Archive for the ‘General’ Category
Forex Patterns And Forecast Methods Used Today For Successful …
December 12th, 2008
Forex Patterns And Forecast Methods Used Today For Successful Forex Trading! Part 2
Technical analysis and fundamental analysis differ greatly, but both can be useful forecasting tools for the forex trader. They have the same goal – to predict a price or movement. The technician studies the effects, while the fundamentalist studies the cause of the forex market movements. Many successful traders combine a mixture of both approaches for superior results.
Note: If both fundamental analysis and technical analysis point to the same direction, your chances for profitable trading are much better.
So let us begin with where we left off on the technical analysis:
Moving Averages – Used to emphasize the direction of a trend and to smooth out price and volume fluctuations, or ‘noise’, that can confuse interpretation. There are seven different types of moving averages:
- Simple (arithmetic)
- Exponential
- Time series
- Weighed
- Triangular
- Variable
- Volume adjusted
The only significant difference between the various types of moving averages is the weight assigned to the most recent data. For example, a simple (arithmetic) moving average calculated by adding the closing price of the instrument for a number of periods, then dividing this total by the number of times.
The most popular method of interpreting a moving average is to compare the relationship between a moving average of the instrument’s closing price, and the instrument’s closing price itself.
Sell signal: when the instrument’s price falls below its moving average
Buy signal: when the instrument’s price rises above its moving average
The other technique called the double crossover, which uses short-term and long-term averages. Typically, upward momentum is confirmed when a short-term average (15 -day) crosses above a longer-term average (50-day). Downward momentum is confirmed when a short-term average crosses below a long-term average.
MACD – Moving Average Convergence/Divergence – A technical indicator, developed by Gerals Appel, used to detect swings in the price of financial instruments. The MACD is computed using two exponentially smoothed moving averages of the security’s historical price, and usually shown over a period on charts. By then comparing the MACD to its own moving average (called the signal line), traders believe they can detect when will affect the RSI by creating false buy or sell signals. The RSI best used as a valuable complement to other stock-picking tools.
Stochastic Oscillator – A technical momentum indicator that compares an instrument’s closing price to its price range over a given period. The oscillator’s sensitivity to market movements are reduced by adjusting the time, or by taking a moving average of the result. This indicator is calculated with the following formula:
%K=100* [(C-L14) / (H14-L14)]
- C= the most recent closing price
- L14= the low of the 14 previous trading sessions
- H14= the highest price traded during the same 14 day period
The theory behind this indicator, based on George Lane’s observations, is that in an upward-trending market, prices tend to close near their high, and during a downward-trending market, prices tend to close near their low. Transaction signals occur when the %K crosses through a three-period moving average called ‘%D’.
Trend Line – A sloping line of support or resistance…Click the link below for full story.
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Successful Forex Trading System – This Method Is Simple And Makes …
December 12th, 2008
Successful Forex Trading System – This Method Is Simple And Makes Huge Profits!
If you want a successful Forex Trading system then you should use a breakout strategy, as its simple to understand, easy to apply and makes huge gains. Let’s look at how to incorporate it in your Forex trading strategy for huge gains…
You don’t need a forex robot to do this you can build a system yourself and here we will show you how.
What are Breakouts?
Breakouts are when prices break to new highs or lows on a Forex chart.
If you buy or sell these breakouts you can make huge profits – because they are based on two facts about Forex Price movement which will never change:
1. Forex markets trend for long periods and most trends start and continue from new market highs or lows.
2. The majority of Forex traders lose, because they refuse to buy or sell breaks and want to get in at a better or lower price and the fact they don’t want to go with breakouts, means they work remember 95% of traders lose!
A valid breakout has high odds that it will continue in the direction of a break.
Of course not all breakouts continue so you need to be selective in the ones you choose and here are two ways to find the best breakouts.
1. Generally you’re looking for a minimum of 2 tests of support or resistance but we like 4 or 5 tests. We also like them in time periods that widely spaced apart in terms of time as well. As a general rule of thumb – The more tests the better and the wider and more time frames they occur in the better.
2. Look in the news for levels the participants feel are important and the news tells you they are strong when they break they are likely to be good breakouts. The more uncomfortable you are when a breakout occurs the better it is likely to be, never worry if the majority don’t think a break will continue – the majority lose!
Getting the Odds in Your Favour
The best breaks are always supported by rising price momentum so use one or two indicators to confirm the move.
Two good ones are the RSI and Stochastic which you can learn in about an hour.
These are visual indicators easy to apply and use and can help you make bigger profits, as they help you get the odds on your side more.
We don’t have time to give you all the advantages here but look them up in our other writings.
Place Stop and Ride the Trend
Once the breakout occurs supported by price momentum, you can execute your trading signal and put your stop under the breakout point and you’re in the trade.
When the breakout gets on the move, trail your stop slowly outside of normal volatility – never jack it up to close to quickly keep it back and you will stay in the trend longer and make more profits – sure you have to take open equity dips but if it is a good trend you will be rewarded at the end of the trade.
A Forex Trading Strategy to make Big Gains
Good breakouts come around a few times each month at max in currencies and this form of trading is not for the action trader but the one who wants to make big gains in 30 minutes a day or less.
Discover breakout trading and make it part of your essential forex education and you can make triple digit profits annually with your Forex trading system.
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Forex Trading – Why Trying To Determine Overbought And Oversold …
December 12th, 2008
Forex Trading – Why Trying To Determine Overbought And Oversold Positions Is A Dangerous Game
There are many different methods used by traders to trade the forex markets. One of which is to constantly be on the look out for overbought and oversold positions, but is this really the best way to trade?
If you have any experience at all of trading, whether it’s forex trading or stock market trading, you will know that it’s virtually impossible to consistently enter a position at the exact top or bottom of an instrument’s trading range. Even with the use of multiple technical indicators it is extremely difficult to do. Sure you may get lucky every so often but the reality is that most of the time you will enter a position too early and sometimes the price may just race through what you perceived to be the top or bottom.
It’s important to realize that a currency pair can remain overbought or oversold for a very long time, and just because tried and tested indicators like stochastics and RSI, for example, indicate that the price is overbought or oversold does not mean that the price cannot go a lot higher into an even greater overbought or oversold position. This is true in both short and long time frames, and can often result in a trader’s stop loss being quickly hit as the price continues to become even more overbought or oversold.
For this reason my own personal preference is to follow the overall trend and not try and second guess the market, because this is what you’re ultimately doing when you’re trying to call tops and bottoms all the time. You’re effectively going against the trend and over time this is not the most profitable way to trade in my opinion.
A more effective way of trading is to wait for confirmation of a reversal before entering a position. Yes you may not yield as many points trading this way, but it’s much easier to go with a trend than fight against it.
For example as well as using traditional overbought and oversold indicators you could use crossover indicators such as MACD, TRIX and EMAs to indicate that a true reversal is taking place. You can also wait until short term support and resistance levels are breached for additional confirmation.
The main point I want to get across in this article is that if you’re just using certain indicators to call the top or bottom of a market, or worse still just using your own intuition, you are playing a very dangerous game, and you are unlikely to make consistent profits in the long run. If you do choose to trade this way you’re much better off sacrificing a few points by waiting patiently for additional confirmation that a true reversal is taking place.
By: James Woolley
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James Woolley runs a blog where you can learn forex trading and read his Forex Avenger review.
Best Forex Trading Indicators – How To Use Them For Big Gains
December 12th, 2008
Best Forex Trading Indicators – How To Use Them For Big Gains
What are the best forex trading indicators and how do you use them to make your forex trading strategy succeed? Here we will look at how to do just that.
Firstly, there is no such thing as a best forex trading indicator on its own, as no indicator works all of the time however if you combine the right Forex trading indicators you can build a robust forex trading strategy and seek currency trading success.
Here we are going to give you a subjective view, of the best forex indicators and how to combine them for success.
When trading forex markets, we always like to use simple bar charts and see support and resistance as the initial paint on the canvas. We can see support and resistance and the direction of the market clearly and then decide with our indicators areas of value to buy and sell.
Here are some indicators we have been applying for 25 years and have made money with and the some advantages we think they give to any trader.
Simple Moving Averages
We all know prices come back to an average and we find the most useful the 40 day MA, for defining the biog long term trends and in strong trending markets, we like to buy or sell back to the 20 day MA, to enter fresh positions in the direction of the trend.
Bollinger Bands
Gives you the volatility of the market and they are a great help in determining the standard deviation of the market from the norm. This of course gives you clues to overbought and oversold scenarios, entry points and targets.
Anyone who trades forex, needs to be aware of volatility and standard deviation, so make it part of your essential forex education and use Bollinger Bands.
While you can see trends support and resistance and volatility, this is just setting up areas to trade now you need to do market timing. You should never predict a move, you should always confirm it with momentum indicators to get better market timing.
Here are two great forex trading indicators to do this.
Relative Strength Index
A great indicator you can use it to time entries if the RSI is in your favour and strong, in existing trends – or when it diverges from trends ( particularly when its over bought or over sold) to enter contrary trades.
Stochastic
We love the RSI – But our ultimate indicator to trigger trades is the stochastic; it’s simple and very effective. We always use crossovers to confirm any move we are looking at. In contrary trades we love stochastic crosses with bullish or bearish divergence ( from over bought or oversold areas) against the prevailing trend.
A Great Toolbox Of Indicators for Any Forex Trader
So there you have our best forex trading indicators and they can be used for trend followers, contrary trading or swing trading. We can’t give you every advantage of them here but look them all up and study them and you can blend them, into a powerful forex trading strategy for profit.
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Forex Trading – Hitting And Holding The Big Trends For Massive Gains
December 12th, 2008
Forex Trading – Hitting And Holding The Big Trends For Massive Gains
A little while ago I wrote an article that predicted the euro would peak at 1.60 and could go to its true value of 1.20. Since then the euro has crashed for huge profit of over 35 big points. Here I want to reveal the simple tools, I used to get into and hold the trend…
Before we look at the trade in more detail lets make a point about market behaviour.
Markets tend to make important tops when the news is most bullish. Human psychology always pushes prices to far up or down so how do you spot the turns?
The news is very helpful – but you don’t want to use it the way most investor’s do and believe what it says, you are going to ignore the news and simply look at the price reaction to it.
Confirming the Top
The euro was rising purely on the perception that the ECB would raise interest rates – but the economy was actually going into recession!
So logic told me they probably wouldn’t and the price was coming in to 1.60 area and resistance to the euro was holding. Furthermore, the CFTC Publish a great report called Net Traders Positions which is free and shows the positions of speculators in the futures market ( but it is also a great indicator for how traders are trading in cash FX) and it showed huge speculative buying.
The report also shows you commercial hedgers – these are the people who hedge and are not motivated by greed and look at fair value and they started to sell – these two indicators warned of a top.
Confirming the Break
Now the 1.60 level was holding and you have to then look for proof of a top.
This can be seen in a waning of price momentum or buying. Two great indicators for this are – the stochastic and RSI. We have written about them in our other articles so look them up. They can be learned in about 30 minutes and as soon as both turned down, it was time to sell – then we saw a huge fall.
Value
Thinking about it, the whole euro rise since it hit 1:1 had been driven by interest rate perceptions, so it’s logical to assume that it would go back there once this key fundamental had been removed. The euros true value in purchasing terms is about 1:20, so that is easily achievable and we are not far off that level now.
The above is a huge profit 35 big points! Does that make me a guru or expert?
No of course not, but it shows what you can do with some common sense, when looking at the facts and then using some simple tools to time the move.
Many traders like to trade short term – but my view is trade long term, as you get better odds of success and bigger profits so, look for and hit the turning points and then hold them.
Markets don’t move to some mysterious law, they move to probability and the probability was the euro had no more upside and the result was a great profit.
Could you spot trends like the above?
Of course you can, with a little practice and the right Forex education, you could soon be spotting and hitting the big trend changes and piling up huge profits.
By: kelly Price
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