There is no centralized market in the interbank market, not
standardized contracts, and no central regulator. Transactions are
conducted between the parties on the phone or electronically. Based on
a call-around tradition, occasions can result in billions of dollars the price,
terms of delivery, and others are traded, sometimes on behalf of clients
but often for banks or institutions as speculating on the price
movement of currencies.
However, if you’re a corporate treasurer, a global money managers,
or someone in a similar position, the interbank market is probably
not something that will be involved. This is a complex
reserved market for sophisticated, professional, and agile.
There are, however, the places where traders have easy access to the same
type of forex trading that have large interbank market.
Cash Forex Trading
One of the fastest growing segments of the market in recent years has been
forex cash dozens of new businesses have sprung up, leveraging
online trading and less restrictive regulations. Still controversy
trade secrets
16
surrounding the regulation of business forex cash, and the National Futures
Association and the Commodity Futures Trading Commission have closed
a number of companies that have perceived as “bucket shops” or
guilty of fraud.
In fact, sometimes the biggest risk in trading forex cash is not the market
risk of changing currency values, but the risk of the counterparty, which
is the risk that the company forex money does not fulfill its obligations and
will deal unfairly with your customers. Why are traders accounts’ depend
on the solvency and integrity of the company with which cash forex
have to do careful evaluation of the company is one of the first essential
steps for the forex trader cash.
However, cash forex trading offers a range of benefits
traders are working with a reputable dealer and understand the
risks of high leverage available in some of these companies.
Cheap entry. In some cases, operators can control a lot of currency for
a few hundred dollars. A minimum account size of $ 5,000 is typical,
but in many cases, traders can open a forex account cash for less money
an account to trade forex futures, which are standardized contracts
which are generally larger than the lots traded in the forex spot market.
High leverage. Operators can control a position in a $ 100,000 cash
Forex companies with $ 1,000, that is 100-to-1 leverage. Forex futures can
require 5-8 percent of the value of a contract forex margin as a performance
bonds, cash forex, but takes less than a 1 percent margin.
Guaranteed Limited Risk. The requirements of low initial
giving traders a lot of freedom for the adverse price movements. However, many
companies cash forex traders will take their positions immediately open
when their capital falls below the minimum required.
Live Quotes Real-trade. The company provides cash forex traders
with two-way bid and ask prices for a number of forex pairs through a
17
Forex Trading Using Intermarket Analysis
free streaming quote feed on a trading platform, which usually has
some capacity for analysis, according to the company and established
agreements. If merchants click on the offer or ask price posted
on the screen, is their position at that price instantly. There is
No slippage or partial filling that can occur with forex futures where
Prices are constantly changing. Real-time quotes forex futures
usually require the payment of fees for the exchange, which can mount up.
No commission. Companies do not charge money, forex commissions,
as such. With stocks or futures, traders may have to pay $ 3.95 or $ 9.95
or even $ 100 in commission rates for each trade. Cash forex firms do
do not make their money in commissions, but the difference in bid /
ask spread (the price at which they sell and the price at which to buy).

The end of the environmental management system has paved the way for free-floating exchange rate
by default, because there was no structure capable of controlling currency
fluctuations. The most currencies float freely, even if today the Argentine
weight, the Chinese yuan and other currencies are pegged to the
Dollars. The various agreements floating invented in Europe
nearly half a century finally succumbed to the euro, launched
January 1, 1999. The euro got off to a shaky start, but has become a
of major appliances in the forex market because trades freely against ‘
Dollar, Japanese yen and other currencies. In fact, the euro has
trade secrets
14
was often cited as a potential successor to the U.S. dollar as
reference currency.
Forex Trading Motives
In this fluctuating environment, forex trading volumes have increased
considerably in recent years, banks, other financial institutions, brokers,
hedge funds, corporations, individuals, and also
Central banks have become participants, often using more and more
sophisticated trading strategies. There are three main reasons for
involved in the forex market:
• To convert the profits in foreign currency into national currency
gains to bring back “home.” This is primarily
to corporations that do business globally
basis and whose bottom line may depend in large measure
how they manage their forex transactions.
• To cover the risk of exposure to changes in forex values. If
corporate treasurers are concerned about the exchange rate
risk between the time you made a pact, a product is delivered,
and the payment is made, you may decide to block a
profit with forex position at a favorable rate, rather than
run the risk of losing money because currency values
may change. A pension fund of the United States may also cover
the rate of its currency risk using currency overlay program
negotiated by a manager of money out of it.
• To speculate on changes in currency values. Although
There is a growing awareness of the usefulness of the forex
Trade in commercial transactions in global markets,
speculation is probably the main reason for most
Forex trading today. There is no way to quantify
much of the volume of forex trading is speculation, but
15
Forex Trading Using Intermarket Analysis
has been estimated that over 95 percent of all
Forex trading is speculative and has nothing
to do with business operations.
Three main branches of Forex Trading
Interbank market for the Big Boys
The largest share of forex trading takes place in the interbank market
form of currency swaps, forwards, and more sophisticated operations.
The interbank market is a global over-the-counter network
that includes, as its name suggests, the largest banks in the world as its
backbone along with other major financial institutions and corporations
to be members of the network to participate.

The search for stability
Governments, financial institutions, and the public all sought economic
and stability as a forex volatility and speculation has become dirty words.
In an attempt to draw a new economic order for a postwar world,
officials of the United States, Britain and France met in
Bretton Woods, New Hampshire, in 1944. With European economies
and their currencies ravaged by war, the United States have become the
global economic engine, and the U.S. dollar has emerged as the world
reference currency.
The Bretton Woods Agreement established a plan to peg major currencies
the U.S. dollar and the dollar pegged to gold at a price of $ 35 ‘s
oz. The main currencies were allowed to fluctuate within a band
1 percent on both sides of the set standard for the dollar, and not
devaluations have been authorized in an attempt to obtain commercial advantage. If a
deviated too much currency, central banks have had to enter the forex
Market to bring the currency back into its acceptable range.
These measures have provided the stability that has helped the post-war
recovery. However, as international trade increases, the amount of
Dollars deposited abroad again mounted in the Eurodollar market.
Russia, for example, declined to put its oil revenues in dollars in the U.S.
banks where they could be frozen by the U.S. government during the
Cold War.
13
Forex Trading Using Intermarket Analysis
With large amounts of U.S. dollars abroad that could accumulate
lead to a massive demand for gold backing those dollars at any time,
President Nixon announced in 1971 that the U.S. dollar would not be
longer convertible into gold. Which effectively means the end of
Bretton Woods Accord, which was succeeded by the Smithsonian
Agreement in December 1971, providing a wider band within which
currency would be allowed to fluctuate. Since different countries have
resources, different economic growth rates, different policy
objectives, and other unique circumstances, maintaining a floating arrangement
was destined to fail, no matter what the size of the band.
With closer ties and economic geography, European civil servants
abandon the concept float. However, because they wanted their
economies and currencies to be so closely tied to developments in the United States,
have created their own arrangement in which their currencies would
float, which also did not last long. In 1978, these European nations then
created the European Monetary System (EMS) to keep their currencies
in alignment. This effort lasted until 1993 when the backed-up value
British Pound defended by the Bank of England could not resist
the onslaught of speculators led by George Soros. Great Britain
dropped out of the EMS, spelling the end of that attempt to control
currency values.

Changes in currency values ​​are expressed in terms of “interest rate
points “or” seeds “. Pips are also called points, and are similar to ticks in
shares or futures markets, the smallest increment of price movement. In
most cases, a pip is a turning point in the fourth digit to the right
the decimal, for example, a change from 1.1918 to 1.1919 for
euros. The value of a pip depends on the size of the contract or lot is
negotiated, and that depends on where forex is traded (see Chapter 2).
Forex The2
Market
Although this book is about forex trading today and not for the charm
history of currencies since the time of the Babylonians and
Egyptians, it is useful to have some ‘historical background to understand
how and why currencies of today developed. The forex market is
actually a relatively new development compared to markets for
stocks, bonds, futures and other financial instruments.
From 1870 until the First World War, the gold support for stability
for many of the currencies in the world. Despite its long history as a store
value, however, the gold was not without its flaws. When a
the country’s economy was strong, he could afford to import more goods,
which means that it has sent more money abroad. A side effect of this was to
reduce its supply of gold reserves to support its currency. With less gold
to support its currency, the money supply had to be reduced, causing interest
growth rates, which then slowed economic activity until it has brought
of a recession.
The lowest prices for goods during a recession at the end attracted buyers
from overseas. The increase in exports increased the flow of money
in the country, the establishment of reserves of gold and the money supply,
11
trade secrets
12
reduction in interest rates, and producing economic expansion and
Sometimes an arm.
These boom-and-bust cycles were the norm during the gold standard
days. The First World War interrupted the flow of trade and forex markets has become
very volatile and speculative after the war. The depression
1930 and the beginning of World War II interrupted more normal economic
and forex activities.

The volatility is necessary for a trader to make money in any market, and
the forex market usually provides more than sufficient for the volatility
there are new developments in the forex market every day.
Not too volatile. Forex markets can have abrupt changes in prices
but as a 24-hour market in which price changes are always flowing
through the system, forex markets rarely make the kind of price movement
seen in stocks or futures. Stocks can dive or climb by 10 percent or more
reports of some earnings during the night or announcement, leaving
gaps on the price charts when the exchange opens. A change of a $ 3 $ 30
warehouse is not unusual, but a move of 10 percent in a currency-for
example, if the euro were 12 cents to $ 1.20, it is quite unlikely.
Moreover, while the emerging markets could lead to some extreme currency
price movements, are not the major currencies such as Enron, Worldcom,
or securities dotcom flying all over the chart, or even precipitate and, as
Refco, declare bankruptcy. If forex trading seems too volatile and
risky, it can be a pleasant surprise to learn that forex traders
market is probably more stable than the equity markets.
Couples, Pips, and points
Forex trading concerns the simultaneous buying of one currency and
the sale of another. Unlike markets such as soybeans or the Treasury
notes in which traders are either long or short the market when they enter
a position of real, forex traders are always pairs trading currency-
ie, they are always long one currency and short another.
Forex trades are expressed in terms of the couple’s first currency.
For example, one U.S. dollar / Japanese yen to position-USD/JPY
Forex traders, it means you are long the dollar and the yen short, believing
the value of the dollar gain from the value of the yen.
9
Forex Trading Using Intermarket Analysis
The dollar is the currency in many of these key pairs. Together
with the U.S. dollar, accounting for more than six other major currencies
90 percent of all forex transactions. These are the Japanese yen, euro,
British pound, Swiss franc, Canadian dollar and Australian dollar.

The Mexican peso, Thailand baht, and dozens of other currencies
are traded on the forex market, and some periods of active
business due to exceptional circumstances. For the most part,
However, the forex trader you can just focus on six major currencies
Couples who have more liquidity:
• Euro / U.S. dollar (EUR / USD)
• U.S. dollar / Japanese yen (USD / JPY)
• British pound / U.S. dollar (EUR / USD)
• Dollar / Swiss franc (USD / CHF)
• U.S. dollar / Canadian dollar (USD / CAD)
• U.S. dollar / Australian dollar (USD / AUD)
When non-dollar currencies are traded against one ‘s
other-for example, the Japanese yen against the euro (JPY / USD) -
these positions are known as cross-rates.
The first currency of a pair is the base currency, this is the main
units that traders buy or sell. The second currency is the secondary
or counter currency against which exchange the base currency. The
base currency has a value of 1.0, and the second currency is traded
as the number of units against the base currency. In EUR / USD
couple, looking for the number of dollars per euro, the base
currency, for example, $ 1.2000 per euro. In USD /
JPY pair, you’re looking at the number of yen per dollar, the base
currency, for example, 110 yen per dollar, except for futures
that are covered in Chapter 2.

Forex Trading Using Intermarket Analysis
Twenty-four hours of trading. Forex trading begins Monday morning
Sydney, Australia (Sunday afternoon in the U.S.) and
moves around the world as working days starting in financial centers
from Tokyo to London to New York, ending with the close of trading
Friday afternoon in New York. Anything that happens anywhere
around the world at any time of day or night affects the forex market
immediately. There is no need for an exchange to open the first
effects can be seen. The forex market is always open for trading.
Electronic Trading. With advances in technology, in particular,
Internet and online trading, e-commerce platforms, matching,
Forex trading more executions are instantaneous, traders getting
in and out of positions with a click of the mouse once they make a
trading decision. All the benefits of electronic commerce and updates
positions and current status are available to forex traders today.
Liquidity. With the size of the forex market, around-the-clock trading,
and execution of electronic commerce, lack of liquidity is not much of a problem in more
locations of forex trading. There’s almost always someone to take the other
side of a position a trader can decide to establish, no matter when the order
is located. Forex offers and requests tend to be narrow and minimum slippage.
Financial leverage. Forex markets offer some of the highest leverage
any investment vehicle. Operators can put up to a few hundred dollars
to control a position of considerable value of $ 100,000. As a result, a small
move in favor of a merchant can produce a great return on investment.
However, traders should remember that leverage works both ways. A
small step that is against a position can not eat money to traders’
accounts in a hurry if they are not nimble traders who take fast
actions to reduce losses. This gives you leverage, you can also take away.
A lot of information. Dozens concerned governments of all reports
months that affect the forex market (see Chapter 3). Information is
widely used by financial media. With advances in Internet
trade secrets
6
services and financial news, prices and economic data are provided
within moments of being released and are available to all forex traders
around the world. If anything, there may be too much information
for traders to sort through, which has its own negative consequences.
Simplicity. The traders should not look at or analyze relationships
and price movements of hundreds of companies or mutual funds,
trying to figure out which to buy or sell. With all the fundamental
information from different sources every day, traders
can make life easier by concentrating trade in the forex market
simply because they can easily control the movement
half a dozen pairs forex. In addition, operators need not worry
to go short on a downtick or sell as they do with the actions
because it is easy to sell because it is to buy in the forex market.
Good technical market. Once the traders understand the basics of
technical analysis and how you can apply a software program
trade, may extend the knowledge of all the forex markets without
having to learn and understand a whole new set of market factors.
Since currencies are influenced by government policies
and economic developments that usually extend for long periods
time, the forex markets have a reputation for being a good trend
markets. Consequently, if traders keep an eye on economic conditions
and graphs as they evolve, they discover that the forex market
moves are easier to predict than are movements in other markets. A
look at a chart of currency such as the Canadian dollar is enough to
show clear long-term trends (Figure 1.1), which often have enough
movement within them to meet the professional looking for short term
Swing moves, as indicated by bold bars in Figure 1.2.
Price active movement. Whether watching the movements of prices within
a day or for a certain number of days, currencies tend to have a trading range
that are large enough to produce interesting trading opportunities.

Clearly, intermarket analysis tools that can help you recognize the merchants
recurring patterns and trends in the early stages can give traders
a broad perspective and a competitive advantage in today’s fast
Forex trading arena. It ‘was this realization more than twenty years ago
it has brought to my attention on intermarket analysis and development of
Intermarket market-based forecasting tools that may discern probable
changes in the short term trend based on the ability to pattern recognition
neural networks when applied correctly to intermarket data. The
forex market, by its very nature, is ideal for a commercial vehicle
Intermarket analysis and approaches to forecasting trends explained
this book.
Why Forex?
The first question you may have is “Why trade forex? Not forex
something that interests only the bankers and money managers? “The
advantages of forex trading are explained in detail in Chapter 2. The
trade secrets
4
characteristics of forex trading are described in this chapter, which
should convince the forex traders to include in their trading portfolios.
Characteristics of Forex Trading
Diversification. We live in a world where terrorist attacks may occur
at any time and place, where geopolitical tensions over nuclear
oil, human rights, and many other issues threaten to interrupt the normal
trade and economic relations, in which U.S. companies are investing
heavily in China and elsewhere, to reduce labor costs, and where
China, in turn, is looking to invest in U.S. companies. Economic uncertainty
seems to be a way of life. Traders can not make their investment
concerns on these issues, both for the protection or speculation,
any nation or individual values ​​of interest rate markets. Forex is the
only tool that integrates all these areas of potential concern
and serves as a distinct asset class for investors and speculators.
Global Market. Markets such as equities or interest rates tend to
be exchanged locally during the working day in their time zone. For
example, Japanese traders focus on Japanese equities, European traders
European stocks, and traders of the United States on U.S. stocks. All of these
traders should certainly be aware of what happens elsewhere as
the global integration of financial markets continues. However, a
event in Japan that directly affects the Japanese stocks can not be
the same effect in Europe, European stocks and operators can not pay
attention to what happens in the Japanese and U.S. stock markets.
Forex, however, is an asset class that is truly a global investment
reflecting economic growth in every land. Whatever it is
influence on the currency in Japan has an effect on what happens to
currencies in London or Chicago. It ‘clear that intermarket relationships
between currencies are extremely important in today’s world.
5

What is
Forex?
1
trade secrets
2
bulls and commercial software, the launch of dozens of companies forex cash
taking advantage of online trading, and the globalization of markets
in general. The introduction of the euro on 1 January 1999 and the
weakness of the dollar, after a peak in 2001 has contributed to
the wave of interest in forex trading. Increase the number of individual
traders become aware of the role of the forex world markets with an eye
to profit as currency trends explained.
International trade, less government regulation, the expansion
of democracy in the world, the rise of private property and free
concepts of enterprise, and greater acceptance of free market exchange
principles should keep at the forefront of the forex market traders’
attention for many years to come.
The local values, international impact
Each country has its own currency to facilitate its activities and trade.
The value of a currency relative to another depends on the economic
health of the nations involved, and the perception of stability
and confidence in the political climate of those countries. The conditions
change, currency values ​​fluctuate to reflect the new situation.
These fluctuations create challenges for financial officers and corporate
opportunities for institutional fund managers, but also provide operators
who want to speculate on the impending changes in currency values.
Changes in currency valuations have a significant impact on governments,
companies and financial institutions. Currency fluctuations,
particularly when abrupt, affect the performance of the fund
lines and prices for many goods and other markets. The
Forex market is probably the most pervasive influence throughout the world
economic conditions than any other market, including crude oil.
By their very nature, involve hard currency intermarket relationships.
It ‘obvious that a coin can not trade in isolation and that
3
Forex Trading Using Intermarket Analysis
mass psychology that drives the changes in the value of a currency
is bound to have an influence on what happens to other currencies such as
as well as other related markets. Why the economic policies of the government and
developments that affect currency values ​​tend to evolve over
time, the currency markets are good trend.
The key to forex trading success is to understand how these currency
markets in relation to each other and as models of past price
action can be expected to occur in the future as markets respond to
current financial forces, political and economic. However, these models
and trends are elusive and may not be evident from examination
of price charts. However, operators must identify these patterns
and trends early, to get into what they are potentially highly profitable
trades and to avoid others.

In this moment, other technicians, working independently, began
intermarket relationships to explore, first from an intuitive and
descriptive point of view, rather than the quantitative approach that I
be adopted. One such analyst, John Murphy, who was then
trade secrets
XXVI
technical analyst for CNBC, has lent further credibility among operators
the emerging field of intermarket analysis.
Since late 1980, I continued to improve my trading software
based on neural networks applied to intermarket analysis and have
has succeeded in creating an effective trading strategies trend-forecasting
expected built around moving averages. VantagePoint, which at first
only made predictions for the thirty-year Treasury bonds in 1991, when
was released, now almost seventy different paths in global markets,
including stock indexes, exchange-traded funds, interest rates, energies,
agricultural markets, soft, and, of course, spot exchange
and futures markets.
The focus of this book is about how to use intermarket analysis to forecast
moving averages, which makes them a major, rather than a delay, technical
dynamic indicator for the forex markets.
Forex Trading Forex Using
Intermarket Analysis
1 If you have traveled internationally, you probably know
The foreign exchange market, Forex or FX market is often called.
When you converted dollars to euros or yen or vice versa in a
bank or currency exchange, you may have noticed big differences in
the purchasing power of its currency, depending on when and where
you did the transaction. Even if you have noticed the impact
your portfolio, you can not have understood that they were also
participating in the largest market in the world.
The forex market trades an estimated $ 1.5 to $ 2.5 trillion per day. No
really knows what the real figure is because there is no central
the market to control all the forex transactions around
the world. The forex market is massive, dwarfing the $ 30 billion a day
traded on the New York Stock Exchange. In fact, forex trading exceeds
The combined volume of all major exchanges trading equities,
futures and other instruments all over the world.
Although professionals implementing sophisticated strategies
represent the majority of trading in the forex market huge participation
by individual workers has grown enormously in recent years with
the proliferation of the Internet, improvements in the personal computer-

In 1986 I developed my second program trading software, which
focused on these interdependence of the market. The program, simply
called “Trader”, a spreadsheet format used to correlate the likely trend
direction of a target market with those of related markets, as well as
with expectations in terms of economic indicators that affect freedom
the target market. This program trading software, although fairly primitive
by today’s standards, was the first commercial program available to
traders in the financial sector to implement intermarket analysis.
When the stock market crashed in October 1987, my beliefs about
the interdependence of the world shares, futures and derivatives
markets have been crudely stated. Since then, I was sure that the technical analysis
should broaden its scope to intermarket analysis,
XXV
Forex Trading Using Intermarket Analysis
as the forces that would take the financial globalization
markets continued to gain strength.
Despite my initial efforts to develop intermarket analysis software,
I was not satisfied with the approach that I have the basic mathematical
was used to correlate the data in the program intermarket Trader and heard
forced to continue my search for a more robust mathematical tool.
At the end of 1980 I randomly started working with a mathematical tool
known as neural networks, which is a form of “artificial intelligence”.
I vaguely remembered from this material I have reviewed the academic and
a student at Carnegie Mellon University in Pittsburgh in
end of 1960. A professor there, Herbert A. Simon was a pioneer
in artificial intelligence and its application in decision-making
under conditions of uncertainty. Neural networks have found
the right tool for my work! The neural network had the ability to quantify
intermarket relationships and hidden patterns in related
markets that are increasingly responsible for price movements in
global financial markets by the end of 1980.
In 1991, after much research for the application of neural networks
Intermarket data, I presented my third and final program trading software,
VantagePoint Intermarket Analysis Software. I chose that name
because I felt that the intermarket analysis gives operators an advantage other than
point in the markets than you can watch a single market
at a time. VantagePoint uses neural networks to analyze price, volume,
and open interest data on a specific target market and that between
market and various other related markets. The software then allows
short-term forecasts of the trend and direction of high and low prices of
the target market.