One mismanaged trade can be the ruin of any fortune — and often is. Investments can be a problematic prospect, especially for the average investor whose only aim in to grow his or her nest egg. Indeed, in some regards these investors are the backbone of the industry. That being said, they can also be some of its most dramatic victims.

For this reason alone, many go-it-alone investors prefer to add a new dimension to their investment strategy: time. To the uninitiated, this means they prefer to trade in futures. This means investors can utilize traditional commodities or E-mini index funds to leverage the projected value of commodities at some point in the future — hence the name.

Futures are not shackled to the whims and wishes of Wall Street — not directly, in any case. To that end, an investor can enjoy the privilege of round-the-clock trading via any global exchange. To be sure, the futures trader does not look to New York as much as he or she looks to the Second City, Chicago. The Chicago Mercantile Exchange is the mecca future traders turn to seek their fortunes.

It should be noted that although futures allow for greater investment flexibility, they require ready access to significant amounts of liquid capital. That is, they require access to cash — and lots of it. This is so because should your E-minis drop below the CME margin call, you will be required to ante-up, as it were. You can’t take your place at the roulette wheel unless you can afford to buy the placards, you see.

With a handful of E-minis, some commodities traders can reap a veritable financial whirlwind. What futures promise — and often deliver to the savvy strategist — is the potential for dramatic gains. Of course, this is subject to training and it would be in the best interests of the would-be futures traders to enroll in a futures trading course before embarking on too rigorous a trading regiment.

Heed the better part of your good sense and enroll in a reputable futures trading course prior to frittering away your hard-earned nest egg.

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Suppose you have the data and calculated the currency correlations of the major pairs. The correlation between GBP/USD and EUR/USD is 0.68. This correlation coefficient means both the pairs move in the same direction 68% of the time.

USD/CHF and EUR/USD have a correlation coefficient of -0.975 and is pretty close to (-1). It means both USD/CHF and EUR/USD pairs move in the opposite direction almost 97.5% of the time. It means if USD/CHF moves up, the pair EUR/USD will move down!

You have this information that tells you how much these pairs move in the same or opposite directions. You trade the pairs USD/CHF and EUR/USD at the same time by going long on both. You are in fact canceling both the positions.

If you make pips on USD/CHF pair, you will lose pips on EUR/USD pair and the two trades would effectively cancel each other. A savvy currency trader would go long on USD/CHF currency pair. At the same time he/she will go short on EUR/USD currency pair. So he/she will be shorting USD in both the trades. It is a way of diversifying the USD bearish investment.

Currency correlations can help you in making entry and exit decisions for each trade. Lets suppose GBP/USD starts showing volatility. The pair approaches a resistance level. You plan on going long if there is a breakout.

However, you notice on the charts that the other three pairs are not moving as much as the GBP/USD. EUR/USD is not moving up on the chart. USD/CHF is not moving down on the chart. USD/JPY is not moving down on the chart. This means that the move in GBP/USD is solely pound driven. The move maybe related to some news in the British economy.

Now you know that the move in GBP/USD pair is Pound driven. It is not US Dollar driven. You can take advantage of this information. Ignore the GBP driven move and dont enter into any trade. Wait for a later opportunity that involves simultaneous correlated moves of all the major pairs.

Take another example. Suppose you have entered a short EUR/USD trade. You want to know whether the pair will either proceed down towards your profit target or go against you and cause you to exit the trade with a small loss.

Your EUR/USD has broken the S1 support pivot level and heading towards M1. By looking at the pair EUR/GBP, you find that it has paused at its S1 support pivot level and is showing signs of reversing to the upside.

Knowledge of currency correlations can tell you if EUR/GBP breaks through the S1 level, you are poised for a profitable trade in this type of a situation, However, you should watch the indicators and exit before taking a big loss if it reverses and heads back to the upside. You might consider trading a basket of all the major currencies as you mature in forex trading.

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Forex day trading is a great way to make money and build your saving account. You should learn to day trade forex. But before you embark on your journey of currency trading, a few facts should be very clear. These facts should be the foundation of any forex trading system that you will use daily for day trading.

The first most important fact that you need to understand is that forex is not a get rich quick scheme. Skilled traders can and in fact do make money in forex trading however like any other occupation or career, success just doesnt happen overnight. Use this great formula for success: Practice+Patience+Persistence=Profits.

You should know that there is no substitute for hard work and diligence. Practice trading on a demo account. Pretend that virtual money is your own real money when you trade on the demo account. Do not open a live trading account until you become profitable on your demo account. Double you account first demo trading. You can only be successful if you stick to a system and a plan.

When you start trading forex, just choose two major currency pairs that you will trade in the start. It will become very difficult to keep tab on the all major currency pairs in the beginning. You should start with a major currency pair. The spread on the major pairs is the best and they are the most liquid. EURUSD pair is the most commonly traded pair in the currency markets and usually has the best spread because of its liquidity.

USDCHF is the most volatile pair among the major currency pairs. It is highly volatile and moves the most during the trading week. However, USDJPY moves a lot only on the news out of Japan. GBPUSD is the most stable and least volatile among the major currency pairs.

Follow and understand the daily forex news and analysis of the professional currency analyst. It is important to get a birds eye view of the currency markets and the news that affects the prices. It is also important that you know and understand what the key technical support and resistance levels are in the currency pair that you want to trade.

Support is the predicted level to buy. It is where the currency pair moves up on the charts. Resistance is the predicted level to sell. It is where the currency pair should move down on the charts.

Fortunately all the best forex news and analysis is available freely online. While you are reading the technical news and analysis, write down on a piece of paper what direction the analyst are saying about the currency pair that you are trading and the key support and resistance level.

Learn how to use technical indicators and always trade with stop losses. It is worth your time to be patient and learn how to use technical indicators on the charts that you will be reading shortly.

It is important when you are trading to be disciplined. Stick to a plan. Dont just trade your gut feeling. Depending on your risk capital and strategy, set your stop losses accordingly.

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You should know that day trading isnt investing. Nor is it gambling. But the lines between trading, investing and gambling can be thin. You should know where the difference is. You will be in a better position to follow your trading strategy and make more money. Avoid the trap of gambling! You will be in a better position to preserve your capital.

The difference between investing and gambling is the risk and return tradeoff. In investing, the odds are generally in your favor. However, it doesnt mean that you will make money. Some day traders end up gambling.

Investors, traders and gambler have one thing in common. They put some of their money on risk in the hope of getting a return. Remember, trading is a business. You should know about the potential risk. You should also know about the sources of your potential return, the better off you will be.

What is your reward? Your reward is that you get fair compensation for the risk you took. What is your risk? Risk is that you wont get the expected return. Risk is the probability of a loss. The riskier something is, the more chances of a loss.

The reason there is a balance between risk and reward is that financial markets are reasonably efficient. This market efficiency means that prices of securities reflect all known information about the companies and the economy.

Investing is the basis of modern day capitalism. What is investing? Investing is putting your money at risk to make a return. It is the way that businesses raise capital. Without investing the economy cannot grow in the long run. In investing, you buy stocks of companies for five to ten years that are good but have gone out of favor for the time being. Investing is always focused on the long term like 5-10 years.

What is trading? Trading is the act of buying and selling securities. Investors also trade but they trade only when they find a good opportunity. They expect that by investing they will give them a good profit in a few years time.

Traders look to take advantage of short term price discrepancies in the markets. Trading keeps markets efficient by creating short term supply and demand that eliminates price discrepancies. Speculation is related to trading.

A gambler puts the money on line in the hopes of getting a profitable payoff if a random event occurs. The probability of that random event occurring is usually very small. The odds are always against the gambler. They are in favor of the house. However, a gambler always believes that the odds can be beaten. He wants to win big.

Always remember, trading is not gambling. Traders who do not give attention to their strategy and its performance can cross over into gambling soon. They view the blips on their computer screen as a game that they can win. Soon they are trading as if they are in a casino with odds as bad as a slot machine. They start making trades based on emotions without any regard to the risk and return.

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Almost 90% of the traders in currency markets are speculators. Most of the investors start forex day trading as a speculating venture to make capital gains. Once you have made the positive decision to start currency trading, you need to choose the right forex broker. The right choice will greatly influence the success of the whole enterprise.

These days, the market is overcrowded with companies and banks offering online brokerage services to individual traders and investors to access the currency markets. It is not easy to make the right choice without a certain set of criteria. These criteria will mostly depend on the interests, preferences and means of each individual trader depending on his/her trading strategies and tactics.

What is the best method to choose the right forex broker? Compose a list of questions to ask the forex broker before making a final decision. The following are some of the suggested questions. You should ask the forex broker these questions before making a final decision.

What is the amount of the interday and overnight margin and corresponding leverage? Many good online forex brokers offer margin between 2-5%. They provide leverage ranging from 20:1 to 50:1. Higher margin requirement means lower investment efficiency.

However, beware of lower margin. It means that most of the time the forex broker will be against you as a trader and will do everything possible to prevent you from winning. You will face many trading problems with such a broker. It will become difficult for you to work under such conditions.

What is the minimum contract size offered? Now days, the standard contract size is a $100,000 lot. This contract size is quite affordable. This contract size also allows small individual investors to participate in currency speculation. It allows for reasonably effective money management with limited capital.

What are the requirements of minimum deposit? The investment and financial means of traders differ. It is common that many new traders dont have sufficient funds to open an account. In my opinion, the optimal minimum amount is $10,000 with 2% margin requirement. I think $10,000 is the required minimum amount corresponding to the forex market conditions.

What are the terms of setting and executing stop and limit orders by the forex broker? The ideal condition should be the execution of the stop and limit orders at the fixed price. This should be regardless of the market conditions, its speed and its direction. Some forex brokers provide this type of execution. Other brokers reserve the right to fulfill an order with slippage under unsteady market conditions mostly defined by the broker themselves.

The value of slippage depends on the current state of the market. It can fluctuate from a few pips to tens of pips. Although it is practically impossible to arbitrate the price received from the broker during the transaction. The slippage creates favorable conditions for the abuse of the trader by the broker.

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Gold is the ultimate global currency. At one time US Dollar used to be pegged to gold. But with the collapse of the Bretton Woods System, US Dollar was unpegged from gold.

Now US Dollar is only backed by the full faith and credit of the US Government. Most of the currencies in the world are free floating now. Many countries are also purchasing gold in the open markets as a hedge of their foreign reserves most of which are in US Dollar. In the present financial crisis with the global economy in recession, many investors are trying to take refuge in gold as the ultimate safe haven of their wealth from financial turmoil.

The Australian Dollar is known for its strong correlation with gold prices. Most of this is due to the amount of gold that Australia produces and exports. US Dollar has an inverse relationship with gold prices. When gold prices rise, US Dollar falls in value. This causes the currency pair AUD/USD to rise in value.

The opposite is also true. When US Dollar gains value, gold usually loses value and the pair AUD/USD depreciates. So when gold prices are rising, we can execute long trades on AUD/USD. Likewise, when gold falls in value, we can sell short AUD/USD currency pair. This relationship provides us with a method to take advantage of the fundamental factors that affect the currency markets. This relationship may be due to the fact that gold is considered to be the ultimate safe haven of their wealth by investors in times of financial crisis.

We now know that AUD/USD pair reacts strongly to gold prices. How do you follow gold in currency trading? We will trade AUD/USD following gold. You should use RSI (Relative Strength Index) as the technical indicator to trigger the trade. If you have read the previous article on how to follow oil in currency trading, I had talked about using the CCI (Commodity Channel Index) to trade USD/CAD pair.

Why is that we are now using RSI instead of CCI when both gold and oil are commodities. It all comes down to how quickly the two indicators react to volatility. CCI gives a quicker signal which is good for relatively less volatile pairs. On the other hand, RSI gives slower signals. This is ideal for more volatile pairs like AUD/USD.

Use a moving average to confirm if gold is in an uptrend or a downtrend. Use the seven periods RSI on AUD/USD chart! Watch when it enters one of its reversal zones, then move back out of the reversal zone in the same direction as the gold is trending.

Enter a long trade on AUD/USD if the gold prices are rising and the RSI is crossing back above the 30 line. On the other hand, enter a short trade on AUD/USD pair if the gold prices are declining and the RSI is crossing below the 70 line.

You should set a limit order of 200 pips. You should also put a stop loss order of 50 pips for the trade. This risk to reward ratio is good and is (=50/200). The chances are you are going to make $2000 profit (200 pips is equal to $2000 on a standard lot) if the trade goes as you had anticipated. And if the trade does not go in your favor you should be prepared for a $500 loss (500 pips equal $500 on a standard lot). It is not uncommon to have a trade go against you. Only to find yourself right back in trade that goes your way after sometime.

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