Quotations by Ed Ponsi

Always Tighten Stops, Never Loosen Stops. We never lower our stop when we’re holding a long position, and we never raise a stop when we’re in a short position. [2010] - Ed Ponsi

If you can trade successfully for at least three consecutive months in a demo account, and if you are doing everything correctly, then feel free to progress to live trading. Your first live account should be a “micro” account, one that allows you to trade live, but at the same time allows for little risk. It’s difficult (but not impossible) to get hurt when you’re trading EUR/USD for 10 cents per pip. If you continue to trade well in your micro account, move up to a “mini” account, one where EUR/USD has a value of $1 per pip. [2010] - Ed Ponsi

A weak currency is important to Japan because the Japanese economy is almost entirely driven by exports. [2010] - Ed Ponsi

Forex traders often use the U.S. Dollar Index to confirm USD trades vs. individual currencies, especially against the euro. The index basket consists of the euro (EUR, 57.6 percent), Japanese yen (JPY, 13.6 percent), British pound (GBP, 11.9 percent), Canadian dollar (CAD, 9.1 percent), Swedish krona (SEK, 4.2 percent), and Swiss franc (CHF, 3.6 percent). [2010] - Ed Ponsi

Small speculators are not the contrarian indicator of the COT report; in fact, they are not really a useful predictor of market direction one way or the other. The noncommercial traders are the contrarian indicators of the COT report. They tend to be wrong more often than the small speculators. [2010] - Ed Ponsi

U.S. Treasuries are especially attractive in times of turmoil, as they are considered among the safest investments in the world. Another reason for the strength of the greenback was the sudden loss of confidence in many of the currencies of developing nations. These currencies tend to outperform during good economic times and underperform during bad times. [2010] - Ed Ponsi

Publications like the Wall Street Journal and the Financial Times are good sources for information about potential central bank interventions. [2010] - Ed Ponsi

Because of the ability to print more money, it is considerably easier for a central bank to weaken its own currency than it is to strengthen it. While it is still possible to lose money on an intervention trade, the odds are on the side of the trader who pays close attention and takes the side of the central bank—-especially if that central bank is actively weakening its currency. [2010] - Ed Ponsi

The best time to recalculate your stop is when the market reopens for business, after the weekend. This equates to Sunday evening around 5 p.m. U.S. East Coast time. [2010] - Ed Ponsi

Don’t go long EUR/USD, GBP/USD, and AUD/USD at the same time, because that is really just one big “short the USD” trade. [2010] - Ed Ponsi

Quantitative easing is a way of pouring money into a cash-starved banking system. It is a “last resort” for central banks that have already cut interest rates to the bone and are still seeking ways to stimulate their economies. “QE” also has the effect of weakening the currency. [2010] - Ed Ponsi

If central banks slash rates in anticipation of a recession, currencies that traditionally offer a low yield, such as the Japanese yen, tend to benefit. [2010] - Ed Ponsi

EUR/USD accounts for the most activity by far, as 27 percent of all currency trades occur in that pair. This is why EUR/USD features the tightest spread on most currency trading platforms. USD/JPY is a distant second at 13 percent, and GBP/USD accounts for 12 percent of the action. [2010] - Ed Ponsi

Slightly more than one-third of all Forex trading activity emanating from the United Kingdom (34.1 percent). The United States comes in a distant second, providing 16.6 percent of all Forex trading activity. All of the other countries surveyed registered in single digits. [2010] - Ed Ponsi

Far more transactions occur in the U.S. dollar than in any other currency (hence its status as the world’s reserve currency). The euro is the second most actively traded currency, although it is steadily closing the gap on the USD. [2010] - Ed Ponsi

Don’t rely on automated systems or signal services. [2010] - Ed Ponsi

A consolidation occurs when the exchange rate is trapped in an ever-narrowing area. Consolidations often lead to breakouts. [2007] - Ed Ponsi

Japan is the third largest forex trading center, and comprises about 10 percent of all forex trading volume. London is considered the world’s capital of forex trading. Roughly 30 percent of all foreign exchange volume comes from the trading desks of London. New York is the second most important market in forex trading, and accounts for about 15 percent of the world’s total foreign exchange volume. Trading is especially active early in the U.S. session and usually becomes aimless and choppy after midday in New York. Friday afternoons in the United States are generally the least active. [2007] - Ed Ponsi

The trader who masters all three—-technical analysis, fundamental analysis, and risk management-—is truly a “triple threat” trader. [2007] - Ed Ponsi

Trade a demo account successfully for at least several months before advancing to a mini account. Start with EUR/USD (in a demo account, of course), and when you feel comfortable with the way the pair moves, then branch out and try GBP/USD. You’ll find that this pair trades in a similar fashion to EUR/USD, but with greater volatility. Some traders enjoy this added volatility, while others can’t stand it. [2007] - Ed Ponsi