Market Filters Posted by admin , Friday, 18 December 2009 at 18:57, in Labels: Business, Forex

Market filters, in general, are statistical tools indicating possible high-risk trading areas or times. Because of the leverage and pace in FOREX trading, filters can be extremely useful. If a filter prevents you from making a single bad trade, it has paid the cost of having it in your toolbox. Here is a simple example of a useful filter: The Federal Reserve makes routine (and sometimes not so routine) pronouncements at 8:30 A.M. Eastern

Standard Time. The markets those involving the USD often react very violently just after such announcements. Pull up some charts of this time of day and see for yourself. Observe how often the market feints in one direction right after the announcement and then proceeds in the opposite direction soon thereafter. Don’t enter a trade just before a Fed announcement. Do watch the action after an announcement.

After you decide which pairs and crosses you will trade, it is important to develop and keep a calendar of relevant events and announcements for the country in question. Serious traders will also follow general events in that country for clues to news that may impact its currency. Your daily trade plan should include a calendar showing any such scheduled announcements. Not stepping in doo-doo is more important than finding the pot of gold at the end of the rainbow. The pot of gold is always there, but if you lose too much money you will no longer be in the race to find it. Whereas fundamentals may be difficult to use, news is not. News provides important feedback about the market. A market’s reaction to news may yield valuable clues as to the underlying strength or weakness of a currency.