Fundamental Outlook for US Dollar: Bearish

- Fundamentals support a recovery in US and global growth, but how does risk appetite factor in?
- Bernanke sees signs of stabilization, calls focus on the deficit
- Do technicals call for a dollar collapse or recovery.

It was a tenuous week; but the dollar was able to ultimately hold its own through the close. However, just because momentum behind the earnings-driven rally in risk appetite has stalled does not mean that the world’s most liquid currency has avoided a collapse all together. Sentiment winds have died down; but they can easily jostle the safe-haven dollar should another economic catalyst surface. This makes for an uncertain future when combined with the fundamental influence that the 2Q GDP report will have on the currency. Now, not only do traders have to interpret the data, they will also have to judge whether it has a greater impact on risk appetite or growth considerations for the beleaguered dollar.

Looking ahead to next week, the most immediate threat to the greenback’s stability is the intensity and direction of risk appetite. While this currency is deeply mired in speculation surrounding the economy’s leading or lagging growth potential, interest rate expectations, and deficit projections among other influences; risk appetite has proven itself to be insuperable. With the Federal Reserve vowing to keep the benchmark lending rate at levels that insure a carry status when conditions do turn around and politicians ensuring the economy will struggle with record levels of debt for years to come, there seems little doubt that the dollar will maintain its position on the opposite of risk appetite. But, considering the stalled progress most of the dollar and yen crosses saw last week; is there a strong shift in sentiment in the works? With EURUSD and GBPUSD just off of key levels of resistance, the pressure is growing. However, the primary source of momentum this past week – the second quarter earnings season – is already on the decline. If left up to the markets alone, equities have already forged new highs for the year; but commodities, fixed income and risk-sensitive currency pairs have not pushed to comparable levels. Oddly enough, one of the most likely catalysts for risk going forward also happens to be the most attention grabbing indicator on the US docket: GDP.

According to economists forecasts, the world’s largest economy contracted at a 1.5 percent on an annualized pace through the second quarter. This would be a marked improvement from the 5.5 percent and 6.3 percent rate of the recession through the first quarter of 2009 and fourth quarter 2008 respectively. This would certainly confirm policy officials expectations for a return to positive growth by the end of this year or beginning of the next; but through the near-term it is still a call for speculation to rank the economy’s performance against that of its major counterparts. China recently reported a sharp advance to a 7.9 percent pace of expansion while the UK printed a record 5.6 percent contraction. And, then there are still those economies that have yet to report their numbers. Japan suffered a record-breaking 14.2 percent slump through the first quarter, but is expected to snap back according to BoJ and Cabinet officials. The Euro Zone awaits it August 13th release, but the Bundesbank has already stated Germany saw only a ‘slight contraction’ through the second quarter. This will increasingly become a consideration of nuance.

The other facet of the US 2Q GDP release is that it will be accepted as a gauge of global growth. This further complicates the issue. Should the reading be good, the influence on risk appetite could outweigh the implications for US returns and actually drag the dollar down; and vice versa.  Another important consideration is the timing of this release. Due Friday, speculators may decide to move the dollar before the data crosses the wires. If this is the case, the GDP report could factor into long-term projections but not short-term volatility. –JK

Written by John Kicklighter, Currency Strategist, Dailyfx.com

$1 Million the Hard Way

Let’s say you want to become a millionaire in five years. If you’re starting from scratch, online millionaire calculators (which return a variety of results given the same inputs) estimate that you’ll need to save anywhere from $13,000 to $15,500 a month and invest it wisely enough to earn an average of 10% a year. That means taking calculated risks, diversifying and avoiding investment fees like loads and broker commissions.

Obviously, in order to regularly save this much money each month, you’ll need to have a fantastic income. At the low end, to meet the $13,000 a month savings goal, you’d probably need to make around $265,000 annually. The specific number will vary considerably depending on your income tax situation, but the point is, it’s high.

According to the salary calculator at PaycheckCity.com, if you make $265,000 a year, are single, claim two exemptions on your federal tax return and live in one of the nine states with no state income tax, you’d take home around $185,000 a year, or about $15,400 a month. Saving $13,000 would leave you with $2,400 a month to meet all your expenses – a perfectly reasonable number for many singles, and even some couples.

If you’re willing to be extremely frugal – let’s say you can get by on a mere $700 a month – will it make a big difference? In this case, not really. You’d still need to make almost $250,000 a year.

If you’re in a committed relationship, however, things get a little easier. You can get away with making around $132,500 a year then, as long as your significant other can make up the difference and is on board with your savings plan. Of course, then you’ll have to share your millionaire status.

$1 Million the Harder Way

$132,500 (or $265,000) might seem attainable (or like pocket change) for some C-level executives, but, according to PayScale.com, the median salary for workers with 20 or more years of experience was a mere $71,578 in July 2009. And it’s still only $125,166 for the average CFO with the same amount of experience. Becoming a millionaire in the short-term, therefore, requires a more ambitious strategy than steadily collecting a well-deserved paycheck.

Alan Corey, author of “A Million Bucks by 30″ (2007), claims to have made a million dollars in seven years while earning a salary that more of us can relate to: $40,000 to $50,000 a year. He happened to put some of the money he saved while living very frugally in New York City in the right place (real estate) at the right time (the expansion of the most recent real-estate bubble). Of course, he also had some of success’s most important personality traits, like determination, a strong work ethic, confidence and a willingness to make some extreme sacrifices.

$1 Million the Easy Way

A short-term plan for creating wealth certainly includes these personality traits, but it often includes factors such as timing, luck, and/or possessing an incredibly valuable idea and knowing how to implement and market it. If you know you’re closer to average, consider a more traditional, more attainable approach.

The longer-term road to wealth involves such time-honored tactics as avoiding consumer debt, diversifying your investments, minimizing your investment fees, tax planning, minimizing housing expenses, and, for two-earner households, living on one income. Putting aside someone’s $40,000 in take-home pay every year and earning that 10% return as described earlier will get you to millionaire status in about 15 years. Halve those savings and you’re still only looking at 20 years.

It will take more work for sure, but it’s a lot faster than 51.

Other related stories:

10 Secrets of Millionaires’ Money Management

Wisdom from Lee Kuan Yew’s Daughter

Investopedia

In fact, as the new rules kick in (most will go into effect nine months after the president signs the bill, while others will kick in as early as 90 days afterward)  and banks start curtailing the abusive practices this legislation reins in, other practices will likely emerge that can hurt consumers just as badly. “The pendulum may have swung in the wrong direction”, says Dennis Moroney, research director and senior analyst for TowerGroup, a research and advisory-services firm focused exclusively on the financial-services industry. “The banks now have to respond to these changes.”

You may not like that response. Whether you use your credit cards as a tool to rack up free rewards points or you carry debt that you’re hoping to repay one day, you should watch out for new fees, higher interest rates, less generous rewards and fewer promotional offers. Here’s what you need to know.

In fact, as the new rules kick in (most will go into effect nine months after the president signs the bill, while others will kick in as early as 90 days afterward)  and banks start curtailing the abusive practices this legislation reins in, other practices will likely emerge that can hurt consumers just as badly. “The pendulum may have swung in the wrong direction”, says Dennis Moroney, research director and senior analyst for TowerGroup, a research and advisory-services firm focused exclusively on the financial-services industry. “The banks now have to respond to these changes.”

You may not like that response. Whether you use your credit cards as a tool to rack up free rewards points or you carry debt that you’re hoping to repay one day, you should watch out for new fees, higher interest rates, less generous rewards and fewer promotional offers. Here’s what you need to know.

Watch Out for New Kinds of Fees

The new law prohibits over-limit fees (unless the cardholder agrees to allow transactions that exceed their limits). To make up for that lost revenue, banks will likely introduce other fees. “You will see a re-emergence of fees for all kinds of other services,” says Robert McKinley, founder of CardWeb.com, which provides industry research and analysis. Among the fees cardholders should watch out for: fees for rewards programs and possibly even fees for checking your balance, he says.

Also, expect annual fees to make a comeback, says Moroney. In the 1980s, annual fees were standard, but were dropped as competition among card issuers heated up. Moroney predicts that some issuers will slap annual fees on all their credit cards, while others will tie the fee to spending thresholds, so that only big spenders get a free ride.

What cardholders should do: To protect against unpleasant surprises, examine credit-card statements and change-in-terms letters carefully. For now, card issuers can change terms at any time with 15 days’ notice, but once the new law is in effect, they will have to give 45 days’ notice.

Prepare for Higher Rates

Universal default allows card issuers to hike rates if a cardholder’s credit score drops or if they make late payments on other accounts. Once the new legislation is in place, issuers will lose this powerful risk-management tool. Without the ability to hike rates if a cardholder’s perceived risk level rises, card issuers will just start charging higher rates across the board, says Moroney.

“We’re going back to the kind of marketplace we had in the 1980s,” McKinley says. “You’ll see interest rates go back to the 19% to 20% range for most people.” The average variable-rate credit card today charges a 10.79% APR, according to Bankrate.com.

What cardholders should do: To avoid higher interest charges, consumers who carry a balance will have to shop around for lower rates — perhaps in exchange for paying an annual fee, says Linda Sherry, a spokeswoman for Consumer Action, a nonprofit education and advocacy organization. Those who pay their balances in full each month shouldn’t be affected, she says. To compare credit-card interest rates on new-card offers, use sites like CreditCards.com, CardRatings.com or CardTrak.com.

The End of Grace Periods?

The new legislation requires card companies to give consumers at least 21 days to pay their bills. But it doesn’t require them to offer a grace period, which isn’t the same as the cardholder’s due date — though the two usually coincide, says Chi Chi Wu, staff attorney with the National Consumer Law Center. While the due date designates the day by which a payment must be received for the cardholder to avoid a late-payment fee, the grace period is the time during which the cardholder isn’t charged interest.

McKinley says card issuers may get rid of grace periods altogether, so that cardholders who pay their balances off each month will start paying interest immediately after making a purchase. “The industry has for many years wanted to get rid of the grace period on convenience users,” he says.

What consumers should do: The only way to avoid interest charges if this happens is to stop using credit cards altogether, says Wu.

Say Goodbye to 0% APR Promotions

Low or 0% introductory APR offers have been a boon to diligent card users who played the balance-transfer game. Banks were able to offer those deals thanks to the card users who made a late payment before the offer expired, triggering the bank’s penalty rate of 20% or more. Now that banks won’t be allowed to increase interest rates on existing balances — and all promotional offers have to last for at least six months — these promotions will likely disappear, McKinley says. At best, consumers with excellent credit may receive introductory rates in the 6% range.

What cardholders should do: If you have a low-APR offer right now, be on your best behavior: Send payments on time and don’t do anything to trigger a penalty rate such as exceeding your credit limit.

Rewards Programs Will Be Less Rewarding

Credit-card companies have already been scaling back on rewards programs. Once the new legislation kicks in and they feel the squeeze of lower revenue from penalty fees and interest charges, they’ll become even less generous. Spending thresholds will likely go up, Moroney says, so you’ll have to spend more to earn miles, points or cash back. Banks may also adopt more stringent rules, such as wiping out your rewards balance if you make a late payment.

What cardholders should do: If you’ve accumulated a sizable amount of miles, points or cash back and worry that your card may scale back its program, it may be smart to redeem your rewards now — while the free lunch is still available.

Start early to avoid financial pitfalls. Adrian Cartwood, 49, author of the blog How to Make 7 Million in 7 Years, made his fortune by living frugally while he built his technology-related business. People often get into trouble, he says, by racking up personal debt early on, which acts as a big drag on their earnings. “Learn how to live within your means and how to delay gratification; these are the habits that you need to maintain on the way up, so you can keep your millions when you get there,” he says.

Believe that you can do it. Before investing in real estate and becoming a millionaire, Alan Corey, author of A Million Bucks by 30, read as many biographies and autobiographies of millionaires as he could find. He says he was searching for a common characteristic that could help him in his own quest. “What I found was they all had an incredible self-belief that they would be financially successful,” he says. Corey says that embracing that level of self-confidence helped him get to the top.

Articulate your vision for success. Jen Smith, author of the Millionaire Mommy Next Door blog, says that the saying, “I want to be rich,” is too vague. Instead, she recommends imagining what your ideal life as a millionaire will look like. Smith offers this example: “I want to have $2,000,000 invested so that I can live off of the interest. Then I will quit my job so that I can volunteer, travel, learn to play tennis and watercolor, and enjoy picnics at the beach with my family.”

Smith’s vision involved becoming financially-free before becoming a parent. She cut out images from magazines of beautiful places she wanted to visit and people doing fun things and put them near her desk to help her keep that vision in mind.

Insure against life’s risks. Bankruptcy is often caused by divorce, a death in the family, or a disability that renders someone unable to work. Conversely, protecting against those risks through insurance protects wealth. In The Quiet Millionaire, financial planner Brett Wilder writes that many people either fail to get adequate insurance or pay too much for it because they don’t understand it.

[For more, read: "7 Killer Insurance Mistakes You're Probably Making."]

Work hard–and you’ll get lucky. In his new book, Think Like a Champion, Donald Trump attributes his success to his hard work, which to outsiders often appears to be luck. But Trump says luck only comes from working hard. “If your work pays off, which it most likely will, people might say you’re just lucky. Maybe so, because you’re lucky enough to have the brains to work hard!” he says. That same concept, of course, was advocated by Benjamin Franklin in the 18th century. He said, “The harder I work, the luckier I get.”

Practice smart budgeting. Smith recommends tracking how much you spend each month, something she does religiously. Every month, she downloads her transactions into a spreadsheet to keep her spending on track. Smith also says that, as prosaic as it sounds, maintaining a good credit score is essential to becoming and staying a millionaire. “A good credit score can save you thousands of dollars over the course of your lifetime,” she says.

Do what you love. Sure, a career in finance might come with a hefty annual salary, but you probably won’t excel at something you don’t enjoy. That’s why Corey recommends going into the field that you find yourself reading about in your spare time. He asks, “Do you read fashion magazines? Get a job in fashion. Do you read gossip blogs? Get a job in celebrity-based enterprises. Do you read Car & Driver? ESPN.com? Yahoo Pets Forum?” Even if the field doesn’t seem lucrative, there are ways to make it to the top–something that’s more likely to happen if you love it.

[For more, read: "Juggling Your Money in the Recession."]

Decide how much money you really want. For many people, $1 million won’t be enough. “For most Gen-X and Gen-Yers, retiring with a couple million when they are 65 won’t be anywhere near enough to maintain even an average lifestyle, because that little pup called inflation is constantly nipping at your heels as you try to run towards building your own retirement nest-egg,” says Cartwood. A more reasonable goal might be $3 million– an amount that Cartwood considers the minimum to be a “bare bones millionaire” these days. Consider your ideal lifestyle and what you would like to be able to fund. A mortgage of a certain size? Exotic vacations? College tuition for your children? Having a concrete goal in mind makes it easier to get there, says Cartwood.

Invest against the grain. Corey recommends making investment decisions based on the exact opposite of what everyone else is doing. Right now, for example, stocks are relatively cheap because so many people have sold off shares, which means anyone buying can get them at a discount to their values from a year ago. Corey’s rule of thumb doesn’t just apply to stocks. “Buy a foreclosed house, fill it up with roommates, and you can get a pretty good passive income,” he suggests.

Live below your means. Even Eminem, a celebrity and millionaire, scales back his purchases out of concern for frugality. In February, London’s Independent newspaper reported that as Eminem considered buying a $15,000 watch he liked, he started worrying that he should save his money instead. Eminem reportedly said, “I don’t want to run out of money; I want my daughter to be able to go to college.” And so far, at least, Eminem hasn’t fallen victim to the financial challenges so many other stars, from Aretha Franklin to Annie Leibovitz, have faced.

For more, read: “How to Go Broke Like a Rock Star.”]

On the same note, Smith says that even though she’s a millionaire, no one would know it–and that’s the point. She recommends saving at least 10 to 25 percent of your income. She also suggests avoiding buying “status” items, such as fancy sports cars or mansions. After all, bling doesn’t make a millionaire–and in fact, too much of it can prevent you from ever becoming one.

By: Kimberly Palmer

Here we’ll look at volume, the Aroon indicator and Fibonacci numbers, three technical analysis tools that can be used to help facilitate more profitable trades. In fact, investors can use them in conjunction with each other to spot emerging trends and stay ahead of the crowd. Read on to find out how.

Turn Up the Volume
Volume is defined as the number of shares that trade during a period of time such as an hour, a day, a week or a month. This shows the strength of an upward or downward price move. Generally, low volume occurs when prices move sideways or stay within a trading range, or during market bottoms. Conversely, high volume signals the beginning of a new trend (two or more high or low points) in the stock. High volume also occurs at market tops when there is strong conviction that prices will be moving higher, and can be used to confirm an upward or downward trend. If the stock is moving upward it should have higher volume on the upward moves and less volume on the downward side. Conversely, heavy volume on the downward moves and lower volume on the upward moves points to a downturn. By using volume in conjunction with movements in the stock you can spot the right areas to get into a trade.

Tune in to Aroon
The Aroon indicator can help pinpoint the strength of a trend and the chances that it will continue. Generally investors look for a move above or below zero (the no-trend, or neutral zone) to determine whether a new trend is emerging. A cross above zero indicates an upward trend (an “Aroon up”), while a cross below zero indicates a downward trend (an “Aroon down”). An indication near the zero line with no solid crossovers up or down indicates that the stock could continue to consolidate for a while until a direction is confirmed. The Aroon indicator can help uncover an emerging trend and enable you to take profits or protect yourself from losses.

Fibonacci Retracement
Fibonacci numbers or studies are a series of numbers in which the following number is the sum of the two previous numbers, such as 1,1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 and 233. You can use these numbers in trading in conjunction with support (the price where the stock has stopped falling in the past) and resistance levels (the price where prices have stopped rising previously).

After a significant move up or down, the stock will usually retrace its movement by a certain percentage. During these movements, investors can use the Fibonacci number to see if a stock is going to touch a support or resistance level and bounce off. If it does, this signals that the stock is going to resume its original direction, either up or down. If the stock breaks that level, the investor looks to the next area of resistance or support to see if that is the point where the stock will resume its original move.

As general rule, Fibonacci numbers should be used in conjunction with support and resistance levels to confirm whether the stock has bottomed out or stopped rising at these points.

Putting It All Together
Using volume, Aroon and Fibonacci indicators together can help investors pinpoint whether a stock is likely to move up or down. Volume signals enthusiasm or fear, and whether the stock will continue to move higher, trend lower, top out or hit bottom. The Aroon indicator shows whether a stock is beginning a new trend or staying in a trading range, while the Fibonacci number will signal whether the stock has hit areas of strong support or resistance. While no one indicator is more important than the other, using the combination of all three can provide clues about a stock’s overall directions.

By: Chris Seabury

“I believe that the frequency of irrational investor behavior goes up along with market volatility,” says Chris Blum, head of the U.S. behavioral-finance group for JP Morgan Funds in New York, which studies how people’s emotions affect their financial decisions.

Fortunately, a bit of logic and common sense will keep you clear of these pitfalls. Here’s a look at some common missteps — and how to avoid them.

The Value Trap: A chaotic market makes it easier for investors to convince themselves that because a stock — or a sector or a market — is cheap, it’s a great value. Sometimes, though, there’s a good reason that a stock or sector is cheap: It’s in trouble. You need to look past the share price or valuation and examine the fundamentals of the company, the industry and the economy before you decide that something is a bargain.

“Within industries, not all companies are created equal; some will fare better than others,” says Mr. Blum. It’s through research, not instinct or stock price, that investors discover the real values, he adds.

The Risk Trap: One reason investors are so vulnerable to the value trap is that another force is at work — the urge to recoup losses. Investors who are desperate to make back some of what they have lost and return to “normal” are more willing to take outsize bets on individual stocks or narrowly focused exchange-traded funds.

But that approach is even more unlikely to work in this market environment; the combination of the credit crunch and the recession have made the stock market dangerously volatile. A concentrated portfolio is especially risky, advisers argue.

Investors can’t accept that individual stocks, or stocks overall, aren’t likely to deliver a reliable stream of double-digit profits each year as in the past, says Bill Schultheis, a partner at Soundmark Wealth Management LLC, a financial-planning firm in Kirkland, Washington.

To combat the risk trap, Mr. Schultheis spends a lot of time preaching the virtues of investment basics like diversification and building returns steadily through compound interest and dividends.

The Scapegoat Trap: Like the children in humorist Garrison Keillor’s Lake Wobegon, people believe they are all above average — at investing. Overconfidence makes it easy to blame your financial adviser for your outsize losses last year, and to think you’d be better off making the big decisions yourself.

But that attitude ignores a basic fact: In this market, nearly everyone is in the same boat, more or less, regardless of who’s managing their money. Ditching your professional help and going it alone is a bad idea.

“There are certainly some financial advisers out there who weren’t good at what they did, but the worst mistake someone can make is to fire that individual and decide to do it all themselves instead of finding someone better,” says Mr. Blum.

The reality, he says, is that few investors have the time, patience or expertise needed to develop asset-allocation plans and manage diversified portfolios. “Firing a specific adviser may be rational; deciding to be your own financial adviser probably isn’t,” he says.

The Paralysis Trap: The market debacle has left many investors too terrified to act at all, whether to sell portfolio holdings to limit losses or take advantage of what may be appealing long-term investment opportunities. Some advisers report clients in their 30s and early 40s shunning stocks altogether, when the real risk that they face is likely to be inflation — which may eat up their money if they keep it out of riskier investments that are likely to trounce rising inflation rates over the next decade or two.

“The chance of suffering more pain is so intense that they can’t imagine a world that will be better,” says Joe Sheehan, a partner at Moneta Group, a wealth-management firm in St. Louis. “Two years ago, they would have jumped at the chance to buy more of stocks they already owned at these low prices; now they are frozen in place and won’t respond.”

Mr. Sheehan tries to persuade clients of a simple fact: The world hasn’t changed dramatically enough to justify paralysis. “About 92% of Americans are still employed; the S&P 500 is not going to zero,” he says.

Mr. Sheehan finds himself pointing to psychological studies showing that people tend to rely too heavily on what has happened in the recent past when it comes to predicting the future. “That’s one reason we’re in this mess in the first place,” he says.

Among other things, he notes, investors and homeowners believed that housing prices could only go up — leading to the bubble that got millions of homeowners in horrible financial trouble.

The Comfort Trap: “When people are fearful, Wall Street comes out with a product that tries to make you feel good by promising you safety,” says Andrew Mehalko, chief investment officer of GenSpring Family Offices LLC in Palm Beach Gardens, Florida.

For instance, Mr. Mehalko expects one of the hottest-selling products this year to be principal-protected notes, just as they were after the bear market of 2001-02. While these vehicles — which promise to preserve your principal investment — may provide reassurance, they often also come with hefty fees and can sharply limit your upside potential.

As a general rule, a low-risk strategy will produce minimal returns. So, while you may feel the urge to lock up all your capital in ultrasafe strategies, you need to be prepared to invest some of it in riskier products.

Meanwhile, Mr. Sheehan reports that some of his clients have even developed an aversion to mortgages. That may be rational for people with no nest egg or a job that’s at risk, but it’s not something that everyone should be worrying about.

“It’s not logical at all,” he says, because some have relatively little mortgage debt relative to home value, hold long-term fixed mortgages at the relatively low rate of 5% or so and gain from the tax deduction for mortgage interest.

Yet “all they want to do is pay off that mortgage,” to get rid of “this toxic thing — a mortgage,” he says.

The Chasing-the-News Trap: If you’re a financial-news junkie, it’s tempting to try to react to each twist and turn of the market. But the best thing you can do is turn off the news, put the remote control down on the coffee table and step away from your television set.

In times like these — an almost unbelievably volatile stock market, a distorted bond market and an economic meltdown — newshounds can do tremendous damage to their portfolios. Trying to judge exactly the right moment to get into the market — and then jump out again a day or two later — is likely to leave you with big headaches and outsize trading expenses.

An “atmosphere of constant, breathless hysteria” isn’t conducive to making smart investing moves, says Carol Clark, an investment principal at Lowry Hill, a wealth-management firm in Minneapolis. “That’s not what long-term investing is all about.

“Many of those [300-point] interday moves simply don’t make a lot of sense in the first place, so how can it be sensible to try and respond to them?” she asks.

Instead of acting on every new development, it’s better to look past the noise and invest small amounts regularly, an approach known as dollar-cost averaging. A strategy based on a solid asset-allocation plan and dollar-cost averaging is more likely to lead to sustainable gains over the longer haul.

Ms. Clark offers one final observation. Usually, investors find themselves in traps “because your emotions have run away with your logical thinking,” she says. “You need to find ways to start thinking logically again.”

Sometimes it helps to do something as simple as making a list of your investment goals and putting it on the refrigerator. Whenever you’re tempted to act impulsively in response to something you see on television or hear from a friend at a dinner party, you can go back to that list and remind yourself that yanking money out of the market may not be the best strategy.

“Then, when you feel an urge to turn on CNBC, you train yourself to look at the list instead,” she says.

As a Forex trader you will always be attempting to make more profits than losses from the fluctuations of exchange rates between currencies in the forex market; in short, this is what is called forex trading. The good news is that nobody is going to ask you for a diploma, or somehow verify the amount of hours you’ve spent studying the foreign exchange market (FOREX). All you need is the proper training and the tools that will help you become a profitable trader. But this is not the only advantage you get when trading forex, compared to other ways of investment and speculation as stocks. You have a other great advantages that will make you decide for forex and forget about stocks and commodities.

1): There will Never be a Bear Market in FOREX.
You can have access to a mutually-inclusive (two-way) exchange of world currencies. In other words; currencies trade in “pairs”(for example, US dollar vs. yen or US dollar vs. Euro), one side of every currency pair is constantly moving (up or down) in relation to the other one. Thus, when you buy a particular currency, you are actually simultaneously selling the other currency in that particular pair. As the market moves, one of the currencies will increase in value while the other will decrease proportionally. It is up to you to choose the correct currency to be long or short. Since currency trading always involves buying one currency and selling another, it all means that you have equal potential for profits in both a rising or falling market.

2): Trade with High Leverage – up to 200:1 Leverage.
Every trader participating in the forex market is allowed to trade foreign currencies on a high leverage basis – up to 200 times your investment with some brokers. This is primarily attributed to the higher levels of liquidity within the currency markets. Standard 100,000-unit currency lots can be traded with as little as 1% margin, or $1,000, which is a pretty nice feature of forex. Mini Forex accounts are permitted to trade with just 0.5% margin — in other words, just $50 allows you to control a 10,000-unit currency position. Futures traders, who are asked for margin requirements generally equal to 5%-8% of the total contract value, will immediately appreciate that the FOREX market provides much greater leverage; and stock traders, who must post at least 50% margin, may think they are dreaming.

3): Most Price Movements Are Highly Predictable.
Many times currency prices in the forex market may be volatile, but they have the great advantage that generally repeat themselves in relatively predictable cycles, creating trends. The strong trends that foreign currencies develop are a significant advantage for traders who use the “technical” methods and strategies.

Unlike stocks that sometimes seem to simple lay down in narrow price alleys, currencies rarely spend much time in tight trading ranges and have the tendency to develop strong trends. It is known that over 80% of the trading volume in forex is speculative in nature and, as a result, the market frequently overshoots and then corrects itself. As a technically-trained trader, you can easily identify new trends and breakouts, which provide for multiple opportunities to enter and exit trading positions.