The Euro Zone Economy and the Euro

Where the health of a country’s economy generally helps determine its value when compared to that of another currency, in the case of the Euro it is the economic health of a number of countries that has to be taken into consideration. For instance if Germany was experiencing a strong economic period while Greece may still be weak, the value of the Euro would probably suffer little damage as Germany, France and Italy make up two thirds of the Euro Zone GDP. This means that when monitoring the statistics of the whole EU with the help of Eurostat, it is important to gather the relative information from France and Germany as separate identities in order to get a better perspective of how the currency is actually performing overall.

The same theory applies in Australia as the Australian dollar represents all Australian states, the resource rich economically sound states and the less endowed. A similar analogy can be said of the US dollar representing the whole of the USA. In world ratings, the Euro is only second to that of the US dollar, it is the second most traded currency and either a primary or reserve currency in many other countries.

The Euro and Manufacturing

Apart from Norway, the Euro Zone is mostly an exporter of industrial products to the world. Its manufacturing exports are a larger proportion of its GDP than that of the US or Japan. It is therefore largely an importer of commodity goods a factor in determining its economic health at any one time which leaves the most significant part of its economy as manufacturing and services.

Forex traders need to take into account that the Euro Zone’s main trading partners are other European countries, therefore the value of the Euro is generally dependant on other nations such as the UK, Russia and Switzerland.

The biggest benefits to be gained by trading in foreign exchange rates, besides the possibility of making a comfortable sum of money, is that you are trading in the economies of different countries with diversified strengths such as the Euro, and not that of individual companies or corporations.

Teresa writes about forex trading online for Forex Trading Finder where you can compare foreign exchange brokers to get the best forex reviews.

Does trend trading work?

The short answer is, yes it does. This is why it is one of the most widely used of all trading strategies. Institutional as well as individual traders use trend trading widely. However, the longer and more detailed answer is that you have to do what you’re doing for it to work for you. You need to understand your own motivations and understand why trends are important, and how they work.

Trading with respect to a trend produces far greater opportunities to make money or to hedge against loss than trying to make guesses about what seems to be random stock price movements or market movement. However, what you have to be cautious about is the fact that for particular assets or market segments, trends aren’t that common. There are some stocks or industries where there are no clear trends over 70% of the time.

Trend traders have to have discipline and they must have systems in place so that they aren’t shooting “from the hip”. Trend traders may use tools like A-D Lines, the GMMA, and the EMA. But investors who don’t use these tools may rely on more complex ones and try to pick out individual stocks based on those tools. The problem there is that you must have a well-developed technical prowess with the financial markets to be successful with, or even properly understand, those more complex tools. Trend trading allows you to be successful with much more basic, elemental tools and trading techniques.

90% of the biggest opportunities for profits in the market only occur 10% of the time, and these almost always occur within a defined trend. When you use trend trading, you don’t get caught up in volatility, the “heat of the moment”. You use a rational approach to view, somewhat from a distance, where others are driving the market or the stocks that you are trading in or considering trading in. You are only going to hold a position until you see that it is going to trend in the other direction, and then you get out–hopefully with some profit-taking.

How can you assure that trend trading will work for you?

*Pick just one stock or one segment of stocks and focus on them. Don’t spread your attention too thin when it comes to trading trends.

*Don’t be too quick to get out of your position. Know your time horizon and try to hold your position as long as you possibly can with respect to that horizon.

*Also, don’t be too slow to close out your position. Use the system, not greed.

*Don’t alter your time frame. Once you have selected it, commit to it. If it doesn’t work out, change it the next time you enter into a position.

Learn how you can get 6% monthly returns in just 5-10 minutes a night after the markets have closed by spotting trends with this low risk trading strategy.

http://www.youtube.com/watch?v=QnXXi7yI6IA

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Now this is all very important to trend traders because the strategy in and of itself is already contrarian. It goes against the rule of “buy low and sell high”. You are using trend trading to profit whether or no the market is up or down and even whether or not the stock is going up or down. Rather than trying to anticipate what the stock or the market are going to do based on fundamental analyses, you as a trend trader are making educated guesses about the what’s going to happen based on real-time first-hand observations. You must be keenly aware of volatility, and how much money you wish to risk. As common sense may thus dictate, using software programs can be of great assistance to you for making these sometimes tricky calculations.

Likewise, trend trading systems are supposed to be pre-programmed, in a sense. You are doing all that you can to remove emotion from the equation. You want to enter into a position knowing your exact time horizon in advance. You must also be ready with key stop-loss orders in case it turns out that you have made a bad assumption or a surprise in the stock or that stock’s market sector leads to quite a different turn of events with its trending than you anticipated. And then there’s the fact that you are supposed to follow a trend after it is already in motion, which means that you have to know how to spot them, picking them out from the “crowd” and the “noise” of the trading masses.

So, to sum up, for trend trading you need to consider all of the following:

*Stock price

*How much you are going to risk

*Your time horizon

*Your exit strategy

*The placing of stop-loss orders

It’s also quite important that you pick one stock or one sector and stick with it, having an intense focus upon it. A trend trading software program, which does not require food or sleep and which is not prone to lapses in attention, is an ideal tool for getting this focus in place for you and feeding you the data that you need. Use software programs to help you with all of your finer calculations so that you can capitalize on trends and not worry about your emotions getting in the way.

Click Here For Our #1 Recommended Trend Trading Software

Trend trading strategies are fundamentally different from those of the day trader, however. While a day trader is trying to capitalize on volatility, the trend trader is trying to make non-volatile decisions. A trend trader may hold a position in a stock for weeks, months, or even a year or so. Trend traders are interested in liquidity, not volatility, for the most part.

What are the strategic underpinnings of the trend trader? Why is this a superior trading strategy to day trading for many, many people?

*Trend trading does not require minute-by-minute market monitoring.

*Even short-term trend trading is not as stressful as day trading.

*Trend traders can get paid stock dividends as an added bonus.

*Trend trading allows for more patience, which means that changes that take place in the more-distant future can be capitalized upon.

Short-term trend traders can adjust their time horizons accordingly with their next entered-into position if they sense the need to do so.

However, no system is perfect, and trend trading does have some strategic pitfalls that must be accounted for.

*A day’s good news can be wiped out overnight or the very next day, which can be disheartening and frustrating, and if your time horizon is short-term it can be a profit-killer.

*You have to be very astute about your stop-loss orders. Screwing these up can cost you a bundle of money.

*The longer your trading horizon, the more opportunities for profits you have but the more risk you run of losing focus and missing the golden opportunity.

Some people use a variant on the theme of trend trading–counter-trend trading. This is a favorite method of the contrarian investors, whose philosophy is that to be successful you must always do the exact opposite of what the vast majority of other investors are doing. This strategy involves applying the “buy low-sell high” strategy to trend trading. So an upward trend is a sell signal, whereas a downward trend is a buy signal to them.

So, trend trading strategies differ pretty significantly from day trader strategies, even in the short term. This needs to be kept in mind at all times.

One of the most often used trend trading systems out there is the GMMA, or the Guppy Multiple Moving Average. With the GMMA, the trader puts together two different groups of moving averages that have different time periods.

One of these groups is quite often used by traders with a short-term horizon. The number of days in their time horizon is, most of the time, one of the following: three, five, eight, 10, 12, or 15. For those who are involved with long-term investing as trend traders, they use time frames that consist of 30, 35, 40, 45, 50, or 60 days.

Traders use this relationship between these two different groups of moving averages for determining whether or not the outlook of the short-term traders squares with the long-term traders. It is thought that this cross-checking enables greater objectivity and, therefore, makes sure that the traders aren’t relying on their emotions to make their decisions.

Changing trends get identified by the point where the two different groups of moving averages intersect. A bullish trend means that the short-term MAs are above the long-term MAs, while of course the opposite is true in the event of a bearish trend: the short-term MAs are below those of the long-term MAs.

Trend traders may also use the Exponential Moving Average, or EMA. With this tool, the trader places more weight for decision making on the latest moving average, although he pays attention to all of them within his time horizon. So EMA also gets called the “exponentially weighted moving average”. An EMA responds faster to recent price changes than does a simple MA. The 12-day and 26-day EMAs are the most widely used short-term averages; they get used for producing indicators such as the MACD (moving average convergence divergence) and the PPO (percentage price oscillator). Long-term trend traders would look to the 50-day and 200-day EMAs for their signals.

For trend trading, there also needs to be risk management in place in the system. The simplest way of managing risk is to use the 2% rule. This very simply means that you as a trader take the value of your investment account or portfolio and calculate what 2% of it is. This is always the largest amount that you will invest into trend trading at any given time. The 2% rule keeps you from losing your shirt and your house with your investments. If you make money, you add that to your total and can risk more and more. But if you lose money, you don’t lose that much compared to your total money, plus you keep diminishing your total investment until you start earning more again.

Learn how you can average 6.43% monthly returns in just 5-10 minutes a night after the markets close.

By “trend” we mean that the stock is moving in a particular direction without much back-and-forth (that is, up-and-down) movement. A trend trader is assuming that the stock in question is going to continue in its particular direction for a significant enough amount of time to make it worthwhile to invest in that momentum and profit from it.

What that significant time frame is all depends on the trader in question. In fact, that time frame can be as short as, say, 15 minutes or as long as a few months. But however long his chosen time horizon is, the trend trader will remain in the position he opened until he feels that the stock has reached its resistance and is about to reverse its trending. He then closes his position and takes profits.

Clearly, the great risk with trending trading is that the wrong assumption has been made. This would mean that the stock is not going to continue in its particular direction, at least not for a significant amount of time. If there is too much volatility, it can be hard to read a trend, or easy to misread one (see one that doesn’t exist).

Trend trading is one of the most widely used of all stock and options trading strategies. Institutional fund managers routinely use it to try to get the biggest gains for their clients (and the biggest fees or commissions for themselves at the same time). The most commonly used tool for trying to spot these trends is the A-D Index, or the Advance-Decline Index. The A-D Index represents the total of the difference between the number of advancing securities and the number of declining securities. The simple formula that is used to calculate it is:

(Advances – Declines) + Previous Advance/Decline Index Value

An “advance” simply means that a stock has ended the last trading session up for that session, while a “decline” is the opposite. Traders follow these sessions and how they ended up by plotting an A-D chart, and this creates an “Advance/Decline Line”. In this way, they seek to avoid being taken in by any day-to-day market mood swings–either too much greedy enthusiasm or too much unwarranted fear.

It’s pretty easy to interpret the A-D Index or Line:

*Market down but A-D up means strong uptrend
*Market down plus A-D down means weak uptrend
*Market down plus A-D down means strong downtrend
*Market down but A-D up means weak downtrend

So, trend trading is a way of seeking to make money from a rational approach to an irrational environment. Other people create the trends, and then as the trader you simply leverage them for your gain.

Learn how you can get 6% gains each month in just 5-10 minutes a night taking advantage of trends and ETF Trend Trading.

That doesn’t mean I don’t like risk.  In the real world, I’m an entrepreneur and taking risks comes with the territory.  It doesn’t bother me.

However, I feel like there’s a big difference between me and people gambling in Vegas.  I’m able to stack the odds in my favor.  In Vegas, you close your eyes and hope lady fate is feeling generous that day.  To me that just seems stupid.  I’d rather not take risks where the result is completely up to chance.

So what does this have to do with day trading?  Everything.  Did you know that only 5% of people doing day trading ever make any money?  Most people lose money and some get completely wiped out when they try it.  Why?  They’re not stacking the odds in their favor and they’re taking big unnecessary risks.

Low Risk Day Trading Strategies

So if you’d like to join the land of the 5%, let me give you a few low risk day trading strategies you can use to make excellent returns (about 12.8% per month – that’ll more than quadruple your money in a year)

1) Use Multiple Time Frames

To get a clear picture of what’s happening in the market, you’ll want to make sure you’re looking at multiple time frames.  As an example, let’s say you’re looking 5 minute time frames to enter your trades.  You’ll also want to check out 30 minute or 1 hour time frames to get an idea of where the market is generally headed.

2) Cut Your Losses

The mantra of the day trader should be “live to fight another day.”  That means that you need to put a stop loss in place on every trade you do otherwise you’re playing a dangerous game of Russian roulette with your money and some day it’s going to wipe you out.

You’re going to have trades where you lose money, especially if you’re day trading.  Just don’t allow any single loss to deal a fatal blow to your entire portfolio.

3) Trade with the Trend

Say it with me.  “The trend is your friend.”  The trend is your friend.  This tactic of following trends has created many millionaires and I can’t even tell you how many books have been written on this topic.  Just visit Amazon and check a few of them out.

Learn how to use trend trading to get 12.8% returns per month with day trading or 6.43% monthly returns in just 5-10 minutes a day after the markets have closed by getting this free trend trading pdf report.

Low Risk Trading

When it comes to trading strategies, it seems like just about everybody has their own little scheme for getting massive returns.

Heck, just do a search online and you’ll find people claiming to have the secret to getting 500%, 600%, even 1000% yearly returns.

All you need to do is give them a bunch of money and they’ll reveal their secrets to you.

If you dismiss the outright scams, you’ll find that the ones that promise those kind of returns do so at dramatic risk to your entire portfolio.  Sometimes your exposure can be 10 or even 20% of you’re entire portfolio.

If you have a few losses in a row (and every system will at some point no matter how good it is), you could find yourself wiped out.

Let me give you an example of why you really need to stick to low risk investing strategies and keep your exposure at a minimum.

Let’s say you have $30,000 in your account and you have a few bad trades and your account is reduced to $18,000.

You’ve just lost 40% of your account.  What percentage of a return do you need now to get back to even?

The typical answer is, “Well, I lost 40%, I have to make back 40%.”

Wrong!

Since you lost $12,000, you now have a lower base of money to work with so undoing that $12,000 loss requires you to get a 66.6% percent return on your money just to get back to even.

Remember, you are going to have losing trades and no matter how good your system is, there will be times where you will have multiple losers in a row.

Here’s a breakdown so you can see just how much you’ll need to get back when you lose a percentage of your account.

Drawdown  % To Get Back To Even

10%       11.1%

20%       25%

30%       42.8%

40%       66.6%

50%       100%

60%       150%

70%       233.3%

80%       400%

90%       900%

Are you starting to see why professional money managers are only willing to risk at most 2% per trade and more often it’s .5% or 1%?

Even if you have 10 consecutive bad trades, if you’re risking 1-2% of your account, you’ll be down about 20%.  A good trade or two can make that up.  Beyond that, however, and you’re entering risky territory.

As far as low risk trading goes, there is one system that I recommend above all others.  It takes only 5-10 minutes per day to do after the markets have closed, and averages a 6.43% return each month.  (With monthly compounding, that’s over 100% a year.)

It’s called ETF Trend Trading, and it’s really an amazing system and definitely a low risk system.

Here’s an interesting piece of trivia.  Warren Buffet became the world’s richest man by averaging a compounded annual return of 22%.