How to Win Consistently in Currency Trading Market

Most people will think that success in Forex trading depends entirely on the system or trading strategy you use. In truth, it doesn’t. What it actually depends on, the foundation upon which true success as a trader is built is your mindset and psychology – how you think and feel about the market and how you react to it.

Forex websites trying to sell some indicator or robot-based trading system won’t tell you this, because they want you to believe in their products and that you can make money with them. That’s the source of most of the stories you hear about people who attempt Forex trading and lose money. They come into the market with unrealistic expectations, such as thinking they are going to quit their jobs after a month of trading or thinking they are going to turn $1,000 into $100,000 in a few months. They create a mindset that pressures them with the need to make money and end up trading emotionally – the fastest way to LOSE your money.

I have a friend that says, “I’m not here to be your friend. A friend will tell you what you want to hear. I’m here to be your BEST friend, someone who will tell you what you NEED to hear.” While it is very important to have an effective and uncomplicated trading strategy, it is even more important to manage your emotions around your trades. You need both to experience long-term success in trading.

Before you even start thinking about trading and risking your hard earned money, before we even start discussing strategy, if you feel you want to explore trading as a means of growing your income and wealth portfolio, you need to enter the market with the right mindset.

Discipline
The first thing you need to understand is that trading is a discipline. It is a long-term game of probabilities, you will win some trades, you will lose on some trades, but as long as you a disciplined enough to stick to your trading strategy, to not be emotionally attached to your losses, or worse your wins, you will tend to make more winning trades than losing trades and nett a profit.

Mastery
You need to know what your trading strategy is and you need to master it. You have to know it inside and out and have absolutely no doubts or questions about that the market needs to look like before you risk your money in a trade. You have to become a “sniper.” Once the market conditions match your strategy criteria, you place your trade, without the fear holding you back.

Risk Management
You always, ALWAYS manage your risk on EVERY single trade. The moment you loosen your control over your trades, you allow emotion to creep in and before you know it, you’re in a downward spiral of emotional Forex trading and losing trades. Only risk the money you are prepared to lose in every trade. In fact, you should go in expecting to lose on any given trade so that you’re constantly aware of the very real possibility of it happening.

Plan
You need to be very organized. Have a trading plan and journal to track your trades consistently. Think of Forex trading as a business rather than placing a bet in a casino. Invest with your calculator and not your heart, stay calm in your dealings with the market.

Again, keeping your Forex trading mindset right is the outcome of always taking a conscious effort to practice, manage, and control your emotions when it comes to trading.

Source: How to Win Consistently in Forex Trading by Marcus de Maria, www.srpl.net

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Online Investing: What You Have to Know About Trading In Fast-Moving Markets

The price of some stocks, especially recent "hot" IPOs and high tech stocks, can soar and drop suddenly. In these fast markets when many investors want to trade at the same time and prices change quickly, delays can develop across the board. Executions and confirmations slow down, while reports of prices lag behind actual prices. In these markets, investors can suffer unexpected losses very quickly.

Investors trading over the Internet or online, who are used to instant access to their accounts and near instantaneous executions of their trades, especially need to understand how they can protect themselves in fast-moving markets.

You can limit your losses in fast-moving markets if you

·         know what you are buying and the risks of your investment; and

·         know how trading changes during fast markets and take additional steps to guard against the typical problems investors face in these markets.

Online trading is quick and easy, online investing takes time

With a click of mouse, you can buy and sell stocks from more than 100 online brokers offering executions as low as $5 per transaction. Although online trading saves investors time and money, it does not take the homework out of making investment decisions. You may be able to make a trade in a nanosecond, but making wise investment decisions takes time. Before you trade, know why you are buying or selling, and the risk of your investment.

Set your price limits on fast-moving stocks: market orders vs. limit orders

To avoid buying or selling a stock at a price higher or lower than you wanted, you need to place alimit order rather than a market order. A limit order is an order to buy or sell a security at a specific price. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. When you place a market order, you can't control the price at which your order will be filled.

For example, if you want to buy the stock of a "hot" IPO that was initially offered at $9, but don't want to end up paying more than $20 for the stock, you can place a limit order to buy the stock at any price up to $20. By entering a limit order rather than a market order, you will not be caught buying the stock at $90 and then suffering immediate losses as the stock drops later in the day or the weeks ahead.

Remember that your limit order may never be executed because the market price may quickly surpass your limit before your order can be filled. But by using a limit order you also protect yourself from buying the stock at too high a price.

Online trading is not always instantaneous

Investors may find that technological "choke points" can slow or prevent their orders from reaching an online firm. For example, problems can occur where:

·         an investor's modem, computer, or Internet Service Provider is slow or faulty;

·         a broker-dealer has inadequate hardware or its Internet Service Provider is slow or delayed; or

·         traffic on the Internet is heavy, slowing down overall usage.

A capacity problem or limitation at any of these choke points can cause a delay or failure in an investor's attempt to access an online firm's automated trading system.

Know your options for placing a trade if you are unable to access your account online

Most online trading firms offer alternatives for placing trades. These alternatives may include touch-tone telephone trades, faxing your order, or doing it the low-tech way--talking to a broker over the phone. Make sure you know whether using these different options may increase your costs. And remember, if you experience delays getting online, you may experience similar delays when you turn to one of these alternatives.

If you place an order, don't assume it didn't go through

Some investors have mistakenly assumed that their orders have not been executed and place another order. They end up either owning twice as much stock as they could afford or wanted, or with sell orders, selling stock they do not own. Talk with your firm about how you should handle a situation where you are unsure if your original order was executed.

If you cancel an order, make sure the cancellation worked before placing another trade

When you cancel an online trade, it is important to make sure that your original transaction was not executed. Although you may receive an electronic receipt for the cancellation, don't assume that that means the trade was canceled. Orders can only be canceled if they have not been executed. Ask your firm about how you should check to see if a cancellation order actually worked.

If you purchase a security in a cash account, you must pay for it before you can sell it

In a cash account, you must pay for the purchase of a stock before you sell it. If you buy and sell a stock before paying for it, you are freeriding, which violates the credit extension provisions of the Federal Reserve Board. If you freeride, your broker must "freeze" your account for 90 days. You can still trade during the freeze, but you must fully pay for any purchase on the date you trade while the freeze is in effect.

You can avoid the freeze if you fully pay for the stock within five days from the date of the purchase with funds that do not come from the sale of the stock. You can always ask your broker for an extension or waiver, but you may not get it.

If you trade on margin, your broker can sell your securities without giving you a margin call

Now is the time to reread your margin agreement and pay attention to the fine print. If your account has fallen below the firm's maintenance margin requirement, your broker has the legal right to sell your securities at any time without consulting you first.

Some investors have been rudely surprised that "margin calls" are a courtesy, not a requirement. Brokers are not required to make margin calls to their customers.

Even when your broker offers you time to put more cash or securities into your account to meet a margin call, the broker can act without waiting for you to meet the call. In a rapidly declining market your broker can sell your entire margin account at a substantial loss to you, because the securities in the account have declined in value.

No regulations require a trade to be executed within a certain time

There are no Securities and Exchange Commission regulations that require a trade to be executed within a set period of time. But if firms advertise their speed of execution, they must not exaggerate or fail to tell investors about the possibility of significant delays.

What To Do If You Have a Complaint

Act promptly. By law, you only have a limited time to take legal action. Follow these steps to solve your problem:

Talk to your broker or online firm and ask for an explanation. Take notes of the answers you receive.

If you are dissatisfied with the response and believe that you have been treated unfairly, ask to talk with the broker's branch manager. In the case of an online firm, go directly to step number three.

If your are still dissatisfied, write to the compliance department at the firm's main office. Explain your problem clearly, and tell the firm how you want it resolved. Ask the compliance office to respond to you in writing within 30 days.

Source: eagletraders.com

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4 Things a Successful Forex Trader Should Do

Trading in the financial markets is surrounded by a certain amount of mystique, because there is no single formula for trading successfully. Think of the markets as being like the ocean and the trader as a surfer. Surfing requires talent, balance, patience, proper equipment and being mindful of your surroundings. Would you go into water that had dangerous rip tides or was shark infested? Hopefully not.

The attitude to trading in the markets is no different than the attitude required for surfing. By blending good analysis with effective implementation, your success rate will improve dramatically and, like many skill sets, good trading comes from a combination of talent and hard work. Here are the four legs of the stool that you can build into a strategy to serve you well in all markets.

Leg No. 1 - Approach 
Before you start to trade, recognize the value of proper preparation. The first step is to align your personal goals and temperament with the instruments and markets that you can comfortably relate to. For example, if you know something about retailing, then look to trade retail stocks rather than oilfutures, about which you may know nothing. Begin by assessing the following three components.

Time Frame
The time frame indicates the type of trading that is appropriate for your temperament. Trading off a five-minute chart suggests that you are more comfortable being in a position without the exposure to overnight risk. On the other hand, choosing weekly charts indicates a comfort with overnight risk and a willingness to see some days go contrary to your position.

In addition, decide if you have the time and willingness to sit in front of a screen all day or if you would prefer to do your research quietly over the weekend and then make a trading decision for the coming week based on your analysis. Remember that the opportunity to make substantial money in the markets requires time. Short-term scalping, by definition, means small profits or losses. In this case, you will have to trade more frequently.

Methodology
Once you choose a time frame, find a consistent methodology. For example, some traders like to buy support and sell resistance. Others prefer buying or selling breakouts. Yet others like to trade using indicators such as MACD andcrossovers.

Once you choose a system or methodology, test it to see if it works on a consistent basis and provides you with an edge. If your system is reliable more than 50% of the time, you will have an edge, even if it's a small one. If youbacktest your system and discover that had you traded every time you were given a signal and your profits were more than your losses, chances are very good that you have a winning strategy. Test a few strategies and when you find one that delivers a consistently positive outcome, stay with it and test it with a variety of instruments and various time frames. 

Market (Instrument)
You will find that certain instruments trade much more orderly than others. Erratic trading instruments make it difficult to produce a winning system. Therefore, it is necessary to test your system on multiple instruments to determine that your system's "personality" matches with the instrument being traded. For example, if you were trading the USD/JPY currency pair in theforex market, you may find that Fibonacci support and resistance levels are more reliable in this instrument than in some others. You should also test multiple time frames to find those that match your trading system best.

Leg No. 2 - Attitude
Attitude in trading means ensuring that you develop your mindset to reflect the following four attributes:

Patience
Once you know what to expect from your system, have the patience to wait for the price to reach the levels that your system indicates for either the point of entry or exit. If your system indicates an entry at a certain level but the market never reaches it, then move on to the next opportunity. There will always be another trade. In other words, don't chase the bus after it has left the terminal; wait for the next bus.

Discipline
Discipline is the ability to be patient - to sit on your hands until your system triggers an action point. Sometimes, the price action won't reach your anticipated price point. At this time, you must have the discipline to believe in your system and not to second-guess it. Discipline is also the ability to pull the trigger when your system indicates to do so. This is especially true for stop losses.

Objectivity
Objectivity or "emotional detachment" also depends on the reliability of your system or methodology. If you have a system that provides entry and exit levels that you know have a high reliability factor, then you don't need to become emotional or allow yourself to be influenced by the opinion of pundits who are watching their levels and not yours. Your system should be reliable enough so that you can be confident in acting on its signals.

Realistic Expectations
Even though the market can sometimes make a much bigger move than you anticipate, being realistic means that you cannot expect to invest $250 in your trading account and expect to make $1,000 each trade. Short-term time frames provide less profit opportunities than longer term, but the risk with longer-term time frames is higher. It's a question of risk versus reward.

Leg No. 3 - Discrimination
Different instruments trade differently depending on who the major players are and why they are trading that particular instrument. Hedge funds are motivated differently than mutual funds. Large banks that are trading the spot currency market in specific currencies usually have a different objective than currency traders buying or selling futures contracts. If you can determine what motivates the large players then you can often piggyback them and profit accordingly.

Alignment
Pick a few currencies, stocks or commodities and chart them all in a variety of time frames. Then apply your particular methodology to all of them and see which time frame and which instrument is most responsive to your system. This is how you discover a "personality" match for your system. Repeat this exercise regularly to adapt to changing market conditions.

Leg No. 4 - Management (Implementation)
Since there is no such thing as only profitable trades, no system will trigger a 100% sure thing. Even a profitable system, say with a 65% profit to loss ratio, still has 35% losing trades. Therefore, the art of profitability is in the management and execution of the trade.

Risk Control
In the end, successful trading is all about risk control. Take losses quickly and often, if necessary. Try to get your trade in the correct direction right out of the gate. If it backs off, cut out and try again. Often, it is on the second or third attempt that your trade will move immediately in the right direction. This practice requires patience and discipline, but when you get the direction right, you can trail your stops and usually be profitable at best, or break even at worst.

The Bottom Line
There are as many nuanced methods of trading as there are traders. There is no right or wrong way to trade. There is only a profit-making trade or a loss-making trade. Warren Buffet says there are two rules in trading: Rule 1: Never lose money. Rule 2: Remember Rule 1. Stick a note on your computer that will remind you to take small losses often and quickly - don't wait for the big losses.

Source: http://www.investopedia.com/

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4 Easy Tricks to Avoid Hefty ATM Fees

As much as I try to avoid ATM fees, I always end up paying at least a few per year. It’s super frustrating.

$2.00 here, $4.00 there, and the cost to pull out just one $20 bill adds up month after month. You have network fees from your own bank, foreign access fees from other banks, and even “ATM owner fees” piled on top of everything else, and that’s just for using the machine!

It’s like I’m paying to access my own money….oh wait, I am.

Being so much of a cashless society doesn’t help. It means we’re carrying less cash around then ever before, and although we convince ourselves it’s a good thing not to have hundreds of dollars in hand for fear that it could be stolen, we are almost always guaranteed we’ll be paying hundreds in ATM fees whenever we need access to the green stuff.

It’s time to stop giving away our hard-earned money to the banks for free, and try one of these 4 easy tricks to avoid the extra and quite unnecessary ATM charge.

 

1. Find a Bank that Waives or Credits Fees

Probably the easiest way to avoid ATM fees is to find a bank that doesn’t have them, or credits them back to your account.

Back when we lived in Upstate NY, we were part of a small local bank that credited up to $20 in ATM fees every month. It was so helpful, because no matter where we were, or how much money we needed to access, we knew we never had to pay any extra on top of the cash we pulled. This might not work for those who use an ATM every week, but for the occasional pull-out, it satisfied our needs marvelously.

If you’re on the lookout for a bank that will waive, or credit ATM fees, here is an excellent list. Just be sure to read the fine print! Even if the bank’s rules are pretty soft with ATM’s, there may be minimum balance requirements, or even a bunch of other fees that would make the switch less tempting.

2. Download a Banking App

Most banks have a smartphone app where you can access accounts right on your mobile device {don’t worry, these are always password protected!}, but more importantly, you can quickly check the location of your nearest bank-owned ATM.

The usefulness of this app really depends on your current location, as you may have to drive out of the way to get there. However, with the price of ATM fees rising, it might be worth the slight inconvenience to avoid a penalty. Of course, if you live out in the country, driving to your bank’s nearest ATM might be a different story!

Another option is to download the Allpoint mobile app, which finds surcharge-free ATM’s closest to you. The downside is you need to contact your financial institution first, just to make sure they participate in the Allpoint network before heading out to access your cash.

3. Always Carry a Certain Amount of Cash

Although I don’t personally use the cash envelope system, I do try to have at least $20 cash on me at all times to use for small transactions, and also for when I take a trips to the flea market or scout out a local garage sale. It is rare for any business not to accept credit or debit cards, but these establishments do still exist, and much to my dismay {and often my own fault!}, I’ve been caught without any cash inside them. So embarrassing!

Don’t let cash-only businesses catch you off guard, and make it a habit to carry the specific amount of cash you feel comfortable with. Whenever your supply runs low, run by your bank to pull out another $20 or so. However, if you find yourself doing this often, you might want to pull out a larger amount to save an extra trip.

Another tip for Craigslist users is to keep a larger supply of cash at home for bigger purchases, so you don’t have to run by the bank before you go and pick up your item.

4. Use Your Debit Card to Get Cash Back

Another trick if you find yourself without cash, and the closest ATM is going to charge you an arm and a leg to use it, is to pop into a grocery store or gas station and use your debit card to buy a small item, such as a candy bar. When the machine prompts you for cash back, grab an extra $20-$40 dollars for what you needed – no fees attached.

We have personally done this whenever we found ourselves at a restaurant that only takes cash or we were paying with a gift card and needed cash for the tip. One of us stays at the table while the other runs to the nearest store. It’s certainly not the most convenient thing to do, but it sure does save us some fees.

Some might say that paying for the candy bar is just like paying a fee, but it’s usually less than the $4.00 we so often get penalized with, and we are getting a piece of chocolate out it. So I’d say that’s a win-win!

Next time you find yourself stranded with a cash-only bill and surrounded by out-of-network ATM’s, give one of these 4 easy tricks a try. A little planning can go a long way, and will keep the majority of your money safe and sound — and more importantly, away from nasty ATM fees!

[Source:livingwellspendingless.com]Sourse: Thefinancebucks.com

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Major Forex Events for February 23-27

The US dollar was mixed in a week dominated by Greek headlines. US Consumer Confidence, inflation data, GDP numbers from the US and the UK and most importantly speeches from Mario Draghi and Janet Yellen’s stand out. These are the major events on our Forex calendar. Here is an outlook in the highlights of this week.

The Greek drama remained at the center of attention especially as Germany opposed the bailout extension proposed by Greece, but there seems to be light at the end of the tunnel. From the US: jobless claims release came out better than expected but a disappointment came from the Philly Fed index  The FOMC minutes release was somewhat dovish, but also stale, giving more emphasis to Yellen’s speech. In the UK, employment numbers and meeting minutes were positive, but retail sales disappointedand limited cable’s gains. The BOJ hasn’t moved after weak GDP data, while the loonie suffered sliding oil prices. The Aussie and kiwi enjoyed upbeat data.

Updates:

§  Feb 23, 11:34: Greece not a sure deal: The deal on Greece put together during the latter stages of Friday gave the single currency a lift into the...

1.    German Ifo Business Climate: Monday, 9:00. German business moral edged up for the third straight month in January, reaching 106.7 from 105.5 in December, in line with market forecast. The weak euro boosted exports and is expected to continue its decent amid the fresh bond buying program initiated by the ECB to spur growth. Stronger German growth will help the Euro-area out of its sluggish state. German business  is expected to rise further to107.4.

2.    Mario Draghi speaks: Tuesday, 14:00, Wednesday 14:00. ECB President Mario Draghi is scheduled to speak in Frankfurt and in Brussles before the European Parliament. Draghi refrained from addressing the Grexit scenario, saying it made no sense to speculate on Greece abandoning the euro zone. Draghi may refer to the Greek negotiations, the decision to provide more ELA to Greece and the massive QE decision. It will certainly be interesting.

3.    US CB Consumer Confidence: Tuesday, 15:00, . U.S. consumer confidence rose to a seven-year high in January, reaching 102.9 from an upwardly revised 93.1 in December. Optimism increased about the labor market and economic conditions. Analysts expected a small rise to 95.1. Responders were also positive on short-term outlook and wage growth. Low inflation due to gasoline prices also boosted consumers’ spirits. Consumer confidence is expected to reach 99.6 this time.

4.    Janet Yellen testifies: Tuesday, 15:00 and Wednesday at 15:00. Federal Reserve Chair Janet Yellen will testify before the House Financial Services Committee, in Washington DC. Yellen may address the rate hike issue, the weak inflation trend and the strengthening labor market. Market volatility is expected. We have seen how the meeting minutes were dovish, countering the relatively hawkish statement. Now we will get a real time update, with questions and answers as well.

5.    US New Home Sales: Wednesday, 15:00. New home sales increased sharply in December to a seasonally adjusted annual rate of 481,000, following 452,000 in the previous month. The 11.6% climb indicates an improvement from 2014. Stronger labor market and better economic conditions have facilitated the positive trend of home acquisitions. Furthermore, sales of existing homes rose 2.4% in December to a seasonally adjusted annual rate of 5.04 million. New home sales are predicted to shrink to 447,000 in January.

6.    Chinese HSBC Flash Manufacturing PMI: Wednesday, 1:45. As China emerges from the long New Year celebrations, the independent indicator from HSBC is set to give us an updated picture for the world’s second largest economy. In January, the number stood on 49.7 points, just under the 50 point mark separating growth and contraction. A tick down to 49.6 is on the cards. This has a particular impact on Australia, but also on the whole world.

7.    UK GDP data: Thursday, 9:30. The first estimate of GDP growth from the UK showed a growth rate of 0.5% in Q4, less than expected. This will likely be confirmed in the second release. The growth rate reflects a slowdown from previous quarters which saw strong growth. Elections are coming in May and this publication has political importance as well.

8.    US Inflation data: Thursday, 13:30. U.S. consumer prices registered their biggest fall in December, dropping 0.4%, the largest decline since December 2008, following a 0.3% decline in the prior month. On a yearly base, CPI gained a mere 0.8%, the weakest reading since October 2009. The continuous decline diminishes the possibility of a rate hike. Meanwhile, Core prices without food and energy costs remained unchanged in December. In the 12 months through December, core CPI increased 1.6%, the smallest gain since February. U.S. consumer price index is expected to decline 0.6% while core CPI is forecasted to rise 0.1%.

9.    US Durable Goods Orders: Thursday, 13:30. Capital goods orders plunged 3.4% in Decemberamid slowing global growth and low crude oil prices. Core orders excluding aircraft, dropped 0.8% in December while expected to gain 0.5%. The strong dollar also held back new investments. Durable goods orders took a step back in the fourth quarter of 2014 after strong gains in the previous two quarters. Durable Goods Orders are expected to gain 1.7% while core orders are expected to add 0.6%.

10.  US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial claims for unemployment benefits fell 21,000 last week to 283,000, indicating a positive momentum in the US labor market. Analysts expected claims to reach 293,000. The four-week moving average of claims, a more stable measure of labor market trends fell 6,500 to 283,250 last week. The number of jobless claims is expected to reach 285,000 this week.

11.  US GDP data: Friday, 13:30.  After a strong 5% annualized growth rate in Q3, the initial number for Q4 showed a gain of only 2.6%. And, it’s expected to get worse now, with a downgrade of growth to only 2.1%, in a “payback quarter”.

*All times are GMT.

Source: http://www.forexcrunch.com/

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Currency Interest Rates, Capital Flows, the Central Banks. The way they impact the currency market

If there is one overriding influencing factor in the currency market, it is interest rates. The Central Bank of a country or economic group sets the interest rate on their currency.  They adjust these rates in an effort to encourage trade and maintain control over inflation.  Lower interest rates will encourage economic expansion, as credit becomes cheaper.  Higher interest rates will retard economic expansion as the “cost of money” becomes more expensive.  Changes in interest rates can also greatly affect the value of a currency, which we shall talk of in more detail later.

Following the interest rate decisions for the Federal Reserve’s Open Market Committee (FOMC), which sets the overnight Fed Funds Rate, is extremely important when trading the U.S. Dollar. When the Fed raises interest rates, the yield offered by dollar-denominated assets are higher.  This generally attracts more traders and investors.  If interest rates are lowered, that means that the yields offered by dollar-denominated assets are less, which will give investors less of an incentive to invest in dollars.  Yet it is not just the rate itself that is important.  What is also very critical for FOMC decisions is the language in the statement that accompanies the FOMC’s decision.  Actually, oftentimes by the time of the decision announcement, the decision has already been factored into the market; only slight fluctuations are seen if the decision was the decision that was expected.  The accompanying statement, on the other hand, is analyzed word-for-word for any signs of what the Fed may do at the next meeting. Remember, the interest rate decision itself tends to be less important than the expectations for future interest rate moves.
                                 

Each currency carries with it an interest rate.  This is almost like a barometer of that economy’s strength or weakness.  As a nation’s economy strengthens over time, prices tend to rise as the consumers are able to spend more of their income.  The more we make, the better our vacations can be, and the greater amount of goods and services we are able to consume.  In other words, more dollars are chasing roughly the same amount of goods and this leads to higher prices for those goods.  The rise in prices is called inflation, and Central Banks watch this very closely.  If inflation is allowed to run rampant, our money will lose much of its buying power, and ordinary items such as a loaf of bread may one day rise to unbelievably high prices such as a hundred dollars per loaf.  It sounds like an unlikely far-fetched scenario but this is exactly what occurs in nations with very high inflation rates, such as Zimbabwe.  To stop this danger before it emerges the Central Bank steps in and raises interest rates in order to stem inflationary pressures before they get out of control.  Inflation is very difficult to stop once it begins, hence the Fed’s constant, almost paranoid vigilance in the fight against it.  Higher interest rates make borrowed money more expensive, which in turn dissuades consumers from buying new homes, using credit cards, and taking on any additional debts.  More expensive money also discourages corporations from expansion, as so much business is done on credit, from which interest is always charged.  Eventually, higher rates will take their toll as economies slow down, until a point where the Central Bank will once again begin to lower interest rates, this time to encourage economic growth and expansion -- and so the cycle continues.  Trying to foster growth while at the same time keeping inflation low is the delicate tight rope that the Fed walks during each FOMC meeting.  Other Central Banks also do the same at their regular meetings.

Below is a table of the interest rates on the major currencies as of this writing in October, 2009.

By increasing interest rates, a nation can also increase the desire of foreign investors to invest in that country.  The logic is identical to that behind any investment: The investor seeks the highest returns possible.  By increasing interest rates, the returns available to those who invest in that country increase.  Consequently, there is an increased demand for that currency as investors invest where the interest rates are higher.  Countries that offer the highest return on investment through high interest rates, economic growth, and growth in domestic financial markets tend to attract the most foreign capital.  If a country's stock market is doing well, and they offer a high interest rate, foreign investors are likely to send capital to that country.  This increases the demand for the country’s currency, and causes the currency’s value to rise.

Money will always follow yield.  Should a country increase its interest rate, we will see the general international interest in that currency increase as well.  Recently, the Reserve Bank of Australia (RBA) raised the interest rate on the Aussie Dollar 25 basis points to 3.25%.  The AUD was already strong against other currencies and this move will only serve to strengthen it further.  As a result, pairs such as the AUD/USD, AUD/JPY, GBP/AUD have reflected that strength.  Conversely, should the Central Bank of a country lower the interest rate, we will see capital flow away from that particular currency.

Some of the characteristics of Central Banks are:

• They have access to huge capital reserves.

• They have specific economic goals.

• They regulate money supply and interest rates.

• They set the overnight lending rates to change the rate of interest paid on their domestic currency.

• They buy and sell government securities to increase or reduce the supply of money.

• They sometimes buy and sell their domestic currency in the open market to influence exchange rates.

Clearly interest rates and their changes can have strong impact on the capital flow that a country experiences.

Let me give you a quick overview of the concept of Capital Flows and some of the differences between a positive and negative capital flow.

As we discussed in the last lesson, capital flows represent money sent from overseas in order to invest in a country’s markets.  They can greatly affect a nation's currency price, as a positive capital flow shows demand for investments in that nation's currency, while a negative capital flow would show weak demand compared to supply.

As you might suspect based on the significance of this topic, mere discussions by Central Banks of potential changes in interest rates are followed very closely and can themselves impact how related currency pairs move.  Clearly any announcement of an actual interest rate change are met with rapt attention on the international economic stage and can be potentially trend-changing events for currencies.

The main Central Banks involved in this process are the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve (US), Swiss National Bank, the Reserve Bank of Australia and the Reserve Bank of New Zealand.

The individual banks meet on a regular basis, generally on a 4 to 6 week cycle, depending on the bank in question.

The specific dates of these meetings, along with other fundamental announcements that impact the currency market, can be tracked on Daily FX’s Global Economic Calendar.  This calendar can be accessed at http://test.dailyfx.com/calendar/.

Source: http://www.dailyfx.com/

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Ways To Improve Your Forex Trading Profits

If you are looking for a fun and unique way to garner profits in a unique trading forum, then Forex may be for you. For those unfamiliar with the concept, Forex is the foreign currency exchange market. This article will provide you with the tips you need to navigate Forex like a pro.

Don’t expect miracles from forex trading. Forex is not a winning lottery ticket or a garuantee that you’ll become rich. It’s simply one method of investment among many, and it doesn’t work well for everyone. Re-evaluate your assumptions about forex before you sink significant amounts of capital into trading.

Do not dive into the forex market too quickly. Once you have plenty of experience under your belt, you may be able to analyze indicators and make trades all day long. When you are just starting out, though, your capacities are limited. Remember that the quality of your decisions and analyses will drop the longer you trade, and limit your initial forex experience to a few hours a day.

Watch the home location of your broker when picking a Forex broker. The majority of fraudulent Forex brokers are located in just a few locations: Boca Raton and other parts of Florida, southern California and Russia. Not all brokers in these areas are scammers, of course, but you need to use some extra caution if you see a broker is located there.

When you are first starting out forex trading, start with small investments out of a bank account that can be managed solely online. This prevents you from overextending yourself right away, as well as giving you the option to quickly add and remove money as needed to keep your trading afloat.

Using limit and stop-loss orders when trading on the forex market are essential to making money and reducing losses. In the minute it takes you to place your order the currencies change so using a limit order ensures you get the price you want. Stop-loss limits your risk in the market.

You can always stand out of a trade, you have that personal right. If you are doubtful about your position of a trade, it is best to stay out of it. If you do not have enough information to make an informed decision, it’s better to sit out of the trade than to make risky uninformed decisions.

Do not aspire to riches with Forex if you do not want to be disappointed. A lot of people put their hopes and dreams into using the Foreign Exchange Market to profit, and then ultimately crash and burn when they realize that Forex isn’t a get-rich-quick money-making system. Approach Forex logically and understand that it takes time to profit.

When using a demo Forex trading system, try your hardest to imagine that the money you are trading with is real. If you do not, you will end up picking up very bad habits that are likely cost you real money when you go to make trades in the actual money market.

Don’t over trade. Over 90% of experienced forex traders would probably be profitable if they made just one trade per month. Trying to create opportunities to enter the currency market when there aren’t any is a sure fire way to lose money. Be patience and wait for the right market conditions before taking a position.

The foreign currency exchange market is a little known way to garner massive profits. While at first it may seem a bit exotic to the novice, on the whole it is a rather simple process. If you utilize the tips in this article you will raise your confidence in utilization of the Forex system.

[Source:analysis-forex.com]Sourse: Thefinancebucks.com

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