I agree with your way of thinking. I am not quite sure that ECB will raise the rates. It might be a small chance that they will wait for the move a little longer. The surveys are predicting a raise, therefore I might be wrong.

I have been trading for about one year now, but have not had any major breakthrough. Can somebody assist me in how to go about this trading of a thing? I have lost a lot of money.

Premium

First thing I would recommend is to stop trading live. Use a demo and develop a strategy that generates consistent returns. If you can't stay out of the market, you should at least significantly reduce your account size (just take it out otherwise you will be tempted).

Being successful at trading (just like anything else) takes hard work and the correct mindset. I recommend educating yourself with as much literature as possible and then cultivate experience when you know how to respond.

Always develop your own strategy (one that has proven itself to work after a decent trial period) and use others' analysis to merely confirm or perhaps give you reason to confirm your own signal.

Not only should you have a strategy though, you should also put into practice good risk management and never deviate from it. This means preset rules for position sizing, knowing stops and hard targets before entering the trade and ensuring you aren't doubling exposure on any single currency among other things.

Anyone have anything to add?

Yeah, on the one hand, the EZ seems to be getting weaker, and today the French got hit by a bad consumer confidence report... so it seems (as this article points out: http://www.dailyfx.com/story/bio2/Eu...471718278.html) that Europe really isn't in a position to raise rates. That being said, I (and almost everyone else out there) think they will, for two main reasons:

1. Trichet & Co. are known for being hawkish... while the US cut rates over the past year, they haven't. And while their growth was able to justify them not cutting rates over the past year, growth is slowing. So, the other reason that I can think of for why they will raise rates now is
2. Hubris. The Fed bit the bullet yesterday and left rates alone, even though I'm pretty sure that they would have loved to hike them. However, the ECB basically promised to raise rates a few weeks ago, and even though a lot has changed between now and then (economic data from the EZ has been pretty bad the past few weeks), I think on a psychological level, Trichet & Co. don't want to be seen as going back on their word. I know we would all like to think that these powerful individuals are immune to letting pride get in the way, but no central banker wants to be seen as two-faced.

I mean, I was a psychology major back in the day, so maybe it's just me, but what do you all think?

It has nothing to do with psychology, more so the guidelines of the Maastricht Treaty. In case you forgot that means that inflation must be below 2 percent. Economic indicators in the EZ are deteriorating but that doesn’t change the inflation mandate. The Bundesbank made it a priority that the ECB not follow its Southern neighbors into promoting growth at the expense of future inflationary expectations. The ECB is perceived to an inflation fighter and they will guard that reputation at all costs. The short term benefit of moderate growth is out weighed by the future cost of inflation. So by simple cost benefit analysis, the ECB is much more prudent than the Fed. Whether you think the Fed made the right decision or not, you can not disregard that they are perceived to be dovish. The ECB must not and will not let short term benefits of growth outweigh the long term destruction of inflation. Oh… if only our central bank was prudent like the ECB.

[quote=John Kicklighter;163222]

Always develop your own strategy (one that has proven itself to work after a decent trial period)





John:

How long do you consider a "decent trial period" to be?

Thank you.


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Premium, you are not the only one that is having hard time trading. As John said minimize the account size. I don’t know if you know that FCXM has a team that develop strategies to trade and manage money accounts . You might give them some funds and let them trade for you until you comfortable with your own strategies. Talk to sale people at FXCM and they will give you some advice. Its much better trust me.
Good luck!

[quote=winterwhite;163571]It depends upon the person, strategy and size of the account. A longer trial never hurts. I usually test for 3 months before applying a change to my existing strategies, longer if it is a brand new one. Overall though, it is more important to see number of trades rather than length of time. If you test for three months and only have five traders - that is probably not enough. One month and a hundred trades on the other hand would be closer to sufficient.

People should also remember that a trial period of three months probably won't cover most market conditions (high risk with high volatility, small range bound with low volatility, wide range with high volatility, trend with low volatility, etc.). Most strategies are not universal, and will do better in certain conditions. This is why its important to always test the parameters of your strategy even when it is running live after a trial period.

You may be right about the Maastricht, but rememeber that it's only inflation targeting, and inflation is not the only thing that the ECB has to worry about. It's not as though any lapse where inflation gets above 2% will lead to the guillotining of Trichet and his buddies (then again, this is Europe so who knows). But look, inflation is way over 2% now (http://www.rte.ie/business/2008/0630/eurozone.html), and all that it looks like the ECB will do is one rate hike.

Just one small hike wont in of itself cut inflation by 50%. What I'm saying is this, you're right, because of the Maastricht, inflation is their top concern, but it can not, and is not, their only focus. If inflation was their only worry, they would have a series of rate hikes, which everyone seems to be saying is not going to happen.

So perhaps I'm off with my psychology theory (I hope I am). But don't think that inflation or guillotines are the only things on Trichet's mind...

The new DailyFX+ Market Conditions report is now up:

http://www.dailyfx.com/story/strateg...857539466.html

as always, feel free to leave any questions here and I will answer them as soon as I see them.

Why is the EURGBP so unvolatile? Yes, i know that unvolatile is now a word, and yes, maybe i am just looking at the pair now that its in a rangebound area, but still... is there something special about the EURGBP that makes it move less than most other pairs?? Thanks

Unvolatile is definitely not a word, but I can tell you why the EURGBP tends to move in fairly tight ranges. If we can think of how the USDCAD has historically moved, it has typically moved in a range because of the close economic and trading links between the US and the Canadian economy. The same goes for the EURGBP.

The United Kingdom is very much linked to the Euro Zone as a key trade partner; a cursory look at the CIA Factbook shows that trade with the EU accounts for over 50 percent of all imports and exports. It is thus accurate to say that their economies are very much linked, and many factors affecting exchange rates such as interest rates and current account balances would affect them similarly.

Of course, this is not always the case, and diverging interest rate expectations played a big part in the EURGBP's rally to record-highs.

Hi David,
What is the main sentiment indicator in currency trading. I understand that can be few. It would be very interesting for me to refresh them.

First off, my post yesterday had a typo... I meant to write "not a word" as opposed to "now a word".

Secondly, what the $%&# happened today with the Euro and the USD? I mean, the EUR gets good news, and starts to tank against the USD and the GBP... the USD gets bad news, and has a great day against the EUR and the GBP. Any ideas how that happened?

I understand that what happens in the FX market is not always what one would expect from a news release, but today just baffles me.

Hey Sarah,

It was an unusual reaction. Putting on my fundamental hat, I would say that it wasn't an unreasonable one though.

Everything else being the same, a rate hike from the ECB and a hearty NFP cut would be a direct driver for EURUSD upside. However, if we consider that the hike was more than expected (the euro had been pushed up to the realm where ppl seemed to be expecting a hike and commentary suggesting further near-term hikes) and the NFPs were nearly inline with economists forecasts (and the market was likely expecting worse after the ADP printed -79K reading - and it was overstating the BLS reading for 10 or 11 months straight an an average of 75k), then these numbers were actually disappointing.

Absolute numbers from these indicators won't drive the market. Everything has to be taken into context, and that's what the big traders did.