Forex Broker Study

Foreign exchange brokers, unlike others financial brokers, do not take commission from customer; they only work for banks. Their roles are to bring together buyers and sellers in the market, to optimize the price they show to their customers and quickly, accurately, and authentically executing the traders' orders.

The majority of the foreign exchange brokers execute business via phone using an open box system— there is a microphone with the broker that let him communication on the direct phone lines to the speaker boxes in the banks. By using this way, all banks can hear all the deals which are being executed. Due to the open box system, a trader is also able to hear all prices quoted; whether the bid was hit or the offer taken; and the following price. What the trader will not be able to hear is the amounts of particular bids and offers and the names of the banks showing the prices. Prices are unidentified. Sometimes brokers charge a commission that is paid equally by the buyer and the seller. The fees are negotiated on an individual basis by the bank and the brokerage firm. Brokers show their customers the prices made by other customers either two-way ( bid and offer ) prices or one way ( bid or offer ) prices from his or her customers. Traders show different prices because they "read" the market in a different way; they have different opportunity and different interests. A broker who has more than one price on one or both parties will automatically optimize the price.That means, the broker will always show the highest bid and the lowest offer. Therefore, the market has right of entry to an optimal spread possible. Fundamental and technical analyses are used for predicting the future direction of the currency. A trader might analyze the market by hitting a bid for a small amount to see if there is any response. Another advantage is that brokers might provide a broader selection of banks to their clients. Some European and Asian banks have overnight desks for 24 hours optimization dealing with counterparts in American banks, adding to the liquidity of the market.
Direct dealing .

Direct dealing is based on trading reciprocity. A market maker—the bank making or quoting a price — look forward to the bank that is calling to respond to making a price when called upon. Direct dealing provides more trading judgment, as compared to dealing in the brokers' market. Direct dealing used to be conducted mostly on the phone. Phone dealing was error-prone and slow which were difficult to prove and even more difficult to settle. Direct dealing was perpetually changed in the mid-1980s, by the introduction of dealing systems. Dealing systems are on-line workstations that link the contributing banks over the world on 1 on 1 basis. The performance of dealing systems is characterized by speed, reliability, and safety. The software is rather reliable in working on large exchange rates and the standard value dates. In addition, it is very accurate and fast in contacting with other parties, switching among conversations, and accessing the database. The trader is in continuous visual contact with the information exchanged through video conferencing. Video conferencing between both sides is much better than pure conversation. Most banks use a group of brokers and direct dealing systems. All approaches reach the same banks, but not the same parties, because corporations, for example, cannot deal in the brokers' market. While developing reciprocal relationship between traders and brokers, traders select their trading medium based on price quality, not on personal feelings. The market share between dealing systems and brokers fluctuates based on market conditions. Fast market conditions are beneficial to dealing systems, whereas regular market conditions are more beneficial to brokers.

Matching systems.

Contrasting dealing systems, on which trading is not unknown and is conducted on a 1 on 1 basis, matching systems are unknown and individual traders deal against the rest of the market, similar to dealing in the brokers' market. Nevertheless, not like the brokers' market, there are no individuals to bring the prices to the market, and liquidity may be limited at times. Matching systems are for smaller amounts.. In addition, credit lines are automatically managed by the systems. Traders input the total credit line for each counterparty. When the credit line has been reached, the system automatically disallows dealing with the particular party by displaying credit restrictions, or displays the only price for traders who have open lines of credit. As long as the credit line is restored the system allows the bank to deal again.

Trading Ideas

AIME is effective because of its clear-cut methodology - it teaches the traders how to use all of the above tools together in a simple system to confidently and effectively trade the Forex.


ASSESS - IDENTIFY - MOVE-IN - MOVE-OUT - EVALUATE
AIME is...

1. A systematic trading approach that relies on the same tools Forexmentor uses. The Forexmentor-AIME workshop will be grounded in the Forexmentor course, and focus is on the correct and practical application of Peter's system, using: Pivot Points, Candles, Patterns, MACD, Trendlines & "Insider" tips, tricks and everyday wisdom
2. AIME is a step-by-step method for trading currencies that teaches students to uncover opportunities, enter, monitor, and exit trades, and evaluate and really learn from any trade they make.
3. AIME is an acronym and stands for:

A = Access the market
I = Identify opportunities
M = Move into a trade ( enter ), M=Monitor the trade, M= Move out of the trade ( exit )
E = Evaluate the trade

AIME is an intense 2-day, hands on, " in the trenches" trading "WORK" shop

Economic Fundamental

Share market is very corporate dependant, we need to understand the corporate strategy, what is current corporate trend, who is managing the company? Is the company reliable? Is the annual report reflect true situation?

On the other hand, Forex market is economic dependant among countries. Unlike the financial, political and crisis factors, economic factors occur in a steady stream. Therefore, its very import to keep an eye on the economic announcement in order to make the enter and exit decision on your position.
Some economic aspects:

1.Information source

Update the news on cnn or www.ny.frb.org , forexcapitalnews and so on.

2.Economic data

Measurable values of price and changes in price. For example, the cost to hire a stuff for a month, or the cost of a particular commodity.

3.Formulation of economic activity of relationship

Consumer spending, government spending, ratio of import and export activity, etc. 4 major consumer spending are clothing, food, living and transportation. The economy is considered growing if people switch to consuming from saving. Government spends on building the country facility, construction, government corporate and service, military, etc. A Country economy is growing if the export revenue is more than import demand. Or that means, country‘s income is more than its spending to get other countries’ goods. A strong country is considered independent by supplying significantly more than demanding.

4.Inflation rate

The specific inflation rate involves taking measurable prices, and a model of how people consume, and calculating what the general price level which is from the statistics model. For example, the fuel in U.S. is cost 1 USD 1 litre; To calculate the price level would require a model of how much petrol a person uses in average and what fraction of their income is devoted to this, another factor is how people use the petrol and whether there is any replacement for substitution.

5.Employment

This is another critical economic factor. Its basically measured in the stability of different job and satisfaction in sound.

6.Production

The production is playing important role nowadays as its chain-influence with other economic aspect. The measurable indicators are based on the change in material prices, Quantity orders for supplies and resources, change in manufacture’s durable goods and unfilled orders, sales and supply performance, Index of Production yield to customer expectation, expanding margin.

CHARTS

Chart Pattern and trend line:

Tips: Most people will not consider side way pattern because the possibility to going up or ramping down is the highest. If you would like to trade in side way pattern situation. Here is your 5 sen.

* Play a bounce off resistance
* Play a break off resistance
* Play a bounce off support
* Play a break off support
* Wait for breakout. Don' t do anything.

CHARTS

Peter Bain use mainly daily, hourly, 15 minute, and five minute charts. The daily chart will help you define the overall trend from a position trading point-of-view, and the hourly (one hour) chart will give you a feel for the intraday trend. The 15 minute chart is used for entry and exit – with assistance from the five minute chart, where price is moving quickly, and you need to be closer to the action. Please note that the five minute is not to be used for scalping, as there is a lot of noise there, and you could easily get whipsawed.

Make sure you are using charts that are generated from the same data source that feeds the dealing engine, as is the case with both platforms mentioned above. That way, what you see is what you get when you buy or sell. Some charting packages do not ccurately reflect where price is at any given moment in time.


INDICATORS

Peter Bain really only espouse one – MACD (for divergence only). MACD Divergence is covered extensively in his course and my trading examples MACD is his favorite indicator, and that would be his choice.

The nine and 18 exponential moving averages are okay too to give you some sense of price direction, but he is not a believer in using moving averages for this market – so am not too thrilled about their application and use. Go ahead and plot MACD on the charts you are working with.

He will give you more information in tomorrow’s email on his simple, yet powerful Forex pivot trading system.

S1, S2, R1 and R2

As already stated, the pivot point zone is a familiar technique as it works simply because of the use and trust from many traders and investors. But what about the other support and resistance zones (S1, S2, R1 and R2)? To predict something likely to happen for the support or resistance level with some mathematical formula in some way is quite subjective. We can not rely on that formula blindly merely because of the formula suddenly popped out on the level. For this reason, we have found another simpler alternative way to map our time frame, and somehow it is more objective and effective.

We used the calculation as showed before. But our support and resistance levels are different from others. We take the earlier session high and low and draw those levels on today’s chart. We’ll do the same to the session before the earlier session. By doing so, we are going to add in four more important levels drawn in our chart besides the pivot point .

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.

Those important levels will show us the strength of the market at anytime. The market will be considered as an uptrend market if it is trading above the pivot point. If the market is trading above HOPS1 or HOPS2, it is still considered as an uptrend market and we only take long positions. However, the market is considered as a downtrend market if it is trading below the pivot point. Trading below LOPS1 or LOPS2 is a downtrend market and it is advisable for us to take short trades.

The significance behind this calculation is simple. We all knew that the market stopped at some levels from going higher or lower than earlier session or the session before that because of some reasons. But yet, we don’t know the reasons. By then we only know the fact that the market upturned at that level. All the traders and investors should remembered that where the price stopped in the previous session, and the probability is that the market will upturn from there again (maybe for the same reason, and maybe not). If not, at least we can find some support or resistance at those levels.