Forex Technology

FXEngines Trade The News

2006-06-27T08:25:00.000-07:00

I tested out FXEngines and their news trading service today for the release of the Consumer Confidence Report. I got stopped out on all trades. Tonight I will need to review what happened, as my charting software for CMS showed at leasta 10 pip drop, but on most trades I got stopped out almost as soon as they were entered.

Recent results have not been too impressive, but that doesn't mean there isn't value to their service.

FXEngines

2006-06-16T06:45:00.000-07:00

I have recently been reading about how economic news can impact the trading price of a particular currency. One of the problems, from the individual investors standpoint, is the ability to react to this news and catch part of that price action.

FXEngines.com has begun to offer their system which claims to allow individual investors to tap into news releases and pick up a few profits. I have opened a small account there to see how this will work out. I will post to this blog my experiences with it, as it is a great example, in my opinion, of using technology to aid in trading.

Forex for Absolute Dummies by Joseph R. Plazoby Casey Yew

2006-06-06T07:11:00.000-07:00

Forex (foreign exchange) refers to the foreign currency exchange market, the world's largest financial trading market. Pass yourself as a forex expert with these buzz words:

* Bid - to buy * Ask - to sell * Liquidity - financial ease of transaction, i.e. cash * Trading volume - the amount traded * Bid/ask spread - the difference between the proposed buying price and the actual selling price * OTC - over the counter * Exchange rate - the difference between currency values; for instance, a Canadian dollar is valued at .86 of a US dollar * Hedge funds - large mutual funds companies that control vast amounts of money and are able to manipulate the value of a currency through speculation * Central bank - the national bank of a nation, which usually exerts control over the value of that currency

Forex trading is the investment in the currency of one nation. Multinational Corporations doing business across national boundaries find value in keeping their cash reserves in a variety of countries, and holding their funds in a myriad of ways. For example, a UK corporation may hold a percentage of its working capital in UK pounds, but if it does quite a bit of business in USA it may also maintain a percentage of its money in dollars, in US banks. Individual investors over the decades have discovered that there is profit to be made in investment and speculation in the currency markets.

Take the case during the 70's when the German DM swung rapidly in value. It was worth anywhere from 1.2 marks to the US dollar to 3.5 US marks to the dollar. When the mark was worth 2.5 it was beneficial to spend dollars buying marks, since the mark would buy more goods or services at that rate. As the mark bottomed out 1.7 to the dollar there was less incentive.

Surprisingly, the forex market itself is not unified. One can find many small forex markets specializing in trading various currencies. The most commonly traded currencies in forex speculation are the US dollar, the Australian dollar, the British pound sterling, the Japanese yen, and the European Euro. Currency values vary depending on the market in which an investor is speculating, so there is really no such thing as a single, unified dollar rate, but instead there are multiple dollar rates, which vary according to the market where the trade is occurring.

The major cities in which trades occur include New York, London, and Tokyo. It's a 24 hour process. When Asian trading ends, European trading commences, and when European trading ends, then American trading opens. Naturally, when American trading ends, it is time for Asian trading to open house once more... and so on.

Currently, the most actively traded currency is the US dollar, involved in 90% of all trades. This is followed by the Euro involved in 36% of all trades, then by the yen in 20% and the pound in 17%.

Our fastest rising currency in trade is the Euro, however the US dollar is still the favored anchor point-- and the currency watched so as to judge how others will react. Differences in value of currencies come from the current events. GDP growth, inflation dips, interest rate swings, budget and trade deficits, surpluses and other economic conditions all shift currency values. Investors, for this reason, follow the news very closely. There are 24 hour cable news channels and many web sites devoted to news that aid currency speculators.

The forex market is highly susceptible to rumors. In fact the central banks of countries frequently manipulated local currency value by sowing rumors about interest rate hikes and other economic propaganda that impacts the value of the domestic currency. When this news is false it is called a dirty float- and it dismays the market.
-----------------------------------------------
About the author: A master of manifestation to his associates, Joseph R. Plazo offers intense executive coaching so people can find jobs and build careers.

Money Management

2006-05-31T06:42:00.000-07:00

Although this is a little tangent, a little education on money management is always a good thing. The article at http://www.pfxtrade.com/article4.htm does a good job going over the basics.

Problems with Auto-trading

2006-05-30T06:13:00.000-07:00

I firmly believe that technology can make trading Forex easier. However, there are a couple of issues that have arisen during my experience so far that can create unexpected traps.

A system is only as good as its data. I have had several times where my data-feed has dropped, and my forex application may miss a trade or two. Ensuring that alternative feeds (even though not exactly tied to a broker) exist is very important.

There are non-automated 'feelings' that sometimes can help. Usually auto-trading eliminates the emotions that often cloud judgment. However, occassionally one look at the chart will show that a particular trade is not the right one. Technology can help in recognizing these patterns and situations, but the safer method is to err on the side of caution. I attempt to program my applications to not trade when there is any degree of uncertainty (even beyond the system's parameters).

Outside events can affect a trade. News releases can make a good trade go bad. Byu focusing just on technical analysis, a system will have to ride out news cycles. Often it will be unable to. Any decent system needs to take external events into consideration. This is another key point I make sure my software accounts for.

There are many benefits to auto-trading. The above is a non-exhaustive list of some of the issues I have seen so far. In the long run, however, I believe technology can enhance and ease our trading.

Neural Networks Learn Forex Trading Strategies

2006-05-26T06:45:00.000-07:00

The latest buzz in the Forex world is neural networks, a term taken from the artificial intelligence community. In technical terms, neural networks are data analysis methods that consist of a large number of processing units that are linked together by weighted probabilities.

In more simple terms, neural networks are a model loosely resembling the way that the human brain works and learns. For several decades now, those in the artificial intelligence community have used the neural network model in creating computers that ‘think’ and ‘learn’ based on the outcomes of their actions.

Unlike the traditional data structure, neural networks take in multiple streams of data and output one result. If there’s a way to quantify the data, there’s a way to add it to the factors being considered in making a prediction. They’re often used in Forex market prediction software because the network can be trained to interpret data and draw a conclusion from it.

Before they can be of any use in making Forex predictions, neural networks have to be ‘trained’ to recognize and adjust for patterns that arise between input and output. The training and testing can be time consuming, but is what gives neural networks their ability to predict future outcomes based on past data. The basic idea is that when presented with examples of pairs of input and output data, the network can ‘learn’ the dependencies, and apply those dependencies when presented with new data. From there, the network can compare its own output to see how close to correct the prediction was, and go back and adjust the weight of the various dependencies until it reaches the correct answer.

This requires that the network be trained with two separate data sets – the training and the testing set. One of the strengths of neural networks is that it can continue to learn by comparing its own predictions with the data that is continually fed to it. Neural networks are also very good at combining both technical and fundamental data, thus making a best of both worlds scenario. Their very power allows them to find patterns that may not have been considered, and apply those patterns to prediction to come up with uncannily accurate results.

Unfortunately, this strength can also be a weakness in the use of neural networks for trading predictions. Ultimately, the output is only as good as the input. They are very good at correlating data even when you feed them enormous amounts of it. They are very good at extracting patterns from widely disparate types of information – even when no pattern or relationship exists. Its other major strength – the ability to apply intelligence without emotion – after all, a computer doesn’t have an ego – can also become a weakness when dealing with a volatile market. When an unknown factor is introduced, the artificial neural network has no way of assigning an emotional weight to that factor.

There are currently dozens of Forex trading platforms on the market that incorporate neural network theory and technology to ‘teach’ the network your system and let it make predictions and generate buy/sell orders based on it. The important thing to keep in mind is that the most basic rule of Forex trading applies when you set out to build your neural network – educate yourself and know what you’re doing. Whether you’re dealing with technical analysis, fundamentals, neural networks or your own emotions, the single most important thing you can do to ensure your success in Forex trading is to learn all you can.

Forex Software - Choosing The Best by Oliver Turner

2006-05-25T05:51:00.000-07:00

When it comes to forex trading the forex software you choose is essential. There are so many forex trading companies all competing for your business that choosing the right forex software can be quite a difficult task. Most of the forex software products available offers live online forex trading platforms but what other components are vital when it comes to your forex software.

Key Elements For Your Forex Software

Before purchasing any forex software there are a few essential items that should be included. The most important is security and your online forex trading software should include a 128 bit SSL encryption which will prevent hackers from accessing any of your personal details and information such as your account balance, transaction history, etc.

Providing the best security for your forex trading will include a company that provides 24 hour technical server support for your forex software, 24 hour maintenance should anything go wrong, daily backups of all information, and a security system that has been designed to prevent any unauthorized access. Along with these security protocols there are also some forex trading companies that use smart cards and fingerprint scanners to ensure that only their employees can have access to their servers.

Another important factor when it comes to choosing your forex software is to check what the company's downtime is like. When it comes to trading forex and particularly your online forex trading you need to ensure that the forex software you choose is reliable and available 24 hours a day. The forex software you choose for your forex trading should also have technical support available at all times should your session be cut short.

Ensuring that all the above features are listed in the forex software you choose will help to ensure your forex trading success.Anyway, a forex software is a must have if you want to earn money.

ABOUT THE AUTHOR: We have made the most comprehensive research on forex. Check it out on online forex system - best forex online source. All about Forex on http://www.leandernet.com

2006-05-24T10:40:00.000-07:00

Forex Traders Leverage Technology to Increase Earnings

Long gone are the days when traders in stocks and futures and currency hunched over paper ledgers and foursquare paper to record trades, enter data, make calculations and forecast trends. Today’s Forex trader has a wealth of technology tools to help plot positions, track trends and receive and record data. From data feeds to spreadsheets to specialty charting software, the computer and internet revolution has opened the trading floors to anyone with the right tools. Data feeds, spreadsheets, data analyzers and charting software have changed the way that most forex traders do business in a big way.

Most online Forex brokers have a suite of software tools that they provide or recommend to their clients. These software suites will include everything a trader needs to trade on their own system. There are also independent third-party software forex trading suites that are designed to integrate all of your trading accounts and manage your entire portfolio. They all have several common components.

Data Feed – Getting the Information

Forex traders rely on information to help them make decisions about buying, selling and trading – both up to the minute information about the current market standings and historical data that can extend back a day or a decade. In order to set up the charts and analyses required to make effective, profitable decisions, you need a reliable, fast data feed that pipes all the latest figures directly into your spreadsheets, charts and automated trading software. Some services maintain their own data feeds that are made up of multiple data feeds from several sources.

Spreadsheets for Tracking and Analysis

Forex spreadsheets are far more than record keepers. Most are designed to integrate with Microsoft’s Excel, though there are some that work with Lotus and other spreadsheet and financial tracking software. The spreadsheets use formulas that can pinpoint market moves and generate signals to enter or leave a trade. Spreadsheets can also be used to record and analyze historical data for back testing your trading system, or forecasting future movement of the currencies in which you have an interest.

Charting Software Gives You the Big Picture

While you can design your own charts from your spreadsheets, charting software makes the process far easier by setting up all the parameters for you. You can find charting software that offers multiple chart types and parameters so that you can see precisely the data you’re looking for in graphical form. You can choose bar charts, pivot charts or candlestick charts, each of which tracks the currency exchange rates of the currency pairs that you’re following.

Charts are the visual representation of the market performance of the currency pairs over a period of time. While there’s always some unpredictability in the Forex market, history has shown that the market follows very specific patterns of rising and falling prices. Charts make it easy to see those patterns both in retrospect and as they unfold. When you add in data from a real-time data feed to build those charts, you have one of the most powerful tools on which to base your trading decisions.

Neural Networks

The newest wave of trading tools focuses on a concept of artificial intelligence and learning called artificial neural networks. Because trading decisions are so heavily based on historical data and identifying patterns, most trading analysis software is based on technical analysis, a theory that states that all that matters is performance. This is in direct contrast to those that favor fundamental analysis, which takes into account real world happenings that influence the rise and fall in the value of a country’s currency. Most experts agree that a combination of the two is what works best – and that’s what neural networks provide.

Artificial neural networks are modeled on the human brain and meant to simulate the way that the human brain learns. A neural network ‘learns’ by studying historical data, then making predictions based on what it already knows. When those predictions are proved right or wrong, the network learns something new – and goes back and adjusts all that it already ‘knows’ in light of that new information.

Neural network trading software has been hailed as a Holy Grail for Forex traders. Because neural networks can assimilate multiple types of data and ‘learn’ from them, neural network software is capable of incorporating fundamental indicators into the technical analyses.

Automated Trading

In a market that can move up and down with the irregularity of a see-saw manned by a pair of three year olds, timing is everything. The currency market is one of the most volatile markets in the world, with prices moving by the second. The time that it takes to manually pick and enter stop and buy orders can mean the difference between profit and loss – and certainly in degree of profit or loss. With an automated system, the trader programs in his specific parameters for trade and stop orders, and when the market hits those points, the software sends the order to the broker.

There’s another reason for using an automated trading system, though. There’s a saying that there’s no room for emotion in Forex trading. By creating an automated system that relies purely on technical data, and sends orders when that data says ‘trade’ or ‘hold,’ the trader effectively removes his own emotions from the equation.

Welcome

2006-05-22T12:57:00.000-07:00

Welcome to my new blog on technology and forex (and, in many cases, general stock) trading. I will be posting articles here on the use of technology to aid, and enhance, trading. I am also a software developer and have my own software company at Infinite-Idea.com. There I am developing software to make trading as simple as possible, yet maximize returns. So, let's begin!