Page 42 - Ultimate Guide to Currency Trading

something such as "Swedish krona to dollar" (for USD/SEK) or "British pound to dollar" (for GBP/USD),
and then selecting any news options. This will bring up all of the most recent news that is published on
the public access side of the Internet, including stories from www .marketwatch.com and websites
that are of a more mainstream or general nature, including foreign websites. Upon a full review of the
news, proceed to move on to your trading-news journal to review what was developing with the FX
pairs before you left for your long weekend. Then, finally, move on to looking at your live-trading
screen, with all of its flashing green and red lights, and ever moving charts. At this point, you will have
completely refreshed your view on the value of a pair that you may have been looking at, and will not
(you hope) react too strongly to seeing a quoted price that is far from where you remember it,
whether strongly up or down. This procedure, if undertaken at the beginning of every trading session,
can prevent you from jumping into a trade when the FX pair has been revalued by the entire market,
and you are the last to know.

You Are Always Starting from Scratch

Reviewing the information that is available before you begin to trade is crucial to protecting that
balance in your account and keeping your FX trading profitable. As you look at each bit of information
before you begin to trade, keep in mind that you are trying to establish a new value for a currency pair.
You should always start from scratch with your evaluations of the market's perceived value of a
currency pair, and you should always begin with a new perspective if the currency pair is set to make a
move that would allow you to make a profit with a trade.

Foreign Market Movements

For example, it might be that while you were away for the weekend (with no trades on your books)
that the market's risk appetite developed consider-ably. Good news might have come out of the
European Union (EU) regarding a wide sweeping deal, and that reform deal might serve as an
ointment to that economic area's woes, which in turn will calm market participants all over the world.
The development might have happened early Saturday morning when all of the major markets were
closed. The good news didn't wait for Monday morning to travel though, and traders have been
gleefully waiting to up their inventories of risky assets. They have been spending all of their weekend
thinking of how they would like to have more stock and other higher-yielding assets. As the markets
open in the beginning of the week, the world's stock markets gain. Other assets that go up on positive
news gain also. In the currency arena, this means that the SEK, the NZD, the EUR, and the AUD will
gain, while the low-risk currencies such as the USD, JPY, and the CHF will fall in value.

Since news coming from such a large economic block as the EU can be so positive to the
markets, there can be movements of 1 percent to 1.25 percent or even greater in these FX pairs. If you
have been away from your trading desk for any length of time before the EU's developments came
about, your before valuations will be much different from the market's after valuations.