Learn Binary Options

Non professional forex traders often take the plunge into trading forex before taking the time to learn forex and equipping themselves with the knowledge necessary to find success.  Forex trading is business and not like approaching a roulette table and putting everything on red.  Without proper preparation however, many amateur forex traders find themselves in the same sticky situation as a risk-loving gambler at the roulette table.  That is why proper forex training is imperative for attaining lasting achievement in the forex market.

There are a plethora of options for those seeking forex training, however finding the one that is most suitable to you and your training needs may not be simple.  There are a few criteria that a forex training program should offer in order to fully reap the education necessary to truly learn forex.  We will share with you what you should look for in a training program.

There are two kinds of analysis that each trader should implement into his or her daily updates before opening a trade.  A decent forex training program should teach you both the fundamental and technical aspects of trading forex.  Fundamental reports show all of the outside factors that can affect the market, such as politics, economic announcements and many others.  Technical aspects revolve primarily around the interpretation of the data that can assist traders in accurately predicting future trades.  If one of these elements is missing in a forex training program then you should pass as it is not complete.

Along with understanding the different reports available for forex trading, there are a few other aspects that you should take into serious consideration.  Traders must learn money management.  If a trader’s personal finances are in disarray you can’t expect to make intelligent, thought out trading decisions that are free from an emotional connection. Emotional balance is also pertinent for forex trade.  You need a training program that teaches you how to separate emotion from trading and to maintain self-control.

Once you have found the forex educational program that can train you with the necessary skills, then you need to decipher which trading system is the best fit for you.  Find a reputable system and do your research.  Don’t just rely on ads you see online or on the television, find out what other traders are saying about the quality and consistency of each trading system.

Deciding to trade in forex is a lucrative decision that is available to everyone.  Don’t fall into the common pitfalls of many traders, and take the time to educate yourself and prepare for the forex journey ahead.

Global Equity Markets were mixed across the board yesterday.  In the U.S, the DJIA recovered most of its losses after losing nearly 100 points following the poorer than expect housing data numbers.  Housing Starts came in at 529k versus expectations of 600k.  Building Permits printed at 552k versus expectations of 580k.  The housing market was the first in the U.S economy to show signs of a bottom.  Fear of further weakness sent the equity markets on a roller coaster ride.

Additionally, CPI came in slightly higher than expected, however, not high enough to draw much concern at this time.  Gold still continues to make new highs after touching an intraday high of 1,152 before closing at 1,144.30. Oil continues to hold firm just under $80 a barrel.  In the Agriculture space, Corn, Wheat, and Soybeans gave up some of their gains from earlier in the week.

The Dollar Index continued to hold firm at just above 75.  The Pound was the big loser on the day giving up nearly a half a percent to the Greenback while the EUR gained almost 6/10^th of a percent.  Currencies continue to hold at pivotal levels as momentum to break key Support and Resistance levels has been inconsistent.

Thursday will have a few key data releases that the markets will be watching.  In the U.K, Retails Sales are set to print.  Traders will pay special attention to this release as they look for Global consistency in consumer spending.  In the U.S, Continuing Claims will be published.  Investors want to know on a week by week basis are thing looking up in the labor markets.  In the U.S and Canada, Leading Indicators will print. We will have to see how the markets react following yesterday’s CPI data.

Upcoming Forex Events for November 18, 2009

GBP    Retail Sales (MoM)     Forecast  0.60%  Previous  0.00% 

USD    Initial Jobless Claims Forecast  502.00K  Previous  502.00K 

EUR    ECB President Trichet Speaks 

JPY     Interest Rate Decision Forecast  0.10%  Previous  0.10%   

Research by http://www.ufxbank.com

The Dollar gained little ground today as it advanced versus its G-10 rivals.  DXY support at 74.90 held firmly again today as the index gained before closing at the 75.303 handle.  The EUR was pushed lower as ECB President Trichett applauded the Fed’s Ben Bernanke’s strong Dollar comments made day prior.

The Asian and London session saw traders take profits as they finished the day marginally lower following yesterday’s rally.  Gold continues to make headlines as it closed up a $1 to 1,140.20 while Oil continues to consolidate just below $80.

There was a flurry of U.S economic data released today.  The 2 releases that will capture headlines are the PPI print which continues to show a lack of pressure on price.  The other release which surprised the analysts was the Net TIC Flows. Expectations were for $30 billion but the figure came in at $40.7 billion.   CPI’s are set to print tomorrow in Canada and in the U.S.  In the U.K, BOE Meeting Minutes will be published.

Upcoming Forex Events for November 18, 2009

GBP    MPC Meeting Minutes 

CAD   Core CPI (MoM)        Forecast  0.00%  Previous  0.30%

USD    Core CPI (MoM)        Forecast  0.10%  Previous  0.20%

USD    CPI (MoM)                 Forecast  0.20%  Previous  0.20%  

Research by http://www.ufxbank.com

USD/JPY:

The Yen has lost ground to every other currency in the G-10 except the Dollar, since March of 2009.  The BOJ has always favored a weak currency as it supports their large export business which accounts for over 20% of their GDP.

The Chart above is a daily JPY chart looking back through this past March. Although the Yen trended down it was extremely volatile through August.  After mid August it continued a less volatile trend towards a handle of 88.00 before retracing to 92.00. Since mid October it has been struggling to breach near term resistance at 88.00.

On the daily JPY chart below you can see we added Bollinger Bands (BB). BB are very good during range trading and very dangerous during trending markets.  BB are best understood as a mean or avg as indicated by the yellow dotted line.  The red lines represent a standard deviation from the mean. In short you expect price to be somewhere between the 2 red lines.  When price nears one of the bands you expect it to return toward the mean, what traders call a reversal.

Notice that from March through August the same period of time shown on Chart A above that price moves precisely the way we expect with BB.  The green swing line shows price moving from one band to the next. However, towards the end of August price does not move towards the mean as the JPY has started to trend.  This is why BB are difficult to use during trending markets as we do not expect price to move back towards the mean.

There are a number of tools available to you via your charting platforms that can help you isolate when to expect the BB reversal versus a false reversal signal.  On the lower half of Chart b the Relative Strength Index (RSI) helps traders identify when a trend  is strong and may continue.  The red vertical line that runs through the false reversal signal also shows that the RSI indicates we are in the footholds of a strong trend. Typically an RSI descending after breaching 70 (over bought) or ascending after breaching 30 (oversold) indicate a weakening trend.

Currently the JPY is sitting on the lower band of the BB and the RSI reads low in terms of trend strength.  Additionally, the Yen is bumping up against R1 and R2 is fairly close as well.  For now it appears that the trend has slowed. 

http://mediafectious.com/images/18-11-2009/NOV18JPYA.JPG

http://mediafectious.com/images/18-11-2009/NOV18JPYB.JPG

Analysis by http://www.golearnforex.net

The Dollar ended the week mixed across the G-10 with commodity currencies advancing while the remaining G-10 currencies suffered minor losses.  Global Equity Markets finished the week in positive territory although Futures are pointing towards a slightly lower open.

Gold finished the week ahead at 1,118.70 while Oil lost a little over $3 a barrel to close at 76.35. The Bond Market capped a stellar week with the U.S Government auctioning an additional $81 billion in notes and bonds.

In Japan, GDP figures are set to print Sunday night.  Forecasters are looking for a slight increase in Annualized GDP figures.  On the docket for tomorrow we have Retails Sales set to publish in the U.S.  This may be a real market mover, as traders will use this as a barometer for the impact unemployment  will have on the economy.  Additionally, this will shape expectations for the popular Holiday season Forecasts.

Upcoming Forex Events for November 16, 2009

USD    Core Retail Sales (MoM)        Forecast   0.40%  Previous  0.50%  

USD    Retail Sales (MoM)     Forecast  1.00%  Previous  -1.50%  

USD    Fed Chairman Bernanke Speaks 

GBP    MPC Member Sentance Speaks 

Research by http://www.ufxbank.com

EUR/USD:

The EUR continues to struggle to break the 1.50 handle.  Last week, the EUR on a daily chart, completed the formation of a double top just above resistance at 1.50 [shown in the red boxes in the chart below].  The 50 day SMA continues to hold support for the EUR at 1.4764.  We have not had an entire candle appear below the 50 SMA since April, however, we have bounced off this MA support nearly 15 times since then.

If an entire candle appears below the 50 SMA that would be a good indication to open a near term EUR short position.  On the flip side if we breach R1 we would resume a long EUR position.  You can also see the formation of an ascending triangle when using the 50 SMA as the slope and R1 as the top side.  Although trading becomes thin towards year end and a a result the market can appear a little more volatile we anticipate the 50 SMA will move in a more parallel form to R1.

GBP/USD:

Last week the Pound broke top side resistance at 1.6750, striking 1.6843 before retracing and barley closing above R1.  The Cable has been moving sideways since June bouncing off S&R with near predictability.  As a trader you want to decipher when the current short term trend near S&R is fading.  It not only allows one to time the market but it also can limit your losses.  By setting Stops just north or south of S&R after a reversal appears to be forming a trader will limit their losses should the actual breakout occur.

In order to time the reversal correctly we suggest using candle patterns in conjunction with at least an additional indicator such as an RSI or even a Stochastic oscillator which will highlight over bought/sold points. On the Graph above you can see the candle pattern referred to as a Hangman (red arrow on graph) which indicates a reversal.  On the lower part of the graph you can see the RSI headed down from its near breach of 70. Combine that with price at its current R1 level and you have a nice short entry point.  Remember you limit your risk by placing a stop loss just above your point of entry in case a breakout really occurs.

Analysis by http://www.golearnforex.net

Technical analysis is used as the basis for decision making while trading in binary options. It is therefore important for binary options traders to understand what technical analysis is, to understand the relationship between binary options trade and technical analysis, and to understand how to do a technical analysis.

Technical analysis is one of the methods of analysis in binary options trade. The other method of analysis is fundamental analysis. Fundamental analysis is analysis that is based on fundamental data so that an accurate prediction about the future can be made. Sources of fundamental data include profit and loss statements in a company, the history of commodities such as oil and gold, and other information found in online and offline sources. However, fundamental analysis has a big problem which makes most binary options traders prefer technical analysis. This problem is that just because an underlying asset is a stock in a respectable company or an expensive commodity does not guarantee that it will close in-the-money. Every option goes through ups and downs that are hard to determine with this option.

It is important to note that fundamental analysis works for long-term investments while technical analysis works even for short time investments. Most binary options trade strategies only require short outlooks and for this reason, technical analysis is preferable while trading is binary options.

Technical analysis in binary options trade is based on several principles. These are that the price is determined by the interaction of the supply and the demand, emotions such as greed and fear greatly affect the supply and demand, costs discount everything, price has trends over time, and that patterns form trends – always be on lookout for patterns.

Binary options traders use different tools to do technical analysis. These tool used depends on the user’s ability to use it, on the success rate of the tool, and on several other considerations. These tools enable binary options traders to trade more accurately and more quickly.

Binary options traders use trading calculators such as simple probability calculators and covered call writing calculators to do technical analysis. These calculators help the user to calculate the probability of a binary options trade closing out-of-the-money, to figure out return rates, etc. Another tool used by binary options traders for technical analysis is the index workbench. This tool is especially important for novice binary options traders and it works by educating the users on how risks are best managed and by showing novice traders how returns can be increased. Volatility data is another important tool in technical analysis of digital options trade and it helps the binary options traders to determine the best options to buy, to determine the underlying assets that are overpriced and vice versa, and to predict the movement of prices. Other tools are virtual trading tools which are perfect for training, charts, etc.

Although technical analysis has several advantages over fundamental analysis, it is important to note that both methods can be used at the same time. However, using these methods of analysis does not eliminate the need for intuition – the savviest traders are those who trust their intuition.

Sometimes markets go down while trading in binary options – this can be very frustrating. To be successful in binary options trading, a trader should know how to anticipate a bad market and what to do in case of a bad market. A binary options trader should have a system that is guaranteed to pull him/her out a bad market or to reduce the severity of the effects of a bad market.

Although trading in binary options is not as speculative as trade in other options or trade in other financial instruments since all that a binary options trader has to do is to correctly predict the direction the value of the underlying asset will close, there are still some risks involved. These risks could be especially devastating for novice traders.

One way for a binary options trader to cushion him/herself against bad market conditions is to buy low and to sell high. This is possible with binary options trading because the trade is not affected by the economy, but by the value of the underlying asset. However, there is need for a lot of research on the part of the trader to accurately determine what the true value of the underlying asset is. This strategy works with binary options trading because a trader can exit the trade whenever he/she feels the trade might close out-of-the-money.

Another strategy used by industry players to deal with bad market conditions is fading the market. The buyers purchase the underlying asset when they are facing a downward trend, and they hope that the trend will reverse in the near future. This is possible with binary options trading because panic causes many traders to sell their underlying assets at throwaway prices the moment the market starts heading south. However, this strategy is very speculative and a binary options trader can lose money because the price of the underlying asset may fail to come back before the expiration date. To use this strategy, a binary options trader must do a lot of research and there must be clear signs that the market will head north before the expiration date

A binary options trader can also use a strategy called playing the spread. This strategy involves purchasing the underlying asset 1/16 of the market value up and later selling the underlying asset at 1/16 below the market value. This way, the binary options trader is able to protect him/herself from the risk. However, you will only be successful with this strategy in markets where it is not known – many traders in major markets will not sell you their underlying assets this way because they know they will lose.

Finally, another common strategy for dealing with bad market conditions is post opening selling. With this strategy, the binary options trader buys the options at a price that is below the market price – this way, the risk is lessened because it is unlikely the underlying asset will close below the buying price. A binary options trader will use this strategy to cause a panic in the market so that he/she can be sold the underlying asset below the market price.

The Dollar was relatively unchanged across the board yesterday with the DXY managing to stay afloat above 75 despite testing support just south of 75.  The Pound suffered a minor setback in its race to break resistance when Fitch, a rating agency, said the U.K economy stands in line to potentially be downgraded.

Global Equity Markets were flat as the DJIA average closed the U.S session up 20 points to 10,246.97.  There is a holiday in the United States today, so trading across the board we anticipate will be lighter.  Oil was flat on the day currently at 78.85 while Gold continues to climb currently at 1,108.65.

The economic data released are again light today with most release coming from the U.K reporting.  The U.K will release their quarterly inflation report although there is nothing to suggest any real surprises will show.  With the Pound retreating after testing resistance there is more room to the downside with a quite market today and given the U.K has the most data releases due out.

Upcoming Forex Events for November 11, 2009

GBP    Average Earnings Index +Bonus        Forecast    1.60%  Previous  1.60% 

GBP     BOE Inflation Report           

NZD    Retail Sales (MoM)     Forecast  0.50%  Previous  1.10%  

AUD   Employment Change  Forecast   -10.00K  Previous  40.60K  

Research by http://www.ufxbank.com

GBP/USD:

Perspective is quite valuable regardless of what instrument or product you trade.  Your forex trading style will vary when range trading versus trading in trending markets.  The Chart below is a monthly candle on the GBPUSD.  Notice the tight range the Pound has been trading in since the end of May.  This is shown by the orange rectangular box.  Take note of the strong move down that preceded this period.

For those forex traders that pick entry points based off of Moving Average crosses, then this is a pretty significant cross that just took place.  On the Chart we have a 5, 10 and 15 MA using a monthly tenor.  The 5 MA which follows price closest is in purple on top.  The 10 you would expect to see next when price is appreciating, however, in this case it just crossed back above the 15 indicating that a bullish run has returned.

To put some perspective on this, these Moving averages have not been in this order since early 2008 around the time the Cable was at its all time high against the greenback.  The first confirmation of a long term run up in price would be the breach of the next level of resistance at 1.7045.  Of course MA can always cross back, but using a monthly tenor provides quite a confirmation.

USD/JPY:

The Greenback has replaced the Yen for the carry trade.  Like most other currencies we are at key levels here once again. If we can close above 92.20 we will have completed an inverse head and shoulders as depicted on the graph. 

However, we are far closer to testing resistance at R1 with a handle of 88.30.  If we breach that, we would expect to move a full figure lower and test R2.

Analysis by http://www.golearnforex.net