ForexGen Currency Trading

Moving Averages in the Forex Market

noreply@blogger.com (aamy) — Wed, 6 Jan 2010 06:50:00 -0800

A moving average (MA) is an old and reliable tool used by traders to smooth price data. For example, a 20-day simple MA is the sum of prices for 20 days divided by 20. The smoothing makes it easier to see the underlying trend. Many traders use the MA for just this purpose alone.

In the chart below, you see that a 55 day exponential MA (in red) tends to follow the trend line fairly well on the EURUSD daily chart. As prices moved up from the bottom on the left side of the chart, the MA soon turned up as well.

In addition to displaying the underlying trend, there are three other ways you can successfully use a moving average (MA) in your trading.

The first is for determining support and resistance. In the Euro daily chart, you can see that the last three times price has approached the MA, it has served as support. The pair touched the line again on December 4, 2009 and it remains to be seen whether the EMA will again serve as support. You can experiment with different moving average lengths to see which ones are most effective, depending on the pair you trade and the period you use for trading.

The Mind of a Forex Beginner

noreply@blogger.com (aamy) — Wed, 6 Jan 2010 06:26:00 -0800

FOREX trading is a very complicated business and beginners must proceed with caution if they wish to acquire the confidence and skills necessary to first survive and then profit. Forex experts make significantly higher profits than novices because of their advanced psychology which is based on a more astute understanding of the Forex market’s concepts and features.

In order to obtain a handle on what this all means, let us try to understand a novice’s psychology when faced initially with the enormous subject of Forex Trading. Many of them would have been enticed into this market by all the propaganda and publicity surrounding Forex. As a result, they are unrealistic in their initial objectives believing that Forex is a ‘quick rich’ scheme with the potential for large, easily-acquired profits. Their trading systems are weak and do not cater for that fact that they are not going to profit from all of their trades.

They have not grasped the important concept that even the most experienced trader can get it wrong and that the best they can aim for is to make more profitable trades than losing ones.

Forex Configuration System

noreply@blogger.com (aamy) — Wed, 6 Jan 2010 05:02:00 -0800

To begin achieving Forex success, you first need to define a methodical and easy-to-follow plan that will help you, especially if you are a novice, maximize profits and minimize risk before risking a single dollar on live trading. In addition, you need to realise that, in the same way as a doctor or lawyer, you will not become a Forex Expert overnight. So, you must move away from this mindset as quickly as possible. You must learn to adopt a more scientific and business-like approach to Forex.

Here are the basics of a methodology or trading plan that will enable you to do just that and its concepts will be further enhanced during this course. This is a standard process used by many experienced traders. This methodology will show you how to evolve a low risk trading system to a high one using a well-developed iterative process. First, you need to define a trading system which will be used with specific operational configurations.
The main aim of the trading system is to identify trends, as early as possible, in order to maximize profits whilst, at the same time, avoiding false signals and blips. You will need to use the concepts of Forex Analysis to help you select the functions that will be incorporated intoyourtrading system. This topic will be discussed in more detail later in this course.

The Concepts of Money Management

noreply@blogger.com (aamy) — Wed, 6 Jan 2010 04:40:00 -0800

Once you have developed a Forex Trading Strategy with a positive expectancy, good money management will then be the biggest factor in determining how fast and how large your bankroll grows. Even a Forex trading system with a positive, but still only mediocre, expectancy can be turned into a money machine with the right money management techniques.

Money management is a study that mainly determines how much can be spent on each trade with minimum risk. For instance, if too much money is risked on a single trade then the size of a potential loss could be so great as to prevent users realising the full benefit of their system’s positive expectancy over the long haul.

A good Money Management strategy, combined with the following concept, makes it more amenable for beginners because it enables them to advance their trading knowledge in small increments of risk with maximum account protection. The important concept is ‘do not risk too much of your balance at any one time.

After success has been achieved with a low-risk operational configuration, higher risk ones can be introduced by altering the settings one at a time. Once you have obtained a series of successful advancements, you could then use your trading system with the following settings:

More than 1 lot traded, 10% of your total margin could be traded,more than one currency pair will be traded and more than one trade can be active.