We are adding a series of posts on Forex for the next few weeks because about 30% of the owners of the Futures Trading Secrets Course trade Forex.  These posts are timely, so be sure to subscribe now.

This week is festooned with important global economic data releases. Which are the most prominent and how could they impact your Forex trading? To answer these questions, let us first identify key USA events because these ones have the most ability to influence the global financial markets with the impact of their results.

You will find that many acknowledged financial analysts will tend to focus on the USD Pending Home Sales due for release this Thursday 2^nd September and the USD Change in Non-Farm Payrolls scheduled for posting on Friday 3^rd September 2010. Why is the information concerning US housing and jobs so important you may well enquire? The reason for this is that this information provides clues to the well-being of the most critical item affecting the US economic status i.e. consumer confidence.

In order for a nation’s economy to project a positive and growing image, the general public most possess the ability to be able to purchase products produced by industry freely. Potential buyers can only do this if they are employed and/or they have access to readily available credit from either bank loans or home equity. As you may well know, this has hardly been the case lately since 2008 financial crash. US President Obama even made a speech this Monday emphasizing the intense efforts being made to provide new credit facilities for small US businesses in order to create new jobs.

What has all this got to do with Forex, you may ponder? Quite a lot is the simple answer? If the financial markets are deemed to be struggling, then investors adopt an increasingly risk-aversion stance. This development has the impact of forcing safe-haven currencies, such as the YEN, CHF and USD, to climb against the higher-interest yielders i.e. EUR, GBP, CAD and AUD etc. You can obverse this effect by studying the daily charts of all the major currency pairs. For instance, the CHF (Swissie) has surged by over 1000 pips against the Euro since just the early part of August 2010.

As you must acknowledge, this is a frightening powerful trend and you would be wise not to trade against it. So what should you expect from the important data releases due later this week? Let us look at a couple of scenarios in order to answer this question.

For instance, should both housing and jobs post figures better than expected then you should witness some degree of recovery in risk appetite, which will cause the higher yielding currencies to advance against the YEN and CHF. You are advised to monitor such developments by monitoring trading charts utilizing the daily time frame or higher. This is because their statistics and pivot points are of much higher quality than those associated with lower time frames. However, unless future economic postings provide further supporting positive growth evidence, then you should still regard these developments as temporary relief blips and not full-scale retractions.

Alternatively, if the data releases post results that are worse than anticipated, then you could witness further extensions of the current trends with the YEN and CHF appreciating against all the other majors. Please be sure to this visit this website later this week as further analysis will compare actual developments to those anticipated in this article.

Often traders take this to mean that the price must retrace or pullback from the high.  This is a big mistake, because mathematically, what is happening in the calculation of the indicator is that as each new bar is added to the price, another bar further back must be subtracted.  If the new bar is higher and the old bar is lower, you will get a classic divergence in the indicator.

Think of this phenomena of a fat man getting off a teeter totter with multiple small children on the other side.  Conversely if more and more small children get on the teeter totter, they can out weigh the fat man.

Another outcome of a Classic Divergence is that the price simply goes flat for a period of time, or you get a second or even third divergence.  Be cautious when trading divergences.  They can fool you, especially in a long up trend.

I encourage you to be observant of the strength of the divergences that occur when the trend that is changing is rapid or slow.  We have an excellent video that shows this effect  with a triple classic divergence.

Our proprietary indicators gave us the edge for this very large down day.  The Doji showed the bounce on Friday before the Labor Day Holiday. This video will show you what has happened and what is likely to happen after the holiday.  There is about a 70% probability that the market will retrace at least half of the Friday gain.

Using a longer time frame such as a daily chart will often help those of you who like to day trade the indexes.  Be sure to review something like Bloomberg.com for another data input.  We always look at the Globex from Asia and Europe to help us get a feel for the days market trend.  Also make sure you review the Market Reports for the day as well.  You do not want to be trading ahead of a major announcement.

We have attempted to give you a background in trading.  Overall I learned to trade from Dr. Alexander Elder’s Book and Workbook, “Trading for a Living” back in 1996.  I actually failed the tests in the workbooks several times before I got it right.  I still think that that book is a classic and in a class all by itself. 

A second principle I learned from Alex, is that trading is a triune skill of Mind, Money and Method.  It is the basis of our training program.  With the mental and money management the most important skills.  But like a three legged stool, if you cut off one leg, you can’t sit down.

In the Method area, which I will share with you one part of the method, you have three parts as well.  One of them is how to use Support and Resistance in your trading.  We use these daily Support and Resistance areas as targets.  Why do they work so well?  It is because other traders “Think They Work”.  Remember in your trading your job is not to think, but to observe what is happening right now.

Check out this short video on Support and Resistance  associated with Pivot Points and how we use it. 

The calculation for the new day are calculated from the High (H), low (L) and close (C) of the previous day.  Our recommended software calculates all of this automatically, however we use a trick to get a 24 hour Pivot and Support and Resistance Lines.  Here is the formula  used by floor traders.

Pivot point = P = (H + L + C)/3

First area of resistance = R1 = 2P – L
First area of support = S1 = 2P – H
Second area of resistance = R2 = (P -S1) + R1
Second area of support = S2 = P – (R2 – S1)  and so forth.

Now Support always becomes Resistance and Resistance becomes Support in the markets, so you have minor Support and Resistance in many places on your charts.  The trick is to know which on is the target, so as part of your money management, you should always select a level that offers at least a 3 to 1 win to loss potential..

There are many nuances to using Support and Resistance with other indicators, Fibonacci levels, Ema’s and other indicators.  However, once you master the skill of target shooting, you will be much more profitable.

For a detailed video of how our complete system work with all the indicators, please go to the Futures Trading Room

So here’s the question: If futures trading is so risky, why do I and so many others choose to take that risk? The answer is simple: Money. Trading commodity futures may be risky, but there is potential for enormous profit. Some of the world’s greatest fortunes have been built around commodities:

• Banking patriarch Mayer Rothschild amassed a fortune during the Napoleonic Wars by hoarding and distributing gold bullion to fund the British.
• John D. Rockefeller, Sr., in his day, the richest man in America, built his impressive fortune on oil, forever changing the global oil industry through creation of the Standard Oil Company.
• Self-made steel magnate Andrew Carnegie consolidated the American steel industry, founding the company that would eventually became behemoth U.S. Steel and in the process accumulating a fortune second only to Rockefeller’s.
• Abdel-Aziz Al-Saud, the first king of Saudi Arabia, created a nation and amassed unbelievable personal wealth through consolidation and control of crude oil and natural gas.
• Lakshmi Mittal, the Indian steel magnate, used his knowledge of the steel industry to become the fourth wealthiest person in the world in 2004.
• In 2005, legendary oil man T. Boone Pickens made a cool $1.4 billion betting on the price of oil and natural gas.

Most of us who trade commodity futures will never reach the storied peaks of the world’s legendary commodity kings, but there are plenty of commodity traders who have made a very nice pile through steady trading. There is plenty of “gold” to be found trading futures on the commodity markets. All you need to do to build your own fortune is to consistently make more than you lose.

With the right system, the right signals, the right tools, the right attitude and some patience and persistence, you can “win” as a futures trader. I’ve already done it and I can show you how. If you want to learn the skills you need to succeed as a futures trader, click the link for complete information on my Futures Secrets Trading System. Read testimonials from satisfied clients, now successful futures traders themselves. Click here for details on Futures Trading Secrets.

In current years, commodities have out-performed stocks. From 2002 to 2005, the Dow Jones Industrial Average returned a respectable 7%. During the same period, the Dow Jones-AIG Commodity Index increased a whopping 21%!

Risk is a matter of perception and knowledge. People (and investors are just folks) fear what they don’t know or understand. That’s where the commodity market gets its bad rap. Most investors just don’t know enough about commodities or how they work so they avoid them. Futures traders who take the time to learn about commodities and come to understand commodity markets gain an open playing field with plenty of room to maneuver.

What are the real risks in trading commodity futures?

Geopolitical risk. One of the greatest inherent risks in trading commodities is that the world’s natural resources are tied to physical geography which has been parceled out and is controlled by various world governments or sometimes by international companies. In order to access natural resources, companies must deal with and are often at the mercy of various foreign governments. The complexity of taking natural resources out of the ground and turning them into usable products is intense. Each government imposes on the process its own set of laws, way of doing business, cultural customs, tax structures, environmental concerns, employment requirements, technology network, etc.International disagreements over the control of natural resources are commonplace. Foreign developers can be unceremoniously booted out by the host country, losing their entire investment. If a country chooses to nationalize an industry — as Bolivia nationalized the natural gas industry in 2006 — the foreign developer loses everything in the blink of an eye, and has no recourse for reimbursement of his considerable investment.It’s difficult to protect yourself from geopolitical risk, but it pays to remember that in commodities, size matters. The bigger and more experienced the company, the more likely it is to succeed. Futures traders can use this information to determine probable risk.
Next time: Additional risk factors and how to manage risk.

For more information, 11 free trading lessons and a free ebook, visit Futures Trading Secrets.

A simple moving average is the average of a series of closing prices over a set period of time. For example, to determine a 3-day moving average of a commodity, the closing prices for three consecutive days are added together and divided by 3. A 20-day moving average would add the closing prices for 20 days and divide by 20. The “moving” is created by re-adding and re-dividing each day. In recalculating, the earliest closing price is dropped and the newest closing price is added before the figures are averaged. In our example, you are always averaging 3 prices for the three most recent consecutive days; however, those days are progressing in time through the month; therefore, the average is “moving.”

Because they use information that has already taken place, moving averages are “lagging” indicators. They are also “trend following” indicators that are most useful in trending price patterns in which an uptrend or downtrend is firmly entrenched. Moving averages often serve as both support and resistance points.When graphed, horizontal, or “flatline” moving averages have no predictive value.

The most common moving averages, those touted on the financial networks are 20-, 40-, 50-, and 200-day averages. Also effective are 10-, 30- and 100-day averages. Some traders create their own moving averages at intervals that appeal to them: 12, 18, 21, etc. days. Determine the time periods you believe will be most effective and stick with them. As a rule of thumb, limit your charts to no more than 4 or 5 moving averages per chart to avoid confusion.

For more information about Bill McCready’s trading system, visit Futures Trading Secrets.

The following chart used all of these principles for a Trading Signal for 03/25/08.  Note that these two signals yielded a total of 23 points in 30 minutes.  Is this profit unusual?  Yes!  But the signals generated occur 5-10 times each day.  And the average move on the eMini S&P currently is 5.4 points before a reversal or retracement.  Generating even a net 2 points a day consistently is possible with practice and discipline.

As we enter a new year, I find these words from the Daily Motivator of particular import to my life as a futures trader. More than anything else, your daily attitude affects your ability to perform successfully as a futures trader. If you stay positively focused, you will be able to assess your position will confidence and pull the trigger at the precise moment to ensure maximum profitability. Allow negativity or self-doubt to eat away at your confidence and you will fail.

Everyone has the occasional bad day. But whether it’s a trading loss or a crisis in your personal life, you can’t let feelings of negativity engulf you. You have to “shake it off,” “get back on the horse, “get back in the game.” Hackneyed though the sayings may be, they carry a large truth. The only way to succeed is to refuse to allow yourself to be beaten down. You have to maintain faith in yourself and confidence in your ability to succeed. You have to stay positive.

There are many ways to renew your positive energy each day. I enjoy a brisk walk or run in the early morning. The exercise recharges my physical batteries and participating in the beginning of a fresh, new day revitalizes my spirit. Exercise, daily motivations and personal affirmations are all ways to recharge your positive energy before you tackle a new trading day. Experiment, discover the activities that keep you positively motivated, and make them a daily part of your life. The more positive energy you can maintain in your life, the better trader you’ll be.

Ralph Marston ends his December 22, 2007 Daily Motivator with a thought I’d like to pass along to all of you:

“Whether it’s through your actions or through your attitude, there’s always a way to introduce a more affirmative perspective into your life. Stay focused on the positive possibilities and life will continue to grow more richly rewarding.”

My best wishes for a brighter, happier, more profitable 2008!

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