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The second method of Backtesting is performed manually and visually by the trader. The trader would take the historical data and scroll back in time on a chart and manually apply the trading strategy as if it was in a real time environment.

How to eliminate the hindsight factor while doing manual Backtesting? The trader would advance the chart bar by bar in order to refrain from seeing price action subsequent to the trade at hand. This eliminates trading in hindsight that is detrimental to an objective backtest.

The major disadvantage of Backtesting as compared to automated testing is the significant potential for human error in executing simulated trades and recording performance results.

Additionally the normal range of human emotions and biases that often interfere with actual trading can be a detrimental factor in achieving objective backtest results. Furthermore, it takes a great deal of work and discipline to simulate trades manually over a large data set without straying from the strict rules of the trading strategy.

However, Backtesting manually can provide the trader with the real feel for actually trading the strategy. This provides valuable trading experience although simulated but still a valuable trading experience that no automated backtest could possibly provide.

Backtesting can save traders a great deal of time and money that might otherwise had been wasted on trading unprofitable strategies. Backtesting whether done manually or automatically can be one of the most important elements of building a solid trading strategy.

You must have heard a lot about the benefits of autotrading. Autotrading is the latest fad especially in forex trading where the number of major currency pairs is only six. This makes programming forex autotrading easy. Any mechanical trading system can be backtested. This leads us to the important question of autotrading. These autotrading systems are popularly known as Expert Advisors or Forex Robots.

In contrast, stock autotrading systems can be big more complicated. The US Stock Market has got more than 50,000 stocks listed with them as compared to the forex market where there are not more than six major currency pairs. This makes programming a stock trading robot a bit complicated. However, during the past decade major breakthrough in computer programming has been made.

Big institutions like banks, corporations and hedge funds have always been taking benefit of these autotrading systems. Backtesting is one of the most important components of testing an autotrading system.

Backtesting and autotrading are two important components of implementing trading strategies that generally do not rely upon the trader’s judgments or discretion. These types of strategies are primarily technical in nature, and they must necessarily have rules and criteria that are unambiguous.

Backtesting allows the trader to determine if a given strategy would have been profitable using past price data, which is an indication of how it might potentially perform in the future. In contrast, autotrading actually executes real trades automatically according to a pre – programmed set of instructions that sets trade entries, stop losses, and profit limits.

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October is the month in which the most infamous crashes historically took place. The party starts in December and continues in the early part of January with some hangover effect. So what is the January Effect?

New Year is the end of a year and the beginning of a new year. This is what makes the January Effect so special. There is usually a rally in the stocks in the first few days of January. There are various reasons behind the rally. Most of the people are trying to pay their taxes at that time of the year. The companies are trying to show a good performance at the end of the year by cleaning their balance sheets. The January Effect can be quite a rally but much depends on the strength of the economy, how good December was and is there any catalyst to move the markets. There is usually a significant rally in the early part of January that actually sets the tone for the rest of the month and sometimes for the rest of the year. New Year is party time. People are in exuberant mood. Everyone wants to forget the past year and start the coming year with high hopes and good expectations. This is what is so special about the January Effect. So what is this January Effect? January Effect actually starts in the mid December and tends to favor small stocks. The most profitable period as measured statistically has been found to start from December 31st and end around February 28th with an average rate of return of 6.6% on smaller stocks.

Now January Effect may happen or may not happen but the turn of the month that is the last day of the month and first five days of the next month form a very good seasonal pattern. Now, you must know this fact that the January Effect is not guaranteed every year. The best example is the year 2007 when the market became bearish and didnt start to look to bottom out until March 2008.

If you buy stocks at the last day of the month and hold them for the first five days for the next month, chances are you are going to make some profit. This can be a good swing trading strategy. At the end of the fifth day you move your money back into the money market funds. Turn of the month is a very good seasonal pattern that actually holds up more often than not.

You can do the same on the holidays. Move your money in on the day before the holiday and sell it on the day after the holiday. This system works because the pension funds tend to put new money to work during the holidays and the overall tendency of the market to rise improves.

People start to feel happy when the holidays approach and buy stocks before they run off to celebrate Christmas, the fourth of July, the Labor Day and so on. After the party the reality sets in the stocks are usually sold off. The holidays and those times when people traditionally take vacations often lead to higher prices. Fewer traders lead to lower trading volume which in turn tends to exaggerate price moves.

Thats because these days fall within the most bullish time period of the year, winter! The three days before the New Year Eve and the first three days trading days after the New Year are your best holiday bet for making money.

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Multiple time frame trading is a trading method used extensively by forex traders. It involves the use of multiple timeframes. In this method, a trader first looks at a longer timeframe like a monthly or weekly chart to determine the overall direction of the trend.

Professional traders always use multiple timeframes. Multiple timeframe trading means using three or more timeframes in your trading. You as a trader decide to drill down to a shorter timeframe like the daily or 4 hourly chart to look for dips or pullbacks in the trend if you find a decisive long term trend on this timeframe.

A minor downward retracement would represent a potentially high probability entry to get in the trend at a reasonably good price in a strong long term uptrend. Finally the trader may drill down to an even shorter timeframe like the 30 minutes or 15 minutes charts to pinpoint and time the exact entry.

How do you trade multiple timeframes? Suppose, you are interested in trading multiple timeframes! You identify the retracement in an uptrend on a 4 hourly chart. What you need to do is to wait for a resistance breakout on a 15 minute chart in the direction of the trend before entering into a long position.

Multiple timeframe trading can be very powerful if used correctly. What make multiple timeframe trading so powerful is that it puts the traders on the right side of the market while also identifying the highest probability entries available.

What is Triple Screen trading? Have you heard of the triple screen trading method? One of the multiple timeframe trading strategies is known as Triple Screen. A triple screen resolves the contradiction between the technical indicators and timeframes. The first screen is the long term charts and strategic decisions on long term charts are made using the trend following indicators. How do you decide what is long term? It depends on your favorite timeframe.

The second screen is used to make technical decisions about entries and exits using oscillators. The second screen is the intermediate charts. Suppose your favorite timeframe is the 4 hour chart. Call it your intermediate time frame. The third screen can be an intermediate chart or a short term chart. The third screen is used to place buy and sell orders.

How do you decide what is intermediate and what is long term? Begin by looking at your favorite chart, the one that you use the most. Call it intermediate chart. Multiply its length by five to find the long term chart. Now use trend following indicators on the long term charts.

Staying out of the trade is a legitimate position. Use these trend following indicators like the moving averages, MACD or trendlines in the long term charts to make your strategic decision to go long, short or stay out of the trade.

Return to the intermediate chart if the long term chart is bearish or bullish. Use oscillators to look for entry or exit points in the direction of the long term trend. Set stops and profit targets before you switch to short term charts to fine tune entries and exits.

On the short term chart look for the support/resistance breakout in the direction of the long term trend to pinpoint the trade entry! Use it on your demo account to get familiar with it before you trade live with the triple screen method. Triple screen is a simple but ingenious multiple timeframe approach to forex trading.

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Beginning with the main Pivot Point that is calculated from the previous day’s key price points, the resulting support and resistance are subsequently derived from the following calculations. How is the pivot levels calculated? Beginning with the main Pivot Point that is calculated from the previous day’s key price points, the resulting support and resistance are subsequently derived from the following calculations:

Resistance 1 R1 = 2PP- Previous Low. Resistance 2 R2 = PP + (R1-S1). Resistance 2 R3 = Previous High + 2(PP-Previous Low).

Main Pivot Point PP = (Previous Low + Previous High + Previous Close)/3.

S3 (Support 3) = Yesterday’s Low-2(Yesterday’s High -PP). S2= PP- (R1-S1). S1 (Support 1) = 2PP – Yesterday’s High.

Now most of the trading software has the inbuilt function to calculate the pivot point for you. The main pivot point can be calculated for any time interval. The main pivot point is very important. After calculating these pivot points they are plotted on the currency price chart. Trader’s can calculate the current day’s pivot points using the above formulas based on the previous day’s price data.

Many traders are afraid of pivot points. They consider them to be difficult to understand and master. Nothing is far from the truth. Breakouts or bounces may be traded with pivot points. Once these pivot levels are calculated and plotted, they are used in much the same way as Fibonacci Retracement. These pivot points are often also used as profit targets. Pivot points also indicate whether the market sentiment is bullish or bearish. Traders also use pivot points as reference levels to provide information as to whether the current price is relatively low or relatively high within its expected price range for the day.

You can further refine your pivot point levels by using the S1, R1 and other levels. S1, S2 and S3 as well as R1, R2 and R3 are used as references in pivot point trading. For example, traders may look for long trading opportunities with the view that the price will reasonably move towards equilibrium around the main PP level if the price is near the day’s S2.

Pivot point trading can be adapted to any time frame. This makes it a highly reliable method of analyzing the market. Many traders use different time frames in their trading decisions. You can also calculate the pivot levels for a week and for a month time frame too. Instead of calculating the pivot points for the current day you can also calculated the above levels for 4 hour charts as well as 8 hour charts.

Both Fibonacci and Pivot Points are excellent technical tools that often encompass entire trading discipline in themselves. Just replace the day’s highs, lows and the closing prices with the appropriate time frame highs, lows and closing prices when calculating the pivot points for the other time frames.

In an extremely bullish market condition, the pivot point can become the target low for the trading session. This number represents the true value of a prior session. It is important to understand that it can be used as an actual trading number in determining the high or the low of a given time period, especially in strong bull or bear market conditions.

Pivot point trading has been successfully used by traders in making trading decisions. Traders will step in and buy the pullback until that pivot point is broken by prices trading below that level. A retracement back to the pivot will attract buyers if the market gaps higher above the pivot point in an uptrending market. The opposite is true for the pivot point will act as the target high for the session in an extremely bearish market condition.

Generally prices come back up to test the pivot point if a news-driven event causes the market to gap lower after traders take time interpreting the information and the news. Sellers will take action and start pressing the market lower again if the market fails to break that level and trade higher. Technically speaking, in a bearish market, the highs should be lower and the lows should be lower than in the preceding time frame.

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Divergences are often used as important trading signals. But it doesn’t mean that divergences will always predict a reversal correctly. Price oscillator divergences have long been acknowledged by technical traders as a solid indicator of potential price reversals. Well defined divergences particularly on the long term charts can be surprisingly accurate in many instances.

Catching a major price reversal at the correct time can be so profitable that only a few accurate divergence signals are needed to offset the inevitable false signals. Price divergence oscillators can be spotted with just two elements on the price charts.

How do you determine a divergence? The first element is the price and the second element is an oscillator that runs either above or below a price level. This second element can be Stochastics, RSI, MACD or any similar oscillator.

Many traders use MACD as their sole confirming indicator. The Moving Average Convergence Divergence (MACD) is among the most popular technical indicator or an oscillator invented.

Some traders also take trading signals exclusively from MACD. MACD is a multifaceted indicator that acts as a sign of trend momentum by representing the relationship between two moving averages.

You must have used MACD in your trading. MACD is basically the difference between two moving averages. MACD can be traded by taking signals from the crossovers of two lines, crosses above and below the zero line. Relative Strength Indicator (RSI) is another popular oscillator that provides a measure of price momentum.

RSI may also be used for divergence purposes. RSI is an indicator that gives overbought and oversold signals in ranging markets. However, its usefulness like most other indicators tends to diminish during a trending market. Stochastic indicator may also be used for divergence trading.

A divergence occurs when there is an imbalance between the price element and the oscillator element. Both begin to go separate ways and start telling opposite tales. This is the point when the oscillator is providing a strong hint that price may be losing its momentum and a change in price direction may therefore be impending.

A bearish divergence occurs when the price hits a higher high while the oscillator hits a lower high. A bearish divergence is a hint for an impending reversal back down.

A bearish divergence is an indication that price may soon turn and go back down as the higher high in the price may lose its momentum and begin falling.

On the other hand, a bullish divergence occurs when price hits a lower low while the oscillator hits a corresponding higher low. A bullish divergence hints at an impending reversal back up.

Divergences are often used as hints of possible turns and reversals. However, divergences are not frequently used as a full fledged self sufficient trading strategy. When used in conjunction with other trading tools, divergences can be a remarkably effective method for helping to time major market events.

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Markets tend to react to the outside events. Markets react to the seasons. Markets react to holidays. Markets react to political crisis. Markets are what the people are thinking. The day before the Presidents day is the worst day and the day after the Easter is the worst day after. However, you should keep in mind that a lot of other factors also come into play and you have a lot of room for error. The next best holiday bets are the Labor Day and the Memorial Day because they fall before the first day of trading in September and June respectively.

The best time of the year to own stocks is the Santa Claus rally which for all practical purposes is the 17 day stretch from December 21 to January 7. This is the best time of the year. Most of the folks usually feel fairly good about themselves around this time of the year.

There is a low trading volume which tends to exaggerate the trend. If the economy is not doing good and is slowing down, FED tends to lower interest rates during holidays in order to go into the new year with less of a worry. However, when you are dealing with seasonality, you should keep these facts in your mind:

1) The market is not longer static. Money has no borders now. With one mouse click money is transferred from one locality to another. The seasonal effect may get interrupted by other events. More and more people have real time access to information and larger amounts of capital than at any time in the past.

2) Institutional investors like mutual funds, hedge funds and insurance companies have become important players in the markets. So in case of an event free environment, seasonal tendencies may hold up fairly well. At the end of the year, institutional investors want to make their results look as good as possible to their shareholders and tend to buy the stocks and so on.

3) The days of long term investing or what you call buy and hold are dead! Frequent market crashes have taught the investing public that investing for the long term is fairly risky. So there is more short term trading going on. These are the times for day traders and swing traders. With fewer people willing to hold stocks for longer periods, it is very difficult to predict seasonality.

4) A lot will be written about the recent stock market crash. What were the actual causes of the recent stock market crash? Why so many big banks went belly up in matter of days. What was so special that made this liquidity problem contagious with banks all over the world? The recent market crash was the result of CMO and Default Swaps bringing down the banks and Insurance companies in ways that had not been anticipated or foreseen by the analysts. Many had assumed that derivate securities are safe. Infact they have highly unpredictable tendencies. Derivates and outside the market trading activities can result in highly unpredictable patterns.

Many things are changing. The world is always changing. There is a change in demographics also taking place. With the aging of the population, the overall trend will be towards more income producing investments. So with everyone talking about the seasonal tendencies in the market, it reliability becomes less diminished.

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Knowing the major market cycles is important for you and your trading system. Each market cycle requires a different approach from your trading system. There are four major market cycles. Adapting to market cycles can improve your profitability.

So you need to understand how to determine market cycles if you want to become a successful trader. Lets discuss these market cycles now. The four major market cycles are: 1) Trending, 2) Consolidating, 3) Breaking out of a consolidation and 4) Corrective.

Trending is when the market starts to move consistently in one direction either up or down. An uptrend means each higher high is higher than the previous high and each lower low is also higher from the previous low. Similarly for the down trend!

A Consolidation market also known as Non Trending market will look like a sideways horizontal line on a chart. Consolidating is when the market is struck between two horizontal support and resistance levels. You can use moving averages or other technical indicators to determine whether the market is consolidation or trending. In case of a consolidating market, the moving average line will almost be horizontal.

Now what is breaking out of a Consolidation? After the market has been consolidation for at least 20 bars Breaking out of a Consolidation is when there is a sharp increase or decrease in the price.

And the last market cycle is the corrective cycle. Corrective is a short sharp reverse in prices during a longer market trend. Many traders also use Elliott Wave Theory to determine waves which are also an indication of market cycles In addition to these four market cycles.

Elliott Wave Analysis is a full subject in itself. Some traders dont believe in Elliott waves while others are its die hard fans. However, using Elliott Waves is somewhat advanced for most traders. There are five Elliott waves and each one has its own relevance in determining the trading strategy. You need to have a thorough understanding and ability to correctly determine which wave the market is in at that point.

For example suppose the market is only consolidation and you incorrectly determine that the market has entered a trend. Incorrectly identifying the market with either the four market cycles or by using the Elliot Waves can be a costly mistake.

You might enter a trend trade and get immediately stopped out. Your best plan of action should be constant observation. Market experience is the best teacher and only overtime you will be able to correctly figure out the market cycle.

When you trade, you base your trading decisions on technical indicators most of which are lagging. Hindsight is always perfect but trying to predict the markets can be an elusive and impossible endeavor. Right side of the chart is always an unknown quantity for the trader until it reveals itself.

Remember spring, summer, autumn and winter, the four seasons of a year. The markets have four cycles just as there are four seasons in a year. You need to learn what the different market cycles are in addition to having a trading system. That means you should develop the skill of correctly identifying the different market cycles at the right time.

Effectively identifying the market cycles is a skill that all successful traders have mastered. You need to learn how to adopt your approach to those cycles to remain profitable. For example in a choppy, sideways bracketed market, you need to adopt your system and rules so that you do not get whip sawed and stopped out a lot.

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The stock market is full of sayings like, Sell in May and go away, as well as the conventional wisdom about the, summer rally, the Santa Claus rally, the dark days of autumn, the presidential cycle, and so on. So the first question that comes to your mind is that are these seasonal cycles real in the markets and how you can time your trading with these cycles?

Markets are in a sense like living organisms. You should always keep this in mind that markets are always changing; money keeps on moving in and out of stocks, bonds, currencies, commodities and so on with the stroke of a mouse and speed of electron thousands of times every day. Technology, regulation, innovation, creation and new people make the markets a vibrant and ever changing place. Markets are about big banks, insurance companies, hedge funds, sovereign wealth funds, governments, mutual funds and individual investors creating a very diverse and dynamic environment.

Still such fast action, there is some seasonality in the markets that you should know if you are trading these markets. In 1960s when big Wall Street players would go on summer off, volume dried up and the market tended to have a slight upward bias. Now, with the high speed internet connection and satellites, any money manager can stay in touch with the market on his laptop or mobile phone even on family vacations in a remote island of Pacific!

In the past markets were a whole lot less complicated. Most of the money moved between US and Europe. But with globalization and the ability to communicate in real time, money has started to move in a less predictable fashion. This has altered the trading patterns. What used to work yesterday does not work today.

At the same time, you should be aware that there are times when the markets do tend to follow these seasonal patterns. You shouldnt rely on seasonal analysis as your main method of trading stocks, bonds, currencies or commodities.

September tends to be the toughest month of the year. For the past 50 years, the average return on S…P 500 for the month of September has been around 0.6%. Dow Jones Industrial Average has even preformed worse with return of -1%. Now stock markets have a certain tendency to move in certain directions during certain months of the year. This general seasonal trend is a good one to keep in the background of your mind.

Holidays means party time. Everyone wants to enjoy holidays. Holidays means investors are in a cheerful and exuberant mood and the money managers want to show a good performance at the end of the month. September has been traditionally a bad month and November has been a good month for the bulls. The S…P 500 Index has the general tendency to rise in the month of November. December is another typically strong month. December is the month of holidays and the end of the year.

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The first question that comes to your mind is that are these seasonal cycles real in the markets and how you can time your trading with these cycles? The stock market is full of sayings like, Sell in May and go away, as well as the conventional wisdom about the, summer rally, the Santa Claus rally, the dark days of autumn, the presidential cycle, and so on.

Markets are always changing; money keeps on moving in and out of stocks, bonds, currencies, commodities and so on with the stroke of a mouse and speed of electron thousands of times every day. Markets are about big banks, insurance companies, hedge funds, sovereign wealth funds, governments, mutual funds and individual investors creating a very diverse and dynamic environment.

Still such fast action, there is some seasonality in the markets that you should know if you are trading these markets. In 1960s when big Wall Street players would go on summer off, volume dried up and the market tended to have a slight upward bias. Now, with the high speed internet connection and satellites, any money manager can stay in touch with the market on his laptop or mobile phone even on family vacations in a remote island of Pacific!

With globalization and the ability to communicate in real time, money has started to move in a less predictable fashion. This has altered the trading patterns. What used to work yesterday does not work today. In the past markets were a whole lot less complicated. Most of the money moved between US and Europe.

You shouldnt rely on seasonal analysis as your main method of trading stocks, bonds, currencies or commodities. At the same time, you should be aware that there are times when the markets do tend to follow these seasonal patterns.

During the last 50 years the stock markets had an upward bias. It meant if you had bought stocks and kept them for a few years, there would have been an invariable price appreciation. No doubt, minor downturns were always there in the market but the overall trend in the markets had been up. Historically, September tends to be the toughest month of the year. For the past 50 years, the average return on S&P 500 for the month of September has been around 0.6%. Dow Jones Industrial Average has even preformed worse with return of -1%. Now stock markets have a certain tendency to move in certain directions during certain months of the year. This general seasonal trend is a good one to keep in the background of your mind.

September has been traditionally a bad month and November has been a good month for the bulls. The S&P 500 Index has the general tendency to rise in the month of November. December is another typically strong month. December is the month of holidays and the end of the year. Holidays means investors are in a cheerful and exuberant mood and the money managers want to show a good performance at the end of the month.

Mr. Ahmad Hassam is a Harvard University Graduate. Try This 1500 Pips A Day Forex Signal Service! Know These Candlestick Patterns! This and other unique content ‘forex’ articles are available with free reprint rights.

A professional currency trader may be confident that the US Dollar is indicating overall weakness and the Euro is indicating overall strength for the coming six months after performing the fundamental analysis on both economies.

The next step for the position trader would be to open a long position in EUR/USD pair. This simultaneously provides the position trader with long Euro position and a short US Dollar position.

Going long on Euro and at the same time short on US Dollar, this combined trading position fulfills your fundamental outlook as the position trader on both the currencies. The long term directional bias has been formed by you as the position trader on the basis of fundamental analysis.

So position trading depends on using fundamental analysis in identifying a profitable position in the currency market. But you still need technical analysis to determine your entry and exit in the market. You will have to use technical analysis in setting up the actual trade. Pinpointing the best time for the trade entry as well as setting risk managed control strategies is best accomplished by using technical analysis.

As all currencies are traded in pairs unlike the stock market or for that matter other financial markets, this concept of strength/weakness fits extremely well with the forex markets. The position trading uses fundamental analysis in pairing strength with weakness.

Position trading with the strength/weakness model is the most logical fundamental method for approaching long term forex trading. Trading forex requires a directional commitment on two currencies for each trade, so position trading is ideal for forex trading.

You only invest in stocks that go up and down but two stocks can never be paired together in stock trading. You can buy different stocks to diversify your portfolio but can never pair two individual stocks the way you can pair two currencies in forex trading. Buying one currency because it looks like it will become stronger while simultaneously selling another currency because it looks like it will become weaker is a better way to trade as compared to stocks and other financial markets.

Your first step as a position trader should be to do fundamental research and analysis on all major currency pairs. Analyze the Central Bank policy statements, economic growth factors of these countries, global economic news etc to identify the currency with the strongest positive future prospects and the currency with the strongest negative future prospects at a given point in time.

You will have to study all the major currencies like US Dollar, Euro, British Pound, Swiss Franc and the Japanese Yen. Suppose you identify GBP and USD as the strongest loser currencies by performing fundamental analysis while EUR and CHF as the strongest gainer currencies in the foreseeable future. Possible currency pairs for position trading could be long EUR/USD, long CHF/USD, short GBP/EUR and short GBP/CHF.

Price action is never ever linear. It is always up and down with minor trends superimposed on major trends. You can enter the trades with the help of technical analysis and hold them as long as they move in the correct direction disregarding minor corrective swings and market noise.

Position trading maybe the most difficult method of approaching forex trading for the beginners! It requires a great deal of patience and faith in ones own analysis to weather the inevitable swings against the trading position. But if done properly it can be one of the most effective methods of extracting long term profits from the forex markets.

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try Strignano’s Forex Signals free. Discover a revolutionary Forex Robot Trading System!

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EU has emerged as a major global political and economic power block in recent decades. The European Union consists of fifteen member countries that include the Netherlands, Portugal, Spain, Sweden, France, Germany, Greece, Ireland, Italy, Luxembourg, Austria, Belgium, Denmark, Finland and the United Kingdom.

All these above countries share the common currency Euro except Denmark, Sweden and United Kingdom. These 12 common currency countries constitute the European Monetary Union (EMU). These 12 countries share a single monetary policy dictated by the European Central Bank (ECB).

The EMU is the worlds second largest economic powerhouse after the United States. EMU has a highly developed and efficient fixed income, equity and the futures market. This makes EMU the second most attractive investment market for domestic and international investors.

Historically US assets have had solid returns. As a result, United States absorbs something like 70% of the total foreign savings. In the past, EMU had difficulty in attracting foreign direct investment or large capital inflows. The primary reason was the United States.

However, with the introduction of the Euro and the EMU beginning to incorporate even more members in Eastern Europe, the Euros importance is expected to increase. The capital flows to Europe is expected to increase.

With foreign central banks expected to diversify their Euro reserve holdings even further, demand for Euro is expected to continue rising. EMU is in fact a trade driven and a capital flow driven economy. Trade is very important to the national economies within EMU.

Unlike United States, EMU does not have large trade deficit or surplus. EU exports comprise almost 20% of the world trade. While EU accounts for only 17% of the world imports! Because of the size of the EMUs trade with the rest of the world, it has significant power in the international trade arena.

Both EU and the United States are two very important members of the World Trade organization (WTO). United States is the largest trading partner of EU. The formation of EU allows individual member countries to group as one entity and negotiates on an equal playing field with the United States. International clout is one of the primary reasons in the formation of EU.

Leading import sources for EU are China, Switzerland, United States, Japan and Russia. Leading export markets for EU are the United States, Japan, Poland, Switzerland and China.

EU is primarily a service oriented economy. Services account for more than 70% of the EU economy while manufacturing, mining and utilities account for around 20% of the EU economy. Large numbers of EU based companies concentrate their research, design, innovation and marketing part of the activity in EU while outsourcing most of their manufacturing to Asia.

It is important for most of the countries to hold large amounts of reserve currencies to reduce exchange rate risk and transaction costs. Most international trade transactions involve the British Pound, the Japanese Yen and the US Dollar.

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Try Strignano’s Forex Signals free. Discover a revolutionary Forex Robot Trading System!

Candlesticks have become popular in the Western trading community especially the United States in the past decade. However, candlestick charting methods had been developed by Japanese rice traders hundreds of years back.

Internet made possible the availability of online trading to retail trading. The advent of internet has leveled the playing field for traders whether they trade stocks, futures, options, commodities, precious metals or currencies. In the last two decades there have been seismic changes in the way people used to trade. Access to the market is now only one mouse click away. Trade just by clicking your mouse!

The opening of retail trading especially in the currency markets that was previously only open to large players like big banks and corporations has been a revolution. Market information is now in most cases freely available online. Internet has made commission rates dramatically lower. The result is that a whole generation of new traders and investors want to try their luck beating the market. You can now demo trade with virtual money to develop and hone your trading skills.

I am a great fan of candlesticks charting and I have seen many traders both new and professionals becoming die hard fans of candlestick charting. Why? Because candlestick charting is the best tool available. Can you beat the market? It depends if you are using the right tools.

On your trading platform provided by most of the online brokers you will find various types of charts. There are many forms of charting techniques that have been developed over time. Why candlestick charting is superior to other forms of charting like the line charts, bar charts or point and figure charts? One of the best features of candlestick charting is its visual appeal and readability. You can glance at a candlestick chart and quickly gain an understanding of whats going on with the price action in the market.

You can easily spot opening and closing price of a security or currency on a candlestick chart. These price levels can be a very important area of support and resistance from day to day.

There are certain specific candlestick patterns that can help you identify when is the best time to buy, sell or wait on a trade or investment. This information can be extremely useful for short term traders like day traders and swing traders.

Now in order to trade and invest effectively using candlestick charts you need to understand these candlestick patterns. These candlestick patterns can be a real boon to your trading and you can combine them with other technical indicators for even more reliable results.

Many different types of candlestick patterns can tell you what may lie ahead in the market. Patterns appear on the candlestick charts as simple, single stick occurrences or complex multi stick formations.

This information can be highly valuable in knowing that the prevailing trend might reverse or continue. You may use the information provided by candlestick patterns to decide when to get into a trade, when to get out of a trade or even when to hang unto a trade you are already in.

Download your 82 page candlestick guide here complete with strategy flash cards all free. This is the best candlestick guide in the market and you dont need to waste your money on buying a guide because this candlestick guide is a complementary gift for you from the Options University.

Mr. Ahmad Hassam is a Harvard University Graduate. Try These 1500 Pips A Day Forex Signals From Heaven. Download Your Free 82 Page PDF Candlestick Guide! Get a totally unique version of this article from our article submission service

EU has emerged as a major global political and economic power block in recent decades. The European Union consists of fifteen member countries that include the Netherlands, Portugal, Spain, Sweden, France, Germany, Greece, Ireland, Italy, Luxembourg, Austria, Belgium, Denmark, Finland and the United Kingdom.

Out of these 15 countries, 12 common currency countries constitute the European Monetary Union (EMU). Except Denmark, Sweden and United Kingdom, all these above countries share the common currency Euro. These 12 countries share a single monetary policy dictated by the European Central Bank (ECB).

EMU has a highly developed and efficient fixed income, equity and the futures market. The EMU is the worlds second largest economic powerhouse after the United States. This makes EMU the second most attractive investment market for domestic and international investors.

Historically US assets have had solid returns. As a result, United States absorbs something like 70% of the total foreign savings. In the past, EMU had difficulty in attracting foreign direct investment or large capital inflows. The primary reason was the United States.

However, with the EMU beginning to incorporate even more members in Eastern Europe, Euros importance is expected to increase. Induction of new members will further increase the size of EMU. The capital flows to Europe is expected to increase as well.

Demand for Euro is expected to continue rising with foreign central banks expected to diversify their Euro reserve holdings even further. EMU is in fact a trade driven and a capital flow driven economy. Trade is very important to the national economies within EMU.

EU exports comprise almost 20% of the world trade. While EU accounts for only 17% of the world imports! Because of the size of the EMUs trade with the rest of the world, it has significant power in the international trade arena. Unlike United States, EMU does not have large trade deficit or surplus.

Both EU and the United States are two very important members of the World Trade organization (WTO). United States is the largest trading partner of EU. The formation of EU allows individual member countries to group as one entity and negotiates on an equal playing field with the United States. International clout is one of the primary reasons in the formation of EU.

Leading export markets for EU are the United States, Switzerland, Japan, Poland and China. Leading import sources for EU are United States, Japan, China, Switzerland and Russia.

Large numbers of EU based companies concentrate their research, design, innovation and marketing part of the activity in EU while outsourcing most of their manufacturing to Asia. EU is primarily a service oriented economy. Services account for more than 70% of the EU economy while manufacturing, mining and utilities account for around 20% of the EU economy.

Before Euro, most of the countries had to deal with individual national currencies with each having a different risk profile. Most international trade transactions involve the British Pound, the Japanese Yen and the US Dollar. It is important for most of the countries to hold large amounts of reserve currencies to reduce exchange rate risk and transaction costs.

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Try Strignano’s Forex Signals free. Discover a revolutionary Forex Robot Trading System!

The worlds big banks are the main players in the spot forex market. These big banks make an exclusive club where most trading activities take place. This club is known as the Interbank Market.

Unlike other markets, the interbank market operates on the principle of highest credit standing in dealing with the counterparty in any forex transaction. For this reason, big banks prefer to deal with big banks only. As a result smaller fish are shut down the line from the interbank market. Down the hierarchy in the spot forex market are the smaller banks, big multinational companies, hedge funds and other institutional investors or speculators and the retail forex brokers. The wealthier you are and the more money you have or are able to get credit for, the more chances you have of accessing this big boys club.

The independent retail traders lie at the bottom of the market structure. These big players conduct currency transactions in the interbank market if they have large capital and have credit standing with the large banks. Technology has managed to open up this tight group of big boys although not to the extent that you may think. Most banks now operate their own electronic dealing platforms or provide liquidity to a matching system, prime brokerage platform.

So there is no central exchange in the spot forex market to set the prices. Then who sets the currency prices? The retail forex trades trade through their forex brokers. They generally trade in much smaller lot sizes. Central banks are also occasionally involved in currency transactions. Unregulated nature of the spot forex market as well as poor governmental oversight lets the forex dealers to behave the way they want. Because of the tight knit nature of the forex market and its lack of regulation, the spot forex market is an unfair market for the nonprofessional to operate in.

Market makers make the bid and ask prices based on the currency movements that they anticipate will take place. Without a central exchange, the currency prices are set by the market makers.

Largest banks are the major market makers and they handle billions of dollars worth of forex transactions on behalf of their clients like the other institutions and companies and also for themselves. Many banks have professional traders solely dedicated to trading forex for speculation.

This big money laden network is knows as the interbank market. Interbank market is where large banks deal with one another. The resulting massive flow of money handled by these big banks is what primarily drives the currency markets.

The transactions carried out by these big banks like the Citigroup, Barclays, UBS, Deutsche Bank, Bank of America, Merrill Lynch etc amounts to the greatest bulk of the total daily forex volume. Most of the trading activity takes place in the interbank market.

The banks deal directly with one another through the electronic brokering platforms like the Electronic Brokering Services (EBS) or Reuters Dealing 3000 Matching. These brokering services get the best available rates for the various currency pairs.

These brokering systems match buying and selling requests from the bank dealers. Between these two competitors they connect at least 1000 banks together. The banks establish specific credit lines with one another in order to deal with one another in the forex market as there is no exchange to serve as each banks counterparty.

As the main market makers, these big banks constantly quote bid and offer prices to one another thereby making the market. Smaller banks that also trade forex also get access to these brokering platforms. Next large companies come.

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try These 1500 Pips A Day Forex Signals From Heaven. Develop Your Own Forex Trading System!