Trading Strategies to Survive the Coming Week

The Dow plunged 323 points on Friday as a result of, among other things, a worse-than-expected jobs report. The bellwether average is now down 11% from its high in April. The Nasdaq and S&P 500 have fallen 12% since their recent highs. If this selling pressure continues, Cramer said, there will be an opportunity for "some decent percentage plays" where you can buy stocks at a discount.

The Mad Money host particularly likes accidentally high-yielding stocks, which are offering better returns than bonds right now because interest rates are so low. These are the companies that wouldn’t ordinarily yield at such high levels, but the market has taken the share price down enough to make those payouts attractive. Investors who own them get double the protection: They collect the cash until the market rebounds, then riding the stock back up. And they also get support from new buyers, who flood in because of the yield, putting a floor in the share price.

Among this group of accidental high-yielders, Cramer said he likes EastGroup Properties [MOS 43.06 -1.68 (-3.76%) ], a real estate investment trust, andAnnaly Mortgage [NLY 17.12 -0.14 (-0.81%) ], yielding 5.7% and 15% respectively. With a 5% yield, DuPont [DD 34.41 -1.37 (-3.83%) ] is another one of Cramer's faves because of its cost-cutting measures, good balance sheet and great management.

Last night, he identified a group of stocks that would likely go down, but snap back quickly because they have no exposure to Europe or China .Spanning several sectors, Cramer devised the acronym C.A.N.D.I.E.S.: Chipotle [CMG 143.81 -5.09 (-3.42%) ], Apple [AAPL 255.965 -7.155 (-2.72%) ], Netflix[NFLX 109.78 -2.07 (-1.85%) ], Deckers [DECK 147.16 -6.96 (-4.52%) ],Intuitive Surgical [ISRG 324.67 -12.71 (-3.77%) ], Express Scripts [ESRX 99.1325 -4.0475 (-3.92%) ] and Salesforce.com [CRM 89.64 -5.56 (-5.84%) ].

There are "great stories associated with these stocks, but all stocks are going lower," Cramer said. "And I do mean all stocks."

So how do you play these stocks for the snapback? For some time, Cramer has said the Dow would go to 9,500 if Europe holds and 8,260 if it doesn’t. Today, he wanted to split the difference, telling viewers to pick which number makes more sense to them, depending on how bullish or bearish they are. Then, if they want to buy 10 shares of one of these C.A.N.D.I.E.S., they should spread it out by purchasing just two shares a day, provided each day is lower. If the stock moves higher, though he doubts it will, then that’s just a high-quality problem.

"Leg in slowly," Cramer said, "mindful that we are going lower, not higher, for most of the week" to come.

Five technology trends to watch in 2010

Technology innovation continued its ruthless pace in 2009, despite the economic headwinds. Now it’s time to turn our sights on 2010, where there are going to be some really interesting things to keep an eye on. Let’s count down the five tech trends that should be on your radar for 2010.

5: The consumerization of IT

This is something we’ve been talking about for a couple years but the trend is accelerating. We see it in employees using their own personal laptops and devices for work tasks and using freely available Web tools to help them get their jobs done. This can create a whole host of problems for IT, but in most cases you don’t want to squash it altogether. What you’ll need is a policy that gives employees guidance on how and when these types of tools can and can’t be used, and why.

4: Desktop virtualization

TechRepublic recently asked its CIO Jury about desktop virtualization and 75% said they weren’t interested. However, the 25% that ARE interested are very enthusiastic about using it to cut costs and simplify IT support. In 2010, it’s going to interesting to see if this trend gains momentum and becomes more mainstream, or if it’s simply relegated to a few niche scenarios and industries.

3: E-readers

While most of the buzz around e-readers is centered around consumers readings books and newspapers, there are also a new set of e-readers that will hit the market in 2010 that are aimed at helping businesses streamline the meetings that require huge stacks of paper and bring more multimedia capabilities to business documents. For more ammunition on why you should follow this trend, see Jack Wallen’s article “10 reasons why e-readers make sense in the enterprise.”

2: WAN acceleration

I consider WAN acceleration to be one of the best kept secrets in the IT and business worlds. By caching big files and often-used documents, WAN acceleration appliances and software can save big money on bandwidth costs and give your branch offices and remote workers far better performance on their business applications. Companies like Riverbed are even taking WAN acceleration a step further and using it to help speed up hosted cloud applications by partnering with major SaaS providers. All of this makes WAN acceleration one of the hottest projects in IT right now, because it can offer fast ROI and immediate productivity benefits.

1: Berries, apples, and robots

What do these three things have in common? Well, of course, we’re talking about smartphones with BlackBerry, Apple iPhone, and Google Android. These are the three smartphone platforms that have the most momentum heading into 2010. With smartphones becoming standard tools for more and more business workers, it’s going to be important to watch which devices users gravitate toward, which platforms offer IT more security and manageability features, and which ones developers latch on to as the best place to build new applications for business users

Microsoft computing to attack global problems

New Microsoft initiative will use computing to attack global problems like volcanoes and oil spills

On Monday, Microsoft announced a new focus on high-end distributed computing to help solve global problems and serve as a testbed for Microsoft’s cloud OS.

The program is called the Technical Computing initiative and it was announced via email from Bob Muglia, the president of Microsoft’s server group.

Muglia stated:

“Recent world events clearly demonstrated our inability to process vast amounts of information and variables that would have helped to more accurately predict the behavior of global financial markets or the occurrence and impact of a volcano eruption in Iceland.”

Then Muglia explained that the big leaps forwards in computing power in recent years are making new types of scientific analysis possible:

“Innovations in technology are transforming our ability to measure, monitor and model how the world behaves. The implication for scientific research is profound, and it will transform the way we tackle global challenges like health care and climate change. It will also have a huge impact on engineering and business, delivering breakthroughs that could lead to the creation of new products, new businesses and even new industries…

The challenge is that existing software tools are not optimized to harness today’s computing power and data-intensive analytics software is too complex. As a result, Microsoft is making a pledge to invest in a few strategic areas to help change the equation. Here are the three areas, with quotes from Muglia about each:

1. Technical computing to the cloud: “This platform will help ensure processing resources are available whenever they are needed-reliably, consistently and quickly.”
2. Simplify parallel development: “Parallel programs are extremely difficult to write, test and troubleshoot. However, a consistent model for parallel programming can help more developers unlock the tremendous power in today’s modern computers”
3. Develop powerful new technical computing tools and applications:“Scientists, engineers and analysts are pushing common tools (i.e., spreadsheets and databases) to the limits with complex, data-intensive models… Our development efforts will yield new, easy-to-use tools and applications that automate data acquisition, modeling, simulation, visualization, workflow and collaboration.”

The end game here was also summed up by Muglia:

“One day soon, complicated tasks like building a sophisticated computer model that would typically take a team of advanced software programmers months to build and days to run, will be accomplished in a single afternoon by a scientist, engineer or analyst working at the PC on their desktop.”

In terms of how Microsoft is organizing to accomplish these three goals, CNET’s Ina Fried reported: “The effort, which has been quietly coming together over the past 18 months, includes a team of about 500 dedicated staff along with several hundred more from other product teams at the company. The unit will be jointly run by two Microsoft general managers–[Bill] Hilf and Kyril Faenov–and will be responsible for the high-performance computing version of Windows as well as the new efforts.”

Sanity check

I tip my hat to Microsoft for using its powers for good. The stuff that they are talking about with TCT involves changing high-end computing to make it simpler for scientists and engineers to access computing power and apps they need in a much faster, more powerful way in order to solve big problems.

However, keep in mind that what Microsoft is doing is attempting to co-opt the cloud and create a new high-end platform, based on Microsoft technologies such as Azure. In essence, Microsoft is using this as a testbed for making its technologies part of the foundation of the cloud.

That could be a good thing, if Microsoft helps connect the dots and gives developers better tools for this new world of high-end computing (which is mostly dominated by Linux right now), but we should also keep a close eye on Microsoft to make sure it doesn’t build it in such a way that it ultimately serves Microsoft more than the researchers

Trading Personality Types

Pete the Position Trader

Pete is a busy man with a demanding wife, eight kids, four dogs, three cats, two hamsters, and a pet komodo dragon. It would be impossible to support such a large family on a meager salary, so fortunately, Pete is a successful doctor.

Pete doesn’t like to sit in front of the computer all day. But he does enjoy reading about the world’s economies and has a short list of countries which he keeps up with their economic data releases. Pete prefers to position trade. This means when he enters a trade, his holding period is between a few weeks to a couple of months. He only trades several times a year. Often, at the end of the year, he can recount his number of trades on one hand.

In order to do this, he uses discretionary fundamental analysis. This means he takes an hour or two every week to see what the economic reports (like GDP, employment data, CPI, etc.) are indicating to him. He then makes a decision on which way to trade, but does not automatically go with the signals. Because Pete’s trades are longer term in nature, his profit targets are huge – but so are his stop losses! His stop losses usually range between 100-500 pips while his profit targets range from 500-1,000 pips or more. His trades have a big reward-to-risk ratio, which allows him to minimize his losses when he’s wrong, but hit the jackpot when he’s right.

Pete really enjoys being a position trader because it allows him to have a life. With his current work and family obligations, Pete clearly doesn’t have the time to devote to being a day trader. His trading personality doesn’t require him to make a decision in the heat of the moment and allows him to look for longer-term trends. As a position trader, he can juggle a busy career with his demanding wife, eight kids, four dogs, three cats, two hamsters and Komodo dragon.

Sam the Swing Trader

Sam is a single guy who owns a small coffee shop around the corner, where he works part time. He has also been trading on the side for a while now, and now his schedule is at the point where he is able to watch the market an hour or two a day.

Sam prefers to hold trades in a shorter time frame than Pete the Position Trader. He attempts to predict the short-term fluctuation in a currency pair’s price, and is willing to hold his trades open for more than a day, or even a few days, to give the price movements some time and capture additional momentum. On some trades Sam will generally be in a position from several days to even a week.

Sam dedicates an hour each day and/or evening to go over the market. The first half of his hour is spent reading the major economic news of the day and what news reports are coming out within the next 24 hours. Based on what’s going on globally, he determines whether the currencies he is watching will see volatility or not. Since he only watches two or three pairs at the most, it doesn’t take him long to read the major reports of the day.

After Sam has finished reading the economic news and reports, he determines if the market will trend or range for the next few days, or even weeks. He pulls up his charts and uses technical analysis to find good entry and exit points. His tools to find support and resistance include Fibonacci retracements, channels,trend lines, moving averages, etc. He then sets limit orders with stops and profit target levels, so it’s all practically automated when he enters and exits a trade.

Sam has been pretty successful. He is able to mentally weather the daily swings a swing trader has to go through. His losses have been limited to 50–100 pips, while his gains have ranged between 100–500 pips.

Sam usually checks his position once or twice a day just to make sure unforeseen events haven’t significantly affected his positions, and the rest of his day is spent doing whatever he wants, whether it’s working, hanging with buddies, or browsing internet auction websites for comic books to add to his collection.

Diona the Day Trader

Diona is extremely impatient and feels she always “needs to be doing something.” Her trading style consists of trade positions that are opened and closed in one day or less. Some days, she may only trade once. Other days, she may trade several times before the market closes. The bottom line is that she exits all positions by market close (5 p.m. EST) or when a session, such as the European or Asian session, ends. As a day trader, Diona feels the need to be in the market at all times because she’s afraid of missing a good trade. She is also risk averse and is scared of losing too much per trade, so she uses small stop losses.

Diona has spent years developing a consistent method of taking profits out of the market. Her account is big enough where she could quit her job, and she watches the market full time now. While she is aware of news releases on any given day, Diona mainly relies on technical analysis when trading. She has been using technical tools such as oscillators (MACD, RSI, Stochastic) and moving averages, which automatically signal her to enter and exit high probability trades. She just follows the signals.

Most days, Diona goes for 10–50 pips or more while limiting her losses to 10–20 pips, but occasionally she will scalp the market. Scalping is a method where she trades larger lots and takes less pips (usually 5-10) out of the market. Most of her scalp trades last for a few minutes or even seconds!

The day trading and scalping methods allows Diona to make one to several trades per day and satisfy that “need to be doing something.” Her confidence in the system allows her to stay with the plan and stick with the rules. She does not have to decide whether or not to enter a trade – the charts do it for her! However, Diona knows that her system is not perfect. She loses a little less than half of her trades, but her average win is almost twice her average loss. Over the long run she has consistently profited from the market. She is now able to work from home, be her own boss and take time off to travel whenever she chooses.

Forex Trader's Personality

Are you confident, nervous, cautious or prepared to take risks? Any of these personality traits could, in certain situations, lose you money on the Forex currency market. Personally I hate losing money. It makes me nervous and ready to quit when things don't go my way. On the other hand I rarely rush into any form of investment without careful consideration.

Keeping a cool head and being rational is the ideal personality for a Forex currency trader but we cannot always achieve that. Anyone who says they can, is fooling themselves. What you must do is make sure you have a good trading strategy in place and stick with it. Don't panic when the market moves against you, remember you cannot win every time, but don't become over confident and take risks when you are in profit. Many beginners in the Forex currency market make one or two good trades and start acting rashly. Instead of watching one trade they attempt several, running the risk of getting a margin call.The most important thing is to recognize your own personality weaknesses, control them and have a good trading strategy in place. There are plenty of free courses, as well as software, available online to help you

When you first start trading on the Forex currency market remember it is a learning process.

• Don't use money you can't afford to lose. Trading with the rent or mortgage payment will cloud your judgement.
• Start slowly by trading no more than a fifth of your capital on your first trade, the profit may not be great, but neither will the loss.
• If your strategy suggests otherwise never stick with a losing trade hoping that it will turn.
• If you have a run of bad luck, turn off your computer and walk away for the rest of the day. Your mind frame will be better in twenty four hours.
• Never attempt to trade when you are tired. A good trade may last only a matter of minutes and you need to be on the ball. Everyone has a time of day when they are at their best and one great advantage of the Forex currency market is that it is open almost 24/7.

Finally, I believe that not everyone is suited to Forex trading. Currency trading is a high stress occupation not a hobby. You can lessen the stress by research and planning so that you know you are trading with the least possible risk, by it still requires alertness and concentration. Spend as much time as possible using a Forex dummy trading platform. If you do not find it highly enjoyable then Forex currency trading is not for you.

Fundamental and Technical Analysis

Forex traders use either fundamental analysis or technical analysis to decide when it is the right time to enter the money market. If you are new to forex trader there are some excellent, free courses and software available online.

Fundamental analysis

Fundamental analysis is based on the demand and supply of the currency to be traded. This depends on the economic factors of the country using the currency, for example, economic strength, or otherwise, current interest rates, gross domestic product (GDP) etc.

The difficulty with using fundamental analysis to trade on the Forex money market is that the market is very fast moving, with rapid changes throughout the day. Economic data is more suited to long term investment. It involves constantly studying the data, knowing when a country is going to publish its economic reports and how to interpret them. This is why most short term traders use technical analysis based on price movements.

Technical Analysis

Technical analysis is based on the theory that prices move in a pattern and it is possible to predict when a currency has reached a high or low point based on historical evidence, then buy or sell accordingly.

There are a number of methods, based on charts, that technical analysts use to follow price trends, for example candlestick charts and Bollinger Charts. Traders may study several before taking a decision.

So which of the two methods of analysis should you use? Most traders probably use a combination of both. Fundamental analysis provides a long term view of the strength of a currency based on economic situation of the country using the currency plus current supply and demand, but it would be difficult to trade on a daily basis using this method. Nevertheless a trader needs to be aware of economic situations and when economic figures are published as these can affect trading. Technical analysis is useful for daily trading indicating possible entry and exit points. Therefore most traders will use both fundamental and technical analysis. To succeed on the Forex money market you need to have a thorough understanding of the currency you are trading in. Over 24 hours that currency may move dramatically up or down yet end the day at the same price as it started. Buying or selling at the wrong time can result in huge losses. Even experienced traders have bad days and the skill is to minimize the losses, hence the importance of having a stop/loss price in place. Understand how this works fully before attempting to trade.

Forex Glossary

Here are some of the most common terms used in FOREX trading.

Ask Price – Sometimes called the Offer Price, this is the market price for traders to buy currencies. Ask Prices are shown on the right side of a quote – e.g. EUR/USD 1.1965 / 68 – means that one euro can be bought for 1.1968 UD dollars.

Bar Chart – A type of chart used in Technical Analysis. Each time division on the chart is displayed as a vertical bar which show the following information – the top of the bar is the high price, the bottom of the bar is the low price, the horizontal line on the left of the bar shows the opening price and the horizontal line on the right of bar shows the closing price.

Base Currency – is the first currency in a currency pair. A quote shows how much the base currency is worth in the quote (second) currency. For example, in the quote - USD/JPY 112.13 – US dollars are the base currency, with 1 US dollar being worth 112.13 Japanese yen.

Bid Price – is the price a trader can sell currencies. The Bid Price is shown on the left side of a quote - e.g. EUR/USD 1.1965 / 68 – means that one euro can be sold for 1.1965 UD dollars.

Bid/Ask Spread – is the difference between the bid price and the ask price in any currency quotation. The spread represents the broker's fee, and varies from broker to broker.

Broker – the intermediary between buyer and seller. Most FOREX brokers are associated with large financial institutions and earn money by setting a spread between bid and ask prices.

Candlestick Chart - A type of chart used in Technical Analysis. Each time division on the chart is displayed as a candlestick – a red or green vertical bar with extensions above and below the candlestick body. The top of the extension shows the highest price for the chart division and the bottom of the extension shows the lowest price. Red candlesticks indicate a lower closing price than opening price, and green candlesticks indicate the price is rising.

Cross Currency – A currency pair that does not include US dollars – e.g. EUR/GBP.

Currency Pair – Two currencies involved in a FOREX transaction – e.g. EUR/USD.

Economic Indicator – A statistical report issued by governments or academic institutions indicating economic conditions within a country.

First In First Out (FIFO) – refers to the order open orders are liquidated. The first orders to be liquidated are the first that were opened.

Foreign Exchange (FOREX, FX) – Simultaneously buying one currency and selling another.

Fundamental Analysis – Analysis of political and economic conditions that can affect currency prices.

Leverage or Margin – The ratio of the value of a transaction to the required deposit. A common margin for FOREX trading is 100:1 – you can trade currency worth 100 times the amount of your deposit.

Limit Order – An order to buy or sell when the price reaches a specified level.

Lot – The size of a FOREX transaction. Standard lots are worth about 100,000 US dollars.

Major Currency – The euro, German mark, Swiss franc, British pound, and the Japanese yen are the major currencies.

Minor Currency – The Canadian dollar, the Australian dollar, and the New Zealand dollar are the minor currencies.

One Cancels the Other (OCO) – Two orders placed simultaneously with instructions to cancel the second order on execution of the first.

Open Position – An active trade that has not been closed.

Pips or Points – The smallest unit a currency can be traded in.

Quote Currency – The second currency in a currency pair. In the currency pair USD/EUR the euro is the quote currency.

Rollover – Extending the settlement time of spot deals to the current delivery date. The cost of rollover is calculated using swap points based on interest rate differentials.

Technical Analysis – Analysis of historical market data to predict future movements in the market.

Tick – The minimum change in price.

Transaction Cost – The cost of a FOREX transaction – typically the spread between bid and ask prices.

Volatility – A statistical measure indicating the tendency of sharp price movements within a period of time

Active Money Markets

If you are new to trading on the money market it makes sense to trade in the more active currencies. There are two main reasons for this. Firstly you do not want to be left with a currency where there is little interest and you may have difficulty selling. Secondly the spread between the bid/ask price is likely to be narrower, making it easier to make a profit.

Major Forex Currencies

There are seven major currencies, the US dollar (USD), Euro (EUR), Japanese yen (JPY) British pound (GBP), Swiss Franc (CHF) Canadian dollar (CAD) and Australian dollar (AUD).

The US dollar is the most traded currency followed by the Euro and the Yen. The Euro is the relatively new currency of the European Union although some member states, including Britain,have not changed their currency.

Forex Currency Pairs

Obviously if you are buying a currency you must also be selling another and therefore prices are always quoted in pairs, the USD/EUR being the most active. The more active a pair the narrower the difference between the bid/ask price is likely to be, with a possible spread of just two pips for the most actively traded. A pip is the smallest unit of price for a currency. Most currencies are traded to four decimal points, so that a pip is 0.0001 or 1/100 of a cent. This may seem a minuscule amount until you realise that on a standard trade of $100,000 that is $10. As each trade involves both selling one currency and buying another, the difference in the spread is the cost of the transaction and must be taken into account when calculating profit. The exception to the four decimal points is the Japanese yen which is normally traded to two decimal points.

Choosing a Currency

If you live in a country using one of the major currencies, when you first start trading it makes sense to begin with that currency. Not only are you familiar and comfortable with the currency but you are in a better position to judge its strength. The internet has a wealth of information on the financial climate of a country, but if you live there you has access to all newspaper content, as well being in the unique position of experiencing first hand changes at the consumer level.

The USD is the biggest currency traded and any trade that does not involve it is known as a cross currency. This will probably mean a wider spread. To minimise your costs include the USD as one of your currencies.

Fundamental Factors

Fundamental Factors behind Major Currencies

Every currency traded in Forex is influenced by the conditions in its country of origin, and the external relations that affect its value. Economic Indicators (GDP growth, import/export trade accounts), social factors (unemployment rate, real estate market conditions) and the country’s central bank policy are the factors that determine the currency value in the Forex market. Each one of the six major currencies has its particularities, and we are going to analyze the fundamentals that drive the currencies individually.

The U.S. dollar (USD) is the most traded currency in the Forex market. It is also used as a measure to evaluate other currencies and commodities. The reserves in USD are by far the largest being held by different nations, and they compose 64% of the world reserves. Globally speaking, the fundamentals that drive the U. S. Dollar are several. Since the largest amount of metallic commodities and the oil are mostly traded with prices in USD, significant demand variations in these markets will reflect directly on the currency value, as it happened in 2008 with the EUR/USD reaching 1.60, being the oil price a big contributor for this event. In the domestic market, the biggest factor that has been moving the dollar are the industry indicators and the real estate boom, and both were caused by an unsustainable credit system which could not be paid, causing a domino effect in the United States economy, and consequently, worldwide. During the last few years, the USD has been losing ground for other currencies, thanks to the credit bubble, and erroneous social policies, but it will still remain as one of the most powerful currencies for an undetermined period of time.

The euro (EUR) is by far the newest currency traded among the major pairs traded on Forex markets. It is used by 16 European Union member countries and it tends to enlarge during the next few years. The fundamental factors that move the Euro are often based on the strongest economies using the new common currency, such as: France, Italy and mainly Germany. The countries’ indicators regarding export trade, inflation and unemployment rate tend to have a high impact on the EUR movements, considering that countries such as Germany are larger exporters of manufactures and technology. Europe still remains an energy dependant from the Russian gas and the Middle Eastern Oil, making higher demands for these commodities to have a negative reflect on the European Union common currency.

The pound sterling (GBP) is the national currency of the United Kingdom, and the fundamental factors that move it are as complex and variable as the British economy and its global influence. The London commodity market plays a fundamental role in the GBP trends, being a reference for oil and gold trading. Nevertheless, as a powerful and globally dynamic economy, the United Kingdom indicators, social situation and the housing sector are perhaps the main determinant factors for the GBP price. Lately, the British economy has faced inflation issues, which led the interest rates to be cut, industrial recession, and other domestic factors that made the trading movements to naturally flow from the GBP towards other strong economically backed currencies, such as the EUR.

The Japanese yen (JPY) is the strongest and by far the most traded currency in the Asian market. Japan’s economy is mainly orientated to the industrial production exportation, and the economic situation of its main commercial partner, the USA, tends to have a direct influence on the JPY market. The JPY is a low-yield currency, being the GBP/JPY the most volatile pair traded on Forex, usually the scalper’s favorite one.

Switzerland is a small country located in the European Alps, yet, its strong international trade and money influx, made the Swiss franc (CHF), one of the main currencies traded on Forex. The CHF is often preferred by low yield investors. In times of financial instability, such as for the last years with the USD, many traders choose the CHF as a safe investment. The CHF trends can be often compared to those of the gold, increasing their value while other markets’ tends to depreciate during economic downturns.

The Canadian Dollar (CAD) faces a similar situation with the other commodity currencies, being majorly an export-dependable. Most of the Canadian production is exported to the USA. Facing the very same credit bubble problem that dragged America into recession, Canada has to deal also with a decreasing demand for all commodities. The CAD usually correlates positively with the prices for the all commodities.

Forex News

How News Affect Forex?

The global financial markets are interconnected and depend greatly on the financial and macroeconomic statistics. The Forex market is not an exception. Currency rates — the basic instruments of the foreign exchange market — are affected by the by major financial news, fundamental statistical reports and important geopolitical events. But nothing compares to seeing the actual effects of the news on the Forex market. Here you will find three major examples of such influence.

Monetary Actions

Such news as monetary policy decisions by the major central banks have an immediate impact on the currency pairs. If the interest rate is changed too fast or too slow, or an unexpected comment is made about the future interest rate changes, the currency pairs rally or fall with a speed of light. When the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve announced its first rate cut from 5.25% to 4.75% on September 18th, 2007, after a long series of the rate hikes, it pushed EUR/USD up. On the EUR/USD hourly chart below you can see a jump in the rate as the dollar lost a part of its attractiveness with the lower interest rate and the euro advanced. The reaction has been instant and a strong bullish trend has followed afterwards:

Macroeconomic Releases

Another important type of Forex news that has a strong and immediate impact on the currency rates is the macroeconomic releases and reports. One of the most noticeable effect belongs to the U.S. quarterly GDP data releases. If the reported quarterly change differs from the expected value or is simply significantly above/below the previous quarter, currency market react with unpredictable fluctuations. When the Bureau of Economic Analysis (U.S. Department of Commerce) released its advance GDP report for Q2 2008 on July 31st, 2008, a sharp spike appeared on all dollar-related pairs. The reported change was +1.9%, which was below the expected +2.3% value. The presented chart shows EUR/USD hourly price movement with a strong spike-like candle exactly after the GDP report has been published:

Geopolitical Events

Some global geopolitical events have a considerable influence on the Forex market. Wars, political scandals, elections, peace treaties, nuclear bomb tests and terrorist attacks usually result in a lot of consequences and expectations regarding those consequences. And the currency rates respond to such events with the fluctuations that end up in termination of the old trends and setting up of the new long-term trends. September 11th attacks upon the United States was a major global event that was followed by unprecedented geopolitical consequences — war in Afghanistan and Iraq, higher spending on U.S. war budget and a higher U.S. fiscal debt. It can be seen on the EUR/USD monthly chart below that the September was one of the pivotal points in trend reversal from a bearish one to a bullish one. The dollar has been falling since then:

As you see, the impact of the news on the Forex market can’t be ignored. Whether you trade intraday or long-term, your currency positions will be affected by the Forex news. That’s why it’s important for the currency traders to monitor all the related news and make the market decisions in relation to them.