Commodity Futures Trader

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Almost 90% of the investors enter currency markets as short term speculators. Most of the investors look for quick capital gains in forex. Many start forex day trading as a speculative venture. If you have made the positive decision to start forex trading, your first step should be choosing the right forex broker. This is very important. The right choice of a forex broker will greatly influence your success as a forex trader.

Forex trading is hot right now. It is being called the Recession Proof Business of 21st Century. The market is overcrowded with companies and banks offering online forex brokerage services. Internet has opened the forex markets to individual retail traders and small investors. It will not be easy for you to make the right choice of a forex broker. You need a certain set of criteria. These criteria will mostly depend on your preferences, interests and means as an individual trader and will depend on your trading tactics and strategies.

You may ask, what is the best way to choose the right broker? You should compose a list of questions to ask the forex broker before making a final decision. The following are some of the suggested questions that you should ask. You should ask these questions before making a final decision.

Gold is the ultimate global currency. At one time US Dollar used to be pegged to gold. But with the collapse of the Bretton Woods System, US Dollar was unpegged from gold.

Now US Dollar is only backed by the full faith and credit of the US Government. Like the present financial crisis when the global economy is in recession, many investors are trying to take refuge in gold as the ultimate safe haven of their wealth from financial turmoil. Many countries are also purchasing gold in the open markets.

The Australian Dollar (AUD) is known for its strong correlation with gold prices among the different currencies in the world. This correlation is due to fact that Australia has gold deposits and exports gold. On the other hand, USD has an inverse relationship with gold prices. Gold prices rise, USD falls in value. This causes the currency pair AUD/USD to appreciate in value when gold prices rise.

The opposite of this is also true. When USD gains value, gold usually loses value. The pair AUD/USD depreciates as a result. So when gold prices are rising, we can trade AUD/USD currency pair long. Likewise, when gold falls in value, we can trade AUD/USD short. This relationship may be due to the fact that gold is considered to be the ultimate safe haven of their wealth by investors in times of financial crisis. This relationship provides us with a method that we can use to take advantage of the fundamental factors that influence the currency markets.

Develop trading discipline in yourself if you want to become a successful trader in the long run. In a trading session, lets you come to a point in your market analysis when you have no confidence on the accurate direction of the market forecast. Always remember, a lost opportunity is better than lost capital. Choose not to trade.

You should wait for the market conditions to become clearer before you enter a trade. You should increase the probability of success by trading when the trade setups are strong and risk to reward ratio is not more than 1:2. This is far more important in forex than in stock markets. The forex markets move a lot as compared to the stock markets.

High leverage gives you the opportunity to make a lot more money much faster. If you don not clearly see an opportunity, try to sit on the sidelines and wait for the market conditions to become clearer. Let the market come to you. Learn to be a patient trader.

You should understand that leverage is a wonderful money making tool. It is the key to making money in the currency markets as no other markets allow high leverage that this market allows. A leverage of 100:1 means that for a $1000 deposit, you can trade $100,000. This huge amount of leverage gives you the opportunity to make the kind of returns that you want.

Moving Average Convergence Divergence (MACD pronounced Mac Dee) is the difference between the 26 day and 12 day exponential moving averages. A 9 day exponential moving average called the signal line or a trigger line is plotted on top of MACD to show buy/sell opportunities.

You can use MACD in three ways: Crossover, overbought/oversold conditions and divergences. In wide swinging markets, MACD proves most effective. When MACD falls below the signal line, the basic rule is to sell. Similarly, when MACD rises above the signal line and cuts it from below, it is a buy signal.

MACD is also very useful in telling whether the market is overbought or oversold. When the shorter moving average pulls away from the longer moving average, it is likely the price has overextended itself and it will comeback to the realistic levels.

An indication that an end to the current trend may occur soon is when MACD diverges from the currency pair. A bullish divergence occurs when the MACD is making new highs but the currency price fails to reach those highs and a bearish divergence occurs when MACD is making new lows and the currency price fails to reach those lows.

Momentum is an oscillator that indicates the rate of price change not the actual price level. This oscillator is the net difference between the currency pair closing price and the oldest closing price from the predetermined period. The signal is triggered when the oscillator crosses the zero line. The shorter the number of days included in the calculations, the more responsive the momentum oscillator will be to the short term price fluctuations.