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Archive for the ‘Education’ Category

Hello all,

From time to time, I will be posting some a system that other coaches may have developed, heard of, or even tested. I want you to take the opportunity and test it yourself and see how it works on a particular pair of your choosing. As a word of caution, I want to point out that there is no guarantee that this particular system works in this type of trading environment but this system may give you an idea on how to set up a system of your own.

Some of you may have seen this system before or it may be new, I would suggest you read it, test it and re-test it and make it your own system. That way you will own it at that point and understand it. I ask one thing, post your findings in the comments section and share with others what you find. That way, others can learn from your findings. Have fun!!!

~ G

CCI and Simple Moving Average (50) System

The Commodity Channel Index (CCI) and Simple Moving Average (SMA) trading system is a simple approach to trading the currency market. The CCI is used to determine the entry point into a trade, while the SMA is used to filter the signals. The management of risk is accomplished by using a 100 pip stop loss. Winning trades are exited with a 100 pip profit.

The system employs a bracket approach to exiting winning and losing trades. Both the profit target and stop loss are 100 pips away from the entry point, which means that the system must achieve a high win/loss ratio in order to be profitable. The following table displays the rules of the system:

Timeframe: Daily Chart

Indicators: CCI (14); SMA (50)

Enter Long: When CCI crosses above -100 and SMA is greater than or equal to yesterday’s SMA value.

Enter Short: When CCI crosses below +100 and SMA is less than or equal to yesterday’s SMA value.

Exit Point: Set profit target of 100 pips.

Stop-loss: Set stop of 100 pips after entry.

Pairs Traded: EUR/USD, USD/JPY, USD/CAD, EUR/JPY

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blakeyoung.jpg     That’s right, Blake Young – one of our finest I may add – will be manning Booth #503 at the expo starting today.

    I think Blake wanted to prove that he is a real person, not just some digital presence on webcasts.

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Once again: this week David Settle – a friend and fellow analyst on our site – will be hosting a guided tour on Thursday of the Investools FX site during a 90 minute Open House session. This is a Webex session, so you have the luxury of seeing, hearing and interacting (in the last half hour, David opens it up to questions) with David in real time as he highlights the benefits of the currency market. As David will be using the tools at the FX website he will also be doing some analysis along the way which is sure to help even some of you seasoned vets. Here’s what’s covered:

 

  • Proprietary fundamental tools that’ll give you a quick and simple way to determine a currency’s strength or weakness versus others.
  • Our Powerful charting package including 100+ technical indicators on more than 60 currency pairs at your disposal streaming 24/7.
  • Daily and weekly commentary written by experienced Forex traders.
  • Our interactive educational environment that allows you to learn at your own pace on your own schedule.
  • Other features designed to help you on your path to forex success.

David is very intelligent and has great insight both economically and technically. He’ s a great trader, does some of our trading rooms, and I’ve coached both forex as well as stocks and options with him for years. To register for the event simply go here, and then show up at the right time.

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Secret of wealth? (fx) education

This article, by Ronald Bailey, appeared in the WSJ today (also published in Reason Magazine and in blogs, groups and articles all over elsewhere on the net) and is an excellent reminder of the value of education, enjoy!

The Secrets of Intangible Wealth

By Ronald Bailey
September 29, 2007

A Mexican migrant to the U.S. is five times more productive than one who stays home. Why is that?

The answer is not the obvious one: This country has more machinery or tools or natural resources. Instead, according to some remarkable but largely ignored research — by the World Bank, of all places — it is because the average American has access to over $418,000 in intangible wealth, while the stay-at-home Mexican’s intangible wealth is just $34,000.

But what is intangible wealth, and how on earth is it measured? And what does it mean for the world’s people — poor and rich? That’s where the story gets even more interesting.

Two years ago the World Bank’s environmental economics department set out to assess the relative contributions of various kinds of capital to economic development. Its study, “Where is the Wealth of Nations?: Measuring Capital for the 21st Century,” began by defining natural capital as the sum of nonrenewable resources (including oil, natural gas, coal and mineral resources), cropland, pasture land, forested areas and protected areas. Produced, or built, capital is what many of us think of when we think of capital: the sum of machinery, equipment, and structures (including infrastructure) and urban land.

But once the value of all these are added up, the economists found something big was still missing: the vast majority of world’s wealth! If one simply adds up the current value of a country’s natural resources and produced, or built, capital, there’s no way that can account for that country’s level of income.

The rest is the result of “intangible” factors — such as the trust among people in a society, an efficient judicial system, clear property rights and effective government. All this intangible capital also boosts the productivity of labor and results in higher total wealth. In fact, the World Bank finds, “Human capital and the value of institutions (as measured by rule of law) constitute the largest share of wealth in virtually all countries.”

Once one takes into account all of the world’s natural resources and produced capital, 80% of the wealth of rich countries and 60% of the wealth of poor countries is of this intangible type. The bottom line: “Rich countries are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity.”

What the World Bank economists have brilliantly done is quantify the intangible value of education and social institutions. According to their regression analyses, for example, the rule of law explains 57% of countries’ intangible capital. Education accounts for 36%.

The rule-of-law index was devised using several hundred individual variables measuring perceptions of governance, drawn from 25 separate data sources constructed by 18 different organizations. The latter include civil society groups (Freedom House), political and business risk-rating agencies (Economist Intelligence Unit) and think tanks (International Budget Project Open Budget Index).

Switzerland scores 99.5 out of 100 on the rule-of-law index and the U.S. hits 91.8. By contrast, Nigeria’s score is a pitiful 5.8; Burundi’s 4.3; and Ethiopia’s 16.4. The members of the Organization for Economic Cooperation and Development — 30 wealthy developed countries — have an average score of 90, while sub-Saharan Africa’s is a dismal 28.

The natural wealth in rich countries like the U.S. is a tiny proportion of their overall wealth — typically 1% to 3% — yet they derive more value from what they have. Cropland, pastures and forests are more valuable in rich countries because they can be combined with other capital like machinery and strong property rights to produce more value. Machinery, buildings, roads and so forth account for 17% of the rich countries’ total wealth.

Overall, the average per capita wealth in the rich Organization for Economic Cooperation Development (OECD) countries is $440,000, consisting of $10,000 in natural capital, $76,000 in produced capital, and a whopping $354,000 in intangible capital. (Switzerland has the highest per capita wealth, at $648,000. The U.S. is fourth at $513,000.)

By comparison, the World Bank study finds that total wealth for the low income countries averages $7,216 per person. That consists of $2,075 in natural capital, $1,150 in produced capital and $3,991 in intangible capital. The countries with the lowest per capita wealth are Ethiopia ($1,965), Nigeria ($2,748), and Burundi ($2,859).

In fact, some countries are so badly run, that they actually have negative intangible capital. Through rampant corruption and failing school systems, Nigeria and the Democratic Republic of the Congo are destroying their intangible capital and ensuring that their people will be poorer in the future.

In the U.S., according to the World Bank study, natural capital is $15,000 per person, produced capital is $80,000 and intangible capital is $418,000. And thus, considering common measure used to compare countries, its annual purchasing power parity GDP per capita is $43,800. By contrast, oil-rich Mexico’s total natural capital per person is $8,500 ($6,000 due to oil), produced capital is $19,000 and intangible capita is $34,500 — a total of $62,000 per person. Yet its GDP per capita is $10,700. When a Mexican, or for that matter, a South Asian or African, walks across our border, they gain immediate access to intangible capital worth $418,000 per person. Who wouldn’t walk across the border in such circumstances?

The World Bank study bolsters the deep insights of the late development economist Peter Bauer. In his brilliant 1972 book “Dissent on Development,” Bauer wrote: “If all conditions for development other than capital are present, capital will soon be generated locally or will be available . . . from abroad. . . . If, however, the conditions for development are not present, then aid . . . will be necessarily unproductive and therefore ineffective. Thus, if the mainsprings of development are present, material progress will occur even without foreign aid. If they are absent, it will not occur even with aid.”

The World Bank’s pathbreaking “Where is the Wealth of Nations?” convincingly demonstrates that the “mainsprings of development” are the rule of law and a good school system. The big question that its researchers don’t answer is: How can the people of the developing world rid themselves of the kleptocrats who loot their countries and keep them poor?

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