Automatic Forex Trading

Most people who get involved with automatic forex trading do not realize how significant to the global financial markets the US Non-Farm Payroll happens to be. Many people ask me , " why each month does the number of US jobs make the market jump up and down so much after it is released ?" To give you an answer we must realize at what the US jobs number actually represents. Then we will have our insights as to why it makes the markets move like nothing else .

On the very first Friday of a new month, the US Non Farm payroll is then released. It is released by the US Bureau of Labor and Statistics or (BLS) and what it does is measure, quantitatively , is the number of new jobs, outside of farming , created in the prior month by the US economy . This announcement is so important because the health of the US and global economy are both reflected . In reality , this economy is the world’s largest and consumer spending is the main component driving the economy in the US ; actually making up 70%!  So , in automatic forex trading, since the interest rates in a country is the main factor that affects the currency’s strength or weakness, you need to take a look at what actually drives those rates ; or the US Federal Reserve policy on interest rates. The main piece of data that is used by the Fed is the jobs report to set short term interest rates and because of this, this report can and usually does , cause significant volatility across the markets .
Why does the jobs report have anything to do with where the Federal Reserve sets short term interest rates ? That’s a good question ! If the jobs report is on the strong side this means that many people have jobs and there is high resource utilization. This also means that companies are employing workers and the consumers, or workers, are then spending money by shopping, dining out, or on clothing, and these are the things that help to drive an economy; they grow the economy or heat up the economy . There is more money in circulation when the economy is growing and inflation must be kept in check by the Federal Reserve . They cool the economy and keep inflation in check by raising the short term rates, or they can raise inflation by lowering the short term rates, heating the economy up. As you can see , so the job number is a huge factor , driving all of this beneath the surface .
When you’re getting ready for your automatic forex trading day or week ahead , remember to take a look at the events calendar for the fundamental information that is scheduled to be released that upcoming day or week . If it’s the first week within a month then on the Friday of that first week you’ll have the Non-Farm Payroll report coming out because that is when it always comes out . If you’re looking to take advantage of the volatility that comes after the release of the jobs report , just remember the following formula : If the jobs numbers are stronger than expected this usually means a stronger economy which will lead to a strengthening of the currency because short term interest rates go higher. On the other hand , if the jobs report comes out weaker than expected usually you’ll get short term interest rates that are lower, causing weakness of currency . It doesn’t always happen this cut and dried, but this knowledge can give you a bit of an advantage over your competitors who are trading alongside you.

Automatic forex trading allows anyone, anywhere, to make a nice amount of money . What better way to do this then getting up each morning , pouring a nice hot cup of coffee, and setting up the day in trading while still in pajamas? Sounds great! Hang on because although it can be relaxing as well as easy many people find it’s not all that simple . That’s why this article is going to look at principles of money management – because if you have your money management game-plan in place you are more likely to succeed .
So why then , if this area of money management is so very important , do so many people either overlook it altogether or just flat-out completely ignore it ? That’s a wonderful question that you should really consider if you’re planning for success in this market. I think that this aspect of trading is skipped by people, money management principles, because it’s not something that is "sexy". In reality , how many accountants that are interesting do you know? That’s what this is really about ; boring numbers and more boring numbers .
In reality, it is only going to be boring if you approach it in this way. It’s going to be a drag if you look at it that way and you’re not going to want to get it done . If you have the attitude that this is an important part of becoming a automatic forex trading professional and focus on the huge success that lies just ahead of you if you spend some time thinking your tactics for money management through…. then it can turn into something that is exciting.
Now you’re convinced that this area needs to be focused on . Great ! What is it about ? The following are the keys by importance, follow these and you’ll be off to a great start : never, ever over-leverage yourself , be consistent with the amount of leverage you use on every trade , never add to losers but add to winners . That is all . Sure there are tributaries to all the above but even alone they are powerful .
Next time you’re asking yourself why your level of trading hasn’t evolved the way you wanted it to , keep in mind the money management keys . One final aspect that is important to consider is this : unimaginable psychological benefits can be provided by good money management. These great benefits will help you improve trading more than you ever thought you could . Why? If you have no fear of losing money, or you know you have a solid plan in place that will ensure you’re always around to trade another today , then you can look at markets from a state that is relaxed and clear and this will add serious dividends to your effort .
Automatic forex trading can be the most rewarding, yet challenging thing, you will ever do . Remember that the most valuable keys to your success are often the most uninteresting, simple, and obvious things out there. You’ve wanted to find the trading holy grail – and it happens to be money management .

Automatic forex trading has been unpredictable recently due to the debt crisis Greece has been dealing with . Some are afraid that this problem will spread to other European Union countries that have a lot of debt such as Portugal, Italy, and Spain. As a result of these problems, there has been 11% drop in Euro currency against the US Dollar. A few questions should be asked when taking a look at the situation: Is the Euro sell off complete and is the recent strength in the US Dollar a result of strong fundamentals in the United States or of weakness in the Euro ? The reason these are important questions is because the second question’s answer will have an impact on the answer to the first question.

My take is that the US Dollar currently is benefiting because of Euro weakness and Euro weakness only . Consumer spending in the US economy has picked up steam only because the Federal Reserve for some time has left the rates near 0%. What will occur when the Fed has to raise these rates? Will this head wind be something the US economy can really withstand? Probably not . Also, it is important to keep in mind that consumers are spending more right now because they are walking away from their mortgage payments, credit card payments, and auto payments just to name a few . This allows consumers to have more income than usual so they are spending more in other areas like eating out, shopping for clothes, and buying Apples new i-pad . Again consumers are going at it like crazy. It wasn’t sustainable in the last Federal Reserve inflated boom and again, it won’t be sustainable. In the next several years, default or inflation are the US Dollar’s only options and those two things can only mean disaster for the Greenback .

When doing automatic forex trading making money is naturally the goal . We have no biases. We only want to use our foresight for a profit . Thus, the answer to the second question is that there will be a point when the Euro bottoms out because it has been over sold. It will probably be somewhere about 1.2300-2400. Really , do you really believe that Germany, one of the largest world economies, will let its currency fail ? Probably not. More than likely they won’t. And that is precisely why they are not jumping at the opportunity to print more Euros and bailout Greece . The Euro will be a more sound currency because of what is happening in Greece . The investors world wide will realize that the Euro is a safe option because when there is trouble they will deal with a loss in the short term to preserve their health in the long term . Thus , their economy may be having a tough time , but all of this will make their monetary unit better . The opposite is true in the United States situation . Here, we print money to stave off our short term problems , but this leads to problems with the health of our economy and the US Dollar.
After looking at all that , we soon will be to a point where you will get a great bargain from the Euro that you can take advantage of in your automatic forex trading. Not just for the previously mentioned reasons, but you also need only look at market psychology . Professionals buy when there is a free fall in the market just as the average person is catching wind of the crisis and comes in off the street to go short the move that has already happened . Already this pattern has happened over and over again, and this will continue to occur as long as human physiology includes limbic systems.

Automatic forex trading can be done in a variety of ways and for so many different reasons that just figuring out where to begin is tough . Should you go with an account with a specialized FX trading brokerage, or should you open an account at a brokerage that allows you to trade stocks, options, exchange traded funds, and futures ? As if this decision isn’t sufficiently overwhelming on its own , you then need to decide whether to use your FX trading as a speculative tool or a hedging tool, long term or short term, aggressive or conservative, etc . Many things must be considered before you start out.

Although the above questions alone can start a big response , for clarity’s sake we’ll look at the basics in this article. The best way to get comfortable with the FX trading world is probably to just take the plunge and open up an account at a brokerage that specializes in this field . Wondering what broker to choose ? Well, that is an entirely different subject altogether and well beyond the scope of what I’m prepared to go into here . Just ensure you do some research before you deposit any money !

Now that your Automatic Forex Trading is operation and you have things running, you need to learn more about what you are involved in . With our example, we’re suggesting that because you opened your account with a broker specializing in forex trading, you’ll begin by trading cash or spot contracts. Without turning this into something complicated, this just means you are trading the current price as it is in the market at that moment . If 1.3200 is what you see the Eur/Usd pair is trading on the screen then Euros can be sold against US Dollars at this rate or at this rate you can purchase US Dollars and sell Euros . There is a small spread built into that price you’re seeing and this is the cost of entry when you take the trade . Be sure to choose a broker that has a spread of between 2-3 pips on Eur/Usd and not more than that .

Because speculating can at times be pretty tough, even for professionals such as myself , let’s stay that you want to start with the goal of hedging the United States stock portfolio. Because your stock portfolio is in U.S. dollars you could make money when the stocks go up in terms of the US Dollar but that gain could be cancelled out by a weakening US Dollar . So, you want to hedge that aspect of your portfolio and have decided to buy Euros against US Dollars in your brokerage account . This way as your stock portfolio is suffering when the US Dollar weakens against the Euro , your forex gains that you are experiencing as a result of buying Euros are serving to hedge your downside risk .

The above example is one of the most easy ways that you can add a automatic forex trading component to your portfolio . Other articles in the future will discuss more about global market speculation methods that are more advanced, but this is a great place to start .

When I talk to people who have not tried automatic forex trading before, even those involved in futures, stocks, and bonds , I’m reminded that even the basics of this global market need to be explained . So let’s take a good look at pairings, what they mean, and what the main and cross pairings happen to be .

What is a currency pair ? Let’s start with the Eur/Usd which has against the Euro, the US dollar as the bas currency within this pair. What is the meaning of the pari when I have a price quote that is 1.3200 on the Eur/Usd? To remember this answer the easy way, do this: take your currency pair base , the US dollar here, look at the price quote of 1.3200 , then you say, " 1.3200 US dollars are needed to purchase 1 Euro." This is what that price quote really means. Maybe you look a few weeks later at the price quote and now it is 1.4000 then that means the US Dollar as gotten weaker against the Euro since it now will take you 1.4000 US dollars to purchase just one Euro. Of course , if you find the price quote is 1.2500 down the road, then the US dollar is getting stronger because you’ll only need 1.2400 US dollars to purchae a Euro.

Automatic forex trading can be really tough when for example you see a price quote on the Usd/Jpy pair for 100.50 . Well, using our method from above , take the Jpy base currency take a look at the price quote that is 100.50 and this is the amount of Jpy it takes to purchase one US dollar. That is fairly simple, isn’t it ? In the future you shouldn’t have difficulty understanding a pair and its price quote when looking at a quote window or even a chart screen.

Now that we know how to read the price quotes , what are the main pairs and cross pairs ? You’ll find the main pairs happen to be the strongest world economies paired versus the US dollar. Just a few pairs considered main pairs include the Mzd/Usd, Aud/Usd, Usd/Jpy, Gpb/Usd, and more. Cross pairs do not involve the US dollar which includes the Gbp/Jpy and the Eur/Jpy to name a couple that are popular.

Hopefully you’ll be helped by this article if you’ve been feeling intimidated the automatic forex trading landscape in the past . You may need a bit of time to get used to this with all of the different currency pairs, time zones, and economies . Once you begin realizing how the pieces all go together it really is not too hard – and to many, this is a whole lot of fun!