to do their due diligence, call the companies, get the information, consult with your investment advisor and if you do not have one consider getting one. Put the same time into investigating these companies as you do when you go to purchase a new television, its only for your protection. When it comes to thinly traded securities stagger your orders or put a limit order in to avoid a run up.

NAMC Newswire Note

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Louis Victor
NAMC Newswire

Disclaimer: None of the information contained on the NAMC Newswire constitutes a recommendation by the NAMC Newswire, its journalist, nor its parent company that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific investors or person. Each individual investor must make their own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy featured on the NAMC Newswire or NAMC Radio Any past results are not necessarily indicative of future performance. The NAMC Newswire, its journalist nor its parent company does not guarantee any specific outcome or profit, and all investors should be aware of the real risk of loss in following any strategy or investments featured on the NAMC Newswire or the NAMC Radio. The strategy or investments discussed may fluctuate in price or value and investors may get back less than you invested. Before acting on any information featured on the NAMC Newswire website or the NAMC Radio segment, investors should consider whether it is suitable for their particular circumstances and strongly consider seeking advice from their own financial or investment adviser. Investors are also urged to do their own due diligence before investing in any security.

All opinions featured on the NAMC Newswire or NAMC Radio are based upon information that is considered to be reliable, but neither the NAMC Newswire, its journalist, its parent company, affiliates nor assigns warrant its completeness or accuracy, and it should not be relied upon as such. The statements and opinions featured on the NAMC Newswire by its journalist are based on their outlook at the time of the statement or opinion, and are subject to change without notice. NAMC may at times hold a position in the companies that it features, in these cases appropriate disclosure is made.

Louis Victor is the host of the syndicated radio show and financial newsletter "Wall Street to Main Street" which is featured on the NAMC Newswire Radio. He has been involved in the financial industry for over two decades, on the retail and investment banking ends. He is also well versed in the advertising and marketing industries, which has given him insight into market trends and unqiue companies that may be under the radar.

How The Value of Stocks Are Influenced

A stocks value can change at any given moment, depending on market conditions,investor perceptions, or a number of other issues. When investors pour money into a company's stock, they do so because they believe that the company is going to turn a profit, and the company's stock will go up in value. However if the investors decide that the company's outlook is poor, and they don't invest, or if they sell the stock that they already own, then the company's stock price will fall.

Investors that purchase stock, believe that others will by the stock as well, and that the share price will rise. Investing is a gamble, but its nothing like betting on horses. a long shot always has a chance to win the race even if everyone else is betting on the favorite. But in the stock market, the betting itself actually influences the outcome. Should lots of investors bet on a particular stock, the price of the stock will rise. The stock becomes more valuable because investors want it. The reverse is also true, if investors sell their stock in a company, the stock will fall in value. The more a stock fall, the more investors will sell.

Some people just invest in stock to get a quarterly dividend payment. Dividends are a portion of the company's profits that are paid out to its shareholders. Lets say that if a company declares a annual dividend of $8 dollars a share, and you own 100 shares then you will have made $800 dollars a year, or they would be paid $200 dollars each quarter. The company's board of directors decides how large of a dividend the company will pay, or if it will pay one at all. Most of the time only large, mature companies pay dividends. Smaller companies need to keep reinvesting their profits in-order to continue to grow.

All stocks don't act alike. One of the basic differences is how closely a stocks value, or price, is tied to the condition of the economy. Cyclical stocks are the shares of a company that are highly dependant on the state of the economy. When the economy slows down, their earnings fall rapidly, and so dose the price of their stock. However once the economy recovers, a company's earnings will rise rapidly and their stock will go up.

To learn the truth about options trading and discover some useful options trading tips then visit: