The Big Day

Surprisingly (or not), the consumer confidence index went down to 50.4 with expectations for 56. This shouldn't be a surprise to anyone. Gas prices are the super-high, food prices are soaring, and getting a loan is tougher than two years ago. No consumer will be confident in that situation. The dollar took a dive after the report, Forex Funnel made $100.

Today there are two important reports and announcements. The first one is oil inventories, which, as you know, can make oil price be very volatile. However, the most important announcement for today is the new Fed interest rate. This should make the dollar move.

Today at 2:15pm EDT we will finally know if Bernanke is trying to avoid inflation, avoid a recession, or wait another six weeks before deciding. Watch out for your positions.

Good luck trading today,
Nadav

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Consumer Diffidence

Yesterday was an ordinary day without much events. Even the Dow and S&P indices felt this big nothing and moved about 0% (yes, zero) and 0.01%, respectively.

Today the consumer confidence report is due today, and it will a good gauge for economic activity. Without confidence, there are less consumers and the future doesn't look bright, as consumers make 2/3 of the US GDP.

Tomorrow is the big day with the announcement of the new interest rate. Bernanke will have to choose between restraining inflation and raising rates and avoiding a recession and lowering (or keeping) rates. Tomorrow at 2:15pm EDT, don't miss.

The dollar got stronger yesterday, rising against most major currencies. Like always, Forex Funnel managed to extract $100 out of the market. Let's see what happens tomorrow, after the interest rate announcement.

Good luck with your trades,
Nadav

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The Week Ahead: Last Week of June

June is about to end, but economic data is just getting more and more interesting. First, tomorrow is the consumer confidence and new home sales, which will show whether the economy is going for a recession or there is still some growth.

Wednesday is the big day. Ben Bernanke will announce the Fed interest rate, and will affect many prices: oil, stocks, the dollar, and others. Watch out for those, stay out of the market if you cannot handle high volatility.

Thursday will bring the final first quarter GDP, which is the ultimate gauge for recession. On Friday we will see another measure of inflation, and if it's high, expect high volatility as well.

Have a great week,
Nadav

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Plan Your Trades - Use a Forex Trading System

The forex market is hard to predict, and trading with guesses is not a good habit. To trade right, you need a plan.

A plan like this is called a system. System consists of many indicators, oscillators, fundamental economic data, exchange rate patterns, volumes, known pair behavior, and more. Systems usually don't contain everything, but rather focus on two or three components. Simplicity, not complexity, is key. You don't want a complicated system that generates a trade once a week.

Trading systems come in many shapes and forms, but there are two basic types: self-made and pre-made. A self-made system has the advantage of being free, since you develop it. However, developing a system takes time, experience, and testing tools, which can be rather expensive.

A pre-made system is not free, but it sets you free from all requirements of developing, testing, and having months and years of experience in the forex market. All you have to know is where to find a good system like this, and you are set to go.

If you want a good pre-made trading syste, read the Forex Funnel review or the Forex Tracer review. The reviews are based on my experience with them. These two trading systems are backed up by a satisfaction guarantee, so they are risk free.

Have a great weekend, and good luck with your trades this week!
Nadav

nadavs

Israel Raises Oil, Again(?)

Yesterday oil speculators found another reason to keep oil prices at their outrageous price. This time the excuse was an Israeli military practice that was reported to be a practice for bombing Iran. This bubble will not last too long, be warned.

The oil price, financial and automotive sector trouble, and rumors about profit warning in Merril Lynch made the Dow close under the 12,000 point mark, the Nasdaq index went down over 2%, and in general, this options expiration day was very negative.

The dollar took another dive today (Forex Tracer made $390, Forex Funnel made about $100) against most major currencies. The USD/CAD rate went up to 1.0170, and that was the only rise of the dollar against a major currency.

Have a great weekend,
Nadav

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Less Oil, More Unemployment

China, once again, sets the tone in the global economy. Yesterday they announced that they're going to raise oil caps, and as a result oil went down about $5 per barrel. This move helped Wall Street rise ahead of tomorrow's option expiration.

Unemployment, on the other hand, seems to be on the rise. 381 thousand new initial claims for unemployment have been filed, versus the expected 375 thousand rise. This number brings once again the fear of recession. The dollar responded with flat trading throughout the day, and Forex Funnel used it wisely.

Finally, tomorrow is the quarterly options expiration day on Wall Street. It is also the rebalancing day for some S&P indices. Watch out for high trading volumes and stocks that get "stuck" on a certain price.

Good luck with expiration,
Nadav

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FedEx Delivers Red Numbers

FedEx reported its earnings yesterday, and on the way warned from a downturn in the economy. As a result, Wall Street indices were faced down. Then, at 10:30am, one hour after the beginning of the trading day, the Energy Department reported a further decline in oil inventories. This pushed oil prices up and made the Dow go under 12,000 points.

On the forex front, the oil inventory report made the dollar fall again against major currencies. In turn, Forex Funnel and Forex Tracer did their job and pocketed some hundreds of dollars to the trading account.

Today at 8:30am EST the initial claims number will be released, followed by the leading indicators and the Philadelphia Fed report on 10am. Should be interesting.

Good luck with your trades,
Nadav

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Wholesalers Pay Much More

Consumers paid 0.6% more on May than April, but wholesalers paid more, much more. The producer price index (PPI), the index which reflects the change in wholesale prices, went up 1.4%. More than double the CPI. This is a very bad sign for the American economy, signaling high inflation and rising prices.

Contrary to the PPI, oil prices went down yesterday to below $134. Hopefully they will stay there and keep going down. Those outrageous oil prices make everything more expensive, and soon they will make loans and credit cards more expensive with higher interest rates.

I also started testing a new forex trading system called Forex Funnel. It has a very special trading strategy. I may write a review for it on a Sunday.

Yours,
Nadav

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Slick Excuses

It's excuses time at Wall Street. Yesterday oil nearly hit $140 per barrel, but then retreated. No one knew why that happened, so people invented a new excuse: options expiration. Options may drag oil to a round number, like $140, but there is also some economic reason, and oil went down to about $135.

Today's data includes the PPI, an important gauge of inflation. PPI is more volatile than CPI, but eventually wholesalers affect retailers, which eventually affect consumers. There is no way to escape it. Rising oil and food prices affect the entire economy, which in turn affects the forex market.

EUR/USD was unstable yesterday, rising and falling with no clear patterns. Forex Tracer still managed to pull a small profit out of that, but not as big as usual.

Have a great day,
Nadav

nadavs

The Week Ahead: Third Week of June

The week opened with a sharp rise on the EUR/USD (Forex Tracer decided to take a short position and eventually profited). The dollar went down against most major currencies.

The week ahead has many interesting reports, and an interesting one is the PPI, Producer Price Index. Usually this data comes before the CPI, and it is a good indicator for it. This month's PPI is expected to rise 1%, a huge increase compared to last month's 0.2%. This is a bad sign for the economy, and it usually signals that the CPI will also rise beyond expectations.

Since this is the third week of the month, this Friday is the day when options on Wall Street expire. This means mostly boring and flat trading for the day.

Good luck trading this week,
Nadav

nadavs

Forex Leverage: a Two-Edged Sword

As every forex broker says with pride, in the forex market you can leverage your money and make enourmous earnings. As attractive as it sounds, leverage also has a dark side, losses.

Leverage is just the ability to trade with more money than you have. If you have a leverage of 1:100, you can open a trade of $100,000 with $1,000. When the pair moves, you earn or lose 100 times this move. If the exchange rate goes just 1% in your favor, you double your money.

However, leverage is not perfect. Just like it makes profits big, it also magnifies losses. Just as a 1% move in your favor will double your investment, a move of 1% against you will erase it quickly. If the leverage is higher, and some brokers go as high as 1:500, your losses will be eliminated much faster.

When you trade or use a automated forex trading system, make sure to properly adjust your desired leverage. Don't make it too small, because you'll miss out some good opportunities. However, don't set it too high, or your losses will be greatly magnified.

Have a great trading week,
Nadav

nadavs

Good for Forex, Good for Stocks

Yesterday's CPI figure taught us two important lessons. The first one is that good sales numbers usually come with a higher inflation. The other lesson is that every market interprets data differently. The two markets in this story are the forex market and the stock market.

First, the expected CPI was +0.5%, which is not a small increase. However, the real CPI came out to be +0.6%. Usually, such a small difference does not make such a big impact. However, due to the upcoming Fed meeting, this number is very important.

The stock market reacted with joy to the fact that the Fed is not going to raise the interest rates, as many feared. The S&P index went up by 1.5%, the Dow jumped 1.37%, and the Nasdaq surged over 2%, probably do to the Yahoo-Google agreement.

On the other hand, the dollar rose against all major currencies. The reason for this rise is the completely eliminated risk that the Fed is going to lower interest rates. Inflation is too high, so the Fed can't lower the interest rate and boost inflation. Forex Tracer managed to pull out two quick trades out of this fall in EUR/USD.

As you can see, different market interpret the same data differently. As a trader, you need to know which way to trade on different news, or not trade at all during that times. Know your market and know your pairs.

Have a great weekend,
Nadav

nadavs

The Stimulus Checks are In

At 8:30am EST yesterday, the retail sales figure was published. To the surprise of many, it went up by 1% instead of the expected 0.5%. This big rise lowered the chances of an interest rate cut on June 25, and the dollar surged.

Analysts think that this rise in retail sales was caused by the new stimulus plan checks that arrived during April and May. For now, it looks like the plan definitely worked out.

Today is the big day with the CPI report. If it's above expectations, the dollar will rise and Wall Street will fall. If it's below expectations, there will be another fall for the dollar. Stay tuned, it's coming in 2:30 hours.

Good luck with your trades,
Nadav

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Oil Shortage Effect

Yesterday everything was calm, until the report by the Energy Department. Then, at 10:30am, the United States reported that the crude oil inventories went down by over 4 million barrels. Oil prices jumped, the dollar fell.

Today the retail sales figure finally comes out. A very positive figure will signal that the recession is not coming so fast. A negative figure will make EUR/USD jump and greatly increase the fears of recession. Tomorrow's CPI will also tell us where the economy is going.

Good luck with your trades,
Nadav

nadavs

Flat and Oily

Yesterday's Wall Street trading was mainly flat, but the Wall Street currency, the dollar, was headed in one direction against the Euro: up. The EUR/USD pair lost about 150 pips Yesterday, and as usual, Forex Tracer took full advantage of this situation.

A very important indicator will be released today at 10:30 EST, the crude oil inventories. This number is very important today, and it will help to determine the course of oil for today. If the inventories are exceptionally low, oil may jump beyond its past record.

The interesting indicators will come tomorrow: initial claims and retail sales. These numbers will definitely show the dollar a course of action. With Friday's extremely important report, the CPI, the retail sales figure will also make some people very rich.

Good luck with your trades,
Nadav

nadavs

Bernanke, Recession, and Inflation

Yesterday Bernanke gave a speech about the United States economy. In his speech, he mentioned several very important pieces of information for forex traders, including information about a recession and the inflation.

First, Bernanke talked about the potential recession. He said he knows that the recent job report and oil prices are very unwelcome, but the fear of recession should not be so big. The economy is starting to do better. This gave the dollar a little boost, but not as his inflation speech.

After mentioning the recession, Bernanke started talking about inflation. He said that if consumers and business owners expect inflation, they will behave in such a way that accelerates inflation, so it becomes a self-fulfilling prophecy. Then he warned that if inflation does stay at safe levels, the Fed may have to raise interest rates. This led the dollar to jump, the EUR/USD rate fell, and Forex Tracer managed to get a nice boost out of it.

Today's only interesting report in the US is the trade balance, something Bush managed to ruin. Let's see how bad it will be this time.

Good luck with your trades,
Nadav

nadavs

The Week Ahead: Second Week of June

The forex market opened yesterday with a rise of the EUR/USD to over 1.5760 (Forex Tracer managed to make another $390 off that move). Asian traders did not calm down from the disappointing job report and made the dollar dive.

Ahead of us is a week full of information with two major indicators: retail sales and the CPI. The retail sales indicator tells how much retail sales have grown over the last month, and it is a good indicator of consumer spending. High retail sales means consumers are spending more, and so expanding the economy. A negative figure tells that consumers spent less last month than two months ago. It's not that great, but as long as it doesn't continue, it's fine.

The CPI is the number everyone waits for. It stands for Consumer Price Index, and it measures the change in price of certain goods and services. This number is very important because it is a gauge for inflation. This month it's extremely important, because of May's job report. If the number is negative, it can signal about an upcoming recession. If it's near-flat, it means prices have not risen too much. If it's high, it can signal an upcoming stagflation, a combination of stagnation and inflation. Those two economic situations should cancel each other, but when they show up together, they are really hard to recover from. Beware of the bears.

Have a great week,
Nadav

nadavs

Forex Day Trading

As you know, there are many types of traders. Some are banks, trying to profit on long term trends of currencies. Others are hedge funds, trying to create a revenue for their customers. Some are investors who believe in a currency for the long run. And some are day traders, who have a very clear purpose: profit, and profit today.

Day traders have a very easy to understand mission statement, but their work is hard. They need to identify the exact entry point and exit points to make the most of a short term move. Missing an exit point can cost thousands of dollars.

Good day traders use an automated forex trading system. This system tells them when to enter a trade, how big it should be, and when to exit the trade. Expert traders create their own system, but beginners can handle with a pre-made system.

Pressure is a constant feeling of day trading, but that's where most day traders find the joy in the job. However, some people can't handle such pressure, and they should not day trade, or at least practice with demo accounts first, one supplied by their brokers.

Good luck with your trades,
Nadav

nadavs

Jobs, Oil, and the Dollar

After thinking for a while, I decided to let go of the forex terms right now and focus more on current events and market commentary. On days with not many events, like Sundays, I will continue to explain interesting and important forex terms.

Yesterday could be called Friday the 13, but it came a week earlier. The job report turned out to be extremely negative: 49,000 jobs were taken out of the market. The worse part is the unemployment figure which jumped to 5.5% from 5%, the biggest rise in 22 years. This figure means only one thing: the US is headed or already in a recession.

As a result, the US dollar and Wall Street took a dive yesterday. The EUR/USD pair, which nearly hit a bottom of 1.5360, simply soared to a rate of 1.5769 to end the week. A forex trading system I am testing right now, Forex Tracer, took advantage of this huge leap and created nearly $1000 in about 5:30 hours from an account of $3000.

Wall Street wasn't too impressed with the employment figures as well and sent the Dow Jones index to lose over 400 points near the end. At the close, the Dow went down "only" 394.64 points, a 3.13% decrease. The S&P 500 sank 3.09%.

The bad employment report also signals that a rate cut is likely. This signal sent the oil to one of its highest one day rises: over 7% in one day. A barrel of oil is currently priced at $138.39.

Let's see what Monday brings.
Nadav

nadavs

Forex Market Trends

Just like anything in life, the forex market has its own trends. Although some trends are hard to spot because of the variety of currencies, there are some currencies, like the Israeli shekel (ILS), which have increased in value over many currencies. Here are the three trends a financial market can have:

The first two are well known - an up trend and a down trend. These happen when there is a clear movement of a currency to either direction. It can be in one pair or in all pairs of a currency. For example, the dollar is currently in a long down trend. To profit from an up trend, you need to buy. To profit from a down trend, you need to sell. Simple.

The third trend is sideways, or flat. This trend is the most annoying, since there is no clear movement and prices just go up and down with no clear direction. To profit from such market, you need to ride minor trends or use options. Most forex brokers will allow you to do that, and if not, ask your broker for options (make sure you know how to trade them. Options are very risky).

Good luck with your trades,
Nadav

nadavs

Support and Resistance in Forex

When professional forex traders think about entering a position, their trading system may use either fundamental analysis or technical analysis. If their system uses only technical analysis, there is a very high chance their system uses supports and resistances.

A support is a price or exchange rate that prices do not go under. This happens because of big buying orders waiting at these levels. If there are many buy orders at the 1.5 exchange rate for EUR/USD, it will be hard to go below that price.

A resistance is the opposite of a support. It's a price or exchange rate that make an "upper bound" for currency pairs. This occurs because of big sell orders awaiting on these prices. If there are many sell orders on the 1.55 exchange rate for EUR/USD, it will be hard for the exchange rate to go above this level.

Supports and resistances come in many shapes and forms. However, there are two common forms for them. One is horizontal lines, which means the exchange rate does not go above or below a specific price. The other one is diagonal lines, which means prices are moving in a "tunnel", either upwards or downwards.

Good luck with your trades,
Nadav

nadavs

Bull and Bear Markets

When you read financial newspapers, you often encounter the term "bull market" or "bear market". Also, you can read about "bulls" and "bears". However, as you know, animals don't trade in the currency markets, so it means something else.

A bull market is a market where prices are going up. For example, the stock market was a bull market in the years 2003-2007. A bear market is a time of declining prices and uncertainty in the market, like after the dot com bubble crash.

The forex market does not have official bull and bear markets because currencies do not have a long term tendency to rise like stocks. However, If an analyst or a forex broker says he's "bullish" on a currency, it means that he believes that this currency will rise over currencies. If an analyst says he's "bearish" on a currency, it means that he believes that this currency will go down against others.

Catch the bulls,
Nadav

nadavs

The Take Profit Order

After the stop loss order, there is one more important order: the take profit order. This order is very simple: it just terminates the position and takes the profit generated. There is a really good reason to do that.

The reason for taking profit is that the forex market is never going in one direction for eternity. Eventually it is going to reverse its direction and start going against you. This is why you need to place a take profit order and take your profits in small bites.

Every good forex trading system sets a take profit order, also known as T/P order. However, not all systems do it the same way. There are systems that close the entire position on the take profit order. Other systems close only a part of the position, mostly half, and let the other part run for free until it hits the stop loss. The idea behind this strategy is moving the stop loss to avoid taking a profit and losing it back on the other part of the position.

Good luck with taking profit,
Nadav

nadavs

Forex Bid and Ask

When you trade the forex market, your forex broker is going to give you two important numbers: the bid rate and the ask rate. Both of these rates are very important in making trading decisions and estimating how good the broker is.

The ask price is how much the broker is asking to "buy" a pair of currencies. The bid price is how much the broker is bidding to buy back a pair of currencies (in other words, it's your selling price). Since the broker wants to profit, the ask price is always higher than the bid price. The broker buys (bids) low and sells (asks) high.

The difference between the bid and ask price is the spread, and this is where a good broker is measured. A good broker will give you a good spread of 2-3 spreads on the major currencies. More exotic currencies will probably suffer from high spreads, sometimes even 10 pips or more.

Also, when you get yourself or develop a good forex trading system, make sure it can handle the bid-ask spread, otherwise, you set yourself to losses.

Good luck with your trades,
Nadav

nadavs

Currency Arbitrage

.diIf you are trading in any financial market, you probably heard the term "arbitrage". This term means buying an asset at one market and selling it on another market, where the price is higher. Usually, this price gap is closed very quickly, but people who find arbitrage opportunities can make some quick, safe, profit.

Arbitrage is also possible at forex, but the high liquidity of the forex market makes it almost impossible to take advantage of such opportunity. Here is an example of a forex arbitrage you can use if you find (in this example there is no spread, but remember most forex brokers have).

There are three fictional currencies: ABC, DEF, GHI (original, right?). Their exchange rates are the following:
ABC/DEF = 2
GHI/DEF = 5

From these two exchange rates you can determine the exchange rates of all three pairs. Since the rate is a ratio between currencies, you can treat is as a mathematic proportion. That means the exchange rate ABD/GHI is 2/5 = 0.4.

Now, let's say that the direct trading of ABC/GHI reached a rate of 0.3. In this case, you can profit from the opportunity you got: if you trade from ABC to DEF to GHI, the rate is 0.4. If you trade from ABC directly to GHI, the rate is 0.3. A smart trader would do this (this example assumes the trader has 3000 GHI):

Buy ABC/GHI at 0.3 - sell 3000 GHI and buy 10000 ABC
Sell ABC/DEF at 2 - sell 10000 ABC and buy 20000 DEF
Buy GHI/DEF at 5- sell 20000 DEF and get 4000 GHI

As you can see, with three simple, risk free, orders, you created 1000 GHI out of nothing. Fortunately, this even is really rare, so people are not able to abuse such situations.

Hope you learned something,
Nadav

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