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Gold Futures




Automatic Forex Trading - What Is It?

First , automatic forex trading, like other speculation forms , has one main goal; making money ! So if we start with that premise , that making money is our goal , how is this achieved in our massive global market?

The first thing you need to decide is if you are a technical trader, fundamental trader, or a combination of both. There will be more articles coming on this topic later , but for now let's assume that you like to follow world affairs and current events and you are more attracted to fundamental trading . You would then need to ask yourself , what are the single most important fundamental factors that drive currency movements ?

If focusing on the fundamentals , forex trading decisions are going to be driven by one thing above all others ; the interest rate differentials between various countries. What is an interest rate differential ? Good question ! Suppose there is a short term interest rate of 4% on the Australian Dollar . This means that if you live in Australia and you're in debt this will be the base rate that determines what you pay on your home mortgage, your credit cards, etc . If you're a creditor you get to use this short term interest rate of 4% as the base rate that determines the income you get on investments ; which can include certificates of deposites that come from a bank locally. Then suppose that the short term interest rate of the US Dollar, set by the Federal Reserve , at only 1% . So how in the world does what I just said affect currency movements ?

If the short term rate of the Australian Dollar is 4% and 1% is the short term rate of the US Dollar it all becomes this simple: investors want their investments to have a higher yield and since Australia provides more interest then they take funds and move them to Australia. This shift in the investments going to Australia from the US mean that the US Dollar will weaken since demand is smaller than supply and this strengthens the Australian Dollar since the demand is greater than its supply. Economic fundamentals are working here ; when there is higher demand the value rises.

When you think about your own forex trading and what position to put on next , ask yourself , " which country will moving forward have higher rates and which country moving forward will probably have lower rates ?" Then buy currency that is the favorite for higher interest rates and currency favored for lower interest rates should be sold and increase profits as investors go towards stronger currency and leave the weaker one . This is the essence of forex trading.





Time Zones In Automatic Forex Trading

For an average trader, forex trading time zones can be intimidating and difficult . Just like many other traders, when I started out trading this 24 hour global, cash market , the time zones issue never made a whole lot of sense to me . That changed over time however and here I'm going to show you some of the basics on how I handle this market and hopefully this will give you some help when getting prepared for another big trading day.
Consider where you live first, or where you'll be doing most of the automatic forex trading trading from. This is the most important factor that affects how you look at this 24 hour market . For the purposes of our example here let's suppose you reside in California which is on the West Coast in the U.S. and on Pacific Standard Time which is 3 hours behind New York's East Coast time .
Now that we know the trading will be done in California, which is three hours behind the East Coast , the planning can begin for the automatic forex trading trading day. In this never sleeping 24-hour market (but gets very quiet on weekends and major international holidays such as New Years ) when the New York financial centers close the trading day stops and resets at or around 5pm EST and the banking centers in the Far East like Hong Kong and Tokyo opening, starting their new day, at about that same time . So with that in mind it's best to have your trading charts set up so that the candle or daily bar that you are using closes at 5pm EST every day .
Since we know we're trading from the US West Coast which is three hours behond New York's EST and we're aware of when the 24-hour market will stop and rest for another day. The next thing to consider is when you will get ready and plan for the next day . If you happen to be in California , like our example, and you like staying up late then you may want to start preparing to trade the London Session from about 1am Pacific Standard Time to 4am Pacific Standard Time . Perhaps you like sleeping and you want to sleep through the session in London but getting up early is no problem , around 4am PST (7am EST) so you get a look at the end of the London session and prepare for the start of the New York session which gets a good start at 8:30am EST or 5:30am PST. Perhaps getting up early isn't your thing and so you'd prefer to be a middle of the day trader ; not a problem . Simply wait until about 2pm Pacific Standard Time when the new day in Tokyo starts and you can trade FX during that major market session .
Now you've got a clear handle on what the major forex trading time zones are all about and can plan your days accordingly . And remember , preparation and planning are the most important yet overlooked factors of success in all businesses, including this one. Thinking this through you should be able to plan your automatic forex trading day.

What Do Automatic Forex Trading Currency Pairings Mean?


When talking to people who have never tried automatic forex trading before, even if they come from the world of stocks, bonds, or futures , it makes me remember that for this global market, even the very basics must be explained. So let's take a good look at pairings, what they mean, and what the main and cross pairings happen to be .

What exactly is a currency pair ? First we'll look at the Eur/Usd this has as the base currency the US dollar against the Euro . When I see a price quote of 1.3200 on the Eur/Usd, what does it mean ? The easiest way to remember the answer is this : take the base currency pair , which is the US dollar in this case , take a look at the 1.3200 price quote , and then say , " 1.3200 US dollars are needed to purchase 1 Euro." This is what that price quote really means. If you check the price quote a couple of months later and now it is 1.4000 this means that against the Euro the US dollar has become weaker because it now takes 1.4000 US Dollars to buy 1 Euro . Conversely , if a couple months later the price quote is then 1.25000 , then the US dollar has gained strenght because now it will only take 1.2400 US Dollars to buy 1 Euro .

Automatic forex trading can become even more challenging when you see a price quote of say 100.50 on the Usd/Jpy pair for example . Using the above method , simply take the base currency of Jpy and look at the 100.50 price quote and this is the amount of Jpy it takes to purchase one US dollar. Isn't that fairly easy? Now you will have no difficulty understanding the price quote on any pair when you see a quote window or chart screen .

Now that we know how to read the price quotes , what are the main and cross pairs ? The main pairs are the world's strongest economies agasint the US dollar . A few of these pairs are Eur/Usd, Gbp/Usd, Aud/Usd, Usd/Cad, Usd/Jpy, and Nzd/Usd . A cross pair is a pair not involving the US Dollar which includes the Gbp/Jpy and the Eur/Jpy to name a couple that are popular.

Hopefully this article will be of help to you if you've been feeling intimidated the automatic forex trading landscape in the past . You may need a bit of time to get used to this with the many economies, currency pairs, and different time zones . Once you begin realizing how the pieces all go together it's really not that bad - and to many, this is a whole lot of fun!