Happy Halloween!

Dear Friends/Fellow Traders,

Happy Halloween! I hope you all have an awesome night, just remember NOT to drink and drive, and play with fireworks responsibly (Always SAFETY FIRST).

Now back to the market.

As expected (at least I had expected it), the Consumer Confidence Index and Chicago PMI numbers disappointed, resulting in even more sell-off of the Dollar. The GBP/USD rocketed up to 1.9091, just 9 pips shy of 1.91, and the EUR/USD spiked up to 1.2782, breaking the 1.2765 61.8% Fib (a relatively strong resistance) in the process. I could go on, but basically the Dollar lost against every major in the morning following the release of the two numbers. This does not bode well for the Dollar, as the last bastions of the Dollar Bulls are succumbing to the overwhelming forces of the market and forced to cut losses and establish Dollar Short positions. Of course there will be some very long term Dollar Bulls still hoping for some sort of rebound or a continuous string of positive economic data releases to alleviate the downward pressure on the Dollar, but the chances of that are comparable to that of getting 10 blackjacks in a row at the casino (Chances are there, but slim).

The only major risk for the Dollar Bears (including me) will be the Non-Farm Payrolls and Unemployment Numbers due at 8:30ET on Friday. An upside surprise could see the Dollar regaining some lost ground, while weak numbers would send the Dollar plummeting ever further into the abyss. With that said, I would keep stops relatively tight, or at least move your stops to lock in profits if your positions are already profitable to prevent getting wiped out on a surprise. The Non-Farm Payrolls number is the biggest market-mover that can potentially wipe out a lot of stops and small accounts if not managed carefully. Currency pairs involving the USD can move as much as 100 pips or even more in the first 5 minutes following the release, so prepare for a bumpy ride as the market participants go out of control with their emotions and greed.

My chips are in with the Dollar Bears, as I firmly believe that the NFP numbers will disappoint, but hey I'm never 100% right and there could be surprises, so prepare for that!

Trick or Treat? I think I raked in my share of profits when the US numbers disappointed this morning, so what a Treat!

Stay Tuned for more!

To successful trading,
Dickens

Nearing the end of the month..

Dear Friends/Fellow Traders,

The month has been a dramatic one for the Dollar, switching camps from Bearish to Bullish to Bearish again and then Bullish again, and finally Bearish. The shift in sentiment has been so frequent and extreme that I've almost been thrown into confusion along with the rest of the market; despite all this confusion, my medium-term outlook remains bearish for the Dollar, and I stand by that when I'm monitoring my medium-term positions. My stops are generally very wide for my medium-term positions, and I could be seeing floating losses of up to 150 pips at times when market volatility kicks in, but as long as my emotions are in check and I remain focused on my goal, it should work out fine in the end. Now I'm not saying that it will always swing back in my favour and I do take losses sometimes when sometimes strings of data/news releases goes against my trade, but good risk management/money management has served me well in my trading days, and I tend to win much more than I lose. One thing to always remember, is to ALWAYS abide by your stops, because if the trade has gone against you that far, chances are that it will continue to go against you and your best course of action would be to cut losses and preserve capital to trade another day!

Enough about risk/money management, now here is my outlook for the various currencies nearing the end of the month:

US Dollar: A clear bearish bias, with weak data and not-so-hawkish outlook from the FOMC statements. It looks like the US Economy is geared towards a soft landing.

Euro: Rather cloudy, without a clear medium term directional bias. Short-term bias is up, however, with the German IFO numbers stronger than expected. The Germans are doing very well but the Italians are weighing down on the Euro with its widening trade deficit. The Euro will continue to be a good diversification option out of the Dollar in the long-term.

British Pound: The pound continues to be strong across the board, even with the occasional weak data that may temporarily weaken it for a day or two. For the past few months, the pound has gained the most but weakened the least against most of the other currencies, so that's why I'm usually so reluctant to short the pound because of its "toughness".

Japanese Yen: The Japanese Yen continues to underperform due to the overhyped North Korean Nuclear Tests that is having an effect on the Asia-Pacific region, and the uncertainty surrounding the newly-elected PM Shinzo Abe. However, the economic data continues to impress with strong numbers and I think the Japanese Yen is due for a re-evaluation in the medium-term; having said that I mean that the Japanese Yen is extremely undervalued and I would advise caution if you are planning to short the Yen for carry trades.

Swiss Franc: The Swissie has been on and off for the past few weeks because of the dilemma of the franc being a good contender for carry trades (due to the franc's low interest rate compared with the other majors) and its status of being the world's safest currency. If you've been trading the franc lately you may have been very frustrated because of the lack of direction. However, the swiss franc is a good long term hold as nearly a quarter of its currency is backed by gold reserves. Whenever there are geopolitical risks, a lot of capital flows into Switzerland, despite the low interest rates.

I hope that you have been doing well in your trading, and if you have any questions for me don't hesitate to ask, I will try my best to answer it!

To successful trading,
Dickens

I told you so....

Dear Friends/Fellow Traders,

As I noted before, the price action in the past 2 days was all overhyped market activity from participants who pay WAY too much attention to certain news leaks (without verification of its validity) and certain announcements. Today, we all witnessed a less-hawkish-than-expected FOMC statement brought the Dollar back down to where it started, with a slightly bearish sentiment on the Dollar. We will have to watch the Durable Goods and Jobless Claims data early in the morning tomorrow 8:30 ET to get an even clearer picture of where the Dollar is headed medium-term, but my bet is that it's down. In short, those who had Dollar Long positions were again in for a nasty surprise as most stops were run and fresh Dollar Short positions were taken throughout the market. Looking at the fundamentals of the US economy, I wouldn't bet anything on the Dollar staying strong in the immediate-term with the massive and growing trade-deficit slowing housing market.

Conversely, the British Pound looks very good, with a strong housing market and balanced inflation numbers, it's no wonder the Pound has always done so well against the other currencies even through volatile times. The pound has been a good buy lately, even more so than the Swiss Franc in my opinion. Don't get me wrong, the Swiss Franc is one of the most stable currencies in the world at the moment, with nearly a quarter of its currency backed by gold, it's one of the best long-term holding currencies in times of geopolitical uncertainty. For short-term and medium-term trading, however, you would probably benefit more from the British Pound.

As I write this, the GBP/JPY is trying to break out of its nearly one-month consolidation, just dying for a trending move towards 224 highs. I've had GBP/JPY long positions open for nearly two months now, down from 219's, enjoying capital gains and LOTS of carry trade interest. If it breaks through historical resistance at 223.84, then we can expect to see another move up good for at least 100 pips before stalling, and then I'll be enjoying even MORE capital gains. However optimistic the scenario is at the moment, however, I always plan for the worst and I have my stops in place somewhere near the mid 222's to protect my profits from a huge potential reversal move (It's entirely possible with the Japanese Yen so undervalued at the moment).

For now, the FOMC risk is behind us and we have a pretty good picture of where the US interest rates are headed in the near-term. The only market-movers in the next two days would be the Durable Goods, Jobless Claims, New Home Sales, GDP numbers, PCE numbers, and the U of Michigan Confidence numbers. Weak numbers for the majority of these would definitely put the ball back in the Dollar Bears' court.

Trade small, and trade safe!

Stay tuned!

To successful trading,
Dickens

Market participants are confused, but you don't have to be..

Dear Friends/Fellow Traders,

If you had open Dollar Short positions in the market yesterday, you would have been in for a nasty surprise if you didn't set your stops tight and had reverse orders in place. The Dollar rallied on the back of expectations that the Federal Reserve will end the tightening cycle and possibly raise interest rates as early as early next year, purely based on some story that the Fed research team is saying that "inflation may be a concern". Interest Rate expectations are overhyped, in my opinion, and market participants are totally forgetting the underlying fundamentals that will dictate the value of the currency in the long term, if not the immediate term. Based on extremely soft US data last week, it doesn't look like this Dollar rally will last very long, and I advise you to not be a victim of the "bandwagon effect" and jump on the bandwagon along with all the other traders; by jumping on you would be violating two very important trading fundamentals: (1) You would be effectively "chasing the trend" (if there even is one), and (2) You would be totally disregarding the economic fundamentals of the country (in this case the US). The FOMC policy statement is due on Wednesday October 25, 2006 at 14:15 Eastern Time, which will sway the market one way or another, but it seems that the market has already decided that the Dollar is going to strengthen. In my opinion, the strong consumer demand as of late is most likely linked to the upcoming Christmas season and not a healthy US Economy. The Fed will NOT raise interest rates anytime soon because doing so will have very undesirable consequences for a slowing US economy. A rate cut is more likely in the works, but there is a risk that the Fed could hold a neutral stance. We shall see...

Whether you are Dollar Long or Dollar Short, keep tight stops and have reversal orders in place in case the Fed surprises the market again with totally unconventional announcements.

By the way, the USD/CAD is an extremely attractive sell at the current price, as it's nearing very significant resistance at 1.1295. Above that there is another resistance at 1.1305, so essentially the USD/CAD would have to break through two resistance levels before it can continue any higher. I would sell at market and place a stop and reverse order at or about 1.1310, above the 1.1305 resistance. The slide in commodities is most likely just a correction and will push up again.

Stay tuned!

To successful trading,
Dickens

1.14 Is Out Of The Picture....For Now...

Dear Friends/Fellow Traders,

The US Dollar Bull Trend was stopped in its tracks by this morning's softer-than-expected economic leading indicator and the catastrophic Philadelphia Fed Manufacturing Index, at 0.1% and -0.7, respectively. Expected values were 0.3% and 8.0. The US Dollar plummeted against all the other currencies as long positions were covered for profits and short stops were ran. The USD/CAD fell from 1.14 all the way down to 1.1264 before finding minor support to stop the fall, aided by the rise in gold and oil prices. If the pair cannot close above 1.13 before the end of the week, we can expect a further decline in the pairing, possibly targetting 1.1140.

The stronger-than-expected numbers for the US in the past two weeks had everyone thinking that the US Economy was on a roll again, but after the soft numbers this morning I think the market is going to be thrown into confusion again, and we can all brace ourselves for a period of frustrating market consolidation as the bulls and bears battle each other for dominance.

For the traders who are going long USD/CAD, I would suggest that you cover your positions for losses now, rather than take bigger losses later, because 1.14 is out of the picture for now, unless you plan on holding the position long term, hoping that the USD will go on another bull run again.
However, my observation is that the commodities are poised for another run up again, and so will the commodity currencies CAD and AUD. The AUD/USD is nearing resistance at 0.7600 now and should that give way we will see further gains in the Aussie.

Conclusion? It will probably take a miracle to bring the USD/CAD back to 1.14 again in the next week or two, and if it does, we can all drop our jaws in disbelief.

Take care and stay tuned for more!

To successful trading,
Dickens

I think it's time to own the pound...

Dear Friends/Fellow Traders,

The Yen experienced a sudden surge of buying interest in the past two days, strengthening against the USD, EUR, GBP, AUD, NZD, etc.... the reason is because the market also thinks that the Japanese Yen is undervalued, and is due for a reversal. Russian Central Banks have been diversifying into more Japanese Yen for its forex reserves, and big names have been repositioning their short Yen positions.

However, we're always getting mixed signals in the foreign exchange markets because of sudden macroeconomic events that totally shoot down the technicals. North Korea just told China yesterday that they're going to continue to conduct their nuclear tests, so this might be a little troublesome for the Yen. I suggest that you do not take any positions that involve the Yen at the moment and wait to see how the market plays out to North Korea.

On the other side of the Asia-Europe land mass is British Pound, and its performance in the past week has been nothing short of amazing. They have been gaining ground against all of the other currencies. However, the weaker-than-expected unemployment numbers and wage gains weighed on the pound and it traded down below 1.8700 from mid-1.8700's yesterday afternoon. There is risk that the pound may slip further against the dollar and other currencies but it's finding good support and should take more than these weak numbers to break lower.

Having said that, I entered a long GBP position against the Dollar this morning at a relative discount just above the 1.8660 resistance which has been holding up relatively well. My stop is just below that at 1.8645 and should my positions stop out I would only have lost around 25 pips (A very good risk-to-reward ratio on this trade). The GBP is also gaining against the other currencies and this temporary sell-off of the GBP should provide good entry points for those who are looking to go long the GBP.

Stay tuned!

To successful trading,
Dickens

Watching the Japanese Yen closely...

Dear Friends/Fellow Traders,

I hope you all had a good weekend! The weather here in Vancouver has started to turn for the worse, and I'm more inclined to stay indoors now and watch the currency markets rather than go outside and get soaked. There's limitless opportunities every day, and as I become more and more experienced I will be able to spot more and more of those opportunities which can turn into profits!

Aside from the weather, I will be discussing why we should all be keeping close watch on the Japanese Yen in the upcoming weeks. As I have said before, the Japanese Yen is extremely undervalued when you take into account the robust growth of the economy and its ability to hold its ground in the past month against most of the other currencies despite the political uncertainties surrounding the North Korean Nuclear Test issue and the newly-elected Prime Minister Shinzo Abe.

The buying of Japanese Yen by the Russian Central Bank for its forex reserves today has garnered some attention by market participants today, as JPY strength early in the trading day pushed the JPY crosses lower.

The current Prime Minister of Japan Shinzo Abe is also continously making efforts to improved the strained relationship between China and Japan. He believes that political stability between the two countries will lead to positive long-term growth for both.

All of the points that I have stated above carries positive implications for the Japanese Yen, and further reinforces my point that the Japanese Yen is currently undervalued and may be due for a rally in the upcoming weeks, if not the upcoming months.

Keep your eyes peeled for all upcoming Japanese Economic Data in order to see a clear picture of the strength of the Japanese Economy. Further positive economic news may fuel a strong rally in the yen.

Good luck in your trading, and stay tuned!

To successful trading,
Dickens

The Dollar is on STEROIDS....

Dear Friends/Fellow Traders,

If you've been keeping watch of the currency markets this week, especially this morning, then I'm sure you could agree with me when I say: "Darn, the Dollar is on STEROIDS!". Yes it's true. On the back of the Dollar rally last week before the long weekend, we all thought (well, at least I did) that the Dollar was due for a short-term correction against the major currencies. The EUR/USD rallied back above 1.2600 yesterday and the GBP/USD rallied back above 1.8600. The USD/CHF also corrected down to mid 1.26's and the USD/JPY almost dipping under 1.19. Wow were we all in for a surprise this morning, the U. of Michigan Confidence survey cranked out a stronger than expected number at 92.3, reflecting the optimism in the US consumer. The Dollar consequently rallied against the majors, wiping out stops on short-term dollar bear positions and breaking key supports/resistances. The USD/JPY printed new highs at 119.90, but failed to test the 120.00 level (a break of this level will see the pair rally some more beyond this). The EUR/USD ran through and broke the 1.25 resistance level, which was heavily guarded by the bulls, and printed a low of 1.2485 before bouncing back up above 1.25. Having said that, I see this to be an excellent opportunity to make a profit immediate-term, let me explain why. The 10-month average volatility on the EUR/USD monthly charts is at its lowest level since February of 1980 (The Deutsche Mark was used in place of the Euro before 1999), and often, very low volatility is a precursor for a big market move. The EUR/JPY daily uptrend line has also been broken (taken from mid-May of 2006), which is an indication that the cross may be due for a reversal; on top of that, the Japanese Yen is extremely undervalued based on the fundamentals. We may see a large sell-off of Euros if a reversal does come into play, and will put a downside pressure on the EUR/USD. I will be selling the Euro against the Dollar immediate-term, looking for the pair to run into the low 1.23's before considering to buying back. To get an optimal entry into the market, I'll be selling half my position at market and the other half on a short-term rally. My stop will be placed at 1.2640 for both lots, 10 pips above the September 18, 2006 daily low. If this scenario plays out as expected, the profits will be staggering! Keeping close watch on these two pairs..

Stay tuned for more trading ideas!

P.S. As a side note, today is Friday the 13th! Be careful out there people! (I'm a little superstitious)

To successful trading,
Dickens

If you like watching oil prices....

Dear Friends/Fellow Traders,

Most of us like following two major commodity prices, gold and oil. Gold is perceived to be a safe store of value in times of geopolitical uncertainties and Oil is, well, a daily necessity and a good proportion of headlines and articles on publications focus on oil(some have nicknamed Oil as 'Black Gold'). Getting back to my point, if you like watching oil prices, then there is one currency pair that you MUST keep your eye on; this currency pair is the CAD/JPY (Canadian Dollar/Japanese Yen), and let me explain why. The CAD/JPY pair has a correlation of greater than 85% with the price of oil, because Canada is one of the global supply leaders of oil and is one of the greatest beneficiaries. On the flip side of the coin, Japan is one of the biggest victims since they import nearly 100% of their oil. When oil prices move up, there will be upside pressure on the Canadian Dollar (the CAD will tend to appreciate) and downside pressure on the Japanese Yen (the JPY will tend to depreciate). Conversely, when oil prices move down, Canadian companies will no longer receive staggering revenues and Japanese companies will no longer be faced with astronomical input costs. I may be exaggerating a little with my choice of words, but I'm sure you all get the idea. From my experience there is always a minor lag from when oil prices move to when the CAD/JPY pairing moves, but this correlation has almost always held true for me in the past. I hope that you can all benefit from this neat little observation.

Stay tuned for more updates!

To successful trading,
Dickens

Happy Thanksgiving!

Dear friends/fellow traders,

Happy Thanksgiving! The long weekend is coming to an end, and everyone is getting ready to get back to work. I hope everyone enjoyed their turkey dinner, and be grateful for having their loved ones in their life. Thanksgiving is one of the days in my life where I really sit down and quietly give thanks for all the great things that have been given to me in life (not yet the Lamborghini in the photo of myself at the Ferrari/Maserati showroom at the Wynn Resort in Las Vegas, but not far ahead). Speaking of the photo, I've decided to post the most recent photo of myself so that everyone knows exactly who is writing all these posts! Feel free to contact me at commercedragon@gmail.com at any time if you have any questions or comments that you want to direct to me personally (without posting it in the blog).

Now let's get back to foreign exchange. The upcoming week (October 8 - October 13) is going to be a very important week for the Dollar and the Yen. Last Friday's US Non-Farm Payrolls Data upside surprise and North Korea's underground nuclear test has driven the USD/JPY to new highs ever since the sharp drop in mid-April this year. Whether this bullishness will continue is dependant upon key fundamental data to be released this week for both the US and Japan. Data to watch closely would be the Trade Balance and Retail Sales numbers. A growing trade deficit and/or waning consumer strength could bring an end to the recent Dollar bullishness. To keep up to date on the latest news and economic calendar, check out http://www.dailyfx.com.

If you haven't opened a trading account already, I'll go into detail on how you can do so, along with the FX retailers which I find to be good. There are many FX retailers that offer demo accounts where you can practice with "play money". That way you can practice trading without actually risking any capital. Again, I'll go into more detail later on.

Stay tuned...

To your success,
Dickens

10 Reasons to Trade Forex

Dear Friends/Fellow Traders,

Thank you for checking back! I'm really excited (and nervous...) about writing the second post of my newly-launched blog; I hope the information that I will be sharing with you all in the many days to come will be exceeding your expectations.

Today I will talk about all the reasons why you should be trading forex (if you aren't doing so already). To keep this from being a multi-page essay, I will only state the top 10 reasons (I'm pretty sure you'll find many many more as you progress and grow as a forex trader):

(1) The FX (An even shorter abbreviation for Foreign Exchange) Market is the biggest financial market in the world, with over US$2 trillion traded daily. In contrast, the NYSE only trades about US$50 billion every day. That's over 40 times the daily volume of the NYSE (the biggest stock market in the world).

(2) Being the biggest financial market in the world, it's also the most liquid financial market in the world. Exporters/Importers, investors, and fund managers around the world utilize the FX markets for hedging currency risk and/or placing speculative bets on a daily basis. The FX Markets are essential to companies that do business globally.

(3) Trading in FX market can be done 24 hours around-the-clock, from 5:15 EST on Sunday to 5:00 EST on Friday. The FX market is only closed on weekends.

(4) There is unlimited profit potential for traders in BOTH Bull and Bear markets.

(5) With reference to the above point, short selling (in a bear market) is not hindered by the annoying uptick rule in equities markets. Additionally, there are no trading curbs.

(6) This is probably one of the most important benefit/advantage of trading in the FX market, LOW TRANSACTION COSTS. The only cost to you, the trader, would be the spread between the buy/sell price, which is usually pennies on the dollar for the liquid currency pairs (EUR/USD, USD/JPY, GBP/USD, etc...). In the equities and futures markets, commissions can run up to $20 per trade, and if you were to execute around 20 trades per day, that's a $400 cut back on your profits.

(7) The FX Market is also one of the most versatile markets. What I mean here is that traders can customize leverage according to their risk appetite. While margin accounts in the equities markets only offer 2:1 leverage, and futures/options markets only offer 10:1 leverage, the FX market offers up to 200:1 leverage (depending on the market maker). Used properly, this high leverage can be very powerful and lead to astonishing profits.

(8) In addition to leverage, position sizes are also customizable, which is ideal for traders who want to slowly scale into trade (a risk management strategy). Let's say a standard position size in the FX Market is 100,000 units, the trader can open a position for 25,000 units if he is cautious of whipsaw price action during really active hours, then if the market moves in favour of the trade the trader can open another position for 25,000 units. If the market moves against the trader's position then he has just cut back his losses by 75%. There are many risk management strategies and I will not go through them here, but that is definitely a topic that I will touch upon later on (so check back regularly!).

(9) Shorter trade processes would generally minimize errors, and that is another great characteristic of the FX Market. In the past decade, trading in the FX Market has evolved along with the internet boom, and many retailers offer online trading platforms where traders can instantly execute trades and get real-time price-quotes for many currency pairs at once. A trade done online is only a three-step process: (a) The trader places an order, (b) The FX dealing desk would automatically execute the trade electronically, and (c) the trader receives confirmation of the order when it posts on the trader's trading platform. This 3-step process takes only seconds to execute, so traders can rest assured that their orders have been filled without error or delay.

(10) This is probably my favourite reason for trading in the FX Market: The carry-trade. I won't go into too much detail here about the carry-trade, but essentially you can earn interest on positions that are short the lower-yielding currency and long the higher-yielding currency (interest rate differentials between currencies of different countries). There is also no expiry date on open positions. Utilized properly, the carry trade can add to your profits. I will explain the carry-trade later on!

As you can see, there is practically no downside to trading in the FX Market, only advantages! Just these 10 reasons alone should get you excited about participating in the largest financial market in the world!

Hope that this clears up any myths (the ones I've heard are usually negative) about trading in the FX Market. Remember to check back regularly for useful information on forex trading!

P.S. HAPPY THANKSGIVING!

To your success,
Dickens

***RISK WARNING DISCLAIMER***

(Source: http://www.fxcm.com) Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Welcome to my Forex Trading Blog!

Dear friend/fellow trader,

Hello to all my fellow traders out there and welcome to my Forex trading blog! For those of you who may not be familiar with the term "forex", it's just short-hand for foreign exchange. You may all wonder why I decided to start this blog, and I will tell you exactly why:

(1) Finance is a big passion in life for me, which I realized 2 years ago when I decided to transfer out of Science. Foreign Exchange is so closely correlated to finance and banking on a large scale, that I just had to take a step into this exciting industry.

(2) I wanted to find a place where I can post trading ideas and rant on about how much I love foreign exchange ever since being exposed to it last year.

(3) I wanted to create a community where like-minded people (speculative traders)can come together and share insights.

(4) I want to prove that it DOES NOT take tons of money to make money.

(5) Nothing makes me happier than seeing people experience success in trading. I hope that with this blog we can all leverage each other's intelligence and wisdom and multiply our success! Yes, we will be celebrating our successes! I love celebrating success!

(6) I'm sure I'll find many more reasons as this blog grows....

Make yourself comfortable and be sure to check my blog regularly for trading tips and useful information related to trading forex!

Stay tuned!

To everyone's success,
Dickens

***RISK WARNING DISCLAIMER*** (Source: http://www.fxcm.com)

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.