Defining a Basic Forex Configuration System

By: Terry Allen
To begin achieving Forex success, you first need to define a methodical and easy-to-follow plan that will help you, especially if you are a novice, maximize profits and minimize risk before risking a single dollar on live trading. In addition, you need to realise that, in the same way as a doctor or lawyer, you will not become a Forex Expert overnight. So, you must move away from this mindset as quickly as possible. You must learn to adopt a more scientific and business-like approach to Forex.

Here are the basics of a methodology or trading plan that will enable you to do just that and its concepts will be further enhanced during this course. This is a standard process used by many experienced traders. This methodology will show you how to evolve a low risk trading system to a high one using a well-developed iterative process. First, you need to define a trading system which will be used with specific operational configurations.

The main aim of the trading system is to identify trends, as early as possible, in order to maximize profits whilst, at the same time, avoiding false signals and blips. You will need to use the concepts of Forex Analysis to help you select the functions that will be incorporated into your trading system. This topic will be discussed in more detail later in this course.

You can commence the plan by establishing a demo trading baseline that will be used to compare all future trading systems. A trading system, configured to low risk, will be used for this purposed and will have the following settings:-

1 lot traded only, only 2% of your total margin will be traded, only one currency pair will be traded at any time and only one trade will be active at any one time.

You need to realise quickly that there is big difference between risking 2% and 10% of your total account per trade. Ten trades, risking only 2% of the balance per trade, would lose only 18% of your total account if all were losses. Under the same conditions, 10% risked would result in losses exceeding 60%. Clearly, the first case provides much more account protection resulting in an improved length of survival. You must appreciate quickly that the most successful Forex traders are first skillful survivors and second big earners.

This article is part of a course that is intended to enhance these concepts further.

Dollar Bullish Trends Gain Momentum

The dollar ended this week with the highest rate versus the European common currency after positive reports in the U.S. suggested that the North American economy�s pace of recovery is accelerating, attracting investors to dollar priced assets. After a report indicating better than expected figures for retail sales and an increase in consumer sentiment were published in the United States, the dollar gained versus most of the 16 main traded currencies reverting a losing streak this week that set it to the lowest level in 2009 in the beginning of December. The New Zealand dollar was one of the very few currencies that found support to gain versus the greenback as the South Pacific nation is likely to start a series of interest rates hikes as suggested by the Reserve Bank of New Zealand, which would be following its neighboring Australia, the first wealthy nation to raise borrowing costs after the global slump. A part of analysts affirm that the dollar bearish days are over, as positive reports are likely to continue to be published which will lead the Federal Reserve to raise borrowing costs sooner than previously expected, causing a massive capital inflow to the U.S. and recovering the greenback�s attractiveness in foreign-exchange markets. EUR/USD closed the week at 1.4611 as of 15:43 GMT from a previous rate of 1.4733 on Thursday. GBP/USD traded at 1.6260 from

Euro Suffers as Dubai Situation Worsens

The single European currency approached the yesterday�s minimums against the U.S. dollar and the other major currencies today as the bad news on the Dubai�s troubled debt worsened the global financial outlooks. The demand for the high-yielding assets, including the riskier currencies (such as the euro), decreased after the Financial Times reported that the creditors of one of the Dubai World�s branches are adding pressure on the debtor. The report of the decreased industrial production in France in October has also spurred euro�s decline. Month-over-month the industrial production declined by 0.8 percent in France, while a growth by 1.6 percent was expected by the market participants. Any disappointment in the fast economic recovery is going to hurt the euro. The currency also decreased to the lowest level against the Australian dollar since November 18, as the employment increased 6 times faster than expected in Australia. But despite the other fundamental factors, the currency analysts mention Dubai situation as one of the main reasons for the current euro�s drop, which runs since December 4. Carry trades are at risk and they are mostly based on selling the dollar and the yen and buying the euro. EUR/USD went down from 1.4738 to 1.4711 after reaching as low as 1.4685 today. EUR/JPY gained slightly � from 129.68 to 129.73, while EUR/AUD decreased from 1.6194 to 1.6078 or 0.7 percent.