Forex Strategies

I chuckle as I write the title for this commentary for the very simple reason that it is a line heard so often on the sales and trading desks on Wall Street. We can get a sample of “what the smart money is thinking and doing” from a very recent Bloomberg Poll. Be mindful that those polled represent a global random sampling of 1,263 Bloomberg subscribers. Would you like to know what they think of the following? 1. Which national markets will offer investors the BEST and WORST opportunities over the next year? 2. What asset class will offer the BEST and WORST RETURNS over the next year?  3. What do those polled think of their regional economy, the U.S. economy, and the global economy? 4. Where will the U.S. dollar stand relative to the Euro three months from now? 5. How do these global investors intend on shifting their exposures across asset classes over the next six months? (I find this question to be particular...

Spread betting is a risky game of trading in which you can lose more than you have in your account. That's because of leverage. Every time you buy or sell a market, you just need a small fraction of your total trade – a margin, which can be as low as 1-2%. If the market goes against you quickly, then you could be in trouble. That's what most people think – but are they correct? Spread betting has in fact some risks, and losing more than what you have in your account is a real possibility, but depending on your provider and on the type of trades you carry, it can be a really low one. Before going broke, there is a margin call trigger, in which most providers will automatically start closing positions you have in your account until the margin is again satisfied.

The pictures and stories from Japan have shocked us all. The human aspect of this country’s struggle to cope with the earthquake and tsunami tugs at our hearts. The same applies to those in Middle Eastern countries crying out for freedom and democracy only to be responded to with bullets and bombs. While the human factor is not to be taken lightly, the economic consequences are making the most headlines. These headlines helped to bring back some market volatility that reminded me somewhat of 2008. The markets pulled back and rebounded from the news in Japan, Egypt and Libya relatively quickly. However, the indicators that track investor confidence tell us that investors are becoming more nervous about the future. What is the individual investor to do in these volatile times? I would urge you to do nothing IF your portfolio is properly allocated. Why? Investors tend to do poorly when they react to what the market does instead of preparing...

I’m sure everyone has been presented with the following logic: put in a ‘stop-loss’ at some arbitrary amount, say losing 1%. Then, your payoff distribution is tilted towards infinity, as shown above. It’s like the idea of going to Vegas, and saying you will stop when you lose $500, so you think that you still have an equal chance of generating those +$500 and up numbers, and the bad outcomes are just truncated at -$500. Alas, it doesn’t work like the graphs above. Instead, it generates the graph below, with a lot of probability mass at the stop-loss point:

Mark Moskowitz discusses his theory behind scaling and sizing when it comes to establishing trading positions  

Momentum trader extraordinaire, David "Shine" Shein, introduces you to his world of high velocity trading  

When compared to trading in other financial instruments such as equities, trading in Forex has some distinct advantages. They include: • The Forex market is the largest financial market and thus no single person or entity has the ability to corner or dominate the market. • The Forex market has an average of $3.2 trillion dollars per day. With such a large volume, no one can hope to control the market for an extended period of time. • Taking charge of your own finances. You will be able to harvest better returns than those of mutual funds or hedge funds. • The initial capital outlay is low when compared to equity trading. • The Forex markets moves in patterns. Thus with technical analysis, one can actually predict the trends in the Forex market. • There is a high level of leverage to utilize when it comes to Forex trading unlike the equity market. • With 24 hours trading and its high trading volume, the Forex market is...