Emini - Why does technical analysis work?

Technical analysis describes different ways of predicting the future of the stock/futures market based on its history. Unfortunately, technical analysis is not an exact science. Many prominent scientists label it as "voodoo science". They claim that due to market efficiency, if you use TA to find your entry positions, you’re no better off than someone who chooses those positions randomly. Market efficiency means that all the available information is already calculated in the stock prices, and that you can only guess how the price will behave in the future.The "voodoo science" theory would make sense if it wasn’t for the fact that there is a significant number of traders who are able to consistently make profits in the stock/futures market. These traders use technical analysis as their main tool. Since any trader has or can have access to the same TA tools we have to ask how can a small group of traders consistently win and the other larger group, more or less consistently lose in the stock market game. What is it that winning traders know about technical analysis that gives them the upper hand?The answer is simple: Technical Analysis works but not necessarily for the reason most people believe. Many successful traders don’t want to share this secret. TA works because many people use it, and successful traders are able to predict how other people will react on the different TA indicators and signals. In other words, while the losing traders are using TA to determine their trades, the winning traders are winning because they know how the losers are going to react based on this data. For example, when a price goes below one of the key moving averages, (MA’s) many investors sell that instrument to protect themselves against additional losses. By doing so, they will drive the price of that instrument lower and that will prompt some traders to start short selling that instrument in anticipation of further decline. Prices continue the downward trend, forcing traders who were long on that stock to sell their positions because it is going below their stop limits. This creates a domino effect as the price continues to decline. However, at this point, successful traders realize that most of the current price action was created artificially. They start to enter positions on the buy side and more often than not price starts to reverse. The losing traders have already sold their contracts based on the TA tools. The winning traders buy the contract because they understand that the fluctuation was temporary, and they seize the opportunity based on the losing trader’s reactions.No TA tool by itself will give you reliable buy or sell signals. There is no Holy Grail or magic black box that will give you the perfect, accurate signal. However, the combining of the right group of TA indicators with discipline and adequate trading capital has been the road to fortune for many traders. There is no reason why you cannot emulate their success. Let’s take a look at an example.Understanding Pivot PointsPivot Points are those price levels that are most likely to act as levels of support and resistance on any given trading day. As we already know, Technical Analysis works because many people use it. For the same reason, the most influential pivot points are those that are used by majority of traders. The most widely used formula for calculating pivot points is as follows:H = previous day’s highL = previous day’s lowC = previous day’s closePivot Point = (H + L + C)/3Resistance = 2*PP - LSupport = 2*PP - HPrevious day’s last two hour high = L2HrHighPrevious day’s last two hour low = L2HrLowWhen the price moves through the known pivot point on increased volume it is most likely to continue current trend, and if the price hits the known pivot point but is unable to move through it is most likely to reverse the current trend.Figure above is a 5-minute candlestick chart for S&P 500 E-mini contract and you can observe how the Pivot Point was acting as a major support line throughout the trading day.When the advancing/declining price is not able to move through the known pivot point after two or more tries there is a good probability that it will start to decline/advance. Trading method in which a trader is waiting for a price to reverse after hitting S/R level is called swing trading. On the other hand if the advancing/declining price has easily moved through known S/R level there is a good probability that it will continue to advance/decline. Trading method in which a trader is looking for a price to continue to move in the same direction after moving through S/R level is called breakout trading

Day Trading Indicators and Indicator Trading

Did You Begin Day Trading As An Indicator Only Trader?Did you start day trading after buying a book on technical analysis, and getting a charting program - probably a free one that you found online - in order to save money? While reading your book you learned about trading indicators which could ’predict’ price movement, and what do you know, the ’best’ indicators were actually included in your free charting program - let the games begin.Now that you have all the day trading tools that are necessary, the book for education AND the free charting program with those ’best’ day trading indicators, you now need a day trading plan so you can decide which ones of those ’magic’ day trading indicators you are supposed to use. This really is a great book, besides telling you how to day trade using indicators to ’predict’ price - it also said that you need a trading plan to day trade.So what should this plan be? The book told you about trend following using an indicator called macd, and it also told you how it was possible to pick the top or bottoms using an indicator called stochastic; my guess is that you picked the stochastic indicator to start your day trading - this must be the ’best of the best’ since this indicator was going to ensure you of entering your trades with the ’best’ price. Amazing, simply amazing how easy this day trading stuff really is. In fact, why even bother taking the trades, each time your indicators give a signal - just call up your broker and tell him to stick $100 in your account.My book was Technical Analysis of the Futures Markets. My charting program was TradeStation with an eSignal fm receiver; that was the one that if you hung the antennae wires just right, and you put enough foil on the tips, you might even get quotes. I had sold a business before I started trading so I did have some capital - isn’t that how everyone gets into trading, you either sell a business or you lose your job? My indicator was the macd as I had decided that I was going to be a ’trend follower’ instead of a ’top-bottom picker’. I also decided that I was going to be ’extra’ clever, if one indicator was good than two indicators must be better, so I added a 20 period moving average. My first trade was a winner, then after many months of extensive therapy, I was finally able to forget the next twelve months - ahhh the memories ƒ؛Learning To Day Trading - The Learning ProgressionBeginning to day trade, or learning to day trade, as an indicator trader is very typical. This is also logical when you consider - HOW are you supposed to initially learn how to trade? Trading indicators are available to anyone who has a charting program, and simply using line crosses, or histogram color changes, provide ’easy’ signals to understand. If you will also take the time to learn the arithmetic behind your indicators, as well as learning what each indicator is specifically intended to do, not only is this a logical way to begin, it is also a good ’step’ in your learning progression - understanding the WHAT you are doing, instead of attempting to create ’canned’ indicator only trading systems, without any regard as to WHY you are trading this way.This does become one of the ’sticking’ points in your learning progression, as you come to find out that you are unable to profitably trade indicators as signals only - now what? Now what - you ’can’t’ develop your own indicators, so you start doing google searches for day trading indicators and start buying your ’collection’ - they don’t ’work’ either. Now what - you buy a mechanical trading system - what does hypothetical results may not be indicative of real trading or future results mean? Now what - you start subscribing to signal services OR you start joining the ’latest and greatest’ chat room - am I really the only person using the signals who isn’t profitable?Now what - you never learn how to trade.I began trading as an indicator trader, and I did try to learn everything that I could about the various indicators, as well as trying to combine indicators that were consistent with how I wanted to trade - I just could never develop a mechanical day trading system from what was available to me. I read a couple more books that didn’t really help me, so I then started looking for someone who could teach me. From what I now know about gurus -vs- teachers, I am very lucky that I got involved with a money manager-trader who taught me a tremendous amount, but I still couldn’t get profitable, in part because there was also ’pressure’ to learn how to trade using real money. As well, any discussions or thoughts about trading psychology and the issues involved, especially to beginning traders, was non-existent.Now what - learning but losing - I stopped trading. Learning to trading using real money, and ’scoffing’ at trading psychology as simply individual weakness, really was something that I now regard as misinformation. I always mention this as I now feel that this cost me as much as a year of time, and was very close to costing me my trading future, as stopped trading was VERY close to quitting trading. How can’t trading psychology be real to a beginner, when you consider that you are risking losing money at a very fast pace as a day trader, and when you further consider that you are also doing this when you really don’t know what you are doing - this is NOT by definition being weak. And if trading psychology is real, how are you going to learn to make ’good’ trading habits with real money while you are fighting the implications?Now what - not trading and not ready [quite] to quit - still studying and searching.Probably the single most important ’thing’ that got me to a next step in learning how to trade, was the concept of a trading setup, and that a setup and a signal were not the same. This was extremely meaningful to me, as it also led to an understanding of how to better use trading indicators for the information that they can provide, but not to use them as trading signals - in essence I began learning about trading method where discretion could be consistently applied -vs- trading system that was mechanical and arithmetic rules.Traders who are indicator only traders, are also what I refer to right side only traders, that is they are always looking at the right side of their charts for an indicator signal. BUT what about the left side of the chart, what about price and patterns, what about market conditions - WHAT about the relevant ’things’ that are ’moving’ price, instead of indicators only as an arithmetic derivative of price, and thus, one that is dependant on the time frame that you have chosen to trade from? These ’thoughts’, along with the concept of trade setup, became instrumental in the development of a trading method, and how I came to turning my trading around.When I think about the steps in my learning progression - I would list them as follows:2/95 - 6/96 indicators only teaching service that included signals learning to trading with real money and trading psychology issues stop trading6/96 - 3/97 understanding of trading psychology issues learning about trading setups concept trading method -vs- trading system trade setup - trade trigger are not the same method development understand the importance of the left side of the chart and what is happening ’across’ the chart related trading setups and how/when they triggered indicators + pattern indicators + pattern + price indicators + pattern + price + market conditions3/97 - 11/97 able to paper trade profitably able to real money trade profitably able to trade for a livingIndicator Only Day Trader - Setup Including Indicators Method Day TraderI have attempted to discuss the way I started day trading, and the way I think many-most traders typically begin. Along with this, I have pointed various issues and problems that I had - those regarding how to learn to trade, and then progressing into a profitable trader. My experiences have been both personal, as well as those of many traders that I have worked with over the last 8-9 years through Tactical Trading - that a very large number of these problems are due to day trading only with indicators, the specific indicators used, along with trying to turn these indicators into a mechanical trading system. This is not to say that this can’t be done - I simply couldn’t do it. However, I would strongly suggest that anyone who is in the early stages of day trading, or struggling with their day trading, consider these things that have been discussed

Forex Trading Systems

You should build your own trading systemA trading system on the Forex market is a type of strategy that allows traders to trade with a set of rules. There are many free trading systems and strategies printed in trading articles, journals, books and on trading-related websites. I would have to say that if you are not inclined to learn how to develop your own trading methodology, then perhaps you should consider giving your money for someone else to invest. Give it to someone who is trading a system that he developed and tested himself because he is more likely to have the confidence and courage to follow his own trading system.Why you need a forex trading system?It’s easy to trade with a system.A good system provides consistent result. What makes a good trading system?It’s simple. Forget complicated systems with lots of rules - it’s a proven fact that simple systems work better - and are less likely to fail, in the brutal world of trading.A trading system with profitable expectation.It provides good ratio of reward/risk.A system of comprehensive risk management including market exposure weightings, stop-loss provisions and capital commitment guidelines that preserve capital during trend-less or volatile periods. Once you learn how to develop trading systems and strategies, you can then be better equipped to test them as well. By this point you might even find that the system created by yourself is the best one for you, because it becomes the system more suited to your profit objectives while operating within your risk tolerance levels. It is likely that once you develops this level of competence, you will simply acquire other trading systems only to dissect them, grab the parts you likes and add them to your own system. To me, the irony is that for a trader to know which system to purchase, you must first learn how to create a system. And after knowing how to create a system, he will no longer have the need to buy one

Fibonacci Trading Techniques

Introduction to Fibonacci trading techniques.First, a few words about Fibonacci himself…Leonardo Pisano (nickname Fibonacci) was a mathematician, born in 1170, in Pisa (now Italy). His father was Guilielmo, of the Bonacci family. His father was a diplomat, as a result Fibonacci was educated in North Africa, where he learned "accounting" and "mathematics".Fibonacci also contributed to the science of numbers, and introduced the "Fibonacci sequence"The Fibonacci sequence is the sequence 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, introduced in his work "Liber abaci" in a problem involving the growth of a population of rabbits.Aside from this sequence of number where every next number is the sum of the proceeding two, 0, 1 (0+1), 2 (1+1), 3 (2+1), 5 (3+2), 8 (5+3), 13 (8+5), etc.There are the "Fibonacci ratios".. By comparing the relationship between each number, and each alternate number, and even each number to the one four places to the right, we arrive at some fairly consistent ratios.. The important ones are .236, 50, .382, .618, .764, 1.382, 1.618, 2.618, 4.236, and for good measure we include 1.00 ..It turns out that the ratios are mathematical principles prevalent in nature around us, and is also in man-made objects. There are many interesting, entertaining, and poetic observations about Fibonacci numbers and ratios in the universe (see the reference section below). Fibonacci numbers appear in ancient buildings, in plants, planets, molecules, the dimensions of human bodies, and of course snails… But of what use is all that to the lowly trader?What really interests you, the application of Fibonacci techniques in the trading environment..Traders usually study charts! Fibonacci ratios may be applied to the Price scale, and also to the time scale of charts. I study the price scale. My focus here will be on the price scale for now, perhaps in the future I’ll add some time-scale studies.Prices never move in a straight line. Look at any chart, you will see many wiggles, as price advances and retraces.. Stocks, Futures, Forex, all instruments which are liquid, will often retrace in Fibonacci proportions, and advance in Fibonacci proportions. Not always, and not precisely to the penny. But very often, and reasonably close! This happens often enough that profitable trades can result. I will show you some examples below.I used Fibonacci ratios with a few simple indicators to help determine probable price turning points, optimum entry, exit and stop-loss levels. My complete techniques are available in on-line video seminars, in-person seminars, and via my real-time on-line chat facility. For more details, see the this web pageThe application of Fibonacci to trading can be very complex, and take much time and experience to perfect. Many traders enjoy making the process as difficult and as complex as they can tolerate.. I do the opposite, I try to simplify, try to bring clarity.Fibonacci example - Microsoft Weekly chart. This lesson demonstrates a very basic way to use Fibonacci levels. You just read about Fibonacci ratios. We will use just one of those ratios for now, the .382 Fibonacci ratio. In this chart MSFT made a high of (approximately) $59.97 in December of 1999. After that, it moved down to make a low of $30.19 in May of 2000.The down move was $29.78 (59.97-30.19), quite a substantial amount.Projecting from that low in May, and using a Fibonacci ratio, we can calculate 29.78*.382=$11.37 . So 38.2% of 29.78 is 11.37 . If MSFT were to rally 38.2% of the down-move it would reach $41.57 (11.37+30.20). I’m using rounded numbers in my calculations, the chart above calculates it to be $41.564, we don’t need that degree of accuracy!Several weeks later, MSFT rallied and resisted right near that .382 Fibonacci level !!So we were able to predict a future probable turning point (after the low of May 2000), using the Fibonacci ratio of .382!! If only it were always so easy.The steps involved are:Calculate the total value of a significant price-move (high to low, or vice-versa).Calculate a Fibonacci retracement (in this case .382) of the prior move.Look for price to confirm, by resisting (or support in an up-move) near that predicted retracement area.Fibonacci example - Microsoft Daily chart. This chart shows how a different Fibonacci level (61.8%) predicted resistance and a market turn.Notice how the market behaved at the .382 level (30.80 area). Initially the market spiked through, then fell back to that level (late October). We cannot expect a chart to retrace at every Fib level. We can expect some support/resistance as buyers/sellers enter the market at these levels, but we can’t always predict whether the market will actually turn at any particular level. Fibonacci techniques are used to alert you to a possible trade, if that price level does cause support or resistance. These techniques are not used as a trigger for entry. Other indicators are used in conjunction with Fibonacci studies to provide higher-probability entries..As mentioned before, there are several Fib levels, .236, 50, .382, .618, .764, 1.382, 1.618, 2.618, 4.236, and 1.00 .. So there are several places to look for a market turn. They can be calculated in advance, but trading blindly at a fib level can be dangerous, because you never know for certain (in advance) whether the market will turn at any particular Fib level. I use other indicators to help overcome that problem, click here to learn how to determine which Fib ratio is likely to be strong enough to turn the market.Important notes from this lesson:There are several Fib levels.It takes some skill to determine which Fib level is likely to cause the market to turn.There are some techniques to help you determine where a market is more likely to turn.Do not blindly anticipate a market turn at a Fib level.More Fibonacci examples.QQQ Weekly chart with a deep retracement to .618 and a weak attempt to rally after that. However, consider the daily chart and intraday traders. they would have enjoyed the rally from $75 to $100, after going long from a support level that could have been predicted in March!QQQ daily chart. Multiple Fib levels timing the market perfectly in 3 consecutive waves up!Intraday chart, QQQ 30-minute. Notice the two market Fib retracements (there are others in this chart too).. The rally from 29.26 stopped at 31.10, then it supported **twice** at 30.39, for two good scalps. The next highlighted Fib support is at a retracement of .618 from the move up 30.47 to 32.49 .. Both of these support levels were predictable before the market supported there.. Hint:--- See how the rally continued after the shallow retracement to 30.39 ... See how the rally after the deeper retracement to .618 near 31.25 was a weaker rally.. This is common, a deeper retracement often foretells a weaker rally... See the next lesson in the table of contents for more on these advanced Fibonacci trading principles.Another intraday chart, S&P 5-minute.. The first Fib retracement is on a bearish move, an opportunity to short. The second is bullish, with a long entry near 999.25 .. Note that popular charting software will calculate Fibonacci to rediculous precision, we don’t need anything closer than one tick! Actually, you should allow some room don’t expect precision every time. Allow the trade some room to develop, or you will be stopped out too often.More Advanced - Microsoft Daily chart.By now you’re probably quite interested, perhaps applying all those Fibonacci ratios to many charts.. You should experiment with your own charts. As long as the instrument traded has a lot of liquidity (not a penny stock for example), you should start to see Fib support and resistance at work. You will start to notice that Fibonacci levels "work" sometimes and not others. Sometimes the trades are not profitable, or are less profitable than others. You need to develop the skills required to select better trades. In this mini-lesson I want to show you how to evaluate price action based on which Fib levels it responds to, and how the market behaves immediately preceding the Fib support/resistance.The chart below actually has many Fibonacci levels "performing well", providing support or resistance to the market. I want you to focus on the two that I have identified, for the purposes of this lesson.The first up-move that I have identified topped out at $26.90, and then retraced 61.8% before supporting at that Fib level. There was a pause at the .382 level, but it was not sufficient to hold the market. Now look at the rally from the support level near .618, it rallied but did not exceed the prior high of 26.90 … As a general rule, a retracement to .618 or below indicates that the preceding up-move is losing steam. A shallow retracement which supports at .382 is more likely to rally beyond the prior high than one which has a deep retracement beyond .50 all the way to .618 ..The impressive thrust from 22.55 up to 26.90 was negated by a quick move back to .618 at about 24.20, so a trader should not be too optimistic about a continuation of the initial up-thrust.Similarly, the move up in June, from 23.50 to almost 26.50 would also not inspire much optimism for a huge rally above the high of 26.50 … In general a shallow support at .382 would indicate a probable rally beyond the prior high. However, if the up-move preceding the retracement was sluggish rather than thrusting, you also should temper your enthusiasm.If the second rally which only retraced to .382 had the thrust of the first rally, it would be a more attractive trade!These are not firm rules, instead they are used as a guide, to help you filter for better trades. Every Fib level is not equal, some are more attractive than others.Important notes from this lesson:Not all Fib levels are alike.No technical study is perfect, you must develop the skills to filter out bad trades, and improve the odds of finding better trades.Price action just before a Fib retracement can tell you something about the future.Which Fib level causes the end of a retracement also can give a hint to future price action.No technical study is perfect, you must develop the skills to filter out bad trades, and improve the odds of finding better trades

Forex Market Overview

The following facts and figures relate to the foreign exchange market. Much of the information is drawn from the 2007 Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity conducted by the Bank for International Settlements (BIS) in April 2007. 54 central banks and monetary authorities participated in the survey, collecting information from approximately 1280 market participants.Excerpt from the BIS:"The 2007 survey shows an unprecedented rise in activity in traditional foreign exchange markets compared to 2004. Average daily turnover rose to $3.2 trillion in April 2007, an increase of 71% at current exchange rates and 65% at constant exchange rates...Against the background of low levels of financial market volatility and risk aversion, market participants point to a significant expansion in the activity of investor groups including hedge funds, which was partly facilitated by substantial growth in the use of prime brokerage, and retail investors...A marked increase in the levels of technical trading – most notably algorithmic trading – is also likely to have boosted turnover in the spot market...Transactions between reporting dealers and non-reporting financial institutions, such as hedge funds, mutual funds, pension funds and insurance companies, more than doubled between April 2004 and April 2007 and contributed more than half of the increase in aggregate turnover." - BISStructureDecentralised 'interbank' marketMain participants: Central Banks, commercial and investment banks, hedge funds, corporations & private speculatorsThe free-floating currency system arose from the collapse of the Bretton Woods agreement in 1971Online trading began in the mid to late 1990'sSource: BIS Triennial Survey 2007Trading Hours24 hour marketSunday 5pm EST through Friday 4pm EST.Trading begins in the Asia-Pacific region followed by the Middle East, Europe, and AmericaSizeOne of the largest financial markets in the world$3.2 trillion average daily turnover, equivalent to: More than 10 times the average daily turnover of global equity markets1More than 35 times the average daily turnover of the NYSE2Nearly $500 a day for every man, woman, and child on earth3An annual turnover more than 10 times world GDP4The spot market accounts for just under one-third of daily turnover1. About $280 billion - World Federation of Exchanges aggregate 2006 2. About $87 billion - World Federation of Exchanges 2006 3. Based on world population of 6.6 billion - US Census Bureau 4. About $48 trillion - World Bank 2006.Source: BIS Triennial Survey 2007Major MarketsThe US & UK markets account for just over 50% of turnoverMajor markets: London, New York, TokyoTrading activity is heaviest when major markets overlap5Nearly two-thirds of NY activity occurs in the morning hours while European markets are open65. The Foreign Exchange Market in the United States - NY Federal Reserve6. The Foreign Exchange Market in the United States - NY Federal ReserveAverage Daily Turnover by Geographic LocationSource: BIS Triennial Survey 2007Concentration in the Banking Industry12 banks account for 75% of turnover in the U.K.10 banks account for 75% of turnover in the U.S.3 banks account for 75% of turnover in Switzerland9 banks account for 75% of turnover in JapanSource: BIS Triennial Survey 2007Technical AnalysisCommonly used technical indicators:Moving averagesRSIFibonacci retracementsStochasticsMACDMomentumBollinger bandsPivot pointElliott WaveCurrenciesThe US dollar is involved in over 80% of all foreign exchange transactions, equivalent to over US$2.7 trillion per dayCurrency CodesUSD = US DollarEUR = EuroJPY = Japanese YenGBP = British PoundCHF = Swiss FrancCAD = Canadian Dollar (Sometimes referred to as the "Loonie")AUD = Australian DollarNZD = New Zealand DollarAverage Daily Turnover by CurrencyN.B. Because two currencies are involved in each transaction, the sum of the percentage shares of individual currencies totals 200% instead of 100%.Source: BIS Triennial Survey 2007Currency PairsMajors: EUR/USD (Euro-Dollar), USD/JPY, GBP/USD - (commonly referred to as the "Cable"), USD/CHFDollar bloc: USD/CAD, AUD/USD, NZD/USD - (commonly referred to as the "Kiwi")Major crosses: EUR/JPY, EUR/GBP, EUR/CHFAverage Daily Turnover by Currency Pair

Foreign Exchange Market

The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest market in the world, in terms of cash value traded, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. Retail traders (small speculators) are a small part of this market. They may only participate indirectly through brokers or banks and may be targets of forex scamsMarket size and liquidityThe foreign exchange market is unique because of:its trading volume,the extreme liquidity of the market,the large number of, and variety of, traders in the market,its geographical dispersion,its long trading hours - 24 hours a day (except on weekends).the variety of factors that affect exchange rates,Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the BIS study Triennial Central Bank Survey 2004$600 billion spot$1,300 billion in derivatives, ie$200 billion in outright forwards$1,000 billion in forex swaps$100 billion in FX options.Exchange-traded forex futures contracts were introduced in 1972 at the Chicago Mercantile Exchange and are actively traded relative to most other futures contracts. Forex futures volume has grown rapidly in recent years, but only accounts for about 7% of the total foreign exchange market volume, according to The Wall Street Journal Europe (5/5/06, p. 20).Top 10 Currency Traders% of overall volume, May 2005RankName% of volume1Deutsche Bank17.02UBS12.53Citigroup7.54HSBC6.45Barclays5.96Merrill Lynch5.77J.P. Morgan Chase5.38Goldman Sachs4.49ABN AMRO4.210Morgan Stanley3.9The ten most active traders account for almost 73% of trading volume, according to The Wall Street Journal Europe, (2/9/06 p. 20). These large international banks continually provide the market with both bid (buy) and ask (sell) prices. The bid/ask spread is the difference between the price at which a bank or market maker will sell ("ask", or "offer") and the price at which a market-maker will buy ("bid") from a wholesale customer. This spread is minimal for actively traded pairs of currencies, usually only 1-3 pips. For example, the bid/ask quote of EUR/USD might be 1.2200/1.2203. Minimum trading size for most deals is usually $1,000,000.These spreads might not apply to retail customers at banks, which will routinely mark up the difference to say 1.2100 / 1.2300 for transfers, or say 1.2000 / 1.2400 for banknotes or travelers' cheques. Spot prices at market makers vary, but on EUR/USD are usually no more than 5 pips wide (i.e. 0.0005). Competition has greatly increased with pip spreads shrinking on the majors to as little as 1 to 1.5 pips.Trading characteristicsThere is no single unified foreign exchange market. Due to the over-the-counter (OTC) nature of currency markets, there are rather a number of interconnected marketplaces, where different currency instruments are traded. This implies that there is no such thing as a single dollar rate - but rather a number of different rates (prices), depending on what bank or market maker is trading. In practice the rates are often very close, otherwise they could be exploited by arbitrageurs.Top 6 Most Traded CurrenciesRankCurrencyISO 4217 CodeSymbol1United States dollarUSD$2Eurozone euroEUR€3Japanese yenJPY¥4British pound sterlingGBP£5-6Swiss francCHF-5-6Australian dollarAUD$The main trading centers are in London, New York, and Tokyo, but banks throughout the world participate. As the Asian trading session ends, the European session begins, then the US session, and then the Asian begin in their turns. Traders can react to news when it breaks, rather than waiting for the market to open.There is little or no 'inside information' in the foreign exchange markets. Exchange rate fluctuations are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes in GDP growth, inflation, interest rates, budget and trade deficits or surpluses, and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time. However, the large banks have an important advantage; they can see their customers order flow. Trading legend Richard Dennis has accused central bankers of leaking information to hedge funds. [1]Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar.On the spot market, according to the BIS study, the most heavily traded products were:EUR/USD - 28 %USD/JPY - 17 %GBP/USD (also called cable) - 14 %and the US currency was involved in 89% of transactions, followed by the euro (37%), the yen (20%) and sterling (17%). (Note that volume percentages should add up to 200% - 100% for all the sellers, and 100% for all the buyers). Although trading in the euro has grown considerably since the currency's creation in January 1999, the foreign exchange market is thus still largely dollar-centered. For instance, trading the euro versus a non-European currency ZZZ will usually involve two trades: EUR/USD and USD/ZZZ. The only exception to this is EUR/JPY, which is an established traded currency pair in the interbank spot market.Market participantsAccording to the BIS study Triennial Central Bank Survey 200453% of transactions were strictly interdealer (ie interbank);33% involved a dealer (ie a bank) and a fund manager or some other non-bank financial institution;and only 14% were between a dealer and a non-financial company.BanksThe interbank market caters for both the majority of commercial turnover and large amounts of speculative trading every day. A large bank may trade billions of dollars daily. Some of this trading is undertaken on behalf of customers, but much is conducted by proprietary desks, trading for the bank's own account.Until recently, foreign exchange brokers did large amounts of business, facilitating interbank trading and matching anonymous counterparts for small fees. Today, however, much of this business has moved on to more efficient electronic systems, such as EBS, Reuters Dealing 3000 Matching (D2), the Chicago Mercantile Exchange, Bloomberg and TradeBook(R). The broker squawk box lets traders listen in on ongoing interbank trading and is heard in most trading rooms, but turnover is noticeably smaller than just a few years ago.Commercial CompaniesAn important part of this market comes from the financial activities of companies seeking foreign exchange to pay for goods or services. Commercial companies often trade fairly small amounts compared to those of banks or speculators, and their trades often have little short term impact on market rates. Nevertheless, trade flows are an important factor in the long-term direction of a currency's exchange rate. Some multinational companies can have an unpredictable impact when very large positions are covered due to exposures that are not widely known by other market participants.Central BanksNational central banks play an important role in the foreign exchange markets. They try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies. They can use their often substantial foreign exchange reserves, to stabilize the market. Milton Friedman argued that the best stabilization strategy would be for central banks to buy when the exchange rate is too low, and to sell when the rate is too high - that is, to trade for a profit. Nevertheless, central banks do not go bankrupt if they make large losses, like other traders would, and there is no convincing evidence that they do make a profit trading.The mere expectation or rumor of central bank intervention might be enough to stabilize a currency, but aggressive intervention might be used several times each year in countries with a dirty float currency regime. Central banks do not always achieve their objectives, however. The combined resources of the market can easily overwhelm any central bank. Several scenarios of this nature were seen in the 1992-93 ERM collapse, and in more recent times in South East Asia.Investment Management FirmsInvestment Management firms (who typically manage large accounts on behalf of customers such as pension funds, endowments etc.) use the Foreign exchange market to facilitate transactions in foreign securities. For example, an investment manager with an international equity portfolio will need to buy and sell foreign currencies in the spot market in order to pay for purchases of foreign equities. Since the forex transactions are secondary to the actual investment decision, they are not seen as speculative or aimed at profit-maximisation.Some investment management firms also have more speculative specialist currency overlay units, which manage clients' currency exposures with the aim of generating profits as well as limiting risk. The number of this type of specialist is quite small, their large assets under management (AUM) can lead to large trades.Hedge FundsHedge funds, such as George Soros's Quantum fund have gained a reputation for aggressive currency speculation since 1990. They control billions of dollars of equity and may borrow billions more, and thus may overwhelm intervention by central banks to support almost any currency, if the economic fundamentals are in the hedge funds' favor.Retail Forex BrokersRetail forex brokers or market makers handle a minute fraction of the total volume of the foreign exchange market. According to CNN, one retail broker estimates retail volume at $25-50 billion daily, [2]which is about 2% of the whole market. CNN also quotes an official of the National Futures Association "Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically."All firms offering foreign exchange trading online are either market makers or facilitate the placing of trades with market makers.In the retail forex industry market makers often have two separate trading desks- one that actually trades foreign exchange (which determines the firm's own net position in the market, serving as both a proprietary trading desk and a means of offsetting client trades on the interbank market) and one used for off-exchange trading with retail customers (called the "dealing desk" or "trading desk").Many retail FX market makers claim to "offset" clients' trades on the interbank market (that is, with other larger market makers), e.g. after buying from the client, they sell to a bank. Nevertheless, the large majority of retail currency speculators are novices and who lose money [3], so that the market makers would be giving up large profits by offsetting. Offsetting does occur, but only when the market maker judges its clients' net position as being very risky.The dealing desk operates much like the currency exchange counter at a bank. Interbank exchange rates, which are displayed at the dealing desk, are adjusted to incorporate spreads (so that the market maker will make a profit) before they are displayed to retail customers. Prices shown by the market maker do not neccesarily reflect interbank market rates. Arbitrage opportunities may exist, but retail market makers are efficient at removing arbitrageurs from their systems or limiting their trades.A limited number of retail forex brokers offer consumers direct access to the interbank forex market. But most do not because of the limited number of clearing banks willing to process small orders. More importantly, the dealing desk model can be far more profitable, as a large portion of retail traders' losses are directly turned into market maker profits. While the income of a marketmaker that offsets trades or a broker that facilitates transactions is limited to transaction fees (commissions), dealing desk brokers can generate income in a variety of ways because they not only control the trading process, they also control pricing which they can skew at any time to maximize profits.The rules of the game in trading FX are highly disadvantageous for retail speculators. Most retail speculators in FX lack trading experience and and capital (account minimums at some firms are as low as 250-500 USD). Large minimum position sizes, which on most retail platforms ranges from $10,000 to $100,000, force small traders to take imprudently large positions using extremely high leverage. Professional forex traders rarely use more than 10:1 leverage, yet many retail Forex firms default client accounts to 100:1 or even 200:1, without disclosing that this is highly unusual for currency traders. This drastically increases the risk of a margin call (which, if the speculator's trade is not offset, is pure profit for the market maker).According to the Wall Street Journal (Currency Markets Draw Speculation, Fraud July 26, 2005) "Even people running the trading shops warn clients against trying to time the market. 'If 15% of day traders are profitable,' says Drew Niv, chief executive of FXCM, 'I'd be surprised.' " [4]In the US, "it is unlawful to offer foreign currency futures and option contracts to retail customers unless the offeror is a regulated financial entity" according to the Commodity Futures Trading Commission [5]. Legitimate retail brokers serving traders in the U.S. are most often registered with the CFTC as "futures commission merchants" (FCMs) and are members of the National Futures Association (NFA). Potential clients can check the broker's FCM status at the NFA. Retail forex brokers are much less regulated than stock brokers and there is no protection similar to that from the Securities Investor Protection Corporation. The CFTC has noted an increase in forex scams [6].SpeculationControversy about currency speculators and their effect on currency devaluations and national economies recurs regularly. Nevertheless, many economists (e.g. Milton Friedman) argue that speculators perform the important function of providing a market for hedgers and transferring risk from those people who don't wish to bear it, to those who do. Other economists (e.g. Joseph Stiglitz) however, may consider this argument to be based more on politics and a free market philosophy than on economics.Large hedge funds and other well capitalized "position traders" are the main professional speculators.Currency speculation is considered a highly suspect activity in many countries. While investment in traditional financial instruments like bonds or stocks often is considered to contribute positively to economic growth by providing capital, currency speculation does not, according to this view. It is simply gambling, that often interferes with economic policy. For example, in 1992, currency speculation forced the Central Bank of Sweden to raise interest rates for a few days to 150% per annum, and later to devalue the krona. Former Malaysian Prime Minister Mahathir Mohamad is one well known proponent of this view [7]. He blamed the devaluation of the Malaysian ringgit in 1997 on George Soros and other speculators.Gregory Millman reports on an opposing view, comparing speculators to "vigilantes" who simply help "enforce" international agreements and anticipate the effects of basic economic "laws" in order to profit.In this view, countries may develop unsustainable financial bubbles or otherwise mishandle their national economies, and forex speculators only made the inevitable collapse happen sooner. A relatively quick collapse might even be preferable to continued economic mishandling. Mahathir Mohamad and other critics of speculation are viewed as trying to deflect the blame from themselves for having caused the unsustainable economic conditions.

13 Types of Girls you should Avoid by shami

In general, men are looking first for physical attraction at a woman. Many of them consider that if she is beautiful and well dressed, its the perfect partner they are looking for. But they don't know that behind this appearance its hiding something worst.Maybe this happened to you too. After you began a relationship with her you found out that she is not exactly what you want and what you expect. She hurt you and dumped you when you last expected. Many men are chasing after a woman who lied them and used them. But, in order to stop this, you should know from the beginning which types of girls you should avoid for to not be hurt again.Desperate girl-it is the type of the girl who spend all her life laid out, looking for a perfect life, and suddenly she discover that she gets old and she doesn't get married yet because she hasn't met the perfect man for her-she wants desperately to get married no matter who the guy is or what he does-she is pressed by the time and is ready to marry with a jerk as long as he has marriage material-watch out because if you marry one of this, you have to spend the rest of your life with herMaterialistic girl-usually is good looking and well dressed-is looking very well outside but inside it is a bunch of money hungry taker-she is looking all the time after boys which are staying very well with their wallet-she expects that a man should finance her entire life just because she is biologically female-she is very friendly, nice at the beginning but after some time you'll see that no matter how much you give her, she wants more-she is greed personified-she is interested only in what she wants and not others feelings-stay away from this kind of girl because she will dumped you after she spend all your moneyAngry girl-she is the type of the girl which sees life like a battle-anything what is happening or is told to her is seen as a insult at her address-has also a bad opinion about man, sees only the wrong sides of a man-she is always upset and angry-usually she likes to take out of context everything what is said to her and to interpret the words like she wants-you don't have any future with her, she has a simmering anger at men which can explode at any momentInsecure girl-she is very nice and treats men very well-but she suffers by frustration-is wracked by anxiety about making the wrong decision-she has to think twice about what to do, what to wear, where to go, what to eat-she needs constant reassurance that she's attractive and worries incessantlyStupid girl-this type of girl likes to speak a lot but she doesn't say nothing smart-she likes to say always gossips about the others, but when you want to talk something important with her, she is not able to make conversationUptown girl-she is very rich-everything she has is better than yours and she wants to make sure that you know it-she only dates the best of best-is entirely focused on herself-she is very selfish, self-indulgent grown up as '' daddy's little girl''-needs to be constant center of attention no matter what she does or where she goesChildish girl-everything in life hurts this kind of girl-is the type of girl who cries a lot, every innocent comment or criticism will upset her-avoid this kind of girl because if you are dating one you will have to spend all the time apologizing even if you didn't make any mistake-avoid also long term relationship with her because she is capable of suicide if you want to leave her and all the blame will be thrown on yourselfElusive girl-is the type of girl who is afraid to start a relationship-she might be hurt in a past relationship and so subconsciously avoids or sabotages new relationships in the present-she look interested at the beginning but after a while she runs away-is the type of girl who likes to send mixed messages so you'll never understand herTalking girl-it is a big difference between somebody who is able to make good conversation and have sense of humor , and somebody who always have to make a comment about everything-it is the type which is very hard to please and always has to say something about everything is happening or speaking around herRomantic girl-this lives in her own world, of movies and romance novels-she is very dreamy, imagining things, expecting Prince Charming to come after her-she doesn't know how the real world is-she was grown with the idea that she is a princessDragger girl-this kind of girl will always make you feel bad even there is no reason to feel that-it is always worrying and she can never be happy, everything around her is a total drag-even if a wonderful thing happen to you, she will make you feel like it was the worst thing that could happen everControlling girl-she likes to have the total control in your relationship and on you too-wants to control you in everything you do, you wear or eat-if you try to control her too, she will get angry, cry, scream or use any deceptive female tactic until you give upFlirting girl-she flirts with anybody and flaunt her sexuality at every opportunity-has a big power of attraction-exist the risk to dump you in any moment if somebody better comes alongWith all these types of girls you should avoid, it is now more easy for you to make a good choice about your next girlfriend; but remember that not all the women are the same, maybe there is somewhere a good, carrying woman just for you.