Forex Trading Psychology

Why do 90% of forex traders lose money then? Well, the answer to that is poor risk management which leads to poor mind set and vice versa. Numerous books have been written about trading psychology and many consultants exist. Psychology is an extremely important point to focus on when trading.

Books on trading often talk about the mental problems encountered and Mark Douglas’ book Trading In The Zone. But the problem with some of these books is that they often tell you don’t think like this, or sit there and take losses during whipsaw periods. If a person was brought up thinking one thing it will be very difficult, even with coaching, to change the person’s inherent reactions. And on top of this, trading is extremely counter intuitive. It basically goes against what most people consider common sense. A phrase that a lot of trading experts use is “do the opposite”. A good analogy would be the advice given “when approached by a bear do not run.” It is the right thing to do and most people are taught to do it, however I can imagine there would be a very strong impulse to run if one has an encounter.

In the next section we will go through a common list of problems, describe how they occur, proceed and follow one another and then provide practical approaches that do not involve mind manipulation to avoid these problems. You should read books on this topic and seek counselling with experts about trader’s psychology. However, since it’s a long process to change your cognitive mindset we will discuss some practical ways to avoid the issues so you can trade meanwhile.

The Vicious CycleThe major part of this book instructs the readers on what to do. This section will talk about what not to do so that the reader can see the key psychological elements of trading and what patterns not to get caught on.The vicious cycle begins with a new trader studying the market for a bit, learning technical and fundamental analysis and getting excited about it since it does indeed work a lot of the time and in hindsight even looks easy. The trader may realize that all that is needed is an edge that will be right 51% of the time on trades that win and lose the same amount of money. That cannot be very hard he may think, some patterns out there are effective 60%-80% of the time. Finally the trader will see the edge that they like and begin to trade it live.Most of the time because of enthusiasm and an unbiased eye to the market the trader will have success in the beginning. Initial perception of the market is undistorted by negative emotions because there have been no losing trades. The trader will begin to experience a so-called state of euphoria and will feel like they are on top of the world, financial problems of the future are solved and they will start to act arrogant. The big mistake most will make is to start increasing position size. The attitude may be “I will not lose so I should increase my profits by taking bigger positions.” At some point the trader will take a devastating loss. There is no question about it because no pattern or edge works 100% of the time. The pain will be immense and now the trader is going to try to win back the money that was lost on the trade to get back to even so he can feel like the trade never happened. The primary motive for this usually will not be for profit but for peace of mind. He will not be as selective as before on finding the right trade and may enter on an even bigger position size to wipe out the loss. Now if the trader wins he will get even more confident and eventually lose on a second trade. After he loses big twice in a row he may consider making and even bigger trade to catch up. He will be so eager to wipe out the feeling of the negative trades and get his ego back that he will consider taking an even bigger position size. The trader will rationalize every wrong move made to make it right, justify his actions and never take responsibility for his losses. A classic example of this is poker players complaining about bad bets and others playing dumb. If surrounded by bad players a great poker player should adjust his style and take into account that the player will play bad cards, not cry about it after they lose. The losses and negative emotions will start piling on like a snow ball until the trader realizes that they have to stop. They will probably be down a substantial portion of the account, if not flat busted by this point. Now the trader will be more than humbled. He will feel like he can do no right in the market and will start saying that you can not make money trading or that his platform is rigged, someone manipulated his stop, the spread is too high and on and on. The trader may either walk away from trading all together or do an over extensive amount of education. Both approaches are bad since, even if he reads up a lot and comes back, the trader’s mindset will be drastically distorted by negative emotions.

Practical Ways to Deal with Negative EmotionsYou may have noticed that the above description contained many of the key negative emotions that come into play when trading. These include: Greed, Fear, Hope, Rationalization, and Cockiness. In this section we discuss how we can decrease these negative emotions during trading by taking practical steps.

GreedGreed occurs on many occasions during trading. Some examples and practical solutions include:1) When you are in a trade and you hold it for too long when you know you should exit.Solutions:i) Have set exit points that you back-tested your system with that you will follow.ii) Take partial profit on positions. Possibly place this in your systems rules.

2) When you start trading too big because of positive performancei) Determine the set maximum % of account that you will lose on any trade and do not exceed it under any circumstances.ii) Count the amount of losing trades that your system had when back-tested and understand that they may come in the future.

ConfidenceCockiness is the feeling of euphoria that you have after making numerous successful trades. This feeling can cause recklessness if not handled properly.1) You may start trading too big for your own good:i) Determine the set maximum % of account that you will lose on any trade and do not exceed it under any circumstances.ii) Count the amount of losing trades that your system had when back-tested and understand that they may come in the future.

2) You may make ineffective decisions because you have a feeling of not being able to lose:i) Have a checklist of everything that needs to be taken into account before entering a trade.ii) Have a checklist and a specific procedure of how your system needs to be followed, when it needs to be reevaluated, and exact entry and exit instructions.iii) Always increase the amount of work you do after you are successful.

Fear1) Fear may arise after you had a few unsuccessful trades and are now afraid to make a trade:i) Have a specific cutoff point before you start trading your system. Know the maximum drawdown you are willing to sustain and the maximum amount of losing trades you can handle prior to beginning to trade a system.ii) Don’t stop trading after a poor performance if your financial situation allows.iii) Start trading small to decrease the emotional level and concentrate on market and system analysis.iv) Create a profile of your trading psychology and determine what type of systems you will be trading. Can you handle a big drawdown? What type of profits are you looking for?

2) Fear may cause traders to get out of trades early and leave profit on the table.i) Have set exit points that you back-tested your system with that you will follow.ii) Take partial profit on positions. Possibly place this in your systems rules.iii) Don’t sit and watch every tick of the trade just follow your signals.

Hope and RationalizationHope and rationalization may cause traders to try to justify their decisions, blame others for their performance, and stay in trades that they should be out of because of hope that the market will move in their direction. This is a dangerous emotion and can turn trading into a gambling problem. It is very important to keep in mind that this emotion exists and make a good effort to control it.1) Hope and Rationalization may cause traders to enter trades that they should not be in because of hope that they will catch a break and make money.i) Control position size so that you are not trading to make or lose money but are trading to make the right decision.ii) Have set entry and exit points that you back-tested your system with that you will follow.iii) Take partial profit on positions. Possibly place this in your systems rules.

2) Hope and rationalization may cause traders to stay in trades longer than they should because of hope that the trade will go their way.i) Control position size so that you are not trading to make or lose money but are trading to make the right decision.ii) Have set exit points that you back-tested your system with that you will follow.iii) Take partial profit on positions. Possibly place this in your systems rules.

Google's stock soars 20 percent to post record 1-day gain after stellar earnings report

Google Inc.'s stock soared 20 percent Friday, restoring $28 billion in shareholder wealth as Wall Street renewed its love affair with the Internet search leader after weeks of worry about an online advertising slowdown. Driven by stellar first-quarter results that surprised industry analysts, Google shares surged $89.87 to finish at $539.41. It marked the biggest one-day gain since Google's initial public stock offering in August 2004, leaving the shares at their highest closing price since January.

Google had lost favor with investors as Web surfing data and the faltering U.S. economy raised concerns that people aren't clicking as frequently on the Internet advertising links that generate most of the Mountain View-based company's revenue.
The trend threatened to chip away at Google's earnings because the company typically gets paid by the click.
Although there were signs of decelerated clicking in the United States, Google more than offset any negative effects by expanding its foreign business and tweaking its online ad system in a way that helped reap more revenue per click.
The first-quarter performance reinforced the belief that Google is a "must-own stock," American Technology Research analyst Rob Sanderson wrote in a Friday note.
"While (economic) concerns won't be completely dispelled, we believe the growth story remains intact and investors will again fall in love," he wrote.
Dinosaur Securities analyst David Garrity also is convinced that the worst is over for Google's stock, which was down 35 percent in 2008 before the first-quarter earnings changed investor sentiment.

"We think (Google's stock) has seen its 2008 low. Onward and upward," wrote Garrity, who expects the price to hit $750 during the next year.
Friday's rally still left Google shares well below their peak of $747.24 reached less than six months ago. At that point, Google's market value stood at $235 billion, about $66 billion, or nearly 40 percent higher, than at Friday's close.
Whether Google's stock can get back to where it once was will depend largely on how much more the company's earnings and revenue growth tapers off. With the company's annual revenue headed toward $20 billion, it's becoming more difficult to produce the hefty gains that excite investors.
For instance, Google's first-quarter revenue climbed 42 percent. That's impressive, but well below the 63 percent growth in 2007's first quarter.
Google's profits could be squeezed later this year if it has to spend more money to upgrade the data centers that power its search engine and other online services like e-mail, said Collins Stewart analyst Sandeep Aggarwal. He said he thinks additional investments probably will be needed, given some of the data centers are three or four years old.
Microsoft Corp.'s bid to acquire Yahoo Inc. also could create a more formidable competitor to Google. Recognizing the threat, Google is trying to help Yahoo thwart Microsoft's takeover bid by using its lucrative advertising system to place commercial links on Yahoo's Web site. The potential partnership, in the midst of a test scheduled to be completed next week, would likely face intense antitrust scrutiny.
If nothing else, analysts believe Google wants to delay a combination between Microsoft and Yahoo for as long as possible to give it a better chance to widen its lead in the Internet search market, which currently generates the biggest chunk of online advertising.
Google ended the first quarter with a 60 percent share of the U.S. search market, up from 58 percent at the end of the fourth quarter, according to comScore Media Metrix. Yahoo was in second at a 21 percent share followed by Microsoft at 9 percent.
Despite the challenges ahead, Google still has ample opportunities to grow as advertisers shift more of their spending to the Internet from other media like newspapers, magazines, radio and television.
The Internet is expected to capture about 7 percent, or $44 billion, of the total worldwide advertising market this year. Analysts say the percentage of Internet advertising lags behind the amount of time consumers are spending online, suggesting that marketers will need to ramp up their spending even more if they want to reach potential customers.
Google also has been adding more advertising vehicles to supplement its search engine. Just last month, the company bought DoubleClick Inc. for $3.2 billion in an effort to sell more graphical advertising. And Google is starting to show more video advertising through its increasingly popular clip-sharing site, YouTube.com.
Finally, the first quarter represented a tipping point in Google's maturation into an international company that's becoming less vulnerable to the ups and downs of the U.S. economy. Google collected most of its first-quarter revenue outside the United States, the first time that has happened in the company's 9 1/2-year history.
Besides diversifying its business, the higher international revenue should also help boost Google's profit because it should keep company's tax rate slightly lower than it has been in past years.
Google Chief Executive Eric Schmidt left little doubt he expects the company to prosper as he hailed the first quarter results.
"It's clear we are well positioned for 2008 and beyond, regardless of the business environment we are surrounded by," Schmidt told analysts.

EUR/USD Technical Analysis 12 March 2008

EUR/USD 1.5361 - 12 March

EUR/USD Open 1.5339 High 1.5481 Low 1.5283 Close 1.5340

The Euro continued climbing yesterday to High 1.5481 till 14:00 GMT when the announcement by FED was to to lend as much as $200 billion in US Treasuries helped the US Dollar recover to 1.5285, which are the first resistance and support levels respectively for today. Next resistance upwards is 1.5530, followed by 1.5600. In downward direction next support is at 1.5215, which is 23.6% Fibonacci correction of the rise 1.4440 - 1.5455, and the lowest rate from 5 March at 1.5150.

Technical resistance levels: 1.5480 1.5530 1.5600

Technical support levels: 1.5285 1.5215 1.5150

Trading range: 1.5350 - 1.5415

Trend: Upward

Buy at 1.5361 SL 1.5331 TP 1.5401

Yesterday we made +50 pips profit on EUR/USD from the following signal:

6:03 GMT Buy EUR/USD at 1.5355 SL 1.5329 TP 1.5405 TP reached at 9:18 GMT

Total yesterday +136, as shown at www.zifx.com/performance.php

Technical analysis for crosses(EUR/GBP)-3/12/2008

(EUR/GBP)
The Euro dropped heavily yesterday against the Pound after reaching the major resistance level at 0.7680 which hold the pair from acquiring the 0.77 target, while the support at 0.7630 provided the pair with the strength to incline back again, the short term technical indicators are showing more upside potential, while the point at 0.7630 offers strong demand for the pair.
Support	0.7640	0.7630	0.7615	0.7600	0.7590
Resistance	0.7650	0.7665	0.7680	0.7690	0.7700
Recommendation	...

Technical analysis for crosses(GBP/JPY)-3/12/2008

(GBP/JPY)
Investors' risk appetite was boosted yesterday on the news the Feds will provide more liquidity to the financial system, increasing carry trades as a result which drove the Pound in a bullish wave against the Yen, the short term technical indicators though started showing downside potential in an expected correctional wave, and the point at 205.90 offers strong demand for the pair.
Support	207.13	206.42	205.90	205.34	204.67
Resistance	207.75	208.28	208.84	209.54	210.21
Recommendation	...

Fed move spurs stocks upwards, oil near record

LONDON (Reuters) - World equity markets rose on Wednesday in reaction to large gains on Wall Street which followed Federal Reserve-led moves to inject billions of dollars of liquidity into cash-starved credit markets.

Oil stayed close to its near-$110 a barrel record high but the dollar eased back after gaining in the previous session, as currency traders became skeptical about whether the measures could solve problems in the economy or the credit market.

Deep concerns among investors about the threat of another round of last year's credit crisis were at least temporarily assuaged when the Fed said on Tuesday it would allow financial firms to swap securities backed by home mortgages for some $200 billion in Treasury bonds.

This was supported by other liquidity-inducing efforts by the European Central Bank, Bank of Canada, Bank of England and Swiss National Bank.

The moves spurred the S&P 500 index of leading U.S. stocks to its biggest daily gain since October 2005 with a 3.71 percent rise, a mood that continued to spill over into the rest of the world on Wednesday.

"The Fed's decision to get funds for credit markets has soothed investor sentiment," said Hwang Geum-dan, an analyst at Samsung Securities in Seoul, adding that economic fundamentals nonetheless remained grim.

Europe's FTSEurofirst 300 index was up 1.4 percent, having gained the same amount on Tuesday. Earlier, Japanese stocks rose 1.6 percent with the benchmark Nikkei rising 202.85 points to 12,861.13 and the broader TOPIX climbing 19.98 points to 1,255.13.

Despite the immediate euphoria, stressed world credit markets -- where trading in a broad range of securities including some euro zone government bonds and U.S. municipal bonds had seized up over the past week -- remain a concern to investors.

Credit Suisse, for example, said it did not believe the problems would go away. "We expect to see more hedge fund collapses, more forced sales and more extreme price movements in the near term," it said in a note.

DOLLAR, OIL DECLINE

The dollar, which has been battered by the deteriorating U.S. economy and prospects of lower U.S. interest rates, eased back towards record lows versus the euro as a pick-up in risk appetite prompted by the central bank measures petered out.

"It's a bit of a reality check. The Fed's action obviously is welcome but it doesn't really fix the economy," said Martin McMahon, FX strategist at Credit Suisse in Zurich.

The dollar fell 0.3 percent against a basket of six major currencies to 73.039, edging towards a record low of 72.462 set at the end of last week.

It also eased 0.2 percent to 103.16. The euro was up a quarter of a percent on the day at $1.5368.

Oil prices were steady after hitting a record near $110 overnight, doing little to ease concerns about the world economy. U.S. crude for April delivery was up 37 cents at

$109.12 a barrel, just below its record $109.72.

Euro zone government bonds were trying to consolidate at lower levels after a sharp sell-off the previous session.

The June Bund future was 9 ticks lower at 117.37. Two-year yields were 5.6 basis points higher at 3.383 percent, while 10-year yields were flat at 3.800 percent.

Lufthansa sees further profit rise this year

FRANKFURT (Reuters) - Germany's Deutsche Lufthansa (LHAG.DE: Quote, Profile, Research) expects operating profit to rise again this year as air travel continues to grow even as financial markets stutter and fuel prices hover at record levels.

The positive trend was expected to continue in 2009, Lufthansa said in its annual report on Wednesday.

"The perspectives for the aviation industry are full of promise," Chief Executive Wolfgang Mayrhuber said in a statement.

"In spite of the current uncertainty in the financial markets, the economic conditions remain good for Lufthansa. There have been no ground-breaking changes in terms of the fundamental conditions or the need for mobility."

Shares in Lufthansa were 1.7 percent higher at 15.28 euros by 4:32 a.m. EDT, outperforming a 1.4 percent gain on the German blue-chip DAX index .GDAXI.

"The strong outlook is a positive surprise for us," Equinet analyst Jochen Rothenbacher said in a note.

Mayrhuber's optimism for 2008 was echoed on Wednesday by smaller German rival Air Berlin (AB1.DE: Quote, Profile, Research), despite a drop in 2007 operating profit that missed its own expectations.
Lufthansa said a condition for raising the operating result in 2008 from the record 1.38 billion euros ($2.12 billion) -- a 63 percent rise -- achieved last year was being able to continue to compensate for high fuel prices

Fuel costs rose 15 percent to 3.86 billion euros last year, though the weak dollar brought these costs down by 7.3 percent and hedging saved 109 million euros.

Lufthansa said this week it was raising the fuel surcharges it imposes on passengers on European and domestic routes to 17 euros each way. It charges 77 euros each way on long-haul flights. Crude oil has almost reached $110 a barrel.

The company said earnings last year were also helped by the performance at airline Swiss, which contributed cost and revenue synergies of 233 million euros. Swiss has been fully consolidated in Lufthansa's accounts since July.

Lufthansa had reported last month that 2007 revenue rose 13 percent to 22.42 billion euros. Net profit more than doubled to 1.655 billion euros.

The carrier has said it would propose raising the dividend for last year to 1.25 euros a share from 0.70 euros for the previous year.

Air Berlin on Wednesday posted full-year earnings before interest and tax (EBIT) of 21.5 million euros, down from 64.2 million in the previous year.

"Although the preliminary results for 2007 do not meet our expectations, we have cause for optimism for 2008," CEO Joachim Hunold said in a statement. "We are also pleased with the current bookings situation."

Air Berlin stock was down 1 percent at 9.30 euros.

Oil falls below $100

Crude extends decline to near $99 a barrel on increase in U.S. crude supplies.

SINGAPORE (AP) -- Oil prices fell further Thursday after dropping by more than a dollar in the previous session on larger-than-expected increases in U.S. crude and gasoline supplies.

Prices remained supported near Tuesday's record close of $100.88 a barrel as the U.S. dollar tumbled to fresh lows against the euro and worries about the American economy drove more money into energy futures as a hedge against inflation.

The report by the U.S. Energy Department's Energy Information Administration showed that country's crude oil inventories rose by 3.2 million barrels, or 1%, to 308.5 million barrels.

Although that number is slightly lower than levels a year ago, it is well ahead of the 2.4 million barrel gain analysts had been expecting, according to a survey by Dow Jones Newswires. It was the seventh straight week the report showed a rise in crude inventories, suggesting the U.S. at least has more than enough oil to meet demand.

Light, sweet crude for April delivery lost 36 cents to $99.28 a barrel in Asian electronic trading on the New York Mercantile Exchange, late afternoon in Singapore.

The contract fell $1.24 to settle at $99.64 a barrel Wednesday after surging as high as $102.08 a barrel, a trading record. On Tuesday, the contract jumped $1.65 to settle at a record $100.88 a barrel.

The EIA data showed gasoline inventories also jumped more than expected -- by 2.3 million barrels to 232.6 million barrels; analysts had expected a more modest rise of 400,000 barrels. Refinery activity also increased much more than expected.

The weakening U.S. dollar also helped prop up prices. The 15-nation euro jumped to a record $1.51 against the greenback, meaning that crude remains a relative bargain for buyers overseas. Gold - another commodity seen as a hedge against inflation - also struck a record Wednesday.

In his testimony to the U.S. Congress Wednesday, Federal Reserve Chairman Ben Bernanke warned of sluggish business growth ahead, and signaled a willingness by the central bank to cut interest rates again. But Bernanke also noted that the Fed must keep a close watch on inflation given the sharp rise in energy prices and other costs.

Heating oil futures lost 1.16 cents to $2.7595 a gallon while gasoline futures dropped 2.12 cents to $2.4565 a gallon.

Natural gas futures advanced 3.8 cents to $9.098 per 1,000 cubic feet.

Brent crude rose 31 cents to $97.96 a barrel on the ICE Futures exchange in London.

House approves $18B in oil taxes

Bush to veto bill rolling back tax breaks for oil

Stockholm shares slightly lower midmorning hit by weak US dollar

Shares were slightly lower in midmorning trade on profit taking following yesterday's weak US data and on concerns after the US dollar fell to 15 year lows against the Swedish krona.

At 10.50 am, the OMX Stockholm index was down 0.38 pct at 323.08 points, while the OMX Stockholm 30 was 0.48 pct lower at 975.37 points. Turnover amounted to 4.588 bln skr.

Big exporting companies exposed to the dollar were among the biggest losers, with Volvo B down 1.31 pct at 94.25, Electrolux B down 2.12 pct at 103.75, Ericsson (NASDAQ:ERICY) B down 0.80 pct at 13.65, and Atlas Copco A down 1.73 pct at 99.25.

Handelsbanken A was up 0.28 pct at 177.00 skr after its sharp fall yesterday. Keefe, Bruyette & Woods (KBW) downgraded shares in the bank to 'underperform' and slashed its 2008 and 2009 EPS estimates by 6 pct and 10 pct respectively, following the bank's weaker-than-expected fourth quarter results.

'Handelsbanken reported a weak Q4 result, missing consensus on the net interest income, fee and cost line by 1 pct, 3 pct and 9 pct. We are particularly concerned with the cost development which has previously been SHB's strongest card,' said KBW.

Among the other banks, Nordea was down 0.85 pct at 93.70, Swedbank A down 1.14 pct at 173.50, and Skandinaviska Enskilda Banken A down 0.93 pct at 159.50.

TeliaSonera (PINKSHEETS:TLSNF) was outperforming, up 1.43 pct at 49.50, after Dagens Industri reported the company's CEO Lars Nyberg is in discussions with Russian telecom investment company Altimo over a possible deal.

Scania B was down 0.63 pct at 157.00. Scania's Martin Lundstedt seen as likely successor to Leif Ostling as CEO of company reported Dagens Industri.

Hennes & Mauritz B was down 0.85 pct at 351.00. Swedish retail sales increased 4.8 pct in December from a year earlier, the Central Statistical Bureau reported. Market expectation was for a rise of 6.6 pct, according to a survey by SME Direkt.

Elsewhere in the market, Sandvik was down 0.23 pct at 106.25, Tele2 B down 0.92 pct at 107.75, and SCA B down 1.47 pct at 100.50.

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Euro Holds 1.5100 As Data Continues to Shine, Where is the Top?

Talking Points

• Japanese Yen: Bounces to 106.50
• Euro: Holds 151.00 as labor retail data prove supportive
• Pound: No event risk today
• Swiss Franc: employment expands for 11th quarter in a row
• US Dollar: GDP on tap

EURUSD made itself comfortable at its new home above the 1.5000 level, holding on to the 1.5100 figure for most of the night. The news out of the EZ continued to be constructive as both labor data and Retail PMI numbers demonstrated that the underlying fundamentals in the 15 member region remain sound.

German unemployment declined more than expected dropping by -75K from -48K forecast, as EZ largest economy continued to expand. More importantly German Retail PMI readings recovered from their sharp drop last month of 44.2 to end up above the 50 boom/bust level once again printing at 52.1. Overall, the EZ Retail PMI numbers stood at 52.4 – comfortably in expansion territory.

The overnight economic news goes a long way towards explaining ECB’s rather sanguine attitude towards growth. With labor markets continuing to generate jobs and with consumer demand in the region relatively healthy, ECB sees little need to lower rates anytime soon. As we’ve noted before, as long as EZ employment environment remains supportive, the ECB will have all the political protection it needs to maintain its hawkish policy.

Nevertheless, with EURUSD trading at such lofty highs the pair is overbought on a short term basis, as popular sentiment has clearly shifted to the euro. When the demise of the dollar becomes the top story on the Drudge report, a near term top in the EURUSD is not far behind. Yet any retrace in the pair is likely to be corrective and short lived. For the time being the fundamental story stands squarely on the side of euro bulls and if US data shows no signs of improvement, the pair could easily move higher after a short term pause.

To that end, today’s US GDP numbers could provide some fireworks in today’s North American session. The market expects an upward revision to 0.8% - still a paltry rate of growth - but slightly better than the initial 0.6% read. If the data surprises to the upside, it may quell some of the doom and gloom forecasts of an imminent recession that dogged the greenback. If, however, the news is even worse than the bears believe, the greenback could come under fresh selling pressure stoking fears that the recession is already here as EURUSD will continue its dally journey to new highs.

After 1.50, what’s next for the Euro?

Forex Report with FMCI Update by Forex Metrics - Feb.28/2008

Forex Report with FMCI Update by Forex Metrics - Feb.28/2008

FMCI is down by 54 pips to 1.2210 level with 4 out of 10 currencies up.

Today, after the US economic data release, FMCI dropped substantially due to the fear of recession gripping the global economy. Although Euro was high against USD and Pound, the overall global trend shows sign of economic slowdown.

FMCI reflects the current trend of global economies as a whole, from the value of major global currencies. Fall in FMCI indicates a global slowdown.

Economic data released on Feb/27 was negative for US.

* US Durable Goods Orders m/m fell -5.3% confirming reduction in consumer durable goods buying power.
Core Durable Goods Orders fell -1.6% m/m.
New Home Sales dropped to 588K, again showing no sign of recovery.
USD Crude Oil Inventories dropped to 3.2M and oil prices shot above $100 a barrel pushing inflationary pressure upward.

Finally, Bernanke acknowledged inflation risks but said “it is important to recognize that downside risks to growth remain.”
All these factors accelerate dollar its Record Breaking Declines. Also, Fed clearly indicates substantial interest rate cut which will increase interest rate gap between major economies.

* Germany figures were consistent with expectation, which made EU outlook positive and gave a boost to EURO to an all time high against USD.

* The UK GDP rose 0.6% q/q and 2.9% y/y in Q4 of 2007, which is considered positive, but not strong enough. Value of pound is at a level where exports may remain stable.

US recession fear is for real and interest rate cut at measured pace will only support growth, as any substantial cut will not help the economy. It appears that fed is under panic situation and more concerned about depression than recession.

Whereas Euro is not acknowledging the global slow down, which may be affecting EU in other half of 2008.

Trading with caution is recommended, as the only factor that is consistent globally today is, Change.

Major currencies were overall trending upwards with exception of USD.

Forex Report with FMCI Update by Forex Metrics - Feb.26/2008

Forex Report with FMCI Update by Forex Metrics - Feb.26/2008

FMCI shot up by 110 pips to 1.2245 level with 9 out of 10 currencies up.

Today, FMCI rose substantially with a relatively positive economic data. Major currencies were volatile in upward direction.

Economic data released on Feb/25 was positive in a way for US and UK.

* US existing-home sales fell a less-than-expected by 0.4% on m/m to a 4.89 million annual rate in January. This catalist signifies the possibility of avoiding recession and gave boost to USD, although there was negative news, that inventories of homes available for sale increased 5.5% at the end of January to 4.19 million.

* UK house prices fell 0.2% m/m in February, pushing annual house price inflation to a 22-month low, showing a sign of economic slowdown. Bank of England’s Monetary Policy Committee member Kate Barker commented “Recession remains outside the main possibilities….We have got this combination of shocks coming from abroad and it’s difficult….We certainly expect a period of greater volatility this year,” Definitely inflation is under check and cut in interest rate would be a suitable move for boosting the economic growth.
Major currencies were overall trending upwards, but still range bound.

Weekly Forex Update - Week09 : Feb.24/08 - Mar.01/08

Weekly Forex Update - Week09 : Feb.24/08 - Mar.01/08

ForexMetrics Currency Index (FMCI)

Last week FMCI was stable and consistent above 1.2100 level. Since FMCI is stable, major currencies do not have a definite direction as yet due to uncertainty on global economic slow down. Stable FMCI indicates that major currency pairs may remain range bound, which is suitable for conservative trader. Please be advised that we do not recommend forex trading, as FMI works on its own strategy of “TradeVestment”. For our trading strategy and techniques, range bound currency pairs are most favorable.

Monitor FMCI for fundamental economic analysis and daily report, before trading.
USD

US data definitely points towards continuing slow down of economy but at a reducing rate, as impact of rate cuts starts percolating towards grass root level. Reason for slowdown is liquidity crunch impacting housing sector and the ripple effect has slowed down consumer durables and automobile sector. The basic issue that US faces today is unavailability of cheap liquidity and this cannot be solved just by cutting interest level. US economy is currently under catch 22 situation. If Interest rate drops down to 2% in next 2 quarters, it may be a boost to economic growth but, drop in interest rate is causing inflationary pressure which may even out economic growth in short run.

Federal bank has to be very vigilant in deciding interest rate and has to balance inflation and growth. Bernanke’s decision would be very critical from now onwards, as 50 bps cut, which is widely expected, may not only boost growth, but increase inflation and inflationary pressure at all levels. This may lead US economy to stagflation, which would be undesirable.

Due to political pressure, coming election and external global factors, federal bank appears to be all set to cut more interest rate, as they may not have patience to wait till impact of rate cuts percolate deep into economy, which would be atleast 2 quarters. FMI-Team views that, the balancing act to boost growth and control inflation in current situation, can be performed only by holding interest rates and gradually cutting interest rate at measured pace depending on economic global data.

USD, during recession, may not necessarily get weaker as other economies, as US still contributes to 28% of global business.

What would make USD weaker is not recession or slow economic growth, but high rate of inflation. Currently, we view USD as range bound with majors only because USD is highly dependent on economic data and interest rate decision. Any more drastic cut may lead US to stagflation and USD may change its trend from Neutral to Downward.

European Union (Euro)

Last week, European Union data was kind of soft as the central bank has viewed inflation pressure reducing in next quarter and also forecasting a slower economic growth rate, but is not concerned about recession. We totally agree with this view as these subtle comments make us believe that EU central bank will try to hold interest rate as long as it is possible based on economic data.

There is nothing wrong with this view. However, in our opinion, EU central bank should cut its interest by 25 bps, only in the event of US federal cut as a preemptive move. The reason being to keep EU growth rate stable and well above inflation rate.

We see Euro as range bound currently, but any further increase in interest rate gap between US and UK, may lead to strengthening of EURO. Not good for economy specially in global slow down.

Sell Euro on strength.

Expected EUR/USD Range : 1.4887 to 1.4502

British Pound (GBP)

UK economic growth has been diminishing and inflation is stable. Sustaining growth rate at current interest rate level is tough. Expect interest rate cuts. Delay in interest rate cut by 25 bps may cause substantial slow down in British economy. This is with the view in mind, that liquidity crunch and expensive cost of borrowing will cause a ripple effect in slowing down economic growth.

Sell Cable against USD on strength.

Expected GBP/USD Range : 1.9892 to 1.9383
Expected EUR/GBP Range : 0.7569 to 0.7393

Conclusion:

Economic data from US, UK and EU was weak last week.

Euro will stay strong against USD and Cable.

USD may consolidate and shall remain range bound.

Pound may get stronger against USD and Euro.

Major Currencies Interest Rate as of 11 February 2008

Following the latest EUR and GBP interest rate released on 7th Feb 2008. Interest rate for Sterling Pound was cut from 5.50% to 5.25% after caving in to the rumors of an imminent economical recession. On the other hand, as expected, European Central Bank holds its interest rate steady at 4% for the eight consecutive months.

A day before, the Australian dollar interest rate was raised from 6.75% to 7.00%, an 11 year high. The Reserve Bank of Australia said that the tighter monetary policy was needed against escalating inflation.

After this latest round of interest rate adjustment, the interest rate of major currencies is as follows:

Japanese Yen (JPY) - 0.50%
Swiss Franc (CHF) - 2.75%
US Dollar (USD) - 3.00%
Euro Dollar (EUR) - 4.00%
Canadian Dollar (CAD) - 4.00%
Sterling Pound (GBP) - 5.25%
Australian Dollar (AUD) – 7.00%
New Zealand Dollar (NZD) - 8.25%

Forex Market Mechanism

I believe all of you already know by now that the Forex market is the largest traded market in the world. So how are these currency pairs quoted on the Forex market? You will see two numbers on all Forex quotes. The first number is called the bid and the second is known as the offer (or the ASK) price. Take for instance EURUSD, you will see 1.4394/1.4395. The first quote of 1.4394 is the bid price, the price where traders are prepared to buy Euro against the USD Dollar. The second number 1.4395 is the offer or ask price and it is the price traders are prepared to sell the Euro against the US Dollar. You will notice that there is a difference between the bid and the offer price. This difference is known as the spread. Based on the previous EUR/USD quote, you know that 1 Euro is equal 1.4394 US dollar.

The way profit is measured of a currency is by “pips” or point. PIP is the acronym for price interest point. If the EUR/USD moves from 1.4394 to 1.4444 that is 50 pips. A pip or 0.001 is the last decimal place of a currency quotation with the exception of the Japanese Yen and Yen cross rates. A price movement for the USD/JPY from 111.10 to 111.60 will be 50 pips.

Exploring Today's Gold Stocks: Week of February 11, 2008

Drilling For and Discovering Gold

There were were so many exceptionally impressive gold drill results announced in the past few days, that I just couldn't bring myself to limit the New Drill Results section of this week's Drill Rig to just five. Last week we saw some beautiful low-grade gold intercepts with widths including 200 meters, 233 meters, and 321 meters. We also saw unbelievably high-grade results including 1,375 g/t gold and a mind-bending 5,420 g/t gold. So instead of limiting the New Drill Results section to just five, we decided to list four low-grade sets of results and four high-grade sets of results. But first let's quickly go through some of the new and continuing drill programs.

NEW AND CONTINUING DRILL PROGRAMS

US Precious Metals Inc. (OTC BB: USPR) reported that drilling has begun on the Lal Sabila project in southern Michoacan, Mexico. The company said that the first drillhole is located adjacent to an outcrop that assayed 0.062 o/t (1.758 g/t) gold and 17.3 o/t (490.45 g/t) silver. Rock chip samples from another location on the property assayed 0.335 o/t (9.497 g/t) gold, 1.093 o/t (30.99 g/t) silver, and 0.185% copper, and is scheduled to be cored next.

Bison Gold Exploration Inc. (CNQ: BGEI) says that drilling is scheduled to resume on the Central Manitoba gold project in Canada during mid-February. Initial drilling of the Central Manitoba mine structure commenced in 2006 with interesting gold intersections from the Wentworth Vein and the Tene Deep target. Results from the Wentworth Vein returned 4.47 g/t Au over 2.01 meters, 3.63 g/t Au over 4.14 meters, and 1.84 g/t Au over 3.31 meters. More recent drilling on the Wentworth Vein returned 15.5 g/t Au over 1.91 meters and 7.0 g/t Au over 2.79 meters. The company is still expecting results from hole CM-07-4, which was drilled at the Tene Deep target, and says that results should be returned this month. Bison Gold also intends to re-examine their 100% owned Apex gold property in the Snow Lake district of Manitoba. The Apex property has been extensively sampled and drilled by several companies since 1920. This work has included 15 drill holes by Fifty Three Syndicate in 1934, 82 drill holes by Tungold Mines Ltd. in 1943-46, 4 drill holes by Placer Development in 1980 and 11 drill holes by Nord Resources Ltd. in 1981. In 1997, a pre-NI 43-101 resource calculation of 109,000 tons @ 0.107 o/t (30.99 g/t) Au with a 15.2 foot (4.72 meter) average true thickness was made for the Apex zone.

Gold Reef International Inc. (CNQ: GRIN) announced that it is conducting a core drilling program on the Gold Reef-Newmont Rimrock prospect in Nevada. Gold Reef has aqcuired an exploration permit from the Bureau of Land Management for a Phase I, eight-hole program on its expanded land position in the Rimrock project. The initial stage of the multi-phase core drilling program is expected to continue through May 2008. Core storage and core processing facilities are in place and fully operational near the drill sites.

Skygold Ventures Ltd. (TSX-V: SKV) and Wildrose Resources Ltd. (TSX-V: WRS) announced the commencement of a diamond drilling program at the Spanish Mountain project in central British Columbia. Three drills are currently being utilized to continue to expand the main mineralized zone. The winter drill program is part of a 2008 campaign that includes the completion of a 43-101 compliant resource by the end of March and an expanded summer drill program. Skygold owns a 70% interest and Wildrose holds a 30% participating interest in the Spanish Mountain project.

Little Squaw Gold Mining Company (OTC BB: LITS) has mobilized a drill rig to the Marisol gold property located just south of the US-Mexico border in the State of Sonora. The company intends to complete at least 10 diamond core drill holes for 1,500 meters (5,000 feet) to test for an ore target that has been identified. The Marisol property is in the Cucurpe mining district where some 2 million ounces of gold have been produced. The property consists of 541 hectares (1,337 acres) located 14 km (9 miles) east of the million-ounce San Francisco gold mine.

Shaw River Resources (ASX: SRR) announced the commencement of its on-ground exploration program for 2008 at its 100%-owned Hedland project in western Australia. Initial drilling at the Hunky Dory and Transformer anomalies on the Hedland project include 1.8 g/t Au over 9 meters including 2 meters of 5.76 g/t gold. Previous results from the Screamer anomaly on the Hedland project include 6.65 g/t Au over 1 meter, 1.15 g/t Au over 2 meters, and 0.69 g/t Au over 8 meters. Drilling to date has produced a number of gold intercepts over a 3.7 kilometers long trend. A large surface sampling program is currently under way over the entire area and reverse circulation drilling will recommence in March testing new targets as well as strike and depth extensions at Transformer.

Luiri Gold Ltd. (TSX-V: LGL) has started a +10,000 meter reverse circulation drilling program targeting six new targets in the Matala Dome structure on Luiri Hill gold project in Zambia. Recent trenching across one of the priority targets, the Eclipse target, returned a best intersection of 49 g/t Au over 3 meters. The project area is adjacent to ground held by BHP Billiton in Joint Venture with AIM Resources. This consortium has been actively exploring for iron oxide gold/copper mineral occurrences. The existence of this style of copper/gold deposits in Zambia has been confirmed by independent research, which highlighted similarities between the Dunrobin gold deposit and the Kansanshi copper-gold project of First Quantum, where a measured and indicated mineral resource of over 3 million tonnes of copper and 1.6 million ounces of gold has been defined.

Gold Summit Corp. (TSX: GSM) and joint venture partner Astral Mining Corp. (TSX-V: AST) began a diamond drilling program at the Bear Creek Prospect in North Carolina to test a large gold in soil and rock chip anomaly approximately 400 meters long and 100 meters wide. Three core holes totaling 1,000 meters are initially planned. The drill rig will then move to the Saluda Prospect in South Carolina to drill down dip of high grade gold mineralization intersected last summer. Grades of 14.4 g/t, 7.8 g/t, and 17.8 g/t Au over intersected widths of 2.16, 1.95, and 1.98 meters, respectively. Astral has the option to earn up to an 80% interest in Bear Creek.

Northern Lion Gold Corp. (TSX: NL) announced the commencement of a 3,000 meter diamond drill program on the company's 95%-owned Cercal license, and the continuation of the 5,000 meter diamond drill program on its 100% owned Moura license, both located in southern Portugal. Northern Lion currently has three diamond drills running, with two situated within the Cercal license and one on the Moura license. The Cercal license covers approximately 240 square kilometers, and is well positioned within the Iberian Pyrite Belt, which has been actively mined for over 2,000 years, and hosts giant (>100 million tonnes) and supergiant (>200 million tonnes) volcanic hosted massive sulphide deposits. Northern Lion is also continuing to drill within the Moura license, and is currently testing the Enfermarias deposit, where in the 1980s, the Portuguese government exploration authority drilled 13 holes. 11 of the 13 holes intersected mineralization. The deposit is open for expansion and further delineation.

Amera Resources Corp. (TSX-V: AMS, OTC BB: AJRSF) announced that a 2,500 meter diamond drill program is underway on the Laguna gold project, situated in the prolific Cerro de Pasco District, west-central Peru. Drilling will primarily focus on testing six targets previously identified by Placer Dome Inc. that have similar characteristics to the producing Quicay gold deposit, which is currently being mined by a private Peruvian company.

NEW DRILL RESULTS

This week's LOW GRADE drill result highlights

Brett Resources Inc. (TSX.V: BBR)
Hammond Reef Project, Canada

Drilhole ID Number	Intersection	Gold Grade	Comments
BR-81	67.5 meters	1.03 g/t	n/a
BR-83	321.0 meters	1.12 g/t	amazingly wide intercept

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Mansfield Minerals Inc. (TSX: MDR)
Lindero Project, Argentina

Drilhole ID Number	Intersection	Gold Grade	Comments
LDH-102	166 meters	0.70 g/t	extended mineralization to the west and at depth
LDH-103	142 meters	0.92 g/t	n/a
LDH-104	120 meters	0.91 g/t	n/a
LDH-105	200 meters	1.00 g/t	n/a
LDH-110	233 meters	0.94 g/t	extended high-grade zone found in LDH-19
LDH-111	134 meters	1.09 g/t	extended high-grade zone of the east body
LDH-113	272 meters	0.52 g/t	expanded the central body

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Pediment Exploration Ltd. (TSX-V: PEZ, OTC BB: PEZFF)
San Antonio Project, Mexico

Drilhole ID Number	Intersection	Gold Grade	Comments
PLRC-38	88.4 meters	1.13 g/t	n/a
PLRC-50	76.2 meters	1.52 g/t	including 4.5 meters of 10.40 g/t Au
PLRC-68	64.0 meters	1.64 g/t	including 1.5 meters of 17.40 g/t Au
PLRC-58	71.6 meters	1.47 g/t	n/a

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Osisko Exploration Ltd. (TSX-V: OSK)
Canadian Malartic, Canada

Drilhole ID Number	Intersection	Gold Grade	Comments
CM07-1140	295.2 meters	0.84 g/t	n/a
CM07-1144	150.9 meters	2.10 g/t	n/a
CM07-1160	184.0 meters	1.27 g/t	n/a

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This week's HIGH GRADE drill result highlights

Claude Resources Inc. (AMEX: CGR, TSX: CRJ)
Santoy Lake property, Canada

Drilhole ID Number	Intersection	Gold Grade	Comments
JOY-07-285	0.99 meters	105.07 g/t	n/a
JOY-07-286	10.88 meters	24.31 g/t	including 1.00 meter of 140.95 g/t Au
JOY-07-410	5.02 meters	33.36 g/t	including 1.25 meters of 119.40 g/t Au
JOY-07-479	1.74 meters	314.25 g/t	n/a

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HuntMountain Resources (OTC BB: HNTM)
La Josefina property, Argentina

Drilhole ID Number	Intersection	Gold Grade	Comments
A-06	0.66 meters	75.20 g/t	including 77.00 g/t silver
A-07	0.53 meters	107.00 g/t	including 71.40 g/t silver
A-07	0.46 meters	1375.00 g/t	including 447.00 g/t silver
A-07	0.50 meters	196.00 g/t	including 84.00 g/t silver

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Centamin Egypt Ltd. (ASX: CNT, TSX: CEE)
Sukari project, Egypt

Drilhole ID Number	Intersection	Gold Grade	Comments
D1280	3 meters	1,842.57 g/t	including 1 meter of 5,420.00 g/t Au

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Intrepid Mines Ltd. (TSX: IAU, ASX: IAU)
Paulsens Gold Mine, Australia

Drilhole ID Number	Intersection	Gold Grade	Comments
JOY-07-285	14 meters	49.7 g/t	n/a

6 Gold and Mining Stocks to Watch

Even with the market in a frenzy, gold is still in demand. Especially now that the Feds cut rates by 75bp, you can expect the trend to continue. I have claimed GLD to be my true love in the past because of its supreme run, and this is just one example of a solid play on gold.

With that said, here are 6 different stocks that are involved in gold, or gold and silver mining that should be on your watch close watch list.

Goldcorp, GG Stock is looking quite juicy right now at just above $35 a share, with the stock hitting a high last week of $39.94. If the 50 day moving average can start to uptrend again, watch out. As of this post GG stock rests at $35.06.

GG Stock Chart, Click to View

Barrick Gold Corp, ABX stock has strong exposure internationally and mines gold alongside copper. The stock has found fantastic support recently at $45 which has to have the bulls happy, and is seeing short term resistance around $50. As of this post ABX stock is trading at a last of $48.10.

ABX Stock Chart, Click to View

Randgold Resources, GOLD stock is a play on gold in Africa. The stock has had a fantastic run since early September running from $25 all the way to $45, and as of this post lies at $43.27.

GOLD Stock Chart, Click to View

Kinross Gold, KGC stock has moved nicely as well since early September, and just yesterday the stock found great support at $19 and its 50 day moving average. KGC is a buy above $21.50 and easily has potential to move up to $25 if Gold stocks overall continue to press higher. As of this post KFC sits at $20.20

KGC Stock Chart, Click to View

Buenaventura Comp, BVN stock has seemed to find support at its 50 day moving average, but has fallen under key support area $60 which makes me skeptical. Last week the stock peaked out near $71, and as of this post is at a last of $58.32.

BVN Stock Chart, Click to View

Last but not least everyone has to know about the Streettracks Gold Trust, GLD ETF. $86 is the key level here for the bulls and this ETF has been a favorite since it was trading in the low $70s. Look for intraday resistance between $88 and $90. GLD as of this post is at a last of $87.89.

GLD ETF Chart, Click to View

7 Great Stocks to Short with the Market Heading Down

Looking for stocks to short? Well, this list is for you.

With the market so volatile to the downside there are many easy plays that can yield you quick profits. The overall trend right now is bearish, so play the downside and you have a good shot at being a winner. The smart investor is always the successful investor.

Baidu.com (BIDU) Stock, $230

This stock was a great short candidate first with the move below $262.43, and again with the move below the 200 MA below $248.30. A key entry now would be with a pullback to the 200 MA, with a great cover price being $268.10.

Amazon.com (AMZN) Stock, $68.49

I shorted Amazon at $72 yesterday, current stop at $74.25. The stock was technically first a short with the fall below $73.37, then again with the fall below $72. My target for AMZN is $60.

Apple (AAPL) Stock, $122

Apple was a short yesterday with the fall below $126. The stock was trading horizontally and the fall to new multi month lows suggests lower prices yet to come.

Blue Coast Systems (BCSI) Stock, $23.59

Three short points on BCSI, first the fall below $26, then the fall below $23.87, and next coming up a fall back below $22. Look for strong distribution volume to confirm the trend.

Garmin (GRMN) Stock, $63.41

As I am watching GRMN intraday live the stock has pulled above $66.23 which signals it has begun to fill the gap range from February 5th. Technically making this stock a buy with target price of $71. On the short side look for a fall below $61.82 to make for a great entry.

Mercadolibre (MELI) Stock, $33.95

I liked MELI first with the fall below $40 which came with good distribution volume. Volume has been drying out now this week and the stock should see lower prices to come. Look for heavy volume to lead the way.

Humana (HUM) Stock, $73.18

What a great short entry this made yesterday with the fall below $75.57. MELI is currently trading down another few points today, and should test its 200 MA (or $69 - $70) in the near future.

Extra Notes: When shorting, look for small quick gains, not sizable long positions. If any short yields 20%, immediately sell and walk away. Limit your upside exposure to no more than 3 - 5%. A stock that has been heavily sold off can easily jump back up in price quickly.

Philippine stock market lost 9% in January 2008

If you placed money in the Philippine stock market from the beginning of January this year, you would have already lost 9% by now. That translates to a million pesos worth only P910,000 as of January 31.

That is based on the performance of the Philippine Stock Exchange index (PSEi), a basket of 30 listed common stocks representing the overall movement of market prices and the general state of the Philippine economy.

On January 31, the PSEi closed at 3,294.08, down 9.04% compared to its original level at the start of the year. Badly hit were the Mining and Oil sector which lost 15.12% and the Holding Firms sector which declined in value by 14.74%.

The PSEi lost 9% of its value in January 2008 alone.

Calculating FOREX Profits and Losses

FOREX currencies are traded in much smaller divisions than cash. Whereas the smallest division in US cash is the penny ($0.01), US currency can be traded on the FOREX in divisions of $0.0001. This smallest division is called the pip (short for Price Interest Point - sometimes just called 'points'). Since currencies are traded in large lots of (say) $100,000 - small movements in value can generate substantial profits and losses. In a lot of US$100,000 one pip is worth $10 so an increase in 40 pips (4/10 of one cent) can generate a profit or loss of $400.

Currencies are traded in lots of various sizes. The standard lot is 100,000 units of the base currency. A unit is the currency name e.g. one unit of US dollars is the dollar. So a standard lot of US currency is worth $100,000. FOREX trades can have lots of various sizes - a mini lot is 10,000 units, but the most trades are done using standard lots.

Various currencies have different sized pips. The US dollar is expressed in pips of 0.0001 while the Japanese yen is expressed in pips of 0.01. The value of a pip depends on the size of a lot and the currency pair traded. Currency pairs with USD as the quote (second) currency (e.g. CAD/USD) always have a pip value of $10 per standard lot or $1 per mini lot. A pip value calculator can be used to calculate other currencies.

Order Types

A trader has at his disposal different types of orders to make FOREX trades. A clear understanding of each type of order is necessary to be a successful FOREX trader.

Market Order - is an order to buy or sell at the current market price. They can be used to enter or exit a trade. Market orders should be used with care because in fast-moving markets there may be a difference between the price seen at the time a market order is given and the actual price of the transaction. This is due to slippage - the amount the market moves in the few seconds between giving an order and having it executed. Slippage could result in a loss or gain of several pips.

Limit Order - is an order to buy or sell at a certain limit. They can be used to buy currency below the market price or sell currency above the market price. When buying, your order is executed when the market falls to your limit order price. When selling, your order is executed when the market rises to your limit order price. There is no slippage with limit orders.

Stop Order - is an order to buy above the market or to sell below the market. They are most commonly used as stop-loss orders to limit losses if the market moves contrary to what the trader expected. A stop-loss order will sell the currency if the market falls below the point set by the trader.

One Cancels the Other (OCO) - this order is used when placing a limit order and a stop-loss order at the same time. If either order is executed the other is cancelled, allowing the trader to make a transaction without monitoring the market. If the market falls, the stop-loss order will be executed, but if the market rises to the level of the limit order, the currency will be sold at a profit.

Example OCO Transaction:

Buy: 1 standard lot EUR/USD @ 1.3228 = $132,280
Pip Value: 1 pip = $10
Stop-Loss: 1.3203
Limit: 1.3328

This is an order to buy US dollars at 1.3328 and to sell them if they fall to 1.3203 (resulting in a loss of 25 pips or $250) or to sell them if they rise to 1.3328 (resulting in a profit of 100 pips or $1,000).

Here's another example:

The current bid/ask price for US dollars and Canadian dollars is

USD/CDN 1.2152/57

...meaning you can buy $1 US for 1.2152 CDN or sell 1.2157 CDN for $1 US.

If you think that the US dollar (USD) is undervalued against the Canadian dollar (CDN) you would buy USD (simultaneously selling CDN) and wait for the US dollar to rise.

This is the transaction:
Buy USD: 1 standard lot USD/CDN @ 1.2157 = $121,570 CDN
Pip Value: 1 pip = $10
Stop-Loss: 1.2147
Margin: $1,000 (1%)

You are buying US$100,000 and selling CDN$121,570. Your stop loss order will be executed if the dollar falls below 1.2147, in which case you will lose $100.

However, USD/CDN rises to 1.2192/87. You can now sell $1 US for 1.2192 CDN or sell 1.2187 CDN for $1 US.

Because you entered the transaction by buying US dollars (buying long), you must now sell US dollars and buy back CDN dollars to realize your profit.

You sell US$100,000 at the current USD/CDN rate of 1.2192, and receive 121,920 CDN for which you originally paid CDN$121,570. Your profit is $350 Canadian dollars or US$287.19 (350 divided by the current exchange rate of 1.2187).

Euro Stocks Lower as Pharmas and Banks Sink

European stocks slipped into territory Friday afternoon, tracking U.S. futures and with declining pharmaceuticals and banks dragging on the major indexes.

U.S. stock index futures lost their positive bias, with fears of a U.S. recession returning to the market.

In Asia, many investors were away for the Lunar New Year. Japan fell 1.4 percent in a quiet session and Australia finished 1.1 percent higher, in thin volumes.

GlaxoSmithKline was one of the lead losers on the FTSE-100, with declines of 2.9 percent, as the London-listed drug maker was downgraded by Fitch Ratings after it warned on 2008 earnings Thursday. Sanofi-Aventis and Merck were also lower.

Fears over the health of the U.S. economy and the spreading of the credit crunch still remained a key concern, with some analysts saying any recovery is likely to be short-lived. 'The fundamental themes are still there, still a lack of confidence in economic figures and also increasingly in the corporate figures, with the likes of Glaxo,' Justin Urquhart Stewart, a director at 7 Investment Management, told Reuters. 'Any rebound we see today is going to be pretty thin stuff without much backbone.' Basic resources, financial services and technology stocks were the stars of Europe's Friday morning rally, rising more than 2 percent.

Alcatel Lucent's shares rose more than 2 percent despite the fact that it gave a grim outlook and suspended its dividend.

Construction group Sacyr Vallehermoso rose 4.2 percent after a newspaper report that a French-backed group of banks and insurers were in talks to buy its one third stake in Eiffage.

French construction group Lafarge rose 3.4 percent after a newspaper report said investment group GBL may raise its stake to 18 percent and possibly to 25 percent.

The rise in crude oil futures helped push up shares in BP, Total and Royal Dutch Shell, which rose between 0.6 and 1.4 percent.

Forex - Canadian dollar strengthens vs US dollar after strong employment data 02/08/2008

LONDON (Thomson Financial) - The Canadian dollar strengthened against the US dollar following a strong set of employment data, which dampened hopes for a large interest rate cut at the Bank of Canada's next meeting in March.

Statistics Canada said jobs rose by 46,000 in January, boosting the employment rate to a record high of 63.8 pct.

This brought the unemployment rate down to 5.8 pct from 5.9 pct in December, confounding Thomson IFR Markets' consensus expectation for a rise to 6.0 pct.

"The probability of the BoC doing a 50 basis point cut has dropped significantly," said James Vola at Thomson IFR Markets.

"The economy has had another monster print for employment and wages are rising, and the BoC does not seem likely to add to much fuel to the economy's fire."

At 12.49 pm, the US dollar had weakened to 1.0018 cad, from 1.0074 cad prior to the data.

Oil higher on Nigeria supply disruptions and cold US weather

LONDON (Thomson Financial) - Oil was up in London as supply disruptions in Nigeria and colder weather in the US gave prices a boost.

"On Thursday, Royal Dutch Shell announced that it was halting 130,000 bpd of production in Nigeria due to pipeline leaks," said analysts at Barclays Capital. "In addition, US weather forecasts indicated that temperatures in the North East would fall below normal next week leading to speculation that US demand would rise in response."

They cautioned however that gains have been capped by fears of a looming recession in the US and seasonally lower demand in Q2 of the year, which could yet see prices move further away from the highs.

At 12.38 pm, New York's WTI crude for March delivery was up 59 cents at 88.70 usd per barrel. Yesterday, prices dipped as low as 86.24 usd following a massive rise in US crude stocks the previous day, and lingering recession fears.

In London, Brent crude for March delivery was up 58 cents at 89.09 usd per barrel.

Shell said Thursday it would not be able to honour all its export contracts from its southern Nigerian Bonny export terminal for the rest of February and March because of sabotage.

Militant activity in the crude rich Niger Delta region has slashed around a quarter of production in Africa's largest oil exporter since January 2006. Shell's activities in the country account for around half of Nigeria's 2.6 mln bpd at peak production.

The oil giant has declared a force majeure, which allows companies to suspend contractual obligations such as deliveries of oil and gas following unforeseen events without incurring penalties.

While supply fears are boosting oil today, rising crude inventories in the US and fears demand could fall should the global economy falter have seen prices decline by almost 12 pct since briefly breaching the 100 usd mark in early January.

The dollar has also regained some strength, which could prove bearish for crude and other commodities priced in the US currency, as they become more expensive for overseas investors.

"The Dollar Index continues to gain and should stay under watch for any development of a rebounding trend," said Petromatrix analyst Olivier Jakob. The dollar has firmed against the euro as market watchers expect the European Central Bank to soon start cutting rates in response to the economic slowdown.

The dollar's fall to a series of all time lows, due to economic fears and rapid Federal Reserve rate cuts, has been consistently flagged as one of the key reasons for oil's rally up to its recent highs.

Higher than expected OPEC production is also weighing on prices. On Wednesday, OPEC Secretary General Abdalla El-Badri indicated production had risen slightly in January, despite the cartel holding production quotas steady at its last two meetings.

"On the supply side of the market, rising OPEC production has been widely dismissed in bullish circles, but has ultimately proven to have a calming influence on prices," said Citigroup analyst Tim Evans, adding that he saw the market having a supply surplus in the second quarter of the year.