3.04.2009

Stock investors sift for clues ahead of jobs report

"Investors will be looking ahead to Friday's employment report for the next reading on the economy. The employment number will probably be bad, perhaps another elimination of 600,000 jobs," said Frederic Dickson, chief market strategist, D.A. Davidson & Co.

Market watchers trying to get a handle on the count of unemployed got a preview of sorts in the ADP private-sector payrolls survey released Wednesday. It found companies axed 697,000 jobs in February. Read Economic Report.
"There is no firm correlation between this report and Friday's employment report, but obviously ADP has quite a large footprint in the private sector, so if they're seeing losses it can't bode well for the economy overall even if it's not [correlated one-to-one] with the employment report," said Dan Greenhaus, an analyst at Miller Tabak & Co.
"Construction lost jobs for the 25th straight month, bringing the total number of losses in that sector to over [1 million]. Manufacturing lost jobs for the 36th month in a row, while the goods-producing [category] lost jobs for the 26th month in a row," said Greenhaus.
Also ahead of Friday's Labor Department report, the employment component of the ISM non-manufacturing index for February came in for scrutiny. Read more.
"Only two industries reported increased employment this month, and surprisingly, one of those was the real estate, rental, and leasing sector," said Omair Sharif, an analyst with RBS Research.
Fourteen industries pointed to lower employment levels in February, while two reported no change -- findings "consistent with significant losses in service-sector jobs," said Sharif, who forecast another sharp drop in nonfarm payrolls in February of about 625,000, with the unemployment rate climbing from 7.6% to 7.9%.
A separate tally, also released Wednesday, found major U.S. companies laid cut 186,350 jobs in February, more than double the year-earlier figure. But the unscientific findings of job-cut announcements compiled by Challenger Gray & Christmas also found last month's reductions slowing from January's pace, when layoff announcements tracked by the outplacement firm hit a seven-year high of 241.749. See detailed report.
Following rallies overseas, U.S. stocks climbed after succumbing to five straight days of losses, with energy and materials fronting sector gains.
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EUR - European Currencies Pricing in Expected Rate Cuts

The EUR has faced a rough week thus far. Currently losing against every major currency rival, the EUR may in fact be pricing in tomorrow's expected rate cut by the European Central Bank (ECB). Declining to 1.2525 against the USD in today's early trading hours, and down to 0.8900 against the GBP, the EUR is a little worse for wear.

Typically before an important interest rate decision by the ECB, traders begin to anticipate the policy decision and price-in the impact a day or two ahead of schedule. As such, we may likely be seeing a depreciation of the EUR as most traders are near 100% positive that the ECB will in fact slash rates by 50 basis points tomorrow around noon. Moreover, we may likely see a continuation of this pricing-in up until the moment of its announcement.

However, if for some reason the ECB follows Australia's lead and decides to hold rates steady, there will be a dramatic shift into an upward correction for the EUR pairs and crosses as traders re-value the EUR in a positive direction. As this is unlikely, given recent European economic news, traders are likely to see just such a rate cut.

Looking at today, with very few indicators being released from the Euro-Zone the driving force behind the movement of this currency is going to be Dollar news and the anticipation of tomorrow's interest rate cuts by the ECB and Bank of England (BoE). These rate cuts appear to be in the foreground to this week's trading as many traders are making large profits off the movement which typically follows such an announcement.
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China Looking to Buy Oil & Diversify from US Treasuries

US Treasury yields have been held low across the short-term and long-term due in part to a lack of appealing investment opportunities in a deflationary period, while the Federal Reserve announced in January the possibility of buying long-term US government Treasury bonds to help hold down long-term interest rates (and thus mortgage rates), hoping for a slow controlled decent in housing prices.

At the other end of the spectrum, the US government has been bailing out every large financial institution willing to accept a few billion here or there, and running the printing presses in overdrive.



Eventually this will lead to inflation, as explained by John Williams last August:

Excess supply of a commodity or product usually is reflected in downside pressure on its price, and the same is true for money. Excessive supply of money leads to its debasement, to a decline in its value that otherwise is known as inflation. Where money supply generally is an underpinning of economic activity, it also is the ultimate determinant of prices and inflation. At present, near-record high annual growth in the broadest U.S. money measure M3 is suggesting a significant inflation problem in the year ahead.

The Chinese have nearly 2 trillion Dollars in their reserves, with roughly 2/3 of them being denominated in US Dollars. Seeing their own economy slow, and the coming risk of inflation, the Chinese government is looking to shift some of their reserves away from US Dollars to hard commodities, particularly oil. Marketwatch reports:

China is considering plans to tap its foreign reserves to buy crude oil as part of a push to diversify holdings from U.S. Treasurys, according to a published report.

With the U.S. issuing massive amounts of government bonds to finance economic stimulus measures, Chinese officials are looking to hedge against the risk of Treasury prices dropping.

China, which has been building up a national oil stockpile since 2004, aims to amass 100 million barrels by next year as a first step, the Japanese business daily Nikkei reported.

This may just be jawboning to try to slow down the US printing presses, but if it is more than that, it could have a significant effect on the perceived value of the US Dollar, especially in light of the current $1.75 trillion US deficit - a full 12.3% of the projected 2009 GDP. If foreigners lose confidence in the US Dollar, inflation and interest rates will certainly move sharply off their historic lows as the risk of “risk free” US treasuries is revealed and repriced.
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Starting To Trade On Forex

Whenever you start doing something new, you should learn the basics of it. Every start is hard and needs a lot of dedication, but if you are willing to learn success will come in time. So, before starting to trade on the Forex you should learn the very basics. I recommend that you check out Forex-Training. It provides high quality training and educational resources for foreign exchange ("Forex") and commodity traders. They also give you a free account which you can use to practice before starting to invest real money.

Even if you’re an active trader in stocks, you may not be prepared to invest in forex, or the foreign exchange market. Forex trades 24 hours a day from 5:00 p.m. ET on Sunday until 4:00 p.m. ET Friday, so you won’t hear those opening or closing bells. And, there’s no central market like the New York Stock Exchange or Nasdaq. Instead, trade is conducted between participants through electronic communication networks (ECNs) and phone networks in various markets around the world. So, when you hear that the US dollar closed at a certain rate, it simply means that was the rate at market close in New York. But currency continues to be traded around the world long after New York’s close.

But, like securities, traders can go long or short and they can make a profit or lose money. As with stocks, it’s best to conduct some research into how the forex market works before you begin to trade. After you understand how the forex market works, you can begin to build a trading strategy.

The following list contains 37 tutorials, tools, and resources that will help you get started with investments in forex. If you’ve traded on any stock exchange in the past, some of these tools might feel or appear familiar, but they may have a new twist. The resources listed below were chosen for their clarity and simplicity as well as for their reputation.

Getting Started

First i have to recommend to you this great Forex eBook completely free. I'm sure you will find a lot of useful information here which will help you start and also maybe help you choose your first online broker.

The following information is for the forex beginner, but even intermediate-level forex traders might pick up a tip or two from these sites:

Baby Pips - A pip is the smallest unit of price for any foreign currency, so "baby pips" is a bit redundant. But you won’t find any redunancy on this site. Skip the news on the front page for now and go straight to the School of Pipsology that holds a complete course for beginners. If you walk through all the lessons contained on this site, you’ll have a solid basic forex education under your belt.

Forex Glossary - Although the previous tutorial might help you to understand some forex terms, this glossary is a great tool to have on hand for future reference. You’ll see some familiar terms here, like "selling short" and "limit order," and you’ll learn that they mean the same as they do when you use them for trading securities. But, you’ll also find new terms like "big figure" and "two-way price," terms that will set you apart as a forex trader.

Investopedia - This online financial encyclopedia contains an extensive 10-part article on forex investing, from an introduction to a recap that covers everything from benefits and risks to technical analysis. If you can’t get enough of Investopedia’s information, head to their Forex index, where you can find a list of articles and an opportunity to download their free e-Book entitled, "High Probability Trading Setups for the Currency Market."

National Futures Association(NFA) - Now that you have a basic understanding about forex markets, visit the NFA to learn how to build a sound forex strategy. The NFA is "the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the derivatives markets," which basically means that this organization regulates any market that depends upon future cash flows. The "investor information" section contains materials about how to find a broker and basic lessons in forex trading. Plus, they publish forex warnings, news, and they offer a place for investor disputes and complaints.

Commodities Futures Trading Commission(CFTC) - The CFTC operates along the same lines as the SEC (Securities and Exchange Commission), except this government organization focuses on protecting market users and the public from fraud in the futures and option markets. So keep this site handy to stay on top of any forex scams through their Consumer Advisory on Forex Fraud. You can learn quickly what to avoid in your learning curve through a detailed forex advisory that offers information about other resources as well.

Martket Traders Insitute (MTI) - You don’t need to spend a lot of money to train in forex markets. Even MTI offers free resources such as videos and lesson plans that will help you get off the ground. If you like what you hear and see, you can invest in materials for the advanced trader down the road.

Learn about Currency

If you’re going to trade something, you better know what it is you’re trading. These currency sites will help you get up to speed on foreign currency exchange and markets.

Exchange Rate - Skip the top link box, as those links will take you to FXCM (Forex Capital Markets — see #13 and #33). Instead, try out the "hot" and "currency info" links that provide information about everything you’d want to know about worldwide currencies for 170 countries. Includes calculators, fun facts, serious facts, and more.

Oanda - With a free registration you can access customizable currency tools, including calculators and foreign exchange data. If you don’t register you can still access currency exchange tools that are great items for instant information, especially for travelers, let alone forex investors. The Traveler’s Cheat Sheet is indispensable for money-conscious globetrotters.

GoCurrency - This site offers a powerful and accurate currency converter, but don’t stop there. Learn about currencies by country, currency forecasts, and gather insights on foreign investments.

The Euro - Confused about the Euro? Over 13 European Union countries now use the Euro, and this Web site, brought to you by the European Commission, will teach you everything you want to know about this currency. But the Euro represents just one currency among hundreds. Which leads me to my next point…

List of Currencies - This is an extensive list provided by Wikipedia that covers everything from ancient coinage to the current Yen. As with most Wikipedia lists, you might run across a link or two that doesn’t contain information. But, you can use that information to search elsewhere if needed.

Get the News (other sites beside this blog)

Once you’ve learned the basics, the next best thing you can do before you begin to trade is to read up on forex information via traditional financial news sites and blogs. Use the tutorials listed above during this process so that you can grasp the language and learn the strategies involved in any reporting. Take advantage of forums or chats offered by these resources to ask questions:

Action Forex - This site offers an easy-to-read layout that includes news, insights, fundamentals reports, calculators, and tons of other forex resources.

Daily FX - An easy-on-the-eyes news source that offers a calendar, charts, and a forum. Sponsored by FXCM, this site offers a free weekly trading lesson and free quarterly outlook reports. You must be an FXCM client to access the market commentary, but the other "free" news offers a great resource for learning and for staying on top of forex news.

Forex Reader -  The Forex Reader is a popular blog that offers updates on financial headlines relegated by currency. It also serves as a resource for individuals seeking a Houston trucking accident attorney along with other legal and financial information.

Forex News - Like most of the sites listed here, Forex News offers more than news. Checkout their forums, their technical news, and their educational and research materials while you’re there. Register for free to take full advantage of the site’s resources, including a chat feature.

FXStreet - Global Forex Trading (GFX) sponsors this forex news site. Use the forums, chats, strategies, techniques, and trading tools to get a feel for forex. Additionally, several bloggers share their insights, including Wayne McDonell’s FX Boot Camp Training Videos (visit his FX Bootcamp site).

Profiting with Forex Blog -  You might discover that this newsworthy blog is part of the network, "Profiting with Forex." The blog is interesting, but the backend reports, podcasts, and commentary at the "Profiting" site might appeal to you more.

The Forex Project - Lessons learned first-hand from a forex trader. This site has an unbelievably long list of topics, along with news about the blogger’s personal trading experiences, calculators, charts, news, and a perspective on forex psychology.

Participate in Forums

Speaking of forums, here are a few specific resources where you can tap into information from around the world that may help to answer your questions about forex trading and markets. Be aware that individuals who want to sell their ideas visit these forums, just like any other forums. But, you’ll find a wealth of valid information here as well.

MoneyTec -  With over 33,000 members, this traders’ forum offers a format to discuss trading ideas, share, learn, and build new trading techniques and strategies.

Global View Forums -  Another free forum that’s been around since 1996. This one focuses solely on forex. You must register to participate.

Forex Factory Forum - You’ll find a Forex Beginner Q&A section as well as topics that focus on specific strategies and techniques. Free to register.

Learn Strategies

You’ll discover that some forex traders use Fibonacci (Fib) methods, and that others rely on current financial news to divine futures. There are as many strategies as personalities in the forex market, but — like the stock market — they rely either on fundamental or technical analysis. The following contains a mix of the two:

Fibonacci Lesson - Don’t know much ’bout arithmetic, Fibonacci numbers, or the Golden Section? This tutorial, offered by Dr Ron Knott from the Mathematics Department of the University of Surrey, UK will provide results. Simple to use, easy to understand, and filled with illustrations to help you learn why some numbers are so important to nature. Interstingly, these numbers are also of vast interest to many forex investors.

Fibonacci Forex Indicators - Forex Planet will begin to show you how to apply Fibs to forex in this easy-to-understand lesson. But, the lesson is short, so you might try the next resource as well.

Mini-Lesson on Fibonnaci -  This lesson also applies to forex, and it offers a short tutorial on applications along with a downloadable Fib calculator.

Intro to Japanese Candlestick Charting - Altavest provides a short and succinct introduction to Japanese candlestick charting, another method that forex traders use to graph charts.

Candlestick Patterns - If you like the Japanese candlestick methodology, this site will thrill you. Extensive patterns are illustrated graphically from basic to single patterns and reversal to continuation formations. This entire site offers some great information on techniques and strategies beyond the candlestick information, so take some time to look around while you’re here. Basically, this site has it all as far as technical analysis goes.

Fundamentals of Forex - Forex TV brings you the lowdown on what type of news would affect forex from a fundamental standpoint. You can use the information on this list to conduct further research, but I’ll bring a few of those topics to you now…

Consumer Price Index (CPI) - The US Department of Labor offers a ton of information just on this page alone through their links. But, the CPI is often influenced by many other factors. If you’re a fundamentalist, you might want to tag this next link for further research as well…

Bureau of Economic Analysis (BEA) -  Don’t play around with someone else’s opinions. Get the straight stuff from the US Department of Commerce like the pros. Everyone from the White House staff to US Trade Commission employees to trade policy officials who want to negotiate international trade agreements uses the measurements contained on the BEA Web site. Why should you be left out of this information resource?

Use Charts

Charts offer visual validation for technical strategies, but they also reflect fundamental behaviors in the market. Even if you’re a seasoned securities trader, you might want to learn more about the psychology behind forex trading. If you can read all sorts of charts inside and out, you’ll have the forex advantage.

The Law of Charts - Joe Ross offers advice for traders across the board, but the information contained in his "Law of Charts" offer speaks to forex as well as any other trading strategy. He identifies chart patterns that result from human behaviors and points to entry and exit targets on those charts. You can take advantage of Ross’s other tools as well, including the forum.

Forex Charting 101 - A brief and basic overview of forex charts from Pip Trader. You’ll discover that the charts are very similar to those that you might use for securities trading. But, some of the charts may seem more complicated if you’re not a seasoned trader.

Free Forex Charts - There’s no reason for me to push you into using a specific chart. Instead, I’ll point you to a short list of free forex charts that you can use for practice. When you’re ready to begin trading, take a look at their lists of premium and system trading charts for professional use. The lists contain ratings and reviews, visuals, features, and tips and tricks for individual charts.

FXCM - Although I don’t advocate specific brokers in this article, when you visit brokerage sites make sure that you take advantage of any free information offered by those businesses. In this instance, Forex Capital Markets offers tons of information about forex trading, and you can sign up for a risk-free 30-day practice account to get your feet wet. Forex.com and several other brokerage sites also offer this free account service. Be aware that when you sign up for these services that you’ll be added to a mailing list. You can opt out of these lists, but read any other pertinent information to make sure that you’re not obligated to purchase anything from any brokerage that you use for services such as this one.

Other tools

The tools listed below are "sidebars" to all the information listed above. I’ll cut you loose on the last two sites, as they contain just about every site you’d might want to access for more forex information:

Live Forex Rates - You might recognize the GFT logo behind the rates, but don’t let that distract you from the constantly changing figures. If you’re addicted to live feeds, you’ll be mesmerized by the constantly changing currency
rates on this chart.

A Free Book about Forex - This book is truly free, as you don’t need to register to access the PDF file. A forex trader offers information about all the mistakes he made as he learned how to develop his own forex strategy. Short and easy to read, this little book will bring some insights into how to avoid some pitfalls in the forex markets.

Top 100 Forex Sites - Although these sites are rated by popularity and, therefore, subject to rating scams, you can learn much from the sites that are listed simply from the variety of information that’s offered here. Many sites are brokerage firms, but as I mentioned previously you can find free information on many of these sites such as news, calculators, techniques, and more.

Earn Forex -  A link exchange/directory for other forex sites. Unlike the "Top 100" site listed previously, Earn Forex doesn’t rate their links. But, you will also find much different information here than at the previous site. Additionally, the links are sorted by categories, which makes it easier to find what you need. In addition, you’ll find other tools here like calculators, articles, and a forex FAQ and glossary.

There are many other sites that I could list for your forex training, but my next suggestion is to head to your local library and read some books about forex trading. If you find an author or two who are to your liking, begin to study their techniques and strategies both through their books and on the Internet. If you share your information and questions on forums, you might find a mentor who will help you learn how to strategize and to use charts and fundamentals to your advantage as well.

Forex trading isn’t learned overnight; so don’t feel inadequate if you can’t grasp the fine points immediately. You can’t lose by learning more about how world economies work. The information that you gather in your search for forex training will make you a better trader no matter which markets you prefer to use.

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What is Forex?

If you would go out on a dinner with your friends or family and you mentioned that you were trading on the Forex market most of them wouldn’t know what you were talking about. The worst thing is that most of the Forex traders that join the Forex market don’t know what they are doing. Understanding what Forex is, is the first good step to your success at Forex trading.


The foreign exchange market (Currency, Forex, or FX) is where currency trading takes place. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. Forex transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The foreign exchange market that we see today started evolving during the 1970s when world over countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system till 1971.

Today, the Forex market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Traditional daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements. Since then, the market has continued to grow. According to Euromoney's annual Forex Poll, volumes grew a further 41% between 2007 and 2008.

Forex Turnover

Forex Turnover
Main foreign exchange market turnover, 1988 - 2007, measured in billions of USD.
The purpose of Forex market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollar, Pound Sterling, Yen, etc., and the need for trading in such currencies. Since you aren’t buying anything physical this kind of trading can be confusing. When buying a currency think of it as buying a part in that particular country’s economy because the currency rate reflects the economical situation of the country when compared to others.

Currencies

Currencies
List of most popular currencies on the Forex market

Forex used to be a closed market because only the “big boys” because you needed between 10 and 50 million $ to open an account. But today, with the development of internet, online Forex brokers have the possibility to offer their services to “little” traders. All you need to start is a computer, fast internet connection and information which you can find on this page also.

This enormous market is like the dangerous sea where you can meet lots of sharks and dangerous waters but at the same time it is the only one where two weeks of trading can hypothetically bring you $1,000,000 out of $1,000 of initial investment.

This is certainly hypothetically because a lot of newbie traders deal with their trades as gambling, that surely bring them to having nothing in the end. You should always keep the phrase "be careful!" in your mind. This market would give you its profit possibilities only if you learn the basic things hard and make lots of demo trading.

The statistics is that as much as 95% of traders come to losing their money at Forex, 5% have profit and less than 1% of traders make large fortune at Forex. You shouldn't produce, sell or advertise anything trading at Forex. Your assets are your knowledge, experience and a small amount of cash.

This market is a platform for banks, transnational corporations and individual traders to change the currencies they possess into other ones. This is the spot Forex market. At this market you can trade with up to 1:400 leverage which means that you'll get $400 on your account for each dollar invested. So, you can trade with the $400,000 sum having invested $1,000 onto your account.

Forex is unique among other world markets because in any time of day and night, somewhere in the world, a financial centre is open for business, banks and corporations exchange currency all the time, with a little lower frequency during the weekend.

Why to trade on Forex?

1. There is no commission fee for trading at Forex.
2. There is no intermediary, you can trade directly at Forex.
3. Forex is open 24-hours a day.
4. Nobody can influence the market for a longer period.
5. High liquidity.
6. Free demo accounts, analysis and charts.
7. Small accounts that allow everyone to try out his luck.

Hope this has answered a lot of questions you were asking yourself about Forex and that you can now start trading. Also make sure that you check out other articles on this blog which can help you earn your fortune.

Good luck to everyone!