forex

 
“Look dad, no hands!”

Foreign exchange trading is probably the most technical of any type of trading. From stocks to bonds to options and futures, no market has as much participation from technical analysts than the forex market. However, just because the majority are technical traders doesn’t mean there isn’t plenty of room for fundamentalists.

No Indicators Forex Trading

Trading without indicators means you’ll likely rely more on the fundamentals like trade balances, national debt loads, central bank actions and many other non-chart indicators.

Here is a list of the items often covered by fundamental traders:

• Currency Interest Yields
• Central Bank (Monetary) Policy
• Fiscal (Government Spending) Policy
• Trade balances or imbalances
• Employment (Non-Farm Payroll Report in the United States)
• And many more

For the Long Term

Most fundamental traders perform best with a long term trading horizon usually multiple times longer than technical traders who are frequently day or swing traders. George Soros, arguably the best fundamental (no indicator) trader, made more than $1 billion in just a few months betting against his own country (England’s) currency.

If you’d like to avoid indicators clogging up your computer real estate, long term forex trading may just be your cup of tea. Maintaining a long term investment perspective allows you to ride out the ups and downs made by the short term trends made by technical traders, and realize profits on the long term movements caused by underlying economic trends.

For example, China, which has a strong economy and an excellent trade balance should see higher currency prices in the future. However, in the next 15 minutes, their currency may easily drop .25-.5% before rising several percentage points over the course of years. While technical traders would grab the small pips, no indicator traders would have the several percentage point move in the bag, netting an excellent profit.

Forex scalping, or taking quick profits on short term trades, is one of the most popular forms of forex trading. This approach is highly profitable and rewarding, and many people make enough to generate as much as their previous career. Yep, some people really do make a living scalping forex.

Forex Scalping Techniques

There are a few techniques that will make your trading easier. The first technique, although not so much a technique in itself, is to open an account at a forex broker that has thin spreads. When it comes to making money scalping the foreign exchange market, low pip spreads are preferred.

Scalping Forex with Moving Averages

Moving averages are the most popular indicators with forex scalpers. One well-known technique is to use a short term and long term MA and buy/sell when the two cross. Common choices are the 10, 15, 20, 25, 50, 75, 100, and 200 moving average either calculated in simple form, or exponentially.

What Makes Good Technique?

Each trader needs to find their own niche, their own techniques, but there are some important pieces of information all traders need to know. First and foremost, you need a solid plan with good entry and exit practices. Also, you need to be quick on your feet, and ready to dump a position when it runs out of favor. Finally, you need to be yourself, adapt your techniques around your own trading style and time you have to trade each day.

So you want to trade forex for a living? Who doesn’t? There are literally hundreds of thousands of people that trade forex for living and you can too!

Making a Living with forex

Making a living with forex may seem to be just a pipe dream, but many, many people are using the foreign exchange market as a way to provide for themselves and family. However, we can’t get too caught up in making millions, as very few traders ever make enough with forex to make a living.

Trading Forex Odds

Of all the traders that try to make millions with currencies, very few succeed and the majority fail miserably. Statistics prove that of all the traders who will set out to make a living with forex, only a small fraction will, while 90% of traders will lose everything in their first year. However, this isn’t always the case. Famed forex trader George Soros rose to be a billionaire with just one successful forex trade!

Where to Start Trading For a Living

To make a living trading forex, you’ll need to be well educated about the ins and outs of the foreign exchange market. Certainly, you wouldn’t try to make a living as a surgeon if you hadn’t yet completed medical school, and you can’t expect the same results with forex. Making money takes time, patience, and the ability to learn. If you’ve got those three criteria met, you’ll find yourself quickly advancing in the foreign exchange market, and making a living may not be so far off!

Virtually every single forex broker or brokerage offers a free forex trading simulator that will teach you how to trade, and how to use the trading software, without risking real money. This free applications should be utilized by anyone who wants to learn how to trade forex, and do so without any risk of capital.

Free Forex Trading Simulator

One of the most popular free forex trading simulators is the one offered by Oanda. Also known as a demo account, or a practice account, Oanda’s free simulator will allow you to practice using indicators and other items specific to the platform.

Why Use a Forex Simulator

Unfortunately, nearly 95% of all traders who trade real money fail within a year. Usually, this is the result of poor trading form but can also be due to other factors including not enough time with a free forex simulator. Before trading with real money, you should be competent with the forex platform and have at least a few hours worth of demo trading through a free forex simulator.

Start Your Forex Simulation

A new trader should never turn down the opportunity to practice forex for free. Getting started with a forex simulator, demo account, or practice account will enable you to learn the techniques of forex trading without any costs.

Not interested in testing different indicators? Check out our article on trading forex without indicators.

Just how stocks, bonds, and other investments are well represented by hedge funds, so are currency pairs that trade on the foreign exchange market. Though there are not many forex hedge funds, nor forex hedge fund managers, there exists plenty of opportunity for growth in this industry.

Forex Hedge Funds

Because the foreign-exchange market (forex) is an over-the-counter marketplace, the barriers for entry into this exciting field are very easy to break through. The market is globalized, thus there are no central regulating authorities. As such, forex hedge fund managers can launch their own funds simply by meeting the regulation of the country in which the hedge fund wishes to operate.

Best Fund Countries

The best countries to release a forex hedge fund are those that have a significant flow of capital (to attract investors) as well as limited regulation and oversight. Unfortunately, from the perspective of the hedge fund manager, the United States is unlikely the best place to start. Expensive barriers to entry as well as complicated accounting regulations make it impossibly expensive for upstart forex hedge funds.

Forex Hedge Fund Fees

Hedge funds are some of the most expensive, albeit some of the most profitable, investments for wealthy clients. Ordinary, a hedge fund manager receives as much as 15-20% of the profits each year as well as a 1-2% fee on all accounts at the fund. If the forex hedge fund were to produce returns of 30% on a $100 million portfolio, the hedge fund manager would receive his annual 1-2% cut ($1-2 million) as well as a 20% bonus on the hedge fund’s returns ($6 million at 20%).

Thanks in part to new regulations from the NFA as well as the SEC, many American based forex brokers could no longer allow investors to hedge their positions. Hedging, of course, is the process of buying and selling the same currency pair at the same time.

Forex Hedging

Imagine you own 50 lots of EURUSD and think the price may soon plummet. You choose to sell 40 lots, which brings your net exposure to EURUSD from long 50 lots to long 10 lots. Should the EUR/USD, you’ll only lose one-fifth of what you would have if you did not hedge.

Unfortunately, NFA regulated forex brokers cannot allow hedging to their clients. Previously, forex traders could long 50 lots of EURUSD and simultaneously going short 40 lots, for a total of 90 lots. Now, with NFA regulated forex brokers (US Based Forex Brokers), the trader can only be long or short, not both. So, when the trader seeks to sell 40 lots of EURUSD, the forex broker is forced by regulation to simply lower the total net position to long 10 lots of EURUSD.

How to Hedge with Any Forex Broker

To hedge your positions with a US broker, you’ll have to open two accounts, one for long positions and one for short positions. Unfortunately, this can be cumbersome, as well as make accounting more difficult.

List of Brokers that still allow hedging

Here is a compiled list of forex brokers that can legally allow their clients to hedge their positions without opening multiple accounts:
ACM

ActivTrades

Admiral Markets

Advised Trading

Alpari UK Ltd

Apex FX Trading

Arab Financial Brokers K.S.C.C.

ATC brokers

ATFX – Able Trend Forex

ATG Marketplex (non-US accounts)

Atlantic FX

AvaFX

AVS Carter

Baron Forex

BroCo

C.I.M Banque

Charter FX

CG FOREX

dbFX

Deltastock

Deutsche Bank AG

EFX – England Foreign Exchange

EXNESS

Exto Capital

Fastbrokersfx

FCMarket

Fibo Group Ltd

FIGfx

Fin Market

FinOdds

Forex Capital Trading

Forex Ltd

Forex Metal

Forex Ukraine

Forex Trading Edge
Forex4you

ForexCT

Forex FS

Forexial FX Solutions

Forex Place – 4XP

ForexYard

ForInvest Group

FX Clearing

FX Open

FX Solutions UK

FX Trading

Fx-Pro

FXcast

FXCBS

FXCH

FXCM UK

FxCompany

FXLite

FXM Financial Group

FxPro

Gallant FX

GCI Financial

GIGFX

Global Clearing Group LTD

Global Futures

GO Markets

GTL Trading

IamFX

IFC Markets

iForex

IHI – Investment House International

Interactive Brokers

Interbank FX (2 split accounts)
InvestTechFX

JadeFX

KVB Kunlun

Lite Forex

Mandus Invest SA

Marketiva

Master Forex

MBCFX – Multiple Banks Clearing

MIG BANK

MoneyForex

Neuimex

NordMarkets

NTWO Capital Markets

OneCorpFX

PFGFX – Pro Finance Group

Poltek FX

Prime4x

Pro-Forex

PronetFX

Real Trade Group, Ltd

Saxo Bank

SFXB – SwissFXBroker

Sigma Forex

SmartTradeFX

Spot Trader FX

Swiss International Financial Brokerage K.S.C.

Tadawulfx.ch

TGM – Taurus Global Markets, Ltd

The Collective FX

Tradeview Forex

Uni-FX

UWC – United World Capital

Vantage FX

Varengold Bank FX

Windsor Brokers Ltd

X-Trade Brokers

XForex

10Pips

1pipfix

Fiat currencies have come under criticism for their long history of failure. In fact, virtually every single fiat currency has failed.

Why All Fiat Currencies Fail

The biggest reason fiat currencies fail is because there are no limits to the amount of currency that can be printed up by the issuer—whether it be a treasury or central bank. Think about it. In your pocket, wallet, or purse, you likely have at least a few paper dollars. There is nothing, other than the ink on the bill, that differentiates between $20 and $50. In fact, it costs just as much to make a US $50 bill as it does a $1 bill, about $.03. Crazy to think about, huh?

Failure of Fiat Throughout History

Some of the most notable failures of fiat currency are the Colonial United States, the Weimar Republic, and Rome. The colonial United States had a currency long before the US was even a country. However, to pay for war, the colonies printed up huge amounts of currency, devaluing each dollar held by the public and redistributing money from the average person to the government. The Weimar Republic followed a similar path during WWI in which small denomination bills were worth more for their paper than they were for their purchasing power. The Weimar Republic is known worldwide as an example of fiat currency failure due to inflation.

Fiat Currencies Are Prone to Inflation

One of the biggest failures of fiat currencies is that they can be inflated to no end, often times without consent of the public. In Wiemar Germany, a single US dollar was worth 12 Marks in 1919. However, just four years later, the same $1 could buy as much as 4.2 trillion Marks. As you can see, inflation is clearly one of the biggest failures of fiat currencies.

Believe it or not, there was once a time that every currency was pegged to the US dollar. This one done by a process known as a fixed exchange rate system. In a fixed exchange rate system, the prices of currencies are set by governments and central banks, and do not rise and flow with market changes.

When this system changed, the virtual peg of currencies to the US dollar was removed, however, many currencies were still pegged to the dollar.

Currencies Pegged to the US Dollar

Florin
Bahamian Dollar
Bahraini dinar
Barbadian dollar
Belize Dollar
Cayman Islands dollar
Djibouti franc
East Caribbean Dollar
Nakfa
Jordanian dinar
Lebanese lira
Rufiyaa
Omani rial
Qatari riyal
Riyal
Bolivar
United Arab Emirates dirham
Chinese Renimbi (yuan)

Today, only a few of these currencies are still pegged to the US dollar. Since 1971, many governments decided that it may not be in their best interest to peg to the US dollar, and instead allow the market (forex) to decide exchange rates.

Chinese Currency Peg

The Chinese Renimbi, or yuan, remains as one of the most well-known currencies pegged to the US dollar. By keeping the price of the local currency worth roughly as much as the US dollar, the Chinese are able to encourage an active foreign trade with American businesses. Today, China and the United States are huge trading partners, thanks in part to this peg.

The engulfing candestick pattern can be both a bullish and bearish signal depending on how the candlesticks form. The first candlestick is comprised of a small body candlestick followed by a large candlestick (either positive or negative) that “engulfs” the previous candlestick.

Here is an example of the engulfing candlestick pattern:

Very much like the evening doji star, the evening star consists of a positive candlestick followed by a small body candlestick poised above the first candle, and one last candlestick that opens lower and declines deep into the first candlestick. This candlestick pattern appears only at the top of charts.

Here is an example of the Evening Star candlestick pattern: