Forex Crunch Crosses for Avoiding American Risk Events

Crosses for Avoiding American Risk Events
Free Trades – The Powerful Secret the Guys on Wall Street Don’t Want You to Know!
Forex Daily Outlook – May 21 2010

Crosses for Avoiding American Risk Events

Posted: 21 May 2010 02:00 AM PDT

When you’re trading on a news event from some country, a cross may be more suitable – this bypasses the uncertainty with American releases and the unexpected reaction to them.

Fundamental traders check the fundamental economic indicators, interest rates and prospects and act according to them. When a good figure is published for certain country, it’s currency will usually rise, and when the economic indicator is weak, the currency will fall. The dollar is different:

Since the financial crisis broke out, the dollar sometimes reacts differently – rises on bad US figures – traders flock to the “safe haven” dollar in times of trouble, and ditch it on good US figures, as they have “risk appetite”. In recent months, the dollar behavior varies – it sometimes reacts “normally” to American indicators and sometimes acts by the risk factor.

But the other currencies continue to react normally to their own indicators. The Euro drops on a rise in unemployment and the Aussie enjoys an unexpected rate hike.

Example

On March 30th, the final release for Britain’s GDP came out better than expected – a rise of 0.4%. The Pound reacted with a rise across the board. But a few hours later, American CB Consumer Confidence was due. This is a major market mover.

The result was eventually better than expected,the markets moved strongly in both directions and the dollar eventually won the event – GBP/USD lost a significant part of its gains.

But the outcome of the American figure and the market’s reaction aren’t known after the British release. There are five and a half hours, and the trader wants to ride on the Pound.

So here, it would be wiser to trade the Pound against another currency. In this case, it could be the Euro that generally suffers from the Greek crisis, a currency such as the Aussie that didn’t get any important news on the same day or the yen.

Why pick the yen? Earlier on the same day, Japanese industrial production dropped by 0.9%, significantly worse than expected. The yen was on the fall, and the Pound was on the rise. GBP/JPY didn’t drop like GBP/USD, but continued rising after the release of the American CB Consumer Confidence.

There are lots of similar examples. Traders should keep an open mind to crosses, as they can avoid high risk events in the US.

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Free Trades – The Powerful Secret the Guys on Wall Street Don’t Want You to Know!

Posted: 20 May 2010 12:29 PM PDT

Guest post by Jason Madison of beatwallstreetnow.com

There are no sure things in the world of day trading but there is one technique that comes pretty close. This technique is known as a free trade.

Basically a free trade is when you open a trade and then wait for it to get to a certain amount of profit, and then you close out half of the position to lock in those gains. Next you would move your stop to break even and let the rest of the position run.

What this does is create a situation where you can’t lose because you have already banked profits and even if the market turns and moves completely against you there will be no loss because your stop will get you out exactly where got in.

This is the secret to profitable trading because no matter how great your system is if you don’t take profit and let your winners turn into loser you will never get anywhere. One of the biggest issues facing new traders is taking profit. This is because when they are in profit they don’t close out the position because they feel like they are going to miss out on more gains so they hold to their position.

And then what happens?

They are forced to sit and watch as the market turns against them wiping out all of their gains. Free trades eliminate this because they allow you to take profit and have guaranteed money in the bank, while also keeping half of the position open and allowing you to profit from any further moves.

While in a free trade one of two things will happen. Either the market is going to continue to move in your direction and make you a huge profit or it’s going to turn around and stop you out at break even. Either way it doesn’t matter because you’ll already have money in the bank.

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Forex Daily Outlook – May 21 2010

Posted: 19 May 2010 02:00 PM PDT

Federal Reserve Bank of New York President William Dudley speaks in Sarasota, other great news from Canada with Core CPI and Core Retail Sales expected to rise and additional encouraging forecasts from other countries are on today’s menu.

In the US, Federal Reserve Bank of New York President William Dudley delivers a speech at the New College of Florida, in Sarasota which could affect interest rates and give insight to future monetary policy.

In Canada, Core CPI is expected to edge up to 0.3% after the decrease of -0.2% in April CPI index is also heading for an increase of 0.3% from 0.0% in April, causing inflation which will also affect interest rates.

More in Canada, Core Retail Sales are expected to climb to 0.5% after the drop of -0.1% in April indicating healthy market activity while Retail Sales are likely to drop by 0.3% compared to 0.5% in April due to the Automobile sales which tend to be volatile.

For more on USD/CAD, read the Canadian dollar forecast.

In Europe, German Ifo Business Climate is expected to continue its rise from previous months heading for 101.9 Points after 101.6 points in April, indicates optimism among German businesses.

Also in Europe, German Flash Manufacturing PMI and German Flash Services PMI are also on the rise; Manufacturing PMI by 0.1 points after 61.5 in April and Services PMI by 0.4 points following 55.2 in April.

Later in Europe, French Flash Manufacturing PMI is expected to reach 56.8 after 56.6 in April while French Flash Services PMI Is expected to drop by 0.2 points from 59.2 in April.

More in Europe, Flash Manufacturing PMI is expected to rise by 0.1 points from 57.6 in April while Flash Services PMI is expected to drop by 0.1 points following April’s 55.6 points

Finally in Europe, Europe’s Current Account is narrowing the trade balance deficit by 0.1B from -3.9B in April.

For more on the Euro, read the EUR/USD forecast and Casey Stubbs' latest analysis.

In Great Britain, Public Sector Net Borrowing is foreseen a reduction of 12.3B in the spending deficit of public corporations, central government, and local governments after April’s rising deficit of 23.5B. This may signal a positive shift in U.K.’s economy.

More in Great Britain, Prelim Business Investment released quarterly is expected to rise from -4.3% to -0.5% which is an encouraging peace of news.

Later in Great Britain, Prelim Mortgage Approvals are also expected to climb from 49K to 54K indicating high demand in the housing market.

Finally in Britain, Prelim M4 Money Supply measuring the change in the total quantity of domestic currency in circulation and deposited in banks is likely to increase by 0.1% from 0.2% in April.

Read more about the Pound in the GBP/USD forecast.

That’s it for today. Happy forex trading!

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