Five Simple Rules for Trading Successfully

Trading the forex can be one of the greatest, most exciting experiences that anyone can have, or one of the most nerve-wracking, depending on your level of expertise. It is also a known fact that foreign exchange trading can reap real results for your bottom line, but it can also completely deplete your funds. The main aim of trading foreign exchange is to maximize your earnings in a short time. There are so many ways in which you can benefit from trading and so many reasons why you should really do it, as it provides a fundamental approach to earning whether the market is up or down. For a beginning trader or any other trader for that matter, there are ways in which you can structure your trades and approach it from an organized angle. Not everyone will be able to trade successfully at first, but with lessons and actual experience it will get better over time. Many times, it is through trial and error that you realize just what it is that needs to be done to be successful. A basic understanding of charts, analyses and trading platforms will come into play later on as you become a more seasoned trader. Below are 5 simple rules that you can follow to get the maximum results from your trading.

1. You have to first ask yourself if trading is really what you want to do and why. Even if your answer is to make money, which is an obvious answer, you want to make sure that you don’t bite off more than you can chew. You have to ensure that it is something you will enjoy enough to stick with it, even if your earnings, at first, is not as much as you want it to be. You have to have realistic expectations, based on your capability as a trader. Many will say, or you will read of people who say they earn exorbitant amounts from trading. If you are a seasoned trader who has a huge margin or enough money to place on each trade then you will make money. The more money you trade, the more you stand to earn.

2. A strategy is important for any aspiring or seasoned trader, they have to decide beforehand, which currency pairs to buy or sell, how and where to set their stops, when to enter the market and what is their target. Most importantly, they have to decide how much to risk on each trade. The markets are volatile, you can lose your money as fast as you can earn it. Sticking to your strategy can help you to see results. It does not help to try a new strategy each time you trade. With everything that you do, it is good to be disciplined, trading is no different, switching gears can only harm your trading in the end.

3. Ascertaining what markets to trade in is equally important. Currently, there are four Foreign Exchange markets that you can trade in. New York, Tokyo, Sydney and London. New York market is opened at 8:00 am and closes at 5:00 pm, Tokyo is opened at 7:00 pm and closes at 4:00 am, London at 3:00 am and closes at 12:00 noon and Sydney opens at 5:00 am and closes at 2:00 am. Some sessions will overlap, thus providing an opportunity to make gains as currency pairs are more during the two market sessions. With each market, there are good and bad, but while the New York markets may be ideal for one person, the Sydney markets may be better for another, depending on their location and times they make available for trading. As a trader, being aware of your goals, available funds, personality type and lifestyle, as well as deciding how much risk and leverage to take on can help you to determine which markets to trade in.

4. Develop a plan and literally set it in stone, this goes back to the point about having discipline and sticking to your strategy. Decide on the amount you want to trade with and ensure that you don’t get tempted to go over budget as this sometimes happen. Whether or not you have made a lot on a particular trade, don’t be tempted to go back in, as the market can shift. Even with fundamental or technical analysis, both have the potential of failing if you are not a professional.

5. Learn about the different terms on a trading platform, terms such as stop-loss, limit orders, when to take profits and how to set your margins. This will minimize the stress of worrying and watching the currency pairs as they move. These pairs can move up as you watch your money appreciate in value then decline right before your eyes, but if your margin is sufficient, then it can ultimately go back up afterwards. Last but not least, when you use a trading platform, always pay attention to the disclaimer.

Forex Training

Forex Training - Technical Analysis
Technical Analysis is probably the most common and successful means of making trading decisions and analyzing forex and commodities markets.
Technical analysis is a method of forecasting price movements by looking at purely market-generated data. Price data from a particular market is most commonly the type of information analyzed by a technician, though most will also keep a close watch on volume and open interest in futures contracts. The bottom line when utilizing any type of analytical method, technical or otherwise, is to stick to the basics, which are methodologies with a proven track record over a long period.
Technical analysis differs from fundamental analysis in that technical analysis is applied only to the price action of the market, ignoring fundamental factors. As fundamental data can often provide only a long-term or "delayed" forecast of exchange rate movements, technical analysis has become the primary tool with which to successfully trade shorter-term price movements, and to set stop loss and profit targets.
Technical analysis consists primarily of a variety of technical studies, each of which can be interpreted to generate buy and sell signals or to predict market direction. Please see our Technical Studies page for a detailed description of these studies and their uses.
Forex Training - Fundamental Analysis
Fundamental analysis refers to the study of the core underlying elements that influence the economy of a particular entity. It is a method of study that attempts to predict price action and market trends by analyzing economic indicators, government policy and societal factors (to name just a few elements) within a business cycle framework.
Fundamental trading strategies consist of macro, strategic assessments of where a currency should be trading based on virtually any criteria but the price action itself. These criteria often include the economic condition of the country that the currency represents, monetary policy, and other "fundamental" elements.
Fundamental analysis alone can be difficult to use when dealing with currencies, commodities and other "margined" products. This is because fundamental analysis does not provide for specific entry and exit points, and therefore makes it difficult to control risk when using leverage. However, fundamental analysis can provide a guide as to likely overall direction or trends in a market. GFX provides free daily market research which can be a valuable tool in conducting fundamental analysis on the markets.
Forex Training - Forex Research
High quality Forex research can serve as a valuable technical and fundamental aid to successful currency trading. Develop a better understanding of the Forex markets and trade each day with the best information available. Click on the links below to view Forex commentary, research, and forecasts from GFX and major banks around the world.
Precious Metals Trading
GFX offers a convenient and efficient means to trade precious metals. Margin requirements are approximately 1% (100:1 leverage) and all trading is done with zero commissions.
Metals products are available for trading from the GFX GlobalTrader software, and are included in your account statements along with all currency positions. Product details are as follows:
Gold Trading hours: 24 hours a day Margin Requirement: $500 per lot Lot Size: 65,000 with a price of 650.00 Tick Value: 0.01 = $1.00 per lot Commissions: zero Spread: 75 cents (e.g., 435.25 bid / 436.00 ask) Silver Trading hours: 24 hours a day Margin Requirement: $500 per lot Lot Size: $45,000 with a price of 9.00 Tick Value: 0.01 = $50.00 per lot Commissions: zero Spread: 3 cents (e.g., 7.03 / 7.06 ask)
Platinum Trading hours: 24 hours a day Margin Requirement: $500 per lot Lot Size: $45,000 with a price of 900.00 Tick Value: 0.01 = $0.50 per lot Commissions: zero Spread: 3 dollars (e.g., 904.50 bid / 907.50 ask)
Palladium Trading hours: 24 hours a day Margin Requirement: $500 per lot Lot Size: $18,000 with a price of 180.00 Tick Value: 0.01 = $1.00 per lot Commissions: zero Spread: 3 dollars (e.g., 182.00 bid / 185.00 ask)
GFX also offers online trading in currencies, stock indices, and crude oil.
Glossary of Terms
Ask: Price at which broker/dealer is willing to sell. Same as "Offer". For example, if EUR/USD is quoted at 1.1850/1.1854, the 1.1854 is the "Ask" or "Offered" price.
Bid: Price at which broker/dealer is willing to buy. For example, if EUR/USD is quoted at 1.1850/1.1854, the 1.1850 is the "Bid" price.
Bid/Ask Spread (or "Spread"): The distance, usually in pips, between the Bid and Ask price. A tighter spread is better for the trader.
Cost of Carry (also "Interest" or "Premium"): The cost, often quoted in terms of dollars or pips per day, of holding an open position.
Currency Futures: Futures contracts traded on an exchange, most typically the Chicago Mercantile Exchange ("CME"). Always quoted in terms of the currency value with respect to the US Dollar. Parameters of the futures contract are standardized by the exchange.
Drawdown: The magnitude of a decline in account value, either in percentage or dollar terms, as measured from peak to subsequent trough. For example, if a trader's account increased in value from $10,000 to $20,000, then dropped to $15,000, then increased again to $25,000, that trader would have had a maximum drawdown of $5,000 (incurred when the account declined from $20,000 to $15,000) even though that trader's account was never in a loss position from inception.
EBS: "Electronic Brokerage System", the electronic system on which major banks trade with each other. This is considered to be the most definitive indicator of prices at which currencies are "really" trading, at least for EUR/USD and USD/JPY.
Fundamental Analysis: Macro or strategic assessments of where a currency should be trading based on any criteria but the price action itself. These criteria often include the economic condition of the country that the currency represents, monetary policy, and other "fundamental" elements.
Leverage: The relationship between the notional contract value and the margin required to trade. For example, if the notional amount traded (also referred to as "lot size" or "contract value") is $100,000 dollars and the required margin is $2,000, the trader can trade with 50 times leverage ($100,000/$2,000); or "50:1" leverage. Leverage is the inverse of the percentage margin requirement.
Limit: An order to buy at a specified price when the market moves down to that price, or to sell at a specified price when the market moves up to that price.
Liquidity: A function of volume and activity in a market. It is the efficiency and cost effectiveness with which positions can be traded and orders executed. A more liquid market will provide more frequent price quotes at a smaller bid/ask spread.
Long: A market position that has been bought. It will generate profits as the market moves up and losses as the market moves down. For example, if you bought Euros, you will be "long" Euros.
Margin: The amount of funds required in a clients account in order to open a position or to maintain an open position. The percentage of the contract value required as margin is inversely related to the leverage.
Margin Call: A requirement by the broker to deposit more funds in order to maintain an open position.
Market Order: An order to buy at the current Ask price.
Offer: Price at which broker/dealer is willing to sell. Same as "Ask".
Pip: The smallest price increment in a currency. Often referred to as "ticks" in the futures markets. For example, in EURUSD, a move from .9015 to .9016 is one pip. In USDJPY, a move from 128.51 to 128.52 is one pip.
Premium (also "Interest" or "Cost of Carry" or "Roll"): The cost, often quoted in terms of dollars or pips per day, of holding an open position.
Short: A market position that has been sold. It will generate losses as the market moves up and profits as the market moves down. For example, if you sold Euros, you will be "short" Euros.
Spot Foreign Exchange: Often referred to as the "interbank" market. Refers to currencies traded between two counterparties for "spot" or current delivery rather than future delivery. Generally more liquid and widely traded than currency futures, particularly by institutions and professional money managers.
Stop: An order to buy at the market only when the market moves up to a specific price, or to sell at the market only when the market moves down to a specific price. For example, if EUR/USD is trading at around 1.1850, you could place a stop order to buy at 1.1870. This order would be filled only if the market moved up to 1.1870 or higher.
Technical Analysis: Analysis applied to the price action of the market to develop trading decisions, irrespective of fundamental factors.

Featured WebinarVantagePoint and FX Swing Trading - How to Select the Best Currency PairsPresenter:Peter Molloy , Technical InstructorPeter Molloy demonstrates his process for selecting FOREX currency pairs to trade.

A Favorite Trading Set-up

by: Jim Wyckoff, Senior Analyst

I had a fellow email me recently, asking: "Without giving away any precious secrets, could you tell me a way to improve my entries and exits (on trades)? It seems nobody wants to share their system."
Well, first of all, I don't have any trading "secrets." What I do have is many years of market experience, including studying the markets and technical analysis--and listening carefully to the best and brightest traders share their philosophies on successful trading. (You should be suspicious if anyone tries to tell you they do have a "secret" to trading success, but that's another story.)
On better entering and exiting trades, first of all you need a trading plan--before you enter the trade--and you need to stick to it. Your trading plan can have different scenarios and options once you're into the trade, but the key here is don't "fly by the seat of your pants" when you're into a trade. You don't want to let emotions dictate your strategies while you're actively trading a market.
Know how much money you can stand to lose and then place a stop accordingly, and then don't change your mind when you're in the middle of the trade.
If you've got a winner going, you should also have a plan in place regarding when to take your profits. Again, your trading plan can allow for some flexibility once you are in the trade.
More specifically, I like to "buy into strength" and "sell into weakness." This trading method abides by the old trading adage, "The trend is your friend." Conversely, traders who try to "fight the tape" and be a bottom-picker or top-picker usually wind up getting their fingers burned.
One of my favorite trading "set-ups" is when prices have been in a trading range--between key support and resistance levels--for an extended period of time (the longer, the better). Then if the price "breaks out" of the range (above the key resistance or below the key support), I like to enter the market--long on an upside breakout or short on a downside breakout. A safer method would be to make sure there is follow-through strength or weakness the next trading session--in order to avoid a false breakout. The trade-off there is that you could be missing out on some of the price move by waiting an extra trading session.
If you are long the market, set your sell stop just below a technical support level that's within your tolerance for a drawdown. If you're short, set your buy stop just above a technical resistance level that's within your tolerance for a drawdown. Don't set your stops right at support or resistance levels, because there's a decent chance that those levels will check and possibly reverse the price move--and you'll miss getting stopped out.
If you've got a winner and decide to let your profits run (per your initial trading plan), use trailing stops that utilize technical support and resistance levels.

SHORT TERM TRADING TECHNIQUES FOR THE FX MARKET

By Dave Floyd

Given my background as a scalper in the equities market for eight years I am often asked if those same techniques are applicable to the FX market. First, it is important to define how one defines scalping. First, recalling my days as a floor/screen based trader of equities in 90’s the definition was a technique whereby a trader could profit from very short-term moves in the marketplace by using a combination of 1 & 5-minute charts as well as a keen sense of tape reading.

When I made the transition to the FX markets exclusively back in 2001-02 I was keenly aware that this type of hyper strategy had 2 shortcomings:
1. It was not scalable
2. A scalping technique may not be conducive to the FX markets

While point 2 may be open to debate, one cannot argue that short-term strategies have a finite amount of capital you can deploy at any point in time without disrupting the market.
So with that in mind, the angle I decided to take on this article was to illustrate how some of the techniques and indicators used in a scalping strategy can still be overlaid on to a swing trading approach in order to maximize entry and exit points.
First some assumptions for the forthcoming analysis:

• Trade selection is done using one of or a combination of a 60 & 240-min charts as well as a daily chart. A weekly chart is used merely as a way to identify long-term support and resistance areas.
• I will discuss several indicators, mainly stochastics, fibonacci retracements and extensions, trend-lines and RSI, Elliot Wave analysis
• Trade duration average is several days
• I rely upon not only the G10 pairs but also several crosses
• Risk is defined in advance of each trade and lot size is calculated based on stop-loss
  
• There are limitations, as with any technical approach that combines a fair degree of discretion as rigid entry guidelines may prevent a trade from being executed. However the effectiveness and precision of the entry techniques will typically avoid costly draw-downs while the trade is playing out.
  Here is an ideal example of using a big picture viewpoint/analysis, but drilling down to a lower time frame in order to pinpoint the entry in an attempt to execute at a price that will perhaps provide immediate validation.

In this instance I am anticipating that a retest of the bull trendline will fail, however, the ‘ideal’ scenario is to have the daily stochastic pointing down in order to have bearish momentum at our back. As you can see from the daily chart above, this is not the case. However, what if we could speed up the analysis in terms of drilling down a time frame or two and essentially forecast the turning of that stochastic lower?

I rely heavily upon on the 60 & 240-minute in order to execute trades while frequently doing the analysis on the daily chart. Referring to the 240-minute chart below, it provides an ideal example of using the lower time frame for execution. Note the following:

• Spinning top suggests a reversal is imminent
• Stochastic cross lower igniting bearish momentum
• Trend-line break (115.53) triggers ideal entry
  
• If there is one question mark on this entry it is that the current trend on the 240-minute chart that is up. Trend is defined by 2 parameters:
  What is the slope of the 20-period ema over the last half a dozen bars?
  Are price bars above or below the ema?
  Ideally, for shorts, price bars are below a downward sloping moving average and vice versa for longs.

So now what, where do we take profits? In this case, given that the trend is up on the time frame that we used for execution there is not the luxury of letting the trade ride. In this instance, the logical exit points are seen at either the 50% fib retracement at 115.12 or the swing high at 115.24. These levels are easily achieved.

AUD/NZD Short

This cross has been ‘in play’ this year and continues to be a cross I have relied upon frequently. In this scenario we have a situation where the daily chart suggests a possible short, but does not provide all the points on the checklist for a high probability short.

• Wave 4 completion is confirmed by a stochastic cross lower and a trend-line break
• Price targets are calculated by a simple fibonacci extension of wave 3 using a 1.25 and 1.50 setting

Regardless of the trade, I always respect the time frame that the trade was executed on. In this case, the execution was based on analysis of the 240-minute chart, as a result, exit points also need to be calculated from the same time frame.
Given that our first target was 1.1740 we still want to give the chance for the trade to play out, however, given that the trade is in roughly 100 pips in the money and the stochastic suggest that the selling pressure is waning, it is prudent to take some of the trade off and adjust stop-loss to either break-even or some price that suits the traders risk tolerance, a trailing stop is ideal.

NZD/SEK Short

The chart below provides a perfect example of two time frames coming together that isolate a fantastic short opportunity. In this case, the daily chart is already confirmed as bearish, now, it is just a matter of isolating the entry point as a way to avoid the trade going against you while waiting for the downward trend to resume.
Until the 60-minute charts stochastic roll back over prices are likely to drift higher. The better entry is to wait for pullback into fibonacci resistance at 5.2450-5.2500 and waiting for bearish momentum to resume by way of a stochastic cross.

AUD/JPY Long



1. Bear trend-channel is broken.
2. Prices fail at swing low at 85.00 and form right shoulder of inverted head & shoulders pattern.
3. A fibonacci retracement of the move higher from 5/23 offers the ‘ideal’ long entry point for test to break the neckline.
4. Stochastic is expected to pullback; turn higher confirming point number 3.
5. If all points above are confirmed the target price has a solid chance of being hit.
All of the above points were met and prices did move right into the target price at 85.60.

Trading Ideas for USD/JPY Currency Pair

(Price on 1st pane, Slow Stochastics on 2nd pane; uptrend line in green; horizontal support/resistance levels in yellow; Fibonacci Retracements in grey; 50-period simple moving average in light blue.)
It is no secret that the yen has strengthened dramatically in the last few days, as shown on the accompanying USD/JPY daily chart. After retreating from a significant downtrend resistance line (marked “A”), price has dropped all the way back down slightly below the support offered by the long-term downtrend line (marked “B”), which originally served as resistance before a breakout occurred in June.
In the process, the pair has tentatively broken down below the key 100.00 level (marked “C”), and reached all the way down to the 98.50 support level (marked “D”) before bouncing back up again.
Any further bearish price action below this 98.50 level should eventually target the key 95.75 support level (marked “E”). In the event of a significant upward correction, on the other hand, the key 102.50 region should serve as strong resistance to the upside.

By James Chen, Chief Technical Analyst

Fundamentals - Forex News Trading Strategy

In this lesson, I will talk about the different ways how you can trade forex during key economic news events.
Most common used news strategies:

Trading the Numbers
Straddle the News
Hedging the News
Trading the Numbers


Traders want to take advantage of the discrepancy between the forecasted and the actual key economic number when trading the numbers. As mentioned before, you need a very fast news data feed such as Reuters or Bloomberg because you want to get in the trade before the spike begins.

Steps to trade the numbers:

1. Purchase a fast news datafeed at Reuters or Bloomberg
2. Track the news consensus and determine the significance of the economic news report being released, if it is not important, do not trade it. You will be able to find all important data on a good data calendar
3. For each important news release you need to know how large a discrepancy has to be in order for you to act on the trade.
4. Finally, watch the news release using your fast datafeed and trade the numbers.

Example:


UK CPI News Release
"There are three different numbers. There is the month over month CPI, there is the year over year CPI, and there is the core CPI.

The most important number that most traders and economists will be focusing on is the CPI headline year over year number, which is expected at around 2.8%, same as it was last month.
If for some reason the number comes out at 3.1% or higher, it would set a new high in many years, and a possibility of a rate hike out of UK will probably be considered imminent, so GBP/USD may possibly go up by 80 pips or more in the first hour of the report.
If the CPI reads at 2.4% or lower, it would be a huge drop, and most would probably assume that the Bank of England will have to think twice before hiking the rate anytime soon, so GBP/USD may possibly go down by 80 pips or more in the first hour."
Possible scenarios:
If the consensus and the actual number is inline with the market expectations, you would not trade.If the actual number is at 3.1% or higher, you would go long.If the actual number is at 2.4% or lower, you would go short.


Below picture shows what happened that day. The number came out much better than expected and the GBP/USD spiked up.

GBP/USD CPI news release spike
Things to consider when interested in "Trading the Numbers":
You have only 0.5 - 2 seconds in which to act before the spike begins. Not fast enough? No money for you.
You really need to know how to read and interpret the numbers. Wrong interpretation will cost you money!
A fast news service is very expensive and is not recommended when you trade a small account because it's very unlikely to cover your data feed expenses.

Straddle the News

This strategy is very simple and consists of 2 orders, one to buy a few pips above the range high and one to sell a few pips below the range low, then wait for the price to breakout triggering one of your orders. Your stop loss order should be placed a few pips below the range low when buying, conversely, a stop loss order should be placed a few pips above the range high when selling.

Forex News Trading Strategies

In this lesson, I will talk about the different ways how you can trade forex during key economic news events.
Most common used news strategies:

Trading the Numbers
Straddle the News
Hedging the News
Trading the Numbers

Traders want to take advantage of the discrepancy between the forecasted and the actual key economic number when trading the numbers. As mentioned before, you need a very fast news data feed such as Reuters or Bloomberg because you want to get in the trade before the spike begins.
window.google_render_ad();
Steps to trade the numbers:
Purchase a fast news datafeed at Reuters or Bloomberg
Track the news consensus and determine the significance of the economic news report being released, if it is not important, do not trade it. You will be able to find all important data on a good data calendar
For each important news release you need to know how large a discrepancy has to be in order for you to act on the trade.
Finally, watch the news release using your fast datafeed and trade the numbers.
Example:
UK CPI News Release
"There are three different numbers. There is the month over month CPI, there is the year over year CPI, and there is the core CPI.
The most important number that most traders and economists will be focusing on is the CPI headline year over year number, which is expected at around 2.8%, same as it was last month.
If for some reason the number comes out at 3.1% or higher, it would set a new high in many years, and a possibility of a rate hike out of UK will probably be considered imminent, so GBP/USD may possibly go up by 80 pips or more in the first hour of the report.
If the CPI reads at 2.4% or lower, it would be a huge drop, and most would probably assume that the Bank of England will have to think twice before hiking the rate anytime soon, so GBP/USD may possibly go down by 80 pips or more in the first hour."

Possible scenarios:

If the consensus and the actual number is inline with the market expectations, you would not trade.If the actual number is at 3.1% or higher, you would go long.If the actual number is at 2.4% or lower, you would go short.
Below picture shows what happened that day. The number came out much better than expected and the GBP/USD spiked up.

GBP/USD CPI news release spike

Things to consider when interested in "Trading the Numbers":
You have only 0.5 - 2 seconds in which to act before the spike begins. Not fast enough? No money for you.
You really need to know how to read and interpret the numbers. Wrong interpretation will cost you money!
A fast news service is very expensive and is not recommended when you trade a small account because it's very unlikely to cover your data feed expenses.

Straddle the News

This strategy is very simple and consists of 2 orders, one to buy a few pips above the range high and one to sell a few pips below the range low, then wait for the price to breakout triggering one of your orders. Your stop loss order should be placed a few pips below the range low when buying, conversely, a stop loss order should be placed a few pips above the range high when selling.
An example: (See picture below):
Range high: 1.9938
Range low: 1.9919

Place an order to buy at 1.9941 with a stop loss order at 1.9917. Take profit at 1.9991. Place an order to sell at 1.9916 with a stop loss order at 1.9940. Take profit at 1.9866.
That's it!
GBP/USD CPI news straddle strategy

Things to consider when interested in "Straddle the News" forex strategy:

1. False breakouts or whipsaws can occur, especially when the release came close or in line with market expectations and traders fade the breakout (i.e place trades in the direction opposite to the initial price movement). Worst case scenario, both stop losses get hit. Although the strategy relies on "true" breakouts it can still work during a false breakout if you take the profits quickly and don't get greedy plus you put very tight stops below or above the range to minimize the risk.
2. During key news releases, spreads can widen up and both buy and sell orders can be triggered at the same time. You will end up losing.

3. Slippage - During major fundamental announcements, both stop loss and limit orders may not be guaranteed to be filled at your price. 'Slippage' is the cost involved when currency traders enter the market at a price worse than the level they wanted to get into.

For example, a trader wants to sell GBP/USD at 1.9000 but the order is executed at 1.8999 rate. That 1 pip difference is slippage cost.

Hedging the News
What is hedging? Hedging enables a currency trader to simultaneously hold Buy and Sell positions in the same currency pair at the same time in one trading account.

Hedging News Strategy:

1. To hedge, go both long and short at market price 30 min before the news release.
2. Add a protective stop loss order to both long and short positions 30 seconds before the news release.
3. Add a limit order to both long and short positions 30 seconds before the news release.
Now wait...

Possible scenarios after the news release:

Whipsaw or false breakout - both stop losses can get hit.No movement - nothing will happen to your open positions. Price breaks out - one of your stop loss orders will get hit and hopefully, you will reach your target level on the remaining open position.

Economic Indicators Explained

Balance of Payments:

The balance of payments is separated into two main accounts: the current account and the capital account. It's a complete summary of a nation’s economic transactions and the rest of the world including merchandise, services, financial assets and tourism.

Beige Book Fed Survey:
The Beige Book, is published eight times a year by the Federal Reserve Bank. It highlights the activity information by District and sector. The survey normally covers a period of about 4-weeks in duration.

Business Inventories and Sales:

Inventories are an important component of the GDP report. Business inventories and sales figures consist of data from other reports such as durable goods orders, factory orders, retail sales, and sales data.

Construction Spending:

Spending Measures the value of construction during the course of a particular month.

Consumer Price Index (CPI):

CPI measures the change in prices at the consumer level for a fixed basket of goods and services paid for by a typical consumer. Items included in the CPI reflect all goods and services that people buy for day-to-day living.

Current Account:

The current account is the sum of net income from trade in goods and services, net factor income, and net unilateral transfers from abroad. It's a statement of the country's trade with other nations over a period of time.

Durable Goods Orders:

Durable Goods include large ticket items such as capital goods, transportation and defence orders. They are extremely important because they anticipate changes in production and thus, signal turns in the economic cycle.

Employment Report:

In the US, the employment report is regarded as the most important among all economic indicators. The Employment Report contains 3 components:

Payroll Employment: Measures the change in number of workers in a given month.

Unemployment Rate:

The percentage of the civilian labor force actively looking for employment but unable to find jobs.

Average Hourly Earnings Growth: The growth rate between one month’s average hourly rate and another.

Factory Orders:

The factory orders report contains data on orders and shipments of non durable goods, manufacturing inventories, and the inventory/sales ratio.

FOMC Decision:

The FOMC holds eight regularly scheduled meetings per year. If the FOMC wants to increase economic growth, it will reduce the target fed funds rate. Conversely, if it wants to slow down the economy, it will increase the target rate with a rate hike.

Gross Domestic Product (GDP):

There are four major components of the GDP are: consumption, investment, government purchases, and net exports. GDP measures the market value of goods and services produced in a country.

Housing Starts/Building Permits Starts:

Are divided into single-family and multi-family categories. In both cases, a housing unit is considered “started” when excavation actually begins.

IFO:

Germany’s leading survey of business conditions. The index surveys over 7,000 enterprises on their assessment of the current business situation and their resulting plans for the short-term.

Industrial Production and Capacity Utilization:

Industrial production measures the monthly percentage change in volume of output of the nation’s factories, mines, and utilities. Capacity utilization measures the extent to which the capital stock is employed in production.

National Association of Purchasing Managers (NAPM):

This is leading survey on US manufacturing activity, arranged by the National Association of Purchasing Management (NAPM). New Home Sales:
Monthly data new home sales data contains information on home prices, and number of houses for sale.

Non Farm Payroll (NFP):

NFP represents all business employees excluding general government employees, private household employees, and employees of nonprofit organizations, accounting for about 80% of the workers who contribute to GDP. NFP is released every first friday of the month and can cause big gaps on the forex market.

Personal Income:

Personal Spending, also known as PCE, represents the change in the market value of all goods and services purchased by individuals. It is the GDP's largest component.

Producer Price Index (PPI):

PPI measures the monthly change in wholesale prices and is broken down by commodity, industry and stage of production.

Purchasing Managers' Index (PMI):

PMI is widely used by industrialized economies to assess business confidence. Germany, Japan and the UK use PMI surveys for both manufacturing and services industries.

Retail Sales:

Retail sales is the first real indication of the strength of consumer expenditure .Measures the percentage monthly change in total receipts of retail stores, and includes both durable and non-durable goods.

TICS:

The Treasury International Capital (TIC) Report measures foreign demand for US debt and assets. Strong demand tends to strengthen the dollar as foreigners convert their money in order to purchase US securities.

Tankan Survey:

Japan’s chief business survey, compiled quarterly by the Bank of Japan. The survey consists of two major parts; the "judgment survey," asking businesses about their situation in the previous, current and following quarters on macro-economic variables, business conditions, inventory levels, capacity utilization levels and employment level. The other main part is related to "current management issues" confronting companies.

Trade Balance:

The difference between the monetary value of exports and imports in an economy over a certain period of time. A positive balance of trade is known as a trade surplus and consists of exporting more than your imports; a negative balance of trade is known as a trade deficit or, informally, a trade gap. The Trade Balance also has a sizable impact on GDP.

US Economic Numbers to Keep an EYE On

The rankings for US economic data as seen in below table are based on an analysis of 20-minute and daily ranges. As seen in below table for example, the Non-farm Payroll release days can cause a big shake up in the forex market. They have the potential to move the EUR/USD (on average) 123 pips in 20 min and 193 pips in a day on average.

Biggest FX market “shakers” table
Year 2004 - 20 min after news

Avg. Range (pips)

Non-Farm Payrolls 123
FOMC Decision 74
Trade Balance 64
Inflation - CPI 44
Retail Sales 43
GDP 43
Current Account 43
Durable Goods 39
TICS 33

Year 2004 - Total Daily Range
Avg. Range (pips)

Non-Farm Payrolls 193
FOMC Decision 140
TICS 132
Trade Balance 129
Current Account 127
Durable Goods 126
Retail Sales 125
Inflation - CPI 123
GDP 110

1. Non Farm Payroll (NFP):NFP represents all business employees excluding general government employees, private household employees, and employees of nonprofit organizations, accounting for about 80% of the workers who contribute to GDP. NFP is released every first friday of the month and can cause big gaps on the forex market.

NFP Release Schedule: First Friday of the month at 8:30am EST

2. FOMC DecisionThe FOMC holds eight regularly scheduled meetings per year. If the FOMC wants to increase economic growth, it will reduce the target fed funds rate. Conversely, if it wants to slow down the economy, it will increase the target rate with a rate hike.

3. Trade Balance: The difference between the monetary value of exports and imports in an economy over a certain period of time. A positive balance of trade is known as a trade surplus and consists of exporting more than your imports; a negative balance of trade is known as a trade deficit or, informally, a trade gap. The Trade Balance also has a sizable impact on GDP.

4. Consumer Price Spending (CPI):CPI measures the change in prices at the consumer level for a fixed basket of goods and services paid for by a typical consumer. Items included in the CPI reflect all goods and services that people buy for day-to-day living.

5. Retail Sales:
Retail sales is the first real indication of the strength of consumer expenditure .Measures the percentage monthly change in total receipts of retail stores, and includes both durable and non-durable goods.

6. Gross Domestic Product (GDP):
There are four major components of the GDP are: consumption, investment, government purchases, and net exports. GDP measures the market value of goods and services produced in a country.
7. Current Account The current account is the sum of net income from trade in goods and services, net factor income, and net unilateral transfers from abroad. It's a statement of the country's trade with other nations over a period of time.

8. Durable Goods Orders:
Durable Goods include large ticket items such as capital goods, transportation and defence orders. They are extremely important because they anticipate changes in production and thus, signal turns in the economic cycle.

9. TICSThe Treasury International Capital (TIC) Report measures foreign demand for US debt and assets. Strong demand tends to strengthen the dollar as foreigners convert their money in order to purchase US securities.

Artilce by Lilly De Clerck