Forex Book: FOREX TRADING FOR MAXIMUM PROFIT

Title: 

ForeX Trading for Maximum Profit: The Best Kept Secret Off Wall Street

Author: 

Raghee Horner

Synopsis: 

Take an in-depth, how-to look at Forex trading using the methods, analysis, and insights of a renowned trader, Raghee Horner. As the fate of the dollar against foreign currency generates both anxiety and opportunities, currency trading has been drawing much interest and a growing following among traders in the United States. The Forex market is particularly attractive because it trades with no gaps and has unlimited guaranteed stop-losses.

The liquidity of the Forex market and worldwide participation makes for more reliable and longer lasting trends as well. Raghee Horner, legendary not only as a top Forex trader but as a master teacher of trading systems and techniques, draws on her winning tools and methods, including classic charting techniques, in this book. She'll enable you, regardless of your skill level as a trader or investor, to understand how the Forex operates and lays out a blueprint for getting starting in this little-understood but high-potential trading vehicle.

Technical Specifications

• Hardcover: 216 pages
• Publisher: Wiley
• ISBN-10: 0471710326
• Product Dimensions: 9.4 x 7.4 x 0.9 inches

About The Author

Raghee is a private trader, founder of EZ2Trade Software, entrepreneur, and author. She is a regular contributor at a number of sites including FXStreet, Trading Markets, eSignal and a featured speaker at the Forex and Traders Expos.

She is Autochartist Chief Market Analyst.

Her commentary and analysis is seen daily by thousands of traders at gotforex.com, forextraderdaily.com, and her personal blog ragheehorner.com. She has written articles for Technical Analysis of Stocks and Commodities, Currency Trader, and Traders Journal magazine. Raghee trades from her home in Coral Springs, FL. where she lives with her husband, Herb, and their two dogs.

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Getting Started In Forex

Over a trillion dollars per day is exchanged on the foreign currency market. The Forex market is used by smart traders for speculation, hedging and long-term profit taking.

You can trade in the foreign currency market. It is available to anyone and everyone.

Take our Forex Essentials course and follow our analysis to get started in this exciting market.

Overview: Learning The Forex With Us

There are a couple things you need to know about this course and our educational philosophy. We believe you will learn best when there is a mix of media in a course. That's why every lesson you'll find in Forex Essentials contains the following:

• Written Text 
• Video Demonstration 
• Examples

The combination of these items will provide for you a rich learning experience where the principles will be learned, re-inforced and tested, meaning you really learn the stuff.

This course is also meant to be used as a reference guide. You can come back to it and re-read. Watch the videos again after you've started applying a principle. You will find the video demonstrations to be even more valuable as you have a better understanding, and some experience in the market.

A note to more experienced traders: You will likely still find great benefit in this course. The way PFX approaches and teaches the forex is very different from anything you've seen. We also invite you to submit feedback and offer suggestions for future courses. Simply email feedback@learningmarkets.com

What Every Forex Trader Needs To Know

There are a lot of things that a new trader needs to know about the forex. This section is a summary of some of this information and a preview of the things you will learn through the rest of the course. Feeling comfortable with this information is important before you begin trading and in most cases it isn’t difficult to understand. If you are properly armed and willing to hold realistic expectations and put in some work you can find yourself Profiting With Forex in no time.

You can trade in the foreign currency market. It is available to anyone and everyone.

You don’t have to be a mathematical genius to trade in the forex market.

You don’t have to be an economist to trade in the forex market.

You simply have to learn what trading signals to watch for and how to respond when you see those signals.

First, you have to learn and understand the basics so you have a strong foundation to stand on in your trading.

While learning and understanding this material and building a strong foundation is important, you must remember that this is only your first step. You can only learn so much from this material. To truly become a successful forex trader, you need to take what you learn here and start applying it in the live market.

Think of this part of the course as Driver’s Ed. When you learn to drive, you go to class to learn about traffic rules, how your car works and what you are supposed to do as a driver. That is the first step you take when learning how to drive. However, there are two more steps you have to take before you can get your driver’s license: driving on the range and driving on the street with an instructor.

Trading in a forex demo account (a working practice account that is funded with paper, or pretend, money) is the equivalent of driving on the range when you are learning how to drive. You are in the car and you have to make live decisions, but you are operating in a controlled environment.

Trading in a live forex account is the equivalent of driving on the street when you are learning to drive.

We will be there along side of you to give you pointers and help you make decisions when you are driving on the range (trading in your demo account) and driving on the street (trading in your live account), but you will be behind the wheel. You will be making the decisions and seeing how those decisions play out in real life.

Once you’ve taken these three steps, you are ready to go out and trade on your own.

Learn How The Market Works And You Can Trade It

The first thing you need to learn about as a forex trader is your trading environment. Whether you are a brand new trader or you have had experience trading in other markets—like the stock market—you need to understand the unique characteristics of the forex market so you can be properly equipped for success.

You have access to leverage in the forex market. Leverage gives you the ability to trade a position larger than the amount of money in your account. For example, using leverage, you could place a $100,000 trade by only using $1,000 of your own money in your account.

Word of caution: leverage is a tremendous tool for traders. It allows you to make more money on trades than you normally would if you were using only your own money. However, it also allows you to lose more money on trades than you normally would if you were using only your own money.

When you trade with leverage, you have to post margin. Margin is the amount of money you have to set aside in your account when you enter a trade. For example, if you are using 100:1 leverage and you buy 1 mini lot—which is worth $10,000—you must set aside $100 as margin ($10,000 ÷ 100 = $100).

Currencies are grouped in pairs for trading.

When you trade in the stock market, you buy or sell the stock of one company. When you trade in the forex market, you buy or sell a currency pair (two currencies put together).

Exotic pairs:

(These are some other lesser-traded pairs that contain the USD and a currency from a small and/or emerging economy) 

USD/SEK (U.S. dollar / Swedish krone)

USD/NOK (U.S. dollar / Norwegian krone)

USD/DKK (U.S. dollar / Danish krone)

USD/HKD (U.S. dollar / Hong Kong dollar)

USD/ZAR (U.S. dollar / South African rand)

USD/THB (U.S. dollar / Thai baht)

USD/SGD (U.S. dollar / Singapore dollar)

USD/MXN (U.S. dollar / Mexican peso)

As you begin investing in the forex market, you should focus on the major pairs and some of the crosses. Spreads (the difference between the price you can buy and the price you can sell the currency for) are tighter, liquidity is higher and information is more readily available for the major pairs—which makes it easier for you to be profitable trading them. As you progress, you can consider investing in some of the exotic pairs.

Imagine each pairing as a tug-o-war, the stronger currency pulls the price of the currency pair in its direction.

One thing causes currency pairs to become stronger or weaker: people (buyers and sellers). Remember that it is ultimately people who move this market.

What are these people watching?

You should watch the same things.

Final Thoughts

You have to be willing to take what the market gives you. If you try to fight the market, you will lose every time.

Currency pairs can move up, down or sideways. You should be prepared to know how to respond in each scenario.

The past cannot tell you what will happen in the future. However, you can find recurring patterns that can put you in position to benefit from future movements. This course will help you start doing that.

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Christmas shopping season: So−so in the US, ho−ho in Germany

• Black Friday. The day after Thanksgiving traditionally marks the beginning of the holiday shopping season in the US. Many retailers generate one quarter or more of their annual sales in the final weeks of the year.
• Hope. Now that the US economy has emerged from the Great Recession, the National Retail Federation expects satisfactory sales growth again; but at 2¼% it will probably remain well shy of the holiday shopping seasons of the pre-crisis years. Consumers’ propensity to spend remains muted in light of the still miserable job situation (page 2-5 & chart below).
• US. We do not expect private consumption, which is so important for the US economy, to take off in the coming year either. There will be a headwind from the again increasingly restrictive fiscal policy – even if the Bush tax cuts are extended. The economy will, however, continue to recover, albeit at a still very moderate pace.
• Germany. The picture is different in Germany. Industry representatives are betting on a glittering, even "spectacular" Christmas shopping season – the best in five years! While there may be elements of hope involved here, sentiment is good, and the propensity to buy remains high thanks to falling unemployment and rising income expectations.
• Eurozone. The German upswing is not only robust, it is also gaining in breadth. Domestic demand is increasingly joining exports as a driver of growth. The picture is similar in France, with both countries lifting EMUwide growth (page 6). Therefore, we will likely see the ECB forge ahead with its exit strategy (page 7-8). Nevertheless, growth divergences within the EMU are intensifying.
• Further topics:
  – Data outlook: EMU economic climate continues to improve;
  US purchasing managers more reserved again (page 9).
  – Market outlook: EUR to remain under pressure (page 17).

US: Cautious Optimism Ahead Of The Holiday Shopping Season

• Today is “Black Friday“, which traditionally marks the beginning of the holiday shopping season in the US. Many retailers generate roughly one quarter of their annual sales in November and December.
• Surveys indicate that retailers are cautiously optimistic for this year’s holiday season. The National Retail Federation, for example, expects sales to increase by 2.3%. That would be the strongest gain since the beginning of the Great Recession.
• After private consumption in 3Q already posted its strongest increase in four years, household spending is likely to rise another 2¼ to 2½% in the current quarter. In September, real consumption expenditures already exceeded again their pre-crisis peak.
• At the beginning of the coming year, the dynamic is, however, likely to slow again. The reason for this is a more restrictive fiscal policy. This holds true even if all the Bush tax cuts were to be extended.

The Importance Of The Holiday Shopping Season For Retailers

Today is Black Friday. The day after Thanksgiving traditionally marks the ceremonial kickoff of the holiday shopping season. It is not uncommon for department stores to already open their doors shortly after midnight. Lured by amazing deals, many customers from Los Angeles to New York can hardly wait for the stores to open. The term "Black Friday" refers to the beginning of the period in which retailers go from being “in the red” to being “in the black”, i.e. to making a profit. That reveals how important the holiday shopping season is for many retailers.

Retailers that rely most heavily on the holiday shopping season (category GAFO+, cf. box) report substantially higher sales in November and December than in the rest of the year. Overall, they post close to one quarter of their total annual sales in November and December (cf. chart in the next column). In December, sales at clothing and accessories stores or sporting goods, hobby, book and music stores are even about twice as high as the average for the months of January through October (cf. table in the following box). A glance at retailers’ profits, too, reveals the importance of the holiday shopping for the industry. At the end of the year, after-tax profits are in many cases 40% to 60% above the level of the first three quarters.

Two of the few exceptions to this rule occurred in 2007 and 2008, when the beginning of the financial market crisis (mid-2007) and the bankruptcy of Lehman Brothers (autumn 2008) took a toll on consumer spending, and thus on retailers’ profits (cf. chart next page). But since the US economy has emerged from the most severe recession since WW II, retailers are now in the black again. After-tax profits in 1H 2010 were even the highest in three years.

Cautious Optimism

Surveys for the current year point to a satisfactory holiday shopping season. The National Retail Federation (NRF), for example, expects sales to increase by 2.3% yoy (cf. chart). While this outlook is still much more cautious than during the pre-crisis period (1995-2007), when retailers had on average projected an increase of 5%, it is slightly more positive than in 2008 (+2.2%) and 2009 (-1.0%).

If the NRF projections were to prove accurate, holiday sales would again rise to USD 447bn in the current year. But while that would be the highest level in two years, it would still be 1¼% below the pre-crisis peak – even in nominal terms (cf. chart next column).

The risk to this forecast is probably balanced. On the one hand, retail sales rose solidly in the first ten months of this year (+5% yoy). The historical correlation shown in the following chart suggests that after such a gain between January and October sales in November and December should increase by 3½% rather than by 2¼%, as projected by the NRF.

On the other hand, a representative survey conducted by Gallup Poll shows that the majority of households (52%) is not planning to increase holiday spending this year. Another 34% of respondents stated that they intend to spend less on Christmas gifts than in the previous year, while only 12% said they will spend more (cf. chart next page).

Risk For The Labor Market

To cope with the sharply rising demand during the holiday shopping season, retailers hire a huge number of temporary workers between October and December. In the last twelve years, these holiday hires averaged more than half a million per year (cf. chart).

Accordingly, the seasonal factors "expect" employment to increase strongly in November and December. Since most hires already take place in November, roughly 360k jobs are subtracted here for the seasonal adjustment; followed by another 180k in December (cf. table next column). If actual hires were to lag behind the normal pattern, the seasonally adjusted employment numbers will be correspondingly lower. That was, e.g., the case in 2008.

As the recession was just starting to escalate at that time (after the collapse of Lehman Brothers), retailers hired only 285k additional sales personnel in November and December 2008 and, therefore, much fewer than expected by the seasonal factors. As a result, seasonally adjusted employment in the retail sector fell by 215k in late 2008. In the past year, seasonally adjusted retail employment declined again at the end of the year, even though retailers had hired more than 450k additional employees in November and December.

Solid Start To The Fourth Quarter...

As previously mentioned, consumption expenditures recovered solidly in the run-up to the holiday shopping season. In the third quarter, private consumption already posted its strongest gain in four years (+2.8%). And the start to the current quarter was solid as well, as real household expenditures rose another 0.3% in October. Already in September, real consumer expenditures exceeded again their pre-crisis peak and marked a new all-time high (cf. chart).

Consumer spending is likely to expand slightly more slowly in the current quarter than it did in late summer. But if the expectations for moderate sales growth during the holiday shopping season are not disappointed, real consumption expenditures should increase another 2¼%-2½% in 4Q.

... But Fiscal Policy Will Be A Drag At The Beginning Of 2011

In the first half of 2011, however, consumer spending is likely to lose some momentum again. The main reason for this is a more restrictive fiscal policy. Because even if all the Bush tax cuts were to be extended (which at the moment appears to be the most likely outcome), some fiscal measures that had supported disposable incomes in past months and quarters are set to expire at the end of this year. Most important in this context is probably the end of the Making Work Pay tax credit. This tax provision, which was passed at the beginning of 2009 as part of the American Recovery and Reinvestment Act (ARRA), has reduced the first USD 400 of tax liability for taxpayers making less than USD 75,000. If the program were to expire as planned, that alone would reduce households’ disposable income by USD 60bn, and lower the increase in consumption expenditures in 1H 2011 by about one percentage point. Overall, the drag from all expiring ARRA provisions on 1H GDP growth should be about 1½ to 2 percentage points (cf. chart next column).

An additional question mark is the future of Emergency Unemployment Compensation, as the current law is set to expire at the end of November. If Congress fails to agree on an extension, federal unemployment benefits would – according to calculations of the Congressional Budget Office (CBO) – decline from USD 160bn in the current year to USD 93bn in 2011.1 Apart from the serious ramifications for the families affected, the concomitant decline in disposable income would be an additional strain on consumer spending at the beginning of next year.

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Ireland under huge pressure

Forex Special :-
                            

Summary

• Ireland under huge pressure. 
• Introduction of senior debt burden sharing?
• Covered bonds taking a bigger chunk of wholesale funding.
• DONG Energy extends tender offer.

Market Comment

What a setback! In contrast to expectations, it took only a few minutes for investors to digest and ignore the announcement on Monday of the EU/IMF bail-out of Ireland before jittery markets took PIIGS spreads soaring again. In beautifully rounded numbers, currently Italy trades around 200 basis points, Spain 300bp, Portugal close to 500bp, Ireland close to a record-high of 600bp and Greece around 1,000bp. 

Now the big question is whether market participants will find the new Irish austerity measures credible, taking into consideration the fear surrounding the distressed banking sector. More dramatic measures in this respect are likely to be announced in the coming days. In context, S&P downgraded the sovereign rating of Ireland on Tuesday by two notches to ‘A’ with Negative Watch due to the troubled banking system and the need for further capital injections and supply of liquidity. `

According to www.Irishtimes.com, The EU/IMF delegation currently visiting Ireland is looking for a viable solution to include senior debt burden sharing in the rescue scheme for Ireland. The plan should be announced at the weekend, according to the newspaper. In order to avoid court objections to the proposal, the negotiators are seeking legal advice. Two different approaches are on the table: one for bank bonds to be converted to equity (bail-in) and one for bondholders to inject new capital or face haircuts. 

Whether this is feasible or not is difficult to predict, but the whole manoeuvre is having repercussions for both Irish debt and the broader financial bond markets, particularly the sub-debt markets. Anglo-Irish senior debt is down some four to seven full figures on the news and financial sub spreads have been hit hard.

Focus is now on the next peripheral in line – Portugal. Even if the current pressure on Portugal were to lead to unsustainable levels, we believe the EU would be able to cope with this. A stronger test for the eurozone would arise should Spain (due to the size of the economy) be the next PIIGS country to fall victim to heavy market turbulence, which we believe is likely. Consequently, we believe the ECB needs to reconsider its exit strategy from emergency measures, especially the withdrawal of bank liquidity support. The next ECB decision on the matter will be on December 2. Currently, the ECB provides unlimited liquidity for one week, one month and three months, at a fixed rate of 1%. 

As mentioned above, sovereign peripheral spreads continued to drift wider during the week with contagion to the broader CDS markets. The iTraxx Main and Crossover currently trade around 112bp and 497bp, which is 12bp and 42bp wider than Friday, respectively. As usual, when sovereign concerns resurface, iTraxx Senior Financials underperform and is 46bp wider at 172bp. An even more evident underperformance has been seen in the Sub Financials index which has increased 62bp since last Friday to 288bp. Today the multiple between the sub and  senior index is 1.70x – up from 1.44x just one month ago.

As always, developments in cash markets are steadier than indices but spreads are drifting wider and bid/offer spreads increasing.

The Primary Market

Primary issuance in corporate bonds has been rather subdued during the week due to market sentiment with a SEK1.5bn tap from Stora Enso and 8Y fixed maturities from ENI and Credit Mutuel the most interesting.

Increasing Covered Bond Issuance

While senior unsecured issuance has been modest recently, covered bond issuance has been more stable and the asset class is taking a relatively bigger chunk of the wholesale funding markets (see graph) below. Partly due to lower spreads for the issuer and partly spurred by new regulation. The liquidity coverage ratio and net stable funding ratio requirements in Basel III are benefitting covered bond securities in bank holdings of these instruments.

DONG Extending Tender Period

Following the announcement of DONG Energy's intention to tender its existing hybrid for either cash or a proposed new hybrid, DONG Energy this week announced that it was extending the tender period. Previously the tender offer was set to expire on November 23. On Tuesday DONG Energy announced that it had extended the tender period to today (November 26), at 17:00 CET. The extension is explained by technical issues causing DONG Energy to issue a prospectus supplement for the proposed new hybrid. 

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