Adaptation To The Realities Of The Market
Do you think adaptation to the realities of the market is the most important thing?
Many times in the past I've written about the need to adapt, the need to be able to change your behavior relative to the market because the markets are ever changing. I've stated that mechanical systems may be workable, but for only a short time relative to the life of markets. You must learn to trade what you see and to understand what you see on a chart.
When I first began trading there was no such things as futures contracts for foreign currencies. Why didn't they exist? Because there was no need for them! In the 1970's all that changed when the US dollar went off the gold standard and began to float against other currencies. Following that, the Chicago Mercantile Exchange began to create currency futures to provide a place where currency traders could hedge the risks associated with dealing in foreign currencies. Some of these risks are direct and some are indirect. Direct risk is involved for those who deal directly in foreign exchange. Indirect risk involves companies who export or import and receive payments or make payments in the currency of another country.Ever since currency futures were created, they have been in a state of flux. More recently, for purposes of futures trading, currency gyrations have centered on a massive move away from currency futures to more direct trading in the forex markets. Currency futures, while maintaining their volume and open interest figures, are actually less liquid than they had been previously. Volume and open interest do not reveal the picture of what is happening in the currency futures pits. Volume and open interest levels are being maintained by fewer and fewer futures traders.
In the period from 1992 to the present, we've witnessed currency futures moving from "red-hot" to "cool" and now hot again insofar as speculators are concerned. Foreign exchange, which in 1992 was one of the hottest plays, first turned dull and then back again to exciting.That this has happened can be seen in areas of which most futures traders are ignorant. Five years ago foreign currency traders were being paid huge salaries and anyone with a track record could virtually name his price. Following that, currency traders were no longer in great demand. Now, again, there is a huge demand for successful currency traders.Currency futures are but a small representation of the $1.5 trillion dollar foreign exchange market. Professional currency traders use forex, forwarding contracts, derivatives of all kinds, and the futures pits, to deploy their various trading and hedging strategies. Looking at only the futures is like the blind man trying to tell what an elephant is like by feeling only the tusks.
In past years, foreign exchange desks at banks, insurance companies, brokers, and other institutions were seen closing down and firing hundreds of employees. Today, they are again looking for currency traders.In the 1990s, Midland Bank closed its foreign New York office laying off dozens of people. Frankfurt Bank had pulled out of New York and Tokyo closed down its foreign exchange desk. At that time, the world's largest foreign exchange trader was Citicorp. In the D-Mark alone, they shrank from 39 traders working at 17 different locations around the world to 4 D-Mark traders all working in one room. Keep in mind that these were traders who had been to a greater or lesser extent using the currency futures. The result at that time was that there were fewer big fluctuations in the currency futures than there once were and therefore much less profit.
However, today, just the opposite is happening. Central banks are presently making much greater interventions in the currency markets. They have stopped publishing targeted exchange rates. Such action by the central banks leaves currency speculators at a loss for what to do, and the result has been a huge surge in forex trading.Because today forex brokers abound and are actively marketing the idea of currency speculation, it is having a profound effect on the foreign exchange planning of individuals, companies, and nations.
If some day the major currencies would be the US dollar, the J-Yen and the euro, who would need thousands of traders to trade them? There would be far fewer currency misalignments to provide a basis for trading. But that is not the way the world is moving. The picture I just presented ignores the rise of China as a major economic force on the world scene. Almost certainly, the Chinese currency will become a major trading vehicle. The same is true for other emerging countries. Some of them will no doubt have important currencies from the point of view of world trade. But will these currencies be traded in the futures markets or in forex?
The changes in just this one area ? currency trading ? are an example of how things rapidly change and point out the need for traders to adapt. There have of course, been many other changes in recent years. The advent of all-electronic markets has produced markets of a completely different kind. Computers have brought about the ability to trade in various time frames. New exchanges have created new markets and new contracts ? so many, in fact, that it is difficult to know exactly where to direct ones trading efforts. It is now possible to trade virtually around the clock. It seems that somewhere, some market is trading.
All the best in your trading,
Trading Educators Inc
Joe Ross has been trading for more than 47 years, and is a well known Master Trader. He has survived all the up and downs of the markets because of his adaptable trading style, using a low-risk approach that produces consistent profits.
Joe is the creator of the Ross hook, and has set new standards for low-risk trading with his concept of "The Law of Charts?." Joe was a private trader for most of his life. In the mid 80's he shift his focus and decided to share his knowledge. After his recovery, he founded Trading Educators in 1988 to teach aspiring traders how to make profits using his trading approach.He has written 12 major books on trading. All of them have become classics and have been translated into many different languages.
Joe holds a Bachelor of Science degree in Business Administration from the University of California at Los Angeles. He did his Masters work in Computer Sciences at the George Washington University extension in Norfolk, VA.Joe still tutors, teaches, writes, and trades regularly. Joe is still an active and integral part of Trading Educators.
Trade Exit - How To Cut Losses And Let Profits Run
Cut your losses short and let your profits run. This is the essence of your trade exit rules.Cutting losses shortA protective stop protects your trading capital, it is your initial trade risk. Before a trade is even entered your should know where your protective stop will be - this is your maximum loss (barring any slippage on the exit). There are many different ways to determine a protective stop on a trade:Set dollar amount - Say $500 on every tradePercentage retracement - Say 10% from the entry priceVolatil...(related: Currency Trading)
Forex 101: Make Money With Currency Trading
For those unfamiliar with the term, FOREX (FOReign EXchange market), refers to an international exchange market where currencies are bought and sold. The Foreign Exchange Market that we see today began in the 1970's, when free exchange rates and floating currencies were introduced. In such an environment only participants in the market determine the price of one currency against another, based upon supply and demand for that currency.FOREX is a somewhat unique market for a number of reasons. Firstly, it is one of the few markets in which it can be said with very few qualifications that it is free of external controls and that it cannot be manipula...(related: Currency Trading)
Q1: When you consider that the foreign exchange market has become the world's largest financial market, with over $1.5 trillion USD traded daily, where does it go from here?A1:The FX market is unique, in the UK there is no central exchange, we trade via the inter bank market. With more and more private individuals taking up margin trading and new forex brokers setting up, I can only see the market grow in the near fut...(related: Currency Trading)
Hedging Foreign Exchange Risks
The exchange rate of the Macedonian Denar against the major hard currencies of the world has remained stable in the last few years. Because of the IMF restrictions, the local Narodna (Central) Bank does not print money and there are no physical Denars in the economy and in the local banks.Thus, even if people want to buy Foreign Exchange in the black market, or directly from the banks - they do not have the Denars to do it with.The total amount of Denars (M1, in professional financing lingo) in the economy is around 200,000,000 USD, according to official figures. This translates into 100 USD per capita. Thus, even if each and every citizen of Macedonia were to decide to convert ALL their Denars to Deutsch Marks - they would still be able to buy only 150 DM each, on average. These tiny amounts are n...(related: Currency Trading)
Foreign exchange market, or better known as FOREX, is the world's largest and most prolific financial exchange market originated on 1973. Bearing the status of largest and most prolific currency exchange market, FOREX is the center stage where a v...(related: Currency Trading)
Internet And Computer Systems In The Forex Business
With every passing year the interest in electronic trading is bigger, more especially trading shares and currency through Internet. A new profession came forward ? this of the currency dealer. The appearance of this profession was caused by the full force of development of Internet, which enabled the exchange business to be carried over at home or at the office. The electronic platforms offered by banks and investment brokers enables all of us to go in the sea of the financial markets and to start living a difference a...(related: Currency Trading)
Why Demo Account Performance Is Often Better Than Real Account Performance
Over the past several years, the popularity of online currency trading has grown substantially. Each day, online FX brokerage firms attract new investors - each of them lining up with a glint in their eye, lured in by promises of easy money. Most of these companies allow you to sign up for a free demo account which lets you place mock trades using their trading platform to get a feel for the excitement of currency trading. In the casual world of free demo accounts - many young traders find they are able to garner impressive profits without a significant amount of effort. It almost seems too good to be true. But transferring this success from a demo account to a real account is far less common. Why is this? The actual trading platform behaves the exact same way,...(related: Currency Trading)
How Do Other Countries Devalue Their Currencies?
Countries devalue their currencies only when they have no other way to correct past economic mistakes - whether their own or mistakes committed by their predecessors.The ills of a devaluation are still at least equal to its advantages.True, it does encourage exports and discourage imports to some extents and for a limited period of time. As the devaluation is manifested in a higher inflation, even this temporary relief is eroded. In a previous article in this paper I described WHY governments resort to such a drastic measure. This article will deal with HOW they do it.A government can be forced into a devaluation by an ominous trade deficit. Thailand, Mexico, the Czech Republic - all devalued strongly, willingly...(related: Currency Trading)
I read on a bulletin board a traders comment that on his first outing trading the E-Mini S&P 500 he lost on each of his trades. He noted though, that had he had a wider stop each of his trades would have been profitable and that therefore he would be trading with a wider stop in future.A wider stop on these particular trades may have worked, but this does not mean that a wider stop per se is the answer. In fact, everyday there is the possibility of any given trade going into profit if given enough room, but that does not a wise strategy make. This trader was a seller in a market that subsequently went down; hence he could see that had he given his position a bit more room he would have made a handsome profit. Unless this t...(related: Currency Trading)
Trading Tips No 1: Learn How To Trade The Moment Of Truth
So you have learned how to trade the markets by mastering a few trading tools like Moving Averages, Channels, Stochastics, MACD, or RSI - that is a great accomplishment achieved by only a few. However, having the tools and rules to trade markets successfully, year in and year out, i...(related: Currency Trading)
Ways To Acquire Discipline In Trading
One way to acquire discipline in trading..."Hey Joe! When you were teaching us at our Forex office in Florida, you stressed discipline. Our head trader stresses discipline. What I want to know is if discipline can be acquired or is it just something you are born with? I'm having trouble finding it in myself." - trader -Personally, I believe discipline can be learned, although at times it is very painful. When I began trading, I was a very undisciplined person. But trading and the markets forced me to become disciplined. Was the discipline alre...(related: Currency Trading)
Forex Market Overview
"FX" is an abbreviation of "forex" or "foreign exchange." Foreign exchange is the largest and most liquid market in the world trading approximately $2 trillion every day (that's over 30 times the daily volume of NASDAQ...(related: Currency Trading)
Where To Get Forex Training
For those of you who are interested in forex trading, you may want to start off by getting some good forex training. Forex training is a necessity for anyone with this interest. This is because a lot of money is involved in forex trading. If you don't get some forex training, you are bound to lose a lot of money.Some of you may not even know what forex trading is. If you don't know this, you defiantly need some forex traini...(related: Currency Trading)