Why Interest Rates are Important

Why are Interest Rates so Important?

On June 24, 2017, the US Federal Reserve increased the overnight rate a 2nd time this year by 0.25% to 1.25%. According to the Fed with Fed Chair Janet Yellen, more interest rate hikes are likely to come. The plan is to increase the rate to 3% in 2019 where it considers the rate to be neutral.

How are We to Interpret these Interest Rate Hikes?

With higher interest rates the US is becoming an attractive investment opportunity, increasing demand for the currency and pushing up the price.

These interest rate hikes are also indicative of an economy that is gaining momentum in its recovery from the financial crisis. With unemployment rates at its lowest in 16 years, it is evident that the US economy is in-fact recovering well.

With these lower unemployment rates, we can look forward to wage gains which could lead to higher inflation rates and with this another interest rate hike can be expected later this year.

What does this mean for the Forex Trader?

Financial markets do not like surprises and the US Federal has become masters at informing the financial world of its intent and its plans. This being said, the long-term forecast is that the USD should strengthen against other currencies where the interest rates are not being increased.

Like with technical analysis, you should not focus on merely one indicator when deciding where and when to look for trading opportunities.

Other economic indicators to take into consideration

Gross Domestic Product: In the first quarter of the year the US economy grew at a slower rate than in preceding periods, but GDP is forecasted to increase and the economy to grow faster.

Inflation: Inflation in the US is at a very low rate sitting at, with the low unemployment figures salaries and wages are expected to increase which should, in turn, push the inflation rates higher. With the current inflation levels below the target band inflation is not being considered a major factor when deciding on interest rates.

Quantitative Easing and what the Fed will do Concerning this Stimulus

After the financial crisis in 2008, the Fed bought up US Treasuries and mortgage bonds in their attempts to increase economic activity. They halted this activity with their books showing an asset of $4.2trn. The Fed plans to start reducing this asset which is very likely to have an effect on interest rates. The key thing to remember here is, if this happens too rapidly, interest rates may need rapid increasing too.

It is unsure when the next interest rate hike will be, what we can be sure of though is that the Fed is expected to increase the rate once more this year. Keeping an eye on the other economic data mentioned will certainly give you a good indication of what to expect from the Fed come July 26.

Trading Psychology 101: Your Emotions and Trading

Many traders are being lured into Forex trading by the promise of instant wealth and financial independence. They see advertisements of people who made millions in weeks having the sports cars parked in front of their mansions and wearing expensive clothes. They think they can take the course on offer, trade for a few weeks and never have to work again.

Other traders develop such a strong belief in a strategy that no matter what happens, they refuse to see what the market is telling them and tend to ignore sound advice.

When they then suffer losses they become negative and eventually you will find no sign of logical and rational thinking, a key ingredient of successful trading.

What happens when we suffer a loss?

As a trader, there is always money on the line, and when money is involved you have something to lose. Whenever you suffer a loss or have a bad trading day, you get scared and a certain amount of fear comes into play. The important thing to understand is that fear is an emotion and your emotions are controlled by the same illogical part of the brain that controls your instincts. Emotions distort your logic and when you are feeling vulnerable you are not in the right frame of fame to be making any financial decisions. When you lose, you tend to want to protect yourself and you do not use the frontal- logical cortex of the brain to base your decisions on.

7 Steps get to yourself to trade logically and rationally

-You already know your emotions are going to kick in and when this happens, sit back, relax, and look at your rule book. What does your trading strategy say?

-Ask yourself what it is you need to do based on what you have learned about trading and get your brain to start thinking logical again.

-Ask yourself, what is the most useful and most intelligent thing to do, rule your emotions, don’t let them rule you.

-Keep a trading journal to review your trades. This will help you identify mistakes you have made, where you became emotional and work out what you will do when you are in that position again. Knowing what you will do in a specific circumstance before it occurs, takes the emotion out of play and allows you to use logical and rational thought to base your decisions on.

-Keep learning, professional golfers keep driving and professional traders keep testing and learning.

-Have realistic expectations, many trades come into the market thinking they will trade for two weeks and never have to work again, this is a myth. Instead of focusing on becoming rich, focus on becoming a successful trader.

Learn to understand the market. Many traders who only focus on technical indicators never learn to understand the market and when a trade goes against them, the blame the indicator. Understanding the marketing will help you think logically about why the trade turned out as a loss.

Remember, trading is a marathon, not a sprint.

Ninja Trader: Challenging the Favorite?

The Forex trading platform is becoming increasingly competitive all the time with more and more brokers rolling out their own trading platforms. In this competitive market Ninja, Traders managed to make a name for itself and is making new converts on a daily basis. In the light of this it is only fair we take a closer look at this innovative trading platform.

What then is Ninja Trader?

Ninja trader has been around since 2003 It is not as well-known as platforms such as Meta Trader but with a global clientele of more than 40,000 users and the recently modernised graphical user interface it is becoming hard to ignore. It certainly is a more complex platform than some of the others with the main screen also known as the control centre.

As complex as the system may initially seem there are countless videos available to help you set up and become a power user of the platform, and before you know it, Ninja Trader will be one of your most valued assets.

Ninja Trader boasts an impressive arsenal of features including great charting package, all the technical indicators you could wish for and then you can still add your own custom indicators.

Features that make Ninja Trader great!

Ninja Trader Strategy Builder – Not everyone has the technical skill to build his own trading strategy on a trading platform, this is changing. Ninja Trader has a built in strategy building wizard which allows traders without programming skills to enter a set of conditions and what should happen if those conditions are met.

Ninja Trader Market Analyzer – In short, the market analyser is an up to date quote sheet displaying but not limited to, Net Daily Change, Last Price, Position size, Unrealized profits and an ever extending list of over 150 custom indicators. The quote sheet is colour coded making it easy for you to make decisions on the fly.

Ninja Trader Market Replay – The market replay is a backtesting tool, or should I rather call it a market simulator based on historical data where you can backtest your strategy without having to wait hours for candles to form as if you were trading a demo account. This is an amazing feature and not many trading platforms include something like this. In-fact, this kind of software, like Forex Tester 3, will cost you around $300.

It is free – Yes, just go to their website and start the download, I would suggest watching the demo videos to get accustomed to the software first.

It is flexible – Ninja Trader is not bound to a specific broker. More brokers are added to their list of brokers on a daily basis.

Although Ninja Trader does not have millions of users yet, with their newest version Ninja Trader 8 the got the recipe right and I firmly believe they will make converts of even the sturdiest supporters of some better-known platforms

Backtesting will Train Your Brain for Trading

Backtesting is one of the hottest debate issues in the world, aside from which technical indicators are the most effective. Some trades will tell you it makes absolutely no sense going through this exercise and others will tell you it is the only road to trading success.

What is backtesting?

The simplest way to explain backtesting is the trader using historical data to test his trading strategy on. It works on the assumption that, if the trading strategy was successful in the past, it is very like likely to be successful in the future. While we are aware of the fact that historical successes or not a guarantee of future gains, there is some logic in the argument that you cannot be successful as a trader without backtesting.

Why is backtesting so important?

There are two ways for a trader to acquire a trading strategy, he can either develop it himself or get it from another trader, with the latter almost always being at a price. How would you as a trader know if the strategy has any prospect of being a successful strategy? How would you be able to trust the strategy and not lose it after suffering a loss? The answer to all these questions is backtesting.

Backtesting gives you the change to trade your strategy, at no risk to your trading account, almost the same as trading with a demo account, except that it happens much faster, you don’t need to wait an hour or a day for the next candle to form.

Why is backtesting so advantageous to your trading?

If you have backtested your strategy over a historical period of 2 years or more and it has been consistently profitable, you will:

– Know that the system works under most market conditions, or get the opportunity to perfect your strategy,

-Trust the system, even after suffering a loss, in backtesting you also suffered losses and you know how frequently,

-It gives you much-needed training in trading your system. You can get accustomed to reading the market, watching for your entry signals and entering the trade. Next, you get trained in managing the trade and perfecting your exit strategy,

For novice traders it provides much-needed experience in trading forex, remember, you are trading to become a successful trader. Doctors, lawyers, accountants and many others go through years of learning and then still have to go through an internship before they are qualified, and they are not working in the most competitive market in the world with a failure rate of 90%, you are. See it like this, backtesting is your Forex Trading internship where you will gain the needed expertise to become a successful trader.

Backtesting is not a once off activity, it should be used as the driving range of trading. Go there, frequently to practice your trading, sharpening your skills and to gain and keep confidence in your trading strategy and more importantly confidence in yourself as a Forex trader.

Trading Forex or Stocks

This is probably the question that all new traders ask at some point or another. The bottom line always comes down to what suits you personally better. Things such as, your financial situation, your understanding of the markets themselves and the time that you have to trade. Assessing your goals as a trader will also need to be considered.

Regardless, you will still probably wonder why so many traders are choosing to rather trade Forex over stocks?


Unlike the stock market, Forex allows for 24-hour trading opportunities. Used correctly, this can be an absolute blessing. However, with the wrong approach could be detrimental and ultimately lead to your downfall as a trader. You may end up sitting up all hours of the night trying to find that trade, which in your mind alluded you the whole day.

Major Pairs vs. Thousands of Stock options

Forex has a major hand up on stocks when it comes to simplicity. Forex features only eight Major Pairs compared to thousands of stock options listed the many different Stock exchanges. In this way Forex makes it easier for the trader to plan and implement his/her strategy.


Forex has a much greater volume of movement than that of the stock market. Getting in and out of the market is simple and convenient. Here Forex has a higher liquidity than the Stock Market. In this, it is simple to see why Forex reigns superior, Stocks, in reality, are much less liquid! It should be noted that the Forex market is markedly larger than the Stock Market.

The value to you as a trader when it comes to liquidity is that:

Liquidity leads to tighter spreads and lower transaction costs!

Market Growth

There is an immense difference in the two markets themselves. While you might find that Stocks are slowing down, Forex, on the other hand, is flourishing. The Forex Market has reliably been growing for the past 15 years. The same cannot be said about the stock market, which has reverted back to levels from between 2001 and 2006.

Stocks vs Forex


Leverage the pinnacle difference between the two markets. Due to the leverage offered in the Forex Market, small moves lead to greater profits. However, this is also true for losses. Optimal understanding and usage of Leverage in the Forex market can be a great advantage to the educated trader. This sort of tool is not available in Stocks.

Movement options

Forex allows you to trade at any time, in any direction. This allows you to profit regardless of the direction in which the market is trending.

Fundamental Analysis: Understand why the market moves

One of the most important aspects of trading Forex that is often ignored by beginner and even some more experienced traders is fundamental analysis. Newbie traders tend to focus more on technical analysis, trying out the various technical indicators while completely ignoring the fundamentals, and when the market moves against them they don’t understand why and feel that trading is not for them.

What is Fundamental Analysis all About?

In short, fundamental analysis is exactly about what it implies, the fundamentals. Remember, markets are driven by supply and demand, which in the forex market is driven by interest rates, economic growth and political stability to mention but a few. These, in turn, drive people’s emotions and so, supply and demand are influenced.

When trading equities, you buy a share in a company. The profit margins, dividends, the company’s reputation are some of the factors that will impact the share price. Likewise, when you trade forex, in a sense you are buying shares in the country whose currency you are investing in. Is the country politically stable? How about the interest rates, do you know what the forecasts and when rate announcements will be when you are trading? All of these influence the exchange rate of the currency. When there are presidential elections, like the recent presidential elections in the USA, the candidate’s economic views will influence the exchange rate should a certain party or individual win the election.

Why you Should do Fundamental Analysis

The majority of technical indicators are based on historical data, and the best they can do is give you an indication of what is probably going to happen in the market, based on what happened already.

Let’s say you use and Oscillator like the Stochastic, and it indicates a certain currency is overbought, your reaction would be to sell, but would you still enter this trade if you knew the interest rate for this currency was increased by 100 base points?

When we are trading we should never focus on only one indicator or only one type of analysis. Instead, when we are trading we are looking for confluence, more than one indication the market is going to move in a specific direction. While we cannot predict the future, having a confluence of factors greatly improves the probability that the market is going to move or react in a certain way. Based on this confluence of indicators and factors we can trade more successfully.

Understanding why the Market Moves are Crucial to Our Trading Success

Technical trading is great for the short term trader, however, it will happen that he enters losing trades, and when this happens we have to be able to understand why the market moved, it is not the indicator’s fault. Understanding why the market moved will help you determine where in the market you will find value in a currency and when not to enter trades.

By having an understanding of why the market moves you will know when to be cautious and when there are opportunities in the market and in general make more profit.

Forex Trading is not “a get rich quick scheme!”

In the struggling economies of the world, we all dream of our ship eventually coming in. We dream of financial freedom, and the ability to live without the daunting stress of our struggling financial situation. This, unfortunately, make us susceptible to believing, or at least hoping that there is an easy way for us to break the chains of the struggle.

Life does not work that way, and short of winning the lottery, there is probably no legal way to get rich quick! Even though many may give you the impression that it is, I am here to tell you that Forex Trading is not a get rich quick scheme. Believing that it is will be the very reason that you are not successful. Now I am not saying that you cannot make good money Trading. But let’s look at some of the reason that so many fail, and you will see why I say what I do.

Your Impression of what the Market is

You are often bombarded with all sorts of advertising that claims a Forex trading market of simplicity. They impart the idea, buy in, go to bed and wake up a millionaire. Many whom have fallen into this trap will tell you that when they awoke the following day, what they discovered was not dazzling at all. Most would have lost half or everything that they invested.

All successful traders will tell you that Forex should be seen as any other type of Job. Becoming competent and successful takes time. As you work you develop your skill set, thereby improving your success rate. If it really was so easy, then so many would not fail at it.

Failing to Plan, is Planning to Fail

There is this great excitement when you first enter the world of trading. Most new traders juggernaut in blindly. This ultimately results in a very short life in the trading world. Without an understanding of the ins and outs of the market, there is no way that as a trader you would be able to succeed. Don’t make this mistake. Be the man with the plan!

Trading with your Heart, Instead of Your Head

Any trader will tell you this is probably the biggest stumbling block when you enter the market for the first time.  Emotions are great to rely on when you live day to day, but they will destroy your trading future if you allow them to influence your trading decisions.  There are two ways that emotions do this:

You enter with an aggressive, greed driven drive. Before you know it your equity is on zero!

You become hesitant to enter trades, this happens when you allow the fear of losing the money that you have to influence your actions. This will lead to you missing out on potential financial gains. You will go nowhere if you allow this to happen.

You need to realise that making mistakes is all part of the journey to success. If you treat every loss that you encountered due to mistakes as a learning curve, you will improve.  You should be content with both losses and gains.

This can only be done when you follow your plan to the letter. This will require great amounts of discipline. Set yourself “Loss limits”. If you, for example, incur two losses for the day, and that is your set limit. Stop trading for the day. Review your decisions, and see what went wrong. This is all part of becoming one of the “Pro’s”.

9 Pro Tips for Forex Traders

Whether you’re just getting started as a Forex trader, or you’ve been trading for some time, these are the expert tips you need to improve your chances for success:

1. Don’t trade on your own 

You know that almost everything you do gets easier — and usually turns out better — when you don’t try to do everything yourself. You may find that trading with your spouse or your child (even teenagers have had success in the Forex market!) steers you away from mistakes, and you can also join online trading clubs to share your strategies with other traders who may have advice that could be just what you need to turn a losing streak into the wins you want.

2. Don’t get emotional

You can’t help it — some things make your blood pressure rise, and you feel familiar emotions. Sometimes winning trades can make you feel like more wins are inevitable, and sometimes too many losses can make you take risks you shouldn’t.  Always remember this:  the Forex market never cares how you feel. Determine your trading plan, and trade that plan, no matter what your inner emotional voice tells you.

3. Do use software 

Not too long ago, Forex trading was too complex and rigid for many people to even consider it as a way to make profits. Fortunately, software solutions like Market Traders Institute’s Ultimate Charting Software and Ultimate Market Scanner have been developed to assemble all of the critical data into easy-to-understand trading information. Find a software solution that works well with your style of trading, and use it.

4. Discover your “Trading Personality”

Different traders succeed using different trading methods. One of the most important things you need to find out about yourself is your “Trading Personality,” which sums up how you best respond to the market, and which strategies you should seek out (not to mention which ones you should avoid!).

5. Find a mentor 

The great traders realize that other Forex traders have already faced the same challenges, made the same mistakes, and discovered the answers they need. You owe it to yourself to find an experienced trader who is willing to share what he or she has learned. A mentor can improve your trading greatly.

6. Stop trading sometimes 

It may sound counterintuitive, but sometimes the best thing you can do for your trading is to take a break. Your computer software can run 24/7 without problems, but you can’t — and when you’re tired, or hungry, or just need to give trading a rest, you should listen to your body and stop trading until you’re back in peak shape.

7. Try a new strategy 

The Forex market changes every day (and many times it changes throughout the day). What worked for you yesterday may not be the best choice this morning, which means it may be a great time to try a new strategy. Maybe Momentum Breakout produced hundreds of pips yesterday and Target Trading 2.0 is perfect for the market today. The more strategies you have in your arsenal, the greater your chances of profiting from ever-changing market conditions.

8. Copy someone you trust

The biggest innovation in Forex trading over the past few years has been the rise of “Trade Copier” programs that allow traders to share their exact transactions with other trading accounts. This gives you the ability to follow a mentor (see #5) and make the same profits he’s accruing with his trades in your trading account.

9. Don’t give up 

This is the simplest trading tip of all, but it’s also the one that stops Forex traders cold. When you’re a Forex trader,you need to learn that losing is a part of life. You will lose trades, and you will probably lose a lot of them — especially if you become a great trader!  The trick is always to win more than you lose (you can use that trick pretty much anywhere in life), and as you become more confident with your trades, and you follow the advice of an experienced mentor (whose trades you may be copying), and you use the latest software to chart your trades, you’ll discover that your trading personality will find a way to succeed. If things aren’t working the way you want, look for a new strategy — or a new mentor — or a new trading software. Keep trying new things until losing becomes winning again.