Stocks & Commodities V. 23:10 (12-18): Forex Focus by Todd Gordon, CMT
Access to foreign exchange trading has opened up exciting trading options for the retail trader. You can now trade alongside corporations and institutions in a highly liquid market that is global, traded around the clock, and highly leveraged. Before jumping into this market, however, we must understand the factors that affect the forex market. With that in mind, STOCKS & COMMODITIES has introduced Forex Focus to better prepare the retail trader to participate in the currency market.
Are Fibonacci Levels Leading Indicators For Forex?
Gain insight into the trading tactics of institutional
foreign exchange traders.
The recent explosion in popularity of the cash foreign exchange markets has been fueled by investors from nearly every trading discipline, from hedge fund managers to commodity trading advisors (CTAs) to investment banks to individual traders. This influx of players contributes to the $1.9 trillion turned over daily in the foreign exchange markets, and it is the very size and source of this volume that allows skilled technical traders to place trades in the spot forex markets with relative safety.
So how do we safely navigate among the forces in the currency trading universe and live to tell the tale? The key lies in understanding the use of analytic indicators. Letís take a look.
EVERYBODY LOOKS AT TECHNICALS
Technical analysis existed in the 1970s and 1980s, but not to the degree that it does today. Thirty years ago, there was certainly no equivalent of eSignal or TradeStation running on every currency traderís desk in the interbank market. Those traders could not call up a 38.2% Fibonacci retracement for a recent move by clicking a mouse, nor could they easily pull up a real-time streaming chart to learn that the dollar/Swiss
franc (USD/CHF) had held 1.1800 for the past month.
Far from it. Back then, when a large order hit a traderís
desk, he either knew his technical levels beforehand, having organized and written them down days before, or simply guessed where to position himself ahead of this order. Today, in contrast, charting packages with advanced technical analytics litter the desks of just about every investing institution. Traders can call up technical indicators instantly for any investment instrument and position themselves accordingly. The markets are far different.