Global Currencies

Chapter 1

Forex Basics

Chapter 2

Fundamental Factors

Chapter 3

Technical Tools

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The Next Day, 24 Hours Later

During the night the tide turned against the Dollar. After starting off positive, our USD/JPY position has now turned negative.

USD/JPY - October 25, 2006 - 11:30 AM

There were several stretches of time when we could have broken even on our position. The horizontal red line is the point at which we opened our position, so whenever the candles cross the red line it is a point where our position would have broken even. Even though price seems to be moving sideways, there seems to be a new downtrend forming which would be bad news for our position. We had one last chance to close the position and break even 4 candles (or 2 hours) ago.

Now the pair shows a (-21) pip loss on our position. If your analysis seems to have faltered, it is time to re-evaluate a trade. Don't get fixated on a given position as you want to cut your losing trades and ride your winning trades. The mentality that "price will come back to the level at which I opened the position" is dangerous.

On the other hand our EUR/USD position is gaining traction. We should see what our goals were before opening this position and re-evaluate if this is a good place to close the position.

EUR/USD - October 25, 2006 - 12:00 PM

As mentioned before one should let their winning positions keep gaining. However as a short term goal, if +20 pips is what you were looking for then it may be time to close the position. If we are favoring the Euro in the near term future, we would keep holding the position.

We will hold both positions to show what happens next.

Risk Warning

Before deciding to participate in the Forex market, you should carefully consider your investment objectives, level of experience and risk appetite. Most importantly, do not invest money you cannot afford to lose.

There is considerable exposure to risk in any off-exchange foreign exchange transaction, including, but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair.

More over, the leveraged nature of forex trading means that any market movement will have an equally proportional effect on your deposited funds. This may work against you as well as for you. The possibility exists that you could sustain a total loss of initial margin funds and be required to deposit additional funds to maintain your position. If you fail to meet any margin requirement, your position may be liquidated and you will be responsible for any resulting losses. To manage exposure, employ risk-reducing strategies such as 'stop-loss' or 'limit' orders.

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Forex.com/UK acts as the clearing agent and counterparty to customers introduced by "Global Currencies" for an IB margined forex transactions. FOREX.com is a trading name of GAIN Capital - FOREX.com UK Limited and is authorised and regulated by the Financial Services Authority. FSA No. 190864.