Carry Trading in the Forex Market

Carry means investment. So investment where.. how...why and benefit? Let us carry trade in the Forex market. You enter into the Forex why? Because you want to profit big or small depending your trading isn't it? Yes. So if you want a large amount of profit then carry trading is right for you. But some risks have has to. And in the Forex you probably learn about this risk.

Carry trading is a trading currencies when sells currency which is low interest rate and make fund then buy a high interest rate currency. So by benefiting difference interest rate with the two currencies. Generally carry trades on the daily basis pay method means if you carry trading and your difference interest rate add/give to you by your broker daily basic. Huh...is the right?

Yes. You have gained market movement knowledge very sharply if you want to carry trading. Now attention the following example:

You find suppose AUD interest rate as 6% and USD rate at 2% then different is (6-2)=4%.The economy is good of AUD.And AUD is probably bullish today/this week/this month more than bearish.So you guess that AUD must be upward.Then you buy AUD and sell USD.If AUD is continue bullish and you hold on your position then after one day later you will be get some interest by your broker at 4% and Plus your profit of buy trading is off course still at your balancing point.So carry trading has huge profit by the end of day/week/month/year/s .In the 1990's carry trading heavily cause with jpy/usd because bank of Japan declared low interest rate or about 0%, carry trading interest given is relatively with leverage that you used on the broker.

Again suppose you enter as carry trading then interest different is 4% and you leverage is 10:1 in this case you got 45% interest by your broker.

The most disadvantage is carry trading  the currency pair quote is unstable. So if the trade is against on your favor then you have paid interest from your balance this is cause highly loses of your capital.

So be careful! Cut you lose and gain profit use  fundamental, technical, sentimental analysis for this.

Is The US Dollar Index (USDX) Helpful For Forex

The US Dollar Index is a value of the US Dollar against of  major foreign currencies. It is weighted as the geometric system that mean it's value compared with other 6 major currencies. They are

*EURO................................................... 16.50% weight
*JPY...................................................... 07.28% weight
*GBP..................................................... 03.42% weight
*CAD...................................................... 12.92% weight
*CHF (Swiss Franc).................................. 01.68% weight
*SEK (Swedish Krona)............................... 0.79% weight
*data 10th October 2012

In the March 1973, Bretton Woods System after that it starts with as 100.000 and it's high record 164.7200 in February 1985 and low record in March 2008 as 70.698.

So if you find US Dollar Index as 85.246 that means it fell (100.000-85.246) = 14.754 then you can guess that against pair may be opportunity for buy and hold on.

Formula:
 50.14348112*EURO/USD^ (-576) *USD/JPY^ (0.136) *GBP/USD^ (-119) *USD/CAD^ (0.091) *USD/SEK^ (0.042) *USD/CEF^ (0.036)

Find out index: http://www.federalreserve.gov/releases/H10/Weights

Stephen Jen an economist and former currency strategist describe a theory namely as "The US Dollar Smile Theory"
He has taken up 3 scenarios for this theory as
1. USD strengthens due to risk aversion.
2. USD strengthens due to economic growth.
3. USD weakens due to low economic growth.

Therefore you may find some interesting reaction the USDX for Forex trading. Huh.... Ready to observe it?

Market Sentiment Analysis how to approach

In the Forex market million of people are engaging with their own knowledge of economic, political, technical, fundamental analysis in order to catch pips, and understanding market for better. So after technical analysis and also fundamental you have to do work with market sentiment analysis though it doesn't show you entry and exit trade point yet but you should not ignore it. But how? Well I am now focusing on these topics.

*Analysis how many candlesticks are bullish and bearish, how much bull and bear cadlesticks average range. (H1 or H4 frame candlesticks you may count)
*Follow COT report every Friday www.cftc.gov/MarketsReports
*Mark up when price bullish at the bottom and bearish at the top price.
*Mark up if more than 3 candlesticks is about equally high and low.
*Mark up market when price on Pivot, Fibonacci level.
*Mark up how much  market price range.
*Mark up if market is squeezing.

Identify your market environment

Here Forex Schooling  you have learned some topics those are for only alphabet of currency business. Now you may want to know about how to guess market environment. Well .... The market is healthy or weak or simply move as a snail these are you must be recognized firstly for trading. It is called trade-spotting.
Forex learner called these market environments as Bull market, Bear market or sideways/ranging market.
Bull market means the Buyer is in power so market force up-warding. Bear market means the opposite of a bull market. And ranging market moves very small like  a snail.
Fibonacci and Trade line helps you to focus on the  overall market nature for a specific time and Pivot, Support and resistance just tells you if the market is ranging or not.

*Reversal trending: You may notice that the market is down trending but all of a sudden it goes up trending and this time you may cause of losing your profit since you are not still familiar this. It is called a reversal. And reverse trend is the nature of the market. So you have protected yourselves for this.
Reverse trade can occur any time but usually after a heavy bull or bear trading. And long time price reversal is common remember it.

Technical Analysis Harmonic Pattern

In the previous post you have learned about the Elliott Wave extension. There you notice some patterns. Now I am discussing some different types of pattern and these are very useful. Since you are learning Forex for professional level and I am trying to you as many topics and tips on Forex thus you can make yourself Forex professional.
Do you see bats, crab, butterfly? Yes of course but why? Is it important? Yeah this is important. Sound like noise ...um.. bat, butterfly...
Let's turn on the Harmonic patterns.

*You must be use Fibonacci retracement level and extension for measuring these patterns.

*ABCD pattern: It is likely wave and AB length = CD length, AB length time need = CD length time
An AC length retracement is 0.61 and BD length is 1.27 Fibonacci.

*3 Drive pattern: A and B point retracement is 0.61, point 2 and 3 is 1.27
Drive 2 complete time = drive 3 complete time

 

*Gartley pattern: It is discovered by H.M.Gartley.It is inside ABCD pattern and based on W or M shape or structure overall.There are some rules for it:

*Move AB is 0.61 retracement of XA move.

*Move BC is either 0.38 or 0.88 level retracement of AB

*Move CD must be 0.78 level retracement of XA 

*Crab pattern: In 2000 Scott Carney discover this pattern.His observations are

*Move AB is either 0.38 or 0.61 level of XA move.

*Move BC is either 0.38 or 0.88 level of AB move.

*Move CD may be 1.61 extension level of XA move

*Bat pattern: In 2001 Scott Carney discover another patter.It is bat pattern.His own observations are

*Move AB is 0.38 or 0.50 level of move XA.

*Move BC is either 0.38 or 0.88 of move AB.

*Move CD may 0.38 of move XA.

*Butterfly pattern:It is discover by Bryce Gilmore.His own observations are

*Move AB may be 0.78 level retracement of move XA.

*Move BC is either 0.38 or 0.88 of move AB.

*Move CD may be 1.27 or 1.61 level of move XA.