FOREX

Forex is always priced in pairs between two different types of currencies. When you make a trade, you have to buy one currency and sell another at the same time. If you want to exit the trade, you must buy/sell the opposite position. For example, when you think the price of the Euro is going to rise against the US Dollar. In order for you to enter a trade, you will have to buy Euros and sell US Dollars.
If you want to leave the trade, you will have to sell Euros and buy back US Dollars. You will be hoping that you were right in your guess and that the exchange rate for EU/USD has actually risen, which means that you will get more Euros back than when you bought them, which is how you will make a profit.
These days just about every forex broker is claiming to have the tightest spreads in the industry. But marketing does have the ability to be deceiving. The topic of spreads in the forex spot market is very complicated and often not easy to understand. However, nothing affects your trading profitability more.
First of all in order to understand the spread, you need to know what it is. A spread is the difference between the ask price (the price you buy at) and the bid price (the price you sell at) that is quoted in the pips. If the quote between EUR/USD at a given moment is 1.2222/4, then the spread equals 2 pips. If the quote is 1.22225/40, then the spread is going to equal 1.5 pips.
The spread is how brokers make their money. Wider spreads will result in a higher asking price and a lower bid price. The consequence to this is that you have to pay more when you buy and get less when you sell, which makes it more difficult to realize a profit
Brokers generally don’t earn the full spread, especially when they hedge client positions. The spread helps to compensate for the market maker for taking on risk from the time it starts a client trade to when the broker's net exposure is hedged (which could possibly be at a different price).
Spreads are important because they affect the return on your trading strategy in a big way. As a trader, your sole interest is buying low and selling high (like futures and commodities trading). Wider spreads means buying higher and having to sell lower. A half-pip lower spread doesn't necessarily sound like much, but it can easily mean the difference between a profitable trading strategy and one that isn’t profitable.
The tighter the spread is the better things are going to be for you. However tight spreads are only meaningful when they are paired up with good execution. Quality of execution will decide whether you actually receive tight spreads. A good example of this is when your screen shows a tight spread, but your trade is filled a few pips to your disadvantage or is mysteriously rejected.When this occurs repeatedly, it means that your broker is showing tight spreads but is effectively delivering wider spreads. Rejected trades, delayed execution, slipping, and stop-hunting are strategies that some brokers use to get rid of the promise of tight spreads.

You are going to love this lesson. Using pivot points as a trading strategy has been around for a long time and was originally used by floor traders. This was a nice simple way for floor traders to have some idea of where the market was heading during the course of the day with only a few simple calculations.
The pivot point is the level at which the market direction changes for the day. Using some simple arithmetic and the previous days high, low and close, a series of points are derived. These points can be critical support and resistance levels.
The pivot level and levels calculated from that are collectively known as pivot levels. Every day the market you are following has an open, high, low and a close for the day (some markets like forex are 24 hours but generally use 5pm EST as the open and close). This information basically contains all the data you need to calculate the pivot levels.
The reason pivot point trading is so popular is that pivot points are predictive as opposed to lagging. You use the information of the previous day to calculate potential turning points for the day you are about to trade (present day).
Because so many traders follow pivot points you will often find that the market reacts at these levels. This give you an opportunity to trade.
Before I go into how you calculate pivot points, I just want to point out that I have put an online calculator and a really neat desktop version that you can download for free HERE

If you would rather work the pivot points out by yourself, the formula I use is below:

Resistance 3 = High + 2*(Pivot - Low)
Resistance 2 = Pivot + (R1 - S1)
Resistance 1 = 2 * Pivot - LowPivot Point = ( High + Close + Low )/3
Support 1 = 2 * Pivot - High
Support 2 = Pivot - (R1 - S1)
Support 3 = Low - 2*(High - Pivot)

As you can see from the above formula, just by having the previous days high, low and close you eventually finish up with 7 points, 3 resistance levels, 3 support levels and the actual pivot point.
If the market opens above the pivot point then the bias for the day is for long trades as long as price remains above the pivot point. If the market opens below the pivot point then the bias for the day is for short trades as long as the market remains below the pivot point.
The three most important pivot points are R1, S1 and the actual pivot point.
The general idea behind trading pivot points is to look for a reversal or break of R1 or S1. By the time the market reaches R2,R3 or S2,S3 the market will already be overbought or oversold and these levels should be used for exits rather than entries.A perfect set up would be for the market to open above the pivot level and then stall slightly at R1 then go on to R2. You would enter on a break of R1 with a target of R2 and if the market was really strong close half at R2 and target R3 with the remainder of your position.

This all looks pretty straight forward.

Unfortunately life is not that simple and we have to deal with each trading day the best way we can. I have picked a day at random from last week and what follows are some ideas on how you could have traded that day using pivot points.
On the 12th August 04 the Euro/Dollar (EUR/USD) had the following:
High - 1.2297
Low - 1.2213
Close - 1.2249

This gave us:

Resistance 3 = 1.2377
Resistance 2 = 1.2337
Resistance 1 = 1.2293
Pivot Point = 1.2253
Support 1 = 1.2209
Support 2 = 1.2169
Support 3 = 1.2125
Have a look at the 5 minute chart below

The green line is the pivot point. The blue lines are resistance levels R1,R2 and R3. The red lines are support levels S1,S2 and S3.
There are loads of ways to trade this day using pivot points but I shall walk you through a few of them and discuss why some are good in certain situations and why some are bad.

The Breakout Trade

At the beginning of the day we were below the pivot point, so our bias is for short trades. A channel formed so you would be looking for a break out of the channel, preferably to the downside. In this type of trade you would have your sell entry order just below the lower channel line with a stop order just above the upper channel line and a target of S1. The problem on this day was that, S1 was very close to the breakout level and there was just not enough meat in the trade (13 pips). This cab be a good entry technique for you. Just because it was not suitable this day, does not mean it will not be suitable the next day.

The Pullback Trade

This is one of my favorite set ups. The market passes through S1 and then pulls back. An entry order is placed below support, which in this case was the most recent low before the pullback. A stop is then placed above the pullback (the most recent high - peak) and a target set for S2. The problem again, on this day was that the target of S2 was to close, and the market never took out the previous support, which tells us that the market sentiment is beginning to change.

The foreign exchange market, or Forex market, is an around-the-clock cash market where the currencies of nations are bought and sold. Forex trading is always done in currency pairs. For example, you buy Euros, paying with U.S. Dollars, or you sell Canadian Dollars for Japanese Yen. The value of your Forex investment increases or decreases because of changes in the currency exchange rate or Forex rate. These changes can occur at any time, and often result from economic and political events. Using a hypothetical Forex investment, this article shows you how to calculate profit and loss in Forex trading. To understand how the exchange rate can affect the value of your Forex investment, you need to learn how to read a Forex quote. Forex quotes are always expressed in pairs. In the following example, your pair of currencies are the U.S. Dollar (USD) and the Canadian Dollar (CAD). The Forex quote, USD/CAD = 170.50, means that one U.S. Dollar is equal to 170.50 Canadian Dollars. The currency to the left of the "/" (USD in this example) is referred to as base currency and its value is always 1. The currency to the right of the "/" (CAD in this example) is referred to as the counter currency. In this example, one USD can buy 170.50 CAD, because it is the stronger of the two currencies. The U.S. Dollar is regarded as the central currency of the Forex market, and it is always treated as the base currency in any Forex quote where it is one of the pairs. Let's go now to our hypothetical Forex investment to show how you can profit or come up short in Forex trading. In this example, your pair of currencies are the U.S. Dollar and the Euro. The Forex rate of EUR/USD on August 26, 2003 was 1.0857, which means that one U.S. Dollar was equal to 1.0857 Euros, and was the weaker of the two currencies. If you had bought 1,000 Euros on that date, you would have paid $1,085.70. One year later, the Forex rate of EUR/USD was 1.2083, which means that the value of the Euro increased in relation to the USD. If you had sold the 1,000 Euros one year later, you would have received $1,208.30, which is $122.60 more than what you had started with one year earlier. Conversely, if the Forex rate one year later had been EUR/USD = 1.0576, the value of the Euro would have weakened in relation to the U.S. Dollar. If you had sold the 1,000 Euros at this Forex rate, you would have received $1,057.60, which is $28.10 less than what you had started out with one year earlier. As with stocks and mutual funds, there is risk in Forex trading. The risk results from fluctuations in the currency exchange market. Investments with a low level of risk (for example, long-term government bonds) often have a low return. Investments with a higher level of risk (for example, Forex trading) can have a higher return. To achieve your short-term and long-term financial goals, you need to balance security and risk to the comfort level that works best for you.

Over recent years online Forex trading has now become big business and certainly in the financial sector this is the biggest market of all in the world. The reason why this market has grown compared to the many other financial markets is because of the rise in the number of traders working online rather than using the more traditional method of trading by using the phone. Because of this increase there are a number of sites which are now offering to people the chance of learning about this through taking free online Forex trading courses. However as with a lot of things in life today sometimes the best things in life are not for free and certainly the same could be said for many of these courses. When you are considering taking an online forex trading course, there are a number of things that you will need to take into consideration. 1. Who is offering this course? 2. Just why is it they are offering to provide you with a book to learn about Forex trading for free? 3. Are they actually offering this course because they are promoting a particular trading site and then want you to enroll on it? 4. Once you begin to read the book do you find that they are being extremely pushy when it comes to actually getting you to use a particular website to invest your money in? The answers that you provide to the above questions will help to show you just how honest the information being provided to you for free is. One way of discovering if the free online forex trading course that you are looking at is of the highest standard is by looking at how much of the information contained within it is replicated elsewhere. You will soon learn that a lot of the information you find in some of the free online forex trading course books can easily be found when you search the net. So rather than using these books or courses to teach you how to trade on the Forex market instead use the advice and articles about the subject that are being offered on other sites. Plus why not join one of the many forums that have been set up and discuss your issues with some of the people here. They are people who have been trading on the Forex market for some time and will often offer you the best advice when it comes to finding a suitable course for learning about Forex trading. Certainly the better free online Forex trading courses are those that do not limit themselves to telling you about how one company trades. Rather it should be providing you with views of all the sites that are available and which are run by established companies. Any such courses should be prepared to provide you with everything that you need to know about the world of Forex trading and not restrict you to using the services of just one or the abilities of one company.

Recent years we witnessed increasing numbers of Forex investment opportunities in United States. However, it is common that one afraid of being involved in Forex market because of high risk in this trading field. Although every capital market involves certain level of risk, the risk of loss in foreign currency trading market can be extensive. It would be wise to learn about the potential risk (and managing it) if you wish to trade in Forex market. Knowledge Needless to say, knowledge is the key of handling your risks well. Before you get into Forex market, the best thing you should do is educate yourself. What drives currency price movement? How to read analysis data? How to read chart indicators? Learn detail about how currency price move and how to trade foreign currency exchange in order to avoid unnecessary risks. If you wish to learn more, http://www.golearnforex is a good source for Forex beginner education. Forex dealer Choosing the right FX dealer is a way to avoid unnecessary risks. Forex dealers are not all regulated the same way. Although Forex dealers must be regulated by law, firms and individuals can solicit retail accounts for Forex dealers and manage those accounts without being regulated. As a trader you should take up the responsibility of finding out if your Forex dealers are regulated. If they are not, you may be exposed to additional risks. Also, beware of dealers with investment schemes that sounds too good to be true. Pay extra cautions to dealers that you first knew and always look into the investment offers. If you are from United States, you can always refer to CFTF (at http://www.cftc.gov) or NFA (at http://www.nfa.org) for further information. Forex market is a non-centralized market. There is no common market place for Forex traders and there is no so-call 'standard' in foreign currency exchange price. Different Forex dealers offer very different deals to their customers. As an individual FX trader, you depends solely on the dealer to make a transaction in your trades, thus picking up the right dealer is extremely crucial in your risk. Stop loss order Besides depending on the Forex dealer, a stop loss come very handful if you wish to limit your risks. Always trade Forex with a stop loss order as it will assure you to exit market in a price that you can handle the losses. As an example, if you purchase 100k of EUR/USD at 1.2050 expecting the EUR/USD to rise in value, and your stop is placed at 1.2020, you are guaranteed to be filled at your price (except in very volatile market.) To leverage or not? One way to manage your risks well in Forex market is to trade without overleveraged. Forex dealers want you to trade with high leverage values as this means more spread income for them. Also, trading in high leverage may increase your profit or your losing. There are high possibilities that one lose money more than he or she can afford in margin trading. Conclusion You come to this article probably because of you are new to FOREX and were looking for some readings on the Internet. To be frank, Forex can be very profitable but the risk lie beneath is equally great. But what else in life does not involve risk? You can be fired from your job, factory may malfunctions, stock market may collapse, your boss may runaway with your wages, and hey! These are all risk. Learning in risk management is the key to handle your life. Trade smartly, and gain the maximum out of Forex - good luck!

With the amazing growth of the forex market, you are going to see an astounding amount of traders lose all their money. Unfortunately, they haven't followed the simple steps I have laid out for you. Go through these steps and give yourself the greatest opportunity to achieve your goals.
1. Have Faith In Yourself
To reach the level of elite forex trader, you must trust in yourself and your forex trading education. You must be willing to make all your trading decisions, instead of relying on someone else's thoughts or ability (or lack of). Of course, you will prepare yourself fully before every risking any money.
2. Accept Your Learning Curve
Unless you are a veteran trader, you will lose money trading the Forex market. This is a near certainty. I don't say this to talk you out of trading. In fact, quite the opposite. You will be trading against others that fall to this reality day in and day out. You, however, will not risk a dime until you have learned the skills you need to make money trading the forex.
3. Decide What Type of Trader You Are
There are many ways to trade the forex. They range from very active to very patient. You must decide which style suits you best. The best time to learn this about yourself is while you are trading a demo account. There is no need to allow your learning curve to cost you money.
4. Get Educated
Education is the shortest path to elite forex trading. Regardless of your ultimate goals, you will reach them quicker with a great forex trading education. Take some time to review different options before deciding on who to trust with your forex trading education needs. A forex seminar will help shorten your learning curve drastically.
5. Continue to Get Educated
In order to achieve and retain elite forex trading skills, you must constantly be adding to you knowledge base. Your education should never end. In fact, one of the key points to look for in an elite forex trading course is ongoing education. It's nice to have an ongoing relationship with the person/people helping you to achieve your goals.
What separates an elite forex trader from all others is their desire and ability to be independent. Many traders are willing to follow signals, systems, strategies, or anything else you may call them. By taking this approach, however, these traders are only as good as the people they follow.
An elite forex trader will lead. Their decisions will be calculated and analyzed to near perfection. They will make decisions with no hesitation, and handle the growth of their account in a predetermined, intelligent fashion. Take your trading to their level and you will never look back.

Forex is an abbreviated name for "foreign exchange." The Forex market is a non-stop cash market where the currencies of nations are bought and sold, typically via brokers. For example, you buy Euros, paying with U.S. Dollars, or you sell Euros for Japanese Yen. The value of your Forex investment increases or decreases because of changes in the currency exchange rate or Forex rate. These changes often result from economic and political factors, such as the price of oil or political unrest. To better understand how the exchange rate can affect the value of your Forex investment, this article shows you how to read a Forex quote. Forex quotes are always expressed in pairs. In the following example, your "pair" of currencies are the U.S. Dollar (USD) and the Euro (EUR). The Forex quote, USD/EUR = 265.50, means that one U.S. dollar is equal to 265.50 Euros. The currency to the left of the / (USD in this case) is referred to as base currency and its value is always 1. The currency to the right of the / (EUR in this case) is referred to as the counter currency. In this example, one USD can buy 265.50 EUR, since it is the stronger of the two currencies. Because the U.S. dollar is regarded as the central currency of the Forex market, it is always treated as the base currency in any Forex quote where it is one of the pairs. Incidentally, the U.S. Dollar is involved in nearly 90% of all Forex transactions. In this example, your "pair" of currencies are the Japanese Yen (JPY) and the Euro (EUR). The Forex quote, JPY/EUR= 175.10, means that one Japanese Yen is equal to 175.10 Euros. The currency to the left of the / (JPY in this case) is referred to as base currency and its value is 1. The currency to the right of the / (EUR in this case) is referred to as the counter currency. In this example, one JPY can buy 175.10 EUR, since it is the stronger of the two currencies. The goal of any Forex trading system is to profit from foreign currency movements. This requires adequate training in basic Forex principles, such as performing a Technical Analysis, using Forex charts and Stop/Loss tools, and keeping up-to-date with economic and political events. In a sense, Forex training never ends.

The leverage available in FOREX trading stands out as one of main attractions of this market for many traders. Leveraged trading, or trading on margin, simply means that you are not required to put up the full value of the position.
FOREX provides more leverage than stocks or futures. In FOREX trading, the amount of leverage available can be as much as 500 times the value of your account.
There are several reasons for the FOREX market offering higher leverage. On a day to day basis, the volatility of the major currencies is less than 1%. This is much lower than an active stock that can easily move 5-10% in a single day. With leverage, you can capture higher returns on a smaller market movement. More importantly, leverage allows traders to increase their buying power while utilizing less capital to trade. Obviously an increase in leverage increases risk.

The Foreign Exchange Market, also referred to as the 'FOREX 'or 'FX' market is the largest financial market in the world, with a daily average turnover of more than US$ 2 trillion. The FOREX market allows you to buy and sell currencies against each other and speculate on the differences in exchange rates.
The most commonly traded currencies are referred to as 'Majors'. Most of the daily transactions on FOREX trading involves the Major seven currencies that include the following; The US Dollar (USD), Japanese Yen (JPY), Euro (EUR), British Pound (GBP), Swiss Franc (CHF), Canadian Dollar (CAD) and Australian Dollar (AUD). There are two main reasons to buy and sell currencies. Some of the daily turnover stems from companies and governments that buy and sell products and services in a foreign country and who then need to convert foreign currency profits into their own domestic currency. Over three quarters of the daily trade stems from trading for profit, or speculation.
FOREX is truly 24-hours marketplace open to corporations, small businesses, commercial banks, investment funds and private individuals. Trading commences each day from Sydney Australia.
Thereafter, it moves around the globe in accordance with time zones as the business day begins in each financial center in the following order, Tokyo, London, and New York. In accordance with global time-zone differences, when it is Sunday 2.15pm in New York, trading begins in both Sydney and Singapore, progressing through to Tokyo at 7pm, London at 2am and trading reaches New York at 8am.
The FOREX structure, as it is in operation today was established in the 1970's when free currency exchange rates were introduced. This period also saw the US Dollar overtake the British Pound as the benchmark currency. Over the last three decades FOREX has become the largest financial market in the world.
Until recently, the FOREX market was not accessible to the average trader or individual speculator. FxPro offers traders the opportunity to trade in smaller sized transactions irrespective of volume including individual speculators and smaller companies. Trading rates and price movements remain the same as those for the larger players who once dominated the FOREX market. This policy allows any trader to take advantage of the many benefits offered by the FOREX market.

Today's modern FOREX (Foreign Exchange Market) started in the development form in 1973, although money has been in our lives in many forms since the time of the ancient Pharaohs.
Paper bills and receipts are accredited to the Babylonians but the moneychangers from the Middle East were the first people to use coins for trading between different cultures and countries.
As far back as the middle ages, the requirement to trade in something other than coins emerged as the method of choice. Paper bills and receipts represented transferable payments of funds involving 3rd parties, and this method facilitated foreign currency trading for banking and merchant traders, resulting in increased regional economics.
During the period between the Middle Ages and WW1, the foreign exchange markets remained stable and speculation in the market was relatively low key. Following WW1, the FOREX markets became volatile and fast moving with a tremendous increase in speculative activity.
The general public and most financial institutions did not view speculation on the FOREX market with great interest or favor. The Depression and the removal of the gold standard in 1931 resulted in a serious lull in foreign exchange activities. In addition during the period between 1931 until 1973 the FOREX markets endured a series of changes that had an adverse effect on worldwide economies and interest in the market was minimal.
Since 1973, currencies of major industrialized nations have become more fluid, and are controlled mainly by the forces of supply and demand which affect the foreign exchange market. Prices were floated daily, with volumes, speed and price volatility all increasing throughout the 1970s. This gave rise to new financial instruments, market deregulation and trade liberalization.

Many people enter into trades with little more than a desire for profit. In Forex we normally use between 50 – 400 to 1 leverage. Because of the large amount of leverage we are able to use, simply hoping for a profit is not enough. Traders need a solid plan before the pull they trigger. When planning any battle, successful generals begin at the retreat and work their way backwards. Traders should do the same. The first and most important decision is when to admit defeat and retreat. Survival to fight another day is more important that going down with the ship. This article proposes that traders take a different approach to figuring out when and where to place their next trade. The approach is simple. Just like the generals, start by figuring out when to get out. This may sound strange, but if you apply this idea to whatever other methods you are using to determine your entry signals, your bottom line should improve. The overall idea is simple, rather than first looking for a good entry point, look for a point where you would want to be stopped out. At this point you are probably saying “who ever wants to get stopped out?” The answer is, not the majority. But let’s look at several statistics for a moment to get some perspective. Depending on who you believe, anywhere between 75-95% of all retail Forex traders blow out their account within one year. So it seems that the 5-25% of traders who are winning are doing something different then the majority who are losing. One of those main differences is not being bothered by getting stopped out. Many new traders complain that they hate trading with stops because they have been stopped out of a trade that almost immediately turned around and would have been a huge winner had they not run the stop. They take that to mean that they should not trade with stops. Trading without some kind of risk management is like playing Russian roulette by yourself, it may not be the next pull of the trigger that kills you, but pull it enough times and sooner or later it’s a sure thing. Trading without risk management is much the same. You may get away with it for a while, but the lesson you are learning will sooner or later prove deadly. There are many forms of risk management, from the extremely complex, like cross hedging with options, to the very simple, such as using stops. The use of stop loss orders is one of the simplest and often most effective way to manage the risks of any given trade. The reason many traders have had a bad experience with using stops is not the fault of the stop itself, but rather the placement of the stop. Most traders get into a trade and then decide where to run a stop, if at all. They often have a fixed dollar amount that they are willing to risk per trade and they then place the stop loss order accordingly. All of this on the surface sounds like a good plan, but in practice it often leads to the scenario mentioned before, where the trade gets stopped out and then the market turns on a dime and goes the way the trader had originally anticipated, leaving them to mistakenly blame the stop. The individual points that led to the stop being placed are not bad in and of themselves, but put together this way, they often lead to the frustration mentioned above. So let us look at these issues from another angle. Rather than getting into a trade and then deciding where to get out, let’s determine the exit point and let that dictate where we get in. To do this you will need a chart. Choose the chart’s time-frame based on how long you intend to hold the trade. If you only hold your trades for a few hours then a 15 or 60 minute chart should be fine. If you are more of a swing trader, then daily or even weekly charts would be best. Currencies tend to trend more than most other markets. However, they do not trend all the time. In fact the opposite is true. Most markets only trend about 30% of the time. The remaining 70% of the time they are trading within a range or chopping. Therefore, learning how to trade the chop is paramount if you want to be a trader for years to come. What follows is a simple yet effective way to trade the chop. Trading the Chop First, start by looking at long term support and resistance zones. Markets tend to have certain zones that they “bounce” off of time and time again before penetrating them. These zones are what you want to look for. Start with weekly or even monthly charts, no matter what time-frame you trade in. This will tell you in an instant whether the market is trending or choppy. Once you determine the underlying market condition, look for significant areas of support and resistance. Finally, move to a daily chart and then to a 60 minute chart. After going through these different time-frames you should be able to find a number of these zones. The best are those that coincide through all the time-frames. That will only happen if the market is at or near relative new highs or lows. When it does happen, though, it is time to sit up and pay attention. However, you do not need to wait for perfect conditions to use this method. You only need a support or resistance zone in whatever time-frame you are comfortable trading. Once you have identified these areas on a chart, you need to look closely and determine where that level would be broken and place your stops accordingly. A move through this level would signify that the market is breaking out from the previously established range. Once you find what the highest high is in the case of a resistance level, or lowest low in the case of a support level, you need to go a certain distance beyond that so you are not stopped out by a move of only one or two pips beyond these levels. There are many ways to determine how much extra distance to give each market. One way that I have used is to simply look for the next closest Fibonacci number. This method is not scientific, but one that has served me well over the years. The Fibonacci sequence is one that was discovered by a mathematician all the way back in 13th century. The sequence is as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144… For the purposes of using them for stops I normally only use 8, 13, 21, 34, 55, and 89. So if the last two digits of the highest high in a resistance zone had been 25, then you would use either 34 or 55 depending on which particular market it is in. The more volatile, or greater the average true range (ATR), the wider you should go. Once you identify the zone you can then come up with your exact stop point. Look at the daily chart of the USD/JPY and you can see that we have had significant resistance between roughly 121.50 and 122.25. Each time the market has reached this zone it has failed to follow through. There have been three attempts to break out from this zone, each one being lower than the last, forming a descending trend line. This is what you want to look for. Once you identify the zone you can then come up with your exact stop point. Simply find the recent highest high, in this case 121.66, and then find the next closest Fibonacci number (89) and you have your stop (121.89). Determining your entry point Now that you know where you are going to run your stop you can use that to determine your entry point. This is the point where you want determine how much actual money you are willing to risk on the trade. Most money managers will tell you to never invest more than 1% of your account on one trade. That rule really only works for traders using 50k or more. Most traders start with less and therefore are forced to break that rule. Starting with a $5,000 account and only risking 1% would mean that you can only risk $50 per trade, which in some cases is less than the bid/ask spread once you enter the trade, so it is obviously not realistic. But try to keep the amount you risk on any one trade as low as you can. Trading is a long-term endeavor. Do not fall into the trap of thinking that your next trade is “the big one” and you are sure it will work, and therefore put half or even all of your account into it. That is not money management, it is gambling. But let’s say you are comfortable risking $400 on a trade, or 40 pips on a 100k contract. Looking at a Daily chart of the USD/JPY, you can see that the most recent high was 121.66. Using the Fibonacci stop idea you would run your stop at 121.89 because 89 is the next closest Fibonacci number above 66. Now you have your stop well above a significant point of resistance. To calculate your entry point, simply subtract the 40 pips you are willing to risk from your stop point to arrive at 121.59 (121.89 – 40 = 121.59). The next day the market traded up to 121.63 so a limit order at 121.59 should have been filled. Once the order is filled, you can trail your stop with the market or move it to coincide with other support and resistance zones within the range. Your target would be somewhere near the bottom of the range. In this example your target would be a move to 119.50 or below. So let’s review this method. First determine if the current market is trending or chopping. Then look to identify areas of support and or resistance. Next find the highest high in a recent resistance level or the lowest low in a support level. Determine the next closest Fibonacci number and you have your stop point. Then take the amount you are willing to risk per trade and either subtract it from your stop if it is a short trade or add it to your stop if it is a long trade. You now have both your stop and entry points, and you are only risking whatever amount you determined you were comfortable with. Your stop is placed at a level that signifies a change in the recent trend, and therefore is mush less random than most other stops. This method is not to be used exclusively, but it is one that can compliment whatever other indicators or patterns you are using to determine you next trade. This method should help you avoid getting stopped out at insignificant points that have you selling near highs and buying near lows within the established trading range.

The dollar declined to a one-week low against the euro on speculation a Federal Reserve report today will show a contraction in U.S. manufacturing, encouraging the central bank to delay increasing interest rates.
The U.S. currency held near a one-week low versus the Australian and New Zealand dollars on concern credit market losses and record oil prices will prolong a U.S. economic slowdown. The Swiss franc rose to the highest since 1991 against the yen as the central bank will leave interest rate unchanged at a six-year high today, according to a Bloomberg News survey.
``Today's manufacturing data may prompt yet more dollar selling,'' said Michiyoshi Kato, a senior vice president of currency sales at Mizuho Corporate Bank Ltd. in Tokyo, a unit of Japan's second-largest publicly traded financial group. ``With the U.S. economy still slowing, the Fed cannot raise rates this year.''
The dollar fell to $1.5561 per euro as of 1:19 p.m. in Tokyo, compared with $1.5535 in New York yesterday. It reached $1.5579, the lowest level since June 11. The U.S. currency slid to 107.73 yen from 107.88. The euro traded at 167.63 yen from 167.58 yesterday, when it touched 168.04, the highest since July 23.
The U.S. currency may fall to $1.5590 a euro and 107.20 yen today, Kato forecast.
Futures on the Chicago Board of Trade show a 14 percent chance policy makers will increase the 2 percent target rate for overnight lending between banks by a quarter-percentage point on June 25, compared with 16 percent odds a day earlier.
Manufacturing in the Philadelphia area probably contracted for the seventh month in June. The Federal Reserve Bank of Philadelphia's general economic index will be at minus 10, from minus 15.6 in May, according to a Bloomberg News survey.
Asian Currencies
The dollar rose 2.6 percent against the euro last week, the most since 2005, as Fed Chairman Ben S. Bernanke said economic risks have faded, prompting investors to bet the central bank will raise interest rates later this year.
China's yuan rose to 6.8762 per dollar, the strongest since a dollar link was scrapped in 2005, after U.S. Treasury Secretary Henry Paulson urged China to let markets play a bigger role in setting the currency's value. The South Korean won climbed to 1,025.50 per dollar from 1029.10 on speculation the central bank will buy the currency to contain inflation at a seven-year high.
Carry Trades
The yen and the Swiss franc strengthened as Morgan Stanley's earnings dropped 57 percent, renewing concern credit market losses will deepen. A drop in stocks led traders to reduce investments in higher-yielding assets funded in Japan and Switzerland, a practice known as carry trades. In such trades, investors get funds in a country with low borrowing costs and buy assets where returns are higher.
Japan's target lending rate of 0.5 percent and Switzerland's 2.75 percent rate compares with 7.25 percent in Australia and 8.25 percent in New Zealand. European Central Bank President Jean-Claude Trichet said on June 5 that the bank may raise its 4 percent main refinancing rate in July.
The so-called TED spread, the difference between what banks and the U.S. government pay for three-month loans, widened to 0.8874 percentage points, the highest since May 15, indicating finance companies are becoming more reluctant to lend.
``There emerged renewed concern over subprime-related credit losses, weighing on the dollar and pushing up the yen,'' said Yuji Kameoka, a senior economist and currency analyst in Tokyo at Daiwa Institute of Research, a unit of Japan's second- largest brokerage. ``Financial companies will keep writing down more assets until 2010.''
The dollar may fall to 105 yen in two months, he said.
Yen, Swiss Franc
Japan's currency advanced to 102.04 yen per Australian dollar from 102.17 in New York and to 81.71 yen per New Zealand dollar from 81.89, as the MSCI Asia Pacific Index of regional shares declined 1.8 percent. The Swiss franc rose to 104.28 yen, the highest since February 1991, and climbed to 1.0334 per dollar, the strongest since June 12, from 1.0361 yesterday.
The Swiss central bank will leave its main lending rate unchanged at 9:30 a.m. local time as slowing growth limits policy makers' room to combat inflation, according to 16 of 25 forecasts in a Bloomberg News survey. The rest of them expect the central bank to raise borrowing costs.
``We expect the Swiss National Bank will raise rates today,'' said Tomoko Fujii, head of economics and strategy for Japan at Bank of America Corp., the second-largest in the U.S. ``The nation's inflation rate is very high. The franc will rise to 1.030 against the dollar by the end of September.''
Investors should buy the franc against the dollar as financial market losses boost the currency, according to Morgan Stanley, the second-biggest securities firm by market value.
``Given the overhang of uncertainty and the continued choppiness in global asset markets, we believe there is value in keeping some defensive plays,'' Morgan Stanley strategists Sophia Drossos and Yilin Nie wrote in a research note yesterday. Morgan Stanley bought francs in its model portfolio with a target of 0.9850 and a sell order at 1.05 to limit losses