MONEY on the SPOT !

Written by Research | 19 September 2009

Pointing to Market Opportunities

As every end of the month approaches, the volatility of the Foreign Exchange Market has never been so active as to the direction of the US Dollar. As many articles have been written, one outstanding article that led to this writing is a contributory insight and analysis written by one of our hub authors. The article on ' Why the Dollar will collapse

by Estess has been published sometime ago which undoubtedly providedadditional support to our recent market view regarding the dollar's decline as shown in the market. And the most recent article by Randall W. Forsyth on Up and Down Wall Street, describing the US Dollar's poor performance since 2002 which has continued to depreicate until this month of September as it tried to establish a new low for this month .

Although, the EUR/USD did at 1.4765 as of the end of the 18 th of September which was the highest price since the month of August where the actual trend was defined together with the precious metal on Gold with a high at USD 1,023.95. The "TREND " was clear enough to be seen as we have presented in our recent article on " FX Case Study " that summarizes the last two weeks of trading for the month of August that led our team to meet way ahead of our financial objectives for the year 2009. A follow-up article on Gold - the currecny of Last Resort & TREND following Strategy 2 " highlights the actual analysis that led to pin=pointing market opportunities as the months progresses.  

Being able to spot market opportunities will always take some real research and analysis, although in the FX market it will be there at all times. Missing an opportunity for some may tend to be an irony where the psychology of the trader is affected sometimes by market movements. It is the investor and traders' perception on how to view the market without being emotionally affected by it. Market Trends are there to follow, the persistent bias in the market will always show what the true colors of the market would be. Except that the average price swings could be so wide and sometimes narrow at which times the trader's tendency is to loose their patience.

In our two previous hubs, where the articles describe some pointers in ' Defining a Winning Trade'; plus it is relatively a support to the other article related to having ' An Effective FX Trading Strategy ' that defines the relationships of the four (4) hourly charts as a means of making entry and exist strategies in place when executing a timely trade. The most recent picture / chart relating to the EUR/USD showing the market outlook where it had reached a 50% & above Fibonacci levels shows the temporary correction that it may do before another assault to the north of the prices. Others may say...' Well, its easier said than done '. but having to develop a sense of trading analysis may take some time, years at that matter.

As the market's strong sentiments have continuesly been present with the traders, market movements would prevail specially towards the last week and first week of the months. Trend following and positioning a trade within the major trend has always been effective. Although, contrary analysis may sometimes be useful except for fundamentally fueled markets such as the one the market showed for the past couple of days. For traders to be able to identify such trends sometimes just needs to accept the facts prevailing that weigh heavier than any technical tools provided. The ultimate decision making whether to buy or sell still boils down to the investor willing to risk at the expense of loosing in the market.

As most positions are correct, it is in the skill of the traders who can develop the skill of properly timing the trades. As mentioned before, it is better to have a position executed within a major event or a lack of an event. The reason behind this is that most trades executed should not have to be a head on collision with the rapid pace of the prices. As most retail investors have experienced that the trades or orders done is not even a fraction of the total active participants in the Forex market. So finding the right opportunities can also depend on the anticipation that other currencies are available to trade.

It is just being able to pin-point which currency may become the pace setter or eventually the lead currency in the next few hours / days or weeks to come. In relation to this, establishing a higher degree of profit potentials and objectives should at all times be greater than the probable loss. Where the rational and logical approach in making a well developed trading plan can produce significant bottom line results, in short- profitable trades! It is very difficult, but when a considerable time is spent on serious studies and research, the fruits of those labor will be reflected in dollar amount. Of course in a more positive way than the other.

We hope that this additional information has helped in whatever form or manner as to having a better understanding of how the market behaves in times especially towards the end of each month, as well as the after effects of such movements within the first few weeks of the coming months. Knowing how to look at the charts is one thing, analyzing it is another. As many traders may seem to know the candlestick theory and what the bars mean is not enough to say where the direction of the market will be at in the next few trading sessions.

As a matter of thought, the chart formations, bar configurations in the candlestick theory has long existed even before. If everyone sees the same sequence of shapes / configuration on the computer screen regarding price, patterns, formations such as flags, pennants, wedge, double -tops just to name a few then everyone else would have done similar trading decisions. But the truth of the matter is that each one has its own interpretation. Eventually, whenever the price moved, most of the traders would say ..." I knew that would happen ". It easy to say after the fact.

The best way, is to develop a sense of foresight through time tested research and a much better understanding of the economic conditions which may be difficult to factor-in the equation of a quantitative formula. Only then, traders would have the trained ability to decide what strategy to use to have a positive net amount on a given trade.

The likes of Long Term Capital Management trading in currencies and interest rates with a few other spreads in other financial instruments should be a clear learning example for everyone; as the company had the best algorithmic formulas in physics ever developed and used in their trading from the best minds in the industry. Then BANG! . . . it happened ! And can happen again!

As a closing remark, MegaTrade101 appreciates articles such as ' Why the Dollar will collapse' for its very timely contribution to how the real markets affect the investors as well as the traders' market perception and analysis. The views and opinions here as a matter of consideration is important and being able to be part of this hub group is a privilege to share the thoughts and ideas surrounding the business and financial markets..