If you want to use forex technical analysis, then you will need to look at forex charts to decide where to execute your trading signals.
You will of course need to combine indicators to do this – Here we will give you some essential ones, to help you achieve currency trading success.
Before we look at how to use forex charts correctly, lets make two things clear.
1. Day trading
Do not even try and attempt it. The time frame is to short and all volatility is random, so you have no valid data and will lose. Day trading profits is one of the biggest myths of forex trading – Don’t fall for it.
2. You can’t predict market turns in advance
Forget the far out investment theories like Elliot wave, Fibonacci numbers, cycles etc that are supposed to repeat with scientific accuracy – they don’t. If they did everyone would know the price in advance – so there would be no market.
Right lets move on and look at forex charts and how to get trading signals for longer term profits.
Determining the trend
You have a choice trend lines or moving averages.
The former are better, as you have more precise levels but there is no harm in using moving averages as back up.
Your main aim is to determine support and resistance levels and decide if they are going to break or hold.
Determining Price Momentum
You need to ALWAYS trade in the direction of price momentum. An accelerating price momentum through resistance for example would favour the bulls; if price momentum drops it favours the bears.
There are two essential indicators you can use and if you don’t know what they are learn them – the stochastic AND Relative Strength Index ( RSI) - these are simply great indicators for helping you enter trades and take profits.
Determining Volatility
You need to know about volatility from the point of view of warning pf price reversals and determining targets and there is no better tool than the Bollinger band.
This indicator should NOT be used to generate trading signals but as a warning of trend change coming, or in determining targets there is no better tool.
Using trend lines to determine areas of support and resistance combined with momentum indicators to time entry and exit levels is all you need.
These are objective tools that tell you what to do – Ignore ANY Technical tool that means you have to make subjective judgements i.e Elliot wave or cycles -they will simply see you lose.
The indicators above are essential tools and if you learn about them and combine them, you will have a simple robust method t trend follow or swing trade and ALWAYS trade with the odds in your favour.
If you remember the above in relation to your forex charts, you can achieve longer term currency trading success.
Friday, March 20, 2009
Forex Charts - Essential Indicators For Bigger Forex Profits
Monday, March 16, 2009
Forex Trading Strategy - 3 Basic Steps For Forex Success
If you want to trade forex you need a forex trading strategy, which will allow you to enter the elite 5% of traders who make money and avoid the 95% who lose all their money. Let’s look at a forex trading strategy for success.
1. Basics
Many people think they can buy success from a vendor on the net but you can’t – most of the advice sold is junk and you can get better info for free. Any one who promises to give you success for a few hundred bucks is lying – success comes from within only you will make yourself rich, no one else your on your own.
Educate yourself from the great free resources on the net as the basis of your forex trading strategy. Use a technical approach it’s far easier than fundamental analysis. The latter, will get your emotions involved and with news instantly discounted, its impossible to trade it so don’t try.
Your Forex Trading System
If you educate yourself on technical analysis then you need a system and here is what you need to look at:
1. Learn about breakout methodology (see our other articles) its easy to understand and apply and works.
2. A fatal mistake made by most traders in their forex trading strategy is they try to predict where prices will go.If you do you will lose. You are relying on hope and if you rely on hope like in any venture your are going to lose.
3. Trade the odds and this means price momentum should support your view and confirm the trade before you enter. Two great momentum indicators are - the stochastic and the Relative Strength Index – look them up and use them.
4. Money management is essential and you need to protect what you have - with a breakout methodology that’s easy, your stop will be close behind the breakout when it occurs.
If you follow the above 4 steps in constructing your forex trading strategy, you will have the basics of a system that’s easy to understand apply and makes big profits.
3. The Key To Success
The key to success is to have confidence and discipline
The above system will give you that.
Confidence is essential as it leads to discipline and if you don’t have the discipline to follow your system you have no trading system in the first place.
The other key is to work smart not hard – You get no rewards for effort just for the success of your forex trading signals, so trade infrequently.
Using a breakout system and only trading the best trends means that you can learn everything in about a week and your forex trading strategy will take around 30 minutes a day to apply.
If you base your forex trading strategy on the above 3 points you will have the ingredients needed to enjoy currency trading success.
Thursday, March 12, 2009
Forex market report for Friday 03.06.2009 and recomended actions
EURUSD
Upside is under pressure ahead of the NFP data release today and the Euro managed to recover after dipping to 1.2480 on yesterday. Minor resistance into the 1.2650/60 region has been cleared out and it looks like the barrier into the 1.2680/00 zone is being breached too, at the time of this writing. The break of 1.2680/00 should open 1.2850/80 for extended rallies once finding support above the 1.2680-1.2730 region. Hourly momentum is bullish while the dailies maintain a slightly bearish stance still. Key medium term resistance zone is formed within the 1.2990-1.3090 range and a breach above the 1.3100 mark will confirm the bullish structure. On the downside, support starts at 1.2660 backed by 1.2565, 1.2455/80 and 1.2330. Current quote is 1.2715 @07:10 GMT
Support levels: 1.2660, 1.2565, 1.2455/80, 1.2400/15 and 1.2330.Resistance levels: 1.2750, 1.2880/00 and 1.2990/00.Market sentiment: long-term : bearish, mid-term : bearish, short-term : slightly bearish
Yesterday recommended trade: stand aside
AUDUSD
The Aussie Dollar seem to resume uptrend after yesterday’s correction. Minor resistance emerges at .6480 followed by the key barrier at .6550. A potential break above .6550 will be important as it will confirm the uptrend, opening February’s high at .6850. On the lower side, support is formed into the .6330-.6360 region backed by .6250/80. Hourly momentum is positive at the time of this writing. Current quote is .6448 @07:10 GMT
Support levels: .6330/60, .6280/90 and .6250.Resistance levels: .6480, .6550, .6650 and .6730Market sentiment: long-term : bearish, mid-term : bearish , short-term : slightly bullish
Yesterday recommended trade: stand aside
EURCHF
Downside is under high pressure as the EUR failed to hold above 1.4750. Fast selling drags the pair towards support zone into the 1.4500 zone or maybe lower, to the 1.4300 record low reached on October 2008. Resistance emerges at 1.4650 followed by 1.4700 and 1.4830. Current quote is 1.4604 @07:10 GMT
Support levels: 1.4600, 1.4550, 1.4500 and 1.4300.Resistance levels: 1.4650, 1.4700, 1.4830 and 1.4930.Market sentiment: long-term : bearish, mid-term : bearish, short-term : bearish
Yesterday recommended trade: small short at 1.4930, initial stop at 1.4970, objective at 1.4860. Adjust stop to breakeven on +30 pips (at 1.4900) if reached : 0 (entry not reached)
Tuesday, March 10, 2009
Forex Market
If you’re a new to the forex (foreign exchange) market, you probably have a lot of questions. Making money in a global currency market is an exciting prospect; you’re probably wondering how, and what you need to get started. A lot of information on the internet is geared toward the knowledgeable trader who has at least experienced the stock market. Not everyone has the benefit of Wall Street experience. We are here to help you out if you’re not all that stock savvy and don’t have a financial background.
So, what is foreign currency exchange?
The basic term, foreign currency exchange, is used to explain the exchange of one country’s currency for another’s. If you’ve every traveled out of the country, you probably cashed in your American dollars to find that the trade was nowhere near equal. Forex is the same thing on a much larger scale – it’s similar to the market except it deals in liquid assets at all times. It’s the process of buying and selling cash from nations around the world.
How can foreign currencies be traded?
Currency exchanges can be handled on three different levels. You will need to use a broker or a brokerage firm that allows trades through one of the following:
• The Commodity Futures Trading Commission (CFTC) • Securities and Exchange Commission (SEC)
There is also what is called the off-exchange (over-the-counter) market. An example of this would be that you return from your vacation from Canada and trade your cash in for American dollars. This is only on a retail level or corporate level. Off-exchange trading is subject to very limited regulatory oversight.
How much money do I need to trade Forex?
It depends on the Forex dealer. Brokers concentrated in the Forex market can set their own minimum accounts and are allowed to set their own fees and rate schedules. You’ll need to ask your dealer how much money it’s going to cost you initially.
Many dealers will require a security deposit (a “margin”) to cover future transaction fees. When you choose a broker, make sure that you look over the fees and schedules carefully before you deposit any money. It is important to understand your broker’s capabilities, as well, before handling any transactions through their firm.
These are just a few basic facts about the Forex market to get you started. Trading foreign currencies can be an exhilarating experience when you’ve begun making money, but it is important to get an education before you start out. This website has a wealth of information for the new Forex trader, including tips and strategies. It is highly encouraged that you read up to explore the possibilities of trading in a worldwide environment
Foreign Exchange Dealer
Before you make the decision to switch brokers, you need to understand what spreads are really costing you. Then you can begin to see how lower spreads can improve your returns. When choosing a foreign exchange dealer, you also will want to ask the right questions and understand different brokers' quality of execution--given your trading style.
What is a spread?
A spread is the difference between the ask price (the price you buy at) and the bid price (the price you sell at) quoted in pips. Brokers make most of their money through the spread. Wider spreads result in a higher ask price and a lower bid price. As a consequence, you often may find yourself paying more when you buy and getting less when you sell. The spread compensates the market maker for taking on risk from the time
How do spreads affect forex trading?
Spreads affect the return on your trading strategy more than you think. Traders simply want to make money – by buying low and selling high. Wider spreads means buying higher and having to sell lower. A half-pip lower spread doesn't sound like much, but it can easily make the difference between a profitable trading strategy and an unprofitable one.
Tight spreads return the most cash
The tighter the spread, the better return for you – but not necessarily for your foreign exchange dealer. Tight spreads are meaningful only when they are executed in the way the trader intends. If your trade is somehow rejected or delayed execution, or your notice slippage and stop-hunting are getting in the way of your executions, it may be that your broker is being dishonest with you. It’s time to get a new broker when tight spreads are continuing to be displayed, but are delivered wide. It means that the system is being manipulated to your disadvantage.
What are your broker’s spread policies?
Spread policies usually differ depending on the broker. Sometimes you need to read the fine print. Some brokers may offer fixed spreads that are guaranteed to remain the same regardless of market liquidity. Other brokers offer variable spreads or different spreads for different clients depending on the amount of money they invest. Ask your broker for the paperwork that details their spread policies to make sure you are getting the best spread for your investment.
Foreign exchange dealers all approach their clients in different ways, but they all report to the same commissions and should be able to provide you with their policies in writing. The Forex marketplace is an exciting place to begin trading, and if you’re a new trader, it is highly recommended you read as much material as possible before you begin your trading plan. Don’t let brokers spend your profit on their fees. Make an educated decision
Forex Charts
You can view Forex charts to navigate trends in a variety of formats. Usually, your analysis tools will by supplied by your broker. Come traders also purchase software solutions for technical analysis online.
There are many types of charts for the Forex trader to use, but this article is going to give you insight into the basics. If you are familiar with the stock market, you may be familiar with some of these charts and how they are used.
When reading this article, you may find it helpful to use your charting software to generate some charts so you can learn as you go along.
The Forex Candlestick Chart
Each “candlestick” is composed of a vertical rectangle and/or vertical lines. The lines are actually more like blocks that look like a candlestick. This is the most common chart used to see trends in Forex rates. When looking at a candlestick chart, make note of the following:
• The rectangle – is it black or white? The rectangle color indicates the open and close of a day or trading periods. It may be colored black or white. It depends on the relationship of the open and close to each other. A white body indicates that the asset price, at the end of the day, was higher than it was when it opened. A black body signifies a closing price lower than the price at the opening of the day. The lines, often called shadows, show the high and low of the day.
• Candlestick lengths – how far do they range? The lengths of each candlestick's rectangle and shadows show the range of trading in a day. This can give a trader a good view of each day relative to previous and following ones.
• The patterns – what do they mean? Patterns of candlesticks, sometimes called constellations, maybe interpreted as an indication of human trading activity