Affichage des articles dont le libellé est successful forex trading. Afficher tous les articles
Affichage des articles dont le libellé est successful forex trading. Afficher tous les articles
Forex in usa
MAIN MACROECONOMIC INDICATORS UNITED STATES
Financial institutions, governments, central banks or even some private organizations regularly publish reports with sometimes significant impact on price movements in financial markets. The themes of these reports are extremely varied:
- Employment and unemployment,
- Manufacturing,
- Household consumption,
- Economic growth ...
It can be just as well as balances of outlook. These reports are commonly called "indicators" by financial markets, because they will influence more or less marked changes in the price.
We will therefore in this chapter will present the key indicators that impact the Forex market. These indicators relate to countries or economic areas representing the most traded currency on the Forex, namely the U.S., the eurozone, the UK and Japan. Previously, we briefly present the central banks of these four clusters, the importance of the course is undeniable.
Labor market
Reports on employment report Employment, Non Farm Payrolls: For employees working for non-agricultural private sector and public boards, reveals job creation; limits: Only 60% of responses are published on time, which involves many revisions (high margin of error) Establishment survey: Survey on wages, hours worked ...
Household survey: Survey on the percentage of the workforce, the unemployment rate ..., 95% of respondents match, so there is little error limits: No differentiation between full-time employment / part-no identification precarious, requires many revisions (high margin of error)
Application for unemployment benefits: Measure of new applications and total applications; reveals layoffs (detects the possibility of recession) and the situation of the labor market; limits: does not see job creation. Volatile, need to take into account the monthly averages
Growth
GDP GDP: Total is the value of what was produced and used to estimate the country's economic growth; limits: published a month after the quarter in question, is not actually update.
Production
ISM (Institute for Supply Management) manufacturing: Index measuring changes in the manufacturing sector according to five criteria: production, new orders, employment, delivery time, inventory. Effective measurement tool (if index greater than 42.7: global expansion of the economy, greater than 50: sector expansion, recession, if less). Capture both the trends in activity and detect downturns.
Chicago PMI (Purchasing Managers Index): identical to the ISM manufacturing but only for manufacturing firms in the Midwest. Published before the ISM manufacturing; limits: more volatile than the manufacturing ISM, it is not always a good indicator of the latter.
Industrial production index is a percentage of capacity used each month: if the industry is only 20% of the economy, it is the activity most cyclical, so the index is important for understanding economic cycles and downturns. Limits: the industry is stronger than other sectors by exceptional events such as strikes, weather ... Only 55% of results are available in time
Orders for durable goods (durable goods orders): Measure the commands sent to manufacturing companies with a life expectancy of more than 3 years. Relevant to understand the business opportunities and good indicator of the investment. Strongly correlated to GDP. Boundaries: highly volatile (because includes goods such as aircraft or defense equipment that are not good indicators)
Consumption
Retail sales: measure of the dollar amount spent on the month. First available information on household consumption (which is the largest component of GDP); limitations: only a third of total consumption, and these sales may be affected by price fluctuations. Low response rate (50%), need to renew the investigation to reach the required sample.
Private consumption, PCE (Personal Consumption Expediture): Measuring consumer spending (goods and services). Published data in value (most commented) and volume (most interesting). Gives a good general idea of the trend of consumption; limits: It is still missing the final month of the quarter with the release of GDP.
Consumer confidence: Michigan survey on consumer sentiment overall, their common conditions, their outlook (study of household finances and their perception of economic developments in the United States). Indicator has existed for 50 years. Can identify long term trends close to consumer trends. Short-term analysis rather unreliable to estimate a consumer trend. Depends heavily on political situations in progress.
Consumer confidence: Conference Board: Investigation of sentiments on Employment (now and in 6 months), economic conditions (current and 6 months), and household income. Good indicator of the changing labor market, independent of political developments and stock, depending on the labor market. Little correlated with household consumption and fairly volatile
Construction and Real Estate
Getting Yard and building permits (Housing starts): number of building permits and housing starts (by types of houses and by region, at the signing of the act). Good indicator of the changing real estate market, predicts residential investment (GDP component); limits: a bit simplistic
Sales of new homes (new home sales): measures sales of new homes (when the contract is executed). Good idea of the real estate market trends and future activity in construction. Limitations: Statistics volatile and likely to be substantially revised
Foreign Trade and Balance of Payments
Commercial Balance (Trade Balance): gap between exports and imports (by product and by country), value for services, and by value and volume for goods. Reflection of trade with the rest of the world, reveals the contribution of trade to GDP growth. Limitations: takes into account volatile because of heavy components (eg air) and / or seasonal
Net purchases by non-residents: measurement of long-term transactions with non-resident Americans. Sum of net purchases of U.S. securities and foreign securities by non-residents (if positive capital inflows to the U.S.). Preliminary data on financial flows between the U.S. and the world; Limitations: Only takes into account the long-term securities. Biased sharing between public and private sectors.
Prices, Wages, Productivity
Consumer prices (Consumer price): price measurement for a range of goods and services. The most watched index: CPI-U (all urban consumers). Most comprehensive measure of price trends. Determines inflationary pressures; limits: Possible overestimation of prices (ongoing improvement) Very volatile if one takes into account energy and food.
Producer prices (Producer Price): index of prices received by producers of goods. The index is the most studied of finished products (as opposed to raw goods and intermediate goods). Gives a good indication of price trends; limits: limited fields of action (does not include services). Very volatile if one takes into account energy and food.
Consumption deflator (PCE deflator): price index of private consumption. The index excluding food and energy (core PCE deflator) is the index considered by the Fed in the measure of inflation; limits: limited interest since the consumer price of the same month has already been published.
Cost index of employment (Employment Cost Index, CIS) is a measure of wages (70% of the index) and benefits paid by businesses (30% remaining). Measure the most comprehensive and reliable labor costs; limits: most of the information contained in this index are already known.
Productivity and unit labor costs: measures the change in output per hour worked in the private sector. Publication of real wages and unit labor costs. Detailed report for non-agricultural and non-financial: reliable data to assess the underlying productivity. The labor costs to determine a trend of inflation; limits: data of interest to economists, but less for markets because the interesting information about the already published
Monetary Policy
Beige Book: All reports of each Federal Reserve, and synthesis thereof. Affect consumption, manufacturing and services, real estate, banking, agriculture, energy, prices ... Good description of the economic situation. Very interesting if published before the monthly statistics of the same month. Limitations: Too qualitatively. Lack of appreciation by the Fed.
FOMC (Federal Open Market Committee): Monetary Policy Committee (seven members of the board, and five of the 12 regional bank presidents, including the NY). Ad rates and decisions in terms of future monetary policy. Limits: in general announcements about the rates have already been sent in advance to warn the market but possible surprises
FOMC Minutes: Summary of conversations that took place at the FOMC. Outlines the macroeconomic situation, focusing on strategic issues. Provides information on the concerns of the Fed.
Monetary Policy Report of Congress: Speech by President of the Fed before Congress and publication of monetary policy report. Publication of projections of growth and inflation for the current year and the year ahead. Unique opportunity to have quantitative predictions of the Fed.
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The psychology of successful forex trading part 2
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The psychology of successful forex trading
To these traders, losing money trading was the price of admission to
a fun and exciting game.
This was my first clue that making money is secondary to other considerations
with many people.
I believe that there are many other reasons why people trade. In the example
just given, the clients were more interested in the excitement of trading
than in the making of money. They wanted to feel that jolt of adrenaline
that comes from trading. They liked the high of having the account value
go up and perhaps even liked the adrenaline hit when the account value
went down.
In the lecture, I ask attendees how they feel when they have bought a
market and it is moving strongly higher. People in the audience said that
they felt great; they felt high! And they said that they felt terrible when they
were losing money.
It is common for people to equate the forex market to Las Vegas. People
know that they will lose money when they go to Las Vegas and yet they
still go because of the excitement and entertainment they receive. Except
for card-counters in blackjack, nobody goes to Las Vegas to make money.
Nobody plays roulette with the idea that they will make a lot of money or
will be able to make a living doing it. They do it for the action.
Many people trade forex to provide a diversion from their regular life,
perhaps because they feel that it is boring or not stimulating enough. They
could call their bookie or they could call their broker. It beats sitting at
home and watching TV.
Another reason that many people like to invest in forex is because they
like to solve the puzzle of what makes the market go up and down. They
want to be able to predict the market.
It’s interesting to note that nearly all the articles and books written
about forex trading are about entry and exit techniques. Yet trading techniques
developed by Richard Donchian in the 1960s have been shown to
make money for every year since then. We already know techniques that
make money, yet 90 percent of traders lose money. Odd? Yes! It is clear
to me that it is more important for many people to continue to figure out
what makes the market tick or to figure out new entry and exit techniques
than to make money. Rather than use the old tried-and-true techniques and
make money, they prefer to try to figure out new techniques.
There is a common desire in many to want to figure out puzzles. The
market is a very challenging puzzle to be solved and attracts many people
to do just exactly this. They are fascinated by the puzzle. They want to find
a new way to beat the market.
Many traders believe that there is an underlying truth to the market
or perhaps a powerful underlying pattern or force. They, therefore, believe
that they should spend a tremendous amount of time trying to understand
that underlying force. For example, many people spend countless hours
and days trying to understand Gann or Elliott on the assumption that if
they can just crack the code they will become rich beyond their wildest
dreams. Or that if they just study harder they will understand the teachings
of the guru that they are subscribing to.
These traders focus on trying to unlock the secrets of the universe as
the way of making money rather than go directly to the subject of making
money. They end up spending a tremendous amount of time on the study
of esoteric theory and not on trading the markets. When they do trade the
markets, they often stop trading after just a few losing trades because they
assume that they do not understand the secrets of the universe well enough
and should go back to studying.
Take a look at the popularity of the literature and lectures about trading
systems. The basic concept behind trading systems is that there is a
mathematical model that will create profits. I agree that this is true. The
continuing success of Donchian’s basic systems, mentioned earlier, shows
that trading systems can make money. However, many people like to invent
their own systems or modify other systems that they have bought or read
about. One problem with this is that they spend all their time trying to perfect
the system rather than make money. They often become obsessed with
fine-tuning their system rather than simply using an imperfect system. Of
course, no system is perfect so they end up spending all their free time on
the system instead of making money. The chase of the system is more important
than making money. The perfection of the system becomes much
more important than the point of the system, which is supposedly to make
money.
A number of years ago, I had the opportunity to train traders from
Korea. I had six months to turn them into profit-making traders. They each
had $100,000 to trade. I had three groups of six traders for each six-month
period.
I decided to give the initial six trader-trainees a liberal arts education
about trading. I taught them everything about trading under the sun. I even
had guest lecturers teach them about subjects that I was not an expert in,
like Elliott Wave.
One of the guest lecturers was a good friend of mine who was an Elliott
Wave fanatic and had been trading using Elliott Wave for about eight years.
I left him with the students while he gave the lecture. At the end of the
lecture, I came back in and started to ask him some questions about his
trading that I thought would be informative to my students.
I asked him point-blank, “Why do you use Elliott Wave?”
He said, “There is no greater feeling in the world than to have analyzed
the wave structure of a move and to buy right at the absolute bottom of
Wave Two!”
the first part of lesson :
The psychology of successful forex trading
from : forex trading
The psychology of successful forex trading part 1
It is a well-known fact that roughly 90 percent of forex traders lose
money, about 5 percent break even, and 5 percent make money. Why?
And what can be done about it?
The answers to these questions may be the most critical for any forex
traders. This chapter explores these issues and attempts to highlight ways
that traders can become profitable in their forex trading. The psychology
of trading is the most important factor for determining the success of your
trading.
There are numerous trading systems on the market that are profitable.
There are numerous trading advisors and newsletters that have had longprofitable
track records. Yet the average speculator is a losing trader. The
average speculator, when handed sound advice, will still lose money.
I have been writing on this subject since my book Commodity Spreads
(John Wiley & Sons) was published in 1982. I feel that understanding
the psychology of trading is vitally important for myself as a professional
trader and for you, the intelligent reader of this book.
I have given lectures on this subject mainly to futures and forex traders
though the years. The first thing that I do is ask how many people in the audience
have made significant money over the prior two years. I have had
only one person raise their hand in the hundreds of people who have attended
the lecture. I then ask how many had made significant money over
the prior year. I get a few hands. The point: The vast majority of traders
don’t make money.
I have often wondered why. After all, the vast majority of the people at
the lectures are successful people in their businesses. It costs about $500
to attend the conference, and the attendees may also be paying for travel
and hotels to attend the conference. It takes a certain amount of money to
spend a minimum of $500 to gain some insight into trading.
There are few people who attend these conferences that are not very
successful people. Why is it that they can be successful doctors, lawyers,
and business owners yet cannot trade forex? What is it about forex trading
that is so hard?
WHY DO YOU TRADE?
I ask the audience members why they trade. Of course, the answer is to
make money. I ask them if they are really sure. By this time, they are starting
to second-guess their first answer. But, in the final analysis, they stick
with their answer: that they are trading so that they can make money. I
think that that is completely wrong. I think that people trade for tons of
other reasons and that making money is a relatively minor reason. Nobody
really knows why each individual person trades but there are many reasons
other than making money.
I first discovered this about 20 years ago. Back in the 1970s, I managed
futures money with a partner. We offered two different accounts to our
prospective clients. The first account traded only commodity spreads and
was making 200 percent per year while the second account traded only
outright positions and was making about 100 percent per year (please note
that these returns were so high because I didn’t know as much as I do
now about risk and money management and we were simply taking far too
much risk).
Of course, everybody opened up a spread account because it was
making 200 percent per year. Within six months, nearly everybody had
shifted their account to the outright program in spite of the fact that it
returned only half as much! This stunned us because we always assumed
that people invested in futures to make money. In fact, they were involved,
I believe, for the action. They would call us up when they were invested in
the spread account and ask how their account was doing. We would
respond that they made $12.50 the previous day because a back spread
in the corn market has moved one-quarter of a cent. On the other hand,
they would call about their outright account and we could say that the
value of the account had moved $1,000 because of some big move in the
bellies.
The point is that they wanted the action of the futures markets, not
the profits. Their primary motivation was action and making money was
secondary. It’s okay to pay to see a movie because of the entertainment value.
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