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It has broken the 26 and 200 day moving average a close below 96.6380 would signal a further move down.

MACD signaling a sell and momentum slowing.

This is from a daily perspective.

Looking at the Hourly the EUR$ looks bid.

I personally think that the futures will rally to about 96.7830 before a move down it to 96.50’s

• Market order
  A market order is an order to buy or sell at the current market price. For example, EUR/USD is currently trading at 1.2140. If you wanted to buy at this exact price, you would click buy and your trading platform would instantly execute a buy order at that exact price. If you ever shop on Amazon.com, it’s (kinda) like using their 1-Click ordering. You like the current price, you click once and it’s yours! The only difference is you are buying or selling one currency against another currency instead of buying Britney Spears CDs.
• Limit order
  A limit order is an order placed to buy or sell at a certain price. The order essentially contains two variables, price and duration. For example, EUR/USD is currently trading at 1.2050. You want to go long if the price reaches 1.2070. You can either sit in front of your monitor and wait for it to hit 1.2070 (at which point you would click a buy market order), or you can set a buy limit order at 1.2070 (then you could walk away from your computer to attend your ballroom dancing class). If the price goes up to 1.2070, your trading platform will automatically execute a buy order at that exact price. You specify the price at which you wish to buy/sell a certain currency pair and also specify how long you want the order to remain active (GTC or GFD).
• Stop-loss order
  A stop-loss order is a limit order linked to an open trade for the purpose of preventing additional losses if price goes against you. A stop-loss order remains in effect until the position is liquidated or you cancel the stop-loss order. For example, you went long (buy) EUR/USD at 1.2230. To limit your maximum loss, you set a stop-loss order at 1.2200. This means if you were dead wrong and EUR/USD drops to 1.2200 instead of moving up, your trading platform would automatically execute a sell order at 1.2200 and close out your position for a 30 pip loss (eww!). Stop-losses are extremely useful if you don’t want to sit in front of your monitor all day worried that you will lose all your money. You can simply set a stop-loss order on any open positions so you won’t miss your basket weaving class.

Weird Sounding Order Types

• GTC (Good ‘til canceled)
  A GTC order remains active in the market until you decide to cancel it. Your broker will not cancel the order at any time. Therefore it’s your responsibility to remember that you have the order scheduled.
• GFD (Good for the day)
  A GFD order remains active in the market until the end of the trading day. Because foreign exchange is a 24-hour market, this usually means 5pm EST since that that’s U.S. markets close, but I’d recommend you double check with your broker.
• OCO (Order cancels other)
  An OCO order is a mixture of two limit and/or stop-loss orders. Two orders with price and duration variables are placed above and below the current price. When one of the orders is executed the other order is canceled. Example: The price of EUR/USD is 1.2040. You want to either buy at 1.2095 over the resistance level in anticipation of a breakout or initiate a selling position if the price falls below 1.1985. The understanding is that if 1.2095 is reached, you will buy order will be triggered and the 1.1985 sell order will be automatically canceled.

Always check with your broker for specific order information and to see if any rollover fees will be applied if a position is held longer than one day. Keeping your ordering rules simple is the best strategy.

There are many benefits and advantages to trading Forex. Here are just a few reasons why so many people are choosing this market:

• No commissions.
  No clearing fees, no exchange fees, no government fees, no brokerage fees. Brokers are compensated for their services through something called the bid-ask spread.
• No middlemen. Spot currency trading eliminates the middlemen, and allows you to trade directly with the market responsible for the pricing on a particular currency pair.
• No fixed lot size.
  In the futures markets, lot or contract sizes are determined by the exchanges. A standard-size contract for silver futures is 5000 ounces. In spot Forex, you determine your own lot size. This allows traders to participate with accounts as small as $250 (although we explain later why a $250 account is a bad idea).
• Low transaction costs.
  The retail transaction cost (the bid/ask spread) is typically less than 0.1 percent under normal market conditions. At larger dealers, the spread could be as low as .07 percent. Of course this depends on your leverage and all will be explained later.
• A 24-hour market.
  There is no waiting for the opening bell – from Sunday evening to Friday afternoon EST, the Forex market never sleeps. This is awesome for those who want to trade on a part-time basis, because you can choose when you want to trade–morning, noon or night.
• No one can corner the market.
  The foreign exchange market is so huge and has so many participants that no single entity (not even a central bank) can control the market price for an extended period of time.
• Leverage.
  In Forex trading, a small margin deposit can control a much larger total contract value. Leverage gives the trader the ability to make nice profits, and at the same time keep risk capital to a minimum. For example, Forex brokers offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable a trader to buy or sell $10,000 worth of currencies. Similarly, with $500 dollars, one could trade with $100,000 dollars and so on. But leverage is a double-edged sword. Without proper risk management, this high degree of leverage can lead to large losses as well as gains.
• High Liquidity.
  Because the Forex Market is so enormous, it is also extremely liquid. This means that under normal market conditions, with a click of a mouse you can instantaneously buy and sell at will. You are never “stuck” in a trade. You can even set your online trading platform to automatically close your position at your desired profit level (a limit order), and/or close a trade if a trade is going against you (a stop loss order).
• Free “Demo” Accounts, News, Charts, and Analysis. Most online Forex brokers offer ‘demo’ accounts to practice trading, along with breaking Forex news and charting services. All free! These are very valuable resources for “poor” and SMART traders who would like to hone their trading skills with ‘play’ money before opening a live trading account and risking real money.
• “Mini” and “Micro” Trading:
  You would think that getting started as a currency trader would cost a ton of money. The fact is, compared to trading stocks, options or futures, it doesn’t. Online Forex brokers offer “mini” and “micro” trading accounts, some with a minimum account deposit of $300 or less. Now we’re not saying you should open an account with the bare minimum but it does makes Forex much more accessible to the average (poorer) individual who doesn’t have a lot of start-up trading capital.

Good, good… but what the hell does that actually mean?! Well, let me show you a chart for a clearer view:

In the EURUSD 1H chart above we have a clear downtrend. Moreover, there’s a rather obvious down-trendline that probably most traders have drawn on their respective charts. Alright, in this scenario, where are most traders to place their stoplosses? well, probably few pips above that trendline, isn’t it?

Big dogs (institutional traders, investment banks, hedge-fund managers and the sort) know this. They can “smell” where retail traders (us) have placed our stoploss orders, and they more obvious the trendline or the support/resistance level the better for them. Since those guys have the muscle to spike price under some specific conditions they mercilessly raid our stoplosses in order to shake us out of our positions.

How do they do it? well, they usually wait for volume dryouts in the market so they can indeed move the market with their massive orders. News announcements are their favorite time due to the high volatility market conditions. This is exactly what happens:

1) They wait for price to reach that hot level (in the previous example, that’d be the trendline near-abouts).

2) Then when trading volume is thin in the market (right at the news announcement, or during an off-peak time of the day, etc), they slap their massive orders into the market just enough to drive price beyond that key level.

3) All those poor people’s stop losses get triggered!

4) And here is the beef of it all: a stop loss order is nothing but a pending order opposite to your current position. In the previous example, since we were in a downtrend, most of the people who were short EURUSD also had a  pending buy stop order (meaning their stoploss order) few pips above that trendline. Are you with me so far? so effectively what we have is a bunch of buy stop orders triggering at once, which actually enhances and accelerates the breakout thrust even further!

5) At this time, we have many people (AKA stoploss orders) wanting to buy EURUSD. And if someone buys EURUSD, that means that there must be someone else SELLING -shorting- EURUSD to them… Guess who is shorting EURUSD off those stoplosses? BINGO! the Big Dogs are feeding their positions off those stoploss orders because they know that the breakout is in fact only a fake breakout (since they popped it out of the blue at the end of the day) and soon the downtrend will resume as expected. So what they are effectively doing is re-loading short in a downtrend by forcing those buy stop orders to trigger. Evil, isn’t it?

Please note on the picture above how the stoploss run (both to the upside and to the downside) happened very quickly, within one or two bars and usually with long-wicked bars. The breakout-thrust happens very quickly because, like I said before, all those stoploss orders triggering in cascade accelerate the move. And once all those stoplosses have been dried-out, price falls back down just as quickly!

That is why it’s very dangerous to trade through news announcements if we are near a significant level of support/resistance – you never know, there might be some Big Dog out there ready to breach through that level of support/resistance hoping to raid some -YOUR- stop loss orders.

Well, Forex is nothing but the currency exchange market where people exchange some currencies for another at a set price (market price). Alright, so far so good. But like I just said one currency might yield a different interest rate than another one, so there is a differential that’s got to be paid (or charged) depending on which side of the coin you’re positioned. That interest rate differential translates to us Forex traders as what’s called “swap” in the Forex world lingo, and it’s cashed in (or deducted from) your account on daily basis by your broker.

The interest rates imposed by the world’s main central banks are, as of today, as follows:

(*): please note that this article was writen half a year ago so the rates above-listed have changed by now. Non the less, the principles still apply.

As you can see, the Yen yields only a 0.50% of interest, whereas the Sterling Pound gives out a quite beefier 5.50%.

But wait a second Hector… I think I might be into something here… what if I asked for a loan in Japan (paying a 0.50% interest rates) and invested it in England (netting a 5.50%)… couldn’t I make some free money? If I went long on GBP and short on JPY simultaneously… wouldn’t I be paid a 5.00% interest rate differential for my money? and what’s more… what if I leveraged myself to 1:100, 1:200 or even 1:400?

And that, my friend, is the core principle of Carry Trading: exploiting the interest differentials between the different currencies in order to pocket the swap. For example, some brokers give 25 US dollars/day per each lot of LONG GBPJPY that you hold overnight (if you’re short, you pay the swap to your broker!). LONG USDJPY is about 11 dollars/day per lot depending on the broker.

Pull a zoomed-out daily chart of USDJPY, GBPJPY, EURJPY, AUDJPY, CADJPY or NZDJPY. Do you see those massive uptrends all across the board? (again, please remember that this article was writen in June 2007) yup, they all have been rocketing up like there’s no tomorrow. Carry Trading has been *the* trading theme throughout the last year – everyone, their mothers and their flatmates have been shorting the Yen against all the other major currencies seeking for that juicy yield.

How long will it last? who knows, but as long as EUR, GBP, USD, AUD and NZD keep raising their rates (which they’ve been continuously been adjusted to the upside by their respective Central Banks during the last two years already) and Japan stubbornly sustains its almost-zero-percent interest rates policy, I don’t see why the overall upward market sentiment should change any time soon, at least from a fundamental macro-scope point of view.

Well, there are many swap-exploiting techniques flying around. I mean, you cannot just go long GBPJPY, NZDJPY or USDJPY out of the blue because you may eat up enormous drawdowns if you miss-time your entry. At the end of the day, even though the overall long term trend is up, we could easily see a period of market re-adjustment and price could fall hundred pips to the downside. Have a look at what happened to GBPJPY in late february / early march 2007 – it plummeted almost 2000 pips within few days! That would most likely annihilate any trading account.

So, what then?

Well, like I say there are many techniques out there. For example, some people open two twin trading accounts: one swap-enabled (under which they long the GBPJPY) and one swap-disabled (under which they short the GBPJPY). Basically they eliminate the currency pair fluctuation by taking opposite trades in different accounts and they slowly-but-steadily bank the swap on one of them.

Other technique is the so-called Carry Hedge Baskets , which basically advocates to open multiple trades on different currency pairs trying to annul each other’s volatility, and thus benefiting exclusively from the swap. For example: Go long GBPJPY (you are paid a very high daily swap) and go short CHFJPY (you pay a very small daily swap). By doing so, in one hand you short the Yen (long GBPJPY) and in the other hand you long it (short CHFJPY), effectively limiting the JPY-fluctuation’s impact on your basket. Then you just need to adjust the lot size according to different money-management factors such as pip-value, the average daily volatility for each pair, etc and voila! you have your own Carry Hedge Basket. These type of baskets are all about money-management engineering, and how ingeniously you hedge the different currency pair in order to cancel each other out as much as possible – remember that the point of these baskets is to keep the volatility to a minimum while profiting from the constant money flow coming from the positive daily swap. I have seen some wicked baskets juggling 10+ currency crosses in and out as needed!

A spot market is any market that deals in the current price of a financial instrument.

Which Currencies Are Traded?

The most popular currencies along with their symbols are shown below:

Forex currency symbols are always three letters, where the first two letters identify the name of the country and the third letter identifies the name of that country’s currency.

Instructions:

1. Choose your language from the list in the upper right corner. (English is the default.)
2. In the left scrolling list, choose the exchange unit you want to convert from. Drag the scrolling arrows to scroll through all selections. (All exchange units are listed with the name of their country first. For example, the “Peso” for Mexico is listed as “Mexican Peso.”)
3. In the right scrolling list, choose the exchange unit you want to convert to. Drag the scrolling arrows to scroll through all selections.
4. (Optional) To convert a specific amount, click over the text box next to the”Convert Amount” text and type the amount. The default is 1 unit.
5. (Optional) To convert using the historic rate for a particular date, click the calendar icon beside the date field (or type in the date using the displayed format).
6. (Optional) By default, the conversions use an interbank rate generally not available to the public. To avoid disappointment, choose a percentage add-on from the Interbank rate pull-down list to approximate the spread charged by your financial institution.
7. Click the “Convert Now” button to see the conversion.

Just do it