Trading Currencies - Forex Breakout Strategy

The Breakout Strategy is one of the most commonly used by professional and successful traders. Even though it is used by professionals, it is really simple to implement using regularly updated technical charts which are readily available online.

Breakouts in the forex market occur anytime that a price breaks above or below a resistance or support point. These points are determined by technical analysis and anyone can find what the technical points are on charts online. Sometimes I use the free technical charts available to all at fxstreet.com. However, I highly recommend the technical analysis charts and other resources inside the members area at plus.dailyfx.com.

For those of you who are very new to forex trading or who have never studied the breakout strategy, I will explain the definition of support and resistance points. A support point is a low point which has shown support for the particular currency pair (meaning the last time the pair touched that level it did not fall further). And a resistance point is a high point that the pair has tested but has not been able to break above. So, for example, let's say most recent technical chart on the the EUR/USD gives the following information: S1: 1.3609 S2: 1.3584 S3: 1.3560, and R1: 1.3657 R2: 1.3682 and R3: 1.3706. This means that S1 is the current first level of support for the EUR/USD and the last time the EUR/USD tested S1, enough buying occured that it did not fall any further. If the EUR/USD falls through S1, then S2 is the next level of support, and finally S3 is the third level of support. Likewise, R1 would indicate the first level of resistance through which it may be unlikely for the EUR/USD to be able to break above. If EUR/USD does break above R1, then R2 is the next level of resistance, and R3 is the third level.

Now that you fully understand the basics and the simplicity of reviewing the technical chart. It is easy to spot a breakout trading opportunity. When the price of a currency pair breaks below a support point or breaks above a resistance point, a high probability trade in the continued direction of the breakout may be executed. (If the currency pair breaks through a support point, then go short/place a sell order on that pair. If the currency pair breaks above a resistance point, then go long/place a buy order on that pair.)

The trick here is to enter the trade as soon as you possibly can after the breakout occurs. If you wait too long, you could miss the major move and actually enter too late, possibly even so late that the trade reverses for a loss. If you enter the trade and set a reasonable stop profit, you will minimize your loss potential while setting yourself up to collect the big pip movements that are often associated with currency pair breakouts.

Now obviously, a full breakout does not occur every time a currency pair breaks above or below a technical point. Sometimes it leaps above or below the technical point briefly and then pulls back. Such incidents are often referred to as "false breakouts."

However, catching the trend on a true breakout is worth losing some pips on all the false breaks the trader has to take when using this strategy. Hundreds of pips can be gained when a trader enters a trade at the beginning of a true breakout. So by setting your stops correctly, you should not lose too many pips on false breaks, and you may even be able to grab a small profit even on a false breakout.

When you catch a true breakout, however, you could very well gain hundreds and maybe even 2 hundred pips. When this happens you can set a trailing stop and let the trade continue to run at no risk with your profits "locked in." The first time a trader catches a true breakout with great momentum behind it, the trader will definitely recognize the power and simplicity of the breakout startegy and will realize that all of the small losses on false breaks were well worth it!

Millions of Online Currency Traders Can't Be Wrong - Forex Trading Can Be Downright Vicious

If you are scraping pennies together, you already know that Currency trading is brutal. It's clear to even the most unsophisticated investor that Forex has risk. It's even riskier for an untrained trader. In fact, it may have the highest volatility of any investment market.

One can easily lose their hard earned cash in currency trading if they are not well trained.

It is downright imperative that you don't go into the trading market "glossy-eyed". In advance of investing think over these tips:

1. Do not invest money into a real Currency account until you practice on a free Global currency trading account. The practice will greatly help with discipline and avoiding any investing errors.

Allow at least 30 days of practice before you even think about getting into the live market. Consider the following statistic - 90% of newbie's walk away broke in the real world. The primary reason for the loss is lack of awareness, practice and instruction. Those remaining 10% of leading global currency traders have been fine tuning their skills on free trading accounts for several years in advance of entering the real market.

Don't think for a minute that you can compete without practice.

2. Never risk more than 2-3% of the trading account. Go on placing as many trades as doable, or letting stock trading robots churn & burn your portfolio.

One important difference between a successful and an unsuccessful trader is that the first is able to bounce back under dreary conditions on the market, while a "broke" forex trader will blow up his account after 5-10 fruitless trades in a row. If you are untrained will take a real beating in this market. Just like me, you probably started out "glossy eyed". You may have envisioned yourself living the good life while the dollars rolled in, and you sat back sipping champagne. Eventually, reality hits and you realize that trading is a little complex. Recently, I asked myself if it was just me, or had Forex investing had become more brutal. I also wanted to determine if the Forex market was still the choice place to invest in these leery times. Of course the market is neither bullish nor bearish, but it does take on its own personality. Having asked myself the best investment options handy, I concluded that trading in the Forex currency market was still the choice option, because you may open a small account, to determine the reality of this business.

If the account performs in a way that you feel comfortable, you can add more your money. Of course the bottom-line is that this kind of account returns wonderfully, 5% to 12% per month. Now, don't misunderstand what I am saying, Forex investments carry substantial risk and are certainly not suitable for everyone. Past performance is no guarantee of future outcome. There are plenty of Day currency traders that lose money, and if you invest in a managed account the following statistic can happen to you. If makes you are sincere about becoming a Giant in this market, it is mandatory that you acquire training and education. So what should the newbie's do? Should they try their luck trading forex and lose their money. If done without education and training, the chances of it happening is exponentially increased. So prior to investing real money, you want to learn what candlestick charts are? What are pips? How you place a buy and sell and on and on. The beneficial thing is that most of the following statistical information is now readily available on the internet. You can download online free eBooks on the foreign exchange market.

There are a desirable number of OTC trading platforms online that give you the opportunity to practice global forex investing using virtual money. Most importantly, you can practice the foreign exchange market without the risk of losing your hard earned cash. With a little bit of practice and education you can start trading in a few short weeks, but take advantage of the 30 day offer. Remember, too that there are now many advantageous global forex investing robots that get made the process of OTC trading automatic. People are making desirable cash from home each and every day trading OTC on autopilot. This is an opportunity that you should not miss if you want monetary freedom and to live the life of your dreams. It is conceivable to reduce your risk additionally by looking for a reputable broker. You would be surprised at how many there are out there.

Currency investing is big business for them too! Remember, some currency trading brokers make a fortune by skimming off the top from traders, in addition to getting their commission percentage. A new investor who is lured by the suggestive allure of lavishness that is to be had in the business would be advised not to trust anybody without sound credentials. Approaching a seasoned broker with a recommendable reputation when you start off would be the perfect thing to do. Remember, FX trading is can be wicked. People spend countless hours learning the ins-and-outs of the market. It's an easy way to lose your hat big time if you don't obtain a little practical knowledge. As an investor, you want to be psychologically strong to be a profitable.

However, I believe that with the right training, guidance, and tools you can become a successful forex currency trader.

Remember, the following:
1. Get a free practice account
2. If, you still find yourself overwhelmed, seek advise
3. Never risk more than 2-3% of the trading account
4. Read, study, and practice every single day

A Guaranteed Way to Making Some Foreign Forex Money Even If You've Never Traded Before

Nowadays, it's never been easier to break into the forex market. As opposed to the past, these days all you need is your own computer, a steady internet connection, and a bit of start up capital. You don't even need to risk any real money to learn as you can do it within the safe confines of a practice account online anytime you want. But if you want to make some real foreign forex money right away, there is one tool for trading which you must not overlook.

Roughly 30% of all traders are currently using some form of automated forex trade software to bring in a steady and reliable income from this market. This is software which you run on your own computer which does just that, it automatically trades currency for you. The ultimate goal is to keep you on the winning sides of your trades as often as possible to keep you earning foreign forex money in this market from trends and to minimize your losses around the clock.

Automated forex trade software is adept at doing this and can react to changes in the market faster than any other form of trading around today for the simple fact that it remains constantly connected to and analyzing real time market data, so that when a change occurs it is sophisticated enough to recognize that you'll lose money on this new pattern or not, and trade accordingly when necessary.

I mentioned that nearly a third of all traders are currently using automated forex trade software to secure some automated foreign forex money, this is up from the 17% roughly who were doing it just 5 years ago to show that this is quickly becoming the norm amongst traders. This begs the question, why is it so popular?

Not only does automated forex trade software keep some of the major campaign killers such as human emotions and error from factoring into your campaign because all trading which the program carries out is in direct correlation with how the market reacts and nothing more.

Also, because it's entirely automated, you don't need to tend to it ever or know a thing about the market to enjoy and see something come back out of it. Consequently beginners and casual traders looking to earn some quick and reliable income as well as experienced traders who are looking to supplement their existing trading income have been known to take advantage of it.

Forex Secrets - Delusion No 2 - Who Prompts Forex Quotation To Traders

The delusion conceptually propounds that traders operate at a spontaneous FOREX market (as stipulated by B. Williams, A. Elder, E. Nayman, etc.). But it is not the case. Traders do their job inside a well-organized and controlled currency exchange market, governed by the Consortium of the world’s largest banks.

Hence, who is pushing the currencies up and down, who defines trends, corrective actions and flats?
And, who, ultimately, places a trend at a point, where the majority of traders are happy to think they have saddled the wave and are about to win an enormous profit! Now! Not to be scared! Not to close the position! Not to be satisfied with a minor profit! Later on we will discuss that sort of stupidity. Thus, one persists to continue long in spite of more and more degrading profit. Shortly, the loss starts growing with light velocity! Are you familiar with the situation?

Well, who has reversed the rate?

And who generally tugs currency rates?

Tugging is surely centralized. Compare on-line quotes of several Dealers or banks to find out that they are per second coincident. Do each bank’s traders act in such synchronism, that even not seeing each other, they place identical orders so that quotation is in 100% agreement? NOTHING IS A MIRACLE HERE!

But prior to further explanation, we will listen to Bill Williams, the FOREX scholar (Trading Chaos, Ch. 6): “…let us trace a trend formation process. Earlier, the market and the market trading venue did constitute a single physical space. Majority of large grain traders were concentrated on the “floor”. Their orders involved amounts, sufficient to move the market; they enjoyed better control over the market than at present. During the latest 20 years markets have grown worldwide. Now, not only “Purina Ralstone”, “Kellog” and other prominent commercial associations seek hedging their cash assets transactions. So do millions of the world’s minor profiteers and farmers, competing with them in anticipation of perspective grain price fluctuations? This fact also implies strong potential for traders with nowadays, trends not being constructed on the floor. The latter mainly ensures the market liquidity by way of tackling “outer orders”.

The fact, that today’s trends are formed rather “outside the floor” than “on the floor”, as before, enables one to trace further market tendencies with trade volume being the key thereto. Our only on-line information is restricted to tick volume, time and price. Tick volume constitutes a number of price changes per a certain time period. It is not at all a number of traded contracts. Multiple researches revealed no significant difference between actual and tick volume. Using a tick volume, we may suppose, that it represents actual volume. It is a real-time volume, thus being our key to what’s going on in “trading pits”.

Two basic elements are organic to FOREX trading: brokers on the floor and remote traders. Local brokers constitute staff, executing orders, thus earning their salaries and/or commissions. They don’t possess money to be at their disposal. They are order executors. Their prospects are not burdened by prices, they getting for the orders management.

Remote traders use their own money. They have to pay the price out of their own pockets, unless they are getting a good one. Traders have to be much superior in skill to brokers since they independently take their own decisions, while the broker’s job is to follow the others’ orders.
Remote traders are supposed to support the market by way of taking its opposite side. As a rule, they are not at all crazy about any long-term transactions. Quite a few remote traders have been participants to our private training programs, and it is to be admitted that a 10-minute long transaction may seem quite a long-term one for some of them.

Think back to the fact that trends are built up of orders, delivered to the floor from outside, but not of long-term positions entered by remote traders. Since the traders’ job is to take the side opposite to the orders arriving from outside, they have no prospects of trading in between themselves. They follow your money. We are emphasizing again, that tick volume is our key to understanding what’s going on in the Forex Market. Remote traders do not contribute any significant volume to trading, which might result from dealing with similar traders on the floor. Trends emerge from incoming orders. That is why we are to be certain about when and in what amount the outer order is supplied to the floor. It is presented via a tick volume change”.

So, we, traders, turn out to be price locomotives, don’t we? And brokers on the floor just allocate and execute order, incoming from us, don’t they? And on April, 1, 2005 they all (meaning: we all) together decided to swivel the trend and to stay short against all the rules, news and common sense… I wonder if the scholar ashamed or not?

As regards the above quotation, I have chanced to hear a single argument in favor of Bill Williams (I guess you understood for what sake I’ve cited it in detail): it all pertains to the futures markets; we neither read nor use the above at Forex. Strange enough, these are the arguments of Williams’s advocates, but not of Williams himself.

This book is actually intended for both: futures markets and Forex Market. That’s why pictures taken from both the markets are so mixed up and the author never differentiates between the Technical Analysis methods thereof. Thus, either the author does not trace any difference between the two markets, or he is not eager to reveal it to the reader.
And neither in the foreword, nor in the remarks did Williams and his publishers refer to the fact that something of “Trading Chaos” is inapplicable to FOREX, and thus should not be made use of by a trader at FOREX.

I have repeatedly come through this peculiarity of Williams (correct specific case method definition being extended to a wider coordinates scale) and it actually induced me to write this book. In all and all, the methods and advice, absolutely true and correct for a PART of Forex Market are claimed by Williams to be universal for the WHOLE of Forex Market without being demonstrated where the above is effective and where it isn’t.

The same is being done by Williams’s opponents and advocates, who visualize the portion of Forex where his methods are operable only. As different from analysts and Williams’s bibliographers, TRADERS require much stronger to realize a demarcation with pro-Williams trading to the one side thereof and with counter-Williams trading to the other one.
Logically there comes a question: what might be added to Williams’s indicators in order to turn them effective at the point where they are presently ineffective (see details in chapter on the Williams Alligator).

And now we are getting back to the issue of who supplies traders with FOREX rates quotation, bearing in mind that it’s us, traders, who exercise rates movement in accordance with Williams’s standpoint. Millions of traders have actually been studying FOREX by virtue of the “Trading House” and it is really worth studying. This is one of the most interesting and instructive editions whose repeated reading each time brings about something new and useful.

However, in some passages it smells being custom tailored. Is Williams ignorant of the fact that there is no single FOREX exchange and there’s no single trading venue or floor? And that Pacific, Asian, European and American session classification is arbitrary?

Did You see currency rates move, while there’s a day off in the USA with the banks closed? So did I. So, who has made up his mind in the USA to trade on the floor on a day off?
Then, who prompts rates, who formulates trends and turns them with no objective reason for the rate to swivel and to rush in a direction, not being requisite at all?

Here is the answer, as provided by No. 11, 2002 “FOREX Profiteer” magazine’s article by Nadezhda Larina “Electronic Broker Systems at FOREX market”, http://www.ifin.ru/publications/read/351.stm), reading: ”… an FOREX dealing “Electronic Broking Service (EBS)” enjoys wide popularity with the extra-exchange inter-bank FOREX market. It has been developed by the Consortium of largest FOREX trading participant banks in association with “Quotron” informatics expert company and launched in 1993. Presently EBS incorporates 13 world’s largest market-maker banks, viz,: BN AMRO Bank, Bank of America, Barclays Capital, Citibank, Commerzbank, Credit Suisse First Boston, HSBC Bank PLC, J.P. Morgan Chase and Co.Lehman Brothers, Royal Bank of Scotland, S-E Banken, UBS AG along with Japanese Minex Corp., established by a Consortium of Japanese Banks in a joint manner with KDD Japanese telecommunications company and Dow Jones Telerate.
EBS offers a completely integrated range of dealing services for the professional inter-bank market, being a leading anonymous inter-bank FOREX trading electronic dealer. It is currently used by over 2500 dealers in 850 world banks and yields a trade turnover of about USD80 billion daily.
See there also: “Three greatest FOREX dealers - Citibank, J.P. Morgan Chase and Deutsche Bank, together with Reuters Group PLC) have started Atriax system in June, 2001.The latter terminated the operations in spring, 2002 after having failed to stand the competition.

Can you imagine a monster machine, capable of forcing three world’s largest banks - Citibank, J.P. Morgan Chase and Deutsche Bank to abandon their business plans! Or capable of reversing the EURUSD from 1.3660 to 1.1865 and thus instantaneously executing orders of all the world’s traders, going and standing short! And thus within, April-June, 2005, buying the EUR from traders at USD1.36, 1.29, 1.20, 1.19, etc.

Do you see the loss? Watching the EUR slip 1700 pts after having bought it at 1.36… But, possibly, there is no loss at all?

All of Larina’s basic provisions have actually found confirmation 2 years later in the UK “Financial Times” article by Jennifer Hughes: “A PC occupying trading floor” (see it on Financial Times 2004).
It underlines that during the precedent 2 years the Consortiums turnover has grown by extra daily USD20 billion thus currently stretching to USD100 billion, whereas the most prominent internet-based trading platforms ensure the average of USD15-20 billion daily turnover.
So, let’s jump to some conclusions:

1. The FOREX market is not the same as it used to be earlier, say 11 years ago.

2. There is in fact “a price fluctuation relative uniformity”, otherwise, practical quotations similarity with all the world’s brokers and traders.

3. The reason for the above uniformity has been honestly disclosed from technological standpoint, being the “flourish of electronic exchange technologies”.

4. There is no mention of other reasons for similar rates at absolutely different FOREX trading platforms the world over what links together the above platform and FOREX rates at them from financial, organizational, contractual viewpoints, etc).

5. The great interest is the remark from “Financial Times” reiterating the changes at FOREX during the latest years as narrated by an anonymous ex-dealer (?) who compares the FOREX market as of those 11 years ago: “It used to be a hell noisy and a hell splendid!”

In his opinion the market has lost a significant portion of its individuality with rise of technology. A very interesting phrase: “It used to be a hell splendid”. I would add:” It used to be a hell volatile”, with reference to the fact that the daily rates travel went as far 400 to 500 pips. And there’s nothing of the kind now.

6. Now, why has “The Financial Times” only interviewed the EBS Consortium official?
J. Jeffrey and the currency transactions department director, Fabian Shey Why wasn’t it desirous to interview the Reuters representatives (UK)? What’s the reason for such kind of disrespect to the compatriots?

Or were they hard to be contacted in London, where The Financial Times and Reuters HQs are located, moreover after maintaining that presently both, EBS Consortium and Reuters are dominant at the inter-bank market? Or The Financial Times possesses enough information on compatriots from Reuters to hold that the EBS Consortium official’s interview is sufficient without any Reuters?

7. Please, pay attention to the following from The Financial Times: “Anyway, other opinions are available. According to Justin Trenner, the current volume of on-line trading is turnover amounts to USD100 billion daily with the steep growth observed”. The Financial Times thus turns out to recognize its complete inability to trace not only FOREX cash flows, but even the trading volumes at those platforms.

The principal difference between stocks and FOREX is, by the way, readily apparent from the above. Those, writing about similar Fundamental and Technical Analysis methods for both the markets, are either ignorant as to fundamental difference of these markets, or they are deliberately swindling millions of traders.

When pointing out, that, besides the above Banks Consortium, there exist other electronic dealing facilities (e.g. Electronic Broker Service, Reuters Dealing 2000-2, etc.), N. Larina has overlooked their interrelations aspect. And there are a lot of questions: how and why there is coincidence of trends, corrections, historical highs and lows in the course of a single day, etc.

And what is the way to reconcile the statement on shunt operation of EBS and Reuters Dealing facilities with the information that Citibank, J.P. Morgan Chase and Deutsche Bank together with Reuters Group Plc have failed to stand the competition? Is it attributable to the fact that the Consortium has actually acquired Reuters, maintaining its formal sovereignty in order to support traders’ opinion that FOREX market is free and independent? If affirmative, then it’s fairly clear why the Consortium was not scared to buy the EUR on its dip from 1.36 to 1.1860, since there nothing to be afraid of with one’s knowledge of the point, below which one will not drop the rate as well as the point to stage the EUR rally to in several months with no one to interfere with Your so doing.

Hopefully, it’s now understandable who swivels trends at FOREX! The world’s largest banks Consortium does have power to reverse rates, whenever desirous, overthrowing fundamental laws, news releases, trends and common sense, just the way we witnessed on 01.04.2005 charts. But it’s not at all, traders, as claimed by Williams.

That’s why there is obvious ineffectiveness of the Williams’s Market Facilitation Index (MFI) based on fluctuations of traded volumes; to be more precise, sometimes the indicator tells the truth, whereas sometimes it lies in a barefaced manner.

The reasons are stated above: the banks Consortium pushes rates to where it needs, but not to where traders going into deals, thus accumulating the volumes, indicated on the screen. That’s why traders turn losers when making use of the Williams’s MFI indicator.

If you wish to be trained on Trading System Masterforex-V - one of new and most effective techniques of trade on Forex in the world visit http://www.masterforex-v.su/

Professional Trader from 2000 year.
President of Masterforex-V Trading Academy.

Author of Books:

1. Trade secrets by a professional trader or what B. Williams, A. Elder and J. Schwager not told about Forex to traders.

Forex Fundamental Analysis

Forex Fundamental Analysis

The two primary approaches of analyzing Forex markets are technical analysis and fundamental analysis. Fundamental analysis comprises the examination of economic indicators, asset markets and political considerations when evaluating a nation’s currency in terms of another. The focus of fundamental analysis lies on the economic, social and political forces that drive supply and demand. There is no single set of beliefs that guide forex fundamental analysis, yet most fundamental analysts look at various macroeconomic indicators such as economic growth rates, interest rates, inflation, and unemployment.

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Here we look at some of the major Forex fundamental factors that play a role in the movement of a currency:

Economic Indicators

Economic indicators are reports released by the government or a private organization that detail a country’s economic performance. These economic indicators can be released on a weekly basis, but the more common report is monthly. Indicators are based around a number of economical situations, of which the two primary factors are that of International trade and Interest. Subsidiary factors also include Consumer Price Index (CPI), Purchasing Managers Index (PMI), Durable goods orders, retail sales and Producer Price Index (PPI).

Currency’s Interest Rates

One of the major indicator factors, Interest rates, are a key economic function of any nation. Generally, when a country raises its interest rates, the country’s currency will strengthen in relation to other currencies as assets are shifted to gain a higher return. Interest rates hikes, however, are usually not good news for stock markets. This is due to the fact that many investors will withdraw money from a country’s stock market when there is a hike of interest rates.

International Trade

The trade balance portrays the net difference (over a period of time) between the imports and exports of a nation. A trade deficit can be an economic disaster for a government and a currency. A deficit may appear when a country is importing more than it is exporting, meaning that more money is leaving and less is coming in. In some ways, however, a trade deficit in and of itself is not necessarily a bad thing. A deficit is only negative if the deficit is greater than market expectations and therefore will trigger a negative price movement.

Futures Spread Trading

How professional traders optimize profits

Futures spread trading is probably the most profitable, yet safest way to trade futures. Almost every professional trader uses spreads to optimize his profits. Trading spreads offers many advantages which make it the perfect trading instrument, especially for beginners and traders with small accounts (less than $10,000).

The following example of a Soybean-Spread shows the advantages of futures spread trading:

Example: Long May Soybeans (SK3) and Short November Soybeans (SX3)

Four Advantages of Futures Spread Trading

Advantage 1: Easy to trade

Do you see how nicely this spread starts trending in mid February? Whether you are a beginner or an experienced trader, whether you use chart formations or indicators, the existence of a trend is obvious. (If you are looking for a concept of how to identify a trend, we strongly recommend visiting http://www.tradingeducators.com/?source=Tradejuicetrading_philosophy.htm). Spreads tend to trend much more dramatically than outright futures contracts. They trend without the interference and noise caused by computerized trading, scalpers, and market movers.

Advantage 2: Low Margin requirements

Many spreads have reduced margin requirements, which means that you can afford to put on more positions. While the margin on an outright futures position in corn is $540, a spread trade in corn requires only $135 — 25% as much. That’s a great advantage for traders with a small account. With a $10,000 trading account risking 8% of your account, you can enter 6 corn spreads, instead of only 1-2 outright corn futures trade. How’s that for leverage?

Advantage 3: Higher return on margin

Each point in the spread carries the same value ($50) as each point in the outright futures ($50). That means that on a 3 point favorable move in corn futures or a 3 point favorable move in the spread, you would earn $150. However, the difference in return on margin is extraordinary:
Corn futures - $150/$540 = 27.8% return
Corn spread - $150/$135 = 111% return
And keep in mind that you can trade 6 times as many spread contracts as you can outright futures contracts. In our example you would achieve a 24 times higher return on you margin.

Advantage 4: Low time requirements

You don’t have to watch a spread all day long. You do not need real-time data. The most effective way to trade spreads is using end-of-day data. Therefore, spread trading is the best way to trade if you do not want to watch or cannot watch your computer all day long (i.e. because you have a daytime job). And you can save all the money you would have had to spend for real-time data systems (up to $600 per month).
So where is the catch?
If futures spread trading is so fantastic, why does it seems that hardly anybody trades spreads? Well, it is not true that hardly anybody trades spreads: the professional traders do, every day. But either by accident or design, the whole truth of spread trading has been hidden from the public over the years.
The purpose of this website is to inform you about futures spread trading. In the following we will answer the four frequently asked questions:

• What is a spread?
• Why trade spreads?
• What can you expect when trading spreads?

What Is a Spread?

A spread is defined as the sale of one or more futures contracts and the purchase of one or more offsetting futures contracts. You can turn that around to state that a spread is the purchase of one or more futures contracts and the sale of one or more offsetting futures contracts. A spread is also created when a trader owns (is long) the physical vehicle and offsets by selling (going short) futures. Furthermore, a spread is defined as the purchase and sale of one or more offsetting futures contracts normally recognized as a spread by the fact that the two sides of the spread are actually related in some way. This explicitly excludes those exotic spreads put forth by some vendors, which are nothing more than computer generated coincidences which are not in any way related. Such exotic spreads as Long Bond futures and Short Bean Oil futures may show up as reliable computer generated spreads, but bean oil and bonds are not really related. Such spreads fall into the same category as believing the annual performance of the U.S. stock market is somehow related to the outcome of the Super Bowl sporting event. In any case, for tactical reasons in carrying out a particular strategy, you want to end up with:

• simultaneously long futures of one kind in one month, and short futures of the same kind in another month. (Intramarket Calendar Spread)
• simultaneously long futures of one kind, and short futures of another kind. (Intermarket Spread)
• long futures at one exchange, and short a related futures at another exchange. (Inter-exchange Spread)
• long an underlying physical commodity, and short a futures contract. (Hedge)
• long an underlying equity position, and short a futures contract. (Hedge)
• long financial instruments, and short financial futures. (Hedge)
• long a single stock futures and short a sector index.

The primary ways in which this can be accomplished are:

• Via an Intramarket spread.
• Via an Intermarket spread.
• Via an Inter-exchange spread.
• By ownership of the underlying and offsetting with a futures contract.

Intramarket Spreads

Officially, Intramarket spreads are created only as calendar spreads. You are long and short futures in the same market, but in different months. An example of an Intramarket spread is that you are Long July Corn and simultaneously Short December Corn.

Intermarket Spreads

An Intermarket spread can be accomplished by going long futures in one market, and short futures of the same month in another market. For example: Short May Wheat and Long May Soybeans.
Intermarket spreads can become calendar spreads by using long and short futures in different markets and in different months.

Inter-Exchange Spreads

A less commonly known method of creating spreads is via the use of contracts in similar markets, but on different exchanges. These spreads can be calendar spreads using different months, or they can be spreads in which the same month is used. Although the markets are similar, because the contracts occur on different exchanges they are able to be spread. An example of an Inter-exchange calendar spread would be simultaneously Long July Chicago Board of Trade (CBOT) Wheat, and Short an equal amount of May Kansas City Board of Trade (KCBOT) Wheat. An example of using the same month might be Long December CBOT Wheat and Short December KCBOT Wheat.

Why Spreads?

The rationale behind spread trading is one of the best-kept secrets of the insiders of the futures markets. While spreading is commonly done by the market "insiders," much effort is made to conceal this technique and all of its benefits from "outsiders," you and me. After all, why would the insiders want to give away their edge? By keeping us from knowing about spreading, they retain a distinct advantage.
Spreading is one of the most conservative forms of trading. It is much safer than the trading of outright (naked) futures contracts. Let’s take a quick look at some of the benefits of using spreads:

• Intramarket, and some Intermarket, spreads require considerably less margin, typically around 25% - 75% of the margin needed for outright futures positions.
• Intramarket, and some Intermarket, spreads offer a far greater return on investment than is possible with outright futures positions. Why? Because you are posting less margin for the same amount of possible return.
• Spreads, in general, trend more often than do outright futures.
• Spreads often trend when outright futures are flat.
• Spreads can be filtered by virtue of seasonality, backwardation, and carrying charge differentials, in addition to any other filters you might be using in your trading.
• Spreads can be used to create partial futures positions. In fact, virtually anything that can be done with options on futures can be accomplished via spread trading.
• Spreads allow you to take less risk than is available with outright futures positions. The amount of risk between two Intramarket futures positions is usually less than the risk in an outright futures position. The risk between owning the underlying and holding a futures contract involves the least risk of all. Spreads make it possible to hedge any position you might have in the market. Whether you are hedging between physical ownership and futures, or between two futures positions, the risk is lower than that of outright futures. In that sense, every spread is a hedge.
• Spread order entry enables you to enter or exit a trade using an actual spread order, or by independently entering each side of the spread (legging in/out).
• Spreads are one of the few ways to obtain decent fills by legging in/out during the market Closing.
• Live data is not needed for spread trading, saving you $$ in exchange fees.
• You will not be the victim of stop running when using Intramarket spreads.

What Can You Expect?

Here is an example of what you can expect from Intramarket spread trading. We think you may be pleasantly surprised!!

This spread was entered not only on the basis of seasonality, but also by virtue of the formation known as a Ross hook (Rh). The spread moved from -69.0 to -7.5 = $3,075 per contract. The margin required to put on this spread was only $608, thus the return on margin is more than 500%.

Here is an example of an Intermarket spread. Look at the the following chart: Would you want to have been long live cattle from December until February?

But, what about a spread between Live Cattle and Feeder Cattle?

The spread moved from -10,200 to -7,200 = $3,000 per contract. The margin required to put on this spread was only $540. The return on margin is more than 550%.

Lastly, we show you another intermarket spread. This one was made between Euro and British Pound. Although you might have made money on a Euro trade, you would have suffered from serious whipsaw during the entire length of the trade.

What about a spread between the Euro and the British Pound?

You didn’t have to be in this spread for very long in order to take some fat profits: During February the spread moved from $32,500 to $36,187.50 = $3,687.50 per contract.

How do I start trading spreads?

We can barely scratch the surface of what is available in the almost lost art of spread trading. There are times when seasonal spreads, coupled with chart formations, make a lot of sense. Backwardation in any market often provides an excellent signal for entry into a spread.

Risk Management In Forex Trading

Forex trading is classified as investments that are high risk. This means that the forex trading has classified high risk. One of the highest among other financial investment instruments. The risk factor that you need to know before the start of forex trading: Possible loss of funds 100% Flow of funds very quickly (very liquid) No method of trading that can guarantee you 100% sure destiny. There are many methods of trading is good but there is no one who can Needless to ensure 100% certainty. Forex trading is not a "quick rich scheme" that can make you suddenly rich without working hard. There is no success without work hard. Working hard is part of their experienced financial success in life. Including their successful through forex trading. Needed to work hard to learn the behavior of market analysis and so we can guess the direction of price movements accurately. Likewise needed mental extra trading when the results are not in accordance with our expect. Ask traders on the trading-success that you know whether they had experienced a fall in the wake of trading them. And the answer is almost certainly "yes". The success is only provided for those who would try to learn and continuously improve themselves. I related to the risk that must be faced if we want to start investment in forex, required special tips to decrease, or even to reverse our position that was minus a positive return and benefit.

Money Can’t Buy Success

Money Can’t Buy Success

By now maybe you already spend few hundred or even thousand of dollars trying to hunt some holy grail of Trading, a perfect system that always win never loss through some secret e-Book, ultimate system or whatever that guys trying to sell you methods that will make rich. Most of these guys have never traded in their lives and rely on hyped exaggerated copy to sell their systems !

In fact you can’t buy success, success come from experience, blood, tears and pain. You know that old volks say about 95% of traders who lose are true because they believe that they can can predict the market and they wrong! This is a common myth and the bulk of novice traders think they have to predict where prices are going to succeed. In forex trading if you predict you are relying on hope or making a gambling decission, guess and the market will kill you. Never predict!
Don’t believe the scientific methods sold on the net because they simply don’t work, why they sell it if that a working system instead of using themself? If markets were mathematical scientific, we would all know the answer in advance and there would be no market. Trading to much also an element of fail, many traders simply think if their not trading their missing something but is not true. If you spend 10 hours a day or ten minutes, it doesn’t matter so long as your trading system are accurate.

The other common mistake of newbie trader was they believe that More Indicators equal with More Profits. The best forex trading systems are simple and robust, where a complicated trading system has more elements to break and it will fail. Keep in mind all the best forex trading system are simple, NOT Complicated