Forex Online Secrets

Archive for the ‘How To Trade Forex’ Category

Choosing the Best Forex Trading Software is not easy these days. There are many choices available, and there are many factors you need to take into consideration.

Are you looking for a Forex software that is fully-automated, or semi-automated? Or perhaps you want one with a user-friendly interface.

While these factors are important to look at, the most important factor in the software’s ability to make you money. I am a bit of a pragmatist when it comes to Forex tools and automation. It seems that the more automated your Forex trading becomes, the less unsure you can be if you are making money with it or not.

While some will bed to differ with me (especially the software developers), nothing can eliminate the human decision making process of “buying and selling.” An of course, with the human element comes the emotions of fear and greed, which can drastically drive market up or down in any given day, including your Forex trading account. Trading robots have been tried and most of them have their limitations. Otherwise, everyone would be a millionaire who purchased the trading robot…and that is far from the truth.

The wisest principle when it comes to buying the best Forex Trading Software has to be simply “How Much Money Does It Make Me.” Actor Tom Cruise in Jerry McGuire said it best, “Show Me The Money.” In fact, picking the best Forex Software is easy when you apply this one principle.

While other factors can be taken into consideration, the bottom line has to be on “profits.” After all, this is about making money with Forex.

The next question you must be asking is, “Which Forex Software is the best to make me money?”

That is what this website is all about, namely, helping you choose the best software’s and courses. The best software today will be different 3 months from now. The FX market is fast paced with new systems, software’s, and technologies. That is you will want to BOOMARK this site to keep abreast on all the latest Forex Trading Softwares and technologies.

Technical analysis (TA) is one of the most versatile and accurate methods of measuring the pulse of the market. By implementing TA you will be able to identify recurring patterns in the market as they take place. Once you become familiar with important formations and recurring patterns, you will be able to take full advantage of significant events in the financial markets as they unfold.

Traders who use TA in conjunction with Fundamental Analysis have a distinct advantage over those who just use news data and events to trade. What is important to realize is that TA does not conflict with the fundamental consensus, it merely measures it. By combining the two it will help you interpret the underlying fundamentals that influence price and vice versa.

Keys to successful TA: 3 Methods to Interpret the Studies

Although there are hundreds of different studies and variations that fall under the TA grouping, the most effective methods are usually the simplest. By integrating basic charting tools such as Candlesticks, Moving Averages, Relative Strength and Pivot Points, you will be able to make trading related decisions more effectively. We will start with the most simplistic form of TA, and that is Support and Resistance.

1. How to find Support and Resistance

The most effective attribute a trader can have is to be cable of identifying levels of significant Support (S) and Resistance (R) as they evolve. If a trader is able to do this effectively he can place orders in strategic locations to yield profits and shield losses. Thus, upon iteration of the process he is capable of experiencing growth in account equity.

Technical and flow analysis can help traders discover S and R prior to the arrival of price at the respective levels. By the end of this course you will have the knowledge necessary to:

• Find S/R levels
• Pinpoint places to place entry and exit orders based on S/R
• Trade with peace of mind

Another method to interpret the studies is…

2. Trendlines and Channels

Trendlines are just as straightforward and easy to apply as S/R. They should be interpreted in a nearly exact same way as well. In this case the Trendline is tracing the price lower, however Trendlines can be applied to both falling and rising markets.

To draw a Trendline all you have to do is simply connect two or more price extremes with a line, below is an example.

As you can see on this chart by connecting the first two peaks in price you were able to discover the descending resistance or as traders refer to it as Trendline Resistance.

Creating Channels on your price chart is just as simple creating a Trendline plus one step. Most packages include a utility to create them, however they can be created by simply drawing two parallel Trendlines.

Channels and horizontal levels will give a trader means of placing entry and stop orders strategically based on historical price data.

It is important to realize the lines do not represent a path the market will follow exactly. All Channels and S/R levels are eventually broken through. What the lines will do for you is give you a clear method for measuring the pace of the market so you can place orders accordingly. Below is an example of a channel using parallel Trendlines.

This brings us to our third method to interpretation…

3. Fibonacci Retracements and Projections (Fractals)

Leonardo Fibonacci was a mathematician born in Italy nearly 1000 years ago. Dubbed the “greatest European mathematician of the middle ages”, and authored The Book of Calculations credited for implementing the Hindu-Arabic numerals, also known as the decimal system replacing roman numerals in Europe.

Among these extraordinary accolades Fibonacci was sought after by many powerful rulers of his day to solve problems in trade, finance and urban planning.

In his book Fibonacci describes what is known today as the Fibonacci Sequence, or what the ancient Greeks coined the Golden Ratio (Phi or ?), while modeling trade and exchange rates amongst several Mediterranean nations for The Holy emperor of Rome. Similar observations were made in the Far East at an undocumented time in history.

The Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers:

0 + 1 = 1 + 2 = 3 + 5 = 8 + 13 = 21 + 34 = 55 + 89 = 144 + 233 …… ?

This simple two-stage iterative process results in a number of intriguing interrelationships and self-similarities, such as that any given number is approximately 1.618 (Phi) times the preceding number and any given number is approximately 0.618 (Reciprocal of Phi) times the following number.

We observe the occurrences of this sequence in many instances of dynamic systems including financial markets. However, it is not entirely necessary that you fully grasp the significance of the relationships to utilize it. Rather it is of much greater importance that you understand how to apply it to a chart.

Forex Markets move up and down all day long and some days can be very volatile. It is the discipline of Fundamental Analysis that attempts to study the reasons for the volatility.

Here are just a few of the areas that Fundamental Analysis looks at to determine why the Forex Markets are volatile.

• Geopolitical events – War, Terrorism, Political Developments
• Federal Reserve announcements – FOMC announcements and Beige Book
• Employment data – NFP and Unemployment Percentage Rate
• Inflation data – GDP, CPI and PPI

As you may or may not know, the market often responds with volatile price changes following the release and dissemination of major market data. With so much information to process in such little time and the market making large swings, it is easy to feel like you are well behind the curve. Fortunately there are ways to compartmentalize this seemingly insurmountable data in order to preserve your account equity in the face of uncertainty.

There are just a few things that you must realize in order to make heads or tails of it all.

• The majority of market moving data is released at the onset of American trading, usually 8:30 am in New York.
• The biggest releases are on the first Friday of every month (NFP and Unemployment).
• The days before, of, and following the FOMC announcements are volatile.
• Geopolitical unrest creates uncertainty about stability of exchange rates – uncertainty often translates into weakness in market leading currencies and strength in safe-haven currencies.

Additionally, I have to mention, the U.S. economy and in particular, the U.S. dollar plays a major role. There is another factor that plays a major role in the Forex Market’s volatility, namely:

Employment Friday

Employment Friday as its known in trading pits around the world is the day the U.S. government divulges its latest compilation of the previous month’s employment figures for the entire United States.  The two components of the report that traders are concerned with are Non-farm Payrolls (NFP) and the Unemployment Rate (%).

The numbers are heavily scrutinized and the reaction is potentially very large and often instantaneous.  All markets are impacted by the number from bonds, domestic and international, to exchange rates of countries like Denmark, South Africa and Norway, as well as international equity markets.

U.S. Currency – The Benchmark

You may be wondering: Why in a global market the data from one country moves the market the most?  When the fact of the matter is that the U.S. dollar is the benchmark currency.  This fact is known and accepted as fact on dealing desks all around the world from London, Frankfurt, Dubai, Hong Kong, Tokyo, New Zealand to Sydney and elsewhere.  For that reason traders around the world are very much attuned to the Benchmark nation’s state of affairs with regard to economic data, political developments and various market moving tidbits.

Naturally of course due to information networks and globalization all of the nations of the world are interrelated to one degree or another indefinitely, therefore it is important for others to look to the leading and major contributing economies for clues as to how things are likely to play out in their own respective nations and currency.

Trading in the Forex Market like a seasoned pro will be easier for you with these two important Forex Trading Strategies Having dealt with numerous amateurs, I can tell you, these two tips alone will earn you thousands.

1. Keep Trading Logs

Keeping a brief but concise record of your thoughts at the time of making a trade is one of the most invaluable practices a trader can take on. Doing this will help traders in a many ways:

• The same mistakes that were made in the past are less likely to occur simply because you have documented the event and it will be recalled with ease, and you’ll be in better position to analyze the reiterative flows in your strategy and or thought process for the same reason.
• Good record keeping is synonymous with positive performance in most every task
• Positive reinforcement of favorable habits will emerge with frequent repetition.

Attaching a chart to the comments in a .doc file or spreadsheet will further in your development as a profitable trader.

2. Build Your Account Equity

The key to increasing the size of your account in regular intervals really lies on just one primary factor – consistency.

You need to practice all of the profitable techniques on a consistent basis. This can be difficult for a few reasons:

• The fluctuations in the account can deceive you when in fact they are completely normal and what can be expected when interacting with a spurious variable such as the FX market. This may cause a trader to change from a profitable technique to an unprofitable one creating unnecessary losses.
• Bad habits will arise in place of the good ones – and they may be hard if not impossible to overcome later.
• Factors influencing the trader outside of the market can be damaging unless a sound basis in the fundamentals of trading profitably are firmly in place.

Dispelling Myths

Many of the impedances between traders and profitability come from the traders own actions. Accepting that as fact is 99% of trading profitably. Humility will help bring this to light, and must be practiced at all times.

Novice traders who experience some success in most cases begin to think that they can do no wrong – if they buy they market will go up – if they sell the market will go down. This misnomer will lead to future losses almost certainly. The market teaches ‘tough love’ and you must be humble to it at all times – both in times of rising equity and falling.

You must except that errors are made so that they can be corrected, and profitability is given a chance to come to fruition.

The Japanese Candlestick is a very intuitive and informative means of representing price action of FX rates. At first it might seem difficult to move from line or bar chart to candles, but if you give them a fair evaluation, you will find that they are clearly the most superior method of charting price data.

The candle itself represents a period of time. For example, a daily candle chart will show you the open, high, low and close of that day’s trading range. The top of the candle represents the highest price of the period or the maximum power of the buyers. The bottom of the candle represents the lowest price of the period or the maximum power of the sellers that day. However, every time frame can be used from monthly down to 1 minute. This fact makes them very useful for pattern traders and identifying valid levels of support and resistance.

Candles:

• Illustrate the price range for any given period
• Create patterns making the inclination of the market clearer

The creators of the method consider highs and lows relatively insignificant professing these levels represent the height of panic trading. Rather, they focus on the relationship between opening and closing prices or as they call it the real body of the candle. Often, these candlestick patterns may include several candles in a specific sequence.

The advantages of the candlestick charting:

• Allow traders to visualize the substantial pricing of that period allowing you to focus on certain aspects of the period’s price action.
• Help traders pinpoint key levels of S/R

The most important thing to know when considering the meaning of a candlestick formation is that it can be interpreted differently depending on where it appears and what type price action preceded it. In some instances a candle may indicate the complete opposite of what the exact same formation indicated previously in that same day. Clearly it is important to know how to differentiate.

Below is the most common candle you will encounter trading FX.

The Doji Cross (Doji)

The Japanese word translated in Latin based languages means “a sudden danger”. A perfect Doji has the same closing price as the opening. However, like any other chart formation, there is some flexibility involved. One to five ticks difference between the open and close is acceptable, depending on the time frame and range. On shorter time frames 1-5 ticks and on larger time frames as much as 5 or even 10 on a very large time scale. Just keep in mind that the larger the scale the larger the difference is acceptable.

The Doji is one of the more dynamic formations in that it can appear in many places on your chart but mean something different entirely depending on that location. For example, when found after a large move it indicates a reversal may be looming. Conversely, when one appears after a period of consolidation, or sideways trading, it demonstrates that a large forceful move may be coming soon.

Doji Candlesticks in review…

1. Doji has the same closing price as the opening
2. Demonstrate that a large forceful move may be coming soon
3. When found after a large move it indicates a reversal may be looming