Forex Trading Quotes

Trading Quotes

If you like to open a position you need to place an "entry" order. When an entry order executes, the position becomes "open" and it starts its life in the forex market. At any point in time, you can place an "exit" order to "close" the position. A position can be "long" (entry order is to buy and exit order is to sell an instrument) or "short" (entry order is to sell and exit order is to buy an instrument).

When trading forex you will often see a two-sided quote, consisting of a 'bid' and 'offer'. The 'bid' is the price at which you can sell the base currency (at the same time buying the counter currency). The 'ask' is the price at which you can buy the base currency (at the same time selling the counter currency).

At a point when you place your entry order, you need to define price level at which you want to buy or sell certain instrument. You also need to specify type of the order and quantity of the instrument you want to trade. There are 3 order types:
Market Order
Placing a market order means that you will buy at your broker's current "ask" (or "offer") price, or sell at your broker's current "bid" price, whatever that price currently is. For example, suppose you are buying EUR/USD. The current market, as quoted by your broker is 1.2934 / 1.2938. This means that your broker is willing to buy EUR/USD from you at 1.2934, and sell it to you at 1.2938.
Stop Order
Initiating a trade with a stop order means that you will only open a position if the market moves in the direction you are anticipating. For example, if USD/JPY is currently 108.72 and you believe it will move higher, you could place a stop order to buy at 108.82. This means that the order will only be executed if the market moves up to 108.82. The advantage is that if you are wrong and the market moves straight down, you will not have bought (because 108.82 will never have been reached). The disadvantage is that 108.82 is clearly a less attractive rate at which to buy than 108.72. Opening a position with a stop order is usually appropriate if you wish to trade only with strong market momentum in a particular direction.
Limit Order
A limit order is an order to buy below the current price, or sell above the current price. For example, if EUR/USD is trading at 1.2952 / 56 and you believe the market will rise, you could place a limit order to buy at 1.2945. If executed, this will give you a long position in EUR/USD at 1.2945, which is 11 pips better than if you had just bought EUR/USD with a market order. The disadvantage of the limit order is that if EUR/USD moves straight up from 1.2952 / 56, your limit at 1.2945 will never be filled and you will miss out on the profit opportunity even though your view on the direction of EUR/USD was correct. Opening a position with a limit order is usually appropriate if you believe that the market will remain in a range before moving in your anticipated direction, allowing the order to be filled first.
For both entry and exits orders you can specify price levels at which you want them to be executed. You have to specify entry levels when you place you entry order, while most brokers would allow you to specify exit levels at any time.

Forex Trading Basics, Forex Trading Analysis

Forex Analysis

In order to assess the situation in the market a trader has to be able to use fundamental and/or technical analysis, as well as to make decisions in the constantly changing current of information about political and economic character. Most small and medium players in financial markets use technical analysis. Technical analysis presupposes that all the information about the market and its further fluctuations is contained in the price chain. Any factor, that has some influence on the price, be it economic, political or psychological, has already been considered by the market and included in the price. The initial data for a technical analysis are prices: the highest and the lowest prices, the price of opening and closing within a certain period of time, and the volume of transactions.

A technical analysis is founded on three suppositions:

• Movement of the market considers everything;
• Movement of prices is purposeful;
• History repeats itself.

That is, technical analysis is a statistical and mathematical analysis of previous quotes and a prognosis of coming prices.

A number of technical indicators have been installed into the PRO-CHARTS trading system. Analyzing the indicators one can come to the conclusion about further movements of the quoted currencies.

Fundamental analysis is an analysis of current situations in the country of the currency, such as its economy, political events, and rumors. The country's economy depends on the rate of inflation and unemployment, on the interest rate of its Central Bank, and on tax policy. Political stability also influences the exchange rate. Policy of the Central Bank has a special role, as concentrated interventions or refusal from them greatly influence the exchange rate.

At the same time one should not consider fundamental analysis just as an analysis of the economic situation in the country itself. A far bigger role in the FOREX market belongs to the expectations of the market participants and their assessment of these expectations. Various prognoses and bulletins, issued by the participants, have a strong influence on the expectations. Very often an effect of the so-called self-filfilling prophecy occurs when market players raise or lower the exchange rates according to the prognosis. But a deep and thorough fundamental analysis is available only for big banks with a staff of professional analysts and constant access to a wide field of information.

In spite of these different approaches, both forms of analyses complement one another. Traders who act on the basis of a fundamental analysis, have to consider some technical characteristics of the market (the main rates of support, such as resistance and resale), and supporters of the technical approach to the market must track the main news (interest rates, important political events).

Common Guidelines

Experienced traders will often say "trend is your friend" or "do not overtrade". What does it mean? The explanation below will lead you to pages where you can read more about basic trading guidelines. It is just basics - you will need to read much more related literature to become a successful trader.

Common Guidelines: Plan your trade and trade your plan: You must have a trading plan to succeed. A trading plan should consist of a position, why you enter, stop loss point, profit taking level, plus a sound money management strategy. A good plan will remove all the emotions from your trades.
The trend is your friend: Do not buck the trend. When the market is bullish, go long. On the reverse, if the market is bearish, you short. Never go against the trend.

Focus on capital preservation: This is the most important step that you must take when you deal with your trading capital. You main goal is to preserve the capital. Do not trade more than 10% of your deposit in a single trade. For example, if your total deposit is $10,000, every trade should limit to $1000. If you don't do this, you'll be out of the market very soon.

Know when to cut loss: If a trade goes against you, sell it and let go. Do not hold on to a bad trade hoping that the price will go up. Most likely, you end up losing more money. Before you enter a trade, decide your stop loss price, a price where you must sell when the trade turns sour. It depends on your risk profile as of how much you should set for the stop loss.

Take profit when the trade is good: Before entering a trade, decide how much profit you are willing to take. When a trade turns out to be good, take the profit. You can take profit all at one go, or take profit in stages. When you've recovered your trading cost, you have nothing to lose. Sit tight and watch the profit run.

Be emotionless: Two biggest emotions in trading: greed and fear. Do not let greed and fear influence your trade. Trading is a mechanical process and it's not for the emotional ones. As Dr. Alexander Elder said in his book "Trading For A Living", if you sit in front of a successful trader and observe how he trades, you might not be able to tell whether he is making or losing money. That's how emotionally stable a successful trader is.

Do not trade based on a tip from a friend or broker: Trade only when you have done your own research and analysis. Be an informed trader.
Keep a trading journal: When you buy a currency or stock, write down the reasons why you buy, and your feelings at that time. You do the same when you sell. Analyze and write down the mistakes you've made, as well as things that you've done right. By referring to your trading journal, you learn from your past mistakes. Improve on your mistakes, keep learning and keep improving.

When in doubt, stay out: When you have doubt and not sure where the market or stock is going, stay on the sideline. Sometimes, doing nothing is the best thing to do.

Do not overtrade: Ideally you should have 3-5 positions at a time. No more than that. If you have too many positions, you tend to be out of control and make emotional decisions when there is a change in market. Do not trade for the sake of trading.

FAQs of Forex..

Frequently Asked Questions.

What is Foreign Exchange / Forex / FX?
Foreign exchange is the simultaneous purchase of one currency and sale of another – currencies are always traded in pairs. It was created in the 70's when international trade transitioned from fixed to floating exchange rates, and nowadays is considered to be the largest financial market in the world because of its tremendous turnover.. The foreign exchange market is known as the "Forex," or "FX" market. It is the largest financial market in the world.

Is there a central location for the Forex Market?
Unlike the stock and futures markets, forex trading is not centralized on an exchange. Since transactions are conducted between two counterparts, the FX market is an “inter-bank,” or over the counter (OTC) market.

Who participates in the FX market?
Central, commercial and investment banks have traditionally dominated the Forex market. The reason that the forex market is referred to as an interbank market is due to the fact that historically it has been dominated by banks, including central banks, commercial banks, and investment banks. Other market participation is rapidly increasing, and now includes international money managers and brokers, multinational corporations, registered dealers, options and futures traders, and private investors.

When is the FX market open for trading?
Forex is a true 24-hour market and trading begins each day in Sydney, and then moves around the globe as the business day begins in each financial center - first to Tokyo, then London, and finally New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social, and political events at the time they occur - day or night.

What are the most common currencies in the Forex markets?
The most “liquid” currencies in the Forex market are those of countries with low inflation, stable governments, and respected central banks. Nearly 85% of daily transactions involve the major currencies, including the U.S. Dollar, Japanese Yen, the European Union Euro, British Pound, Swiss Franc, and the Canadian and Australian Dollars.

Is forex trading capital intensive?
Yes, Forex Capital Management requires a minimum deposit of $300 to open a Mini Account and $2000 for a regular account. Your relationship with Forex Capital Management enables you to conduct highly leveraged trades. You set the degree of leverage that you wish to deploy. Please remember that while this degree of leverage enables you to maximize your profit potential, there is an equally great potential for loss.

What is Margin?
Margin is a performance bond, or good faith deposit, to ensure against trading losses. Margin requirements in the FX marketplace allow you to hold positions much larger than the asset value of your account. Trading with Forex Capital Management includes a pre-trade check for margin availability, the trade is executed only if there are sufficient margin funds in your account. Most forex brokers' online trading platforms perform automatic pre-trade checks for margin availability, and will only execute the trade if you have sufficient margin funds in your account.

What are “short” and “long” positions?
Short positions are taken when a trader sells currency in anticipation of a downturn in price, and Long positions are taken when a trader buys a currency at a low price in anticipation of selling it later for more.

What is the difference between an "intraday" and "overnight position"?
Intraday positions are all positions opened and closed before 17:00 Eastern Time (the end of the international trading day). Overnight positions are positions that are held through 17:00 Eastern Time.

How is pricing determined for certain currencies?
Currency prices are affected by a variety of economic and political conditions, but probably the most important are interest rates, inflation and political stability. Sometimes governments actually participate in the forex market to influence the value of their currencies, either by flooding the market with their domestic currency in an attempt to lower the price, or conversely buying in order to raise the price. This is known as Central Bank intervention.

How can I manage risk?
The most common risk management tools in Forex trading are the stop-loss order and the limit order. The stop-loss order directs that a position be automatically liquidated at a certain price in order to guard against dramatic changes against the position. A limit order sets the maximum price that the investor is willing to pay in a transaction, as well as a minimum price to be received in exchange. The foreign exchange marketplace is so liquid that it is easy to execute stop-loss and limit orders. Forex Capital Management guarantees execution of stop-loss and limit orders at the specified price on orders up to US$1 million.

What trading strategy should I use?
Currency traders make decisions using both technical factors and economic fundamentals. Technical traders use charts, trend lines, support and resistance levels, and numerous patterns and mathematical analyses to identify trading opportunities, whereas fundamentalists predict price movements by interpreting a wide variety of economic information, including news, government-issued indicators and reports, and even rumors. The most dramatic price movements, however, occur when unexpected events happen. The event can range from a Central Bank raising domestic interest rates to the outcome of a political election or even an act of war. Nonetheless, more often it is the expectation of an event that drives the market rather than the event itself.

How often can trades be made?
As one might expect, trading activity on any particular day is dictated by current market conditions. Some small to medium size traders might make as many as 10 transactions in a day. By not charging commission and offering tight spreads, Forex Capital Management investors can take positions as often as is necessary without concern for excessive transaction costs.

How long should a position be maintained?
Forex traders generally hold positions until one of three criteria is met:
1. A sufficient profit has been realized from the position.
2. A pre-set stop-loss order is triggered.
3. A better potential position emerges and the trader needs to liquidate funds to take advantage of it.

How do margin calls work?
A margin call is generated when the equity balance in an account drops below the margin requirement for that size account. If the maximum allowable leverage has been exceeded, any open positions are immediately liquidated, regardless of the nature or size of the positions.

Foreign Currency Exchange

Why Not Forex?

Forex has some disadvantages/risks associated with it too.

Under margin trading conditions even small market movements may have a great impact on the customer's trading account. You must consider that if the market moves against you, you may sustain a total loss greater than the funds deposited. You are responsible for all the risks, financial resources you use and for the chosen trading strategy.

Do you know 7 out of 10 traders keep losing money in Forex market, while the rest of the 30% work freely at home and earn millions annually. What differs between the losing 70% and the winning 30%? Forex trading skills and the trading system! If you want to work less than 20 hours a day at home, if you want to make millions by trading freely at home, if you want to have financial freedom by trading Forex; you better LEARN Forex trading before you start trading Forex. Forex market is definitely not a game for newbie and you need to brush up your skills before getting your hands wet.

Foreign Currency Exchange

Investing in Forex

Investing in foreign currencies is a relatively new avenue of investing. There are considerably fewer people are aware of this market than there are people aware of several other avenues of investing. Trading foreign currency, also known as forex, is the most lucrative investment market that exists. There are several factors that make this true among which, successful forex traders earn realistic profits of one hundred plus percent each month. Compared to some of the better known investment markets such as corporate stocks, this is an unheard of return on investment. It’s very necessary to mention here that a person who invests in forex must, without exception, make it a point to learn the detailed, but simple strategies and information surrounding the market. This very fact is what makes the difference between successful forex traders and other traders.

A few additional points, which create such powerful leverage for investors within the forex market are: The amount of capital required to begin investing in the market is only three hundred dollars. For the most part, any other investment market is going to demand thousands of dollars of the investor in the beginning. Also, the market offers opportunities to profit regardless what the direction of the market may be; In most commonly known markets investors sit and wait for the market to begin an up trend before entering a trade. Even then, investors, as a rule must sit and wait some more to be able to exit the trade with a nice profit. Given that the forex market produces several up, down, and sideways trends in a single day, it can easily be seen that forex stands head and shoulders above other markets. Additionally there are trading strategies, which are taught that provide for compounded profits; these are profits on top of profits. In addition, free demo accounts are available within the industry of forex trading, which facilitate the sharpening of skills without the risk losing any capital. And the advantage regarding the time factor in trading foreign currency is a very attractive point for any investor. Compared to one of the most sought after avenues of investing, which often requires forty or more hours each week, namely in the real-estate market, the forex market requires a much smaller demand on the investor’s time. Forex trading requires approximately ten to fifteen hours each week to earn a full time income. It’s easy to see that the advantages and great leverage that exist in the forex market, make it among the most lucrative, time liberating, and easy to enter by far.

133 Trading Tips

1. Learn the basics of Forex trading. It's amazing how many people simply don't know what they're doing. In order to compete at the highest level in the trading business and be one of the few truly successful participants you must be well-educated about what you are doing. This does not mean having a degree from a well-respected university - the market doesn't care where you were educated.
2. Forex trading is a zero sum game. For every long there is also a short. If 80% of the traders are on the long side, then the remaining 20% are on the short side. This means further that the shorts must be well capitalized and are considered to be strong hands. The 80%, who are holding much smaller positions per trader, are considered to be weaker hands who will be forced to liquidate those longs on any sudden turn in prices.
3. Nobody is bigger than the market.
4. The challenge is not to be the market, but to read the market. Riding the wave is much more rewarding than being hit by it.
5. Trade with the trends, rather than trying to pick tops and bottoms.
6. Trying to pick tops and bottoms is another common fx trading mistake. If you're going to trade tops and bottoms, at least wait until the price action actually confirms that a top or a bottom has been formed before you take a position in the market. Trying to pin-point tops and bottoms in the foreign exchange market is very risky, but exercising a little patience and waiting for a proven top or bottom to form can increase your odds of profiting and somewhat reduce your risk.
7. There are at least three types of markets: up trending, range bound, and down. Have different trading strategies for each.
8. Standing aside is a position.
9. In uptrends, buy the dips; in downtrends, sell bounces.
10. In a Bull market, never sell a dull market, in Bear market, never buy a dull market.
11. Up market and down market patterns are ALWAYS present, merely one is more dominant. In an up market, for example, it is very easy to take sell signal after sell signal, only to be stopped out time and again. Select trades with the trend.
12. A buy signal that fails is a sell signal. A sell signal that fails is a buy signal.
13. Let profits run, cut losses short.
14. Let your profits run, but don't let greed get in the way. Once you've already made a nice profit on a trade, consider taking either some or all of the money off the table and move on to the next trade. It's natural to hope that one trade will end up as your "winning lottery ticket" and make you rich, but that is simply not realistic. Don't hold the position too long and end up giving all your well-deserved profits back to the market.
15. Use protective stops to limit losses.
16. Use appropriate stop-loss orders at all times to cut your losses and never, ever sit back and let your losses run. Almost every trader at some point makes the mistake of letting his or her losses run in hopes that the market will eventually turn around in his or her favor but, more often than not, it simply leads to an even greater loss. You win some, you lose some. Simply learn to cut your losses, take your occasional lumps and move on to the next trade. And if you made a mistake, learn from it and don't do it again. To avoid letting your losses run, get into the habit of determining an acceptable profit target as well as an acceptable risk tolerance level for each and every Forex trade before entering the market. Then simply place a stop-loss order at the appropriate price - but not so tight (close to the market) that the stop could quickly take you out of the position before the market has a chance to move in your favor. Using a stop is always the smart move.
17. Avoid placing protective stops at obvious round numbers. Protective stops on long positions should be placed below round numbers (10, 20, 25, 50,75, 100) and on short positions, above such numbers.
18. Placing stop loss is an art. The trader must combine technical factors on the price chart with money management considerations.
19. Analyze your losses. Learn from your losses. They're expensive lessons; you paid for them. Most traders don't learn from their mistakes because they don't like to think about them.
20. Stay out of trouble, your first loss is your smallest loss.
21. Survive! In Forex trading, the ones who stay around long enough to be there when those "big moves" come along are often successful.
22. If you are a new trader, be a small trader (mini account) for at least a year, then analyze your good trades and your bad ones. You can really learn more from your bad ones.
23. Don't trade unless you're well financed... so that market action, not financial condition, dictates your entry and exit from the market. If you don't start with enough money, you may not be able to hang in there if the market temporarily turns against you.
24. Be more objective and less emotional.
25. Use money management principles.
26. Money management increases the odds that the trader will survive to reach the long run.
27. Diversify, but don't overdo it.
28. Employ at least a 3 to 1 reward-to-risk ratio.
29. Calculate the risk/reward ratio before putting a trade on, then guard against holding it too long.
30. Don't trade impulsively; have a plan.
31. Have specific goals and objectives.
32. Five steps to build a trading system:
    • Start with a concept
    • Turn it into a set of objective rules
    • Visually check it out on the charts
    • Formally test it with a demo
    • Evaluate the results
33. Plan your work and work your plan.
34. Trade with a plan - not with hope, greed, or fear. Plan where you will get in the market, how much you will risk on the trade, and where you will take your profits.
35. Follow your plan. Once a position is established and stops are selected, do not get out unless the stop is reached or the fundamental reason for taking the position changes.
36. Any successful trading system must take into account three important factors: price forecasting, timing, and money management. Price forecasting indicates which way a market is expected to trend. Timing determines specific entry and exit points. Money management determines how much to commit to the trade.
37. Don't cherry-pick your system's set-ups. Trade every signal.
38. Trading systems that work in an up market may not work in a down market.
39. Establish your trading plans before the market opening to eliminate emotional reactions. Decide on entry points, exit points, and objectives. Subject your decisions to only minor changes during the session. Profits are for those who act, not react.Don't change during the session unless you have a very good reason.
40. Double-check everything.
41. Always think in terms of probabilities. Trading is all about thinking in probabilities NOT certainties. You can make all the "right" decisions and the trade still goes against you. This does not make it a "wrong" trade, just one of the many trades you will take which, through probability, are on the "loosing" side of your trading plan. Don't expect not to have negative trades - they are a necessary part of the plan and cannot be avoided.
42. The place to start your market analysis is always by determining the general trend of the market.
43. Trade only with a strategy that you've proven to yourself.
44. When pyramiding (adding positions), follow these guidelines:
    • Each successive layer should be smaller than before.
    • Add only to winning positions.
    • Never add to a losing position. One of the few trade management rules that we can state we never break is 'Never add to a losing trade'. Trades are split into winners and losers, and if a trade is a loser, the chances of it turning right around and becoming a winner are too small to risk more money on. If indeed it is a winner disguised as a loser, why not wait until it shows it's true colors (and becomes a winner)before you add to it. If you do this you will notice that nearly always the trade ends up hitting your stop loss and does not look back. Sometimes the trade turns around before it hits your stop and becomes a winner and you can count yourself very fortunate. Sometimes the trade hits your stop loss and then turns around and becomes a winner and you can count yourself unlucky.
    • Whatever the result, it is never worth adding to a loser, hoping that it will become a winner. The odds of success are just too low to risk more capital in addition to the initial risk.
    • Adjust protective stops to the breakeven point.
45. Risk Control
    • Never risk more than 3-4 percent of your capital on any trade
    • Predetermine your exit point before you get into a trade
    • If you lose a certain predetermined amount of your starting capital, stop trading, analyze what went wrong, and wait until you feel confident before you begin trading
46. Don't trade scared money. No one ever made any money trading when they had to do it to pay the mortgage at the end of the month. Having a requirement to make X dollars per month or you will be financially in trouble is the best way I know to completely mess up all trading discipline, rules, objectives, and leads quickly to disaster. Trading is about taking a reasonable risk in order to achieve a good reward. The markets and how and when they give up their profits is not under your control. Do not trade if you need the money to pay bills. Do not trade if your business and personal expenses are not covered by another income stream or cash reserve. This will only lead to additional unmanageable stress and be very detrimental to your trading performance.
47. Know why you are in the markets. To relieve boredom? To hit it big? When you can honestly answer this question, you may be on your way to successful Forex trading
48. Never meet a margin call; don't throw good money after bad.
49. Close out losing positions before the winning ones.
50. Except for very short term trading, make decisions away from the market, preferably when the markets are closed.
51. Work from the long term to the short term.
52. Use intraday charts to fine-tune entry and exit.
53. Master interday trading before trying intraday trading.
54. Don't trade the time frame. Trade the pattern. Reversal patterns, hesitation patterns and breakout patterns appear often. Learn to look for the pattern in any time frame.
55. Try to ignore conventional wisdom; don't take anything said in the financial media too seriously.
56. Always do your homework and stay current on global events. You never know what's going to set off a particular currency on any given day.
57. Learn to be comfortable being in the minority. If you are right on the market, most people will disagree with you. (90% losers,10% winners).
58. Technical analysis is a skill that improves with experience and study. Always be a student and keep learning.
59. Beware of all tips and inside information. Wait for the market's action to tell you if the information you've obtained is accurate, then take a position with the developing trend.
60. Buy the rumor, sell the news.
61. K.I.S.S - Keep It Simple Stupid, more complicated isn't always better.
62. Timing is especially crucial in Forex trading.
63. Timing is everything in Forex trading. Determining the correct direction of the market only solves a portion of the trading problem. If the timing of the entry point is off by a day, or sometimes even minutes, it can mean the difference between a winner or a loser.
64. A "buy and hold" strategy doesn't apply in Forex trading.
65. When you open an account with a broker, don't just decide on the amount of money, decide on the length of time you should trade. This approach helps you conserve your equity, and helps avoid the Las Vegas approach of "Well, I'll trade till my stake runs out." Experience shows that many who have been at it over a long period of time end up making money.
66. Carry a notebook with you, and jot down interesting market information. Write down the market openings, price ranges, your fills, stop orders, and your own personal observations. Re-read your notes from time to time; use them to help analyze your performance.
67. Don't count profits in your first 20 trades. Keep track of the percentage of wins. Once you know you can pick direction, profits can be increased with multi-plot trading and variations in using your stops. In other words, now is the time to get serious about money management.
68. "Rome was not built in a day," and no real movement of importance takes place in one day.
69. Do not overtrade.
70. Have two accounts. One real account and the other a demo account. Learning doesn't stop when trading real dollars begins. Keep the demo account and use it to test alternative trades, alternative stops, etc.
71. Patience is important not only in waiting for the right trades,but also in staying with trades that are working.
72. You are superstitious; don't trade if something bothers you.
73. Technical analysis is the study of market action through the use of charts, for the purpose of forecasting future price trends.
74. The charts reflect the bullish or bearish psychology of the marketplace.
75. The whole purpose of charting the price action of a market is to identify trends in early stages of their development for the purpose of trading in the direction of those trends.
76. The fundamentalist studies the cause of market movement, while the technician studies the effect.
77. Rising commodity prices generally hint at a stronger economy and rising inflationary pressure. Falling commodity prices usually warn that the economy is slowing along with inflation.
78. The longer the period of time that priced trade in a support or resistance area,the more significant that area becomes.
79. There are three decisions confronting the trader -whether- to go long, go short or do nothing. When a market is rising, the best strategy is preferable. When the market is falling, the second approach would be correct. However, when the market is moving sideways, the third choise - to stay out of the market - is usually the wisest.
80. Channel lines have measuring implications. Once a breakout occurs from an existing price channel, prices usually travel a distance equal to the width of the channel. Therefore, the trader has to simply measure the width of the channel and then project that amount from the point at which either trendline is broken.
81. The larger the Pattern, the Great the potential. When we use the term "larger", we are referring to the the height and the width of the price pattern. The height measures the volatility of the pattern. The width is the amount of time required to build and complete the pattern. The greater the size of the pattern-that is, the wider the price swings within the pattern (the volatility ) and the longer it takes to build - the more important the pattern becomes and the greater the potential for the ensuing price move.
82. The breaking of important trendlines. The first sign of an impending trend reversal is often the breaking of an important trendline. Remember however, that the violation of a major trendline does not necessarily signal a trend reversal.The breaking of a major up trendline might signal the beginning of a sideways price pattern, which later would be intedified as either the reversal or consolidation type.Sometimes the breaking of the major trendline coincides with the completion of the price pattern.
83. The minimum requirement for a triangle is four reversal points. Remember that it always takes two points to draw a trendline.
84. The moving average is a follower, not a leader. It never anticipates; it only reacts. The moving average follows a market and tells us that a trend has begun, but only after the fact.
85. Shorter term averages are more sensitive to the price action, whereas longer range averages are less sensitive.In certain types of markets, it is more advantageous to use a shorter average and, at other times, a longer and less sensitive average proves more useful.
86. When the closing price moves above the moving average, a buy signal is generated. A sell signal is given when prices move below the moving average.
87. A buying signal on a two-moving average combination occurs when the shorter term of two consecutive averages intersects the longer one upward. A selling signal occurs when the reverse happens, and the longer of two consecutive averages intersects the shorter one downward.
88. Shorter average generates more false signals, it has the advantage of giving trend signals earlier in the move. The trick is to find the average that is sensitive enough to generate early signals, but insensitive enough to avoid most of the random "noise".
89. Cutting losses is painful for every trader. The ability to cut one's losses in time is the sign of a seasoned trader.
90. A channel breakout suggests a target for the currency price equal to the width of the channel.
91. Long term charts provide important information regarding long-terms or cycles. The trader can get a correct perspective regarding the real direction of the market in the long run, the strength or direction of the current trend occurring within that trend, or the possibility of a breakout from the long-term trend.
92. Common Points All Of Reversal Patterms
    • The first signal of an impending trend reversal is often the breaking of an important trendline
    • The larger the pattern,the greater the subsequent move
    • Topping patterns are usually shorter in duration and more volatile than bottoms
    • Bottoms usually have smaller price ranges and take longer to build
93. The head-and-shoulders formation is confirmed only when the completion of the three rallies and their reversals is followed by a breach of the neckline. The failure of the price to break through the neckline on closing prices basis puts on hold or negates the validity of the formation.
94. The double-top formation is confirmed only when the full completion of the two rallies and their respective reversals is followed by a breach of the neckline (the closing price is outside the neckline). The failure of the price to break through the neckline puts on hold or negates the validity of the formation.
95. The flag formation is a reliable chart pattern that provides two vital signals: direction and price objective. This formation consists of a brief consolidation period within a solid and steep upward trend or downward trend. The consolidation itself tends to be sloped in the opposite direction from the slope of the original trend, or simply flat.
96. A Breakaway gap provides the direction of the market.
97. The runaway or measurement gap provides the direction of the market. This gap confirms the health and velocity of the trend.
98. The runaway or measurement gap is the only type of gap that provides a price objective. The price objective is the previous length of the trend, measured from the runaway gap, in the same direction as the original trend.
99. The exhaustion gap provides the direction of the market.
100. Near the beginning of important moves, oscillator analysis isn't that helpful and can be misleading. Toward the end of market moves, however, oscillators become extremely valuable.
101. When the oscillator reaches an extreme value in either the upper or lower end of the band, this suggest that the current price move have gone too far too fast and is due for a correction of some type.
102. The oscillator is most useful when its value reaches an extreme reading near the upper or lower end of its boundaries. The market is said to be overbought when it is near the upper extreme and oversold when it is near the lower extreme. This warns that the price trend is overextended and vulnerable.
103. A divergence between the oscillator and the price action when the oscillator is in an extreme position is usually an important warning.
104. Oscillator - the crossing of the zero line can give important trading signals in the direction of the price trend.
105. Because of the way it is constructed, the momentum line is always a step ahead of the price movement. It leads the advance or decline in prices, then levels off while the current price trend is still in effect. It then begins to move in the opposite direction as prices begin to level off.
106. RSI is plotted on a vertical scale of 0 to 100. Movements above 70 are considered overbought, while an oversold condition would be a move under 30. Because of shifting that takes place in bull and bear markets, the 80 level usually becomes the overbought level in bull markets and the 20 level the oversold level in bear markets.
107. The first move of RSI into the overbought or oversold region is usually just a warning. The signal to pay close attention to is the second move by the oscillator into the danger zone. If the second move fails to confirm the price move into new highs or new lows, a possible divergence exists. At that point, some defensive action can be taken to protect existing positions. If the oscillator moves in the opposite direction, breaking a previous high or low, then a divergence or failure swing is confirmed.
108. Stochastics simply measures, on a percentage basis of 0 to 100, where the closing price is in relation to the total price range for a selected time period. A very high reading (over 80) would put the closing price near the top of the range, while a low reading (under 20) near the bottom of the range.
109. One way to combine daily and weekly stochastics is to use weekly signals to determine market direction and daily signals for timing(it depends from the type of the trader). It's also a good idea to combine stochastics with RSI.
110. Most oscillator buy signals work best in uptrends and oscillator sell signals are most profitables in downtrends. The place to start your market analysis is always by determining the general trend of the market. Oscillators can then be used to help time market entry.
111. Give less attention to the oscillators in the early stages of an important move, but pay close attention to its signals as the move reaches maturity.
112. The best way to combine technical indicators is use weekly signals to determine market direction and the daily signals to fine-tune entry and exit points. A daily signal is followed only when it agrees with the weekly signal (daily-weekly, 4 hour-daily, 4 hour-1 hour).
113. The failure of prices to react to bullish news in an overbought area is a clear warning that a turn may be near. The failure of prices in an oversold area to react to bearish news can be taken as a warning that all the bad news has been fully discounted in the current low price. Any bullish news will push prices higher.
114. -Elliot Wave Theory- A complete bull market cycle is made up of eight waves, five up waves followed by three down waves.
115. -Elliot Wave Theory- A trend divides into five waves in the direction of the longer trend.
116. -Elliot Wave Theory- Corrections always take place in three waves.
117. -Elliot Wave Theory- Waves can be expanded into longer waves and subdivided into shorter waves.
118. -Elliot Wave Theory- Sometimes one of the impulse waves extends. The other two should then be equal in time and magnitude.
119. -Elliot Wave Theory- The Finobacci sequence is the mathematical basis of the Elliot Wave Theory.
120. -Elliot Wave Theory- The number of waves follows the Finobacci sequence.
121. -Elliot Wave Theory- Finobacci ratios and retracements are used to determine price objectives. The most common retracements are 62%, 50% and 38%.
122. -Elliot Wave Theory- Bear markets should not fall below the bottom of the previous fourth wave.
123. -Elliot Wave Theory- Wave 4 should not overlap wave 1.
124. Support and resistance are the most effective chart tools to use for entry and exit points. For purposes of placing stop loss, support and resistance levels are most valuable.
125. One of the commodities most effected by the dollar is the gold market. The prices of gold and the U.S. dollar usually trend in opposite directions.
126. The Yen is sensitive to changes in the price or structure of the raw material markets.
127. The commodity-producing countries (Canada, Australia, N. Zealand ) are more dependent on Japan than the other way around.
128. The Yen is sensitive to the fortunes of the Nikkei index, the Japanese stock market and the real estate market.
129. The majority of the pound transactions take place in London with a volume decreasing significantly in the U.S. market, and slowing down to a trickle in Asia. Therefore, in the New York market, many banks have to stop quoting the pound at noon.
130. Swiss Franc has a very close economic relationship with Germany, and thus to the euro zone.
131. The major markets are London, with 32 percent of the market,New York with 18 percent and Tokyo with 8 percent. Singapore follows with 7 percent, Germany has 5 percent and Switzerland, France and Hong Kong have 4 percent each.
132. Don't use the markets to feed your need for excitement.
133. Don't be too greedy or too cautious.

Forex The Future Investment

There are many many advantages over the various other ways of investing. First of all it is a 24 hr market, except for weekends of course. You have the US market then the European and then the Asian. One of the great times to trade is during the over lapping periods. The USA and European overlap between 5am & 9am eastern and the Euro & Asian between 11pm & 1am eastern. Usually the busiest time and best to trade.

The is also the risk factor for the accounts. With futures and options you can get margin calls that can wipe you out. If you get caught in a bad trade not only do you lose the money in the account but you may have to come up with a lot more from your pocket. It can be very risking. But not in Forex. Worst case scenario you could lose whats in you account. But you would have to do something really stupid. Like making a big trade on a Fundamental day and leave it alone. If market takes a bad move and you weren’t there. OOPS. But That wouldn’t happen with a smart trader.

Then there are the demo accounts which is an account where you can trade using all the right things, platform,charts,and information. But you are using play money, or what we call paper trading too.

Benefits of Trading The Forex Market

Historically, the FX market was available most to major banks, multinational corporations and other participants who traded in large transaction sizes and volumes. Small-scale traders including individuals like you and I, had little access to this market for such a long time. Now with the advent of the Internet and technology, FX trading is becoming an increasingly popular investment alternative for the general public.

The benefits of trading the currency market:

It is open 24-hours and it closes only on the weekends;

It is very liquid and efficient;

It is very volatile;

It has very low transaction costs;

You can use a high level of leverage (borrowed money) with ease; and

You can profit from a bull or a bear market.

Continuous, 24-Hour Trading

The value of currencies on the other hand is affected by so many factors and so many participants that the likelihood of any one individual or group of individuals drastically affecting the value of a currency is minute. Because of its sheer size, the currency market is hard to manipulate. The ability for people to engage in ‘insider trading’ is virtually eliminated. As an average trader, you are less disadvantaged. You are likely to be playing on relatively equal ground along with all the other traders and investors whom you are competing against.

Forex Brokers

Most FOREX traders use a broker to handle their transactions. What exactly is a broker? Strictly speaking, a broker is an individual or a company that buys and sells orders according the investor’s decisions. Brokers earn money by charging a commission or a fee for their services.

A FOREX broker needs to be associated with a large financial institution such as a bank in order to provide the funds necessary for margin trading. In the United States a broker should be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.

Before trading FOREX you need to set up an account with a FOREX broker. You may feel overwhelmed by the number of brokers who offer their services online. Deciding on a broker requires a little bit of research on your part, but the time spent will give you insight into the services that are available and fees charged by various brokers.

The best advertising is word-of-mouth advertising, and this is just as valid in FOREX trading as it is for any other type of business. Talk to friends and associates to see who they are dealing with and find if they have any complaints or difficulties in dealing with a particular broker.

You could try selecting a few online brokers and contact their Internet help desks to see how quickly they respond to enquiries and whether or not they answer questions to your satisfaction. Keep in mind, however, that pre-sales service may be better than after sales service. This can be true for any online business, not just FOREX brokers.

10 REASONS TO TRADE FOREX

1)WORLD'S LARGEST MARKET
Forex is the world's largest market with approximately $1.9 trillion in daily volume. Market participants include banks,investment funds,corporations and individual traders around the world.


2)ROUND THE CLOCK TRADING
The Forex market trades 24-hours a day from Sunday afternoon to Friday evening (EASTERN TIME) providing instant and effective executions around the clock. During the trading week :A)there is no waiting for the market to open to execute trades as is the case with stock,bond and commodity markets B)traders can initiate or adjust positions at any time and C)resting orders can be executed day or night .


3)HIGH LIQUID MARKET
In addition to being the largest global market,Forex is a highly liquid market. In general, bid/offer spreads are tighter than other traded markets,including equities and futures.


4)NEVER A BEAR-MARKET
Forex provides large amounts of leverage to market participants**. This leverage enables traders to put on positions commensurate to the market opportunity and their account size.*


5)EFFICIENT CAPITAL FOR TRADERS
The dealing desk is open 24-hours a day from Sunday 5:00 PM New York time until Friday 4:30 PM New York time. Quotations, order placement, and confirmation available online or via telephone.


6)PORTFOLIO DIVERSIFICATION
Forex trading* can help diversify traditional investment portfolios comprised of equities, fixed income and commodities. The factors that drive FX valuations are typically different than those that influence other asset classes, giving forex market participants the potential for greater diversification.*


7)FUNDAMENTAL GLOBAL TRADING OPPORTUNITIES
Forex trading is a "pure play" on global macro and fundamental economic news and trends.


8)TECHNICAL TRADING OPPORTUNITIES
Forex markets trends are frequently more robust than other markets, which may make them better suited to technical trading models.


9)BROAD ARRAY OF TRADING OPPORTUNITIES
Forex markets are diversified with broad array of trading opportunities in major currency pairs,cross rates,emerging market and exotic currencies. In addition,active traders can day trade or position trade when they see a longer- term opportunity.


10)NO ONE CAN CORNER THE MARKET
The Forex market is so vast and has so many participants that no single entity,not even a central bank,can control the market price for an extended period of time.

Tip A. Trading strategies that work well in an up-market may not work in a down-market.
Same as: systems that work well in a good trending market may not be applicable at all to a ranging market. The solution is either to have a system for each type of the market or make sure that one solid system will work well under all market conditions — extensive testing is the way to know the truth.

Tip B. Do not try to pick tops and bottoms of the price.
It is a very wrong approach that unfortunately many traders have adopted. Searching for bargains is a good thing when you go shopping, but will put you in troubles if applied to Forex trading. Simply spot the trend and join it like other traders who are serious about trading do.

Tip C. Always remind yourself that the first and the last market bars/ticks are the most expensive.
Delay entering the market on the first ticks and be out of the market early. On the open, never trade in the direction of a gap.

Tip D. Never worry about missing out on a trading opportunity.
Do not provoke yourself to take a trade that does not meet all entry rules. Just because it seems to be too good to pass up is not an excuse for trading. You are never going to run out of trades, so be firm and stick to your rules.

Tip E. By using knowledge about currency correlation traders can easily avoid opening positions that cancel each other
(e.g. +10 pips on one pair and -10 on another = 0). Find out which currency pairs move simultaneously and which — in opposite direction. Currency correlation information.

Tip F. Did we say: "Have your stop loss order in place"?
Yes we did. Anyway, we will repeat it one more time. Even if your trading system needs no stops, still have it. Not that you are going to use it, but just for the safety of your capital. A sudden huge move in the market may cost you a big portion of your trading account especially if margin call is triggered.

We use insurance for many things in our life, why don't have one for your trading account? For trading systems without a stop loss orders — put one on a decent distance, for example 100+ pips. Also do not use too tight stop orders as they will most likely be hit more often then you need to.

Tip G. Spend less time trading Forex but make it quality time.
Trade only when you can be 100% focused. Time spent in front of the monitor does not assume profitability, so don't fool yourself and do not trade half-ready.

Tip H. And finally, it is wrong to trade with the money that you cannot allow to lose.
That is also why traders switching from Demo to real account often may find themselves losing a trade after trade with a system that used to be profitable. This is because with a real account they've got fear to lose money, while on Demo account their minds were free.

Do not trade if you cannot afford to lose your money. Moreover, do not trade if you must make X amount of money per month to pay your bills in order to avoid financial trouble. Trading scared is the best way to mess up all trading rules, discipline and get additional stress.

Trading smart is what we wish you to achieve, and believe us, being focused and serious about the job you do will make you successful!

Tip 1. Gamblers go to casino. All unproved, spontaneous actions in Forex trading — are a part of pure gambling.
Any attempt to trade without analysis and studying the market is equal to a game. Game is fun except when you are losing real money...

Tip 2. Never invest money into a real Forex account until you practice on a Forex Demo account!
Allow at least 2 month for demo trading. Consider this: 90% of beginners fail to succeed in the real money market only because of lack of knowledge, practice and discipline. Those remaining 10% of successful traders had been sharpening and shaping their skills on demo accounts for years before entering the real market.
A good demo account to start practicing with could be, for example, FXGame from Oanda.

Tip 3. Go with the trend!
Trend is your friend. Trade with the trend to maximize your chances to succeed. Trading against the trend won't "kill" a trader, but will definitely require more attention, nerves and sharp skills to rich trading goals.

Tip 4. Always take a look at the time frame bigger than the one you've chosen to trade in.
It gives the bigger picture of market price movements and so helps to clearly define the trend. For example, when trading in 15 minute time frame, take a look at 1 hour chart; trading hourly would require obtaining a picture of daily, weekly price movements.

If a trend is hard to spot — choose a bigger time frame. Up and down market patterns are always present. Always make sure you know the dominant trend, unless you are a scalper. Scalpers have no need to spend their time studying big trends, what's happening in the market here and now (during 5-10 minute time frame) should be of only importance to a Forex scalper.

Tip 5. Never risk more than 2-3% of the total trading account.
One important difference between a successful and an unsuccessful trader is that the first is able to survive under unfavorable conditions on the market, while an unsuccessful trader will blow up his account after 5-10 unprofitable trades in the row.

Even with the same trading system 2 traders can get opposite results in the long run. The difference will be again in money management approach. To introduce you to money management, let's get one fact: losing 50% of total account requires making 100% return from the rest of money just to restore the original balance.

Tip 6. Put emotions down. Trade calm.
Don't try to revenge after losing the trade. Don't be greedy by adding lots of positions when winning.
Overreaction blocks clear thinking and as a result will cost you money. Overtrading can shake your money management and dramatically increase trading risks.

Tip 7. Choose the time frame that is right for you.
Choosing wise means that you are comfortable and have time enough to analyze the market, place and close orders etc. Some people can't wait for hours for the price to make a move, they like action and therefore prefer smaller time frames. On the contrary, for others 10-15 minutes is a hustle to be able to make the right decision.

Tip 8. Not trading or standing aside is a position.
When in doubt — stay out. If it is not clear where the market will move — don't trade. In this case saving present capital is and absolutely better choice than risking and losing money.

Tip 9. Learn to use protective stops. Respect them and don't move.
Hoping that market will turn in your direction is a very delusive hope. By moving a stop loss further a trader increases his chances to end up with much bigger loss.

When holding to a losing trade too long, and even if funds permit, traders as a rule are very reluctant to accept big losses, thus often continue "hoping for best". In the mean time invested money is stuck in the open trade for unknown period of time (weeks and even months) and cannot be used for opening new positions. Not working money — dead money. Also this will result in constant interest payments for holding open positions.

Tip 10. "Keep it simple, stupid" — applies to indicators, signals and trading strategies.
Too much information will create a controversial picture of where to trade and when not to. To avoid lots of confusion create a simple but working method of trading Forex.

Tip 11. Think about risk/reward ratio before entering each trade.
How much money can you lose in this trade? How much can you gain? Now, make a decision if the trade is worth entering.
Example: if trader is looking for possible 35 pips gain and possible 25 pips of loss, such conditions are not worth trading. Compare it with the situation when a trader has 100-120 pips of potential gain and only 10-20 pips of possible loss. This is the trade to open!

Tip 12. Never add positions to a losing trade. Do add positions when the trade has proven to be profitable.
Don't allow a couple of losing trades in a row become a snowball of losing trades. When it is obviously not a good day, turn the monitor off. Often not trading for one day can help to break a chain of consecutive losses. Trying to get revenge can often make things worse.

Tip 13. Let your profits run.
Let your position be open for as long as the market wishes to reward you. Of course, for this traders need a good exit strategy, otherwise they risk to give all profits back...
Running two or more open trades gives an option to close some positions earlier and keep others running for higher profits.

Tip 14. Cut your losses short.
It's better to finish unprofitable trade quickly than wait for the situation to get worse. Don't put a stop loss too far — it's your money you risk. Better calculate the best spot to enter when a potential loss would be minimized. Again: respect your stop and don't move it "cherishing hopes".

Tip 15. Trade currency pairs in respect to their active market hours.
Learn about overlapping market hours: when two markets are open and highest volume of trades is conducted.
For example, Australian and Japanese trading sessions are overlapped from 8pm to 1 am EST. At that time trader can successfully trade AUD/JPY currency pair.

Tip 16. Choose the right day to trade.
This recomendation is often wrongly taken as an optional thing, because everyone knows that Forex market is open 24 hours a day 7 days a week. Yet, choosing the time to trade can make a difference between successful and hopeless trading.

It's proved and highly recommended not to trade on Mondays, when the market has recently awaken and is making first "probation steps" to form a new or confirm a current trend; and on Fridays afternoon, during the huge volume of closing trades. The best days to trade are Tuesdays, Wednesdays and Thursdays.

Tip 17. Learn about Fibonacci levels and how to use them for trading.
Fibonacci can be very helpful in trading, even partially using the study, for example, to determine the best exit, can bring traders to a new edge of trading.

Tip 18. Always ensure that a signaling bar/candle on the chart is fully formed and closed before you enter a trade.
A golden rule of trading: "Always trade what you see, not what you would like to see" is the best explanation here.

Tip 19. If you ask for someone else's advice as about how and when to trade
in other words, choose to rely on live trading signals from other traders, make sure you do it for your benefit, not for disaster. If you use such signals to discover how other traders do analysis and study on the price — you are on the right track and soon you'll be able to do analysis yourself.
But if you're just blindly following recommendations and your only task is to push the correct button... think again.

Tip 20. Using a highly leveraged account comes at a cost.
It will, of course, give a trader more financial gear to trade, and also trader's broker will be happy as it will mean higher spread income for him. On the other side a trader signs up for additional risks that multiply with higher leverage in a "friendly tight" proportion.

Tip 21. Learn to measure trading success by the end of the day, week and then month and year.
Do not judge about your trading success on a single trade. To be successful traders don't need to win every trade, they also don't become rich in one trade — they need to be profitable in a long run.

Tip 22. There is no such thing as a secret approach to understanding the market.
Take the time to develop a solid trading system and find out that the secret to trading success lies in hard work and constant learning.

Why do hundreds of thousands online traders and investors trade the forex market every day, and how do they make money doing it?

This two-part report clearly and simply details essential tips on how to avoid typical pitfalls and start making more money in your forex trading.

1. Trade pairs, not currencies - Like any relationship, you have to know both sides. Success or failure in forex trading depends upon being right about both currencies and how they impact one another, not just one.
   
2. Knowledge is Power - When starting out trading forex online, it is essential that you understand the basics of this market if you want to make the most of your investments.
   The main forex influencer is global news and events. For example, say an ECB statement is released on European interest rates which typically will cause a flurry of activity. Most newcomers react violently to news like this and close their positions and subsequently miss out on some of the best trading opportunities by waiting until the market calms down. The potential in the forex market is in the volatility, not in its tranquility.
   
3. Unambitious trading - Many new traders will place very tight orders in order to take very small profits. This is not a sustainable approach because although you may be profitable in the short run (if you are lucky), you risk losing in the longer term as you have to recover the difference between the bid and the ask price before you can make any profit and this is much more difficult when you make small trades than when you make larger ones.
   
4. Over-cautious trading - Like the trader who tries to take small incremental profits all the time, the trader who places tight stop losses with a retail forex broker is doomed. As we stated above, you have to give your position a fair chance to demonstrate its ability to produce. If you don't place reasonable stop losses that allow your trade to do so, you will always end up undercutting yourself and losing a small piece of your deposit with every trade.
   
5. Independence - If you are new to forex, you will either decide to trade your own money or to have a broker trade it for you. So far, so good. But your risk of losing increases exponentially if you either of these two things:
   Interfere with what your broker is doing on your behalf (as his strategy might require a long gestation period);
   Seek advice from too many sources - multiple input will only result in multiple losses. Take a position, ride with it and then analyse the outcome - by yourself, for yourself.
   
6. Tiny margins - Margin trading is one of the biggest advantages in trading forex as it allows you to trade amounts far larger than the total of your deposits. However, it can also be dangerous to novice traders as it can appeal to the greed factor that destroys many forex traders. The best guideline is to increase your leverage in line with your experience and success.
   
7. No strategy - The aim of making money is not a trading strategy. A strategy is your map for how you plan to make money. Your strategy details the approach you are going to take, which currencies you are going to trade and how you will manage your risk. Without a strategy, you may become one of the 90% of new traders that lose their money.
   
8. Trading Off-Peak Hours - Professional FX traders, option traders, and hedge funds posses a huge advantage over small retail traders during off-peak hours (between 2200 CET and 1000 CET) as they can hedge their positions and move them around when there is far small trade volume is going through (meaning their risk is smaller). The best advice for trading during off peak hours is simple - don't.
   
9. The only way is up/down - When the market is on its way up, the market is on its way up. When the market is going down, the market is going down. That's it. There are many systems which analyse past trends, but none that can accurately predict the future. But if you acknowledge to yourself that all that is happening at any time is that the market is simply moving, you'll be amazed at how hard it is to blame anyone else.
   
10. Trade on the news - Most of the really big market moves occur around news time. Trading volume is high and the moves are significant; this means there is no better time to trade than when news is released. This is when the big players adjust their positions and prices change resulting in a serious currency flow.
    
11. Exiting Trades - If you place a trade and it's not working out for you, get out. Don't compound your mistake by staying in and hoping for a reversal. If you're in a winning trade, don't talk yourself out of the position because you're bored or want to relieve stress; stress is a natural part of trading; get used to it.
    
12. Don't trade too short-term - If you are aiming to make less than 20 points profit, don't undertake the trade. The spread you are trading on will make the odds against you far too high.
    
13. Don't be smart - The most successful traders I know keep their trading simple. They don't analyse all day or research historical trends and track web logs and their results are excellent.
    
14. Tops and Bottoms - There are no real "bargains" in trading foreign exchange. Trade in the direction the price is going in and you're results will be almost guaranteed to improve.
    
15. Ignoring the technicals- Understanding whether the market is over-extended long or short is a key indicator of price action. Spikes occur in the market when it is moving all one way.
    
16. Emotional Trading - Without that all-important strategy, you're trades essentially are thoughts only and thoughts are emotions and a very poor foundation for trading. When most of us are upset and emotional, we don't tend to make the wisest decisions. Don't let your emotions sway you.
    
17. Confidence - Confidence comes from successful trading. If you lose money early in your trading career it's very difficult to regain it; the trick is not to go off half-cocked; learn the business before you trade. Remember, knowledge is power.

The second and final part of this report clearly and simply details more essential tips on how to avoid the pitfalls and start making more money in your forex trading.

1. Take it like a man - If you decide to ride a loss, you are simply displaying stupidity and cowardice. It takes guts to accept your loss and wait for tomorrow to try again. Sticking to a bad position ruins lots of traders - permanently. Try to remember that the market often behaves illogically, so don't get commit to any one trade; it's just a trade. One good trade will not make you a trading success; it's ongoing regular performance over months and years that makes a good trader.
   
2. Focus - Fantasising about possible profits and then "spending" them before you have realised them is no good. Focus on your current position(s) and place reasonable stop losses at the time you do the trade. Then sit back and enjoy the ride - you have no real control from now on, the market will do what it wants to do.
   
3. Don't trust demos - Demo trading often causes new traders to learn bad habits. These bad habits, which can be very dangerous in the long run, come about because you are playing with virtual money. Once you know how your broker's system works, start trading small amounts and only take the risk you can afford to win or lose.
   
4. Stick to the strategy - When you make money on a well thought-out strategic trade, don't go and lose half of it next time on a fancy; stick to your strategy and invest profits on the next trade that matches your long-term goals.
   
5. Trade today - Most successful day traders are highly focused on what's happening in the short-term, not what may happen over the next month. If you're trading with 40 to 60-point stops focus on what's happening today as the market will probably move too quickly to consider the long-term future. However, the long-term trends are not unimportant; they will not always help you though if you're trading intraday.
   
6. The clues are in the details - The bottom line on your account balance doesn't tell the whole story. Consider individual trade details; analyse your losses and the telling losing streaks. Generally, traders that make money without suffering significant daily losses have the best chance of sustaining positive performance in the long term.
   
7. Simulated Results - Be very careful and wary about infamous "black box" systems. These so-called trading signal systems do not often explain exactly how the trade signals they generate are produced. Typically, these systems only show their track record of extraordinary results - historical results. Successfully predicting future trade scenarios is altogether more complex. The high-speed algorithmic capabilities of these systems provide significant retrospective trading systems, not ones which will help you trade effectively in the future.
   
8. Get to know one cross at a time - Each currency pair is unique, and has a unique way of moving in the marketplace. The forces which cause the pair to move up and down are individual to each cross, so study them and learn from your experience and apply your learning to one cross at a time.
9. Risk Reward - If you put a 20 point stop and a 50 point profit your chances of winning are probably about 1-3 against you. In fact, given the spread you're trading on, it's more likely to be 1-4. Play the odds the market gives you.
   
10. Trading for Wrong Reasons - Don't trade if you are bored, unsure or reacting on a whim. The reason that you are bored in the first place is probably because there is no trade to make in the first place. If you are unsure, it's probably because you can't see the trade to make, so don't make one.
    
11. Zen Trading- Even when you have taken a position in the markets, you should try and think as you would if you hadn't taken one. This level of detachment is essential if you want to retain your clarity of mind and avoid succumbing to emotional impulses and therefore increasing the likelihood of incurring losses. To achieve this, you need to cultivate a calm and relaxed outlook. Trade in brief periods of no more than a few hours at a time and accept that once the trade has been made, it's out of your hands.
    
12. Determination - Once you have decided to place a trade, stick to it and let it run its course. This means that if your stop loss is close to being triggered, let it trigger. If you move your stop midway through a trade's life, you are more than likely to suffer worse moves against you. Your determination must be show itself when you acknowledge that you got it wrong, so get out.
    
13. Short-term Moving Average Crossovers - This is one of the most dangerous trade scenarios for non professional traders. When the short-term moving average crosses the longer-term moving average it only means that the average price in the short run is equal to the average price in the longer run. This is neither a bullish nor bearish indication, so don't fall into the trap of believing it is one.
    
14. Stochastic - Another dangerous scenario. When it first signals an exhausted condition that's when the big spike in the "exhausted" currency cross tends to occur. My advice is to buy on the first sign of an overbought cross and then sell on the first sign of an oversold one. This approach means that you'll be with the trend and have successfully identified a positive move that still has some way to go. So if percentage K and percentage D are both crossing 80, then buy! (This is the same on sell side, where you sell at 20).
    
15. One cross is all that counts - EURUSD seems to be trading higher, so you buy GBPUSD because it appears not to have moved yet. This is dangerous. Focus on one cross at a time - if EURUSD looks good to you, then just buy EURUSD.
    
16. Wrong Broker - A lot of FOREX brokers are in business only to make money from yours. Read forums, blogs and chats around the net to get an unbiased opinion before you choose your broker.
    
17. Too bullish - Trading statistics show that 90% of most traders will fail at some point. Being too bullish about your trading aptitude can be fatal to your long-term success. You can always learn more about trading the markets, even if you are currently successful in your trades. Stay modest, and keep your eyes open for new ideas and bad habits you might be falling in to.
    
18. Interpret forex news yourself - Learn to read the source documents of forex news and events - don't rely on the interpretations of news media or others.

US economy on federal life support

Fri, Aug 8 2008, 12:17 GMT

by HVB Group Global Markets Research

HVB Group

• Bail-out. Were it not for the billions in aid from the Treasury and the Fed, it is quite possible that the US financial system would have already collapsed. Nevertheless, they could not prevent the failure of individual financial institutions as well as an economic growth slowdown.

• Tax checks. The financial crisis combined with a weaker labor market as well as high oil prices already led to falling real compensation of employees. Without the tax rebates, private consumption would have already plunged into negative territory and the US economy into recession. The tax rebates are still providing support, but the economy is expected to do little more than stagnate by year-end 2008 (pages 7-9).

• Hope. And it is questionable whether the recent rapid inventory rundown can prevent further production cuts and can push the growth trend north next year. Calls for a new fiscal package are, therefore, becoming progressively louder. But even then, US growth will remain well below potential in 2009 (pages 5-6).

• Monetary policy. For that reason, the Fed would retain its accommodative policy also next year – were it not for the high inflation and the fear of rising inflation expectations, which would require even stronger counter-inflationary measures later. The Fed will, therefore, exploit initial signs of labor market stabilization to start to reverse its expansionary monetary policy – but definitely not before the end of this year.

• Further topics:
  

  – Weekly Comment: Surprised? Me? (page 2).

  – Germany: Industrial production heading for stagnation (page 10).

  – Bank of England faces a major challenge (page 13)

  – Data outlook: Eurozone economy has contracted (page 15).

  – Market outlook: USD to post further gains; Bunds to move sideways (page 23).

Surprised? Me?

Trichet’s press conference yesterday confirmed that the window of opportunity for further rate hikes has been slammed shut by the cold blast of negative data releases that swept through the eurozone in the last few weeks. Rate hikes have been priced out, and the real question is how long the ECB can lean against the wind before the market starts pricing in rate cuts – my guess is another 2-3 months at the maximum. While the ECB has “no bias”, the macro data have a clear downward bias that leaves little doubt on the direction of the next policy move. Yesterday’s press conference also confirms that the golden age of the euro has probably come to an end, and that conditions are in place for a recovery of the USD over the remainder of the year. In this regard, Bernanke’s and Trichet’s positions this week were reassuringly consistent (unlike in June), and this should also favor a consolidation of the recent commodity price correction. The ECB yesterday acknowledged that the weakening of growth evident in the latest data is only partly a technical correction from an unusually strong Q1, and that some of the longnoted downside risks to growth have started to materialize. In particular, in both the statement and the Q&A, Trichet pointed to a weakening in the global economy and to the adverse impact of high commodity prices. The statement notes that growth in “mid-2008” will be “substantially weaker” than in Q1, and the sum up paragraph dropped the reference to “moderate ongoing real GDP growth”, which would sound inaccurate for an economy which seems to have hit a wall in Q2. In September, the revised staff forecasts will likely show a significantly less rosy outlook. We have been arguing for a long time that the eurozone would face a steeper downturn than the ECB seemed to anticipate, and the recent data have brought strong support to our position: our proprietary indicators, the composite PMI and the GDP tracker (cf. chart) are pointing to a very significant loss of momentum.

Q2 is very likely to be in negative territory, raising an outside risk of a technical recession.

The eurozone is not an island. We had already seen a fullfledged financial contagion from the subprime crisis, and recent data have shown that the real economy is also being hit. Previous ECB assessments had placed a significant bet on decoupling, arguing that buoyant emerging markets would support global growth and therefore external demand. Yesterday, instead the bank blamed in part the global slowdown for the unexpectedly sharp downturn in eurozone growth. The data vindicate the analysis in the latest IMF report, which shows that the interdependence between the eurozone and the US is high and has increased over time and that growth slowdowns are highly synchronized, with both the trade and the financial channel becoming stronger. As a rough rule of thumb, the IMF finds that a 1pp decline in US GDP growth leads to a ½ pp decline in eurozone growth after one year. Given the lag, the ongoing slump in the US poses a continuing threat to the eurozone’s growth outlook.

Trichet mounted an awkward defense of the ECB’s position, arguing that the bank had not been surprised by recent developments because they were just the materialization of risks that it had identified and mentioned for several months. I do believe the ECB honestly saw its baseline scenario as the most likely. Ex-post, however, this defense sounds disingenuous. The IMF staff report published a few days ago noted a simple difference between the IMF’s growth forecasts and those of the ECB: the IMF forecasts lower growth with symmetric risks, whereas the ECB forecasts higher growth with risks skewed to the downside – ex post, it is easy to argue that the ECB’s scenario was too sanguine. Moreover, while the ECB may not have been surprised by the sudden downturn in the data, it did not seem to have provisioned for it – July’s rate hike was presumably decided on the assumption that downside risks would not materialize.

Trichet also defended up-front the decision to hike rates last month, arguing that it had been vindicated by the information that has become available since the last meeting. As my colleague Aurelio Maccario very aptly noted in his note earlier yesterday, excusatio non petita, accusatio manifesta: the prominent and unprompted defense of last month’s hike gave very much the impression that the ECB felt accused of having tightened policy in the face of an already slowing growth momentum. The case for the prosecution is indeed quite strong: since the onset of the crisis, monetary and financial conditions in the eurozone had tightened substantially (cf. chart on the following page). The case for monetary tightening was far from obvious, and the IMF had noted that it saw no compelling case for tougher monetary policy. Pressed during the Q&A, Trichet was unable to come up with a more precise list of the evidence that had ex-post validated the hike.

That is probably understandable. I have argued that in my view July’s hike was a pre-emptive strike aimed at avoiding widespread second round effects and at anchoring inflation expectations. If that is the case, then the vindicating evidence is largely counterfactual, namely that broader second round effects have not materialized, and that inflation expectations have not risen further. On the latter point, though, in my view inflation expectations seem to have reacted more to the recent correction in oil prices than to the ECB’s hike.

Trichet was put on the spot when asked whether he shared the view expressed by one Council member that the growth slowdown would not cool inflation pressure, and whether the ECB was ignoring the fact that a downturn would eventually exert deflationary pressures. Trichet replied that the ECB took into account all factors that could influence inflation, the “only needle in the compass”, but did not offer a convincing rebuttal to the implicit charge that the bank might be underestimating future deflationary pressures.

The ECB was very careful in stressing that it is not lowering its guard against inflation – second round effects are still public enemy number one. The statement repeats the assessment that upside risks to price stability have increased further. This sounds at odds with the slowdown in growth and the correction in commodity prices, but Trichet clarified that past commodity price increases have caused significant pressure that is still in the pipeline. Moreover, Trichet noted that the ECB is monitoring not only wages but wage and price-setting at large, and is equally concerned about potential price dynamics in sectors where competition is weaker. This might reflect the fact that the ECB has perceived that in some goods and services sectors price-setters might be tempted to raise prices to recover margins eroded by higher input costs. Compared to previous meetings, the emphasis has switched a bit away from wage negotiations and to a broader assessment of price-setting trends in the economy.

As another hawkish caveat, Trichet noted en passant that the commodity price shock we have experienced could have reduced the eurozone’s potential growth rate. If that were the case, then a given slowdown would be less effective in reducing inflation. Pressed on the issue in the Q&A, Trichet said the ECB had not yet come up with a new estimate of potential output growth. Overall, however, I would take this as a further indication that the ECB is still gathering all the arguments that could still support the need for a tight monetary stance.

The credit tightening conundrum was on the table again, pending the release of the new Bank Lending Survey. The ECB stands by its assessment that the expansion of bank credit to non-financial corporations has not been significantly affected by the crisis. Trichet acknowledged that consumer credit and mortgages have decelerated significantly, contributing to some loss of momentum in credit overall. The ECB’s overall assessment, however, remains that credit supply is not likely to be a constraint to growth, although it does expect loan demand to decelerate in line with GDP. The IMF believes there will be a credit supply effect, but not a massive one: it has estimated that the deterioration in bank soundness observed to date in the eurozone could cause a 0.3pp decline in GDP growth with a 6-quarter delay, with the risk of a stronger impact to the extent that non-eurozone banks (UK, Swiss), more affected by the financial crisis, play a role in eurozone credit creation. In this regard, the IMF also noted that corporate balance sheets are healthy and there is no investment overhang, but that European companies are more leveraged and more reliant on bank credit than in the US.

The golden days of the euro are over. Markets have realized that the economic slowdown is now migrating or spreading from the US to the rest of the world, and the eurozone is already being hit. It seems increasingly likely that the next policy rate moves will be a cut in the eurozone and a hike in the US – although the timing on both is still very uncertain. With the rate differential set to narrow, and faith in the resilience of the European economy crumbling, EUR-USD should continue its correction (cf. chart next page) over the remainder of the year. This should be good news for all concerned. First, the strengthening of the euro has become a significant headwind for eurozone growth. The IMF estimates that the EUR is overvalued by at least some 10%, and this is allowing for a significant gain in competitiveness, as the REER is 15% stronger than the 1993-2006 average. The 10% estimate, according to the IMF report, is broadly shared by EC and ECB, with some European officials expressing significant concern about the possible impact of the appreciation on medium-term growth prospects. Second, as I have argued in the past, a declining EUR-USD strengthens the chances that the recent correction in oil prices will continue or at least consolidate. In this regard, Bernanke’s and Trichet’s positions this week were reassuringly consistent, unlike in June.

Communication, accountability and legitimacy. In a recent piece with my colleagues Aurelio Maccario and Davide Stroppa, I have argued that the ECB’s communication strategy faces significantly harder challenges now than in the past. Yesterday’s press conference confirmed this, with the ECB visibly on the defensive. My impression yesterday was that the publication of the minutes could indeed be a useful way to cast more light on the way that the Council members are weighing some of the issues raised in the Q&A – but this is a separate and more complex topic.

Bottom line: The window of opportunity for further rate hikes is now closed, and we still expect the next move will be a cut delivered most likely in Q2 next year. The more interesting question is how soon the markets will start pricing in an easing cycle. From what we heard yesterday, I expect the ECB to lean heavily against the wind, trying to prevent rate cut expectations from arising before there is convincing evidence that headline inflation is decelerating and that core inflation has remained stable. It will be another serious communication challenge. I would expect markets to start pricing in cuts by year-end.

Trading Greenspan

Federal Reserve Chairman Alan Greenspan is perceived as an enigma, a man whose message is cloaked behind a wall of obtuse language. The markets spend an inordinate amount of time trying to break down that wall, hoping they might at last find the Holy Grail on Greenspanisms. But for most, understanding Greenspan to the point where both he and the Fed are even semipredictable, and hence, tradable, is an elusive challenge. Greenspan is

therefore seen as a distraction to investors who would rather focus on companies and industry fundamentals than monetary policy. But Greenspan’s influence is too powerful to be ignored, so investors must labor over his every word.

Is Greenspan, in fact, unhittable—throwing the markets curveballs when they are looking fastball, or is he telegraphing his pitches first? I, for one, fully believe that he reveals his pitches so that anyone, including you, can pick them up before he delivers them. When you look closely, Greenspan, and the Fed in general, are surprisingly open and their predictability far less daunting than legend has it. In fact, the Fed sometimes strains to signal their intentions before they act. Why they do this is clear (this may come as a shock to some of you):they are on our side. Incredibly, this is as forgotten as a trip to the dentist.

Don’t fight the Fed; follow them

The old adage, “don’t fight the Fed,” is Wall Street lore. History is strewn with periods where the performance of both the stock and bond markets was significantly impacted by Fed policy (2000 is the most recent example). Along the way, many investors have either profited from or been harmed by the Fed during these periods, depending upon the degree of respect these investors showed toward the Fed’s influence. It is astonishing to think about how often the Fed is sometimes ignored. This ignorance is usually the result of excess optimism—as was seen in the midst of the Fed’s most recent rate hikes—or excess pessimism—as seen in 1994 toward the end of the Fed’s last rate-hike cycle. Basically, the market sometimes can’t see past its own emotions, but it almost always comes around.

One important insight into Trading Greenspan can be gleamed by looking at the bond market’s historical behavior in the aftermath of the Humphrey- Hawkins testimonies that Greenspan has delivered twice yearly to Congress. These testimonies, which are mandated by law, require the Fed to give their view on monetary policy and the economy to Congress. The detail to which Greenspan describes the Fed’s sentiments almost always pushes him into sensitive topics and this spurs sharp reactions in the markets. The below table illustrates these reactions and provides insight into just how you might consider Trading Greenspan in the future.

	Bond Futures ( 32's )		Eurodollars Futures (tiks)		Next Closest Eurodollars
Testimony	February	July	February	July	Febuary	July
1993	+7	-5	Unch	-3	-3	-10
1994	+14	-31	Unch	-9	Unch	-16
1995	+30	-58	+7	-5	+8	-8
1996	-68	+43	-13	+4	-13	+6
1997	-55	+40	-6	+3	-12	+7
1998	-29	+18	-2	Unch	-9	Unch
1999	-29	-34	-3	-8	-4	-9
Averages :
( Absolut changes )	33/32	33/32	4.4bps	4.6bps	7bps	8bps

As the table shows, sharp reactions have generally followed Greenspan’s initial testimony (Greenspan appears before both the House and Senate—usually just a few days apart—but the text of his speeches on both days is the same, as is required by law). The table shows that the front-month bond contract has averaged an absolute change of 33/32 on the first day of Greenspan’s testimony.

That there have been sharp reactions should not be too surprising. But what stands out, and what is the most tradable, is the follow-through; the market usually continues to move in the same direction as it did on the first day of testimony and the cumulative reaction is usually double that of the initial reaction. It goes on: one month later, the reaction nearly doubles again (also in the same direction).

Ostensibly, the reaction is so sharp because the market believes that what it hears from Greenspan is an unmistakable reflection of the Fed’s policy leaning.And since Fed policy doesn’t change on a dime, the market’s reaction generally continues for weeks on end. Therefore, the next time Greenspan delivers a Humphrey-Hawkins speech, or any other policy speech for that matter, reflect upon what he said (read his entire speech!) and gauge your response. If the market trades sharply higher or lower following a Greenspan speech, place a trade in the same direction of that reaction and wait for follow-through. Give it at least one week. Reassess after one week but keep in mind that the markets’ move can generally go on for at least a few weeks.

Employing the use of both eurodollars and U.S. Treasuries has been a successful approach toward profiting from this volatility. It is important, however, to choose the area of the curve that appears to be attracting momentum traders

(usually the long-bond, but this spec flow is increasingly shifting to 5-and 10-year T-notes). Also consider long straddles and strangles on bond futures. Although both tend to richen in price (due to increases in implied volatility) ahead of Greenspan’s testimony, the ensuing volatility usually sustains much of the richness.

Of course, since the stock market pays particularly close attention to the bond market, similar reactions can be anticipated there, too, especially in the interest rate-sensitive groups such as financials and consumer cyclicals.

By Tony Crescenzi

TradingMarkets.com

Trading Greenspan , part II

In my first lesson, “Trading Greenspan, Part I," I described the best way to trade Greenspan during the two months when he delivers his Humphrey-Hawkins testimony. But what about the other ten months? The first step is to recognize that when Greenspan delivers a policy speech, the impact can span several months. As I said before, this is because Fed policy doesn’t change on a dime. Thus, once the Fed’s policies become clear, the markets behave as though they assume that these policies will be in place for a while. Your trading strategies, therefore, should evolve around the notion that Fed pronouncements have lasting impact.

But how can we decipher where Fed policy stands on a regular basis? I suggest you become a regular Fed watcher. Get in their shadows, in other words. Being a Fed watcher is actually quite simple. What it boils down to is merely tracking the verbiage spewed by the FOMC—that cast of 13,including Greenspan, who vote on whether to raise or lower interest rates at FOMC meetings (held eight times per year). There are five additional Federal Reserve officials who attend the Fed’s meetings, but they vote only every other year (they are in essence the proverbial flies-on-the-wall at the FOMC meetings). While their views matter, too, keep your focus on the voting members.

To get you comfortable with Fed watching, think about it this way: let’s say that you’ve been asked to solve a mystery where all the principal players are known; they talk all the time; you get a plethora of clues about what they’re thinking; they give you verbatim transcripts of what they say; and they give you the minutes from all of their policy meetings. I’ll bet you can crack that mystery in a jiffy. Seen in this light, Fed watching looks pretty well-defined and far less intimidating than most perceive it.

One of the things that I often tell people to do, and that I find many top investors already do, is to read the text of the Fed’s speeches. It is not all that laborious since most speeches are just a few pages long. Reading their speeches gives you far greater insight than if you simply read headlines from newswires that largely reflect a reporter’s subjective view about the speeches.

I strongly believe that no investor should leave it up to reporters to tell them what they should be thinking about what the Fed said; it is up to you. It is perilous to leave it in the hands of reporters, who often have very little background on the financial markets and, quite frankly, can be novices. Do the work yourself and you will find a dramatic improvement in your mastery over the state of Fed policy.

What should you look for when you are reading the text? I look for key phrases that are repeated in lockstep by several Fed members. When I see a particular phrase used either verbatim or nearly so by a few members, I always sense that the phrase is a representation of current Fed policy. When this happens, I envision Fed members meeting with each other, either in person or by telephone conference, drawing conclusions about where they stand on policy.

This then finds its way into their public comments. Of course, all Fed members have their own personal views that they freely express, but this helps us in the battle to interpret the Fed’s public comments. How? Basically, if there’s consistency in the use of phraseology by members known to have bipolar views on monetary policy (just as a democrat and republican would on the issue of tax cuts), then their joint use of a particular phrase is generally a strong indication of agreement over where the Fed stands on a particular issue.

Last year, for example, just before the Fed began its most recent rate hike cycle, several Fed members repeatedly used the phrase, “the balance of risks have shifted (toward higher inflation).” Their common use of this phrase told me that the Fed was in the midst of formulating a new policy designed to counter those risks. This, of course, meant that rate hikes were on the way and they did indeed follow.

It is always striking to me to think that if I simply follow the words of a handful of people (the Fed), I can gain insights that I believe give me an edge on millions of investors. That is why I always include the Fed in my required readings.

Greenspan the Chameleon

Now that I have given you insights into Trading Greenspan, there is one last thing to keep in mind: Greenspan is a chameleon. He changes his stripes all the time. He has savoir-faire—he knows the right thing to do at the right time. Dogma toward policies that can get quickly outdated or outmoded doesn’t bog him down. One minute he is the champion of a particular economic model, the next he scraps it. Greenspan has an indelible record in this regard and it has served both he and the American economy well. You need simply avoid getting mired in the belief that you have Greenspan all figured out.

Greenspan’s views, you see, evolve with the times.

The best example of this, of course, was his recent near-total abandonment of the traditional view that strong economic growth leads to inflation. This critical shift gave him the presence of mind to “permit” the economy to grow at an average rate of more than 4% over the past four years, a rate long considered to be well above the 2.5% speed limit that the Fed has historically used as their guide in the formulation of monetary policy.

Greenspan deftly saw that things were indeed different this time. He sensed that the implementation of new technology and innovations had changed the rules of the game. Greenspan, therefore, became more tolerant of strong growth than his past record would have led you to believe. Incredibly, Greenspan saw that the current period might be, as he called it, a “once-in-a-century period of innovation.” Once-in-a-century indeed. That’s an appellation that belongs to Greenspan.