How do you short a currency?

April 28, 2014 at 10:33 pm

Answer by Dave Hughe:

There are basically 3 ways to short a currency:
1. You can sell a contract for that currency in a Futures Market.
2. You can sell an index of that currency. For example, if you believe that the US dollar is going to weaken, you can sell a US dollar index, which measures the value of the USD against a basket of currencies: U.S. Dollar Index
3. You can sell that currency against another currency in the Forex market.

In Forex all currencies are traded in pairs. Each pair’s name is an abbreviation of the names of its currencies. There are many different pairs but the main trading activity is concentrated in the following:

EUR/USD   –  Euro versus US dollar
GBP/USD   –  British Pound versus US dollar
USD/JPY    –  US dollar versus Japanese yen
USD/CHF   –  US dollar versus Swiss franc
USD/CAD  –  US dollar versus Canadian dollar
AUD/USD  –  Australian dollar versus US dollar
NZD/USD  –  New Zealand dollar versus US dollar

There are also pairs called crosses such as:
EUR/JPY    –  Euro versus Japanese yen
EUR/GBP   –  Euro versus British pound
EUR/CHF   –  Euro versus Swiss franc

The list goes on.

The price of the pair states how much the first currency is worth in the second currency denomination. For example, if the price for EUR/USD is 1.3500, this means that one Euro is currently worth US$1.35.

You are always long or short one side of the pair against the other side of that pair. When you buy the EUR/USD pair this means that you simultaneously buy the Euro and sell the USD. When you short the Euro, you basically sell the Euro and buy the USD.

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What is the link between technical analysis and psychology?

April 27, 2014 at 7:28 pm

Answer by Dave Hughe:

The whole idea of technical analysis was based on the premise that most of the time people would respond in the same way to similar situations. And that these similarities of responses are reflected in patterns on charts.

Whether this is true or not is a matter of opinion. But some chart patterns and other forms of technical analysis repeat themselves way too often for simple coincidences.

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How can one be a good forex trader?

April 27, 2014 at 4:47 pm

Answer by Dave Hughe:

The same way that one can be good at anything else. How does one become a good plumber or doctor or athlete? By learning and practicing. That is the only way really.

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Fr., Apr. 25 End of Week Results: +66 pips (Total: +3,174 pips)

April 25, 2014 at 5:51 pm

Just another short slow week after the long weekend. The result is +66 pips of profit and we are holding AUDUSD over the weekend. The up to date  results since the start of this blog are as follows:
Week 1: +231 pips
Week 2: – 19 pips
Week 3: +415 pips
Week 4: +366 pips
Week 5: +137 pips
Week 6: +150 pips
Week 7: + 20 pips
Week 8: +155 pips
Week 9: + 23 pips
Week 10: – 149 pips
Week 11: +465 pips
Week 12: +126 pips
Week 13: + 50 pips
Week 14: +306 pips
Week 15: +201 pips
Week 16: + 11 pips
Week 17: +325 pips
Week 18: + 80 pips
Week 19: – 133 pips
Week 20:+ 380 pips
Week 21: – 32 pips
Week 22: + 66 pips

Total: +3,174 pips

AUDUSD reached 1st target: +66 pips profit

April 24, 2014 at 9:21 am

The AUDUSD short position opened on Apr. 17 (see the original post) reached its first profit target for a +66 pips of profit. The stop-loss orders for the remaining 2 units are moved to their break even points now.

AUDUSD trade blog

Th., Apr. 24 Trade signals

April 24, 2014 at 9:05 am

This morning there were two signals. The GBPUSD news trade was cancelled due to the lack of action. The AUDUSD short position is open.

Forex Signals Apr24


Wd., Apr. 23

April 24, 2014 at 8:58 am

There were no trades on Tuesday. The USDCAD position got closed at break even point. See the chart below:

USDCAD trade chart

Our AUDUSD short position is in the money now

April 23, 2014 at 2:08 am

The AUDUSD dropped like a stone on the lower than expected CPI number. The pair broke through the support line and made a new low on a daily chart falling below the psychologically important resistance at 0.9300. It might take time to break through that number though.

Our  short-position position opened on Apr. 17 is in the money now (see that post here: Th., Apr. 17. The first profit target is just above the daily 200MA at 0.9262.

Tu., Apr. 22 Forex Trade Signals

April 23, 2014 at 12:30 am

Today there were 2 signals issued (see below). Later on the USDJPY signal was cancelled. The USDCAD position was open but it went nowhere and will be held overnight.

FX trading signals Apr22

What is the difference between stock trading and gambling in a casino?

April 20, 2014 at 5:50 pm

Answer by Dave Hughe:

All the talk about 50/50 odds in the stock market or any other financial market for that matter is simply NOT TRUE. Just the same as calling the stock market a zero-sum game.

The broker's commissions and other charges shift the odds against the trader. Yes, your chances of correctly guessing the direction of the price move are 50/50 but you have to pay commissions on the way in the trade and on the way out. These commissions will eat part of your profits when you win and add to your losses when you lose.

Therefore, if you will be right 50% of the time and your average win will equal your average loss, you will still lose money. How is that for a 50/50 chance?

As for the difference between gambling in a casino and trading, there is not much considering the fact that the odds are stack against you in both cases.

The difference lies in the approach. If you calculate your risks and shift the odds of winning in your favor, you can win on average in both endeavors.

There are people who consistently beat casinos and there are traders who consistently make profits in financial markets.

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