Tuesday, September 16, 2008
Monday, September 15, 2008
What is Technical Analysis?
Technical analysis attempts to forecast future price movements by examining past market data. Most traders use technical analysis to get a "big picture" on an investment's price history. Even fundamental traders will glance at a chart to see if they're buying at a fair price, selling at a cyclical top or entering a choppy, sideways market.
Technical analysts make a few key assumptions:
All market fundamentals are reflected in price data. Moods, differing opinions, and other market fundamentals need not be studied.
History repeats itself in regular, fairly predictable patterns. These patterns, generated by price movements, are called signals. A technical analyst's goal is to uncover a current market's signals by examining past market signals.
Prices move in trends. Technical analysts believe price fluctuations are not random and unpredictable. Once an up, down or sideways trend has been established, it usually will continue for a period.
Get in and get out - at the right time
Traders rely on price charts, volume charts and other mathematical representations of market data (called studies) to find the ideal entry and exit points for a trade. Some studies help identify a trend, while others help determine the strength and sustainability of that trend over time. Technical analysis can add discipline and minimize emotion in your trading plan. It can be hard to screen out fundamental impressions and stick with your entry and exit points as planned. While no system is perfect, technical analysis helps you see your trading plan through more objectively and dispassionately.
Price chart types
Bar charts
The most common type of chart showing price action. Each bar represents a period of time - a "period" as short as 1 minute or as long as several years. Over time, bar charts show distinct price patterns.
Candlestick
of a simple bar, each candlestick shows the high, low, opening and closing price for that period of time it represents. Candlestick patterns provide greater visual detail as they develop.
Point & figure charts
Point & figure patterns resemble bar chart patterns, except Xs and Os are used to mark changes in price direction. Point & figure charts make no use of time scale to associate a certain day with a certain price action.
Technical indicator types
Trend
Trend indicators smooth price data out, so that a persistent up, down or sideways trend can be easily seen. (Examples: moving averages, trend lines)
Strength
Strength indicators describe the intensity of market opinion on a certain price by examining the market positions taken by various market participants. Volume or open interest are the basic ingredients of strength indicators.
Volatility
"Volatility" refers to the magnitude of day-to-day price fluctuations, whatever their directional trend. Changes in volatility tend to anticipate changes in prices. (Example: Bollinger Bands) Cycle
Cycle indicators indicate repeating market patterns from recurrent events such as seasons or elections. Cycle indicators determine the timing of a particular market pattern. (Example: Elliott Wave)
Support/resistance
Support and resistance describes the price levels where markets repeatedly rise or fall and then reverse. This phenomenon is attributed to basic supply and demand. (Example: Trend Lines) Momentum
Momentum indicators determine the strength or weakness of a trend as it progresses over time. Momentum is highest when a trend starts and lowest when the trend changes. When price and momentum diverge, it suggests weakness. If price extremes occur with weak momentum, it signals an end of movement in that direction. If momentum is trending strongly and prices are flat, it signals a potential change in price direction. (Example: Stochastic, MACD, RSI)
Technical analysts make a few key assumptions:
All market fundamentals are reflected in price data. Moods, differing opinions, and other market fundamentals need not be studied.
History repeats itself in regular, fairly predictable patterns. These patterns, generated by price movements, are called signals. A technical analyst's goal is to uncover a current market's signals by examining past market signals.
Prices move in trends. Technical analysts believe price fluctuations are not random and unpredictable. Once an up, down or sideways trend has been established, it usually will continue for a period.
Get in and get out - at the right time
Traders rely on price charts, volume charts and other mathematical representations of market data (called studies) to find the ideal entry and exit points for a trade. Some studies help identify a trend, while others help determine the strength and sustainability of that trend over time. Technical analysis can add discipline and minimize emotion in your trading plan. It can be hard to screen out fundamental impressions and stick with your entry and exit points as planned. While no system is perfect, technical analysis helps you see your trading plan through more objectively and dispassionately.
Price chart types
Bar charts
The most common type of chart showing price action. Each bar represents a period of time - a "period" as short as 1 minute or as long as several years. Over time, bar charts show distinct price patterns.
Candlestick
of a simple bar, each candlestick shows the high, low, opening and closing price for that period of time it represents. Candlestick patterns provide greater visual detail as they develop.
Point & figure charts
Point & figure patterns resemble bar chart patterns, except Xs and Os are used to mark changes in price direction. Point & figure charts make no use of time scale to associate a certain day with a certain price action.
Technical indicator types
Trend
Trend indicators smooth price data out, so that a persistent up, down or sideways trend can be easily seen. (Examples: moving averages, trend lines)
Strength
Strength indicators describe the intensity of market opinion on a certain price by examining the market positions taken by various market participants. Volume or open interest are the basic ingredients of strength indicators.
Volatility
"Volatility" refers to the magnitude of day-to-day price fluctuations, whatever their directional trend. Changes in volatility tend to anticipate changes in prices. (Example: Bollinger Bands) Cycle
Cycle indicators indicate repeating market patterns from recurrent events such as seasons or elections. Cycle indicators determine the timing of a particular market pattern. (Example: Elliott Wave)
Support/resistance
Support and resistance describes the price levels where markets repeatedly rise or fall and then reverse. This phenomenon is attributed to basic supply and demand. (Example: Trend Lines) Momentum
Momentum indicators determine the strength or weakness of a trend as it progresses over time. Momentum is highest when a trend starts and lowest when the trend changes. When price and momentum diverge, it suggests weakness. If price extremes occur with weak momentum, it signals an end of movement in that direction. If momentum is trending strongly and prices are flat, it signals a potential change in price direction. (Example: Stochastic, MACD, RSI)
What's Forex?
"Forex" stands for foreign exchange; it's also known as FX. In a forex trade, you buy one currency while simultaneously selling another - that is, you're exchanging the sold currency for the one you're buying. The foreign exchange market is an over-the-counter market. Currencies trade in pairs, like the Euro-US Dollar (EUR/USD) or US Dollar / Japanese Yen (USD/JPY). Unlike stocks or futures, there's no centralized exchange for forex. All transactions happen via phone or electronic network. Who trades currencies, and why? Daily turnover in the world's currencies comes from two sources:
Foreign trade (5%). Companies buy and sell products in foreign countries, plus convert profits from foreign sales into domestic currency.
Speculation for profit (95%). Most traders focus on the biggest, most liquid currency pairs. "The Majors" include US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. In fact, more than 85% of daily forex trading happens in the major currency pairs. The world's most traded market, trading 24 hours a day With average daily turnover of US$3.2 trillion, forex is the most traded market in the world. A true 24-hour market from Sunday 5 PM ET to Friday 5 PM ET, forex trading begins in Sydney, and moves around the globe as the business day begins, first to Tokyo, London, and New York. Unlike other financial markets, investors can respond immediately to currency fluctuations, whenever they occur - day or night.
Foreign trade (5%). Companies buy and sell products in foreign countries, plus convert profits from foreign sales into domestic currency.
Speculation for profit (95%). Most traders focus on the biggest, most liquid currency pairs. "The Majors" include US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. In fact, more than 85% of daily forex trading happens in the major currency pairs. The world's most traded market, trading 24 hours a day With average daily turnover of US$3.2 trillion, forex is the most traded market in the world. A true 24-hour market from Sunday 5 PM ET to Friday 5 PM ET, forex trading begins in Sydney, and moves around the globe as the business day begins, first to Tokyo, London, and New York. Unlike other financial markets, investors can respond immediately to currency fluctuations, whenever they occur - day or night.
Sunday, September 14, 2008
Japanese Candlesticks
Candlestick Charts identical to a bar chart in the information conveyed, but presented in an entirely different visual context. The candlestick encapsulates the open, high, low and close of the trading period in a single candle.
Candlestick charts are on record as being the oldest type of charts used for price prediction. They date back to the 1700's, when they were used for predicting rice prices. In fact, during this era in Japan, Munehisa Homma become a legendary rice trader and gained a huge fortune using candlestick analysis. He is said to have executed over 100 consecutive winning trades!
The candlesticks themselves and the formations they shape were give colorful names by the Japanese traders. Due in part to the military environment of the Japanese feudal system during this era, candlestick formations developed names such as "counter attack lines" and the "advancing three soldiers". Just as skill, strategy, and psychology are important in battle, so too are they important elements when in the midst of trading battle.
Candlestick charts are much more visually appealing than a standard two-dimensional bar chart. As in a standard bar chart, there are four elements necessary to construct a candlestick chart, the OPEN, HIGH, LOW and CLOSING price for a given time period. Below are examples of candlesticks and a definition for each candlestick component:
Candlestick charts are on record as being the oldest type of charts used for price prediction. They date back to the 1700's, when they were used for predicting rice prices. In fact, during this era in Japan, Munehisa Homma become a legendary rice trader and gained a huge fortune using candlestick analysis. He is said to have executed over 100 consecutive winning trades!
The candlesticks themselves and the formations they shape were give colorful names by the Japanese traders. Due in part to the military environment of the Japanese feudal system during this era, candlestick formations developed names such as "counter attack lines" and the "advancing three soldiers". Just as skill, strategy, and psychology are important in battle, so too are they important elements when in the midst of trading battle.
Candlestick charts are much more visually appealing than a standard two-dimensional bar chart. As in a standard bar chart, there are four elements necessary to construct a candlestick chart, the OPEN, HIGH, LOW and CLOSING price for a given time period. Below are examples of candlesticks and a definition for each candlestick component:
This kind of chart displays each time period in a "candlestick" format. As in the bar chart, the candlestick shows the open, high, low and close of a specific time period. A candlestick can either be solid or transparent. Its appearance depends on the relationship between the opening and the closing price. If the close is higher than the open, the candlestick is transparent or empty.
If the close is lower than the open, the candle is solid or filled. When two thin lines extend vertically above and/or below the body of the candle, this means that they represent the highs and lows respectively, but not the closing price. These lines represent the high and the low for the period and referred to as shadows. The high for the period is the upper shadow and the low is known as the lower shadow.
A black or filled-in body represents that the close during that time period was lower than the open, (normally considered bearish) and when the body is open or white, that means the close was higher than the open (normally bullish).
The thin vertical line above and/or below the real body is called the upper/lower shadow, representing the high/low price extremes for the period.
Candlestick charts have three major advantages when compared to bar charts.
Candlestick charts are much more "visually immediate" than bar charts. Once you get accustomed to the candle chart, it is much easier to see what has happened for a specific period - be it a day, a week an hour or one minute.
With a bar chart you need to mentally fill in the price action. You need to say to yourself, "The left tick says that's where it opened, the right tick where it closed. Now I see. It was an up day." With a candlestick chart, this is all done for you. You can spend your energy on analysis - not on figuring out what happened with the price.
With candles you can spot trends more quickly by looking for whether the candles are clear or colored. Within a trend, you can easily tell what a stock did in a specific period.
Most importantly, candles are vital for spotting reversals. These reversals are usually short term - precisely the kind the swing trader is looking for. When traditional technical analysis talks about reversals, usually it is referring to formations that occur over long periods of time. Typical reversal patterns are the "double top" and the "head and shoulders." By definition, these involve smart money distributing their shares to naive traders and normally occur over weeks or even months.
Candlesticks, however, are able to accurately pick up on the changes in trend that occur at the end of each market swing. If you pay meticulous attention to them, then they often warn you of impending changes.
Bar Chart, The Chart Of Interval Histograms, Just 4 Forex
Technical analysis is simply the study of prices as reflected on price charts. Technical analysis assumes that current prices should represent all known information about the markets. Prices not only reflect intrinsic facts, they also represent human emotion and the pervasive mass psychology and mood of the moment. Prices are, in the end, a function of supply and demand. However, on a moment to moment basis, human emotions also dramatically effect prices. Markets may move based upon people's expectations, not necessarily facts.
Standard bar charts are commonly used to convey price activity into an easily readable chart. Usually four elements make up a bar chart, the Open, High, Low, and Close for the trading session/time period. A price bar can represent any time frame the user wishes, from 1 minute to 1 month. The total vertical length/height of the bar represents the entire trading range for the period.
The top of the bar represents the highest price of the period, and the bottom of the bar represents the lowest price of the period. The Open is represented by a small dash to the left of the bar, and the Close for the session is a small dash to the right of the bar. Below is a standard bar chart example.
Standard bar charts are commonly used to convey price activity into an easily readable chart. Usually four elements make up a bar chart, the Open, High, Low, and Close for the trading session/time period. A price bar can represent any time frame the user wishes, from 1 minute to 1 month. The total vertical length/height of the bar represents the entire trading range for the period.
The top of the bar represents the highest price of the period, and the bottom of the bar represents the lowest price of the period. The Open is represented by a small dash to the left of the bar, and the Close for the session is a small dash to the right of the bar. Below is a standard bar chart example.
Each period, for example hour, looks as follows:
On a daily bar chart each bar represents one day's activity. The vertical bar is drawn from the day's highest price to the day's lowest price. Closing price and opening price are represented by ticks on the bar.
Bar chart is graphic representation of price action using a vertical bar to connect the highest price to the lowest price during a period. The opening price is displayed as a horizontal line on the left side of the bar. The closing price is displayed as a horizontal line on the right side of the bar. Bar Charts can be constructed for any time period in which prices are available. Traditionally, the most popular time interval for bar chart is hourly chart. However, since the wide availability of the real time prices, it is common to use smaller time interval such as 30 minutes, 15 minutes, 5 minutes, 1 minute.
Line Chart
All charts are plotted with time on the x-axis and the currency pair on the y-axis. Each time period on our real time charts can range from a tick by tick to a weekly interval (the tick refers to each individual pip movement). This gives traders the flexibility to view currencies with closer examination while also allowing them to spot the trends most suitable for their time-sensitive trading strategy.
A line chart's strength comes from its simple design; it provides an uncluttered, easy to understand view of a currency's price. Line charts display the currency's closing price.
A line chart is simply a graph of the value of a currency taken at regular time intervals based on current prices.
Tick chart
Tick chart has the finest scale - 1 tick (individual quoting of bid and ask prices by market-maker). It is the chart of Bid and Ask quotations which look as columns on the chart of the prices.
The maximum of each separate column is Ask, the minimum of each concrete column is Bid.
As a rule tick chart is not used for the analysis of the market as its scale is so small that does not approach for the technical analysis. However tick charts are effectively used for exact definition of support and resistance levels and also to raise efficiency of purchases and sales, making it on local minima and maxima.
The maximum of each separate column is Ask, the minimum of each concrete column is Bid.
As a rule tick chart is not used for the analysis of the market as its scale is so small that does not approach for the technical analysis. However tick charts are effectively used for exact definition of support and resistance levels and also to raise efficiency of purchases and sales, making it on local minima and maxima.
Common Trade Types
Currency Pair Terminology, Just 4 Forex
EUR/USD = "Euro"
USD/JPY = "Dollar Yen"
GBP/USD = "Cable" or "Sterling"
USD/CHF = "Swissy"
USD/CAD = "Dollar Canada" (CAD referred to as the "Loonie")
AUD/USD = "Aussie Dollar"
NZD/USD = "Kiwi"
USD/JPY = "Dollar Yen"
GBP/USD = "Cable" or "Sterling"
USD/CHF = "Swissy"
USD/CAD = "Dollar Canada" (CAD referred to as the "Loonie")
AUD/USD = "Aussie Dollar"
NZD/USD = "Kiwi"
Saturday, September 13, 2008
Master Forex, Just 4 Forex
FOREX is about freedom. Freedom to choose, first of all. Freedom to use your mind and make your own decisions. Freedom to learn and train. Freedom to earn and to be successful!
FOREX is a highly profitable business which doesn’t depend on time, place or political situation in your country. The main FOREX advantage is that you perform operations using computer from any part of the world 24 hours per day 5 days per week. FOREX is your own business, your responsibility and your success.
Masterforex offers a wide variety of trade instruments, an easy and user-friendly trading platform, which was designed for traders and by traders.
FOREX is a highly profitable business which doesn’t depend on time, place or political situation in your country. The main FOREX advantage is that you perform operations using computer from any part of the world 24 hours per day 5 days per week. FOREX is your own business, your responsibility and your success.
Masterforex offers a wide variety of trade instruments, an easy and user-friendly trading platform, which was designed for traders and by traders.
Minimum deposit 1$
Forex, CFD, Futures
Islamic accounts
Instant Execution
Spreads from 2 pips
Trading terminal for PDAs and Smartphones
Leverage up to 1:500
Most comfortable ways of account deposit/withdrawal
The best partners conditions on the market
24/5 online customer support
Forex Trading Strategy, Just 4 Forex
The first thing someone needs when beginning in the Forex Trading market is a well thought out Forex trading strategy. This is because those who do not have a good Forex trading strategy usually end up failing miserably. Of course those who are also in it just for a quick buck will invariably end up losing in the long run. Those without a clear Forex trading strategy will either lose constantly or just break even.A lot of times the Forex trading strategy will be different depending on different Forex traders. This is because different kinds of Forex traders needs require different kinds of Forex trading strategies. A Forex trading strategy for a Forex day trader will reflect their need to be concerned with day-to-day fluctuations than long-term data. This means that someone who is deciding to become a Forex trader needs to first decide what kind of Forex trader he or she are going to be. Once they decide which kind of Forex trader they are going to be they will better be able to plan their Forex trading strategy.A very important aspect of every Forex Trading strategy is to be able to lessen any losses or eliminate them altogether. This part of the Forex trading strategy is one that needs to be followed strictly or it can make things a complete mess. Someone who is a Forex day trader will most likely make smaller stops. On the other hand a Forex swing trader will have stops that are less limited. These are both different kinds of foreign exchange trading strategies, but can both lessen losses immensely for either kind of Forex trader.Another part of a good Forex trading strategy is to plan the size of Forex transactions. This allows many different Forex trades to be made at any time instead of just one huge Forex transaction. This will lessen any loss, by dividing the Forex trades, so not all are affected. This also brings in more discipline to the equation.Following the Forex trading strategy that you plan out requires discipline and following it to the letter, because the Forex market does not always lend itself to the best opportunities in Forex trading. In the Forex market it is mostly about timing, if not all about timing. Understanding this and incorporating it into your Forex Trading strategy is how you will benefit the most from it.A few other things that need to be incorporated into a good Forex Trading strategy is first of all acquiring accurate knowledge about the way it works, different things that can affect Forex trade and what various Forex software and services that are available to meet their needs for Forex charting and such. One last thing that needs to be included of course is what other Forex traders are doing, allowing the Forex Trading strategy to be planned accordingly.There are many tools available to help analyze and understand the market movements and patterns. As a beginning FOREX trader you should study each tool independently to develop a good working knowledge of its function and use. As you master each tool you can continue to use it while you educate yourself on the next tool you want to learn. Since many of these tools are similar you will find that the time it takes you to learn a new tool continues to drop as you become familiar with more of them.You will find many Forex trading strategies are based on "support" and "resistance" levels. The support level is what is considered the bottom price for a currency; the currency will drop to this level and then eventually rise again. The resistance level is just the opposite this is the top price that the currency will reach but does not normally exceed. Once it reaches this point it will eventually drop again. It is normal for support and resistance levels to gradually shift over time.If a currency suddenly moves beyond it's normal support or resistance levels then it is expected that the currency will continue to move in that direction for a time. A currency is considered to be "bullish" when it is moving up, if a currency becomes bullish and breaks through its normal resistance level it is expected to continue moving upward for a time.You need to study Forex price charts to determine the support and resistance levels for a currency. You study the charts looking for an unbroken pattern of high and low prices that the currency does not exceed. The longer time span you use for your charting the more accurate and dependable your final analysis will be. You can then use these levels to determine at what point you want to enter and exit a trade.This just one Forex Trading strategy that a Forex trader can use, this one is based entirely on Forex technical analysis. To be truly successful a FOREX trader needs multiple Forex Trading strategies that they can employ based on market conditions.Forex Trading Strategy and Economic IndicatorsThe promise of "Easy Money" captures the interest of many beginning Forex traders. You can find offers all over the Internet claiming, "risk free trading", "low investment", and "high returns". While there is some truth in these statements you will find that they are over simplified and the reality of FOREX trading is a little more complicated.It is very tempting to dive right in and start Forex Trading as soon as you open your FOREX TRADING account. Doing this will most likely lead you to make the two most common Forex Trading mistakes of beginning Forex investors. These are trading based on emotions and trading without a philosophy or Forex Trading strategy. While watching the movements of a currency pair you may feel that you are letting an opportunity pass by if you don't get involved. So you buy only to see the price start moving against you, in a panic you sell at a loss, to then watch the price recover.You must have a rational Forex Trading strategy and not base any decisions on emotion. Undisciplined Forex trading like the scenario described above will only lead to losing money in the Forex tradingYou have to be well educated in Forex market movements to make rational Forex trading decisions. You must be able to read Forex Trading technical studies and Forex Trading analyses and use that information to plot out entry and exit Forex Trading points. You must be able to use the various types of Forex trade orders available to maximize your Forex Trading profits and minimize your Forex trading losses.The first thing you have to do is to understand the market and the forces that move it and affect it. Learn who trades on the FOREX market and why do they do it. Who are the successful Forex traders and what do they do that makes them successful Forex Traders. By doing this you will be able to identify the successful Forex trading strategies and use them to help you develop a Forex Trading strategy of your own.Banks, Corporations, Governments, investment funds, and traders are the major groups of investors in the foreign exchange market. While they all have their own objectives four of these five all have one thing in common. They have external controls; these are rules and guidelines that control the Forex trades that they make and the basis that they can be held accountable to. The exception to that is the individual Forex traders, they are accountable only to themselves.A Forex trader that enters the market with out rules and guidelines is setting himself or herself up to lose money. The "big boys" and the well educated Forex investors all approach Forex trading with strategies, if you want to play on the same field with them and be successful Forex trader you will have to play by the same rules. You absolutely must have a Forex trading strategy, and you will need to be disciplined and follow it.Money management is a critical part of every Forex trading strategy. Along with knowing which currencies to trade and how to recognize Forex trading entry and exit points as successful Forex trader must has to manage his available resources and make money in the Forex trading.Forex Trading Strategy Tips If you want a successful FOREX trading strategy, you should incorporate the following tips into your existing Forex Trading strategy you should then become a profitable Forex trader. The aim is not to just to make money, but to make big profits consistently.1. Get a Forex Trading Method you have Confidence inYou need to have total confidence in your Forex Trading method - so you can follow it with discipline. Pick a simple, Forex Trading technical method – simple Forex Trading methods work best, as they’re more robust in the face of brutal market conditions - complicated Forex Trading methods tend to break. Just use a few rules and parameters, and they should work across all markets – a technical Forex Trading system should work on ANY market that trends. 2. Don’t Trade Forex FrequentlyThe good Forex trades only come around a few times a year, so focus on them. Many traders think there is good opportunities everyday - there aren’t. There’s no correlation between how often you trade Forex, and how much money you will make - if you want to make big Forex profits, you need patience.4. Only Focus on the Long Term Forex TrendsForget Forex day trading, and focus on the longer-term Forex trends only - how can you make big profits in a day? - You can’t. Don’t forget you have to cover your losing days as well. Always remember – Forex brokers interested in making the maximum amount of commission, perpetrate the make money by day trading myth. Forex trends last for months or years - focus on them, and milk them for all they’re worth.5. Trade Forex in IsolationDon’t discuss your Forex trading with anyone - the only way you’ll make big money is by doing it by yourself. Have confidence in your ability and don’t let anyone put you off - this is an essential character trait of all great Forex traders.6. Work Hard not SmartMany losing Forex traders think the more effort they make with their FOREX trading strategy, the greater their Forex trading skills will become – this is not true! You can learn a Forex Trading method in a short period of time, and if you have a simple robust Forex Trading method, you can do your Forex Trading analysis in about 30 minutes a day - and that’s it!7. Trade Forex pairs, not currencies Like any relationship, you have to know both sides. Success or failure in Forex trading depends upon being right about both currencies and how they impact one another, not just one.8. Knowledge is Power When starting out online Forex trading, it is essential that you understand the basics of this market if you want to make the most of your investments in the Forex Trading.The main Forex influencer is global news and events. For example, say an ECB statement is released on European interest rates which typically will cause a flurry of activity. Most newcomers react violently to news like this and close their Forex positions and subsequently miss out on some of the best Forex trading opportunities by waiting until the market calms down. The potential in the Forex Trading market is in the volatility, not in its tranquility.9. Unambitious Forex trading Many new Forex traders will place very tight Forex Trading orders in order to take very small profits. This is not a sustainable approach because although you may be profitable in the short run (if you are lucky), you risk losing in the longer term as you have to recover the difference between the bid and the ask price before you can make any profit and this is much more difficult when you make small Forex trades than when you make larger ones.10.Over-cautious Forex tradingLike the Forex trader who tries to take small Forex Trading incremental profits all the time, the Forex trader who places tight Forex Trading stop losses with a retail forex broker is doomed. As we stated above, you have to give your Forex Trading position a fair chance to demonstrate its ability to produce. If you don't place reasonable Forex Trading stop losses that allow your Forex trade to do so, you will always end up undercutting yourself and losing a small piece of your forex trading deposit with every Forex trade.Many of the above Forex Trading tips are not conventional wisdom - but keep in mind that 90% of Forex traders don’t make big Forex Trading gains – and they follow the herd.Forex Trading Strategy Tips to Avoid Forex Trading pitfalls1. Take it like a man If you decide to ride a loss, you are simply displaying stupidity and cowardice. It takes guts to accept your Forex trading loss and wait for tomorrow to try again. Sticking to a bad Forex Trading position ruins lots of Forex traders - permanently. Try to remember that the Forex market often behaves illogically, so don't get commit to any one Forex trade; it's just a Forex trade. One good forex trade will not make you a Forex trading success; it's ongoing regular performance over months and years that makes a good Forex trader.2. Focus Fantasising about possible Forex Trading profits and then "spending" them before you have realised them is no good. Focus on your current Forex Trading position(s) and place reasonable Forex Trading stop losses at the time you do the Forex trade. Then sit back and enjoy the ride - you have no real control from now on, the market will do what it wants to do.3. Don't trust Forex Trading demos Demo Forex Trading often causes new Forex traders to learn bad Forex Trading habits. These bad Forex Trading habits, which can be very dangerous in the long run, come about because you are playing Forex Trading with virtual money. Once you know how your Forex broker's system works, start trading forex with small amounts and only take the risk you can afford to win or lose in the forex trading.4. Stick to the Forex Trading strategy When you make money on a well thought-out strategic forex trade, don't go and lose half of it next time on a fancy; stick to your forex trading strategy and invest forex trading profits on the next forex trade that matches your long-term goals.5. The clues are in the details The bottom line on yourforex Trading account balance doesn't tell the whole story. Consider individual forex trade details; analyse your forex trading losses and the telling losing forex trading streaks. Generally, forex traders that make money without suffering significant daily losses have the best chance of sustaining positive performance in the long term forex trading.6. Simulated ResultsBe very careful and wary about infamous "black box" Forex trading systems. These so-called Forex trading signal systems do not often explain exactly how the Forex trade signals they generate are produced. Typically, these Forex trading systems only show their track record of extraordinary Forex results – historical Forex trading results. Successfully predicting future Forex trade scenarios is altogether more complex. The high-speed algorithmic capabilities of these Forex trading systems provide significant retrospective Forex trading systems, not ones which will help you trade Forex effectively in the future.7. Get to know one cross at a time Each currency pair is unique, and has a unique way of moving in the marketplace. The forces which cause the pair to move up and down are individual to each cross, so study them and learn from your experience and apply your learning to one cross at a time. 8. Risk Reward If you put a 20 point Forex trading stop and a 50 Forex trading point profit your chances of winning are probably about 1-3 against you. In fact, given the spread you're trading on, it's more likely to be 1-4. Play the odds the Forex market gives you.9. Trading for Wrong Reasons Don't trade Forex if you are bored, unsure or reacting on a whim. The reason that you are bored in the first place is probably because there is no Forex trade to make in the first place. If you are unsure, it's probably because you can't see the Forex trade to make, so don't make one.10. Zen TradingEven when you have taken a Forex Trading position in the markets, you should try and think as you would if you hadn't taken one. This level of detachment is essential if you want to retain your clarity of mind and avoid succumbing to emotional impulses and therefore increasing the likelihood of incurring forex trading losses. To achieve this, you need to cultivate a calm and relaxed outlook. Trade forex in brief periods of no more than a few hours at a time and accept that once the trade has been made, it's out of your hands.11. Determination Once you have decided to place a Forex trade, stick to it and let it run its course. This means that if your Forex trading stop loss is close to being triggered, let it trigger. If you move your stop midway through a trade's life, you are more than likely to suffer worse moves against you. Your determination must be show itself when you acknowledge that you got it wrong, so get out.12 Short-term Forex Trading Moving Average Crossovers This is one of the most dangerous forex trading scenarios for non professional forex traders. When the short-term forex moving average crosses the forex longer-term moving average it only means that the average price in the short run is equal to the average price in the longer run. This is neither a bullish nor bearish forex trading indication, so don't fall into the trap of believing it is one.13. StochasticAnother dangerous Forex Trading scenario. When it first forex trading signals an exhausted condition that's when the big spike in the "exhausted" currency cross tends to occur. My advice is to buy on the first sign of an overbought cross and then sell on the first sign of an oversold one. This forex trading approach means that you'll be with the trend and have successfully identified a positive forex trading move that still has some way to go. So if percentage K and percentage D are both crossing 80, then buy! (This is the same on sell side, where you sell at 20). 14. One cross is all that counts EURUSD seems to be trading higher, so you buy GBPUSD because it appears not to have moved yet. This is dangerous forex trading. Focus on one cross at a time - if EURUSD looks good to you, then just buy EURUSD.15. Wrong Forex Trading BrokerA lot of FOREX TRADING brokers are in business only to make money from yours. Read forums, blogs and chats around the net to get an unbiased opinion before you choose your Forex Trading broker.
16.Too bullish Forex Trading statistics show that 90% of most forex traders will fail at some point. Being too bullish about your Forex trading aptitude can be fatal to your long-term Forex Trading success. You can always learn more about trading the markets, even if you are currently successful in your forex trades. Stay modest, and keep your eyes open for new ideas and bad habits you might be falling in to.17. Interpret forex news yourself Learn to read the source documents of forex news and events - don't rely on the interpretations of news media or others.
16.Too bullish Forex Trading statistics show that 90% of most forex traders will fail at some point. Being too bullish about your Forex trading aptitude can be fatal to your long-term Forex Trading success. You can always learn more about trading the markets, even if you are currently successful in your forex trades. Stay modest, and keep your eyes open for new ideas and bad habits you might be falling in to.17. Interpret forex news yourself Learn to read the source documents of forex news and events - don't rely on the interpretations of news media or others.
Essential Indicators, Just 4 Forex
The list below highlights some key indicators that can be woven into your Forex trading style, It is important to acknowledge the probability that no indicator on its own is a good enough reason for entering or exiting a trade, it is crucial to get a combination factor when considering a trade.
Moving Averages
A “Moving Average” is a technical indicator that shows the average value of a particular currency pair over a previously determined period of time. This means, for example, that prices may be averaged over 20 or 50 days, or 10 and 50 min depending on the time frame that is more convenient for you at the moment of your trading activity.
Moving Averages are an averaged quantity and can bee seen as a smoothed representation of the market activity at the moment and it’s 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 mechanics of how Moving Averages can tell a Forex trader where the Forex market is moving (up or down) is by considering two different time frame Moving Averages and then plotting them on a 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.
Once you have plotted the two Moving Averages with your charting software 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 by using this simple concept of the Moving Averages you can start understanding the basics of confirming trends when checking your Forex charts during your particular trading hours.
Bollinger Bands
Bollinger bands are simply volatility bands drawn either side of a moving average.
You calculate Bollinger bands using the standard deviation of price over the same period as moving averages the mean price, then the volatility bands are plotted above and below the moving average.
Moving averages are used to identify the underlying trend of currencies and Bollinger bands take this one step further by:
Combining the moving average of the currency with the volatility of the individual market (or the standard deviation) – this then creates a trading envelope – with a middle mean price (moving average and 2 x bands (expanding or contracting) either side that reflect volatility or standard deviation.
As prices move away from the longer-term average, the standard deviation rises - and thus the bands will fluctuate in varying amounts, away from the average.
Relative Strength Index (RSI)
The RSI (Relative Strength Index) is a popular technical analysis oscillator. There are numerous uses of the RSI, including objective buy and sell signals and bullish and bearish divergences. The RSI, as its name implies measures the relative strength of price currently compared to the past: the formula usually uses a 14-period input. As an oscillator, above 70 is considered overbought and below 30 is considered oversold.
Some traders use the RSI for objective buy and sell signals. They usually interpret a buy signal as occurring when the RSI crosses back above 30 after spending time in the oversold area. A sell signal is declared when the RSI moves back below 70 after spending a period of time in the overbought region. The RSI as well as buy and sell signals is visually depicted in the link to the chart Relative Strength Index
Another popular use of the Relative Strength Index for stock, futures, or currency traders is bullish and bearish divergences. At times when price is increasing, but the RSI is falling or not moving, this can signal trouble. This bearish divergence can suggest that a trader exit his/her position.
In contrast, when price is falling, but the RSI is failing to go lower, but is maintaining steady or rising, a bullish divergence has occurred. A trader might exit any short positions.
Moving Average Convergence Divergence (MACD)
MACD (Moving Average Convergence Divergence) comes as a standard Forex signal on all the main charting packages. Some show MACD by itself with two lines, one a combination of a 12 and 26 Exponential Moving Average, and the other line based on a 9 Exponential Moving Average.
Some charting packages also include what is called a Histogram in the same charting area as MACD. The histogram merely represents in a different way what is happening between the two MACD lines as to market momentum. The wider the gap between the MACD lines, the higher or lower the height of the histogram bars.
To identify MACD divergence, simply draw a line across the highs if MACD is above the zero line, or draw a line across the lows if MACD is below the zero line.
Now go to the price action section of the chart, the candlesticks, and draw a line across the highs directly above where the line is drawn on the MACD highs, or draw a line across price lows directly above where the line is drawn on MACD lows.
If they are going in opposite directions you have MACD divergence. In other words, when MACD is making lower highs and lower lows but price is making higher highs and higher lows, this negative MACD divergence forms a Forex signal indicating price could well start to drop.
If MACD is making higher highs and higher lows but price is making lower highs and lower lows, this positive MACD divergence forms a Forex signal indicating price could well start to rise.
Moving Averages
A “Moving Average” is a technical indicator that shows the average value of a particular currency pair over a previously determined period of time. This means, for example, that prices may be averaged over 20 or 50 days, or 10 and 50 min depending on the time frame that is more convenient for you at the moment of your trading activity.
Moving Averages are an averaged quantity and can bee seen as a smoothed representation of the market activity at the moment and it’s 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 mechanics of how Moving Averages can tell a Forex trader where the Forex market is moving (up or down) is by considering two different time frame Moving Averages and then plotting them on a 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.
Once you have plotted the two Moving Averages with your charting software 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 by using this simple concept of the Moving Averages you can start understanding the basics of confirming trends when checking your Forex charts during your particular trading hours.
Bollinger Bands
Bollinger bands are simply volatility bands drawn either side of a moving average.
You calculate Bollinger bands using the standard deviation of price over the same period as moving averages the mean price, then the volatility bands are plotted above and below the moving average.
Moving averages are used to identify the underlying trend of currencies and Bollinger bands take this one step further by:
Combining the moving average of the currency with the volatility of the individual market (or the standard deviation) – this then creates a trading envelope – with a middle mean price (moving average and 2 x bands (expanding or contracting) either side that reflect volatility or standard deviation.
As prices move away from the longer-term average, the standard deviation rises - and thus the bands will fluctuate in varying amounts, away from the average.
Relative Strength Index (RSI)
The RSI (Relative Strength Index) is a popular technical analysis oscillator. There are numerous uses of the RSI, including objective buy and sell signals and bullish and bearish divergences. The RSI, as its name implies measures the relative strength of price currently compared to the past: the formula usually uses a 14-period input. As an oscillator, above 70 is considered overbought and below 30 is considered oversold.
Some traders use the RSI for objective buy and sell signals. They usually interpret a buy signal as occurring when the RSI crosses back above 30 after spending time in the oversold area. A sell signal is declared when the RSI moves back below 70 after spending a period of time in the overbought region. The RSI as well as buy and sell signals is visually depicted in the link to the chart Relative Strength Index
Another popular use of the Relative Strength Index for stock, futures, or currency traders is bullish and bearish divergences. At times when price is increasing, but the RSI is falling or not moving, this can signal trouble. This bearish divergence can suggest that a trader exit his/her position.
In contrast, when price is falling, but the RSI is failing to go lower, but is maintaining steady or rising, a bullish divergence has occurred. A trader might exit any short positions.
Moving Average Convergence Divergence (MACD)
MACD (Moving Average Convergence Divergence) comes as a standard Forex signal on all the main charting packages. Some show MACD by itself with two lines, one a combination of a 12 and 26 Exponential Moving Average, and the other line based on a 9 Exponential Moving Average.
Some charting packages also include what is called a Histogram in the same charting area as MACD. The histogram merely represents in a different way what is happening between the two MACD lines as to market momentum. The wider the gap between the MACD lines, the higher or lower the height of the histogram bars.
To identify MACD divergence, simply draw a line across the highs if MACD is above the zero line, or draw a line across the lows if MACD is below the zero line.
Now go to the price action section of the chart, the candlesticks, and draw a line across the highs directly above where the line is drawn on the MACD highs, or draw a line across price lows directly above where the line is drawn on MACD lows.
If they are going in opposite directions you have MACD divergence. In other words, when MACD is making lower highs and lower lows but price is making higher highs and higher lows, this negative MACD divergence forms a Forex signal indicating price could well start to drop.
If MACD is making higher highs and higher lows but price is making lower highs and lower lows, this positive MACD divergence forms a Forex signal indicating price could well start to rise.
Forex Trading Charts, Just 4 Forex
Reading FOREX TRADING Charts
Forex Trading Price charts can be simple line graphs, bar graphs or even candlestick graphs. These are graphs that show prices during specified time frames. These time frames can be anywhere from minutes to years or any time interval in between.
Forex Trading Line charts are the easiest to read, they will show you the broad overview of price movement. They only show the closing price for the specified interval, they make it very easy to pick out patterns and trends but do not provide the fine detail of a bar or Forex Trading candlestick chart.
With a Forex Trading bar chart the length of a line displays the price spread during that time interval. The larger the bar is the greater the price difference between the high and low price during the interval. It is easy to tell at a glance if the price rose or fell because the left tab shows the opening price and the right tab the closing price. Then the bar will give you the price variation. When printed Forex Trading bar charts can be difficult to read but most Forex Trading software charts have a zoom function so you can easily read even closely spaced bars.
Originally developed in Japan for analyzing candlestick contracts candlestick charts are very useful for analyzing FOREX prices. Forex Trading Candlestick charts are very similar to Forex Trading bar charts they both show the high, the low, open and close price for the indicated time. However the color coding makes it much easier to read a candlestick chart, normally a green candlestick indicates a rising price and a red one indicates a falling price.
The actual candlestick shape in reference to the candlesticks around it will tell you a lot about the price movement and will greatly aid your analysis. Depending on the price spread various patterns will be formed by the candlesticks. Many of the shapes have some rather exotic names, but once you learn the patterns they are easy to pick out and analyze.
Forex Trading Price charts are not usually used by themselves to get the full affect you need to supplement them with some Forex Trading technical indicators. Technical indicators are normally grouped into some pretty broad categories. Some of the more common ones used to monitor and track the Forex Trading market movement are: trend indicators, strength indicators, volatility indicators, and cycle indicators.
Here is a list of some of the more commonly used indicators as well as a brief description:
Average Directional Movement Index (ADX) – This index will help indicate if the market is moving in a trend in either direction and how strong the trend is. If a trend has readings in excess of 25 then this is considered a stronger trend.
Moving Average Convergence/Divergence (MACD) – This shows the relationship between the moving averages which allows you to determine the momentum of the market. Any time that the signal line is crossed by the MACD it is considered to be a strong market.
Stochastic Oscillator – This compares the closing price to the price range over a specific time frame to determine the strength or weakness of the market. If a currency has a stochastic of greater than 80 it is considered overbought. However if the stochastic is under 20 then the currency is considered undersold.
Relative Strength Indicator (RSI) – This is a scale from 1 to 100 to compare the high and low prices over time. If the RSI rises above 70 it is considered overbought where as anything below 30 is considered oversold.
Moving Average – This is created by comparing the average price for a time period to the average price of other time periods.
Moving Averages Basics
Among the important concepts a new forex trader should know is what a Moving Average means, how this indicator is calculated and its use as a trading tool.
A “Moving Average” is a technical indicator that shows the average value of a particular currency pair over a previously determined period of time. This means, for example, that prices may be averaged over 20 or 50 days, or 10 and 50 min depending on the time frame that is more convenient for you at the moment of your trading activity.
Moving Averages are an averaged quantity and can bee seen as a smoothed representation of the market activity at the moment and it’s 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 mechanics of how Moving Averages can tell a forex trader where the forex Trading market is moving (up or down) is by considering two different time frame Moving Averages and then plotting them on a 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.
Once you have plotted the two Moving Averages with your Forex Trading charting software (available from most internet forex Trading brokers), 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 Forex Trading market, or if the crossing is below the longer period MA that will be an indication of a down trend in the forex Trading market.
So by using this simple concept of the Moving Averages you can start understanding the basics of confirming trends when checking your forex trading charts during your particular trading hours.
Moving Average Convergence Divergence
MACD is a more detailed method of using moving averages to find Forex trading signals. This indicator was developed by Gerald Appel, the MACD plots the difference between a 26-day exponential moving average and a 12-day exponential moving average. A 9-day moving average is generally used as a trigger line, this means that when the MACD crosses below this trigger it is a bearish signal(time to sell) and when it crosses above it, it's a bullish signal (time to buy).
This indicator will help the Forex trader using MACD studies to have an early signal of what the Forex market will do next. When the MACD turns positive and makes higher lows while prices are still tanking, this is usually a strong buy signal. Conversely, when the MACD makes lower highs while prices are making new highs, this could be a strong bearish divergence and a sell signal.
The other indicator, RSI, stands for Relative Strength Index. The RSI indicator measures the markets activity as to whether it is over bought or over sold. It gives a Forex trader an indication of which way the Forex Trading Market is moving at the moment. It is important to note, that this is a leading indicator and thus allows one to see what the market is about to do next and then act accordingly in order to have gains. The higher the RSI number, the more over bought it is and conversely the lower the RSI number, the more over sold it is. It is a great leading indicator for the micro and macro reversals in the forex Trading market.
This Forextechnical indicator was developed by Welles Wilder to help investors gauge the current strength of a stock's price relative to its past performance. The usefulness of this indicator is based on the premise that the RSI will usually top out or bottom out before the actual market top or bottom, giving a signal that a reversal or at least a significant reaction in stock price is imminent.
The main purpose of the RSI is to measure the market’s strength and weakness. A high RSI, above 70, suggests an overbought or weakening bull market. Conversely, a low RSI, below 30, implies an oversold market or dying bear market.
But RSI does not indicate a top or a bottom. Sometimes overbought market will be followed by little downward correction in order to gather momentum so it could go up much further. And sometimes oversold market will be followed by little upward correction in order to gather momentum so it could go down much further.
Japanese candle sticks
Japanese candle sticks are the most animated way to observe price movement. It records the price movement on Forex charts in effect drawing a clear picture for Forex traders to study. Japanese candle sticks also known as sign language of the Forex market. In candlestick charts, as in many other charts, you get the open, close, high and low of the online Forex prices.
One of the biggest advantages of Forexcandlestick charts is when you only take a glance; you can observe a lot of information about the online Forex currency movement. Most importantly, you can notice the difference between the open and close prices of the online Forex. If you notice a red candlestick, it can serve as a warning about the direction of the currency price. The fat red section is the body of that Forex candlestick. The lines protruding from the top and bottom are the upper and lower wicks. The very top of a candles wick is the highest price for that candle while the bottom of the wick is the lowest price for the candle.
Forex Candlestick charting is great for Forex traders wanting an extra edge in their quest for profits - this is due to the way the candle bodies are drawn, that gives a better insight that is visual, and shows Forex trader psychology.
More Forex traders than ever are using Forex candlestick charts due to the extra trading edge they can get with this form of Forex charting - if you have not used them before, then this article is for you.
Forex Trading Candlestick charts are not new, and have been used for hundreds of years by Japanese traders to predict and act on market movements.
Forex Trading Candlestick charting giving greater insight into human psychology
In the 1700's, Homma, a Japanese trader in rice, noticed how the price of rice was influenced by human psychology as much as the supply and demand situation. Homma used candlestick charts to trade rice and amassed a huge fortune in the markets. In fact, it was rumored he never to have had a single losing trade!
Human psychology has never changed, and has remained constant over time – Forex Trading candlestick charting is therefore just as useful today, as it was hundreds of years ago.
The Re-emergence of Candlestick Charting
Steve Nison, book, "Japanese charting techniques," bought candlestick charting back into the public domain in the 1990s. Currency traders soon started using Forexcandlestick charting instead of Forexbar charts for greater insight into market movements
So why use Candlestick Charts?
1. They complement other Technical Tools
You can use Forex candlestick charts as you would use the common Forexbar chart, and you can combine them with traditional market indicators. ForexCandlestick charts are a great way to spot opportunities, and then filter, and time trades with other indicators.
2. Spotting trend changes
Because of the way Forexcandlestick charts are viewed, they can give warnings of market reversals, far more visually than traditional bar charts. If you look at candlestick charting, the human psychology of the move literally jumps out the page at you.
3. Straightforward to use
Forex Trading Candlestick charts use, the same open, high, low and close data that traditional Forex Trading bar charts use, and are easy to draw. In addition, there are many packages like super charts and trade station that will draw them automatically for traders. The different candle names are also easy to remember.
4. Define market momentums
The way the Forex candlestick chart is drawn not only gives the direction of price, but also the momentum behind the move. The Forex Trading candlestick chart graphically illustrates the relationship behind the open, high, low, and closes by the body - and adds an extra visual edge, due to the way they are drawn.
The Forex Trading candlestick has a wide part, called the "real body." This real body represents the range between the open and close of that day's trading. When filled in black, the real body means the close was lower than the open.
If the real body is empty, it means the opposite - the close was higher than the open.
Above and below the real body we see the "shadows." We see these as the wicks of the candle (which give them their name), and the shadows actually show the high and the low of the day's trading.
A Visual Aid to Give You an Edge
Forex Trading candlestick charts should be used rather than traditional bar charts because they give you an extra visual dimension.
Regardless, of whether you are a Forex day trader, Forex position trader, Forex system trader or a Forex trader who likes to make your own trades, there is really nothing to dislike about candlestick charts!
Easy and fun to use, and providing a greater insight into Forex market moves, along with the ability to use in any type of Forex trading, means if you aren’t already using Forex Trading candlestick charting, then its time to start.
Forex Trading Price charts can be simple line graphs, bar graphs or even candlestick graphs. These are graphs that show prices during specified time frames. These time frames can be anywhere from minutes to years or any time interval in between.
Forex Trading Line charts are the easiest to read, they will show you the broad overview of price movement. They only show the closing price for the specified interval, they make it very easy to pick out patterns and trends but do not provide the fine detail of a bar or Forex Trading candlestick chart.
With a Forex Trading bar chart the length of a line displays the price spread during that time interval. The larger the bar is the greater the price difference between the high and low price during the interval. It is easy to tell at a glance if the price rose or fell because the left tab shows the opening price and the right tab the closing price. Then the bar will give you the price variation. When printed Forex Trading bar charts can be difficult to read but most Forex Trading software charts have a zoom function so you can easily read even closely spaced bars.
Originally developed in Japan for analyzing candlestick contracts candlestick charts are very useful for analyzing FOREX prices. Forex Trading Candlestick charts are very similar to Forex Trading bar charts they both show the high, the low, open and close price for the indicated time. However the color coding makes it much easier to read a candlestick chart, normally a green candlestick indicates a rising price and a red one indicates a falling price.
The actual candlestick shape in reference to the candlesticks around it will tell you a lot about the price movement and will greatly aid your analysis. Depending on the price spread various patterns will be formed by the candlesticks. Many of the shapes have some rather exotic names, but once you learn the patterns they are easy to pick out and analyze.
Forex Trading Price charts are not usually used by themselves to get the full affect you need to supplement them with some Forex Trading technical indicators. Technical indicators are normally grouped into some pretty broad categories. Some of the more common ones used to monitor and track the Forex Trading market movement are: trend indicators, strength indicators, volatility indicators, and cycle indicators.
Here is a list of some of the more commonly used indicators as well as a brief description:
Average Directional Movement Index (ADX) – This index will help indicate if the market is moving in a trend in either direction and how strong the trend is. If a trend has readings in excess of 25 then this is considered a stronger trend.
Moving Average Convergence/Divergence (MACD) – This shows the relationship between the moving averages which allows you to determine the momentum of the market. Any time that the signal line is crossed by the MACD it is considered to be a strong market.
Stochastic Oscillator – This compares the closing price to the price range over a specific time frame to determine the strength or weakness of the market. If a currency has a stochastic of greater than 80 it is considered overbought. However if the stochastic is under 20 then the currency is considered undersold.
Relative Strength Indicator (RSI) – This is a scale from 1 to 100 to compare the high and low prices over time. If the RSI rises above 70 it is considered overbought where as anything below 30 is considered oversold.
Moving Average – This is created by comparing the average price for a time period to the average price of other time periods.
Moving Averages Basics
Among the important concepts a new forex trader should know is what a Moving Average means, how this indicator is calculated and its use as a trading tool.
A “Moving Average” is a technical indicator that shows the average value of a particular currency pair over a previously determined period of time. This means, for example, that prices may be averaged over 20 or 50 days, or 10 and 50 min depending on the time frame that is more convenient for you at the moment of your trading activity.
Moving Averages are an averaged quantity and can bee seen as a smoothed representation of the market activity at the moment and it’s 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 mechanics of how Moving Averages can tell a forex trader where the forex Trading market is moving (up or down) is by considering two different time frame Moving Averages and then plotting them on a 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.
Once you have plotted the two Moving Averages with your Forex Trading charting software (available from most internet forex Trading brokers), 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 Forex Trading market, or if the crossing is below the longer period MA that will be an indication of a down trend in the forex Trading market.
So by using this simple concept of the Moving Averages you can start understanding the basics of confirming trends when checking your forex trading charts during your particular trading hours.
Moving Average Convergence Divergence
MACD is a more detailed method of using moving averages to find Forex trading signals. This indicator was developed by Gerald Appel, the MACD plots the difference between a 26-day exponential moving average and a 12-day exponential moving average. A 9-day moving average is generally used as a trigger line, this means that when the MACD crosses below this trigger it is a bearish signal(time to sell) and when it crosses above it, it's a bullish signal (time to buy).
This indicator will help the Forex trader using MACD studies to have an early signal of what the Forex market will do next. When the MACD turns positive and makes higher lows while prices are still tanking, this is usually a strong buy signal. Conversely, when the MACD makes lower highs while prices are making new highs, this could be a strong bearish divergence and a sell signal.
The other indicator, RSI, stands for Relative Strength Index. The RSI indicator measures the markets activity as to whether it is over bought or over sold. It gives a Forex trader an indication of which way the Forex Trading Market is moving at the moment. It is important to note, that this is a leading indicator and thus allows one to see what the market is about to do next and then act accordingly in order to have gains. The higher the RSI number, the more over bought it is and conversely the lower the RSI number, the more over sold it is. It is a great leading indicator for the micro and macro reversals in the forex Trading market.
This Forextechnical indicator was developed by Welles Wilder to help investors gauge the current strength of a stock's price relative to its past performance. The usefulness of this indicator is based on the premise that the RSI will usually top out or bottom out before the actual market top or bottom, giving a signal that a reversal or at least a significant reaction in stock price is imminent.
The main purpose of the RSI is to measure the market’s strength and weakness. A high RSI, above 70, suggests an overbought or weakening bull market. Conversely, a low RSI, below 30, implies an oversold market or dying bear market.
But RSI does not indicate a top or a bottom. Sometimes overbought market will be followed by little downward correction in order to gather momentum so it could go up much further. And sometimes oversold market will be followed by little upward correction in order to gather momentum so it could go down much further.
Japanese candle sticks
Japanese candle sticks are the most animated way to observe price movement. It records the price movement on Forex charts in effect drawing a clear picture for Forex traders to study. Japanese candle sticks also known as sign language of the Forex market. In candlestick charts, as in many other charts, you get the open, close, high and low of the online Forex prices.
One of the biggest advantages of Forexcandlestick charts is when you only take a glance; you can observe a lot of information about the online Forex currency movement. Most importantly, you can notice the difference between the open and close prices of the online Forex. If you notice a red candlestick, it can serve as a warning about the direction of the currency price. The fat red section is the body of that Forex candlestick. The lines protruding from the top and bottom are the upper and lower wicks. The very top of a candles wick is the highest price for that candle while the bottom of the wick is the lowest price for the candle.
Forex Candlestick charting is great for Forex traders wanting an extra edge in their quest for profits - this is due to the way the candle bodies are drawn, that gives a better insight that is visual, and shows Forex trader psychology.
More Forex traders than ever are using Forex candlestick charts due to the extra trading edge they can get with this form of Forex charting - if you have not used them before, then this article is for you.
Forex Trading Candlestick charts are not new, and have been used for hundreds of years by Japanese traders to predict and act on market movements.
Forex Trading Candlestick charting giving greater insight into human psychology
In the 1700's, Homma, a Japanese trader in rice, noticed how the price of rice was influenced by human psychology as much as the supply and demand situation. Homma used candlestick charts to trade rice and amassed a huge fortune in the markets. In fact, it was rumored he never to have had a single losing trade!
Human psychology has never changed, and has remained constant over time – Forex Trading candlestick charting is therefore just as useful today, as it was hundreds of years ago.
The Re-emergence of Candlestick Charting
Steve Nison, book, "Japanese charting techniques," bought candlestick charting back into the public domain in the 1990s. Currency traders soon started using Forexcandlestick charting instead of Forexbar charts for greater insight into market movements
So why use Candlestick Charts?
1. They complement other Technical Tools
You can use Forex candlestick charts as you would use the common Forexbar chart, and you can combine them with traditional market indicators. ForexCandlestick charts are a great way to spot opportunities, and then filter, and time trades with other indicators.
2. Spotting trend changes
Because of the way Forexcandlestick charts are viewed, they can give warnings of market reversals, far more visually than traditional bar charts. If you look at candlestick charting, the human psychology of the move literally jumps out the page at you.
3. Straightforward to use
Forex Trading Candlestick charts use, the same open, high, low and close data that traditional Forex Trading bar charts use, and are easy to draw. In addition, there are many packages like super charts and trade station that will draw them automatically for traders. The different candle names are also easy to remember.
4. Define market momentums
The way the Forex candlestick chart is drawn not only gives the direction of price, but also the momentum behind the move. The Forex Trading candlestick chart graphically illustrates the relationship behind the open, high, low, and closes by the body - and adds an extra visual edge, due to the way they are drawn.
The Forex Trading candlestick has a wide part, called the "real body." This real body represents the range between the open and close of that day's trading. When filled in black, the real body means the close was lower than the open.
If the real body is empty, it means the opposite - the close was higher than the open.
Above and below the real body we see the "shadows." We see these as the wicks of the candle (which give them their name), and the shadows actually show the high and the low of the day's trading.
A Visual Aid to Give You an Edge
Forex Trading candlestick charts should be used rather than traditional bar charts because they give you an extra visual dimension.
Regardless, of whether you are a Forex day trader, Forex position trader, Forex system trader or a Forex trader who likes to make your own trades, there is really nothing to dislike about candlestick charts!
Easy and fun to use, and providing a greater insight into Forex market moves, along with the ability to use in any type of Forex trading, means if you aren’t already using Forex Trading candlestick charting, then its time to start.
Forex Trading Education and Training, Just 4 Forex
Should new Forex traders take Forex trading courses or join a Forex training program? Definitely yes; by now you have probably heard that only 5% of Forex traders achieve consistent profitable results when trading the Forex market. The main reason for this is the lack of education. Don’t get me wrong here, taking a Forex training program or a Forex trading course won’t guarantee profitable results, nothing can, but choosing the right Forex training program or Forex trading course will definitely put the odds in your favor.
Before spending any amount of money on any Forex trading course or Forex training program there are some important aspects you need to take in consideration. There are many Forex training programs available, but not every one of them suits the needs of every Forex trader.
The first thing you should be looking in a Forex training program is the content of the material. Unfortunately, most Forex courses or Forex training programs focus or spend most of the time on basic concepts. Though these basic concepts are important, spending most of the course on them won’t help the trader to make consistent results.
The following subjects are what I consider the most important aspects of Forex trading and every Forex training program or Forex trading course should address:
Forex trading basics:
Review Forex Trading basic concepts such as: Forex Trading margin, Forex Trading type of orders, a little Forex Trading background, Forex Trading bid/ask rollover, etc. You need to make sure you understand every Forex Trading single concept to perfection.
Main drawbacks of Forex traders.
Being aware of the common Forex Trading mistakes made by Forex traders and knowing how to handle them will prevent new Forex traders from making those Forex Trading mistakes.
Technical and fundamental Forex Trading analysis.
These are the two main approaches adopted by Forex traders. Knowing how to properly apply each concept will definitely put the odds in your favor.
The three pillars of Forex trading. I consider that these three subjects have the most impact on every Forex trader trading account.
Forex trading system development.
Having the right Forex Trading system is a must if you want to have consistent Forex Trading profitable results. Having a Forex Trading system that doesn’t fit you will cause a series of problems that will make your Forex Trading account vanish away (second guessing the Forex Trading system, not following your system, etc.)
Money management.
This is considered by many successful traders to be the most important single aspect of trading. Money management helps to increase your profits geometrically and at the same time limit your losses (i.e. a good risk reward ratio of about 2:1 will make you money in a Forex trading system that is right only 38% of the time.)
Trading psychology.
Being aware and knowing hot to handle the psychological barriers that affect every trader decision will put the odds in your favor.
Other important aspects every Forex training program should include are:
Developing habits for success (such as discipline patience, taking responsibility of every action, commitment, etc.,) understanding and taking our trading as a business, risk and trade management.
Another important aspect you should take into consideration when choosing a Forex training program is the mechanics of it, getting to know how the Forex training program works.
A good Forex Trading course will have the following:
A live conference room, where you can apply everything learned under live market conditions.
One-on-one feedback, every Forex trader has different needs and requires special attention. For instance a Forex trader wanting to improve the system and requires individual feedback from the instructor about it.
Online Forex Trading course, a course that could be accessible through internet. A plus is a course where you are able to access the course at the convenient time for you, so you don’t have to change your lifestyle.
A Forex forum, where members can talk just about everything related to the Forex market and the Forex training program.
Trading the Forex market is no easy task. It requires a lot of hard work. Making the right decision will definitely put the odds in your favor. Take your time when doing your diligence because it is a big and important step in a trader’s trading career.
Six Forex Trading Tips for Forex Trading Newbie's
You have decided to be a Forex trader in the forex market, and you have no idea on how to begin. Let's first start by defining what the forex market is and what it does.
The term "forex", also known as the foreign exchange is a market for the sale and purchase of all kinds of currencies. It originated in the early 1970's when floating currencies and free exchange rates were first introduced. At this time, the forex market traders were the ones who set the value of one type of currency against another.
Nowadays, the Forex Trading market forces determine the value of a currency against another. One unique aspect of the Forex Trading market is that very little trading qualifications are required of anyone intending to trade therein.
Independence from external control ensures that only the market forces influence the currency prices. As the largest financial market, with trades reaching up to 1.5 trillion U.S. dollars, the money moves so fast, it’s impossible for a single investor or Forex Trader to substantially affect the price of any major foreign currency.
In addition, unlike any stock that is rarely traded, forex traders are able to open and close any positions within seconds, because there are always a number of willing buyers and sellers.
1. The first thing you need to do is open a forex Trading account. You will have to fill an application form which includes a margin agreement stating if the Forex Trading broker will be allowed to intervene with any Forex trade when it appears too risky. Since most Forex trades are done using the Forex Trading broker's money, it is only logical that he protect his interests. However, once you have established an account, you can fund it and begin trading in the forex market.
2. Adopt a Forex trading strategy that has proven to be successful for you. Remember that Forex Trading strategies will work differently for different Forex traders, so don't try to adopt a Forex trading strategy that works well for another Forex trader. It might backfire on you. The two available approaches are either Forex Trading technical analysis or Forex Trading fundamental analysis. A combination of the two is a more preferred choice for experienced Forex traders.
3. Understand that prices move by trends. Forex Trading has a popular saying, “The trend is your friend.” There are certain movements that have been studied over many years in order to identify a pattern in the trend. These Forex Trading trends need to be understood in order to understand a good Forex trading strategy. For small Forex Trading accounts that are $25,000 and under, trading with a trend may help improving your odds when compared to bi-directional trading. Most Forex Trading newbie’s will look to trade Forex in any direction, when they should be trading Forex with a trend.
4. Ensure you know which are the top five currencies pairs in the foreign exchange. These are USD/Yen, Swiss franc/USD, Euro/Yen, Euro/USD and Pound/USD.
5. For Forex Trading newbie's, it is advisable to maintain two Forex Trading accounts to ensure you learn to play the Forex trading game. Keep one real Forex Trading account, one that you will actually use to trade real money; and the second Forex Trading account should be a Forex Trading demo account, one that you can use to test alternative moves in the Forex trading game. You can easily use your Forex Trading demo account to shadow the trades in your real Forex Trading account so you can widen your stops to see if you are being too conservative or not.
6. Always examine the one hour, four hour and daily charts that concern your trades. Although you can trade Forex at 15 and 30 minute time intervals, doing so requires a handful of dexterity.
Before spending any amount of money on any Forex trading course or Forex training program there are some important aspects you need to take in consideration. There are many Forex training programs available, but not every one of them suits the needs of every Forex trader.
The first thing you should be looking in a Forex training program is the content of the material. Unfortunately, most Forex courses or Forex training programs focus or spend most of the time on basic concepts. Though these basic concepts are important, spending most of the course on them won’t help the trader to make consistent results.
The following subjects are what I consider the most important aspects of Forex trading and every Forex training program or Forex trading course should address:
Forex trading basics:
Review Forex Trading basic concepts such as: Forex Trading margin, Forex Trading type of orders, a little Forex Trading background, Forex Trading bid/ask rollover, etc. You need to make sure you understand every Forex Trading single concept to perfection.
Main drawbacks of Forex traders.
Being aware of the common Forex Trading mistakes made by Forex traders and knowing how to handle them will prevent new Forex traders from making those Forex Trading mistakes.
Technical and fundamental Forex Trading analysis.
These are the two main approaches adopted by Forex traders. Knowing how to properly apply each concept will definitely put the odds in your favor.
The three pillars of Forex trading. I consider that these three subjects have the most impact on every Forex trader trading account.
Forex trading system development.
Having the right Forex Trading system is a must if you want to have consistent Forex Trading profitable results. Having a Forex Trading system that doesn’t fit you will cause a series of problems that will make your Forex Trading account vanish away (second guessing the Forex Trading system, not following your system, etc.)
Money management.
This is considered by many successful traders to be the most important single aspect of trading. Money management helps to increase your profits geometrically and at the same time limit your losses (i.e. a good risk reward ratio of about 2:1 will make you money in a Forex trading system that is right only 38% of the time.)
Trading psychology.
Being aware and knowing hot to handle the psychological barriers that affect every trader decision will put the odds in your favor.
Other important aspects every Forex training program should include are:
Developing habits for success (such as discipline patience, taking responsibility of every action, commitment, etc.,) understanding and taking our trading as a business, risk and trade management.
Another important aspect you should take into consideration when choosing a Forex training program is the mechanics of it, getting to know how the Forex training program works.
A good Forex Trading course will have the following:
A live conference room, where you can apply everything learned under live market conditions.
One-on-one feedback, every Forex trader has different needs and requires special attention. For instance a Forex trader wanting to improve the system and requires individual feedback from the instructor about it.
Online Forex Trading course, a course that could be accessible through internet. A plus is a course where you are able to access the course at the convenient time for you, so you don’t have to change your lifestyle.
A Forex forum, where members can talk just about everything related to the Forex market and the Forex training program.
Trading the Forex market is no easy task. It requires a lot of hard work. Making the right decision will definitely put the odds in your favor. Take your time when doing your diligence because it is a big and important step in a trader’s trading career.
Six Forex Trading Tips for Forex Trading Newbie's
You have decided to be a Forex trader in the forex market, and you have no idea on how to begin. Let's first start by defining what the forex market is and what it does.
The term "forex", also known as the foreign exchange is a market for the sale and purchase of all kinds of currencies. It originated in the early 1970's when floating currencies and free exchange rates were first introduced. At this time, the forex market traders were the ones who set the value of one type of currency against another.
Nowadays, the Forex Trading market forces determine the value of a currency against another. One unique aspect of the Forex Trading market is that very little trading qualifications are required of anyone intending to trade therein.
Independence from external control ensures that only the market forces influence the currency prices. As the largest financial market, with trades reaching up to 1.5 trillion U.S. dollars, the money moves so fast, it’s impossible for a single investor or Forex Trader to substantially affect the price of any major foreign currency.
In addition, unlike any stock that is rarely traded, forex traders are able to open and close any positions within seconds, because there are always a number of willing buyers and sellers.
1. The first thing you need to do is open a forex Trading account. You will have to fill an application form which includes a margin agreement stating if the Forex Trading broker will be allowed to intervene with any Forex trade when it appears too risky. Since most Forex trades are done using the Forex Trading broker's money, it is only logical that he protect his interests. However, once you have established an account, you can fund it and begin trading in the forex market.
2. Adopt a Forex trading strategy that has proven to be successful for you. Remember that Forex Trading strategies will work differently for different Forex traders, so don't try to adopt a Forex trading strategy that works well for another Forex trader. It might backfire on you. The two available approaches are either Forex Trading technical analysis or Forex Trading fundamental analysis. A combination of the two is a more preferred choice for experienced Forex traders.
3. Understand that prices move by trends. Forex Trading has a popular saying, “The trend is your friend.” There are certain movements that have been studied over many years in order to identify a pattern in the trend. These Forex Trading trends need to be understood in order to understand a good Forex trading strategy. For small Forex Trading accounts that are $25,000 and under, trading with a trend may help improving your odds when compared to bi-directional trading. Most Forex Trading newbie’s will look to trade Forex in any direction, when they should be trading Forex with a trend.
4. Ensure you know which are the top five currencies pairs in the foreign exchange. These are USD/Yen, Swiss franc/USD, Euro/Yen, Euro/USD and Pound/USD.
5. For Forex Trading newbie's, it is advisable to maintain two Forex Trading accounts to ensure you learn to play the Forex trading game. Keep one real Forex Trading account, one that you will actually use to trade real money; and the second Forex Trading account should be a Forex Trading demo account, one that you can use to test alternative moves in the Forex trading game. You can easily use your Forex Trading demo account to shadow the trades in your real Forex Trading account so you can widen your stops to see if you are being too conservative or not.
6. Always examine the one hour, four hour and daily charts that concern your trades. Although you can trade Forex at 15 and 30 minute time intervals, doing so requires a handful of dexterity.
Basics of Forex Trading, Just 4 Forex
Forex trading or Foreign Exchange Trading refers to the simultaneous trading—that is, buying and selling-of two different currencies. It is done between and among major financial institutions, central banks, retail currency traders or speculators, large international companies, government institutions, companies with overseas operations and the like.
The Forex Market operates 24 hours through a global electronic network where trading occurs over the telephone and computer networks.
The Top Forex Currencies
Each world currency is given a three letter code which is used in FOREX quotes, the instrument traded by Forex traders and investors are currency pairs. A currency pair is the exchange rate of one currency over another. The most traded currency pairs are:
EUR/USD, GBP/USD, USD/CAD, USD/JPY, USD/CHF, AUD/USD.
The Trade
Trade happens when you accept the offered price and when the dealer confirms.
A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.
Lets have the EUR/USD and AUD/USD for example.
So, for instance, if a trader goes long or buys the Euro, she or he is simultaneously buying the EUR and selling the USD. If the same trader goes short or sells the Aussie, she or he is simultaneously selling the AUD and buying the USD.
The first currency of each currency pair is referred as the base currency, while second currency is referred as the counter or quote currency. Each currency pair is expressed in units of the counter currency needed to get one unit of the base currency. If the price or quote of the EUR/USD is 1.2545, it means that 1.2545 US dollars are needed to get one EUR.
There are no further costs in the trade. There are no commissions and other fees as well.
Bid/Ask Spread
All currency pairs are commonly quoted with a bid and ask price. The bid is the price your broker is willing to buy at, thus the trader should sell at this price. The ask is the price your broker is willing to sell at, thus the trader should buy at this price.
Margin Trading
In contrast with other financial markets where you require the full deposit of the amount traded, in the Forex market you require only a margin deposit. The rest will be granted by your broker.
The leverage provided by some brokers goes up to 400:1. This means that you require only 1/400 or .25% in balance to open a position (plus the floating gains/losses.) Most brokers offer 100:1, where every trader requires 1% in balance to open a position.
The standard lot size in the Forex market is $100,000 USD.
For instance, a trader wants to get long one lot in USD/YEN and he or she is using 100:1 leverage.
To open such position, he or she requires 1% in balance or $1,000 USD.
Of course it is not advisable to open a position with such limited funds in our trading balance. If the trade goes against our trader, the position is to be closed by the broker.
It’s very important to understand every aspect of trading. Start first from the very basic concepts, then move on to more complex issues such as Forex trading systems, trading psychology, trade and risk manage
The Forex Market operates 24 hours through a global electronic network where trading occurs over the telephone and computer networks.
The Top Forex Currencies
Each world currency is given a three letter code which is used in FOREX quotes, the instrument traded by Forex traders and investors are currency pairs. A currency pair is the exchange rate of one currency over another. The most traded currency pairs are:
EUR/USD, GBP/USD, USD/CAD, USD/JPY, USD/CHF, AUD/USD.
The Trade
Trade happens when you accept the offered price and when the dealer confirms.
A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.
Lets have the EUR/USD and AUD/USD for example.
So, for instance, if a trader goes long or buys the Euro, she or he is simultaneously buying the EUR and selling the USD. If the same trader goes short or sells the Aussie, she or he is simultaneously selling the AUD and buying the USD.
The first currency of each currency pair is referred as the base currency, while second currency is referred as the counter or quote currency. Each currency pair is expressed in units of the counter currency needed to get one unit of the base currency. If the price or quote of the EUR/USD is 1.2545, it means that 1.2545 US dollars are needed to get one EUR.
There are no further costs in the trade. There are no commissions and other fees as well.
Bid/Ask Spread
All currency pairs are commonly quoted with a bid and ask price. The bid is the price your broker is willing to buy at, thus the trader should sell at this price. The ask is the price your broker is willing to sell at, thus the trader should buy at this price.
Margin Trading
In contrast with other financial markets where you require the full deposit of the amount traded, in the Forex market you require only a margin deposit. The rest will be granted by your broker.
The leverage provided by some brokers goes up to 400:1. This means that you require only 1/400 or .25% in balance to open a position (plus the floating gains/losses.) Most brokers offer 100:1, where every trader requires 1% in balance to open a position.
The standard lot size in the Forex market is $100,000 USD.
For instance, a trader wants to get long one lot in USD/YEN and he or she is using 100:1 leverage.
To open such position, he or she requires 1% in balance or $1,000 USD.
Of course it is not advisable to open a position with such limited funds in our trading balance. If the trade goes against our trader, the position is to be closed by the broker.
It’s very important to understand every aspect of trading. Start first from the very basic concepts, then move on to more complex issues such as Forex trading systems, trading psychology, trade and risk manage
Forex Glossary, Just 4 Forex
Here are some of the most common terms used in FOREX TRADING:
Ask Price Sometimes called the Offer Price; this is the market price for traders to buy currencies. Ask Prices are shown on the right side of a quote – e.g. EUR/USD 1.1965 / 68 – means that one euro can be bought for 1.1968 USD dollars.
Bar Chart – A type of chart used in Forex Trading Technical Analysis. Each time division on the Forex chart is displayed as a vertical bar which show the following information – the top of the bar is the high price, the bottom of the bar is the low price, the horizontal line on the left of the bar shows the opening price and the horizontal line on the right of bar shows the closing price.
Base Currency –is the first currency in a currency pair. A quote shows how much the base currency is worth in the quote (second) currency. For example, in the quote - USD/JPY 112.13 – US dollars are the base currency, with 1 US dollar being worth 112.13 Japanese yen.
Bid Price – is the price a Forex trader can sell currencies. The Forex Trading Bid Price is shown on the left side of a quote - e.g. EUR/USD 1.1965 / 68 – means that one euro can be sold for 1.1965 UD dollars.
Bid/Ask Spread – is the difference between the Forex Trading bid price and the Forex Trading ask price in any currency quotation. The spread represents the Forex Trading broker's fee, and varies from Forex Trading broker to broker.
Broker – the intermediary between buyer and seller. Most FOREX TRADING brokers are associated with large financial institutions and earn money by setting a spread between bid and ask prices.
Candlestick Chart - A type of chart used in Forex Trading Technical Analysis. Each time division on the Forex Tradingchart is displayed as a candlestick – a red or green vertical bar with extensions above and below the candlestick body. The top of the extension shows the highest price for the chart division and the bottom of the extension shows the lowest price. Red candlesticks indicate a lower closing price than opening price, and green candlesticks indicate the price is rising.
Cross Currency – A currency pair that does not include US dollars – e.g. EUR/GBP.
Currency Pair – Two currencies involved in a FOREX transaction – e.g. EUR/USD.
Economic Indicator – A statistical report issued by governments or academic institutions indicating economic conditions within a country.
First In First Out (FIFO) – refers to the order open orders are liquidated. The first orders to be liquidated are the first that were opened.
Foreign Exchange (FOREX, FX,) – Simultaneously buying one currency and selling another.
Fundamental Analysis – Analysis of political and economic conditions that can affect currency prices.
Leverage or Margin – The ratio of the value of a transaction to the required deposit. A common margin for FOREX trading is 100:1 – you can trade currency worth 100 times the amount of your deposit.
Limit Order – An order to buy or sell when the price reaches a specified level.
Lot– The size of a FOREX transaction. Standard lots are worth about 100,000 US dollars.
Major Currency – The euro, German mark, Swiss franc, British pound, and the Japanese yen are the major currencies.
Minor Currency – The Canadian dollar, the Australian dollar, and the New Zealand dollar are the minor currencies.
One Cancels the Other (OCO) – Two orders placed simultaneously with instructions to cancel the second order on execution of the first.
Open Position – An active trade that has not been closed.
Pips or Points – The smallest unit a currency can be traded in.
Quote Currency – The second currency in a currency pair. In the currency pair USD/EUR the euro is the quote currency.
Rollover – Extending the settlement time of spot deals to the current delivery date. The cost of rollover is calculated using swap points based on interest rate differentials.
Technical Analysis – Analysis of historical market data to predict future movements in the market.
Tick – The minimum change in price.
Transaction Cost – The cost of a FOREX transaction – typically the spread between bid and ask prices.
Volatility – A statistical measure indicating the tendency of sharp price movements within a period of time.
Ask Price Sometimes called the Offer Price; this is the market price for traders to buy currencies. Ask Prices are shown on the right side of a quote – e.g. EUR/USD 1.1965 / 68 – means that one euro can be bought for 1.1968 USD dollars.
Bar Chart – A type of chart used in Forex Trading Technical Analysis. Each time division on the Forex chart is displayed as a vertical bar which show the following information – the top of the bar is the high price, the bottom of the bar is the low price, the horizontal line on the left of the bar shows the opening price and the horizontal line on the right of bar shows the closing price.
Base Currency –is the first currency in a currency pair. A quote shows how much the base currency is worth in the quote (second) currency. For example, in the quote - USD/JPY 112.13 – US dollars are the base currency, with 1 US dollar being worth 112.13 Japanese yen.
Bid Price – is the price a Forex trader can sell currencies. The Forex Trading Bid Price is shown on the left side of a quote - e.g. EUR/USD 1.1965 / 68 – means that one euro can be sold for 1.1965 UD dollars.
Bid/Ask Spread – is the difference between the Forex Trading bid price and the Forex Trading ask price in any currency quotation. The spread represents the Forex Trading broker's fee, and varies from Forex Trading broker to broker.
Broker – the intermediary between buyer and seller. Most FOREX TRADING brokers are associated with large financial institutions and earn money by setting a spread between bid and ask prices.
Candlestick Chart - A type of chart used in Forex Trading Technical Analysis. Each time division on the Forex Tradingchart is displayed as a candlestick – a red or green vertical bar with extensions above and below the candlestick body. The top of the extension shows the highest price for the chart division and the bottom of the extension shows the lowest price. Red candlesticks indicate a lower closing price than opening price, and green candlesticks indicate the price is rising.
Cross Currency – A currency pair that does not include US dollars – e.g. EUR/GBP.
Currency Pair – Two currencies involved in a FOREX transaction – e.g. EUR/USD.
Economic Indicator – A statistical report issued by governments or academic institutions indicating economic conditions within a country.
First In First Out (FIFO) – refers to the order open orders are liquidated. The first orders to be liquidated are the first that were opened.
Foreign Exchange (FOREX, FX,) – Simultaneously buying one currency and selling another.
Fundamental Analysis – Analysis of political and economic conditions that can affect currency prices.
Leverage or Margin – The ratio of the value of a transaction to the required deposit. A common margin for FOREX trading is 100:1 – you can trade currency worth 100 times the amount of your deposit.
Limit Order – An order to buy or sell when the price reaches a specified level.
Lot– The size of a FOREX transaction. Standard lots are worth about 100,000 US dollars.
Major Currency – The euro, German mark, Swiss franc, British pound, and the Japanese yen are the major currencies.
Minor Currency – The Canadian dollar, the Australian dollar, and the New Zealand dollar are the minor currencies.
One Cancels the Other (OCO) – Two orders placed simultaneously with instructions to cancel the second order on execution of the first.
Open Position – An active trade that has not been closed.
Pips or Points – The smallest unit a currency can be traded in.
Quote Currency – The second currency in a currency pair. In the currency pair USD/EUR the euro is the quote currency.
Rollover – Extending the settlement time of spot deals to the current delivery date. The cost of rollover is calculated using swap points based on interest rate differentials.
Technical Analysis – Analysis of historical market data to predict future movements in the market.
Tick – The minimum change in price.
Transaction Cost – The cost of a FOREX transaction – typically the spread between bid and ask prices.
Volatility – A statistical measure indicating the tendency of sharp price movements within a period of time.
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