Investing in Forex

Investing in foreign currencies is a relatively new avenue of investing. There are considerably fewer people are aware of this market than there are people aware of several other avenues of investing. Trading foreign currency, also known as forex, is the most lucrative investment market that exists. There are several factors that make this true among which, successful forex traders earn realistic profits of one hundred plus percent each month. Compared to some of the better known investment markets such as corporate stocks, this is an unheard of return on investment. It's very necessary to mention here that a person who invests in forex must, without exception, make it a point to learn the detailed, but simple strategies and information surrounding the market. This very fact is what makes the difference between successful forex traders and other traders.

A few additional points, which create such powerful leverage for investors within the forex market are: The amount of capital required to begin investing in the market is only three hundred dollars. For the most part, any other investment market is going to demand thousands of dollars of the investor in the beginning. Also, the market offers opportunities to profit regardless what the direction of the market may be; In most commonly known markets investors sit and wait for the market to begin an up trend before entering a trade. Even then, investors, as a rule must sit and wait some more to be able to exit the trade with a nice profit. Given that the forex market produces several up, down, and sideways trends in a single day, it can easily be seen that forex stands head and shoulders above other markets. Additionally there are trading strategies, which are taught that provide for compounded profits; these are profits on top of profits. In addition, free demo accounts are available within the industry of forex trading, which facilitate the sharpening of skills without the risk losing any capital. And the advantage regarding the time factor in trading foreign currency is a very attractive point for any investor. Compared to one of the most sought after avenues of investing, which often requires forty or more hours each week, namely in the real-estate market, the forex market requires a much smaller demand on the investor's time. Forex trading requires approximately ten to fifteen hours each week to earn a full time income. It's easy to see that the advantages and great leverage that exist in the forex market, make it among the most lucrative, time liberating, and easy to enter by far.

I hope this information gives you a clear understanding of how you can turn your investing into a true method of making your money work harder for you.

Forex The Future Investment

There are many many advantages over the various other ways of investing. First of all it is a 24 hr market, except for weekends of course. You have the US market then the european and then the Asian. One of the great times to trade is during the over lapping periods. The USA and european overlap between 5am & 9am eastern and the Euro & Asian between 11pm & 1am eastern. Usually the busiest time and best to trade.

The is also the risk factor for the accounts. With futures and options you can get margin calls that can wipe you out. If you get caught in a bad trade not only do you lose the money in the account but you may have to come up with alot more from your pocket. It can be very risking. But not in Forex. Worst case senerio you could lose whats in you account. But you would have to do something really stupid. Like making a big trade on a Fundamental day and leave it alone. If market takes a bad move and you weren't there. OOOPS. But That wouldn't happen with a smarth trader.

Then there are the demo accounts which is an account where you can trade using all the right things, platform,charts,and information. But you are using play money, or what we call paper trading too.

Plus with Forex you have a mini account. Instead of needing thousands of dollars to get into it. You can open an account with as little as $300.00. Now of course you will be trading at 1 tenth of a trade. IN other words you controling 10,000 instead of 100,000.00 These are call lots. Which also means you will only risk 1 tenth too!

So if you would love to learn to do investing and not have near the risk you really need to take a closer look at Forex trading.

Mapping Your Time Frame

It is useful to have a map and be able to see where the price is relative to previous market action. This way we can see how is the sentiment of traders and investors at any given moment, it also gives us a general idea of where the market is heading during the day. This information can help us decide which way to trade.

Pivot points, a technique developed by floor traders, help us see where the price is relative to previous market action.

As a definition, a pivot point is a turning point or condition. The same applies to the Forex market, the pivot point is a level in which the sentiment of the market changes from “bull” to “bear” or vice versa. If the market breaks this level up, then the sentiment is said to be a bull market and it is likely to continue its way up, on the other hand, if the market breaks this level down, then the sentiment is bear, and it is expected to continue its way down. Also at this level, the market is expected to have some kind of support/resistance, and if price can't break the pivot point, a possible bounce from it is plausible.

Pivot points work best on highly liquid markets, like the spot currency market, but they can also be used in other markets as well.

Forex Pivot Points

In a few words, pivot point is a level in which the sentiment of traders and investors changes from bull to bear or vice versa.

Why PP work?

They work simply because many individual traders and investors use and trust them, as well as bank and institutional traders. It is known to every trader that the pivot point is an important measure of strength and weakness of any market.

Calculating pivot points

There are several ways to arrive to the Pivot point. The method we found to have the most accurate results is calculated by taking the average of the high, low and close of a previous period (or session).

Pivot point (PP) = (High + Low + Close) / 3

Take for instance the following EUR/USD information from the previous session:

Open: 1.2386

High: 1.2474

Low: 1.2376

Close: 1.2458

The PP would be,

PP = (1.2474 + 1.2376 + 1.2458) / 3 = 1.2439

What does this number tell us?

It simply tells us that if the market is trading above 1.2439, Bulls are winning the battle pushing the prices higher. And if the market is trading below this 1.2439 the bears are winning the battle pulling prices lower. On both cases this condition is likely to sustain until the next session.

Since the Forex market is a 24hr market (no close or open from day to day) there is a eternal battle on deciding at white time we should take the open, close, high and low from each session. From our point of view, the times that produce more accurate predictions is taking the open at 00:00 GMT and the close at 23:59 GMT .

Besides the calculation of the PP, there are other support and resistance levels that are calculated taking the PP as a reference.

Support 1 (S1) = (PP * 2) – H

Resistance 1 (R1) = (PP * 2) - L

Support 2 (S2) = PP – (R1 – S1)

Resistance 2 (R2) = PP + (R1 – S1)

Where , H is the High of the previous period and L is the low of the previous period

Continuing with the example above, PP = 1.2439

S1 = (1.2439 * 2) - 1.2474 = 1.2404

R1 = (1.2439 * 2) – 1.2376 = 1.2502

R2 = 1.2439 + (1.2636 – 1.2537) = 1.2537

S2 = 1.2439 – (1.2636 – 1.2537) = 1.2537

These levels are supposed to mark support and resistance levels for the current session.

On the example above, the PP was calculated using information of the previous session (previous day.) This way we could see possible intraday resistance and support levels. But it can also be calculated using the previous weekly or monthly data to determine such levels. By doing so we are able to see the sentiment over longer periods of time. Also we can see possible levels that might offer support and resistance throughout the week or month. Calculating the Pivot point in a weekly or monthly basis is mostly used by long term traders, but it can also be used by short time traders, it gives us a good idea about the longer term trend.

S1, S2, R1 AND R2...? An Objective Alternative

As already stated, the pivot point zone is a well-known technique and it works simply because many traders and investors use and trust it. But what about the other support and resistance zones (S1, S2, R1 and R2,) to forecast a support or resistance level with some mathematical formula is somehow subjective. It is hard to rely on them blindly just because the formula popped out that level. For this reason, we have created an alternative way to map our time frame, simpler but more objective and effective.

We calculate the pivot point as showed before. But our support and resistance levels are drawn in a different way. We take the previous session high and low, and draw those levels on today's chart. The same is done with the session before the previous session. So, we will have our PP and four more important levels drawn in our chart.

LOPS1, low of the previous session.

HOPS1, high of the previous session.

LOPS2, low of the session before the previous session.

HOPS2, high of the session before the previous session.

PP, pivot point.

These levels will tell us the strength of the market at any given moment. If the market is trading above the PP, then the market is considered in a possible uptrend. If the market is trading above HOPS1 or HOPS2, then the market is in an uptrend, and we only take long positions. If the market is trading below the PP then the market is considered in a possible downtrend. If the market is trading below LOPS1 or LOPS2, then the market is in a downtrend, and we should only consider short trades.

The psychology behind this approach is simple. We know that for some reason the market stopped there from going higher/lower the previous session, or the session before that. We don't know the reason, and we don't need to know it. We only know the fact: the market reversed at that level. We also know that traders and investors have memories, they do remember that the price stopped there before, and the odds are that the market reverses from there again (maybe because the same reason, and maybe not) or at least find some support or resistance at these levels.

What is important about his approach is that support and resistance levels are measured objectively; they aren't just a level derived from a mathematical formula, the price reversed there before so these levels have a higher probability of being effective.

Our mapping method works on both market conditions, when trending and on sideways conditions. In a trending market, it helps us determine the strength of the trend and trade off important levels. On sideways markets it shows us possible reversal levels.

How we use our mapping method?

We use the mapping method in three different ways: as a trend identification (measure of the strength of the trend), a trading system using important levels with price behavior as a trading signal and to set the risk reward ratio of any given trade based on where the is the market relative to the previous session.

A Quick Forex Guide for Traders

In this Forex course we will review some steps you need to take care before you venture into your trading journey. Most traders venture into the Forex market with little or no experience in the Forex market. This results in painful experiences like loosing most of the risk capital, frustration because it seemed so easy to make money, etc.

The first thing you need to realize is that, it is not easy to make money. As every other endeavor in life, where important rewards are to come after mastering it, you need to work hard. You need to get very well educated and experienced before having the possibility to receive important rewards on it. The key on mastering the Forex market relies on commitment, patience and discipline.

Ok, you have decided you are going to trade the Forex market, you have seen several advertisings featuring how easy is to make money in the Forex market. You might think this is your opportunity to reach your financial freedom, right away, time is money, why waiting any longer if you have the opportunity to make money now. I know, I've been there, but you have a chance now, I didn't, no body told me what I am going to tell you.

We, Forex traders, make transactions based on a set of rules. These sets of rules are what we call a Trading System. Our systems tell us the exact time where we need to get in the market and out the market in order to make a profit (i.e. buy low sell high.)

Creating a system is the first big step you need to take care first. Why is this so important? Because you need to build a system that suits your personality, otherwise you are going to find hard to follow it, thus hard to profit from.

A system can be based on technical indicators or what we called a mechanical system or based on experience and intuition or what we call discretionary systems. I highly recommend using and trying first a mechanical system, because discretionary systems are dangerous during the early stages of a Forex trader (can lead to indiscipline.) With experience, on later stages, you will find out which signals work better and which ones to avoid.

The next step in this Forex course is to try your system on a demo account. Most Forex brokers offer a demo account, an account with virtual money. This is an excellent choice to test your trading system as there is no money at risk. In this step you will figure out if the strategy works for you. If you feel comfortable trading it, then it is most likely to produce good results. How much time should you stay in this step? It varies, but you shouldn't go one step further until your system gets consistent profitable results over a period of time. It can take many months, but remember, you need to be patient.

You must be honest to yourself; you need to take every single signal generated by your system, not only the signals you thought were going to work, otherwise, you are going to have problems in the next two steps.

Ok, by know you had consistent profitable results on your demo account. You might think its time to go full. Nope, nope, nope. There is a big difference between trading a demo and a real account. The most important difference lies on emotions (fear, greed, anger, etc.) These are psychological barriers that affect every single decision made by traders regardless of what he/she is trading (stocks, bonds, Forex, futures, grains, etc.) These emotional factors, in my opinion, are the most determinant factor that separates profitable traders from the others.

The next step in this Forex course is specially designed to deal with emotions and to confirm the results obtained in the prior step (consistent results in a demo account.) At this step you need to trade in a real account with limited funds. Some brokers offer fractional lot trading. Meaning you are able to trade any desired amount (even cents.) The important thing here is that these emotions we've been talking about are present only when there is real money at risk. At this stage, you are going to see if you are really comfortable trading your system and if you are able to trade with such system, remember different systems produce different emotions. If you are able to produce similar results than those obtained in a demo account, then ready for the next step. If you didn't, then you might need to create another system, there is chance your system never fit you. If you created consistent profitable results on this stage, you have a chance to produce similar results in the next one, on the other hand, if you didn't produce good results in this stage, you will not be able to make on the next stage. Remember, you need to do things right, and be honest to yourself.

The last stage is trading in a real account with sufficient funds. If you are at this stage, and have passed successfully every prior stage, then you have a chance to make it, go ahead and try it, you need to be confident in yourself and in your system, your strategy have already produced consistent profitable results, there are reasons to believe you are going to make it. Very few traders fail at this stage (if passed successfully prior stages.)

Trading successfully is no easy task, it requires a lot of work, patience, discipline, and education. By completing the steps outlined in this Forex course, you have a chance to produce profitable results. I repeat it again, you need to be honest to yourself about the results obtained in every stage. Some times you might need expert guidance regarding your system development strategies.

Trading with Stochastics

Stochastics are amongst the most popular technical indicators when it comes to Forex Trading. Unfortunately most traders use them incorrectly. In this article we will review the correct way to use this popular technical indicator.

George Lane developed this indicator in the late 1950s. Stochastics measure the current close relative to the range (high/low) over a set of periods.

Stochastics consist of two lines:

%K – Is the main line and is usually displayed as a solid line

%D – Is simply a moving average of the %K and is usually displayed as a dotted line

There are three types of Stochastics: Full, fast and slow stochastics. Slow stochastics are simply a smother version of the fast stochastics, and full stochastics are even a smother version of the slow stochastics.

Interpretation:

Buy when %K falls below the oversold level (below 20) and rises back above the same level.

Sell when %K rises above de overbought level (above 80) and falls back below the same level.

The interpretation above is how most traders and investors use them; however, it only works when the market is trendless or ranging. When the market is trending, a reading above the overbought territory isn't necessary a bearish signal, while a reading below de oversold territory isn't necessary bullish signal.

Trending market

When the market is trending is necessary to adapt the oscillator to the same conditions: When the market is trending up, then the signals with the higher probability of success are those in direction of the trend “Buy signals”, on the other hand when the market is trending down, selling signals offer the lowest risk opportunities.

Thus when the market is trending up, we will only look for oversold conditions (when the stochastics fall below the oversold level [below 20] and rises back above the same level) to get ready to trade, and in the same way, when the market is trending down we will only look for overbought conditions (when the stochastics rise above de overbought level [above 80] and falls back below the same level.

Taking all overbought/oversold signals during a trending market will lead us to many whipsaws. If you are not comfortable with the number of signals given, try expanding your trading to other currency pairs.

Trend-less market

During a ranging market we could use the interpretation explained above to trade off stochastics.

Divergence

Divergence trades are amongst the most reliable trading signals in the Forex market. A divergence occurs either when the indicator reaches new highs/lows and the market fails to do it or the market reaches new highs/lows and the indicator fails to do it. Both conditions mean that the market isn't as strong as it used to be giving us opportunities to profit from the market.

Stochastics can also be used to trade off divergences.

Price behavior

A price behavior can be incorporated into any kind of system or Forex strategy. When using divergences or overbought/oversold condition with a price behavior approach, the probability of success of our signals increases enormously. Why? Because price dictates at the end, how all indicators will behave, it also gives us a lot of information about the probable direction it will take in the future.

I hope this article helps you become a better trader.

How to take a loss

There are quite a few books written on how to make money in the market. Some of them are even written by people who have made money as traders! What you don't see often, however, are books or articles written on how to lose money. “Cut your losers and let your winners run” is commonsensical advice, but how do you determine when a position is a loser? Interestingly, most traders I have seen don't formulate an answer to this question when they put on a position. They focus on the entry, but then don't have a clear sense of exit—especially if that exit is going to put them into the red.

One of the real culprits, I have to believe, is in the difficulty traders have in separating the reality of a losing trade from the psychological sense of feeling like a loser. At some level, many traders equate losing with being a loser. This frustrates them, depresses them, makes them anxious—in short, it interferes with their future decision-making, because their P & L is a blank check written against their self-esteem. Once a trader is self-focused and not market focused, distortions in decision-making are inevitable.

A particularly valuable section of the classic book Reminiscences of a Stock Operator describes Livermore 's approach to buying stock. He would sell a quantity and see how the stock responded. Then he would do that again and again, testing the underlying demand for the issue. When his sales could not push the market down, then he would move aggressively to the buy side and make his money.

What I loved about this methodology is that Livermore's losses were part of a grander plan. He wasn't just losing money; he was paying for information. If my maximum position size is ten contracts in the ES and I buy the highs of a range with a one-lot, expecting a breakout, I am testing the waters. While I am not potentially moving the market in the way that Livermore might have, I still have begun a test of my breakout hypothesis. I then watch carefully. How are the other averages behaving at the top ends of their range? How is the market absorbing the activity of sellers? Like any good scientist, I am gathering data to determine whether or not my hypothesis is supported.

Suppose the breakout does not materialize and the initial move above the range falls back into the range on some increased selling pressure. I take the loss on my one-lot, but then what happens from there?

The unsuccessful trader will respond with frustration: “Why do I always get caught buying the highs? I can't believe “they” ran the market against me! This market is impossible to trade.” Because of that frustration—and the associated self-focus—the unsuccessful trader does not take any information away from that trade.

In the Livermore mode, however, the successful trader will see the losing one-lot as part of a greater plan. Had the market broken nicely to the upside, he would have scaled into the long trade and likely made money. If the one-lot was a loser, he paid for the information that this is, at the very least, a range-bound market, and he might try to find a spot to reverse and go short in order to capitalize on a return to the bottom end of that range.

Look at it this way: If you put on a high probability trade and the trade fails to make you money, you have just paid for an important piece of information: The market is not behaving as it normally, historically does. If a robust piece of economic news that normally sends the dollar screaming higher fails to budge the currency and thwarts your purchase, you have just acquired a useful bit of information: There is an underlying lack of demand for dollars. That information might hold far more profit potential than the money lost in the initial trade.

I recently received a copy of an article from Futures Magazine on the retired trader Everett Klipp, who was dubbed the “Babe Ruth of the CBOT”. Klipp distinguished himself not only by his fifty-year track record of trading success on the floor, but also by his mentorship of over 100 traders. Speaking of his system of short-term trading, Klipp observed, “You have to love to lose money and hate to make money to be successful…It's against human nature what I teach and practice. You have to overcome your humanness.”

Klipp's system was quick to take profits (hence the idea of hating to make money), but even quicker to take losses (loving to lose money). Instead of viewing losses as a threat, Klipp treated them as an essential part of trading. Taking a small loss reinforces a trader's sense of discipline and control, he believed. Losses are not failures.

So here's a question I propose to all those who enter a high-probability trade: “What will tell me that my trade is wrong, and how could I use that information to subsequently profit?” If you're trading well, there are no losing trades: only trades that make money and trades that give you the information to make money later.

Brett N. Steenbarger, Ph.D. is Director of Trader Development for Kingstree Trading, LLC in Chicago and Clinical Associate Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY. He is also an active trader and writes occasional feature articles on market psychology for a variety of publications. The author of The Psychology of Trading (Wiley; January, 2003), Dr. Steenbarger has published over 50 peer-reviewed articles and book chapters on short-term approaches to behavioral change. His new, co-edited book The Art and Science of Brief Therapy is a core curricular text in psychiatry training programs. Many of Dr. Steenbarger's articles and trading strategies are archived on his website, www.brettsteenbarger.com

Penny Stocks and Investing

Penny stocks are shares that trade in stock markets from a fraction of a penny up to several dollars.

They are much riskier than the average investments, but sometimes can have a rewarding potential. Indeed, a few penny stocks have gone from i.e. 20 cents to $10.00, while others have become completely worthless.

Many investors like penny stocks because it does not take a big cash outlay to get started.

The upside of penny stocks is the ability to turn a small investment into a "fortune."

The downside is the greater risk, big volatility of the shares, and the total lack of corporate transparency.

There are many risks associated with trading penny stocks. In many cases these risks can be mitigated or avoided altogether, but there is always a great chance of losing money.

Never buy penny stocks that you heard about for free:

By far, the biggest danger to penny stock investors is free stock picks. They come by phone, through e-mail spam, and even by fax. In many cases, a carefully crafted and fostered "rumor mill" alerts you to a penny stock through a friend who knows a friend of a guy ...

Never buy stocks you heard about through an unsolicited e-mail or phone call ...

Never buy picks from a FREE newsletter ...

In most cases, the penny stock company is paying people to promote their stock. They mislead you as to the prospects and potential of the company. If they were so good, why would they need to pay for investor awareness?

Besides the above risks for penny stock traders, there are other common pitfalls to watch out for:

Low Visibility:

The company does not furnish regular financial reports.

Solution: Stick to trading penny stocks listed on the premiere exchanges (Nasdaq SmallCap, Nasdaq National, AMEX, and some OTC-BB. Avoid most OTC-BB and all Pink Sheet stocks.)

Low Tradability:

The stock trades very few shares per day, and there is little investor interest.

Solution: Focus on higher volume penny stocks, or those with greater investor interest. You can tell by daily trading volumes if a stock may be problematic. Look for at least 20,000 shares traded per day, but the more, the better.

Stock Hype:

How do you know what information to trust? Companies have been known to "exaggerate" their situation.

Solution: Make sure you do your own due diligence on the companies, or get leads about great penny stock companies from a proven newsletter or service. The best scenario involves doing your own research on penny stocks that you have been alerted to through a professional service, and only getting involved after you have looked into the company.

Protect Yourself!

When you are getting started, you should keep your investment amounts low. Don't put all your money into one stock, and when you do invest make sure that you understand the company and have a good reason to think the shares will increase in price.

You may even want to try "practice trading" with fake money before you start with actual cash. Watch the stocks of a few of your favorite companies for a few weeks, to get a feel for the market.

Most importantly, be honest with yourself!

If you know you won't or can't do the research required to pick good penny stocks, you should either give up on the idea altogether, or get the assistance of a professional stockbroker.

Buy the Dips!

"The best time to buy stock is when blood is running in the streets."

Nathan Mayer Rothschild (1776 - 1836)

I hope that you have enough courage to enjoy the market's severe ups and downs!

But for most of you these are unsettling times, and you start sweating when you see your holdings decline by double-digit percentages!

But take courage, those movements may actually be good for you!

What should a careful investor do in a market downturn?

How can you avoid panic and make the best use of panic selling by others?

Dramatic dives in the stock market allow you to "Buy the Dips!" And the dips are so frequent these days, you don't even need to know when they will occur!

With stock prices flying up and down, chances are that on your next payday prices will be down, so you'll get more shares for your money.

You'll be enjoying cost averaging!

The more volatile the market and the more extreme the price fluctuations, the better off you'll be in the long run.

It may sound crazy at first, but it makes sense:

When prices swing wildly up and down, you will frequently have the opportunity to buy low.

As the stock market inches up over time, you'll enjoy greater gains than those who plunked all their money into the market when it was high, or who invested in a market that was slowly rising rather than wildly fluctuating!

So when prices dip, open up the champagne ...

You'll be buying stocks on sale!

The Real Estate Bubble!

We live in a time when wish fulfillment matters above all.

Lately I'm seeing a prime time TV ad with several success-driven faces mouthing the phrase, "I will own a Jaguar."

Never mind that a Jag today goes for what a starter home in a Midwestern suburb used to cost about 10 - 15 years ago.

And speaking of wishes and homes, we know that ownership of the latter is, after all, the American dream. It's just that cost and income have always kept some folks from partaking.

Yet lenders have apparently discovered a way to create the illusion of owning a home when, arguably, there is no "ownership" at all.

For a lot of wannabe homeowners, lining the pockets of lenders is the price for playing along.

Trends in residential real estate over the past decade help explain how this illusion was conjured up.

Let's start with the recent past.

As the economy struggled over the past year, the media has repeatedly said that the real estate market remains prosperous. Interest rates fell to remarkably low levels and stayed there; a record percentage of families in the U.S. became homeowners.

In theory, low interest rates produce more affordable fixed-rate mortgages, a formula for long-term stability.

But in reality, the data suggests that low interest rates have invoked the law of unintended consequences: new homeowners are taking on far more debt than they can afford, via the riskiest mortgage loans on the market.

A few facts:

*

First-time homebuyers made an average down payment of 3% in 1999, down from 10% a decade earlier.

* As a percentage of disposable personal income, mortgage payments have reached the highest level since the Federal Reserve began following the data -- a 45% increase since 1980.

* The percentage of people choosing adjustable-rate mortgages -- which increase the size of mortgage payments as interest rates rise -- has virtually doubled in the past year, to 30%.

So -- people didn't save much before buying their home, bought more home than they could really afford, and many of them will have to pay more each month if rates begin to rise.

Now, this all sounds less serious if home prices rise at the rate we've seen in the past few years.

Will that continue?

Not according to one real estate analyst recently quoted in The Christian Science Monitor. He follows property values in 120 markets around the country, and says that a record 45% of those markets are overpriced based on the relationship of income to housing prices.

"Bubble" is the word he used!

If the bubbles start to burst, home mortgages will resemble car loans: the owners can't build real equity because the value of the asset is falling.

Here we get to the scary part, namely the illusion of home ownership I mentioned above. The "mortgage as car loan" comparison becomes even stronger.

Forex

While the value of a country's currency remains stable within its own borders, in the same time its value can widely fluctuate compared to that of other countries.

Exchanging rates keep on changing constantly and supply and demand for any given currency, and thus its value, are influenced by economic factors, political conditions and market psychology.

Betting on the spreads between countries" currencies by placing "buy" or "sell" orders is what Forex trading is all about.

Although, the value of the daily turnover in the forex markets substantially exceeds those of other markets, this is not the domain of the big players only. Small investors can also participate!

The market for foreign exchange is the world"s largest financial market.

Trading is conducted through an "over-the-counter" network of traders from major commercial and investment banks linked by computer terminals. Participants include importers and exporters, as well as traders, portfolio managers and foreign exchange brokers.

Major trading centers include London, New York and Tokyo, with total trading volume in excess of $1.5 trillion dollars of foreign currency per day.

More than half of all trading directly involves the exchange of U.S. dollars and other currencies are traded against U.S. dollars since currency dealers quote other currencies against the dollar when trading among themselves.

Using a Stock Market and Portfolio Strategy

To be an effective investor, you need a stock market plan that guides your choice of investments, the way you buy stocks, how long you keep investments in your portfolio, and when you sell.

That's called an investment strategy!

Without a stock market strategy, you're likely to invest randomly -- a stock here, a bond there -- without a sense of how your investments can work together to achieve the return you want and without being able to control your risks.

What's more, much of the long-term success of any investment portfolio depends on the way its assets are allocated, or distributed, among the range of investment choices.

Money Laundering

Money laundering, the "cleaning of money" with regard to appearances in law, is the practice of engaging in specific financial transactions in order to conceal the identity, source, and/or destination of money, and is a main operation of underground economy.

In the past, the term "money laundering" was applied only to financial transactions related to organized crime.

Today its definition is often expanded by government regulators to encompass any financial transaction which generates an asset or a value as the result of an illegal act, which may involve actions such as tax evasion.

As a result, the illegal activity of money laundering is now recognized as potentially practiced by individuals, small and large businesses, corrupt officials, terrorists, members of organized crime, and even corrupt states, through a complex network of “shell” companies and trusts based in offshore tax havens.

The term "money laundering" does not derive, as is often said, from the Al Capone having used laundromats to hide ill-gotten gains.

It was Meyer Lansky who perfected money laundering's older brother, "capital flight," transferring his funds to Switzerland and other offshore places.

The first reference to the term "money laundering" itself actually appears during the Watergate scandal.

US President Richard Nixon's "Committee to Re-elect the President" moved illegal campaign contributions to Mexico, then brought the money back through a company in Miami. It was Britain's Guardian newspaper that coined the term, referring to the process as "laundering."

After September 11, 2001, money laundering became a major concern of the war on terror.

Money laundering is often described as occurring in three stages: placement, layering, and integration.

Placement:

Refers to the initial point of entry for funds derived from criminal activities.

Layering:

Refers to the creation of complex networks of transactions which attempt to obscure the link between the initial entry point, and the end of the laundering cycle.

Integration:

Refers to the return of funds to the legitimate economy for later extraction.

If a person is making thousands of dollars a week from a business (not unusual for a store owner) and wishes to deposit that money in a bank, it cannot be done without possibly drawing suspicion.

In the United States, for example, cash transactions and deposits of more than $10,000 are required to be reported as "significant cash transactions" to the Financial Crimes Enforcement Network (FinCEN), along with any other suspicious financial activity which is identified as "suspicious activity reports."

One method of keeping this small change private would be for an individual to give money to an intermediary who is already legitimately taking in large amounts of cash.

The intermediary would then deposit that money into an account, take a premium, and write a check to the individual.

Stock Ownership by Management

Nearly seven decades have passed since the publication of Adolf Berle and Gardiner Means "The Modern Corporation and Private Property."

Yet the question of firm ownership and control still generates an enormous amount of public debate.

In 1932, Berle and Means warned that the separation of ownership and control would destroy the economic foundation on which capitalism was built.

Berle and Means believed that the increasing separation of ownership and control was inherent in capitalist development.

Others expressed concern that a wide variety of tax incentives, antitrust policies, regulations and political pressures, rather than anything inherent in capitalism, would result in strong managers and weak owners.

Managerial ownership of publicly traded firms is higher now than in 1932. (see "Were the Good Old Days that Good?" by Randall Kroszner) Insiders holdings today are on average four times higher, and this increase is true across all firm sizes.

Managerial ownership is only one of many mechanisms that can be used to address the problem of aligning management's incentives with those of the owners.

Therefore, greater managerial ownership has been accompanied by less reliance on other methods of corporate control, such as i.e. incentive-based pay.

There is a link between firm performance and the level of managerial ownership. The relationship between insider ownership levels and performance has significantly changed over time.

Shareholders have greater incentives to induce managers to change the amount of stock they hold based on the idea that increased ownership would result in improved performance.

As managerial ownership increases, there is more pressure on management to enhance performance.

Good managers will reap even greater rewards from their efforts, resulting in increased productivity, lower costs and new innovations.

While it might be easy to decide that increased managerial ownership may be the right course, this is not always the case ...

More insider ownership of the company is not always necessarily better ...

There are many costs and benefits that need to be weighed and considered!

On-Line Stock Market Trading

It's very tempting, and it sounds great - to be able to electronically trade and make money every day trading from home or office!

But the truth about how electronic on-line trading is sold to the public is an ugly story. No one you talk to about this will admit it! No surprise there!

But you can always count on us to shed light on the truth behind the myth, that will prevent you from disaster!

Brokerage firms decided to set up marketing companies that would offer the ability to set up offices and make money by advertising that you can now trade from their offices in your community and they would make a small fee every time you execute a trade.

Most of the people that would operate offices know absolutely nothing about trading and even less about economics.

They would hire a person to teach the aspiring traders how to use the electronic trading system.

The person teaching in most cases never even traded in stocks before in his life, or had no experience trading and probably never even set foot in a real trading department of a brokerage firm.

The result is a disastrous combination of the inexperienced, incompetent managers and teachers instructing inexperienced aspiring traders!

The truth of the matter is that most people are not successful trading in this environment. Not because on-line trading "doesn't work," but because they're not taught how to do it properly!

The people that are operating these offices expected it to be as simple as running a coffee shop.

They had what I call a casino mentality!

They thought that all they had to do was open an office and people would beat down their door to get in.

They didn't realize that if people lost money they would quit trading.

The owners of the offices were not equipped to continually train the traders and offer support and on-going advice to insure the traders success.

See, in the beginning it was very simple.

While watching a screen, as soon as you saw offers fading you would obtain an execution at the offer, then simply sell the stock when it traded up a certain percentage.

That worked like shooting fish in a barrel when there was only about 300 guys trading back in the early days.

Now you have 60000 or more guys trying to trade that last offer before the stock goes up!

Market makers are also very shrewd cats. They know how to trade against the other traders and take advantage of their weaknesses (which is immediately selling the stock they bought if it doesn't go up).

Now, Really ...

Who Is the Idiot?

Remember, when you buy or sell, somebody is on the other side of the trade ...

Do you really think that you know more than this other person?