Positive
A positive balance of trade = exports higher than imports. Exports good – money coming into an economy, a trade surplus.

Negative
The opposite of this is a trade deficit, or trade gap – more goods are being imported the exported. Imports bad – money going out an economy to pay for them.

Balance of trade has historically been a critical issue in the Japanese economy, which is heavily based on exports. The financial management of the economy is geared towards stimulating exports wherever possible – keeping the value of the Yen low, low interest rates etc. – so JPY tends to be more sensitive to good/bad balance of trade figures than other currencies – on average…

Japan is a good example of a mature economy and these always tend to run a trade surplus – other examples include Germany and Canada, (sometimes unfairly referred to as stagnant economies), running generally at a lower expectation of growth. But the strong growth economies eg. United States, Australia run regular trade deficits, simply to fuel this growth.

When it comes to pure economic theory – as usual, economists are divided. Some say that trade deficits have to be tackled as they will inevitably bring an economy down, others say it’s a necessary evil to stimulate some growth, and a few even reckon a trade deficit matters not at all…

The markets, however – and it’s always the markets we’re interested in when it comes to forex trading – will tend to go classic picture, trade surplus good, trade deficit bad.

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ETFs, exchange-traded funds, grew out of the older style, mutual funds or unit trusts.

Since ETFs trade on the market, investors can use the same trading tools as they can with a conventional stock, for example, limit orders, stop-loss orders, margin/leverage, selling short, and no restriction on lot size.

ETFs retain the valuation feature of a unit trust, which can be purchased/redeemed at the end of each day for its net value – but you’re not limited to trading at the close price. An ETF is continually priced through market trading hours and so intra-day trading becomes possible. (Not something that ever went on with unit trusts or mutual funds).

Commodity ETFs invest in commodities, such as the precious metals and commodity futures. Among the first commodity ETFs were gold exchange-traded funds, which have been widely offered in recent years. There’s also currency ETFs…

Currency ETFs
Rydex launched the first ever currency ETF, called the Euro Currency Trust (NYSE: FXE) in 2005.
See the diagram top right for its recent progress – don’t forget, you can go short, so there’s always ticks to be made. Since then, they’ve launched a series of funds tracking all major currencies under their brand CurrencyShares.

Deutsche Bank offers the EONIA Index on the Frankfurt exchange, which tracks the euro – and also the Sterling and US Dollar Money Market ETFs in London – LSE: XGBP and LSE: XUSD respectively.

Currency ETFs will always suit some investors better than others – if you don’t fancy the cut-and-thrust of spot retail forex trading, they can be good option to explore.

Market Demand
If you’re going to have a market in a commodity, in theory there has to be some end-user demand. Gold has always had the demand from jewellery – the other metals also, but less so. 60% of consumed platinum and palladium goes into auto catalytic converters. For silver, electronics make up the industrial demand.

Over this next year, the safe-haven bullish market forces are going to be balanced by surpluses in the market – the question now is whether investors will be able to keep prices at the same levels and even push on upwards, without demand also driving…

Time has passed – the market has moved to reflect new circumstances, what was true then, is now altered… so you change your position and go into a revised risk/reward situation.

If you have a stop-loss placed, then this also needs to be revised to account of the changed situation – most likely you’ll be moving it to your original entry price.

Some will say that you’re now in the position of playing with the broker’s money as if the broker were House at the casino and you can’t lose – not quite true. It’s still your money but you’ve locked in some profit. You can’t lose on your original position, having adjusted the stop – you can lose on the potential of your position as it stands. But you are a winner – now is the time to give yourself a pat on the back.

The losing trades
What if you’ve lost? – you never do the same thing with losers, just to try to claw back on the vanishing pips – the market might suddenly reverse etc. etc… Never change a stop on a losing trade, unless you’re getting out entirely.

Result?
The result of scaling your winning trades efficiently is an increased pip profit per trade – while at the same time your losses should remain the same. There will always be losses, but there’s an edge here.

How do the CFD providers make their money? There’s the spread, and they’re doing a lot of order-matching behind the scenes, while hedging off any discrepancy.

Bid/Ask Spread
As with traditional online retail share dealing and forex, CFD prices are quoted as a bid/offer – (the price you sell at, versus the price you buy at).

Margin/Leverage trading
Yes, there’s margin involved – boosting returns and losses – but not the 1:400 leverage of the standard forex market.

My own view is that CFDs are to be avoided, on stocks, equities, anything and everything – it’s one small step away from spread betting and if you want to end up like those dumbasses who spreadbet on the FTSE opening every morning, fine, go ahead…

One other point – the basic position is that CFD trading in the forex market is not legal if conducted in the USA – different jurisdictions may vary.

For example, it’s most likely your Metatrader is at C:\Program Files\MetaTrader, so all you need do here is drop it into

C:\Program Files\MetaTrader\experts

if it’s a downloaded expert advisor, or

C:\Program Files\MetaTrader\experts\indicators

if it’s an indicator and it should all show up next time you run MetaTrader.

And that’s it. What you can’t easily do with an ex4 file is look at its source code and edit it to your own requirements – there used to be one or two reverse-engineering applications on the market that would decompile an ex4 to an mq4 – they were, and probably still are, (incredibly) expensive for what they did.

Program files are standard text files – you could open and edit them in a normal text editor (Wordpad etc.) These contain the source code in MQL4 programming language, which is readable, hopefully, by humans. To install an EA in MetaTrader, an mq4 file has to be compiled, that is converted to a binary code – but, no problem, MetaTrader will do this for you.

MetaTrader comes complete with its own mq4 file editor, called, surprisingly, MetaEditor. If you already have MetaTrader installed on your desktop, the editor is associated with this file extension and will (should) open the file if you double-click on the icon.

Installation
You’ve downloaded a mq4 file and you want to install it.

First – and it’s best to do this now, rather than later – you’ll need to copy the downloaded mq4 file to the correct folder in your copy of MetaTrader.

So use a file explorer program, and find out where your MetaTrader is installed. Most likely it’ll be found at C:\Program Files\MetaTrader

(It might be at C:\MetaTrader and the MetaTrader name might vary – if you’ve downloaded it as part of a broker’s demo package)

Now, locate the correct subfolder:
If it is an expert advisor – the mq4 file should be copied to C:\Program Files\MetaTrader\experts

If it’s an indicator, then it should go in C:\Program Files\MetaTrader\experts\indicators

A library? C:\Program Files\MetaTrader\experts\libaries – you should be getting the idea.

Compilation
Double-click on the icon of the mq4 file to open in MetaEditor – you’ll see the source code in the upper window – and hit the ‘Compile’ button in the toolbar, simple as that. If all’s gone well, you’ll see a message, ’successfully compiled, 0 errors’.

And the work is done for you – if you look in the subfolder, you should see a new, identically-named ex4 file – and this will appear in your Expert Advisors list, ready for use. It doesn’t do any harm to restart MetaTrader at this point.

If there are errors in the compilation process, this is because the code isn’t written properly – as can happen, downloading stuff from the net – and would need fixing, which beyond our scope to discuss here, or simply, deleting. Move on to something that does work.

You may see, at times, .mqh files associated with MetaTrader – these are snippets for programming and go in experts\includes – you can’t compile them to .ex4 files. As always with first steps in programming – if you’re not sure, you probably shouldn’t be doing, and leave well alone…

News Quality
Some deeply cynical people might suggest that the talking-heads aren’t total experts on what they going on about in the first place. I know they have to simplify to some extent, but their technical analyses do seem lurch into the bizarre on occasion. Some might even suggest that the talking-heads have been chosen because they are telegenic, or, in some cases, blonde… This could never be.

Leave well alone
The stuff on your television, or coming at you by desktop video, is chit-chat – it’s there to entertain, to inform the amateur and generally fill up a bit of airtime. So don’t place trades on the basis of this reported ‘news’. You’re looking at what happened an hour ago – at best – it’s stale, and you won’t make a pro trader that way.

And here’s a nice enough example. GPB/USD 30-min chart – the currency pair becoming range-bound, candlesticks shortening and then breakout – here, to the downside.

Bollinger bands are a measure of market volatility – in simple terms, when there’s a trend on, or when the price is zigzagging with no clear outcome, the upper and lower bands expand away from each other. When the price settles down (becomes range-bound) the bands begin to come together and that’s the Bollinger squeeze. It’s as if there’s a constriction and the price has to pop out – one way or the other.

How to take advantage of a Bollinger Squeeze
We know there’s an increased probability of imminent breakout – because that’s the way markets, forex, stocks, whatever, tend to work – but which way? That’s the point – it’s not possible to say, just by looking at the Bollinger squeeze and without other information, whether the breakout is going to be bullish or bearish.

So, if your trading platform allows, you might investigate pending, conditional, orders – covering either option. OCO orders – one cancels other can also be the way to go, if you have the option – two orders, where if one is filled, the other order is cancelled. You’ll also be keeping an even closer eye on possible market reaction to news events.

When to pull the trigger?
Of course, the other question is how long the squeeze is going to last before there’s a breakout. Don’t just guess on a trade and click one off immediately, just because you’ve seen the Bollinger squeeze come on. It may be 5 time periods, it may be 30.

Cause and Effect
Indeed, just because there’s a squeeze, there’s no absolute proof there’s going to be a breakout, ever - that would be falling into the trap of thinking that an indicator creates a market – it’s the other way round.

There’s more information about Bollinger bands, and if you ever feel like going through the theory attached, it’s all here.

Timescales
I work with one-hour up to daily charts and maybe longer timescales than these at times – I’m not averse to rolling over trades and certainly would never consider closing just to avoid rollover. Short-term, 5-minute charts and scalping – too old for that sort of thing….

Keep it simple
I stick to a relatively small number of pairs – all of which involve the cable. It’s what I know, it acts as a base for the knowledge – and so I do feel it allows me the chance to take advantage of more exotic action when the opportunity arises, NOK/GBP for example.

As an entirely personal prejudice, I avoid EUR/GBP – I’ve come to the conclusion that there are too many and too subtle variables involved in the relative closeness of the economies.

Pesky Indicators
EMA, exponential moving average, usually 26-period – it’s always the first indicator I slap onto a chart – and I never make a trade unless it’s confirmed by a clear signal from the EMA. This, and Bollinger Bands to check out the volatility, are all that’s required…
I’ve flirted with a lot of other indicators in my time, and had, frankly, mixed results. These are the basics and I don’t see any compelling reason to hang on to some of the more complicated indicators, Alligators, RSI… etc.

Hide what you’re doing?
I don’t use stops. Or to be exact, while I do place fixed stops on the trade, they are bracketed very generously and only there in the case of catastrophe, or lottery win. Usually, I’m paying attention to the market and closing trades manually. This isn’t because I’m totally petrified by the possibility of being stop-hunted, more like I’ve never been able to go very far away from market data while my money is riding on it, so since I’m there, I might as well make all the decisions myself at the time.