Forex trading has received a great deal of attention from those seeking quick, instant wealth. Nevertheless, without creating a strong and unique strategy to approach Forex, these individuals will be left penniless. Forex trading strategies lower potential risk in either day/swing trading for those individuals with solid determined traders who remain calm at crucial moments and stick to the strategy.
Forex trading strategies are plentiful, perhaps the exact reasons why a lot of people haven’t got a clue where to start. Nevertheless, all these strategies use two common characteristics and techniques: fundamental or technical analysis.
When you look at a fundamental analysis report, what you see is the whole financial scope including trades, historical analysis. These trends reveal international macroeconomics and influences that effect the supply and demand of currency trading. Here are five factors that influence it:
Forex is considered one of the most lucrative trading online market ever, consisting of millions of traders all looking to acquire huge profits; nevertheless, Forex trading can be risky, particularly to those lacking sufficient experience. To achieve those Forex success, one must learn and become adept quickly and operate with sound strategies.
In order to get a basic understanding of Forex trading, consider setting up demonstration accounts. These demo accounts provide you the capability of trading, except with “virtual” money rather than the real thing. This method is without risk and a great way to give you results on your trading capabilities. When you’ve used this strategy enough and you see yourself improving significantly, it’s time to move onto the next phase.
Trading divergence patterns is not a complete trading strategy rather it is an additional tool in the technical trading toolkit of any trader. Divergence is simply the disagreement between the price action and the indicator movement.
Now any oscillator can be used to show divergence patterns. The most commonly used oscillators include RSI, Stochastics, MACD, CCI, ROC and Williams %R. However, any oscillator can show divergence with price action.
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Forex is perhaps the best way to make oodles of money in the world currency market. Making money through Forex is much similar to making money through holding stocks. The strategies of the Forex market is highly in demand as more and more investors are plunging into the Forex investment market, shifting their bases from the stock and the bond market.
Moving averages are one of the most simplest yet the most widely used technical indicators. You will find almost every other trading system using moving averages in one form or another. Moving averages are just the average of the closing prices of a currency pair over a certain period of time.
Moving averages can be useful when you are looking to confirm a trend. The first rule of thumb when using moving averages is that when the currency pair price is above the moving average, an uptrend is in place. When you combine this with a bullish candlestick pattern you can get profitable entry and exit signals. Similarly, when price action is below the moving average, a downtrend is in place.
Trendline is one of the most easiest to understand technical indicators. Most of the charting software will automatically draw the trend line for you. You can use a bullish trendline and the bullish candlestick patterns to pick long entry points as well as confirm trends. In the same manner, you can use a bearish trendline in conjunction with bearish candlestick patterns for a short entry in the market.
When you combine a bullish trendline with a bullish candlestick pattern or a bearish trendline with a bearish candlestick pattern, you will get a pretty accurate signal that tells whether you should stick with a position or exit it.
Elliott Waves were first discovered by R.N Elliott in the 1930s. What he found was that markets follow a certain wave pattern over the long term as well as on the short term that is repeated over and over again. This wave pattern is now considered to be a universal law of the markets and is named as Elliott Waves Principle.
Money does not grow on trees. That is why most of the people are hesitant to invest their money in Foreign Exchanges in fear of losing it. If you jump into investing your money on a business you are not familiar with, tendencies are you may fail miserably and lose all of your investments. You don’t want that to happen. Practice trading is your number one step.
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First read the article on the Moving Average Convergence Divergence (MACD) to know what is the MACD black line and the signal or the trigger grey line and plus what is a MACD histogram. When the MACD line crosses above the signal line or the trigger line, this is known as the MACD cross or a Moving Average Crossover. When the MACD line is above the trigger line, it supports a long position and when the MACD line is below the trigger line, it supports a short position.
The Moving Average Convergence/Divergence (MACD) is a versatile indicator. Moving Average Convergence/Divergence is one of the simplest and most reliable forex indicators. MACD will help you identify both the bull divergence as well the bear divergence which are rare but effective patterns.
This is a hybrid tool that is helpful in determining the present market direction as well as measure the price momentum. Many traders use MACD as their sole confirming indicator. This multi faceted indicator acts as a sign of the trend momentum by representing the relationship between the two moving averages.
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Online FX trading and global data can be at times, intertwined. The ability to unravel these figures and react accordingly is a valuable investing skill set. The data from the latest December 3rd Non-Farm Payroll results certainly provides food for investing thought.
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Forex Binary Options can deliver massive 1,328% gains! Forex Binary Options is a tool that 99% of the investing public hasn’t heard about yet. Forex Binary Options are a brand new currency trading tool that is cheap, easy and powerful. In simple terms, Binary Options are like a bet whether something will happen or not. It is just like a Yes or No investment.
For example, you can bet on whether EUR/USD rate will fall below 1.3570 or whether AUD/USD rate will rise above 1.0000. Now, if your bet comes out right and EUR/USD rate does fall below 1.3570 or AUD/USD does rise above 1.0000, you collect your original investment plus a profit. If not, you lose the original investment that you had made in the trade.
Prices trend. Trendlines are drawn by connecting two or more points of support and resistance. An uptrend means a series of price bars or candles exhibiting higher lows, higher highs or higher closes. Similarly, a downtrend means a series of price bars or candles showing lower highs, lowers lows or lower closes.
An uptrend line or support is drawn by connecting the higher lows with a straight line and extending that into the future. Similarly, a downtrend line or resistance is drawn by connecting the lower highs with a straight line and extending that into the future.
Currency trading using the Euro has been erratic; with the velocity of forex trading bouncing and rebounding to streams of Euro Zone related news. Speculation is rife within the currency focused foreign exchange markets with some traders attempting to ‘guestimate’ the future of the Euro. Unless you have been sitting at your desk with your eyes closed and ears covered it is hard to miss the fact that the Greek and Irish debt crisis has rocked Euro Zone stability. The latest knockout blow comes in the form of a rather pricey €85 billion rescue package for the Irish economy.
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Many people think that an Introducing Broker is merely a middleman and that commissions and fees will, therefore, be higher than if they were working directly with the dealing firm. However, this isn’t true because, for one, due to the high volume of customers they provide, these brokers often receive a large discount on fees and commissions. Their profit comes from this difference as they charge the standard rates a regular, discount Forex broker offers. In fact, sometimes they offer better conditions.
One of the most popular ways to use Stochastics is divergences. A divergence takes place when the price and the stochastics diverge from following the same path. For example, if the price makes a new low but the stochastics don’t, it is a divergence. In the same way, if the stochastics make a new high and the price doesn’t, it is again a divergence.
Now, keep this in mind that divergence on a daily chart is quite different than the divergence on the weekly chart. Divergence on the daily chart means that the price will make a short term counter trend move in the next one to five days.
Stochastics is one of the most popular indicators in forex trading. You can find it on almost all platforms and charting services. But most traders use them incorrectly. Stochastics is an oscillator that has two components %K and %D. This is the formula to calculate K=100(C-L)(H-L) where C is the Close, H High and L the Low of the period. Typically this period is 14 days. However, 9 days period is also popular. %K is the 3 day MA of K and %D is the 3 day MA of %K.
Fortunately, you don’t have to go into all this maths unless you want to fiddle with it and see if you can make it work better. One common question is how many days to use in Stochastics. Stick with 14 days as it is the default. Longer period means lesser signals and lower whipsaw while shorter periods means more signals and more whipsaw.
A Channel is formed when we draw a trendline and then a line parallel to the trendline with most of the price action if not all falling between the two lines. By scanning through a few charts, you will find that it is easy to identify channels. Channels occur frequently.
However, currencies rarely stay in a narrow range for long and have a tendency to breakout from a tight range and develop a strong trend in the market. Important economic news releases can act as a trigger for a breakout.
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Many traders use scalping as their main trading strategy. Scalping means quickly entering and exiting the market making a few pips every time. Most scalpers look for making a quick 10-20 pips each time they enter and exit the market. By making a few high probability scalping trades every day, you can make 30-60 pips easily.
There are many scalping strategies. This simple scalping strategy is known as the Lucky Spike and it is being used by many traders to make consistent profits each and every day scalping the forex market.
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Many traders make a good living catching changes in the trend. Catching a trend change means trying to pick the top or bottom of a trending move. It is not easy but it can be highly rewarding if done correctly. Bullish and bearish Engulfing Candlestick Pattern is one of the most popular patterns used by these type of traders to anticipate a trend reversal.
This is a two stick pattern meaning it takes two days for the pattern to develop. The pattern’s name comes from the fact that the signal day completely engulfs the setup day. So the candle body and the wick on the signal day engulfs the candle body and wick on the setup day.
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Ireland is in economic meltdown, with forex trading yet again being reminded of the delicate balance of the Euro. If you thought that the incoherent panic of the Greek Debt crisis had been swept under the carpet, think again. Traders are yet again being pounded by European disdain as yet another country weakens at the heels. Ireland is far from falling into economic disrepute but it is beginning to walk a very thin line in terms of reputation and confidence.
The Euro is not contained within one country and therefore its value is intrinsically linked with the economic paths of many countries. While in times of prosperity the value of the Euro is locked in and somewhat endorsed by multiple successes, it only takes one small cog in the constantly churning Euro zone wheel to fracture the fragile economic machinery.
You can bet on the direction of the currency market with the help of forex binary options. Forex Binary Options also known as Exotics give you a fixed payoff of $100 if the market is above or below a certain price level when the binary options contract expires. And in case the market does not cooperate, you get $0 as a payoff. You can trade forex binary options on currency pairs like EURUSD, USDCAD, GBPUSD, USDJPY with intraday, daily and weekly expirations.
You must have often heard market analysts talking about the daily, weekly and monthly support and resistance levels. How do these analysts calculate these daily, weekly and monthly support and resistance levels? Most are using Daily, Weekly, and Monthly Pivot Point numbers!
Difference between a winning trader and a losing trader is what they do with the price data they have. Pivot Point can give you the edge as they are considered to be a leading indicator unlike most other technical indicators that are lagging in nature. Read the first article on Pivot Point Analysis before you continue with this one.
Pivot Point Analysis is a robust and time tested method of market analysis. This strategy works in all markets that have an established range. The range is the high and low of a given time period and it accurately depicts the market participants exuberant bullishness and pessimistic bearishness for a given trading session.
The high and low are the two most important reference points for a given trading session. The high is a reference point for those who bought out of greed thinking that they were missing an opportunity. Similarly, the low depicts selling out of fear thinking that they would lose by staying in the long trade.
The forex market or the Foreign Exchange market is a world wide market where you can trade currencies with each other. A particular currency can be exchanged for another, in a forex market in case the price of this currency is lower than the other. It can be exchanged back again if the price rises. This is the way in which you can make money in this market. If you are burdened with debt and are considering debt reduction, then it is a very good solution for you to invest in the forex market and make some money.
Some reasons why you should consider investing in the forex market for debt reduction are as follows.
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Commodities Channel Index (CCI) is an oscillator that measures the strength of the current market cycle and attempts to predict when it will end. CCI indicator default measurements are +100 to -100. When the indicator is above +100, the market is considered to be overbought and when it is below -100, the market is considered to be oversold.
Commodities Channel Index breakouts occur when it falls below +100 or rises above -100. Most traders are taught to buy when the breakout from the oversold market takes place and sell when the breakout from the overbought market condition takes place. In this CCI Breakout Trading Strategy, we will be using a variation of this by combining the Commodities Channel Index Breakouts with our usual support and resistance on the Daily Charts.
The challenge for many new forex traders is to identify the overall trend on the intraday charts. The 200 Exponential Moving Average (EMA) can solve the problem for them. 200 EMA is one of the most popular technical analysis indicators amongst forex traders.
In order to use the 200 EMA Forex Strategy open the 4 hour, 1 hour and the 15 minute charts on your MT4 Platform. Plot the 200 EMA on these 3 charts and color it red.
Tile the three charts in a vertical fashion so that you can view the three charts one above the other. Now, scroll through the various currency pairs like the EUR/USD, GBP/USD, USD/CHF, USD/JPY, USD/CAD, EUR/JPY, AUD/USD, NZD/USD, EUR/CHF or whatever pair you like to trade.
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There are certain Candlestick Patterns that are vital to your trading. They are vital because they identify possible trend reversals. Why should you identify these candlestick patterns? Because they can make you money! Failure to spot these candlestick patterns can lead to costly trading mistakes.
Ask any trader who uses candlesticks in trading, which of all the candlestick patterns is the most important to recognize. He or she will unhesitatingly say a Doji. Appearance of a Doji Candlestick Pattern is often a signal for the beginning of a minor or an intermediate trend.
Many new forex traders lack the patience to wait days for a trade to develop. These types of traders want the trade to turn into a profit within minutes of entering into the trade. If it doesn’t, they usually abandon the trade as they lack the patience to follow it through. These type of traders are more than happy to make 10 pips multiple times a day instead of making something like 100-200 pips in a trade with the potential of the trade going against them in the beginning.
For these type of traders momentum trading is the best forex trading strategy. The aim of this short term momentum forex trading strategy is to hit the profit target as early as possible. This is achieved by entering the market long or short when the momentum is on your side.
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Ichimoku Kinko Hyo is a unique trend trading charting system. You will find this Ichimoku Kinko Hyo Indicator to be one of the most versatile and effective trend trading indicators. In fact, it is a full trend trading charting system that you can easily master. It won’t take much of your time and effort. The name may sound intimidating to those unfamiliar with Japanese and a quick glance at the formula makes it appear far more complex than it really is. Despite its intimidating appearance, this is a very simple system.
Ichimoku Kinko Hyo Indicator is surprisingly not a well known indicator. The primary strength of the Ichimoku Kinko Hyo System is that it uses multiple data points to give the trader a deeper and comprehensive picture of the price action. Ichimoku is a very visual system that helps the trader to quickly discern and filter the low probability trade setups from the high probability trade setups.
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Never let your profit turn into a loss. In forex trading, a few seconds might be enough for the market to move into the negative territory and wipe out all of the pips gained by you. As a trader, your number one focus after entering into a trade is to determine when to get out. If the position is losing money, you can use the traditional stop loss strategies.
However, suppose your trade is profitable. Seeing profits emerge in your trade is exciting. But the technical challenge is to recognize when to exit a profitable position before your profit turns into a loss. These challenges are real as many traders are unable to get out in time and protect their profit.
Breakout trading can be highly profitable yet at the same time frustrating as many breakouts have a tendency to fail. The main cause behind most of these false breakouts in the forex market is the big players that intentionally cause pairs to breakout in order to suck in non suspecting or inexperienced players.
Breakout trading is all about learning how to avoid trading a false breakout. You need to develop a price filter that can help you screen a false breakout from a true breakout so that you can trade it.
Risk to award ratio is often used when evaluating the risk of a Forex trading strategy, be it manual or automated. It’s one simple number that can tell a lot about a strategy. In fact, this number alone can tell a good strategy from a bad one. So what is the Risk to Award ratio and how do we use it?
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