Friday, April 25, 2008

Forex And Forex Trading Related News

Forex Trading System Article Of The Month

forex trading machine

Forex Trading System: Choosing between Mechanical and Discretionary Systems

There are basically two types of Forex trading systems, mechanical and discretionary systems. The trading signals that come out of mechanical systems are mainly based off technical analysis applied in a systematic way. On the other hand, discretionary systems use experience, intuition or judgment on entries and exits. But which one produces better results? Or more importantly, which one fits better your trading style? These are the answers we will try to answer on this article.

We will first analyze the pros and cons about each system approach.

Mechanical systems


This kind of system can be automated and backtested efficiently.

It has very rigid rules. Either, there is a trade or there isn't.

Mechanical traders are less susceptible to emotions than discretionary traders.


Most traders backtest Forex trading systems incorrectly. In order to produce accurate results you need tick data.

The Forex market is always changing. The Forex market (and all markets) has a random component. The market conditions may look similar, but they are never the same.

A system that worked successfully the past year doesn't necessary mean it will work this year.

Discretionary systems


Discretionary systems are easily adaptable to new market conditions.

Trading decisions are based on experience. Traders learn to see which trading signals have higher probability of success.


They cannot be backtested or automated, since there is always a thought decision to be made.

It takes time to develop the experience required to trade successfully and track trades in a discretionary way. At early stages this can be dangerous.

Now, which approach is better for Forex traders? The one that fits better your personality. For instance, if you are a trader that finds it hard to follow your trading signals, then you are better off using a mechanical system, where your judgment won't play an important role in your system. You only take the trades that your system signals.

If the psychological barriers that affect every trader (fear, greed, anger, etc.) puts you in unwanted scenarios, you are also better off trading mechanical systems, because you only need to follow what your system is telling you, go short, go long, close a trade. No other decision has to be made.

On the other hand, if you are a disciplined trader, then you are better off using a discretionary system, because discretionary systems adapt to the market conditions and you are able to change your trading conditions as the market changes. For instance, you have a target of 60 pips on a long trade. But the market suddenly starts trending up pretty strongly, then you could move your target to say 100 pips.

Does it mean that trading a discretionary system has no rules? This is absolutely incorrect. Trading discretionary systems means that once a trader finds his/her setup, the trader then decides what to do. But every trader still needs certain rules that need to be followed, such as the size of the position, conditions that have to be met before thinking to get in the market, and so on.

I am a discretionary trader. The main reason I chose a discretionary system is that my trades are based on price behavior, and as you already know, the price behaves similar to the past, but it is never identical, therefore the outcome of every trade is unknown. However, I do have rigid rules on my system, certain conditions have to be met before I even think in getting in a trade. This keeps me out of trouble, once my setup is present and in accordance with the rules I have set, then I closely watch the price behavior and finally decide whether it is a good opportunity or not.

Whether you choose to be a discretionary or a mechanical trader there are some important points you should take in consideration:

1. You need to make sure the Forex trading system you are using totally fits your personality. Otherwise you will find yourself outguessing your system.
2. You also need to have some rules and most importantly have the discipline to follow them.
3. Take your time to build the perfect system for you. It's not easy and requires time and hard work, but at the end, if done correctly, it will give you consistent profitable results.
4. Before going live, try it on a demo account or even on a small account (I will go for the second option, since psychological barriers will be present.

Additional Info On Forex Today

forex software

AUD/JPY is one of the important pairs influencing AUD after Dollar, Euro and Pound. Usually falling AUD/JPY is good for Yen Bulls as well.
Check out the first commercially available Stock Trading Robot Which Earns $346.77 Per Week

learn forex

For position traders, the basic bias of the market in his trading time frame, the liquidity situation of the market in that time frame, and the size of trading positions must be all taken into account when exercising stops, be it based on tech levels or a certain sum of money or a percentage of a total equity. It is a must but also it is form of art like trading itself. And every trader must develop his own unique style of using stops. But unfortunately, all this can be learned only by paying a certain amount of tuition fee to the market.

foreign exchange converter

Unquestionably, the foreign exchange or Forex market is the largest financial market in the world. This results in fair prices and narrow spreads. There are no restrictions to sell currencies short, unlike stocks, which have to be sold short on an up tick rule. This means that as a Forex trader you can make money just as easily in rising and falling markets. Stock liquidity is reduced after regular trading hours. Foreign exchange trading does not exhibit this problem because the currency market is open around the clock.

Forex Trading System Stories

European Mid Morning Update 23rd April 2008

Wed, 23 Apr 2008 03:43:57 -0400
Energy and food prices continue to strangle consumer spending power

Releases from Europe:

March Forecast Actual
French Consumer Spending (MoM) - 0.3% - 1.7%
French Consumer Spending (MoM) +2.8% +1.2%

French Manufacturing PMI (P) 51.6 51.5
French Services PMI (P) 56.8 54.0
German Manufacturing PMI (P) 54.8 53.6
German Services PMI (P) 51.5 54.6

More evidence of a consumer squeeze as French consumer spending crashed by a rather alarming -1.7% in February. Consumers appear to be delaying replacement of their cars which were down -9.1% over the month. Given that the figure will include spending on fuel and food, both of which continue to defy Noyer’s disbelief, the actual spending on other goods will be a larger negative number…

Manufacturing PMI’s took a tumble also, possibly another reflection of reduced consumer demand… Certainly given the strength especially of the German industrial production numbers the figure here was a bit of a damp squid.

The following economic releases are due today:

Italian Retail Sales (MoM) - 0.1%
Italian Retail Sales (YoY) +0.6%
Euro-zone Industrial New Orders (MoM) - 0.4%
Euro-zone Industrial New Orders (YoY) +5.7%

Euro-zone Manufacturing PMI (P) 51.6
Euro-zone Services PMI (P) 51.4
Euro-zone Composite PMI (P) 51.5

The Bank of England minutes are due to be released

Australian inflation rises further. Of course, no prizes in guessing that energy prices fueled the rise. Automotive fuel was up by a hefty 5.4% and even more in pharmaceuticals – a massive 13.1% gain.

It brought the headline RBA measurements a +4.1% YoY rise in the trimmed mean and a +4.4% rise in the weighted mean. This is well above the RBA’s 3% upper band.

It boosted the Aussie Dollar to the next resistance point, and a 24 year high at 0.9515 as traders anticipate higher interest rates again.

However, with the recently acquired wisdom that lower interest rates are unlikely to bring any real benefit to the economy equally the argument for higher interest rates appears equally valid. If there is nothing central banks can do to stop inflation, then why push up interest rates and squeeze more life from the consumer and business?

Japan saw a similarly poor number in their trade surplus, now down 30% over the past 12 months. Of course, no prizes in guessing that energy prices fueled the rise in imports. Overall imports have risen by 11.1% YoY while export growth has dipped to +2.3% YoY as U.S. demand fell again for the 7th consecutive month.

France sees its consumer slashing their spending habits with car purchases taking a particularly heavy hit.

Higher energy and food prices are sucking the life blood of just about all industrialized economies. Spending is being diverted to pay for transport costs and food. An ever decreasing amount is left over to pay for real economy products.

Yesterday light sweet crude reached a high of $119.90.

However much central banks lower rates there seems little they can do to get a bang out of their bucks…

This is a global phenomenon and not restricted to the U.S. but it is the Dollar that takes the beating. The conditions are right for a reversal in the downtrend but there is little interest in bucking the trend.

Note important support and resistance areas:

Res: 103.92-05 1.6110-56 1.0161-07 2.0047-69
Res: 103.27-59 1.6042-71 1.0065-82 1.9940-97

Spt: 102.32-66 1.5932-45 0.9966-96 1.9804-41
Spt: 101.50-77 1.5840-86 0.9846-70 1.9716-44

See Also


reddit BlinkList


Post a Comment

<< Home