(It doesn’t.) ? Technical analysis does not translate well into forex. (It does.) ? Fundamental analysis is ineffective due to central bank intervention. Forex Is Your Friend BASIC TECHNIQUES by Mark Galant While online equities and futures trading have enjoyed exponential growth and widespread notoriety over the past few years, online foreign exchange trading is only now gaining popularity among seasoned active traders, commodity trading advisors (C TA s), and other professional money managers.

RISKY BUSINESS ? Is forex as risky as everyone thinks? One way to measure risk is to compare a financial product’s risk relative to its return. If you take the time to compare an investment in forex to common investments such as equities and fixed income, you will find that from a risk/reward standpoint, forex investments provide respectable returns and should be considered viable portfolio diversification tools. For example, 2001 annual volatilities for the Dow Jones Industrial Average (DJIA ), 30-year bond futures, and US dollar/yen (USD /JPY ) were roughly 21.5%, 10%, and 10.5%, respectively. An investment in a basket of major currencies (or USD /JPY ) last year was comparable to 30-year bond futures (which was one of the best returns for the fixed income markets in years), and clearly outpaced the negative returns generated by the DJIA . Although forex trading can lead to very profitable results, there are risks involved. When it comes to trading forex, you’ll need to worry about exchange rate risks, interest rate risks, credit risks, and country risks — things you may not consider when trading stocks. THE TREND IS YOUR FRIEND IN FOREX Approximately 80% of all currency transactions last a period of seven days or less, while more than 40% last fewer than two days. Given the extremely short lifespan of the typical trade, technical indicators heavily influence entry, exit, and order placement decisions

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