Forexunderstanding

Most traders have heard of seasonal patterns, something which is mostly associated with commodities. The foreign exchange market also has calendar patterns which influence trading, and just like in commodities, traders can take advantage of them to improve their odds for success and profits.
Monthly Patterns
Nearly all currency pairs have one or more months during which they have a directional tendency. There are three pairs in particular which have traded in the same direction during a particular month at least seven years in a row. AUDJPY has risen in January, while USDCAD has fallen in June and USDJPY has dropped in August. In each case, the moves have been significant. Lets take a look at USDJPY as an example.
On average, USDJPY has declined over 325 points each year since 1999 in the month of August, which translates to 2.80%. While the percentage does not seem extraordinary, when one takes leverage in to consideration, it is a different story. Had one shorted 100,000 USDJPY at the start of each August and closed that position out at the end of the month, the total profit would have been in excess of 20,000 (not taking in to account interest carry). That is an outstanding return considering the margin requirement for a position like that is only 2,000. And this does not even consider compounding!
Weekday Patterns
For the short-term trader, there are also patterns of behavior which are based on weekdays. It is a little more complicated, however, than just saying buy or sell on Monday, for example. A secondary condition must be applied, which can be accomplished using the month. The result is patterns which take place on certain weekdays during a given month.
An example of this kind of pattern is GBPUSD on Mondays in December. The pound has risen 73% of the time on Monday during the last month of the year since 1999 (31 observations). The average move has been 40 pips. Assuming a 5 pip spread, a trader who entered traded this pattern over the last seven years would have booked over 1000 pips in profits, which translates to more than 10,000 if one took positions of 100,000 GBPUSD each time.
Trading the Patterns
The examples outlined above are just a couple of the patterns which can be found in the forex market. There are many worth incorporating in to ones trading. Obviously, one strategy which could be employed is a simple enter-and-hold based on the pattern for a given month or weekday. That, however, does leave one open to the both in-trade draw downs, some of which can be substantial, and the simple fact that patterns do not always repeat every time, and sometimes change.
An alternative to enter-and-hold is to use calendar patterns to bias ones trading. For example, a day trader could look for opportunities to buy in to weakness in GBPUSD on Mondays in December. Similarly, a swing trader could use short-term breakdowns to enter in to short trades in USDJPY during August.
The trader looking to employ forex calendar patterns must utilize the same good risk procedures as are always necessary. This applies regardless of the strategy employed.

FOREX! Find Out If Its the Right Market For You!

Being successful! Does that have anything to do with choosing a market to trade? I would maintain that it does. One of the Secrets To Success is to choose something that fitsYou. After all, if one of your goals is to achieve a certain income level or net worth figure there are a multitude of ways that someone has been successful with, but probably only a few, that might be right for you. This applies just as much to the financial markets as it does elsewhere.

If youre reading this article, probably one of your endeavors is or will be some type of activity in the financial markets. Now which of the markets are right for you, meaning the best fit for your circumstances and your goals? Addressing this question will be far more profitable then trading the first market you happen to come into contact with. Ill help in this process by discussing some of the relevant features of the Forex or cash Foreign Exchange market.

One of the first Forex concepts to note is that the currency you are trading is a representation of a nations economy. Why is this important? Because its notable that national economies dont perceptibly change in a day or even a month. Contrast this with individual stocks, commodities or futures that are easily affected by daily news or even weather events. Thus the price moves of the major currencies take place against a broader backdrop than the before mentioned markets. This is expressed in the tendency of currencies to show strongly trending behavior in contrast to staying in tight trading ranges. Many will realize that tight trading ranges are some of the most difficult trading conditions while the trend is your friend because it is easier to profitably trade by hitching a ride. Trending markets also lend themselves to rules based technical trading systems. Do you prefer to have your trading choices laid out in advance, or do you shoot from the hip?

Are you planning to trade as a business or significant avocation? Do you plan to be active on a full or part time basis? If part time, are you otherwise occupied during regular business or market hours? Did you know that Forex trades 24 hours a day, six days a week? This makes sense if you realize that the Forex markets are serving the needs of nations and traders in every time zone. To facilitate this, most trading is done with online trading platforms that are considered to make an Over The Counter (OTC) market. Do your plans call for flexible or outside of regular hours scheduling?
How much capital would you like to allocate to your chosen trading activity? Someone whose trading is part time and viewed as a hobby may have a different amount of trading capital available than someone whose plan is to structure their trading as a business activity. Regarding capital requirements, the Forex market can accommodate almost any trading plan. This is possible because there are two trading unit sizes available. The full size lot is 100,000 currency units and may be controlled by a 1% or 1,000 unit margin. There is also a mini size lot of 10,000 currency units that may be controlled by a .5% or 50 unit margin. pound based traders can put the pound sign ahead of the above figures for illustration. To translate this to trading account requirements; a mini account can be started for as little as 300.00 US.

The above discussion of just a few facets of the Forex market is hoped to stimulate thoughtful consideration of the best trading situation forYou, and will continue as a series of articles to consider relevant features of the Forex markets.

To Be Continued