Use the COT Report to Trade the Forex Market With These COT Report Forex Strategies

While the COT Report is not an exact timing indicator, it can aid in forex trading and provide a context for the current, and future, market environment. There are potentially many ways to use the COT Report for analyzing a forex pair; here are three COT Report forex strategies.

Speculators are Trend Followers

Speculators drive trends. Contrary to popular the convention "Don't follow the crowd," we actually want to follow the crowd...at least for a time. If others are buying, we want to be buying too. This is how trends occur, and how traders make money. The trick is to get out before everyone starts heading for the exit.

Therefore, use the interest of speculators as a confirmation tool for trends. If the Euro is moving higher and speculators are increasing their long position this means big traders are pushing the market in your favor if you are long the EURUSD. Trade with the big boys, and follow the trend. Don't get too greedy though, because if all the speculators are long, then there is no one left to keep pushing the trend. This brings us to the next way to use the COT data.

Extreme Levels Can Indicate a Reversal

When speculators are accumulating a position it can be a confirmation that there is interest in the trend - if shorts are being accumulated as the price drops or if long positions are being accumulated as the price rises this can be a good sign the trend will continue. But speculators have a limit--they can't purchase or sell indefinitely. They may run out of money, or simply wish to take profit (or losses). When speculators are tapped out, want out or don't want to invest anymore there is nowhere left for the price to go, but to reverse.

Therefore, the COT data can be used as a type of "overbought/oversold" indicator. Not in terms of price and arbitrary levels like most overbought and oversold indicators, but in terms of the health of traders within the market. Each futures market will be a bit different but critical levels will often repeat and indicate when speculators are overextended.

This method is not recommended for a top or bottom picking strategy; it can be used to provide a context for other analysis and be used to confirm reversals in price though. Extreme levels can look easy to isolate in hindsight, but are not ideal timing indicators. That said, it is very useful for alerting traders when a reversal could be nearby. The COT data should not be acted on alone though; wait for price to confirm a potential reversal signal in the COT data.

Watch For Speculators to Flip Their Position

With the third approach we are looking to capture "the meat" of the trend. If speculators are net short and that short position continually decreases until eventually it crosses above zero, a new trend is quite possibly underway.

The movement from net short to net long or vice versa signals a change in sentiment and that a new trend is emerging or has already begun. Using the logic of our first method of following the speculator trend (when it aligns with price) this shift represents a potential trading opportunity. Exiting positions can be done when the price breaks the trends, when speculation reaches extreme levels or when speculative demand begins to wane. Again, the COT data should always be combined with price analysis, and not acted on in isolation.

COT Report Forex Strategies- Conclusion

The COT report is useful in at least three ways for forex trading. None are precise entry and exit signals but rather provide a context for other analysis and can be used as a confirmation tool for reversals or trends. The first uses COT data as a confirmation tool for forex trends. The second method alerts us when speculators are over-extended, which could in turn lead to a reversal. The third method can be used to see shifts in sentiment and potentially catch a chunk of the trend (but remember to watch for over-extension). When using any indicator, wait for price to confirm the indicator signal.

If you would like to know more, are interested in learning to trade or need help with your trading methods, visit me at http://vantagepointtrading.com/.

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Top Trading Strategies for Online Forex Trading

The key to successful profitable Forex trades will be determined by the trading strategies you utilize, knowledge of the Foreign exchange process, the definitions of the Forex terms, and the analysis used to closely monitor the fluctuations of the currency market and the main principles that are used by currency traders to formulate trading strategies that they will use.

There are many different strategies used to trade Forex. The main factor that determines your strategy is your leverage. The strategies used in currency trading are quite different from those used in stock trading. Leverage is designed to allow online currency traders to have more funds for trading than they have deposited. Investors are able to use up to 500 times more than what they deposit. This allows investors to get a higher yield in the foreign exchange market. As a trader you can optimize your profits with a mini Forex account applied with these leverages.

Leverage is widely used and it allows the investors to take advantage of the short-term fluctuations in the currency exchange market.

Another popular trading strategy used in trading is known as stop-loss order. This method is used to protect capital of investors by creating a pre-determined point at which the trader will close an open position. This method allows a trader to minimize the risks while trading.

Money management is another strategy used by traders to trade profitably. Some of the money management strategies used are, risk-reward ratio and percentage risk method.

Automatic entry orders are another form of online trading strategies and are very commonly used. FX traders are able to enter the market at a pre-determined price. The predetermined price is be used to trade the currency once this exchange rate is reached.

There are many different types of online Forex trading strategies and it is up to the trader to find the ones that best match their trading. The most popular FX strategies include a combination of one or more technical indicators to form a Forex trading system. The trading system is used to generate entry and exit signals.

Traders can use all these strategies, to come up with a Forex trading plan. The Forex trading plan will specify the rules of opening and closing trades. All these strategies should be written within your plan. The Forex trading plan is the number one trading strategy for trading the online foreign exchange market.   

Learn the most popular Forex trading strategies by visiting Forex Market Science Website and get a free example of a Forex trading system.

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Forex Strategies - How Can You Achieve Success As a Forex Trader?

If you are contemplating trading in the forex market, then it is advisable for you to become aware of a few effective forex strategies that can help you earn a substantial amount of profit within just a short period of time. You have to figure out which among the available forex strategies at present can help you effectively deal with the risks associated to forex trading. It is also important for you to employ strategies that are not only effective but are also proven to have the ability to retain its effectiveness for a long time.

As a means to help you effectively trade in the forex market, you should consider establishing effective forex strategies and forex trading system through simple yet reliable technical analysis techniques. You do not actually have to reinvent the wheel in your attempt to take advantage of the most reliable strategies. You can actually use those technical analysis techniques that are already around for centuries. Some of these effective techniques are trend analysis, price action analysis, trading breakouts of consolidation, core price chart analysis and fifty percent Fibonacci's Retrace-ment. All of these techniques are capable of helping you generate huge sums of money once you start to trade.

Trade timing is also considered to be one of the most relevant strategies that you should use. This strategy is focused towards accurately deciding the entry and exit points in trading. Bear in mind that determining these points is known to be as significant as effectively managing your own money. If you decide to use the trade timing strategy in trading, then you have to make sure that you are fully aware of the principle behind this. This principle states that it will never be possible for you to determine both the technical pattern and the price of the trade all at the same time. You can base your trading event on the price level or at the technical pattern's chart. Trade timing is known to be among those forex strategies that are capable of improving your profitability if done the right way.

Another of the many effective forex strategies that you can use is to determine the correlation between volatility and interest rate gaps. As a means to help you achieve success in forex trading, you have to consider pairing the act of widening interest rate gaps with rising volatility. It is also advisable for you to fully understand the relationship between current market volatility and interest rates. This is one of the many forex strategies that can help you adjust your portfolio accordingly.

If you're interested on learning more about one of the best forex strategies, you could visit at Forex Strategies. Do not miss this opportunity so what are you waiting for? Visit http://forexsimplex.com/forex-strategies now!

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Forex Technical Analysis Strategies That You Should Know

There are two main strategies in Forex trading. These are fundamental analysis and technical analysis. You need these two strategies in order to successfully trade foreign currencies and make a profit out of your trading practices. If you want to earn an extra or full-time income out of the money market, you should definitely learn these strategies and use them when trading.

Fundamental analysis strategies rely mostly on the economic factors like strength of the economy, current rates of interest as well as gross domestic product. On the other hand, if you would look more closely on forex technical analysis strategies, you will see that there is a slight difference. With technical analysis, you will base your trading decisions on the history of the particular foreign currency you are trading. You can sell or buy currencies based on historical evidence.

Using forex technical analysis strategies will follow these assumptions:

- Factors affecting the market include political events, periodic fluctuations, economic conditions and the law of supply and demand. These can cause the currency price to drop or go up.

- You need to watch out for market patterns because this will lead to predictable consequences. The prices of currency basically follow such market trends.

- If you want to be able to predict the price movements at the moment, use historical trends that will help you make a decision whether to buy or sell that foreign currency. There are 100-years worth of market data that have been collected so that forex traders can use this when trading currencies. The patterns and trends you will see are directly correlated to human psychology and how they react as circumstances around them change.

A lot of forex traders give a high regard for these technical analysis strategies. Some may also make use of fundamental analysis strategies in order to support and get a confirmation before making a buying or selling decision. The good thing about forex technical analysis strategies is that it is so versatile that it can be used in a lot of foreign currencies. They are also applicable in all types of market.

It come as no surprise that a lot of beginners in the forex trading industry become quite overwhelmed with the complexities of technical analysis strategies. That is why research and continued studies will help you master the art of forex trading using technical analysis. It is important that you learn about the charts, indicators and tools that the technical analysis use in order for you to get a better understanding of the market and make the right forex trading decisions.

James T. Taylor is a successful and experienced Forex trader, know his ways getting hot Pips. Now helping traders by sharing his skills. He is also a webmaster for http://www.fishingforexpips.com/, bringing you all the latest Forex information, advice and reviews. Best of all he is giving away Fishing Forex Pips's Indicator System you can download from this link: http://www.fishingforexpips.com/

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Trading Strategies for a Bear Market

In my last article I wrote about trading strategies you can use in a bear market. We're hearing a lot lately about being 'bearish' in these current markets, but it's worthwhile considering how you can use trends to help you with your trading decisions, even during these tough trading times.

Secular bull vs secular bear market

First of all, it's worth taking note of whether we're in a secular versus a cyclical trend. This will make a difference because while a cyclical trend may last years, a secular trend can last decades.
Most analysts think we are in a secular bear market. That means we may see a downward trend which could take place over decades.

However, it's not all doom and gloom. Even within this secular bear market, we are likely to see a number of cyclical bull and bear trends. And that's where you might find opportunities in those shorter cyclical trends to make some money. You just have to know how to identify the trends.

So to recap, a secular trend is the big long trend and a cyclical trend is the shorter trend within the primary secular trend.

US market and cyclical bear markets

It's worth looking at the history books to see how shorter trend cyclical bear markets panned out.

The biggest cyclical bear market was from 1929-32 which saw a decline of around 90% in the Dow Jones Industrial Average (DJIA).

There were also bear markets in the following periods which saw losses of around 50% for the DJIA:

1937-38

1981-82

2007-09

1973-74.

The longest bear market was 1946-49 which saw losses of around 25%.

And for the year between 1973-1974 we saw an interesting bear market. This was a time where earnings every quarter grew and yet the stock market tanked 56%.

The Japan story and the secular bear market

Another interesting lesson from history was the Japanese experience in the 90s. That's where we saw a long-term secular bear market.

From the peak of the share market in 1992 to the recent lows in 2011, we've seen Japan lose 80% in value in their sharemarket. While this is a sobering statistic, there has also been potential for massive gains. Here's how...

Take advantage of the cyclical bulls

During long-term secular bear markets, a buy and hold strategy rarely works. That's because over that time, the market may lose 80% in value like it did in Japan in the 90s. But even in that secular bear market, there were huge cyclical bull markets. In the case of Japan for example, the biggest rally was an impressive 125% from 2003-2007.

To take advantage of the cyclical bull markets, the key is to have a method to identify these bull turning points.

Turning points using moving averages

A longer term moving average, like the 200 day moving average, is a useful tool for identifying turning points. This indicator only gives good signals in a trending market (where the market is moving up or down). It does not work in a non-trending market (where the market moves sideways).

You can identify a sideways or non-trending market using visual methods, that is, by looking at price peaks around the same levels and troughs around the same levels.

Alternatively, a triple moving average system can be used.

Triple moving average

To identify a turning point using triple moving average indicators, for example, you can chart a 50 day, 100 day and a 200 day moving average.

If all three time periods show prices moving in the same direction, the market is trending. If not, then it's not a good idea to use a trend indicator such as 200 day moving average.

200 day moving average

But in cases like right now, where you can see a clear downward trend, then a 200 day moving average can help.

When the price line moves above the 200 day moving average line, it usually signals a buy signal. If the price line moves below the 200 day moving average line, it usually signals a sell signal.

Just remember, like other techniques including fundamental analysis, technical analysis is not an exact science, but it can be helpful to use probability to enter and exit positions.

Turning points using P/E ratios

During a secular bull market, a higher P/E ratio is expected. However, during a secular bear market, P/E ratios bottom out at depression-like levels.

The average P/E ratio of the Australian sharemarket in the last secular bull market from 1982-2011 was 15.1. The P/E ratio peaked at 22.8 in 1994.

During the last secular bear market in Australia from 1969-1982, historical P/E ratios bottomed at 5.4 in 1974. The average P/E ratio for the Australian market was 8.4 from the period 1974-1981.

So while commentators are busy saying that valuations are cheap for the market, you need to consider that yes, they may be cheap if the market was in a secular bull market. But if you think we're in a secular bear market, then valuations are actually quite expensive.

Even for long-term fundamental investors, it becomes important to determine the type of market conditions which dominate to figure out which is the appropriate average to apply. And right now, we just have to wait and see which way the worm will turn.

Julia Lee is an Equities Analyst for online shares trading platform Bell Direct. Julia provides information on share trading and online trading for frequent traders and investors.

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