Introduction
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Forex Robots are automated systems that trade the forex market for you. They are also known as expert advisors (ea's) and can be referred to as automated trading software.
Advantages
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They are useful if you dont have time to trade the currency market on a daily basis. This is referred to as day trading and in some cases scalping. The automated software will can trade for you and make you profit provided you choose a good forex robot. There are reviews all over the net on the different robots available. Forex forums are a good place to look for information. The also reduce the stress day trading can cause and help aspiring traders who have discipline and emotion problems. These can both have a negative affect on trading. Fear and greed are eliminated when automated software trades on your behalf.
Disadvantages
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Some people claim that forex robots do not work. Of course not all work but there are a few that can produce profit provided they are used correctly. Factors that have to be considered are: Does the forex robot use a stop loss? You should never use a martingale system as this can blow your account in a single trade. It is also important to choose a broker who has a competitive spread on the pair that the forex robot trades on. Many systems look good in back testing due to slippage, spread and execution delays not being taking into consideration. It is a good idea to forward test the expert advisor before using it on your live account.
What to look for in a forex robot
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Make sure that it uses a stop loss. It would be an advantage if it runs on currency pairs with low spreads. Also check the time that the ea is active. Scalping ea's that run during the quieter times are amongst the most profitbale and have little risk. Even scalping robots can bring big profits with small drawdowns.
Summary
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Forex robots do work, it is just a matter of back testing and forward testing untill the system is optimized to bring the highest amount of profit with the smallest amount of risk and drawdown. I use an ea on my live account that I have setup on a virtual private server and it brigns me great results everyday without me having to go through the stress that manual traders do.
Good Luck with your trading!
Sunday, May 30, 2010
Wednesday, May 26, 2010
Business Cycles Affect Currency Market Cycles
Early in life we discover the meaning of past, present and future in linear terms, and we structure our life around those words, but most of the events we experience in daily life occur in cycles. There are several obvious examples. The four seasons, weather patterns, and business transactions, affect our present linear life just like the past and the future are always experienced in the present.
A business cycle is defined as the growth and contraction of our economic life. Various business cycles determine global economic trends, and in order to successfully understand and participate in any kind of monetary trading system it’s important to identify a certain business cycle, and the trends it creates. The business cycle is a vital factor in the growth or the shrinkage of the money supply; the more currency in a given market, the less value it has, so the forex market, and the cycles within it, always responds in some way to a business cycle. A Business cycle can define consumer demands, unemployment, the availability of credit, industrial production, and these issue impact international capital, so it either fortifies or depreciates a country’s currency.
When a nation is going through a business cycle boom international capital flow increases; traders are always looking for better returns on their investments through international loans or foreign direct investments. An increase in capital flow will cause a country’s currency to appreciate, but if a country is going through the bust cycle of the business cycle, capital investments will disappear and currency values depreciate. The business cycle continues in one direction or another until it’s saturated through market developments or government action.
Understanding how the business cycle works gives currency traders the opportunity to short the currencies of nations that are in the bust phase of the business cycle, and long the currencies of nations entering the boom phrase. The key to turning these trades into profits is identifying market cycles with some help from forex analysis tools and forex charts, and then using a forex strategy that flows with them.
There are Three Major Currency Market Cycles
It doesn’t matter what financial market you’re investing in; financial markets only move in three cycles. The major market cycles are: Trending, Consolidation and Breakout.
The trending cycle is when a currency’s value consistently moves in the same direction; either up or down. A forex trend is defined as progressively higher highs and higher lows. Since currency values usually don’t move in a straight line up or down, it can be hard to identify a trend without some kind of help.
A consolidation cycle is also known as Non Trending; it looks like a horizontal line of bars on a forex chart. When the value is stuck between two horizontal supports and resistance levels can’t break these supports for at least seven bars, the consolidation cycle is in motion.
Moving averages or other technical indicators will help determine if the market is trending or consolidating. The moving average line will almost be horizontal in a consolidating market.
The breakout market cycle occurs when the currency has been in the consolidation market for at least seven bars, and then the price breaks out of this ranging market and creates a new high or low. Most forex traders only have a forex strategy for one or two market cycles. The most popular strategies are for breakout and trend cycles.
You Need More Than One Strategy to be Successful in all Three Market Cycles
Recent research on market cycles shows that on average the forex market is only in the trending cycle thirty percent of the time; it’s in a breakout cycle ten percent of the time, and is in the consolidation cycle sixty percent of the time. If you only have a strategy for the trending cycle, you’re only trading thirty percent of the time. If you have a breakout strategy along with a trending strategy that only increases your trading time to forty percent. That means if you only incorporate those two market cycle strategies into your forex system, you will be sitting on the trading sidelines sixty percent of the time.
Some traders do get sucked in and make trades using the wrong strategy when the market is in the consolidation cycle, and they experience the painful results of that decision, so it’s crucial to have a strategy for each cycle. The bottom line for profitable trades is to identify market cycles as early as possible, and then use the correct forex trading strategy so you flow with the cycles as they change.
A business cycle is defined as the growth and contraction of our economic life. Various business cycles determine global economic trends, and in order to successfully understand and participate in any kind of monetary trading system it’s important to identify a certain business cycle, and the trends it creates. The business cycle is a vital factor in the growth or the shrinkage of the money supply; the more currency in a given market, the less value it has, so the forex market, and the cycles within it, always responds in some way to a business cycle. A Business cycle can define consumer demands, unemployment, the availability of credit, industrial production, and these issue impact international capital, so it either fortifies or depreciates a country’s currency.
When a nation is going through a business cycle boom international capital flow increases; traders are always looking for better returns on their investments through international loans or foreign direct investments. An increase in capital flow will cause a country’s currency to appreciate, but if a country is going through the bust cycle of the business cycle, capital investments will disappear and currency values depreciate. The business cycle continues in one direction or another until it’s saturated through market developments or government action.
Understanding how the business cycle works gives currency traders the opportunity to short the currencies of nations that are in the bust phase of the business cycle, and long the currencies of nations entering the boom phrase. The key to turning these trades into profits is identifying market cycles with some help from forex analysis tools and forex charts, and then using a forex strategy that flows with them.
There are Three Major Currency Market Cycles
It doesn’t matter what financial market you’re investing in; financial markets only move in three cycles. The major market cycles are: Trending, Consolidation and Breakout.
The trending cycle is when a currency’s value consistently moves in the same direction; either up or down. A forex trend is defined as progressively higher highs and higher lows. Since currency values usually don’t move in a straight line up or down, it can be hard to identify a trend without some kind of help.
A consolidation cycle is also known as Non Trending; it looks like a horizontal line of bars on a forex chart. When the value is stuck between two horizontal supports and resistance levels can’t break these supports for at least seven bars, the consolidation cycle is in motion.
Moving averages or other technical indicators will help determine if the market is trending or consolidating. The moving average line will almost be horizontal in a consolidating market.
The breakout market cycle occurs when the currency has been in the consolidation market for at least seven bars, and then the price breaks out of this ranging market and creates a new high or low. Most forex traders only have a forex strategy for one or two market cycles. The most popular strategies are for breakout and trend cycles.
You Need More Than One Strategy to be Successful in all Three Market Cycles
Recent research on market cycles shows that on average the forex market is only in the trending cycle thirty percent of the time; it’s in a breakout cycle ten percent of the time, and is in the consolidation cycle sixty percent of the time. If you only have a strategy for the trending cycle, you’re only trading thirty percent of the time. If you have a breakout strategy along with a trending strategy that only increases your trading time to forty percent. That means if you only incorporate those two market cycle strategies into your forex system, you will be sitting on the trading sidelines sixty percent of the time.
Some traders do get sucked in and make trades using the wrong strategy when the market is in the consolidation cycle, and they experience the painful results of that decision, so it’s crucial to have a strategy for each cycle. The bottom line for profitable trades is to identify market cycles as early as possible, and then use the correct forex trading strategy so you flow with the cycles as they change.
Sunday, May 2, 2010
FOREX (Foreign Exchange Market)
The forex market is all about trading between countries, the currencies of those countries and the timing of investing in certain currencies. The FX market is trading between counties, usually completed with a broker or a financial company. Many people are involved in forex trading, which is similar to stock market trading, but FX trading is completed on a much larger overall scale. Much of the trading does take place between banks, governments, brokers and a small amount of trades will take place in retail settings where the average person involved in trading is known as a spectator. Financial market and financial conditions are making the forex market trading go up and down daily. Millions are traded on a daily basis between many of the largest countries and this is going to include some amount of trading in smaller countries as well.
From the studies over the years, most trades in the forex market are done between banks and this is called interbank. Banks make up about 50 percent of the trading in the forex market. So, if banks are widely using this method to make money for stockholders and for their own bettering of business, you know the money must be there for the smaller investor, the fund mangers to use to increase the amount of interest paid to accounts. Banks trade money daily to increase the amount of money they hold. Overnight a bank will invest millions in forex markets, and then the next day make that money available to the public in their savings, checking accounts and etc.
Commercial companies are also trading more often in the forex markets. The commercial companies such as Deutsche bank, UBS, Citigroup, and others such as HSBC, Braclays, Merrill Lynch, JP Morgan Chase, and still others such as Goldman Sachs, ABN Amro, Morgan Stanley, and so on are actively trading in the forex markets to increase wealth of stock holders. Many smaller companies may not be involved in the forex markets as extensively as some large companies are but the options are stil there.
Central banks are the banks that hold international roles in the foreign markets. The supply of money, the availability of money, and the interest rates are controlled by central banks. Central banks play a large role in the forex trading, and are located in Tokyo, New York and in London. These are not the only central locations for forex trading but these are among the very largest involved in this market strategy. Sometimes banks, commercial investors and the central banks will have large losses, and this in turn is passed on to investors. Other times, the investors and banks will have huge gains.
Different currency rates happen and change every day. What the value of the dollar may be one day could be higher or lower the next. The trading on the forex market is one that you have to watch closely or if you are investing huge amounts of money, you could lose large amounts of money. The main trading areas for forex, happens in Tokyo, in London and in New York, but there are also many other locations around the world where forex trading does take place.
The most heavily traded currencies are those that include (in no particular order) the Australian dollar, the Swiss franc, the British pound sterling, the Japanese yen, the Eurozone eruo, and the United States dollar. You can trade any one currency against another and you can trade from that currency to another currency to build up additional money and interest daily.
The areas where forex trading is taking place will open and close, and the next will open and close. This is seen also in the stock exchanges from around the world, as different time zones are processing order and trading during different time frames. The results of any forex trading in one country could have results and differences in what happens in additional forex markets as the countries take turns opening and closing with the time zones. Exchange rates are going to vary from forex trade to forex trade, and if you are a broker, or if you are learning about the forex markets you want to know what the rates are on a given day before making any trades.
The stock market Is generally based on products, prices, and other factors within businesses that will change the price of stocks. If someone knows what is going to happened before the general public, it is often known as inside trading, using business secrets to buy stocks and make money - which by the way is illegal. There is very little, if any at all inside information in the forex trading markets. The monetary trades, buys and sells are all a part of the forex market but very little is based on business secrets, but more on the value of the economy, the currency and such of a country at that time.
Every currency that is traded on the forex market does have a three letter code associated with that currency so there is no misunderstanding about which currency or which country one is investing with at the time. The eruo is the EUR and the US dollar is known as the USD. The British pound is the GBP and the Japanese yen is known as the JPY. If you are interested in contacting a broker and becoming involved in the forex markets you can find many online where you can review the company information and transactions before processing and becoming involved in the forex markets.
From the studies over the years, most trades in the forex market are done between banks and this is called interbank. Banks make up about 50 percent of the trading in the forex market. So, if banks are widely using this method to make money for stockholders and for their own bettering of business, you know the money must be there for the smaller investor, the fund mangers to use to increase the amount of interest paid to accounts. Banks trade money daily to increase the amount of money they hold. Overnight a bank will invest millions in forex markets, and then the next day make that money available to the public in their savings, checking accounts and etc.
Commercial companies are also trading more often in the forex markets. The commercial companies such as Deutsche bank, UBS, Citigroup, and others such as HSBC, Braclays, Merrill Lynch, JP Morgan Chase, and still others such as Goldman Sachs, ABN Amro, Morgan Stanley, and so on are actively trading in the forex markets to increase wealth of stock holders. Many smaller companies may not be involved in the forex markets as extensively as some large companies are but the options are stil there.
Central banks are the banks that hold international roles in the foreign markets. The supply of money, the availability of money, and the interest rates are controlled by central banks. Central banks play a large role in the forex trading, and are located in Tokyo, New York and in London. These are not the only central locations for forex trading but these are among the very largest involved in this market strategy. Sometimes banks, commercial investors and the central banks will have large losses, and this in turn is passed on to investors. Other times, the investors and banks will have huge gains.
Different currency rates happen and change every day. What the value of the dollar may be one day could be higher or lower the next. The trading on the forex market is one that you have to watch closely or if you are investing huge amounts of money, you could lose large amounts of money. The main trading areas for forex, happens in Tokyo, in London and in New York, but there are also many other locations around the world where forex trading does take place.
The most heavily traded currencies are those that include (in no particular order) the Australian dollar, the Swiss franc, the British pound sterling, the Japanese yen, the Eurozone eruo, and the United States dollar. You can trade any one currency against another and you can trade from that currency to another currency to build up additional money and interest daily.
The areas where forex trading is taking place will open and close, and the next will open and close. This is seen also in the stock exchanges from around the world, as different time zones are processing order and trading during different time frames. The results of any forex trading in one country could have results and differences in what happens in additional forex markets as the countries take turns opening and closing with the time zones. Exchange rates are going to vary from forex trade to forex trade, and if you are a broker, or if you are learning about the forex markets you want to know what the rates are on a given day before making any trades.
The stock market Is generally based on products, prices, and other factors within businesses that will change the price of stocks. If someone knows what is going to happened before the general public, it is often known as inside trading, using business secrets to buy stocks and make money - which by the way is illegal. There is very little, if any at all inside information in the forex trading markets. The monetary trades, buys and sells are all a part of the forex market but very little is based on business secrets, but more on the value of the economy, the currency and such of a country at that time.
Every currency that is traded on the forex market does have a three letter code associated with that currency so there is no misunderstanding about which currency or which country one is investing with at the time. The eruo is the EUR and the US dollar is known as the USD. The British pound is the GBP and the Japanese yen is known as the JPY. If you are interested in contacting a broker and becoming involved in the forex markets you can find many online where you can review the company information and transactions before processing and becoming involved in the forex markets.
Trade Forex Online: Factors to consider
The value of a country's currency is influenced by a number of factors: The economics of the country, its trade deficit, political and social environment.
If the current government's deficit increases, its currency's value will fall. As the government decreases its deficit, the currency can begin to recover value and the exchange rate will become more favorable. The same relationship holds true with a country's trade deficit. If the country imports more goods and services than it exports it will have a negative influence on the currency.
Inflation lessens the ability of a unit of currency to buy less and less, so the currency loses value. If the inflation becomes rampant the currency is valued less because it's also viewed as unstable. As the rate of inflation begins to decline the currency begins to increase in value.
Politics and social changes can play havoc with the currency exchange rates. Changes in the regime that are viewed negatively can lower the value of the country's currency in the short term and continue into the long term. If the present government makes decisions that are looked at negatively it can decrease the currency value as well. The opposite can happen. Current government officials can make policy changes that are viewed positively by the rest of the world and that can increase the value of the currency.
For the United States, interest rates and the price of oil can have a major impact on the value of the US dollar.
Interest rates effect how much it's going to cost to borrow money and how much can be earned on investments. Historically if the US raises its interest rates it attracts foreign investors. Those investors have to sell their own currency in order to buy U.S. dollars to purchase treasury bonds. If the interest begins to drop, or the perception is that the rates won't rise any more, investors may purchase Euros as an alternative investment which lowers the value of the US dollar.
The United States is dependent on foreign oil production. Many US industries are dependent on oil and an increase in the price of oil means an increase in their expenses and a drop in profits. In a similar way, a country's dependency on oil influences how the country's currency is valued and will be impacted by changes in oil prices. The US's dependency on oil makes the dollar more sensitive to oil prices than countries who aren't so dependent. As the price of oil increases the value of the dollar drops.
If the current government's deficit increases, its currency's value will fall. As the government decreases its deficit, the currency can begin to recover value and the exchange rate will become more favorable. The same relationship holds true with a country's trade deficit. If the country imports more goods and services than it exports it will have a negative influence on the currency.
Inflation lessens the ability of a unit of currency to buy less and less, so the currency loses value. If the inflation becomes rampant the currency is valued less because it's also viewed as unstable. As the rate of inflation begins to decline the currency begins to increase in value.
Politics and social changes can play havoc with the currency exchange rates. Changes in the regime that are viewed negatively can lower the value of the country's currency in the short term and continue into the long term. If the present government makes decisions that are looked at negatively it can decrease the currency value as well. The opposite can happen. Current government officials can make policy changes that are viewed positively by the rest of the world and that can increase the value of the currency.
For the United States, interest rates and the price of oil can have a major impact on the value of the US dollar.
Interest rates effect how much it's going to cost to borrow money and how much can be earned on investments. Historically if the US raises its interest rates it attracts foreign investors. Those investors have to sell their own currency in order to buy U.S. dollars to purchase treasury bonds. If the interest begins to drop, or the perception is that the rates won't rise any more, investors may purchase Euros as an alternative investment which lowers the value of the US dollar.
The United States is dependent on foreign oil production. Many US industries are dependent on oil and an increase in the price of oil means an increase in their expenses and a drop in profits. In a similar way, a country's dependency on oil influences how the country's currency is valued and will be impacted by changes in oil prices. The US's dependency on oil makes the dollar more sensitive to oil prices than countries who aren't so dependent. As the price of oil increases the value of the dollar drops.
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