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forex online trading / Point and Figure Charts: an Easy Way to Recognize Trends in Forex

2011-01-24T23:37:00.000-08:00

Author - Carl Hayes

To trade forex profitably, we need to catch trends and stick with them until they complete a healthy part of their development. While there are many indicators today available to the typical trader towards the purpose of identifying and trading trend patterns, point and figure charts stand among those for the simplicity of the signals generated and lack of clutter in the display. The strengths of the P&F chart is its simplicity. Although it may appear complicated or difficult at first sight to an inexperienced trader, in fact its laconic depiction of the market action makes it an ideal choice for trend following strategies where one would like to disregard most of the retracements, and volatility in favor of following the main momentum of the market.

A P&F chart consists of boxes and X and Os. An X indicates an uptrend, the price was rising during this period. An O indicates a period of falling prices. But unlike other kinds of charts, P&F charts do not record all the price action in a period. There are two important criteria for including any day's price movement on a P&F chart: box size and reversal amount. Box size determines the minimum amount by which the price action must move above the last trading days's close in a column of Xs (that is, in an uptrend), or below the close of the previous day in a column of Os (in a downtrend). Reversal amount determines the minimum movement when the price contradicts an ongoing trend. It is the minimum amount by which we'll need to negate a column of X's and begin a column of Os if the price goes down, and vice versa if it goes up. In other words, as long as the reversal remain less than the reversal amount in an uptrend, we'll have a column of X's, and when the same is the case in a downtrend, we'll have a column of Os. In the stock market, box size is often 1, and the retracement amount is 3.

It sounds complicated, but it really is very simple. Traders will buy or sell at reversal points. For example, when, after a period of X's the chart shows an O, it's likely that a reversal has taken place and it is time to short the market. Conversely, you may choose to jump in a trend after it emerges and keep buying and selling for as long as the main trend remains intact. Since the P&F chart only includes significant price movements, the reversals and trends indicated by it are thought to be more reliable.

The P&F chart is not exactly popular among traders, and many forex trading brokers do not include it in their standard packages. However, this does not make this tool any less efficient than others. If you favor this kind of charting in stock trading, and want to use it in forex, there's no reason to discourage you from doing so. The same rules and principles are valid, and due to the simple and uncomplicated nature of the P&F, you can even use your own hand calculations for drawing it at all times.

In order to learn to trade forex you must have the appropriate knowledge. ForexTraders.com offers free information to help educate yourself on strategies, analysis, how to choose among the many forex trading brokers and we even offer a free course!

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forex trading online / Technical Analysis: How to Read the Price Action

2011-01-23T22:16:00.000-08:00

Author - Carl Hayes

Regardless of the school of analysis we belong to, most of us will have few problems with the statement that the price action is all that matters to trading, ultimately, because the only determinant of our profits or losses is the price itself. We may have very sensible, well-thought justifications for our Forex analysis and Forex strategy, but if we cannot confirm them with the price action, the sad fact is that they are worthless.

Technical analysis takes this concept one step further, and claims that all that matters to trading is the price action itself. In other words, traders should disregard news events, statistics and data, along with economic and political developments, and concentrate all their attention on the price itself. This attitude is justified on the basis of the belief that the price action, created by knowledgeable and profit-hungry traders, reflects all the information available to the public at any one time, and it is futile so seek an edge over the market by trying to stay updated on all data. Not only is it impossible, technical analysts contend, but also useless, since the price already incorporates all the available information in itself according to the interpretation of the best and most powerful minds in the market. Technical analysts exhort us to study the markets, and ignore everything else, thus gaining a strong focus on the only piece of information that matters, the price.

Critics of technical analysis counter that while the price does represent the total amount of bulls and bears in the market, it doesn't reflect a consensus, and as such cannot be taken as a speaking the opinion of market participants at large. In other words, there is no such thing as a market opinion. In addition, they add, although in the short term the price action is difficult to predict, in the longer term economic events establish clear trends which can easily be anticipated and exploited through fundamental analysis. Technical analysts defend their school by positing that fundamental analysis is difficult, no more reliable than technical studies, and more time-consuming.

The tools of technical analysis are all applied on the price action as depicted on charts. Indicators are used to evaluate any price pattern to generate buy or sell signals, while price patterns are interpreted to identify the underlying momentum. Technical analysis does not claim to create error-free, concrete answers to questions in traders' minds, but it does offer to identify the scenarios where the potential for a profitable trade is greatest. A technical trader must have a mind adapted and used to dealing with probabilities, and he must be ready to take losses when they are unavoidable as well.

Let's conclude this brief study by noting that in the chaotic environment of the Forex market diligent money management methods, and emotional control are just as important, if not more important than any kind of strategy or analysis. To learn Forex, we need to preserve our capital. And money management is what teaches us how to preserve it. With patience and commitment, it is not hard to succeed in Forex, but without those two, there's no point in entertaining dreams about bathing in pools of gold and silver either.

forex trade / Indicator of Forex Market Economy

2011-01-22T22:14:00.000-08:00

Author - Manish

All the investors in the forex market often base their decisions in trading upon economic and political news around the world. Forex and stock market depend on the countries economy. Using of industrial production index is the best way to predict the market trends in the future. All the traders are using this market indicator specially the traders who want to trader for a long time because if a country's economy is improving definitely its currency rate goes up and if the economy is decreasing, currency rate will automatically goes down.

What is Indicator?

Forex indicators are the primary and most essential tools used to determine the trend of foreign exchange and their future prospects. These tools sometimes become so important for the users to anticipate future ups and downs of the Forex market according to which, they could invest and deal their finances with foreign exchange.

There are a variety of Forex indicators available to the users of foreign exchange, which are highly advanced and avail an enhanced platform to the Forex dealers and users to deal the challenges with foreign exchange efficiently. These indicators are useful not only to the novice Forex trader, but also an experience Forex dealer as well. The two most significant indicators of them are as follows.

Moving Averages: Simple, Exponential and Weighted

Most Forex traders use Moving Average Indicators to calculate the trends in foreign exchange. This procedure can be set and interpret easily. Using this indicator, we can easily measure the average movement of the price within a particular time period. Through this indicator, the price data get smoothen with which, we can easily observe the market trend and tendencies.

Stochastic indicator

Stochastic indicator is another significant tool used as a Forex indicator by the Forex experts and dealers to estimate market trends and tendencies. The main idea suggested by this indicator is that the rising price always lies closer to its previous highs and the falling price always lies to its previous lows.

forex online / Forex Information: How To Draw DeMark Trendlines

2011-01-21T22:12:00.000-08:00

Author - Michael A. Jones

When searching for Forex information on the internet you are likely to find articles relating to trendlines and trendline analysis.

Tom DeMark is a specialist in the field of technical market analysis and his best-selling book "The New Science of Technical Analysis" released in 1994 spells out some innovative techniques when it comes to the use of trendlines.

Much Forex information on the internet is of a general nature, and many articles are written about Forex by individuals who are not traders themselves. Tom DeMark on the other hand has had a long career with institutions trading stocks, futures, currencies and options.

His guidelines on the use of trendlines are very specific and they can be helpful to the newer trader who is searching for reliable Forex information on how to use standard indicators.

Here is a brief step-by-step description of how to draw DeMark trendlines:

Note: The term swing high and swing low (also called cycle high and cycle low) refers to the following:

In An Uptrend: A swing high is the wick of a candle that is higher than the wick of the candle to the left and right.

In A Downtrend: A swing low is the wick of a candle that is lower than the wick of the candle to the left and right.

Obviously the more candles to the left and right that are higher in a swing low or lower in a swing high makes the swing or cycle more significant.

An uptrend is where price is making higher highs and higher lows. A downtrend is where price is making lower highs and lower lows.

Drawing DeMark Trendlines

Drawing Trendlines In An Uptrend

Examine the bottoms of the candles on your chart and identify the most recent candle wick that is lower than the candle wicks to the immediate right and left of it.
Look left on the chart, and identify the previous low candle that has candle wicks higher to the immediate right and left of it which is lower than the current low candle.
Now draw a line from the current lowest candle to the previous lowest candle (drawing from right to left).
Now take the end of the newly drawn line which stops at the current low candle and extend it forward some distance (drawing from the present position to the right).

Drawing Trendlines In A Downtrend

Examine the tops of the candles on your chart and identify the most recent candle wick that is higher than the candle wicks to the immediate right and left of it.
Look left on the chart, and identify the previous high candle that has candle wicks lower to the immediate right and left of it which is higher than the current high candle.
Now draw a line from the current highest candle to the previous highest candle (drawing from right to left).
Now take the end of the newly drawn line which stops at the current high candle and extend it forward some distance (drawing from the present position to the right).

You have now drawn a Tom DeMark trendline.

This can now be a reference point for future price action. It will often be observed that price will come and check this level. If it breaks through, it can mean a change in direction, the significance of which will depend on the time frame being used.

Trendlines drawn on 5 minute or 15 minute charts have much lesser significance than trendlines drawn on higher time frames such as the 1 hour, 4 hour, or daily.

Caution Required

Much Forex information extols the virtues of trendlines as an indicator of possible future price action.

Mr. DeMark certainly has made this a science and his detailed approach to drawing trendlines is certainly more accurate than just drawing general trendlines along the bottoms and tops of trends according to the way the eye sees.

However, trendlines in themselves do not indicate where high probability trades can be taken.

It is important to use a variety of indicators before pulling the trigger. Examining previous levels of support and resistance is probably far more significant in determining where price is likely to hesitate that watching trendlines.

However, they can be useful. If you find a key support or resistance level also coincides with a Fibonacci retracement or extension level which is also at an intersection with a trendline, then you have built a reasonably solid case for a trade.

Use this Forex information on DeMark trendlines wisely, with caution, and it can be another useful addition to the Forex day trader's toolkit!

trading forex / Discover Some Magic to Beat The Forex: The Elliott Wave Theory for Forex Markets

2011-01-20T12:11:00.000-08:00

Author - Joseph Plazo

One of the best known and least understood theories of technical analysis in forex trading is the Elliot Wave Theory. Developed in the 1920s by Ralph Nelson Elliot as a method of predicting trends in the stock market, the Elliot Wave theory applies fractal mathematics to movements in the market to make predictions based on crowd behavior. In its essence, the Elliot Wave theory states that the market — in this case, the forex market — moves in a series of 5 swings upward and 3 swings back down, repeated perpetually. But if it were that simple, everyone would be making a killing by catching the wave and riding it until just before it crashes on the shore. Obviously, there's a lot more to it.

One of the things that makes riding the Elliot Wave so tricky is timing — of all the major wave theories, it's the only one that doesn't put a time limit on the reactions and rebounds of the market. A single In fact, the theories of fractal mathematics makes it clear that there are multiple waves within waves within waves. Interpreting the data and finding the right curves and crests is a tricky process, which gives rise to the contention that you can put 20 experts on the Elliot Wave theory in one room and they will never reach an agreement on which way a stock — or in this case, a currency — is headed.

Elliot Wave Basics

* Every action is followed by a reaction. It's a standard rule of physics that applies to the crowd behavior on which the Elliot Wave theory is based. If prices drop, people will buy. When people buy, the demand increases and supply decreases driving prices back up. Nearly every system that uses trend analysis to predict the movements of the currency market is based on determining when those actions will cause reactions that make a trade profitable.

* There are five waves in the direction of the main trend followed by three corrective waves (a "5-3" move). The Elliot Wave theory is that market activity can be predicted as a series of five waves that move in one direction (the trend) followed by three 'corrective' waves that move the market back toward its starting point.

* A 5-3 move completes a cycle. And here's where the theory begins to get truly complex. Like the mirror reflecting a mirror that reflects a mirror that reflects a mirror, the each 5-3 wave is not only complete in itself, it is a superset of a smaller series of waves, and a subset of a larger set of 5-3 waves — the next principle.

* This 5-3 move then becomes two subdivisions of the next higher 5-3 wave. In Elliot Wave notation, the 5 waves that fit the trend are labeled 1, 2, 3, 4 and 5 (impulses). The three correcting waves are called a, b and c (corrections). Each of these waves is made up of a 5-3 series of waves, and each of those is made up of a 5-3 series of waves. The 5-3 cycle that you're studying is an impulse and correction in the next ascending 5-3 series.

* The underlying 5-3 pattern remains constant, though the time span of each may vary. A 5-3 wave may take decades to complete — or it may be over in minutes. Traders who are successful in using the Elliot Wavy theory to trade in the currency market say that the trick is timing trades to coincide with the beginning and end of impulse 3 to minimize your risk and maximize your profit.

Because the timing of each sequence of waves varies so much, using the Elliot Wave theory is very much a matter of interpretation. Identifying the best time to enter and leave a trade is dependent on being able to see and follow the pattern of larger and smaller waves, and to know when to trade and when to get out based on the patterns you identify.

The key is in interpreting the pattern correctly — in finding the right starting point. Once you learn to see the wave patterns and identify them correctly, say those who are experts, you'll see how they apply in every facet of forex trading, and will be able to use those patterns to trigger your decisions whether you're day trading or in it for the long haul.

forex trading scams / Fibonacci Numbers — Trade For Huge Profits With This Unique Tool!

2011-01-19T22:09:00.000-08:00

Author - Sacha Tarkovsky

The Fibonacci number sequence and golden ratio can be found throughout nature and traders such as Gann applied them to financial markets and made millions using this unique tool as part of his trading method.

The Fibonacci number sequence and golden ratio is used by many savvy traders today so let's look at how they can make huge profits in ANY financial markets.

Support and resistance levels are critical for all traders as they can help identify entry and exit points when trading.

Fibonacci percentage "retracement" levels derived from the Fibonacci number sequence and golden ratio are an innovative and useful tool for any trader, so why are they so useful.

Let's find out.

Fibonacci Numbers and Golden Ratio Applied To Trading

The Fibonacci sequence was printed in the Liber Abaci, written by Leonardo Fibonacci in 1202. It introduced Hindu-Arabic to Europe for the very first time and they replaced Roman numerals.

The Fibonacci number sequence was based around the following equation:

How many pairs of rabbits can be generated from one single pair, if each month each pair produces a new pair, which, from the second month, starts producing more rabbits?

While the Fibonacci number sequence and golden ratio was used to solve the above equation.

The result was:

It produced a number sequence that has importance throughout the natural world.

After the first few numbers in the sequence, the ratio of any number in relation to the next higher number is approximately .618, and the lower number is 1.618.

These two figures are known as the golden mean or the golden ratio.

The Golden Mean and Golden Ratio

These numbers are pleasing to the us and appear throughout biology, art, music, weather, creatures and even architecture.

Examples of natural objects based on the Golden Ratio are:

Snail shells, galaxies, hurricanes, DNA molecules, sunflowers and many more objects that occur in the natural world.

Retracement Levels

The two Fibonacci percentage retracement levels considered the most critical by traders are: 38.2% and 62.8%.

Other important retracement percentages are: 75%, 50%, and 33%.

So how can traders use them?

Well, there are three main advantages and they are:

1. Fibonacci numbers Define exit numbers

If three or more Fibonacci price levels come together, a stop loss can be placed above the area which indicates an important area of support or resistance.

Setting stop loss trades using Fibonacci retracements allows traders to set pre defined exit points, so they can exit the market if their wrong.

This means they can trade in a disciplined fashion and protect their equity, which is critical to all traders.

2. Fibonacci levels Can Define Position Size

Depending on the risk a trader wants to take on a trade Fibonacci numbers can give the size of position to be taken, in terms of risk the trader wishes to assume.

Why?

This is simply because the monetary loss from the stop for a trade is different on most positions taken in the market.

A stop close to resistance and support may mean that a bigger position than one where support or resistance is further away.

Traders can therefore decide position size within their money management parameters easily and have a pre defined exit point.

3. Fibonacci Numbers & Profit Per Trade

With Fibonacci numbers, once a pattern completes against a Fibonacci price area traders can use them to lock in profits.

This indication of how far a profit may run, enables traders to lock in profits at pre defined set levels.

The advantage of the Fibonacci number sequence is they are a predictive tool:

So, they allow traders to have specific stop loss and profit objectives in advance.

Traders can then use them to lock in more profits and cut losses to a minimum, which is essential for longer term profitability.

Gann used them for this purpose and that is why they are such a useful tool for traders

One of the keys to trading any market is discipline:

To cut losses and run profits and win over the longer term by trading without emotion.

Gann knew this and all traders who have traded know how emotions can wreck a trading plan and the Fibonacci number sequence makes a trader stay disciplined.

Do they work?

Gann understood that using Fibonacci numbers could make large profits and cut losses on his trades and he used them to amass a fortune of over $50 million.

Fibonacci numbers are useful but should be used as part of a trading plan and Gann for example did not just rely on them he had an array of innovative tools that he combined to make stunning profits.

He was one of the most successful traders of all time and his legend lives on and many savvy traders around the world still use his methods

Check them out and you may be glad you did.

Not only are they innovative, they can give you big profit potential and that's what we all want as traders.

forex robots / Gann Angles — A Unique Powerful Tool For Trading Profits

2011-01-18T02:08:00.000-08:00

Author - Sacha Tarkovsky

W D Gann developed technical trading systems that made him a fortune of in excess of 50 million dollars.

Gann was a trading legend and his stature is reflected in the life size portrait people see when they enter the New York Stock Exchange.

Gann Angles were one of his most effective tools so let's look at them. What do they do?

Gann angles allow you to pinpoint your entry and exit levels for bigger profit potential. Let's look at why Gann angles work.

Gann based his investment strategy on the fact that by studying the Past we can see patterns that will be reflected in the future which is true of any technical systems, but his view was unique on how these patterns occurred

Gann based his methods on the following:

1. Price, time, and range are the only three factors relevant to market movement.

2. Markets are cyclical in nature.

3. Financial price movements are geometric in design and function.

Gann believed that market movements were a reflection of human nature which is constant over time and by studying the past we can predict the future.

Gann's use of angles

Gann's used three patterns to predict market behavior in the future

1. Price study- This uses support and resistance lines, pivot points and angles.

2. Time study — This looks at historically reoccurring dates derived from natural order that Gann believed governed market movement.

3. Pattern study — This studies trends using trend lines and reversal patterns.

Using Gann angles requires practice and experience and below we have outlined tha basics that anyone using Gann angles should keep in mind.

Firstly, determine time units.

The way to determine a time unit is to study charts and look at the distances in which significant price movements occur.

Put the angles to the test and see how they perform.

The intermediate time period ( 1 — 3 months) tends to produce the highest number of accurate patterns and is the time frame to trade.

Secondly, a trader needs to determine the high or low from which to draw the Gann lines

Here you can use Fibonacci levels or pivot points to help you get an accurate picture . Gann then looked for "vibrations" or "price swings."

Finally, you need to know which pattern to use:

The most common patterns are the 1x1, the 1x2, and the 2x and are purely differences in the slope of the line.

The 1x2 is half the slope of the 1x1.

The numbers simply indicate the number of units and the slope of the line.

Traders need to look for patterns to trade.

The direction of the slope will be either down and to the right from a high point or up and to the right, if it's a low point.

Always look for repeat patterns on the charts.

Gann' theories are based upon the cyclical in nature of market movement, so the easier the patterns are to spot the more likely they will be tradable for profit.

Using Gann Angles for Trading Profits

Gann angles are a fantastic tool for predicting support and resistance levels.

Of course, many other trading methods use support and resistance lines however Gann angles add a new dimension, simply because they are diagonal.

The best Gann Formation

Will indicate a balance between time and price.

This will occur when prices move in synch with time.

This is present when the Gann angle being studied is at exactly 45 degrees.

In total there are nine different Gann angles that can be applied.

When one line is broken, the following angle will then give the next area of support or resistance.

Gann angles are just one of the tools He used to amass a fortune trading other include, the Golden ratio, Fibonacci numbers — when combined you have a powerful proven trading method.

As markets are cyclical and human nature never changes Gann's methods still apply today and are used by many savvy traders.

Gann made millions from Gann angles and the tools above study his methods further and see what they can do for your trading and you may be glad you did.

forex ea / Bollinger Bands

2011-01-17T22:07:00.000-08:00

Author - Cynthia Macy

Contracting bands warn that the market is about to trend: the bands first converge into a narrow neck, followed by a sharp price movement. The first breakout is often a false move, preceding a strong trend in the opposite direction.

A move that starts at one band normally carries through to the other, in a ranging market.

A move outside the band indicates that the trend is strong and likely to continue — unless price quickly reverses.

A trend that hugs one band signals that the trend is strong and likely to continue. Wait for divergence (when the price is flat or rising or falling, but the MACD is going in the opposite direction...the price will break out in the direction of the MACD) or a Momentum Indicator to signal the end of a trend.

I use the BB's for indication of when a breakout or breakdown is imminent. When the outside bands get very narrow, it means the price is consolidating and is getting ready for a breakout, either up or down.

At this point, it's dangerous to have a position because you don't know if it's going to break up or down. When the bands get very narrow, it's almost better to close out your old positions, even at a loss, until you see a clear direction. If you don't want to close out an old position at a loss, at least hedge it. See more about hedging later in the Advanced Day Trade Forex course.

The BB's can't tell you which direction the breakout will be, the Chaos Oscillator (MACD) and Momentum will do that, and I always trade in the direction the Momentum and Chaos (MACD) are going.

Sometimes when using the slower timeframes, I use the outer BB's as targets for my limit sell price. If the bands are really wide after a big move, I use the middle band as my limit target price.

Bollinger Bands are designed to capture the majority of price movement. When prices move beyond the upper or lower band, they are considered high (overbought) or low (oversold) on a relative basis.

forex factory / Better Understand Technical Analysis and Some Indicators

2011-01-16T23:05:00.000-08:00

Author - Sorna Devadas

We're focusing on technical analysis in this article with a description of some of the important indicators.

We could say, all wealthy traders use technical analysis but not all technical analysis traders are wealthy although T.A. is the most precise way of trading the Forex market. It's also useful note that fundamentals play their part in indicating whether a price will move up or down. It gives you the edge over other traders.

Technical Analysis is so powerful because of a few reasons

1) it represents numbers. All information and its impact on the market and traders is represented in a currency's price. 2) It helps to predict trends and the foreign exchange market is very 'trendy'. 3) Certain chart patterns are consistent, reliable and repeat themselves. T.A. helps us to see them.

Here's one way of putting technical analsysis into perspective (wish I had a dollar each time I said 'technical analysis'). We all know that prices move in trends. Research has shown that those that trade 'with the trend' greatly improve their chances of making a profitable trade.

Trends help you become aware of the overall market direction and often rescue us from less then profitable entry points. I attended a 2 day course costing me over $2500 AUD and the biggest thing I learned from it was the need for discipline and emotional control. The content was so basic that within the next 3 or 4 articles, I would have covered all of it. So learning the 'tools of the trade' the technical indicators and their applications will help you to diagnose what the market is doing but even then you need to expect ups and down and trade with emotional control.

Stay with the trend, follow the price.

Find the price of the currency pair. If EUR/USD is 1.4224 and moves to 1.4180 then 1.4090 then the market is in a down trend. Concern yourself only with what the market IS doing not what it might do. Listen to the markets and the indicators will backup what they are telling you.

Moving Averages. Tell you the price at a given point of time over a defined period of intervals. They are called moving because they give you the latest price while calculating the average based on the selected time measure.

They lag the market so to give you an indication of a change in trend, use a shorter average such as a 5 or 10 day moving average. By combining a shorter term and longer term M.A. you can detect a buy signal when the shorter term crosses the longer term moving average in the upward direction. Or a sell signal if it crosses in a downward direction. For example, you could use a 5 day versus a 20 day moving average or a 40 day versus a 200 day moving average. There are simple moving averages, linearly weighted which gives more importance to the recent prices or exponentially weighted. The latter is a favourite because it considers all prices in a time period but emphasizes the importance of the most recent price changes.

MACD Based on moving averages, a MACD plots the difference between a 26 exponential moving average and a 12 day exponential moving average, with a 9 day used as a trigger line. If a MACD turns positive when the market is still plummeting it could be a strong buy signal. The converse also works.

Bollinger Bands (sounds like an elastic band) Prices tend to stay between the upper and lower bands. They widen and become more narrow depending on the volatility of the market at the time. A sell signal would be when the moving average is above the Bollinger bands and vice versa for a buy signal. Some traders use it in conjunction with RSI, MACD, CCI and Rate of Change.

Fibonacci Retracement Describe cycles found throughout nature and when applied to technical analysis can find shifts in the market trends. After a climb prices often retrace a large portion sometimes all of the original move. Support and resitance levels often occur near the Fibonacci retracement levels.

RSI Relative Strength Index measures the market activity to see whether it's overbought or oversold. This is a leading indicator so helps to indicate what the market is going to do (awesome!). Ahigher RSI number indicates overbought (so expect a bearish shift) and a lower number indicates oversold.

Successful traders will generally use 3 or 4 signals to provide a more conculsive signal before entering a trade.

Always remember, "If in doubt, stay out!" . Technical analysis doesn't factor in political news, a country's economic profile or fundamental supply and demand.

Technical Analysis helps us figure out how much money to risk on a trade. How and when to enter the market and how to exit the trade for profit or to minimize loss.

I sincerely hope you find this article useful.

forex scalping / Moving Averages Basics And How They Help FOREX Traders

2011-01-15T22:04:00.000-08:00

Author - Adrian Pablo

With Forex trading becoming a more extended and desired occupation for lots of people around the world, living with the desire of working at home and still having the ability to gain a full time income, the need for accurate trading systems and techniques has become a major necessity for all these new forex traders.

Among one of the important concepts a new forex trader should know is what a Moving Average means, how it's calculated and what its use as a trading indicator is.

Moving Average is defined as a technical indicator that shows the average value of a particular currency pair over a previously determined amount of time. This means, for example, that prices are averaged over 20 or 50 days, or 10 and 50 min depending on the time frame you are using at the moment of your trading activity.

As an averaged quantity, MA's can bee seen as a smoothed representation of the current market activity and an indicator of the major trend influencing the market behavior.

This smoothing effect of the Moving Average is very helpful when the trader is looking for getting rid of the "noise" in the price fluctuations of the currency pair he is trading at the moment and a more precise emphasis in the trend direction is required.

The basic mechanics of how Moving Averages can tell you where the forex market is moving (up or down), at the moment of your analysis is by considering two different time frame Moving Averages and plotting them on the forex chart. It is very important that one of these MA is over a shorter time period than the other one; let's say one will be over a 15 days period and the other over a 50 days period. Most trading station software available by a number of brokers will let you do this plotting and much more.

Once you have plotted the two Moving Averages, you will notice points of crossover where the shorter time period MA will cross above the longer time period MA indicating an upward trend in the market, or if the crossing is below the longer period MA that will be an indication of a down trend in the forex market.

So from this simple concept you can commence to understand the basics of confirming trends when checking your forex charts during your trading hours

forex strategy / Forex Traders Need To Know About Crossing Currency

2011-01-14T18:02:00.000-08:00

Author - David Mclauchlan

Why did the currency cross the road? No this has nothing to do with the term crossing currency

Crossing currency on the Forex is one of the most profitable ways to earn money for many investors. The Forex is unlike any other type of market in the world. The foreign exchange market is extremely liquid and involves over two trillion dollars everyday. The top three currencies that are most traded on the Forex are the US dollar, the Japanese yen and the Euro. All of these currencies are traded the most out of all other forms of currency.

With the foreign exchange currency being so large, it is very liquid. Crossing currency using the Forex allows a large amount of flexibility for the trader and investor. The Forex gives the trade the ability to buy and sell currency quickly so that they are never stuck in any investment. When investors use online trading as their form of crossing currency, the trading platform can be pre-set to the preferences of the trader. If the trade is not going as expected, the platform can be set to stop the trade, allowing the trader to lose less money while using the Forex.

Learning to trade on the foreign exchange, also called the Forex, market can be both exciting and profitable. In order to trade successfully on the Forex it is essential to understand the way the market works, the terminology and the trends. Brokers and financial institutions are often the best way for traders to learn how to use the Forex for profit.

When an investor or individual wants to trade one type of currency for another, it is called exchanging currency, or crossing currency. Currency crossing is the main goal of trading on the Forex. For example, if a business or investor has US dollars and needs to trade those into Japanese yens, a broker would do this on the Forex. Many investors trade currency to make a profit. When a certain type of currency is bought at a low exchange rate, the currency can be sold once the rate increases to turn a profit.

Learning to cross currency in the Forex can be complicated. The biggest factor in trading on the Forex is having knowledge about the Forex and how it works. In addition, there are many benefits of using the Forex for trading. Crossing currency gives traders the leverage to make large profits while keeping the risk of losing capital to a minimum. In ideal conditions, an investor that puts in $500 could potentially make over $100,000.

Crossing currency also allows traders and investors to profit in rising and falling markets. This is another difference between the stock market and the foreign exchange market. With the stock market, an investor can only make money when the shares are on the rise. When there is a falling "bear" market or the stocks decline, investors cannot make money on the stock market. When crossing currency in the Forex, this is not true. This is one appealing factor of trading on the Forex. Investors can make large amounts of profits when a currency pair is either up or down. Crossing currency in the right direction can always make profits.

Another benefit of using the Forex for currency crossing, or trading is that the Forex is always open. When investing the in the stock market, the trading is limited to when the market is open. It has a definite closing time during the business week. This is not true of the foreign exchange currency. The Forex is open all the time and does not close. Traders benefit from the ability to trade twenty-four hours a day using the Internet.

Learning to trade on the Forex can be easy when new investors go through an experienced broker or financial institution. Also, there are many ways to learn how to trade on the Forex using free demo accounts available on the Internet. These websites offer valuable resources and free ways for the new investor to practice using the Forex. This is very important for those who want to learn the ins and outs of crossing currency before opening an actual account. Mini Forex accounts are also a good way for the new investor to trade currency without having the risk of a regular account. A mini account allows traders to use a smaller amount of money as their initial investment.

forex indicators / Trading Trend And Ranges In Today's Forex

2011-01-13T22:01:00.000-08:00

Author - David Mclauchlan

First what is Forex: The FOREX or Foreign Exchange market is the largest financial market in the world, with an volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another.

When you choose to start trading in the Forex market, which is often called the foreign exchange market, you will need to know a little trading vocabulary. Learning specific terms and what they mean are essential before you even think about using real money to trade. You would never get into a pilot's seat and try to fly a plane without ever having taken flying lessons. The same goes for foreign exchange market trading. You need to be fully aware of what you are doing. This is a market that is not quickly learned, so you should never assume that once you jump into it, you will learn as you go. While some people opt to do that, they typically end up losing an adequate sum of money because they were not as prepared as they should have been. Knowing the importance of trading trends and ranges in Forex trading is very important. If you are thinking of trading in the Forex market, be sure you know what these terms mean and their implications.

Trading Trend

When price moves consistently in one direction in the Forex, a trend occurs. When the direction is higher, the trend is often called bullish. When the direction of the price is moving lower, the trend is often called bearish. These terms are relative of course. When you define a trend, you should always remember that price peaks and troughs are in the same direction. When you are dealing with a bearish trend, remember that price highs and lows are moving lower. Likewise when you are dealing with a bullish trend, they are moving higher.

Often when trends occur, it is possible to draw support lines under one that is moving higher (an uptrend). You can also often draw resistant lines above one that is moving lower (a downtrend). Once you see these lines break, it can be assumed that the trend is complete. At this point there is a possibility that the trend will begin to reverse. When it does reverse, you will need to know the pattern of what that entails.

Trend Reversal

When you hear of a trend reversal, it simply means that the direction of market prices is changing. Often you will see trend reversals following a four step pattern. Usually, this includes the market making a new high, the trend line being broken, the market making an intermediate low, and a new rally that does not match the first high. Many times you will see prices break the previous low however. You may come across terms such as Double, Triple Tops, and Bottoms, which are all trend reversal patterns. Head and shoulders patterns are also popular reversal patterns.

Trading Range

The trading range is actually a sideways chart pattern. It is often used to represent a resting period before the original trend is resumed. You may see these when you are charting trends and should know what they imply.

Often trends are very important to investors. Those who engage in trend-following are people who look at major trends and make decisions in the direction of the trend. This can be a good strategy, but you must know a great deal about trends and the market in general in order to use this technique successfully. Beginners are not usually very good at tracking trends and using trend-following techniques. One thing that you should also note is that some price movements are trendless. This means that they have no clear direction, which makes trend-following nearly impossible.

Remember, that in order to fully understand trends, you must be educated in the ways of the market and foreign exchange in general. Beginners should not rely heavily on foreign exchange market trend tracking. Once you get more experience you can begin looking into tracking more and more. However, be aware that different things affect and influence the Forex. These influences can change what people expect trends to be. Therefore, you should be a seasoned trader in order to rely on the trends and ranges alone. Educate yourself on these terms and learn to recognize them in the actual market. After all, learning the terms is one thing and being able to see them in reality is different.

forex broker reviews / Relative Strength Analysis In Forex Trading

2011-01-12T10:00:00.000-08:00

Author - David Mclauchlan

First what is Forex: The FOREX or Foreign Exchange market is the largest financial market in the world, with an volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another.
Analysis means: Research used to assist in predicting the direction of the markets based on technical data relating to price movements of the market, or on fundamental data such as corporate earnings.
The relative strength analysis is a technical report that allows investors and brokers to make informed decisions about trading on the Forex. The Forex, also known as the FX or foreign exchange market is the most liquid of all markets in the world. Over two trillion dollars changes hands everyday through the foreign exchange market. There are many factors that affect both the stock market and the foreign exchange market.
When investors and brokers look at the relative strength analysis, they are getting a picture of how the trends in the Forex should go. This analysis allows brokers to see current trends in the foreign exchange market and allows them to know if they are interested in buying or selling currency at any given time. This can help an investor or financial institution make educated decisions on which markets are gaining and which ones are losing.
There are many factors that affect the exchange rate in the Forex. These factors can include political events, governmental policies, inflation, and current trends in the importing and exporting business, consumer opinions and even natural disasters all over the world. The relative strength analysis looks at all of these factors. The past trends in the Forex are also taken into consideration, but are not the only thing that is looked at when forecasting this type of market.
The relative strength analysis compares all foreign currency and the exchange rates every day. The report will then be sorted by their strength rating and ranked according the previous week's rating. This report relies on at least 45 weeks of data so that sustained growth can be seen with ease. Using this analysis promises to be one of the most valuable tools of forecast the trends in the Forex. In addition, it can show the rating of stocks and rate them into which ones are the strongest. The stock market has a direct relation to the foreign exchange market because it reflects current trends in buying and selling, which will increase or decrease the value of currency.
The current trend in predicting the trends in the Forex is to use not only the relative strength analysis, but to also look at other factors such as the stock market barometers and economic factors. When investors and brokers look into all of these factors when forecasting the Forex, it makes for a highly reliable means of predicting trends. This can be the vital difference between making money and losing money on the foreign exchange market.
When using the relative strength analysis in relation to the foreign currency exchange, it is possible to tell which markets are performing well and which ones are not. The key is finding the markets and currency that are moving up on the ranking scale. It is important to remember that like stocks, the Forex is affected by a variety of factors. The relative strength analysis can help investors find which ones are good investments. This report is based mostly on a stock's closing price and the relative strength analysis is based on gains and losses. The report can calculate the markets report for any period in time.There are several benefits to using the relative strength analysis when attempting to forecast the Forex. When an investor looks at the relative strength of a certain stock, it affects the foreign exchange rate. One with a strong relative strength is ideal, but the value on these will not be low. Investors can look at a stock that is increasing in values and used the relative strength to measure whether or not this particular stock is moving up because it has a history of increasing or if it has a sustained high value. Stocks with a good relative strength over a constant, steady time period are good performers in the Forex market.

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forex blog / Fibonacci And The Forex Market

2011-01-11T21:57:00.000-08:00

Author - David Mclauchlan

First what is the Forex market: The FOREX or Foreign Exchange market is the largest financial market in the world, with an volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another.

Strategies for anticipating and capturing significant turns in stocks, stock indices and exchange-traded funds in Forex trading are known as Fibonacci strategies. Classic principles and applications of Fibonacci numbers and a trading system known as the Elliott Wave are used. Basically the idea is to calculate and predict key turning points in the markets, analyze business and economic cycles and identify profitable turning points in interest rate movement. Forex traders also benefit from the system and from Fibonacci.

Fibonacci was the name used by the Italian mathematician Leonardo Pisano from 1170 to 1250. The son of Guilielmo and a member of the Bonacci family, Fibonacci sometimes used the name Bigollo, which may mean good-for-nothing traveller. Fibonacci was a genius ahead of his day. He was a brilliant mathematician who wrote several books. He is most well known today for the sequence 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, etc, which figures prominently in what is today known as Fibonaccian mathematics, and has a quarterly scholarly journal devoted to it. Until that time the Western world had used the Roman numeral system, Fibonacci introduced the West to the modern decimal system, imported from Babylonia. The Fibonacci number sequence is studied as part of number theory and hase applications in the counting of mathematical objects such as sets, permutations and sequences, as well as in computer science.

It was Fibonacci's belief that Arabic numerals were simpler and more efficient than Roman numerals. He traveled throughout the Mediterranean world and studied under the major Arab mathematicians returning to Pisa around 1200. In the year 1202, at the age of 32,Fibonacci published his findings in The Book of Calculation. In it he showed the practical importance of this new number system by applying it to commercial accounting and to conversion of weights and measures. He also showed how to apply it to the calculation of interest, money changing, and many other applications. The book was well received and had a profound impact on European thought. Despite this, the use of decimal numbers did not become widespread until the invention of printing almost three hundred years later. Fibonacci was honored to be a guest of the Holy Roman Emperor Frederick II who was a fan of mathematics and science. In the year 1240 his city, the Republic of Pisa honored him by paying him a salary from the city.

Fibonacci's numbers are used in the run time analysis of Euclid's algorithm determining he greatest common divisor of two integers. It was also used by Yuri Matiyasevich to solve Hilbert's tenth problem. The numbers are also used in a formula about diagonals Pascal's triangle. He said that every positive integer can be written uniquely in a way as the sum of one or more distinct Fibonacci numbers and in that way the sum does not include any two consecutive numbers, which is called Zeckendorf's theorem. A sum of Fibonacci numbers that satisfies these ideas is a Zeckendorf representation

The numbers are also commonly found in nature. They have been found in the patterns of leaves, grass and flowers, and branches in bushes and trees. Fibonacci numbers can also be found in the arrangement of tines on a pine cone, in raspberry seeds and other natural sources. Genes too and enzymes often show Fibonacci patterns.

Fibonacci, known in his day and recognized as a genius, was able to see patterns that escaped others. It is only with the modern age of computers that his numbers and patterns can be utilized anywhere near what he envisioned. Fibonacci's translation of Arabic numerals, replacing the limited and bulky Roman system of numerals, is a debt the entire modern world owes to him. Serious Forex traders also owe a debt to the man from Pisa.

forex calculator / The Elliott Wave Theory For Forex Markets

2011-01-09T09:56:00.000-08:00

Author - David Mclauchlan

The Forex, or foreign currency exchange, is all about money. Money from all over the world is bought, sold and traded. On the Forex, anyone can buy and sell currency and with possibly come out ahead in the end. When dealing with the foreign currency exchange, it is possible to buy the currency of one country, sell it and make a profit. For example, a broker might buy a Japanese yen when the yen to dollar ratio increases, then sell the yens and buy back American dollars for a profit. One of the best known and least understood theories of technical analysis in forex trading is the Elliot Wave Theory. Developed in the 1920s by Ralph Nelson Elliot as a method of predicting trends in the stock market, the Elliot Wave theory applies fractal mathematics to movements in the market to make predictions based on crowd behavior. In its essence, the Elliot Wave theory states that the market — in this case, the forex market — moves in a series of 5 swings upward and 3 swings back down, repeated perpetually. But if it were that simple, everyone would be making a killing by catching the wave and riding it until just before it crashes on the shore. Obviously, there's a lot more to it.

Elliot Wave Basics

Every action is followed by a reaction.

It's a standard rule of physics that applies to the crowd behavior on which the Elliot Wave theory is based. If prices drop, people will buy. When people buy, the demand increases and supply decreases driving prices back up. Nearly every system that uses trend analysis to predict the movements of the currency market is based on determining when those actions will cause reactions that make a trade profitable.

There are five waves in the direction of the main trend followed by three corrective waves (a "5-3" move).

The Elliot Wave theory is that market activity can be predicted as a series of five waves that move in one direction (the trend) followed by three 'corrective' waves that move the market back toward its starting point.

A 5-3 move completes a cycle. And here's where the theory begins to get truly complex. Like the mirror reflecting a mirror that reflects a mirror that reflects a mirror, the each 5-3 wave is not only complete in itself, it is a superset of a smaller series of waves, and a subset of a larger set of 5-3 waves — the next principle.

This 5-3 move then becomes two subdivisions of the next higher 5-3 wave.

In Elliot Wave notation, the 5 waves that fit the trend are labeled 1, 2, 3, 4 and 5 (impulses). The three correcting waves are called a, b and c (corrections). Each of these waves is made up of a 5-3 series of waves, and each of those is made up of a 5-3 series of waves. The 5-3 cycle that you're studying is an impulse and correction in the next ascending 5-3 series.

The underlying 5-3 pattern remains constant, though the time span of each may vary.

A 5-3 wave may take decades to complete — or it may be over in minutes. Traders who are successful in using the Elliot Wavy theory to trade in the currency market say that the trick is timing trades to coincide with the beginning and end of impulse 3 to minimize your risk and maximize your profit.

forex news / Neural Networks Learn Forex Trading Strategies

2011-01-08T21:55:00.000-08:00

Author - Duncan McQueen

The latest buzz in the Forex world is neural networks, a term taken from the artificial intelligence community. In technical terms, neural networks are data analysis methods that consist of a large number of processing units that are linked together by weighted probabilities. In more simple terms, neural networks are a model loosely resembling the way that the human brain works and learns. For several decades now, those in the artificial intelligence community have used the neural network model in creating computers that 'think' and 'learn' based on the outcomes of their actions.

Unlike the traditional data structure, neural networks take in multiple streams of data and output one result. If there's a way to quantify the data, there's a way to add it to the factors being considered in making a prediction. They're often used in Forex market prediction software because the network can be trained to interpret data and draw a conclusion from it.

Before they can be of any use in making Forex predictions, neural networks have to be 'trained' to recognize and adjust for patterns that arise between input and output. The training and testing can be time consuming, but is what gives neural networks their ability to predict future outcomes based on past data. The basic idea is that when presented with examples of pairs of input and output data, the network can 'learn' the dependencies, and apply those dependencies when presented with new data. From there, the network can compare its own output to see how close to correct the prediction was, and go back and adjust the weight of the various dependencies until it reaches the correct answer.

This requires that the network be trained with two separate data sets — the training and the testing set. One of the strengths of neural networks is that it can continue to learn by comparing its own predictions with the data that is continually fed to it. Neural networks are also very good at combining both technical and fundamental data, thus making a best of both worlds scenario. Their very power allows them to find patterns that may not have been considered, and apply those patterns to prediction to come up with uncannily accurate results.

Unfortunately, this strength can also be a weakness in the use of neural networks for trading predictions. Ultimately, the output is only as good as the input. They are very good at correlating data even when you feed them enormous amounts of it. They are very good at extracting patterns from widely disparate types of information — even when no pattern or relationship exists. Its other major strength — the ability to apply intelligence without emotion — after all, a computer doesn't have an ego — can also become a weakness when dealing with a volatile market. When an unknown factor is introduced, the artificial neural network has no way of assigning an emotional weight to that factor.

There are currently dozens of Forex trading platforms on the market that incorporate neural network theory and technology to 'teach' the network your system and let it make predictions and generate buy/sell orders based on it. The important thing to keep in mind is that the most basic rule of Forex trading applies when you set out to build your neural network — educate yourself and know what you're doing. Whether you're dealing with technical analysis, fundamentals, neural networks or your own emotions, the single most important thing you can do to ensure your success in Forex trading is to learn all you can.

forex signals / Forex and Some Important Facts about Bollinger Bands

2011-01-07T12:53:00.000-08:00

Author - Adrian Pablo

Forex trading is nowadays one of the most looked after occupation for many persons of all ages around the world. This is due to its great advantages over other capital markets and its high profitability potential; among these advantages you will find that is extremely easy to access a trading platform from the best forex broker firms thanks to the internet; and also you will notice that Forex has a high liquidity along with a high leverage.

But having a good broker firm and great trading platform is only one part of what you need in order to make your forex trading career a winning and profitable one. You need to have the right knowledge and techniques in order to forecast with the best accuracy what the market will do next. One of the techniques used to predict the Forex market behavior is that based on Bollinger Bands.

These Bollinger Bands are what is called a technical trading tool and they are widely used in the capital markets (including Forex) and were created by John Bollinger in the early 1980s. These bands technique was formulated based on the need for adaptive trading bands and the discovery that the volatility of the markets was a dynamic phenomena, not a static one as was widely believed at the time.

Bollinger Bands consist of a chart of three curves drawn in relation to currency pairs prices. The band situated in the middle is a measure of the intermediate-term trend and is usually a simple moving average, that serves as the base for the upper and lower bands. The interval between the upper, lower and the middle bands is determined by the volatility of the market, typically the standard deviation of the same data that were used for the moving average. The default parameter is 20 periods and two standard deviations above and below the middle band; of course this may be adjusted to suit your needs.

In short, the purpose of Bollinger Bands is to provide a relative definition of high and low price. By definition prices are considered high when touching the upper band and low when they touch the lower band. This relative definition can be used by the Forex trader to compare price actions and as a very useful indicator when the purpose of the trader is to arrive at rigorous buy and sell decisions.

forex system / Trading Forex With Pivot Points

2011-01-06T23:51:00.000-08:00

Author - E.J. Sieberhagen

Pivot Point Trading are used today by Forex Traders and are calculated on the previous days move and trades are entered when the market hits a support or resistance line of the pivot point providing your OB/OS indicator is in agreement. All the support and resist lines are put in place 1st thing in the morning. then you wait for the market to hit those entry Points.

Contrary to what some might believe, trading Forex with Pivot Points are probably the most popular method used in trading the financial markets today. Long before the invention of computers this was the method used by the traders in the pits to determine hidden support and resistance levels.

The Pivot Point is still used by experienced floor traders and technical analysts alike. The major advantage now is that we now have computers and can calculate our points well in advance. Many charting packages can calculate them for you automatically, thus enhancing the use of Pivot Points.

Whilst there is a lot more to Pivot Point Trading in Forex Trading than we will be mentioned in this article, the purpose of this exercise is to introduce you to the concept of trading Forex with Pivot Points.

Remember the market can only go up, down, or sideways. It is like an elastic band that has been stretched, sooner or later it will rebound to an equilibrium point where the market is in balance, and then stretch the opposite way only to rebound and reach another balance point. Then some fundamental announcement or happening will drive the market in a new direction and so on day after day. Pivot Points can aid us in determining how far that elastic can stretch before it rebounds.

Whilst there are many time frames that can be used for calculating Pivots, for the purpose of this exercise lets concentrate on the daily time frame (i.e.: 24hr) Pivot Points are calculated using the previous days, Open, High, Low, and Close figures. There are many Pivot Point calculators available on the web so you don't have to waste your time doing the calculations manually. Also bear in mind the longer the time frame you are using the longer you must be prepared to stay in the market or wait for the next entry point.

Pivot points unlike many other indicators are an objective tool. Because they are mathematically calculated, there can only be one answer for a specific time period.

Many subjective indicators like Fibonacci retracements, (and I am a great fib fan) Elliot waves etc. can have different people trading in different directions at the same time due to individual interpretation..

The PP's can help you to predict the next day's highs and lows in advance. PP's can give you anything from 4 to 8 support and resistance levels. However you still have to be able to identify the trend to be a successful PP trader. Pivot Points also work best in a trending market.

Entry and exit points

Pivot Points can give you exact entry and exit points, rather than enter markets that are in the middle of a run, or about to turn the other way. Here is where we use other indicators to assist on the entry or exit. If the market stalls at a Pivot Point level, and you have an overbought or oversold indicator that will be a good time to get in or out. Or if a Fibonacci level coincides with a Pivot Point level it can make a strong case to enter or exit a trade. If the market is bullish and your favourite indicator is not near overbought, when it hits the first resistance level then you probably have a good case to stay in the market and make your profit target the next Pivot Point resistance line. The breakout above the 1st resistance level can then become your new stop or stop reverse.

Obviously the reverse is true of the support level as well. By combining the Pivot Points with your favourite indicator you can develop your own trading system that no one else uses.

Trading for the day will probably remain between the 1st support (S1) and resistance (R1) levels as the floor traders make their markets. Once one of these levels is penetrated other traders will be attracted to the market, and should the second level be breached, the longer term traders are attracted to the market.

Knowledge of where the floor traders are expecting support or resistance can be a distinct advantage especially when there is no outside influence in the market. Provided no significant market news has occurred between yesterdays close and today's opening, the local floor traders and market makers tend to move the market between the Pivot Point (P) and the first support line (S1) and resistance (R1) If one of these levels is breached then expect the market to test the next levels (S2) and ( S3) or (R2) and (R3)

Whilst there are many other aspects to Pivot Point trading why not try this simple method first and see if you can develop your own strategy by using your existing trading technique's in conjunction with the Pivot Points.

forex trading signals / * * Forex Articles * WebMoney * PayPal * Moneybookers * Liberty Reserve Advertising: Forex Signals: 600+ pips/month Forex Trading - Lifetime Bonus Subscribe to the Forex Newsletter How To Read Forex Charts: 5 Things You Must Know

2011-01-05T21:49:00.000-08:00

Author - Mark Hamburg

Learning the basic skills in forex, such as how to read forex charts, is really important.

This is because once you have this vital skill under your belt, it will be a lot easier and quicker when the time comes for you to learn and practice an actual forex trading system.

By the time you finish this article, you'll learn how to read forex charts, as well as know the pitfalls that can occur when reading them, especially if you haven't traded forex before.

Firstly, let's revise the basics of a forex trading as this relates directly to how to reade forex charts.

Each currency pair is always quoted in the same way. For example, the EURUSD currency pair is always as EURUSD, with the EUR being the base currency, and the USD being the terms currency, not the other way round with the USD first. Therefore if the chart of the EURUSD shows that the current price is fluctuating around 1.2155, this means that 1 EURO will buy around 1.2155 US dollars.

And your trade size (face value) is the amount of base currency that you're trading. In this example, if you want to buy 100 000 EURUSD, you're buying 100 000 EUROs.

Now let's have a look at the 5 important steps on how to read a forex chart:

1. If you buy the currency pair, that is, you're long the position, realise that you're looking for the chart of that currency pair to go up, to make a profit on the trade. That is, you want the base currency to strengthen against the terms currency.

On the other hand if you sell the currency pair to short the position, then you're looking for the chart of that currency pair to go down, to make a profit. That is, you want the base currency to weaken against the terms currency.

Pretty simple so far.

2. Always check the time frame displayed. Many trading systems will use multiple time frames to determine the entry of a trade. For example, a system may use a 4 hour and a 30 minute chart to determine the overall trend of the currency pair by using indicators such as MACD, momentum, or support and resistance lines, and then a 5 minute chart to look for a rise from a temporary dip to determine the actual entry.

So ensure that the chart you're looking at has the correct time frame for your analysis. The best way to do this is to set up your charts with the correct time frames and indicators on them for the system you're trading, and to save and reuse this layout.

3. On most forex charts, it is the BID price rather than the ask price that's displayed on the chart. Remember that a price is always quoted with a bid and an ask (or offer). For example, the current price of EURUSD may be 1.2055 bid and 1.2058 ask (or offer). When you buy, you buy at the ask, which is the higher of the 2 prices in the spread, and when you sell, you sell at the bid, which is the lower of the two prices.

If you use the chart price to determine an entry or exit, realise that when you place an order to sell when the chart price is say 1.330, then this is the price that you'll sell at assuming no slippage.

If on the other hand, you place an order to buy when the chart price is the same price, then you'll actually buy at 1.3333. A forex system will often determine whether your orders will be placed simply according to the chart price or whether you need to add a buffer when buying or selling.

Also note that on many platforms, when you're placing stop orders (to buy if the price rises above a certain price, or sell when the price falls below a certain price) you can select either "stop if bid" or "stop if offered".

4. Realise that the times shown on the bottom of forex charts are set to the particular time zone that the forex provider's charts are set to, be it GMT, New York time, or other time zones.

It's handy to have a world clock available on your computer desktop in order to convert the different time zones. This is important when you're trading major economic announcements.

You'll need to convert the time of an announcement to your local time, and the chart time, so you'll know when the announcement is going to happen, and therefore when you need to trade.

5. Finally, check whether the times on your forex charts corresponds to when the candle opens or when the candle closes. Your charting software may be different to someone else's in this way.

The reason I mention this, is that if you need to trade major economic announcements, either by entering a trade based on the movements that happen after the announcement, or to exit a trade before the announcement in avoid getting stopped out during it, then you need to be precise (to the minute!) as these trades are performed according to what happens at the 1 minute immediately after the announcement, not the candle afterwards!

So there you have it.

You now have the 5 essential keys to how to properly read forex charts, which will help you to avoid the common mistakes which many forex beginners make when looking at charts, and which will speed up your progress when you're looking at forex charting packages, and forex trading systems that you want to trade!

Now that you know this, practice looking at forex charts with each of these 5 points in mind.

So get to it!

forex forum / What's the .382 Fibonacci Ratio in Forex Trading?

2011-01-04T09:47:00.000-08:00

Author - Adrian Pablo

It was mentioned in a past article that Fibonacci forex trading is the basis of many forex trading systems used around the world by profitable forex traders. These systems are all based on the famous Fibonacci ratios (.236, .50, .382, .618, etc.) and each of them can specialize in a particular ratio along with other minor indicators in order to make the pinpointing of the entry and exit levels as accurate and profitable as possible.

One of the widely used Fibonacci ratios is the 0.382 ratio. As it can be easily seen on any forex chart, currency prices are continually changing and they follow an oscillatory pattern with peaks and valleys. The limit of the peak is usually called a resistance level while the valley is usually called a support.

In order to find the 0.382 ratio level what you do is, first; measure the size of the drop or rise over your time of interest. Once you have that value you multiply this by 0.382. Now depending on what you are looking at, a rise or a drop on the price of the particular "currency pair" you are trading, you will add the last value you calculated to the total drop or subtract the value from the total rise.

These operations will give you the 0.382 Fibonacci ratio level, either for a rise or a drop on the chart you are analyzing. Once you have the value you can then start planning the strategy you will follow in order to make a high probability profit from this valuable information. For the 0.382 ratio level calculated for a recent rise in the "currency pair" exchange price, your calculated level will be a highly probable support and for the case of a level calculated for a recent drop of the prices your level will be a highly probable resistance.

Knowing this ahead of the market and having the proper secondary indicators, will give you a huge advantage over most forex traders, and that's something any trader would like they could count on. That's why Fibonacci trading is so widely accepted over the world, and of course, why it's so profitable and successful.

forex signal / What's Fibonacci Forex Trading?

2011-01-03T23:45:00.000-08:00

Author - Adrian Pablo

Fibonacci forex trading is the basis of many forex trading systems used by a great number of professional forex brokers around the globe, and many billions of dollars are profitable traded every year based on these trading techniques.

Fibonacci was an Italian mathematician and he is best remembered by his world famous Fibonacci sequence, the definition of this sequence is that it's formed by a series of numbers where each number is the sum of the two preceding numbers; 1, 1, 2, 3, 5, 8, 13 ...But in the case of currency trading what is more important for the forex trader is the Fibonacci ratios derived from this sequence of numbers, i.e. .236, .50, .382, .618, etc.

These ratios are mathematical proportions prevalent in many places and structures in nature, as well as in many man made creations.

Forex trading can greatly benefit form this mathematical proportions due to the fact that the oscillations observed in forex charts, where prices are visibly changing in an oscillatory pattern, follow Fibonacci ratios very closely as indicators of resistance and support levels; maybe not to the last cent, but so close as to be really amazing.

Fibonacci price points, or levels, for any forex currency pair can be calculated in advance so that the trader will know when to enter or exit the market if the prediction given by the Fibonacci forex day trading system he uses fulfills its predictions.

Many people tries to make this analysis overly complicated scaring away many new forex traders that are just beginning to understand how the forex market works and how to make a profit in it. But this is not how it has to be. I can't say it's a simple concept but it is quite understandable for any trader once he or she has grasped the basics and has had some practice trading using Fibonacci levels along with other secondary indicators that will help to improve the accuracy of the entry and exit point for every particular trade.

forex chart / Pivot Points in Forex: Mapping your Time Frame

2011-01-02T21:43:00.000-08:00

Author - Raul Lopez

It is useful to have a map and be able to see where the price is relative to previous market action. This way we can see how is the sentiment of traders and investors at any given moment, it also gives us a general idea of where the market is heading during the day. This information can help us decide which way to trade.

Pivot points, a technique developed by floor traders, help us see where the price is relative to previous market action.

As a definition, a pivot point is a turning point or condition. The same applies to the Forex market, the pivot point is a level in which the sentiment of the market changes from "bull" to "bear" or vice versa. If the market breaks this level up, then the sentiment is said to be a bull market and it is likely to continue its way up, on the other hand, if the market breaks this level down, then the sentiment is bear, and it is expected to continue its way down. Also at this level, the market is expected to have some kind of support/resistance, and if price can't break the pivot point, a possible bounce from it is plausible.

Pivot points work best on highly liquid markets, like the spot currency market, but they can also be used in other markets as well.

Pivot Points

In a few words, pivot point is a level in which the sentiment of traders and investors changes from bull to bear or vice versa.

Why PP work?

They work simply because many individual traders and investors use and trust them, as well as bank and institutional traders. It is known to every trader that the pivot point is an important measure of strength and weakness of any market.

Calculating pivot points

There are several ways to arrive to the Pivot point. The method we found to have the most accurate results is calculated by taking the average of the high, low and close of a previous period (or session).

Pivot point (PP) = (High + Low + Close) / 3

Take for instance the following EUR/USD information from the previous session:

Open: 1.2386
High: 1.2474
Low: 1.2376
Close: 1.2458

The PP would be,
PP = (1.2474 + 1.2376 + 1.2458) / 3 = 1.2439

What does this number tell us?

It simply tells us that if the market is trading above 1.2439, Bulls are winning the battle pushing the prices higher. And if the market is trading below this 1.2439 the bears are winning the battle pulling prices lower. On both cases this condition is likely to sustain until the next session.

Since the Forex market is a 24hr market (no close or open from day to day) there is a eternal battle on deciding at white time we should take the open, close, high and low from each session. From our point of view, the times that produce more accurate predictions is taking the open at 00:00 GMT and the close at 23:59 GMT.

Besides the calculation of the PP, there are other support and resistance levels that are calculated taking the PP as a reference.

Support 1 (S1) = (PP * 2) — H
Resistance 1 (R1) = (PP * 2) — L
Support 2 (S2) = PP — (R1 — S1)
Resistance 2 (R2) = PP + (R1 — S1)

Where, H is the High of the previous period and L is the low of the previous period

Continuing with the example above, PP = 1.2439

S1 = (1.2439 * 2) — 1.2474 = 1.2404
R1 = (1.2439 * 2) — 1.2376 = 1.2502
R2 = 1.2439 + (1.2636 — 1.2537) = 1.2537
S2 = 1.2439 — (1.2636 — 1.2537) = 1.2537

These levels are supposed to mark support and resistance levels for the current session.

On the example above, the PP was calculated using information of the previous session (previous day.) This way we could see possible intraday resistance and support levels. But it can also be calculated using the previous weekly or monthly data to determine such levels. By doing so we are able to see the sentiment over longer periods of time. Also we can see possible levels that might offer support and resistance throughout the week or month. Calculating the Pivot point in a weekly or monthly basis is mostly used by long term traders, but it can also be used by short time traders, it gives us a good idea about the longer term trend.

S1, S2, R1 AND R2...? An Objective Alternative

As already stated, the pivot point zone is a well-known technique and it works simply because many traders and investors use and trust it. But what about the other support and resistance zones (S1, S2, R1 and R2,) to forecast a support or resistance level with some mathematical formula is somehow subjective. It is hard to rely on them blindly just because the formula popped out that level. For this reason, we have created an alternative way to map our time frame, simpler but more objective and effective.

We calculate the pivot point as showed before. But our support and resistance levels are drawn in a different way. We take the previous session high and low, and draw those levels on today's chart. The same is done with the session before the previous session. So, we will have our PP and four more important levels drawn in our chart.

LOPS1, low of the previous session.
HOPS1, high of the previous session.
LOPS2, low of the session before the previous session.
HOPS2, high of the session before the previous session.
PP, pivot point.

These levels will tell us the strength of the market at any given moment. If the market is trading above the PP, then the market is considered in a possible uptrend. If the market is trading above HOPS1 or HOPS2, then the market is in an uptrend, and we only take long positions. If the market is trading below the PP then the market is considered in a possible downtrend. If the market is trading below LOPS1 or LOPS2, then the market is in a downtrend, and we should only consider short trades.

The psychology behind this approach is simple. We know that for some reason the market stopped there from going higher/lower the previous session, or the session before that. We don't know the reason, and we don't need to know it. We only know the fact: the market reversed at that level. We also know that traders and investors have memories, they do remember that the price stopped there before, and the odds are that the market reverses from there again (maybe because the same reason, and maybe not) or at least find some support or resistance at these levels.

What is important about his approach is that support and resistance levels are measured objectively; they aren't just a level derived from a mathematical formula, the price reversed there before so these levels have a higher probability of being effective.

Our mapping method works on both market conditions, when trending and on sideways conditions. In a trending market, it helps us determine the strength of the trend and trade off important levels. On sideways markets it shows us possible reversal levels.

How we use our mapping method?

We at StraightForex (www.straightforex.com) use the mapping method in three different ways: as a trend identification (measure of the strength of the trend), a trading system using important levels with price behavior as a trading signal and to set the risk reward ratio (RR) of any given trade based on where the is the market relative to the previous session.

forex trading strategy / Forex Trading Indicators and the Ever Changing Market Conditions

2011-01-01T19:39:00.000-08:00

Author - Martin Redhead

Once you enter the Forex trading world you will immediately notice the need of using technical analysis in order to find trends when looking at the forex charts and also the importance of being aware of when they first develop so you can ride the trend until it ends. The foreign exchange market is a very strong trending market, lots of ups and downs in short periods of time, and it's, therefore, a place where technical analysis can be very effective.

But you should always remember that the indicators are only giving you a high probability behavior the markets may show when you are trading, but will never tell you the behavior of the currency prices with total certainty.

If you want to become a profitable forex trader you will need to use as many technical indicators as you can, or create a personalized trading strategy based on a combination of these indicators, to recognize with the best accuracy possible the trend. In other words, a professional forex trader will try to identify the major trend, the intermediate trend, and the short-term trend and then construct his trades in that direction based on how long their rules allow him to hold a position.

The forex markets are always changing, that's why you should always have an open criterion when using your technical indicators. Markets will be changing and different combinations of indicators may be required with time in order to have the most accurate, highest probability, prediction of future currency price behaviors.

If the action of the market shows your judgment to be correct, then you must consider staying with the market' and look for the maximum profit on each trade, according to your risk-to-reward/equity management rules. If you happen to be in a bad day and the market goes against you, the smart trader will take profits and get out of that trade. In a narrow market, when prices are not going anywhere, but move within a narrow range, there is no sense in trying to anticipate when the next big movement is going to be.

So, you must always be alert and open to use as many and as different indicators in order to stay tuned with the market and become a profitable trader at the end of the day.

free forex / The Best Forex Broker: One for Everyone

2010-12-31T09:43:00.000-08:00

Author - Carl Hayes

Dishonest and illegitimate brokers who defraud their customers are a disgrace to the online Forex brokerage business. Many traders are rightfully scornful of those who lack the basic decency to allow them to withdraw their funds, even after losses. And sometimes traders can't help but feel that if they could just locate that best Forex broker hidden somewhere in the far reaches of the cyber-jungle, trading and profiting would give the taste of fine French wines, instead of the usual vinegar. But are Forex brokers really such a wicked lot that even the Evil One himself is put to shame by his incompetence in comparison? Is the oversight of multiple government agencies, newspapers and the trader community insufficient to convince them to behave like normal people? Most importantly, since retail Forex is like a shower of gold and silver for online brokers, do they really need to kill their Golden Goose by defrauding traders and destroying their Forex strategies through misquotes and stop-running?

The fact of the matter is that the number of fraudsters in the Forex market is a lot smaller than what many disgruntled traders believe. If you have the misfortune of being a victim of one of them, no doubt, our words will not do much to help you trust the brokers. But we invite you to recall the fact that there are a significant number of firms which have been in operation for many years in nations where regulation and oversight is strictest. Surely, a broker with a long history in Switzerland does not prove much about the reliability of Forex brokers, but others headquartered in New York, and monitored and authorized by the authorities for years cannot have had the skills to keep everyone blind for so many years. Forex is risky, and requires patient study, but it is no longer a shady corner of the internet world: it is regulated and monitored, and more and more a part of the mainstream of financial business.

And while we'd love to send you to the best broker in this article, the good news is that we don't even need to. There are a large number of firms operating online today which cater to different kinds of investors with different expectations and skills. If you're a professional, you will not be equally satisfied by the offer of a decent, legitimate broker which caters to beginners and average traders for the most part. As a beginner, you're unlikely to have all your needs expectations fulfilled by a well-established firm with excellent services and yet a significant minimum deposit requirement. It is this diversity of offers that makes online Forex the field of pioneers, and such an exciting place to be for traders. If you're one of those brave people who want to explore this brave new world, go check your Forex broker ratings now, and who knows, maybe you'll grow to become the next Martin Schwartz of the century. Anything is possible in Forex.

forex trading strategies / Choosing the Right Forex Broker

2010-12-30T10:22:00.000-08:00

Author - David Thorpe

Introduction

When you first start trading the forex market finding a broker is unlikely to be a major concern; aren't all brokers the same anyway? Lets face it if you can find a trading strategy that you are comfortable with and become consistently profitable then that is the battle won, right? Unfortunately it isn't that easy and the shame of it is that there are too many so-called brokers out there who want to rip you off.

Where Does This Mentality Come From?

The retail forex industry has been brought up on the fact that FX is worth $2 Trillion in volume every single day (in reality only a fraction of this comes from private speculators, the vast majority is generated by large banks and multinational corporations). This is quite a lure especially when we are reminded at how this figure completely dwarfs the stock market, and we've all heard how much you can make from stocks. Now add the statistic into the mix that between 90 and 95% (probably closer to 99%) of all retail speculators lose money and you have a bevy of firms climbing all over themselves to get their hands on this cash. Forex is billed as the way to become mega rich, leave your job and live the life you've always wanted but if it was that easy everyone would be doing it!

How do Retail Brokers Position Themselves?

To answer this question we need to briefly explain some market dynamics. The forex market is completely decentralised. This means that, unlike centralised exchanges such as the NYSE and LSE, there is no central location where each transaction can be traced and recorded nor do currencies have specialist market makers responsible for providing quotes for the entire market. Instead, the entities that act as market makers for the currency market are the World's largest banks. These banks carry out transactions between each other on a regular basis, hence the term 'interbank market'. In order for you to deal directly with these large banks you need to establish credit relationships with them which takes a vast amount of money and consequently most people cannot afford to do this. So this is where the retail brokers come in; they connect you with the large banks. Because they are representing many clients they have enough equity to establish credit relationships and deal with these banks, supposedly on your behalf.

This Position is Open to Exploitation

Retail Forex Brokers are the middleman between you and the interbank market so every time you place an order to buy EURUSD for example, your broker alters their currency holding positions with their large bank partners to reflect this. Rightly so your broker charges a fee for this service which usually comes in the form of spread (the difference between the bid and the ask). The spread they offer you is slightly larger than the spread they are offered in the interbank market so your broker can make a small profit on every trade you make. Everything sounds all well and good so far, agreed?

Now let me ask you a question: suppose you work in Las Vegas as a runner placing bets at sports books for several clients. Now you've been doing this for a while and you recognise that some of your clients are good at picking winners and some are good at picking losers. If you could make a little extra on top of your fee for running by doing the opposite of the clients who consistently lose bets would you do it? Now suppose that 99% of your clients lose money over a long enough period of time so all you have to do is bet against them all and you will make a fortune! Sometimes around the really big sporting events you get so busy you can't place your clients' bets and your bets quickly enough so you figure you'll make sure you get in with good odds and then sort out your clients once you are done, meaning they get slightly or sometimes much worse odds than you. This mindset is greedy and unfortunate and you won't have many friends but at least you would make a good retail forex broker!

Sorry to use a gambling analogy here (trading should never be confused with gambling) but it does explain the problem quite nicely. All you have to do to apply it to our situation is switch out a few words: Las Vegas is the interbank market, runner becomes retail broker, sports book becomes large bank, bets become client trades, running fee becomes spread, big sports events are big news items and the difference between the odds you get and the odds your client gets is the slippage you hand out.

Isn't This Slightly Cynical?

Yes the analogy used is slightly cynical; it is not the case that every broker out there is guilty of these 'bucket shop' tactics (rest assured that every brokerage will deny it however) but it is far too common. Even bank traders can experience slippage at volatile times but the degree to which it occurs at the retail level is unacceptable. Furthermore you cannot use volatility as a defence when you begin to hound profitable traders with constant re-quotes, accusations of illegal scalping (no such thing even exists!) and forced account closure. And what about a brokerage going bankrupt without returning your funds? Is it any wonder that this article is questioning the honesty of some retail brokerages?

What About Regulation?

The retail market is still fairly young and therefore loosely regulated. However, there are two organisations that police the sector and they are beginning to step in and protect the consumer on a more regular basis. These organisations are the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). Of the two the CFTC is most heavily involved in the regulation of fraud, manipulation and abusive trade practices in the retail forex sector. The CFTC.gov website is an excellent source of information on customer protection and on-going legal disputes against brokers and other entities.

Lets Talk About the Positives

It's not all bad out there; certain firms do offer very attractive and honest services. Let us summarise some of the attributes you should consider looking for in a broker:

1. NFA and CFTC registered

2. No dealing desk, ECN style brokers

3. Variable spreads that reflect the volatility at interbank level

4. Firms that charge commission rather than a flat spread (the thinking here is the more you trade the more they make so it is in their interest to see you make profitable trades and continue to trade happily with them — less likely to be on the other side of your trades)

5. Friendly and efficient customer service

6. The offer to insure your capital in a secure bond (will protect client funds in the event of a broker's bankruptcy)

7. Limit entries (your broker allows you to enter the market with a specified 'chase factor' of a few pips. If your order is not filled within the acceptable 'chase factor' your order is either partially filled or not filled at all — prevents ridiculous slippage at times of high volatility)

8. A good reputation within the industry (check independent sites for user reviews)

9. No BS marketing that focuses on the multi millions you will make within months of opening your account (these firms prey on inexperienced traders and gamblers who have no chance of being profitable)

10. Realistic and modest margin/ leverage (firms that offer leverage over 100:1 are encouraging you to trade big and lose you account to them quickly - you may wish to look out for a broker who offers you a choice of margin requirements)

Of course not all of these attributes can be classed as 'golden rules'. If something is perceived as attractive then it is open to exploitation. For example, ECN brokers are becoming very popular and this has lead to several firms advertising an ECN service when they don't really have the technology to provide one.

Do Your Due Diligence

I know it can seem tedious but researching your chosen broker is definitely time well spent. At the very least you should spend time browsing a broker's website. You may like to make a list of things you like the sound of and things you don't (remember, if something sounds too good to be true then it probably is). Contact their customer support and put these issues to their representatives and see if you are offered a satisfactory response (also a great test of their customer service dept. and general professionalism). I would also seriously suggest checking the CFTC website and browsing forums, discussion boards, blogs and user review websites for any information. My last suggestion here is that you share your good and bad experiences within trading communities. Although you will probably never hear about it your efforts will save your fellow trader his/ her time, money and probably a few grey hairs.

Good luck and happy hunting!