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2010-11-07T03:26:00.002+02:00

Hey there here is the place where you can share with as your experience with FOREX.Some tips for new traders who want to be like you or want to not make your mistakes!Everyone can share his story!Hey there here is the place where you can share with as your experience with FOREX.Some tips for new traders who want to be like you or want to not make your mistakes!Everyone can share his story!Hey there here is the place where you can share with as your experience with FOREX.Some tips for new traders who want to be like you or want to not make your mistakes!Everyone can share his story!Hey there here is the place where you can share with as your experience with FOREX.Some tips for new traders who want to be like you or want to not make your mistakes!Everyone can share his story!

Be Smart

2010-11-05T23:53:00.000+02:00

Hello guys, i`m Teodosy and i`ve built this blog to help people with their trading.
I know that if you want to be the best you need the best info.
In nowadays there is so so much information some is free some is not free.
Like all you know Forex market is the BIGGEST market in the world $1.4 trillion a DAY.

Now imagine this is the largest market ever.
Ok thisis cool but...... the truth is that only 5% of all traders actually make some money of this.Here i offer you free information all you need no need to pay anything just read learn how to trade when to trade what to trade.At last you have to know how to make money.... before you actually make them not like most people.Most people first blow up their accounts and then they start learning be smart learn first then make money.Ok i`ll be here to help you all with all info i could find on the net i`ll post it here that`s why check daily this site for more FREE information.

I wish you all best.

2008-11-05T11:13:00.000+02:00

What is Forex Trading?
Forex, or Foreign Exchange, is the simultaneous exchange of one country's currency for that of another.
The way it works is an investor who wishes to purchase or sell one currency for another with the hope of making a profit when the value of the currencies change in favor of the investor. This can happen either from market news, or events that happen across the globe. For example, If you bought currency and the price appreciates in value, then you will earn a profit by closing your position. When you do this and sell the currency back in order to lock in the profit, you are in actuality buying the counter currency in the pair. By trading currency pairs, one currency valued against another, a rate of worth has been established. The reason is because a country's currency has value only relative to the currency of another country.

There are many different tools that can help a Forex trader out. Advanced charting programs are a major tool, as well as the FOREX traders guide. Along with these tools, global interactive training rooms with live video feeds, and the daily world bank FOREX report help investors get the most out of FOREX trading.

Proper Behavior of a Forex Trader

The world of Forex trading is a great open land of opportunities where great profits can be achieved. But in order to obtain these great profits you must have a proper understanding of how the forex markets work and behave.

The Forex market is a market of trends, as you can see in any forex chart where the oscillation of prices during specific periods of times is more than evident. And this specific behavior of the market is what brings us to one of the most important rules of the forex trader behavior:

You must always trade with the trend and never go against the evident movements of the market. This an important rule many traders forget on the assumption that they can somehow cheat the market. But this is not possible, you will always have to check your indicators and if the market trend is going in the direction suggested by the indicators you must stick with that.

You must always cut losses. Yes, every trader has losing trades and you must learn how to deal with that fact of the forex world. In short don’t let losing trades ride too far and on the contrary, you should let the winning ones ride as long as possible in order to always have a positive balance at the end of the day.

The best technique you can use in order to fulfill this proper winning vs. losing trades positive balance is the use of Stop Orders. Every trader should trade using stops if he wants to maintain the proper balance in his trades for the day. A Stop Order lets you manage and decide how much money you want to risk losing if the trade you are in results in a bad trade. So, if you combine this “security” stop with a correct technical analysis of your indicators you will always be on the winning side, even if you have a few losing trades.

In short, the proper behavior of a forex trader can be resumed in two main attitudes: Always follow the trends of the markets and decide accordingly (sell or buy) and always maintain a positive balance of your trades using stop orders in order to cut losses at its maximum.

Forex Day Trading - Is It Too Good To Be True?

A type of trading available in the Forex market is called Forex day trading. This financial trading option can be something that can definitely make trading work better for you. One of the biggest benefits of trading day currencies is that it is available twenty-four hours a day. This of course can give traders the obvious benefit of trading at any hour that they choose. With foreign exchange day trade there is no rush or panic, and decisions can be more carefully considered and executed.

Something else that is beneficial when it comes to day trading is that a lender can start a lot smaller if they choose. Starting smaller can also let them concentrate on a few major currencies rather than on tens of thousands. Foreign exchange day trading allows for more focus and a better ability to spread an investment. These benefits are not available with a traditional stock market approach. Something else that is great when it comes to Forex day transactions is that spreads can be narrower if the trader wishes. This allows the trader to regulate more easily the day spends. Of course this also leads to more liquidity.

Some other benefits that come with Forex day trade include there being no restrictions when selling currencies short. This allows for a trader to continue making money at a steady rate, whether markets are rising or falling. Also because of certain times when trading volumes are high, having day trading as an available tool can help a trader avoid these times if they choose, yet still make high enough profits. Foreign exchange day trading allows the trader to avoid times when the British, European, and United States markets are all open at the same time and activity is overwhelming, yet still make profits if they so choose.

Day trade also allows the Forex trader to take full advantage of some of the general benefits offered in the Forex market. These include twenty-four hour online currency trading, one hundred to one leverage, commission free trading and regulated FCM status. Having some of these advantages can definitely improve one's chance of making large profits in the Forex market.

As you can see being able to use Forex day transactions in your trading activities could be a decision that could make you millions of dollars if used properly. Trading day currencies is a great option for those who like to make their own hours, yet still want to benefit fully from the Forex market in general.

Forex Terms Every Forex Trader Should Know

Before jumping into the forex market, you need to arm yourself with some terminology that will be used in any course or software on this subject. The following set of terms were put together with the idea of providing the novice forex trader with the fundamental concepts of the forex trading business. While they sound technical, most are easy to understand and apply.

Let us begin with the instruments that are traded in the forex markets. Currencies are traded in pairs so the instrument will always be in this double denomination. The reason for this is simple; the basis of forex currency trading is to exchange one currency for another. So if the pair is the Euro and the US Dollar, and the forex trader is taking a long position or buying the Euro in hopes that it will appreciate, effectively the trader is also selling US Dollars to buy the Euros. The most widely traded pairs are the Great Britain Pound and the US Dollar (indicated as GBP/USD), the Euro and the US Dollar (the EUR/USD pair), the Aussie Dollar and the US Dollar (AUD/USD pair), the USD and the Japanese Yen (USD/JPY pair), and the Canadian Dollar and the USD (USD/CAD pair). These pairs account for well over 80% of the total volume of the trading in the forex market. The advantage to trading in these currency pairs is that they are highly liquid and allow the investor to convert their portfolio to cash very quickly to realize a profit.

In every pair, the first currency is called the base currency, over which the second one is countered to imply the price of the pair. The second is therefore called the quote currency and the pair price is recorded in terms of the units of the quote currency required to buy one unit of the base currency. Thus, assuming the price of the GBP/USD pair is 1.5, this implies that 1.5 USD will buy 1 GBP.

Every pair is quoted in terms of a bid ask spread. The bid price means that this is the rate at which your forex broker bids to buy the currency at, while the ask price is the rate which the forex broker is asking to sell the currency to the forex trader. The bid price will always be lower than the ask price and the forex trader will buy at the ask price and sell at the bid price. The bid ask price will be quoted as: GBP/USD 1.532/5, meaning the bid price is 1.532 and the ask price is 1.535.

A price interest point or a pip, as it is commonly called, is the smallest incremental change a currency pair will experience, for instance, a change in the GBP/USD price from 1.532 to 1.542 is a change of 10 pips. A trading margin is a deposit which is a minimum amount or a small percentage of your traded amount that you have to put up. The remaining amount is supplied by your broker. This amount can vary from 1% to 0.25%, also referred to as 100:1 and 400:1. Most often, forex brokers will offer 100:1 or 200:1 to most clients. This is risky but enables the trader to leverage a large amount that he or she would not otherwise have access to.

Finally, a margin call can happen when the forex trader allows the balance in the trading account to go below the margin deposit percentage agreed upon with the forex broker. The broker will automatically sell your long positions or buy your short positions and clear the entire trading account, returning the margin amount to the trader to protect the trader from losing more money than they have.

A Mini-Guide To The Managed Forex Account

A managed forex account is forex made easy. It is especially tailored for those investors who do not have the time or desire to monitor their own forex account. Many different companies offer these accounts to their clients. A managed forex account is often chosen by individuals who wish to take advantage of the high liquidity and high profitability of the forex market without taking the time to “learn” forex trading.

The world of forex trading is highly complicated and success requires education and familiarity with terms, charts, signals and indicators. With a managed forex account, the investor can rely on someone who is already familiar with and successful in the forex world.

One type of managed forex account utilizes robots to trade the investors account. To the investor, no human hand means that there will be no emotional trades. These automated systems are designed by experienced traders and take into account all the indicators and statistics of any good forex trading system to signal the robot to trade. This is really forex made easy.

Another type of managed forex account attempts to take the difficulty out of self-trading by allowing the investor to employ a professional trader to make the trades. These accounts remain solely in the individual investor’s name, meaning that money can be withdrawn at any time, unlike conventional stock trading. In other words, a managed forex account is not merely combining one investor’s money with numerous other investors’ money to obtain results. These managed forex accounts are actively traded by individuals for individuals. Forex made easy for individuals.

Perhaps you are looking for forex, but you wish to trade your account yourself, for fun or as a hobby. Without a managed account, you must follow all the rules of successful forex trading. Forex education is absolutely necessary. There is no way to trade a forex account successfully without education because this is a complex financial undertaking. In fact, professional advice is highly recommended. Try a “demo” account, before you invest real money. Software, seminars, daily newsletters and much more is available for the new trader. If you are not looking for a managed forex account, you are not really looking for forex made easy. You are looking for the tools needed to maximize your chances of success.

Forex trading is a risky business. According to statistics, only 5-10% of new traders make it through their first six months with their initial investment intact. Even less make a profit. A managed forex account is a way to reduce the risk and increase the profit.

A Day in the Life of a Forex Trader

Are you looking into breaking into the field of professional foreign exchange trading? Or are you already a forex trader doing it regularly? Either way, this article may be of interest to you. The forex trader is a different breed of human being. They utilize the markets to earn a living everyday. We have a look into the insight of a day in the life of a forex trader.

Any professional forex trader has the potential to make massive returns from their initial investment or on the nastier side any trader can make massive losses. It is not a game of chance, trading is a skill of emotional control and sound decision making. Traders have an understanding of market mechanics and their behaviour as a response of economic trends.

Traders makes their living from taking advantage of price differences between the buy and sell price of currency pairs and more importantly they make their money by following the market trend. If you yourself have studies forex charts you may notice how the price fluctuates – there are only three directions the price can do: rise, fall or stay the same. Currency prices only stay the same if the currency value is not floated and fixed to a certain value. Traders make their money on the difference on price so the trader can either buy long and hope the currency rises or sell short as the currency drops in price and still makes a profit.

The advanced forex trader waits for a new trade or rather waits for the right time to open a new trade by looking for the right indicators and signs to signal an entry into the foreign exchange market. There are two things that the forex trader can do at home to watch out for an entry signal: look at charts or wait for news. Traders watch for the right trending signals to enter a trade. And the primary rule for the trader is that ‘the trend is your friend.’ Stick to the trend and you won’t get hurt. Secondly, traders also watch the news. They must know what economic data is coming out on which days and what that data means to the future of the economy of the respective countries. If they don’t keep track of these facts and economic data and indicators they may find that some currencies are especially volatile during these news announcement events and see the market jump. The forex trader must be ready for these economic announcements to ensure they can anticipate the increased market activity.

Once the forex trader has successfully entered into a trade, a trade that is going well the trader then simply rides the trend to completion, implementing a trailing stop to lock in profits as the price trends the way the trader wanted the trend to go. But if the trade goes sour, the forex traders needs to exit the trade with grace. The trader must cut their losses to succeed in the business of foreign exchange trading.

Hopefully this has given you an overview of what a professional forex trader does to make a living from simply taking advantage over the price difference. The technique is to enter a trade correctly using trend analysis or a news announcement and then follow the rules of “riding the trend” or the “trend is your friend” with “cutting your losses quickly.”

What Every Forex Trader Needs to Know

Do you want to get into a market with an annual trade volume of over 2 trillion dollars, making it the largest market in the world? Well, if you do, then welcome to the world of currency trading, or as some call it, Forex trading. “Forex” stands for the foreign exchange market, a 24/7 global exchange that deals in the currencies of the world. Because the Forex market is very loosely regulated, it is easy for many people to enter it as an individual or retail trader. The downside to such loose regulation, however, is that the Forex market is a lot riskier than other markets and it invites investor scams; furthermore, if you do get scammed, there is very little that you can do about it.

Make no mistake: currency trading is a high risk endeavor. People get into it anyway because of the chance to make a high profit. Of course, that also entails a chance of taking a high loss. For that reason, you should only invest in Forex trading money that you can afford to lose.

In order to be successful at currency trading, you need to buy low and sell high. In Forex terms, it means buying a currency that is going to appreciate in value against another currency. Once it rises in value, you can sell it for a profit. The problem that currency investors face is figuring out which currencies will appreciate. This is where skill, knowledge and experience come in. A good Forex trader needs to have the ability to read the market trends, and to do that you need to have a keen understanding of the foreign exchange market, and that can take months to develop.

Becoming a successful Forex trader, then, requires more than investing only your money. You also need to put in a lot of time and effort. And after all that, you have no guarantee of success. The foreign exchange market is highly volatile. You have about as much chance of mastering it as you would taming a wild stallion. Yet some people do come close to mastery, and manage to make Forex trading their daily job. You could be one of those people.

Forex Trading Strategy - Finding the Right One For You

The first thing someone needs when beginning in the Forex market is a well thought out Forex trading strategy. This is because those who do not have a good foreign exchange 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 trading strategy will either lose constantly or just break even.

A lot of times the Forex trading strategy will be different depending on different traders. This is because different kinds of traders needs require different kinds of forex trade strategies. A Forex trading strategy for a 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 trader they are going to be they will better be able to plan their trading strategy.

A very important aspect of every 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 day trader will most likely make smaller stops. On the other hand a 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 trader.

Another part of a good Forex trading strategy is to plan the size of transactions. This allows many different trades to be made at any time instead of just one huge transaction. This will lessen any loss, by dividing the trades, so not all are affected. This also brings in more discipline to the equation.

Following the 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 trading. In the Forex market it is mostly about timing, if not all about timing. Understanding this and incorporating it into your strategy is how you will benefit the most from it.

A few other things that need to be incorporated into a good strategy is first of all acquiring accurate knowledge about the way it works, different things that can affect trade and what various software and services that are available to meet their needs for charting and such. One last thing that needs to be included of course is what other Forex traders are doing, allowing the strategy to be planned accordingly.

As you can see a lot needs to be looked at when entering the Forex market. Thoroughly and completely researching all these different aspects is an important way of preparing yourself to do so. Coming up with a Forex trading strategy that benefits the trader in the best way possible is definitely the way to go.

Become A Profitable Forex Trader Following The Trend

Forex trading can be a hard world when you are just starting your trading career and you are in the beginning of the learning curve that will guide you to the goal of becoming a profitable forex trader; someone with the ability to make all the money needed to have a comfortable lifestyle just with the help of the currency markets.

Many forex traders tend to think that in order to become a good forex trader they must use many technical indicators so they can foresee what will happen in the currency markets and then act accordingly to enter the appropriate trade and make a good profit from their ability to read the indicators.

Technical indicators are good and will greatly improve your profitability, but there other ways to approach the world of forex trading that can be more simple but not without great profitable results, and this despite the use of fewer indicators. It’s a fact that forex trading systems that are based on logical, scientifically sound, and well-tested forex trading concepts have been performing extremely well and will continue to do so for many years to come. So you must aim to base your trading career on these kind of systems that on the long run will greatly outperform other kind of systems.

To be successful in forex trading, you only need to do two things: Identify the trend (or have someone or something to identify it for you) & join the trend with the precise timing. That’s really all profitable forex trading is about.

Fear And The Profitable Forex Trader

Forex trading is one of the most looked for occupations for many people these days. Around the world people is getting tired of fixed working hours and tight cubicles that limit their aspirations of a more relaxed and satisfying working life.

In order to start Forex trading the new trader doesn’t need a fortune or good Wall Street contacts that will let him become part of the chosen ones. The only thing the new forex trader needs is some starting capital (as low as $100, but an amount around $5000 would be more recommendable) and the free forex trading platform that will be provided by the Forex broker.

But one thing is to start Forex trading and other very different is becoming a profitable Forex trader. In order to become a profitable trader the new trader will immediately discover the imperative need of having an accurate knowledge of the markets and a good understanding of the forex technical indicators. Concepts as Moving Averages, Fibonacci levels, Bollinger Bands, etc; are the basic knowledge every trader must have.

This basic knowledge is indeed essential but once in front of the trading station, with real money on the line and with an open trade subject to the currency markets oscillations; things will start to get tricky even if the basic technical concepts of forex trading have been understood by the beginning and sometimes also by the experienced trader.

Knowledge will start to fade in front of one of the most basic instincts we humans beings have. Fear will ask for an entrance to the traders mind and if let in by the inexperienced trader, it will turn the making of critical decisions difficult and many bad trading moves may follow.

It is very natural to be afraid and let fear invade us if we are not really sure of what we are doing or we can not afford to lose even a cent in a bad trade; or seen in a different approach, the trader is so anxious and perfectionist that he won’t let him lose anything and will take it very seriously if he loses a trade.

Fear is one of the worst enemies of the Forex trader. In order to become a profitable trader it is essential that the person involved in trading understands that he must leave fear aside and stick to the trading plan he has constructed and arranged before, always understanding that losing trades happen to everyone and they are always part of a profitable trading career. A forex trader must learn how to profitable use his stops without heavily compromising the capital in his trading account, i.e., he must play safe but realizing that a calculated risk must be undertaken in order to maximize profits.

In short, fear is a natural emotion we all humans have given the right environment is present; therefore it is the trader’s obligation not to arrange a “fear environment” around him and be psychologically prepared for the ups and downs of the trade. No one is prefect and that’s an even deeper truth in forex trading.

Quality Forex Training is the Key to Success

Quality Forex training is the key to success for any budding Forex trader. But sometimes I think Forex training is too regulated then at other times I think that there isn't enough oversight. The reason that Forex training is so important and vital is because the Forex market is extremely competitive, volatile and fragile. Training is an essential step to become an experienced trader. Forex training is in demand as many people look for ways to profit from the currency trading marketplace.

Some things to consider when looking for free Forex training. Many websites offer a free demo account and free Forex trading System training. You can get free, live Forex training over the web from professional traders. Go to one of these websites and try a free practice account and learn how currency trading works.

Choosing which of the many Forex courses you want to take is not an easy task. There are literally hundreds of courses and materials out there for proper Forex training. Some training courses are specifically designed for home study use. But is it necessary for new Forex traders to study more about Forex trading courses or just join a Forex training program. The good news is that lots of courses will show you winning entry techniques and you should take the time to find and digest as many training courses as you can before you begin. Due to this fact, more and more people are either enrolling into FOREX courses or purchasing different kind of books regarding FOREX trading. Online education courses are a great way to learn and there are many to chose from on the internet today.

Without the proper preparation and expertise, a trader's chances of succeeding are reduced. With the correct training and mentoring a new trader can then intelligently develop a strategy that is suitable for him. Get to know the tools of the trade, as well as what will be expected of you to become a successful trader. If you'd like to learn how to become a successful Forex trader, consider a professional Forex mentoring course. With this kind of one on one assistance, a new trader can acquire and improve their necessary professional trading skills. With a little research, you can learn how to avoid common Forex trader mistakes and how to learn to move on. Have you heard the wise saying that a trader who fails to plan, plans to fail.

You may ask, “Do I have what it takes to be a currency trader” ask yourself do you have the drive and tenacity to succeed . I can tell you that as a well trained currency trader you can earn average profits of 5% to 25% or more per month. As a competent Forex trader you must study and understand daily foreign exchange rates. Becoming a successful trader will take work and a little stress, but the rewards are great. But I would say that fear and greed are, without a doubt, the enemies of the successful Forex trader and proper training is very important if you seriously want to get into the world of Forex trading.

So to sum it up quality Forex training is the key to success. The reason that Forex training is so important and vital is because the Forex market is extremely competitive, volatile and fragile. Forex training is essential to become an experienced trader. Forex training is very much in great demand as many people are looking for ways to profit from the currency trading marketplace. Training is widely available on the internet, including online courses, advanced trading workshops, books and more. If you search the internet you'll discover a lot of companies offering Forex training along with some great free Forex resources.

Forex Trading: Profitable or Risky?

Forex trading has become very popular in recent times as a way of making money on the side using extra funds. In fact, a few people have even been able to turn their Forex trading activities into a regular source of income. When you play on the Forex market, you are running a risk, but you are doing so because Forex trading offers you an opportunity to make a good profit. It is not for everyone, and certainly not for people who are risk-averse and very cautious about money. It also requires a person who is willing to do the work of studying the market, because being able to read the market trends is crucial in making a profit out of Forex trading.

You may be thinking about getting into Forex trading. With that in mind, let us examine what goes on in Forex trading. Essentially, Forex trading deals with the foreign exchange market. This is a 24 hour global market where people are constantly buying and selling different world currencies. A typical Forex investor will attempt to buy a foreign currency at a low rate, with the anticipation of selling it at a higher rate. An investor must do a lot of these trades, and make money out of most of them, in order to get ahead in the world of Forex trading. By handling large volume of trades, an experienced trader can make a great deal of money in a very short time. But experience and success do not come easily. It takes time for a trader to gain a keen understanding of the foreign exchange market, and a lot of time and money must be put into it.

Forex trading can be risky for two reasons. One reason is that, in order to make a significant profit, a Forex trader easily has to get into marginal trading. In marginal training, only a small percentage of a lot is paid for by the trader’s own money, while the rest is leverage. In other words, a trader makes use of borrowed capital when doing a marginal trade. The greater the leverage involved, the greater the risk to the trader.

The other reason that Forex trading is risky is market uncertainty. Even the most experienced Forex trader cannot make perfect predictions on how the foreign exchange market will perform. The market can easily be affected at anytime by unexpected events, especially events that make the news, such as wars in elections.

If you're still interested in getting into Forex trading, then be prepared to work hard and do your homework, and also be prepared to take on the risks.

How to build working forex system.

If you want some good FOREX education to help you build and execute a trading method the good news is you don’t have to buy a worthless e-book from a vendor ( with no real time results ) you can get all the info you need free.

Here are some tips on the best FREE FOREX education.

You Need a PROVEN method

This should be technically based.

All you need to do is search technical “analysis of FOREX markets” and “support and resistance” and you will find everything you need.

Once you have done this, you need a methodology to trade with.

The simplest method to understand is:

A breakout methodology search “FOREX Breakouts”

Once you understand the above, you will need to decide if breakouts are valid.

You need to calculate price momentum i.e. is it failing at a breakout, or is it accelerating?

The former indicates resistance or support will hold, the latter it will fail and a breakout occur.

Get a good free chart service like futuresource.com

Pull up the charts on the indicators and look at the studies at the bottom.

There are three that we find useful and you will to – look up their logic and try using them in conjunction with support and resistance.

Price momentum indicators that are good are:

Relative Strength Index RSI and the ultimate indicator for timing trades: The Stochastic.

We also like Bollinger bands for targets and to see volatility

Look up the logic of both. Using these in association with support and resistance is a great way to trade.

Other useful indicators to look at are: Moving averages, MACD and the ADX

Breakouts trading them for profit

It’s a fact that most major moves start from new market highs NOT market lows and that is why a breakout method is so effective.

To check if a breakout will fail or break you simply need to get some momentum indicators to gauge strength of price.

We like the stochastic and RSI, But indicators used are matter of preference.

A SIMPLE METHOD FOR PROFIT The above may sound simple and it is – the best methods are.

You don’t make money in FOREX trading for being clever you get paid for being right.

There is no correlation between how complicated a method is and how successful it will be.

In fact, simple methods are best and you should focus your FOREX education on them because:

They are easy to understand, easy to apply and more robust in the face of brutal market conditions.

The PROOF

We have used a simple system and demonstrated how profitable it can be in numerous articles and we have applied the above tools to spot big moves – check them out.

Before you

Waste money on a worthless e-book from a vendor who has simply put together a system with a simulation of profits (he is probably no smarter than you), take a few hours to research and build your own method.

Keep in mind only you can make yourself successful and if you think you can buy success for $100 or so – think again!

If you do the above, you will have something that you can have confidence in and apply with discipline for profits.

One final point:

When trading breakouts only trade ones that are significant i.e. on weekly and daily charts (forget day trading it doesn’t work)

If you trade only the best breakouts and trade with momentum you will have huge profit potential.

Finally, have patience and only trade the best set ups.

That’s it.

Research the above FREE FOREX education, build and test your method and then go and make some profits!

GRAB 2 X FREE TRADER PDF'S AND MUCH MORE!
Free Forex education

Brief history of Forex trading

Initially, the value of goods was expressed in terms of other goods, i.e. an economy based on barter between individual market participants. The obvious limitations of such a system encouraged establishing more generally accepted means of exchange at a fairly early stage in history, to set a common benchmark of value. In different economies, everything from teeth to feathers to pretty stones has served this purpose, but soon metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value.

Originally, coins were simply minted from the preferred metal, but in stable political regimes the introduction of a paper form of governmental IOUs (I owe you) gained acceptance during the Middle Ages. Such IOUs, often introduced more successfully through force than persuasion were the basis of modern currencies.

Before the First World War, most central banks supported their currencies with convertibility to gold. Although paper money could always be exchanged for gold, in reality this did not occur often, fostering the sometimes disastrous notion that there was not necessarily a need for full cover in the central reserves of the government.

At times, the ballooning supply of paper money without gold cover led to devastating inflation and resulting political instability. To protect local national interests, foreign exchange controls were increasingly introduced to prevent market forces from punishing monetary irresponsibility.

In the latter stages of the Second World War, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The Bretton Woods Conference rejected John Maynard Keynes suggestion for a new world reserve currency in favour of a system built on the US dollar. Other international institutions such as the IMF, the World Bank and GATT (General Agreement on Tariffs and Trade) were created in the same period as the emerging victors of WW2 searched for a way to avoid the destabilising monetary crises which led to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that partly reinstated the gold standard, fixing the US dollar at USD35/oz and fixing the other main currencies to the dollar - and was intended to be permanent.

The Bretton Woods system came under increasing pressure as national economies moved in different directions during the sixties. A number of realignments kept the system alive for a long time, but eventually Bretton Woods collapsed in the early seventies following president Nixon's suspension of the gold convertibility in August 1971. The dollar was no longer suitable as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.

The following decades have seen foreign exchange trading develop into the largest global market by far. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.

But the idea of fixed exchange rates has by no means died. The EEC (European Economic Community) introduced a new system of fixed exchange rates in 1979, the European Monetary System. This attempt to fix exchange rates met with near extinction in 1992-93, when pent-up economic pressures forced devaluations of a number of weak European currencies. Nevertheless, the quest for currency stability has continued in Europe with the renewed attempt to not only fix currencies but actually replace many of them with the Euro in 2001.

The lack of sustainability in fixed foreign exchange rates gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates, in particular in South America, looking very vulnerable.

But while commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have found a new playground. The size of foreign exchange markets now dwarfs any other investment market by a large factor. It is estimated that more than USD1,200 billion is traded every day, far more than the world's stock and bond markets combined.

Six Trading Tips for the Forex Newbie

For those of you who are new to the forex market, or even for those of you who are considering becoming a forex market trader, this article is for you. Welcome to forex 101, where you will learn exactly who forex is and what it does. Also for the forex newbie’s, you will find a list of six trading tips that will help you in your transactions.

For those of you who are new to the forex trading market, first you will need to know the meaning of the term “forex” which stands for FOReign EXchange market. This pertains to the international foreign currency exchange market where currencies of all kinds are bought and sold. The forex market got its start back in the early 1970's when floating currencies and free exchange rates were first introduced. At this time, the forex market traders were the only players on the market to decide upon the value of one type of currency against another, all solely based upon a particular currency’s supply and demand.

The forex market is very unique for a number of reasons. First of all, this is one of the few markets that require very little trading qualifications and is free from any external control and can not be manipulated in any way. As the largest financial market, with trades reaching up to 1.5 trillion U.S. dollars, or USD, the money moves so fast, it’s impossible for a single investor 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. To open a forex account, all you have to do is simply fill out an application and provide all the necessary identification. The application will include a margin agreement will state if the broker will be allowed to intervene with any trade when it appears too risky. This agreement is made to protect the interests of the broker because most trades are done by using the broker’s money. However, once you have established an account, you can fund it and begin trading in the forex market.

2. In order to become a successful trader, you will need to adapt your own trading strategy. There is no one strategy that will work for all the traders, each individual trader will need to develop their own approach to the market. While some traders may relay solely on technical analysis, others may prefer a more fundamental approach, while the more successful traders use a combination of both. Each individual trader will need to learn the best approach for them selves in order to gain a more comprehensive overview of the forex market in order to prepare for any entry and exit points.

3. Understand that prices move by trends. Forex 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 trends need to be understood in order to understand a good trading strategy. For small accounts that are $25,000 and under, trading with a trend may help improving your odds when compared to bi-directional trading. Most newbie’s will look to trade in any direction, when they should be trading with a trend.

Forex Definitions, Terms and Acronyms:

* Day trading - refers to the practice of buying and selling stocks during the day such that a gain or loss is made on the difference between the purchase and sales prices.
* Rocket scientist (slang) - a financial consultant with exceptional mathematical and computer programming skills.
* Direct quotation or price quotation - quotes using a country's home currency as the price currency.

4. Before you take any position, look over the top five currencies to make sure you’re not missing something. The top five foreign in forex are: USD/Yen, Swiss franc/USD, Euro/Yen, Euro/USD and Pound/USD.

5. For newbie’s, it would be safest to have two accounts because you learn as you play the trading game. Keep one real account, one that you will actually use to trade real money; and the second account should be a demo, one that you can use to test alternative moves in the trading game. You can easily use your demo account to shadow the trades in your real 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 at 15 and 30 minute time intervals, doing so requires a handful of dexterity.

Trading tips

1. Trade 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.

2. Knowledge is Power - When starting out trading forex online, it is essential that you understand the basics of this market if you want to make the most of your investments.

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 positions and subsequently miss out on some of the best trading opportunities by waiting until the market calms down. The potential in the forex market is in the volatility, not in its tranquility.

3. Unambitious trading - Many new traders will place very tight 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 trades than when you make larger ones.

4. Over-cautious trading - Like the trader who tries to take small incremental profits all the time, the trader who places tight stop losses with a retail forex broker is doomed. As we stated above, you have to give your position a fair chance to demonstrate its ability to produce. If you don't place reasonable stop losses that allow your trade to do so, you will always end up undercutting yourself and losing a small piece of your deposit with every trade.

5. Independence - If you are new to forex, you will either decide to trade your own money or to have a broker trade it for you. So far, so good. But your risk of losing increases exponentially if you either of these two things:

Interfere with what your broker is doing on your behalf (as his strategy might require a long gestation period);

Seek advice from too many sources - multiple input will only result in multiple losses. Take a position, ride with it and then analyse the outcome - by yourself, for yourself.

6. Tiny margins - Margin trading is one of the biggest advantages in trading forex as it allows you to trade amounts far larger than the total of your deposits. However, it can also be dangerous to novice traders as it can appeal to the greed factor that destroys many forex traders. The best guideline is to increase your leverage in line with your experience and success.

7. No strategy - The aim of making money is not a trading strategy. A strategy is your map for how you plan to make money. Your strategy details the approach you are going to take, which currencies you are going to trade and how you will manage your risk. Without a strategy, you may become one of the 90% of new traders that lose their money.

8. Trading Off-Peak Hours - Professional FX traders, option traders, and hedge funds posses a huge advantage over small retail traders during off-peak hours (between 2200 CET and 1000 CET) as they can hedge their positions and move them around when there is far small trade volume is going through (meaning their risk is smaller). The best advice for trading during off peak hours is simple - don't.

9. The only way is up/down - When the market is on its way up, the market is on its way up. When the market is going down, the market is going down. That's it. There are many systems which analyse past trends, but none that can accurately predict the future. But if you acknowledge to yourself that all that is happening at any time is that the market is simply moving, you'll be amazed at how hard it is to blame anyone else.

10. Trade on the news - Most of the really big market moves occur around news time. Trading volume is high and the moves are significant; this means there is no better time to trade than when news is released. This is when the big players adjust their positions and prices change resulting in a serious currency flow.

11. Exiting Trades - If you place a trade and it's not working out for you, get out. Don't compound your mistake by staying in and hoping for a reversal. If you're in a winning trade, don't talk yourself out of the position because you're bored or want to relieve stress; stress is a natural part of trading; get used to it.

12. Don't trade too short-term - If you are aiming to make less than 20 points profit, don't undertake the trade. The spread you are trading on will make the odds against you far too high.

13. Don't be smart - The most successful traders I know keep their trading simple. They don't analyse all day or research historical trends and track web logs and their results are excellent.

14. Tops and Bottoms - There are no real "bargains" in trading foreign exchange. Trade in the direction the price is going in and you're results will be almost guaranteed to improve.

15. Ignoring the technicals- Understanding whether the market is over-extended long or short is a key indicator of price action. Spikes occur in the market when it is moving all one way.

16. Emotional Trading - Without that all-important strategy, you're trades essentially are thoughts only and thoughts are emotions and a very poor foundation for trading. When most of us are upset and emotional, we don't tend to make the wisest decisions. Don't let your emotions sway you.

17. Confidence - Confidence comes from successful trading. If you lose money early in your trading career it's very difficult to regain it; the trick is not to go off half-cocked; learn the business before you trade. Remember, knowledge is power.

The second and final part of this report clearly and simply details more essential tips on how to avoid the pitfalls and start making more money in your forex trading.

1. 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 loss and wait for tomorrow to try again. Sticking to a bad position ruins lots of traders - permanently. Try to remember that the market often behaves illogically, so don't get commit to any one trade; it's just a trade. One good trade will not make you a trading success; it's ongoing regular performance over months and years that makes a good trader.

2. Focus - Fantasising about possible profits and then "spending" them before you have realised them is no good. Focus on your current position(s) and place reasonable stop losses at the time you do the 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 demos - Demo trading often causes new traders to learn bad habits. These bad habits, which can be very dangerous in the long run, come about because you are playing with virtual money. Once you know how your broker's system works, start trading small amounts and only take the risk you can afford to win or lose.

4. Stick to the strategy - When you make money on a well thought-out strategic trade, don't go and lose half of it next time on a fancy; stick to your strategy and invest profits on the next trade that matches your long-term goals.

5. Trade today - Most successful day traders are highly focused on what's happening in the short-term, not what may happen over the next month. If you're trading with 40 to 60-point stops focus on what's happening today as the market will probably move too quickly to consider the long-term future. However, the long-term trends are not unimportant; they will not always help you though if you're trading intraday.

6. The clues are in the details - The bottom line on your account balance doesn't tell the whole story. Consider individual trade details; analyse your losses and the telling losing streaks. Generally, traders that make money without suffering significant daily losses have the best chance of sustaining positive performance in the long term.

7. Simulated Results - Be very careful and wary about infamous "black box" systems. These so-called trading signal systems do not often explain exactly how the trade signals they generate are produced. Typically, these systems only show their track record of extraordinary results - historical results. Successfully predicting future trade scenarios is altogether more complex. The high-speed algorithmic capabilities of these systems provide significant retrospective trading systems, not ones which will help you trade effectively in the future.

8. 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.

9. Risk Reward - If you put a 20 point stop and a 50 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 market gives you.

10. Trading for Wrong Reasons - Don't trade 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 trade to make in the first place. If you are unsure, it's probably because you can't see the trade to make, so don't make one.

11. Zen Trading- Even when you have taken a 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 losses. To achieve this, you need to cultivate a calm and relaxed outlook. Trade 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.

12. Determination - Once you have decided to place a trade, stick to it and let it run its course. This means that if your 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.

13. Short-term Moving Average Crossovers - This is one of the most dangerous trade scenarios for non professional traders. When the short-term moving average crosses the 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 indication, so don't fall into the trap of believing it is one.

14. Stochastic - Another dangerous scenario. When it first 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 approach means that you'll be with the trend and have successfully identified a positive 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).

15. 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. Focus on one cross at a time - if EURUSD looks good to you, then just buy EURUSD.

16. Wrong Broker - A lot of FOREX 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 broker.

17. Too bullish - Trading statistics show that 90% of most traders will fail at some point. Being too bullish about your trading aptitude can be fatal to your long-term success. You can always learn more about trading the markets, even if you are currently successful in your trades. Stay modest, and keep your eyes open for new ideas and bad habits you might be falling in to.

18. 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.

2007-11-07T00:23:00.000+02:00

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I wish you all best.

2007-11-05T08:01:00.000+02:00

Forex trading hours, trading time:

New York opens 8:00 am to 5:00 pm EST

Tokyo opens 7:00 pm to 4:00 am EST

Sydney opens 5:00 pm to 2:00 am EST

London opens 3:00 am to 12:00 noon EST

Currency correlation

2007-11-05T07:57:00.000+02:00

Some currencies tend to move in the same direction, some — in opposite. This is a powerful knowledge for those who trade more than one currency pair. It helps to hedge, diversify or double profitable positions.

Statistically measured by performance, currency pairs are given so called "correlation coefficients" from +1 to -1.
A correlation of +1 means two currency pairs will move in the same direction 100% of the time. A correlation of -1 means they will move in the opposite direction 100% of the time. A correlation of zero means no relation between currency pairs exists. Information about current correlation coefficients can be found here: Currency Correlations Table

The example of strong positive correlation between two currency pairs is: GBP/USD and EUR/USD. They have a correlation coefficient of over +0.90, which means that when EUR/USD goes up, GBP/USD also goes up.

A well known sample of two opposite moving currency pairs is EUR/USD and USD/CHF, they have very high coefficient of over -0.90, which means that they move inversely almost 100% of the time!

Examples of same direction moving currency pairs are:

EUR/USD and GBP/USD
EUR/USD and NZD/USD
USD/CHF and USD/JPY
AUD/USD and GBP/USD
AUD/USD and EUR/USD

Inversely moving pairs are:

EUR/USD and USD/CHF
GBP/USD and USD/JPY
GBP/USD and USD/CHF
AUD/USD and USD/CAD
AUD/USD and USD/JPY

How a trader can use this information?

1. A very simple use is avoiding trades that cancel each other. For instance, knowing that EUR/USD and USD/CHF move inversely near-perfectly, there would be no point to go short on both positions as they eventually cancel each other (loss + profit).

1.a. However, there is a strategy of hedging one currency pair with another. Lets' take the same pairs: EUR/USD and USD/CHF. For example, a trader has opened long positions on both currency pairs. Since they move in opposite directions, if EUR/USD is making some losses, the other pair will go in profit. Hence, the total loss will not be as bad as if it would be without the second "backup trade". On the other hand, profits here are not large either.

2. When confident, a trader may double position size by placing same orders on parallel (moving in the same direction) currency pairs.

3. Another option would be to diversify risks in trade. For instance, AUD/USD and EUR/USD pairs have the correlation coefficient of about +0.70 which means that pairs are moving mostly in the same direction but not as perfect (which is what we need here). If we decide that USD is going to weaken, for example, we will go long and place half of buy order on AUD/USD currency pair, and half on EUR/USD. Splitting the orders will preserve trader's positions from sudden losing rallies (sudden "jumps" in price); and as these currencies move not 100% identical a trader will have some time to react adequately. Different monetary policies of different countries' banks also create an impact: when one currency will be less affected than the other and therefore will move slower.

2007-11-05T07:54:00.000+02:00

What to trade, when to trade

During the 24 hours period currency pairs in Forex market experience several hours, when the volume of trades is the highest and so is the pip movement.

Below are Forex market sessions and examples of the most active currency pairs:

London/ New York sessions:

EUR/USD
USD/CHF
GBP/USD

Tokyo/Sydney sessions:

EUR/JPY
AUD/USD
USD/JPY
AUD/JPY

Sydney session:

AUD/USD
EUR/USD

During the week the most active Forex trading days are: Tuesday, Wednesday and Thursday. Sundays (opening) and Mondays are days when traders are mostly watching and analyzing the market and predict further price moves. Fridays are traded approximately till noon, after that all actions slow down and almost freeze before the actual market closing at 5 pm EST.

2007-11-05T07:49:00.000+02:00

GMT and EST hours for trading Forex

Forex market welcomes traders 24 hours a day.
Forex market opens on Sunday 5 pm EST (10:00 pm GMT), closes on Friday 5 pm EST
(10:00 pm GMT).

Trading sessions according to GMT (Greenwich Mean Time):

Region	City	Open (GMT)	Close (GMT)
Europe	London	8:00 am	5:00 pm
Europe	Frankfurt	7:00 am	4:00 pm
America	New York	1:00 pm	10:00 pm
America	Chicago	2:00 pm	11:00 pm
Asia	Tokyo	midnight	9:00 am
Asia	Hong Kong	1:00 am	10:00 am
Pacific	Sydney	10:00 pm	7:00 am
Pacific	Wellington	10:00 pm	6:00 am

Trading sessions according to EST (Eastern Standard Time):

Region	City	Open (EST)	Close (EST)
Europe	London	3:00 am	12:00 noon
Europe	Frankfurt	2:00 am	11:00 am
America	New York	8:00 am	5:00 pm
America	Chicago	9:00 am	6:00 pm
Asia	Tokyo	7:00 pm	4:00 am
Asia	Hong Kong	8:00 pm	5:00 am
Pacific	Sydney	5:00 pm	2:00 am
Pacific	Wellington	5:00 pm	1:00 am

Forex tips

2007-11-04T22:05:00.000+02:00

Tip 1. Gamblers go to casino. All unproved, spontaneous actions in Forex trading — are a part of pure gambling.
Any attempt to trade without analysis and studying the market is equal to a game. Game is fun except when you are losing real money...

Tip 2. Never invest money into a real Forex account until you practice on a Forex Demo account!
Allow at least 2 month for demo trading. Consider this: 90% of beginners fail to succeed in the real money market only because of lack of knowledge, practice and discipline. Those remaining 10% of successful traders had been sharpening and shaping their skills on demo accounts for years before entering the real market.
A good demo account to start practicing with could be, for example, FXGame from Oanda.

Tip 3. Go with the trend!
Trend is your friend. Trade with the trend to maximize your chances to succeed. Trading against the trend won't "kill" a trader, but will definitely require more attention, nerves and sharp skills to rich trading goals.

Tip 4. Always take a look at the time frame bigger than the one you've chosen to trade in.
It gives the bigger picture of market price movements and so helps to clearly define the trend. For example, when trading in 15 minute time frame, take a look at 1 hour chart; trading hourly would require obtaining a picture of daily, weekly price movements.

If a trend is hard to spot — choose a bigger time frame. Up and down market patterns are always present. Always make sure you know the dominant trend, unless you are a scalper. Scalpers have no need to spend their time studying big trends, what's happening in the market here and now (during 5-10 minute time frame) should be of only importance to a Forex scalper.

Tip 5. Never risk more than 2-3% of the total trading account.
One important difference between a successful and an unsuccessful trader is that the first is able to survive under unfavorable conditions on the market, while an unsuccessful trader will blow up his account after 5-10 unprofitable trades in the row.

Even with the same trading system 2 traders can get opposite results in the long run. The difference will be again in money management approach. To introduce you to money management, let's get one fact: losing 50% of total account requires making 100% return from the rest of money just to restore the original balance.

Tip 6. Put emotions down. Trade calm.
Don't try to revenge after losing the trade. Don't be greedy by adding lots of positions when winning.
Overreaction blocks clear thinking and as a result will cost you money. Overtrading can shake your money management and dramatically increase trading risks.

Tip 7. Choose the time frame that is right for you.
Choosing wise means that you are comfortable and have time enough to analyze the market, place and close orders etc. Some people can't wait for hours for the price to make a move, they like action and therefore prefer smaller time frames. On the contrary, for others 10-15 minutes is a hustle to be able to make the right decision.

Tip 8. Not trading or standing aside is a position.
When in doubt — stay out. If it is not clear where the market will move — don't trade. In this case saving present capital is and absolutely better choice than risking and losing money.

Tip 9. Learn to use protective stops. Respect them and don't move.
Hoping that market will turn in your direction is a very delusive hope. By moving a stop loss further a trader increases his chances to end up with much bigger loss.

When holding to a losing trade too long, and even if funds permit, traders as a rule are very reluctant to accept big losses, thus often continue "hoping for best". In the mean time invested money is stuck in the open trade for unknown period of time (weeks and even months) and cannot be used for opening new positions. Not working money — dead money. Also this will result in constant interest payments for holding open positions.

Tip 10. "Keep it simple, stupid" — applies to indicators, signals and trading strategies.
Too much information will create a controversial picture of where to trade and when not to. To avoid lots of confusion create a simple but working method of trading Forex.

Tip 11. Think about risk/reward ratio before entering each trade.
How much money can you lose in this trade? How much can you gain? Now, make a decision if the trade is worth entering.
Example: if trader is looking for possible 35 pips gain and possible 25 pips of loss, such conditions are not worth trading. Compare it with the situation when a trader has 100-120 pips of potential gain and only 10-20 pips of possible loss. This is the trade to open!

Tip 12. Never add positions to a losing trade. Do add positions when the trade has proven to be profitable.
Don't allow a couple of losing trades in a row become a snowball of losing trades. When it is obviously not a good day, turn the monitor off. Often not trading for one day can help to break a chain of consecutive losses. Trying to get revenge can often make things worse.

Tip 13. Let your profits run.
Let your position be open for as long as the market wishes to reward you. Of course, for this traders need a good exit strategy, otherwise they risk to give all profits back...
Running two or more open trades gives an option to close some positions earlier and keep others running for higher profits.

Tip 14. Cut your losses short.
It's better to finish unprofitable trade quickly than wait for the situation to get worse. Don't put a stop loss too far — it's your money you risk. Better calculate the best spot to enter when a potential loss would be minimized. Again: respect your stop and don't move it "cherishing hopes".

Tip 15. Trade currency pairs in respect to their active market hours.
Learn about overlapping market hours: when two markets are open and highest volume of trades is conducted.
For example, Australian and Japanese trading sessions are overlapped from 8pm to 1 am EST. At that time trader can successfully trade AUD/JPY currency pair.

Tip 16. Choose the right day to trade.
This recomendation is often wrongly taken as an optional thing, because everyone knows that Forex market is open 24 hours a day 7 days a week. Yet, choosing the time to trade can make a difference between successful and hopeless trading.

It's proved and highly recommended not to trade on Mondays, when the market has recently awaken and is making first "probation steps" to form a new or confirm a current trend; and on Fridays afternoon, during the huge volume of closing trades. The best days to trade are Tuesdays, Wednesdays and Thursdays.

Tip 17. Learn about Fibonacci levels and how to use them for trading.
Fibonacci can be very helpful in trading, even partially using the study, for example, to determine the best exit, can bring traders to a new edge of trading.

Tip 18. Always ensure that a signaling bar/candle on the chart is fully formed and closed before you enter a trade.
A golden rule of trading: "Always trade what you see, not what you would like to see" is the best explanation here.

Tip 19. If you ask for someone else's advice as about how and when to trade
in other words, choose to rely on live trading signals from other traders, make sure you do it for your benefit, not for disaster. If you use such signals to discover how other traders do analysis and study on the price — you are on the right track and soon you'll be able to do analysis yourself.
But if you're just blindly following recommendations and your only task is to push the correct button... think again.

Tip 20. Using a highly leveraged account comes at a cost.
It will, of course, give a trader more financial gear to trade, and also trader's broker will be happy as it will mean higher spread income for him. On the other side a trader signs up for additional risks that multiply with higher leverage in a "friendly tight" proportion.

Tip 21. Learn to measure trading success by the end of the day, week and then month and year.
Do not judge about your trading success on a single trade. To be successful traders don't need to win every trade, they also don't become rich in one trade — they need to be profitable in a long run.

Tip 22. There is no such thing as a secret approach to understanding the market.
Take the time to develop a solid trading system and find out that the secret to trading success lies in hard work and constant learning.

Trend Trading

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A style of trading that attempts to profit from riding short, medium or long term trends in price.

Technical Analysis

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A style of trading that involves analysing price charts for technical patterns of behaviour.

Swing Trading

2007-11-04T13:07:00.001+02:00

A style of trading that involves seeking to profit from short to medium term swings in trend. Trades can last from hours to days

Scalping

2007-11-04T13:06:00.000+02:00

A style of trading that involves frequent trading seeking small gains over a very short period of time. Trades can last from seconds to minutes.

Range Trading

2007-11-04T13:05:00.002+02:00

A style of trading that attempts to profit from buying technical levels of support and selling technical levels of resistance. The upper level of resistance and lower level of support defines the range.

Position Trading

2007-11-04T13:05:00.001+02:00

A style of trading that involves taking a longer term position that reflects a longer term outlook. Trades can last from weeks to months.

News Trading

2007-11-04T13:04:00.000+02:00

A style of trading whereby a trader attempts to profit from fundamental news announcements on a country's economy that may affect the value of a currency, usually seeking short term profit immediately after the announcement is released.

Fundamental Analysis

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A style of trading that involves analysing the macroeconomic factors of an economy underpinning the value of a currency and placing trades that support the trader's outlook.

Discretionary Trading

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A style of trading that involves the human decision making process for every trade.

Day Trading

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A style of trading that involves multiple trades on an intra-day basis. Trades can last from minutes to hours.

Carry Trading

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A position whereby the trader attempts to profit from holding a currency with a higher interest rate and shorting a currency with a lower interest rate.

Automated Trading

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A style of trading that involves neither human decision making or involvement, but uses a pre-programmed strategy based on technical or fundamental analysis that automatically places trades via automated trade execution software.

Example Trade

Assume you have a trading account at a broker that requires a 1% margin deposit for every trade. The current quote for EUR/USD is 1.3225/28 and you want to place a market order to buy 1 standard lot of 100,000 Euros at 1.3228, for a total value of US$132,280 (100,000 * $1.3228). The broker requires you to deposit 1% of the total, or $1322.80 to open the trade. At the same time you place a take-profit order at 1.3278, 50 pips above your order price. In taking this trade you expect the Euro to strengthen against the U.S. dollar.

As you expected, the Euro strengthens against the U.S. dollar and you take your profit at 1.3278, closing out the trade. As each pip is worth US$10, your total profit for this trade is $500, for a total return of 38%.

Short Position

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A position in which the trader attempts to profit from a decrease in price. i.e. Sell high, buy low.

Long Position

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A position in which the trader attempts to profit from an increase in price. i.e. Buy low, sell high.

Stop-Loss Order

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An order to restrict losses at a specified price level.

Stop-Entry Order

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An order to buy above the market or sell below the market at a specified level, believing that the price will continue in the same direction.

OCO Order

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One Cancels Other. An order whereby if one is executed, the other is cancelled.

Market Order

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An order to buy or sell at the current market price.

Limit Order

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An order to buy or sell at a specified price level.

Limit Entry Order

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An order to buy below the market or sell above the market at a specified level, believing that the price will reverse direction from that point.

GTC Order

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Good Till Cancelled. An order stays in the market until it is either filled or cancelled.

Forex ECN Broker

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ECN is an acronym for Electronic Communications Network. A Forex ECN acts like a stockmarket ECN and does not operate a dealing desk, but instead provides a marketplace where multiple market makers, banks and traders can enter competing bids and offers into the platform either inside or outside the spread, allowing traders to trade on those prices. Orders are matched between counterparties for a small fee or commission.

Base Currency

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The first currency in the pair. Also the currency your account is denominated in.

Support

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Support is a technical price level where buyers outweigh sellers, causing prices to bounce off a temporary price floor.

Standard Account

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Trading with standard lot sizes, generally 100,000 units of the base currency.

Spread

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The difference between the sell quote and the buy quote or the bid and offer price. For example, if EUR/USD quotes read 1.3200/03, the spread is the difference between 1.3200 and 1.3203, or 3 pips. In order to break even on a trade, a position must move in the direction of the trade by an amount equal to the spread.

Spot Market

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The market for buying and selling currencies at the current market rate.

Slippage

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The difference between the order price and the executed price.

Sell Quote / Bid Price

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The sell quote is displayed on the left and is the price at which you can sell the base currency. It is also referred to as the market maker's bid price. For example, if the EUR/USD quotes 1.3200/03, you can sell 1 Euro at the bid price of US$1.3200.

Rollover

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A spot transaction is generally due for settlement within two business days (the value date). The cost of rolling over a transaction is based on the interest rate differential between the two currencies in a transaction. If you are long (bought) the currency with a higher rate of interest you will earn interest. If you are short (sold) the currency with a higher rate of interest you will pay interest. Most brokers will automatically roll over your open positions allowing you to hold your position indefinitely.

Resistance

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Resistance is a technical price level where sellers outweigh buyers, causing prices to bounce off a temporary price ceiling.

Pip Value

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The value of a pip. Pip value can be fixed or variable depending on the currency pair and base currency of your account. e.g. The pip value for EURUSD is always US$10 for standard lots and US$1 for mini-lots. A simple way of calculating pip value is as follows: Divide 1 pip by the exchange rate and multiply it by the lot size to get the base currency pip value. To convert it to your account currency, multiply it by the applicable exchange rate. For example;

EURUSD = 0.0001 / 1.30000 = €0.0000769 * 100,000 = €7.69 * EUR/USD 1.30000 = US$10.00 pip value (fixed)

USDJPY = 0.01 / 120.00 = US$0.0000833 * 100,000 = US$8.33 pip value (variable)

Pip

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The smallest price increment a currency can make. Also known as points. For example, 1 pip = 0.0001 for EUR/USD, or 0.01 for USD/JPY.

Buy Quote / Offer Price

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The buy quote is displayed on the right and is the price at which you can buy the base currency. It is also referred to as the market maker's ask or offer price. For example, if the EUR/USD quotes 1.3200/03, you can buy 1 Euro at the offer price of US$1.3203.

NDD

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An acronym for 'No Dealing Desk'. A no dealing desk broker uses a matching engine to match up orders between its liquidity providers and their traders.

Mini Account

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Trading with mini lot sizes, generally 10,000 units of the base currency.

Micro Account

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Trading with micro lot sizes, generally 1,000 units of the base currency.

Margin

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The deposit required to open or maintain a position. A 1% margin requirement allows you to control a $100,000 position with a $1,000 margin deposit.

Market Maker

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A market maker provides liquidity for a particular currency pair by standing ready to buy or sell that currency by displaying a bid and offer price. Market makers earn their commission from the spread between the bid and offer price.

Manual Execution

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An order which is executed by dealer intervention.

Lot

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The standard unit size of a transaction. Typically, one "standard" lot is equal to 100,000 units of the base currency, or 10,000 units if it's a "mini" lot, and even 1,000 units if it's a "micro" lot. Some dealers offer the ability to trade in any unit size, down to as little as 1 unit!

Leverage

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The extent to which you are using borrowed funds to gear your account. Increasing your leverage magnifies both gains and losses. To calculate leverage used, divide total open positions by account equity to get the leverage ratio. e.g. If a trader has $1,000 in his account and opens a $100,000 position, he is leveraging his account by 100 times, i.e. 100:1 leverage. If he opens a $200,000 position with $1,000 in his account, he is leveraging his account by 200 times, i.e. 200:1 leverage.

ISO Currency Codes

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Entity	Currency	Alphabetic code	Numeric code
AFGHANISTAN	Afghani	AFN	971
ALBANIA	Lek	ALL	008
ALGERIA	Algerian Dinar	DZD	012
AMERICAN SAMOA	US Dollar	USD	840
ANDORRA	Euro	EUR	978
ANGOLA	Kwanza	AOA	973
ANGUILLA	East Caribbean Dollar	XCD	951
ANTARCTICA	No universal currency
ANTIGUA AND BARBUDA	East Caribbean Dollar	XCD	951
ARGENTINA	Argentine Peso	ARS	032
ARMENIA	Armenian Dram	AMD	051
ARUBA	Aruban Guilder	AWG	533
AUSTRALIA	Australian Dollar	AUD	036
AUSTRIA	Euro	EUR	978
AZERBAIJAN	Azerbaijanian Manat	AZN	944
BAHAMAS	Bahamian Dollar	BSD	044
BAHRAIN	Bahraini Dinar	BHD	048
BANGLADESH	Taka	BDT	050
BARBADOS	Barbados Dollar	BBD	052
BELARUS	Belarussian Ruble	BYR	974
BELGIUM	Euro	EUR	978
BELIZE	Belize Dollar	BZD	084
BENIN	CFA Franc BCEAO †	XOF	952
BERMUDA	Bermudian Dollar (customarily known as Bermuda Dollar)	BMD	060
BHUTAN	Indian Rupee Ngultrum	INR BTN	356 064
BOLIVIA	Boliviano Mvdol	BOB BOV	068 984
BOSNIA AND HERZEGOVINA	Convertible Marks	BAM	977
BOTSWANA	Pula	BWP	072
BOUVET ISLAND	Norwegian Krone	NOK	578
BRAZIL	Brazilian Real	BRL	986
BRITISH INDIAN OCEAN TERRITORY	US Dollar	USD	840
BRUNEI DARUSSALAM	Brunei Dollar	BND	096
BULGARIA	Bulgarian Lev	BGN	975
BURKINA FASO	CFA Franc BCEAO †	XOF	952
BURUNDI	Burundi Franc	BIF	108
CAMBODIA	Riel	KHR	116
CAMEROON	CFA Franc BEAC ‡	XAF	950
CANADA	Canadian Dollar	CAD	124
CAPE VERDE	Cape Verde Escudo	CVE	132
CAYMAN ISLANDS	Cayman Islands Dollar	KYD	136
CENTRAL AFRICAN REPUBLIC	CFA Franc BEAC ‡	XAF	950
CHAD	CFA Franc BEAC ‡	XAF	950
CHILE	Chilean Peso Unidades de fomento	CLP CLF	152 990
CHINA	Yuan Renminbi	CNY	156
CHRISTMAS ISLAND	Australian Dollar	AUD	036
COCOS (KEELING) ISLANDS	Australian Dollar	AUD	036
COLOMBIA	Colombian Peso Unidad de Valor Real	COP COU	170 970
COMOROS	Comoro Franc	KMF	174
CONGO	CFA Franc BEAC ‡	XAF	950
CONGO, THE DEMOCRATIC REPUBLIC OF	Franc Congolais	CDF	976
COOK ISLANDS	New Zealand Dollar	NZD	554
COSTA RICA	Costa Rican Colon	CRC	188
CÔTE D'IVOIRE	CFA Franc BCEAO †	XOF	952
CROATIA	Croatian Kuna	HRK	191
CUBA	Cuban Peso	CUP	192
CYPRUS	Cyprus Pound Euro (effective 1 January 2008)	CYP EUR	196 978
CZECH REPUBLIC	Czech Koruna	CZK	203
DENMARK	Danish Krone	DKK	208
DJIBOUTI	Djibouti Franc	DJF	262
DOMINICA	East Caribbean Dollar	XCD	951
DOMINICAN REPUBLIC	Dominican Peso	DOP	214
ECUADOR	US Dollar	USD	840
EGYPT	Egyptian Pound	EGP	818
EL SALVADOR	El Salvador Colon US Dollar	SVC USD	222 840
EQUATORIAL GUINEA	CFA Franc BEAC ‡	XAF	950
ERITREA	Nakfa	ERN	232
ESTONIA	Kroon	EEK	233
ETHIOPIA	Ethiopian Birr	ETB	230
FALKLAND ISLANDS (MALVINAS)	Falkland Islands Pound	FKP	238
FAROE ISLANDS	Danish Krone	DKK	208
FIJI	Fiji Dollar	FJD	242
FINLAND	Euro	EUR	978
FRANCE	Euro	EUR	978
FRENCH GUIANA	Euro	EUR	978
FRENCH POLYNESIA	CFP Franc	XPF	953
FRENCH SOUTHERN TERRITORIES	Euro	EUR	978
GABON	CFA Franc BEAC ‡	XAF	950
GAMBIA	Dalasi	GMD	270
GEORGIA	Lari	GEL	981
GERMANY	Euro	EUR	978
GHANA	Ghana Cedi	GHS	936
GIBRALTAR	Gibraltar Pound	GIP	292
GREECE	Euro	EUR	978
GREENLAND	Danish Krone	DKK	208
GRENADA	East Caribbean Dollar	XCD	951
GUADELOUPE	Euro	EUR	978
GUAM	US Dollar	USD	840
GUATEMALA	Quetzal	GTQ	320
GUINEA	Guinea Franc	GNF	324
GUINEA-BISSAU	Guinea-Bissau Peso CFA Franc BCEAO †	GWP XOF	624 952
GUYANA	Guyana Dollar	GYD	328
HAITI	Gourde US Dollar	HTG USD	332 840
HEARD ISLAND AND MCDONALD ISLANDS	Australian Dollar	AUD	036
HOLY SEE (VATICAN CITY STATE)	Euro	EUR	978
HONDURAS	Lempira	HNL	340
HONG KONG	Hong Kong Dollar	HKD	344
HUNGARY	Forint	HUF	348
ICELAND	Iceland Krona	ISK	352
INDIA	Indian Rupee	INR	356
INDONESIA	Rupiah	IDR	360
INTERNATIONAL MONETARY FUND (I.M.F)	SDR	XDR	960
IRAN, ISLAMIC REPUBLIC OF	Iranian Rial	IRR	364
IRAQ	Iraqi Dinar	IQD	368
IRELAND	Euro	EUR	978
ISRAEL	New Israeli Sheqel	ILS	376
ITALY	Euro	EUR	978
JAMAICA	Jamaican Dollar	JMD	388
JAPAN	Yen	JPY	392
JORDAN	Jordanian Dinar	JOD	400
KAZAKHSTAN	Tenge	KZT	398
KENYA	Kenyan Shilling	KES	404
KIRIBATI	Australian Dollar	AUD	036
KOREA, DEMOCRATIC PEOPLE'S REPUBLIC OF	North Korean Won	KPW	408
KOREA, REPUBLIC OF	Won	KRW	410
KUWAIT	Kuwaiti Dinar	KWD	414
KYRGYZSTAN	Som	KGS	417
LAO PEOPLE'S DEMOCRATIC REPUBLIC	Kip	LAK	418
LATVIA	Latvian Lats	LVL	428
LEBANON	Lebanese Pound	LBP	422
LESOTHO	Rand Loti	ZAR LSL	710 426
LIBERIA	Liberian Dollar	LRD	430
LIBYAN ARAB JAMAHIRIYA	Libyan Dinar	LYD	434
LIECHTENSTEIN	Swiss Franc	CHF	756
LITHUANIA	Lithuanian Litas	LTL	440
LUXEMBOURG	Euro	EUR	978
MACAO	Pataca	MOP	446
MACEDONIA, THE FORMER YUGOSLAV REPUBLIC OF	Denar	MKD	807
MADAGASCAR	Malagasy Ariary	MGA	969
MALAWI	Kwacha	MWK	454
MALAYSIA	Malaysian Ringgit	MYR	458
MALDIVES	Rufiyaa	MVR	462
MALI	CFA Franc BCEAO †	XOF	952
MALTA	Maltese Lira Euro (effective 1 January 2008)	MTL EUR	470 978
MARSHALL ISLANDS	US Dollar	USD	840
MARTINIQUE	Euro	EUR	978
MAURITANIA	Ouguiya	MRO	478
MAURITIUS	Mauritius Rupee	MUR	480
MAYOTTE	Euro	EUR	978
MEXICO	Mexican Peso Mexican Unidad de Inversion (UDI)	MXN MXV	484 979
MICRONESIA, FEDERATED STATES OF	US Dollar	USD	840
MOLDOVA, REPUBLIC OF	Moldovan Leu	MDL	498
MONACO	Euro	EUR	978
MONGOLIA	Tugrik	MNT	496
MONTENEGRO	Euro	EUR	978
MONTSERRAT	East Caribbean Dollar	XCD	951
MOROCCO	Moroccan Dirham	MAD	504
MOZAMBIQUE	Metical	MZN	943
MYANMAR	Kyat	MMK	104
NAMIBIA	Rand Namibia Dollar	ZAR NAD	710 516
NAURU	Australian Dollar	AUD	036
NEPAL	Nepalese Rupee	NPR	524
NETHERLANDS	Euro	EUR	978
NETHERLANDS ANTILLES	Netherlands Antillian Guilder	ANG	532
NEW CALEDONIA	CFP Franc	XPF	953
NEW ZEALAND	New Zealand Dollar	NZD	554
NICARAGUA	Cordoba Oro	NIO	558
NIGER	CFA Franc BCEAO †	XOF	952
NIGERIA	Naira	NGN	566
NIUE	New Zealand Dollar	NZD	554
NORFOLK ISLAND	Australian Dollar	AUD	036
NORTHERN MARIANA ISLANDS	US Dollar	USD	840
NORWAY	Norwegian Krone	NOK	578
OMAN	Rial Omani	OMR	512
PAKISTAN	Pakistan Rupee	PKR	586
PALAU	US Dollar	USD	840
PANAMA	Balboa US Dollar	PAB USD	590 840
PAPUA NEW GUINEA	Kina	PGK	598
PARAGUAY	Guarani	PYG	600
PERU	Nuevo Sol	PEN	604
PHILIPPINES	Philippine Peso	PHP	608
PITCAIRN	New Zealand Dollar	NZD	554
POLAND	Zloty	PLN	985
PORTUGAL	Euro	EUR	978
PUERTO RICO	US Dollar	USD	840
QATAR	Qatari Rial	QAR	634
RÉUNION	Euro	EUR	978
ROMANIA	New Leu	RON	946
RUSSIAN FEDERATION	Russian Ruble	RUB	643
RWANDA	Rwanda Franc	RWF	646
SAINT HELENA	Saint Helena Pound	SHP	654
SAINT KITTS AND NEVIS	East Caribbean Dollar	XCD	951
SAINT LUCIA	East Caribbean Dollar	XCD	951
SAINT PIERRE AND MIQUELON	Euro	EUR	978
SAINT VINCENT AND THE GRENADINES	East Caribbean Dollar	XCD	951
SAMOA	Tala	WST	882
SAN MARINO	Euro	EUR	978
SAO TOME AND PRINCIPE	Dobra	STD	678
SAUDI ARABIA	Saudi Riyal	SAR	682
SENEGAL	CFA Franc BCEAO †	XOF	952
SERBIA	Serbian Dinar	RSD	941
SEYCHELLES	Seychelles Rupee	SCR	690
SIERRA LEONE	Leone	SLL	694
SINGAPORE	Singapore Dollar	SGD	702
SLOVAKIA	Slovak Koruna	SKK	703
SLOVENIA	Euro	EUR	978
SOLOMON ISLANDS	Solomon Islands Dollar	SBD	090
SOMALIA	Somali Shilling	SOS	706
SOUTH AFRICA	Rand	ZAR	710
SPAIN	Euro	EUR	978
SRI LANKA	Sri Lanka Rupee	LKR	144
SUDAN	Sudanese Pound	SDG	938
SURINAME	Surinam Dollar	SRD	968
SVALBARD AND JAN MAYEN	Norwegian Krone	NOK	578
SWAZILAND	Lilangeni	SZL	748
SWEDEN	Swedish Krona	SEK	752
SWITZERLAND	Swiss Franc WIR Franc WIR Euro	CHF CHW CHE	756 948 947
SYRIAN ARAB REPUBLIC	Syrian Pound	SYP	760
TAIWAN, PROVINCE OF CHINA	New Taiwan Dollar	TWD	901
TAJIKISTAN	Somoni	TJS	972
TANZANIA, UNITED REPUBLIC OF	Tanzanian Shilling	TZS	834
THAILAND	Baht	THB	764
TIMOR-LESTE	US Dollar	USD	840
TOGO	CFA Franc BCEAO †	XOF	952
TOKELAU	New Zealand Dollar	NZD	554
TONGA	Pa'anga	TOP	776
TRINIDAD AND TOBAGO	Trinidad and Tobago Dollar	TTD	780
TUNISIA	Tunisian Dinar	TND	788
TURKEY	New Turkish Lira	TRY	949
TURKMENISTAN	Manat	TMM	795
TURKS AND CAICOS ISLANDS	US Dollar	USD	840
TUVALU	Australian Dollar	AUD	036
UGANDA	Uganda Shilling	UGX	800
UKRAINE	Hryvnia	UAH	980
UNITED ARAB EMIRATES	UAE Dirham	AED	784
UNITED KINGDOM	Pound Sterling	GBP	826
UNITED STATES	US Dollar (Same day) (Next day)	USD USS USN	840 998 997
UNITED STATES MINOR OUTLYING ISLANDS	US Dollar	USD	840
URUGUAY	Peso Uruguayo Uruguay Peso en Unidades Indexadas	UYU UYI	858 940
UZBEKISTAN	Uzbekistan Sum	UZS	860
VANUATU	Vatu	VUV	548
VENEZUELA	Bolivar Fuerte	VEF	937
VIET NAM	Dong	VND	704
VIRGIN ISLANDS (BRITISH)	US Dollar	USD	840
VIRGIN ISLANDS (U.S.)	US Dollar	USD	840
WALLIS AND FUTUNA	CFP Franc	XPF	953
WESTERN SAHARA	Moroccan Dirham	MAD	504
YEMEN	Yemeni Rial	YER	886
ZAMBIA	Kwacha	ZMK	894
ZIMBABWE	Zimbabwe Dollar	ZWD	716
	Gold	XAU	959
	Bond Markets Units European Composite Unit (EURCO)	XBA	955
	European Monetary Unit (E.M.U.-6)	XBB	956
	European Unit of Account 9(E.U.A.-9)	XBC	957
	European Unit of Account 17(E.U.A.-17)	XBD	958
	Palladium	XPD	964
	Platinum	XPT	962
	Silver	XAG	961
	Special settlement currencies
	UIC-Franc	XFU	Nil
	Gold-Franc	XFO	Nil
	Codes specifically reserved for testing purposes	XTS	963
	The codes assigned for transactions where no currency is involved are:	XXX	999

Foreign Exchange Market

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An informal network of trading relationships between the world's major banks and other market participants, sometimes referred to as the 'interbank market'. The foreign exchange market has no central clearing house or exchange and is considered an over-the-counter (OTC) market.

Foreign Exchange

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The simultaneous transaction of one currency for another.

FCM

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Futures Commission Merchant. An individual or organisation licensed by the U.S. Commodities Futures Trading Commission (CFTC) to deal in futures products and accept monies from clients to trade them.

Exchange Rate

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The value of one currency expressed in terms of another. For example, if EUR/USD is 1.3200, 1 Euro is worth US$1.3200.

Drawdown

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The extent to which equity is lost in a trading account from a trade or series of trades, measured from peak to subsequent trough, most commonly in percentage terms.

Dealing Desk

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A dealing desk provides prices and executes trades.

Currency Pair Terminology

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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"

Currency Pair

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The two currencies that make up an exchange rate. When one is bought, the other is sold, and vice versa.

Counterparty

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One of the participants in a transaction.

Counter Currency

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The second currency in the pair. Also known as the terms currency.

Buy Quote / Offer Price

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Sell Quote / Bid Price

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Base Currency

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The first currency in the pair. Also the currency your account is denominated in.

Automatic Execution

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The order is executed by the broker without dealer intervention or involvement.

Basic Trading Styles

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Automated Trading
Carry Trading
Day Trading
Discretionary Trading
Fundamental Trading
News Trading
Position Trading
Range Trading
Scalping
Swing Trading
Technical Trading
Trend Trading

Basic Trade Types

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Long Position
Short Position

Basic Order Types

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GTC Order
Limit-Entry Order
Limit Order
Market Order
OCO Order
Stop-Entry Order
Stop-Loss Order

Forex Basics

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Automatic Execution
Base Currency
Bid
Buy Quote
Counter Currency
Counterparty
Currency Pair
Currency Pair Terminology
Dealing Desk
Drawdown
ECN
Exchange Rate
FCM
Foreign Exchange
Foreign Exchange Market
ISO Currency Codes
Leverage
Lot
Manual Execution
Market Maker
Margin
Micro Account
Mini Account
NDD
Offer
Pip
Pip Value
Resistance
Rollover
Sell Quote
Slippage
Spot Market
Spread
Standard Account
Support
Terms Currency

History

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The Japanese began using technical analysis to trade rice in the 17th century. While this early version of technical analysis was different from the US version initiated by Charles Dow around 1900, many of the guiding principles were very similar:

The "what" (price action) is more important than the "why" (news, earnings, and so on).
All known information is reflected in the price.
Buyers and sellers move markets based on expectations and emotions (fear and greed).
Markets fluctuate.
The actual price may not reflect the underlying value.

According to Steve Nison, candlestick charting first appeared sometime after 1850. Much of the credit for candlestick development and charting goes to a legendary rice trader named Homma from the town of Sakata. It is likely that his original ideas were modified and refined over many years of trading eventually resulting in the system of candlestick charting that we use today.

Formation

In order to create a candlestick chart, you must have a data set that contains open, high, low and close values for each time period you want to display. The hollow or filled portion of the candlestick is called "the body" (also referred to as "the real body"). The long thin lines above and below the body represent the high/low range and are called "shadows" (also referred to as "wicks" and "tails"). The high is marked by the top of the upper shadow and the low by the bottom of the lower shadow. If the stock closes higher than its opening price, a hollow candlestick is drawn with the bottom of the body representing the opening price and the top of the body representing the closing price. If the stock closes lower than its opening price, a filled candlestick is drawn with the top of the body representing the opening price and the bottom of the body representing the closing price.

Compared to traditional bar charts, many traders consider candlestick charts more visually appealing and easier to interpret. Each candlestick provides an easy-to-decipher picture of price action. Immediately a trader can see compare the relationship between the open and close as well as the high and low. The relationship between the open and close is considered vital information and forms the essence of candlesticks. Hollow candlesticks, where the close is greater than the open, indicate buying pressure. Filled candlesticks, where the close is less than the open, indicate selling pressure.

Long Versus Short Bodies

Generally speaking, the longer the body is, the more intense the buying or selling pressure. Conversely, short candlesticks indicate little price movement and represent consolidation.

Long white candlesticks show strong buying pressure. The longer the white candlestick is, the further the close is above the open. This indicates that prices advanced significantly from open to close and buyers were aggressive. While long white candlesticks are generally bullish, much depends on their position within the broader technical picture. After extended declines, long white candlesticks can mark a potential turning point or support level. If buying gets too aggressive after a long advance, it can lead to excessive bullishness.

Long black candlesticks show strong selling pressure. The longer the black candlestick is, the further the close is below the open. This indicates that prices declined significantly from the open and sellers were aggressive. After a long advance, a long black candlestick can foreshadow a turning point or mark a future resistance level. After a long decline a long black candlestick can indicate panic or capitulation.

Even more potent long candlesticks are the Marubozu brothers, Black and White. Marubozu do not have upper or lower shadows and the high and low are represented by the open or close. A White Marubozu forms when the open equals the low and the close equals the high. This indicates that buyers controlled the price action from the first trade to the last trade. Black Marubozu form when the open equals the high and the close equals the low. This indicates that sellers controlled the price action from the first trade to the last trade.

Long Versus Short Shadows

The upper and lower shadows on candlesticks can provide valuable information about the trading session. Upper shadows represent the session high and lower shadows the session low. Candlesticks with short shadows indicate that most of the trading action was confined near the open and close. Candlestick with long shadows show that traded extended well past the open and close.

Candlesticks with a long upper shadow and short lower shadow indicate that buyers dominated during the session, and bid prices higher. However, sellers later forced prices down from their highs, and the weak close created a long upper shadow. Conversely, candlesticks with long lower shadows and short upper shadows indicate that sellers dominated during the session and drove prices lower. However, buyers later resurfaced to bid prices higher by the end of the session and the strong close created a long lower shadow.

Candlesticks with a long upper shadow, long lower shadow and small real body are called spinning tops. One long shadow represents a reversal of sorts; spinning tops represent indecision. The small real body (whether hollow or filled) shows little movement from open to close, and the shadows indicate that both bulls and bears were active during the session. Even though the session opened and closed with little change, prices moved significantly higher and lower in the meantime. Neither buyers nor sellers could gain the upper hand and the result was a standoff. After a long advance or long white candlestick, a spinning top indicates weakness among the bulls and a potential change or interruption in trend. After a long decline or long black candlestick, a spinning top indicates weakness among the bears and a potential change or interruption in trend.

Doji

Doji are important candlesticks that provide information on their own and as components of in a number of important patterns. Doji form when a security's open and close are virtually equal. The length of the upper and lower shadows can vary and the resulting candlestick looks like a cross, inverted cross or plus sign. Alone, doji are neutral patterns. Any bullish or bearish bias is based on preceding price action and future confirmation. The word "Doji" refers to both the singular and plural form.

Ideally, but not necessarily, the open and close should be equal. While a doji with an equal open and close would be considered more robust, it is more important to capture the essence of the candlestick. Doji convey a sense of indecision or tug-of-war between buyers and sellers. Prices move above and below the opening level during the session, but close at or near the opening level. The result is a standoff. Neither bulls nor bears were able to gain control and a turning point could be developing.

Different securities have different criteria for determining the robustness of a doji. A $20 stock could form a doji with a 1/8 point difference between open and close, while a $200 stock might form one with a 1 1/4 point difference. Determining the robustness of the doji will depend on the price, recent volatility, and previous candlesticks. Relative to previous candlesticks, the doji should have a very small body that appears as a thin line. Steven Nison notes that a doji that forms among other candlesticks with small real bodies would not be considered important. However, a doji that forms among candlesticks with long real bodies would be deemed significant.

Doji and Trend

The relevance of a doji depends on the preceding trend or preceding candlesticks. After an advance, or long white candlestick, a doji signals that the buying pressure is starting to weaken. After a decline, or long black candlestick, a doji signals that selling pressure is starting to diminish. Doji indicate that the forces of supply and demand are becoming more evenly matched and a change in trend may be near. Doji alone are not enough to mark a reversal and further confirmation may be warranted.

After an advance or long white candlestick, a doji signals that buying pressure may be diminishing and the uptrend could be nearing an end. Whereas a security can decline simply from a lack of buyers, continued buying pressure is required to sustain an uptrend. Therefore, a doji may be more significant after an uptrend or long white candlestick. Even after the doji forms, further downside is required for bearish confirmation. This may come as a gap down, long black candlestick, or decline below the long white candlestick's open. After a long white candlestick and doji, traders should be on the alert for a potential evening doji star.

After a decline or long black candlestick, a doji indicates that selling pressure may be diminishing and the downtrend could be nearing an end. Even though the bears are starting to lose control of the decline, further strength is required to confirm any reversal. Bullish confirmation could come from a gap up, long white candlestick or advance above the long black candlestick's open. After a long black candlestick and doji, traders should be on the alert for a potential morning doji star.

Long-Legged Doji

Long-legged doji have long upper and lower shadows that are almost equal in length. These doji reflect a great amount of indecision in the market. Long-legged doji indicate that prices traded well above and below the session's opening level, but closed virtually even with the open. After a whole lot of yelling and screaming, the end result showed little change from the initial open.

Dragon Fly and Gravestone Doji

Dragon Fly Doji

Dragon fly doji form when the open, high and close are equal and the low creates a long lower shadow. The resulting candlestick looks like a "T" with a long lower shadow and no upper shadow. Dragon fly doji indicate that sellers dominated trading and drove prices lower during the session. By the end of the session, buyers resurfaced and pushed prices back to the opening level and the session high.

The reversal implications of a dragon fly doji depend on previous price action and future confirmation. The long lower shadow provides evidence of buying pressure, but the low indicates that plenty of sellers still loom. After a long downtrend, long black candlestick, or at support, a dragon fly doji could signal a potential bullish reversal or bottom. After a long uptrend, long white candlestick or at resistance, the long lower shadow could foreshadow a potential bearish reversal or top. Bearish or bullish confirmation is required for both situations.

Gravestone Doji

Gravestone doji form when the open, low and close are equal and the high creates a long upper shadow. The resulting candlestick looks like an upside down "T" with a long upper shadow and no lower shadow. Gravestone doji indicate that buyers dominated trading and drove prices higher during the session. However, by the end of the session, sellers resurfaced and pushed prices back to the opening level and the session low.

As with the dragon fly doji and other candlesticks, the reversal implications of gravestone doji depend on previous price action and future confirmation. Even though the long upper shadow indicates a failed rally, the intraday high provides evidence of some buying pressure. After a long downtrend, long black candlestick, or at support, focus turns to the evidence of buying pressure and a potential bullish reversal. After a long uptrend, long white candlestick or at resistance, focus turns to the failed rally and a potential bearish reversal. Bearish or bullish confirmation is required for both situations.

Before turning to the single and multiple candlestick patterns, there are a few general guidelines to cover.

Bulls Versus Bears

A candlestick depicts the battle between Bulls (buyers) and Bears (sellers) over a given period of time. An analogy to this battle can be made between two football teams, which we can also call the Bulls and the Bears. The bottom (intra-session low) of the candlestick represents a touchdown for the Bears and the top (intra-session high) a touchdown for the Bulls. The closer the close is to the high, the closer the Bulls are to a touchdown. The closer the close is to the low, the closer the Bears are to a touchdown. While there are many variations, I have narrowed the field to 6 types of games (or candlesticks):

Long white candlesticks indicate that the Bulls controlled the ball (trading) for most of the game.
Long black candlesticks indicate that the Bears controlled the ball (trading) for most of the game.
Small candlesticks indicate that neither team could move the ball and prices finished about where they started.
A long lower shadow indicates that the Bears controlled the ball for part of the game, but lost control by the end and the Bulls made an impressive comeback.
A long upper shadow indicates that the Bulls controlled the ball for part of the game, but lost control by the end and the Bears made an impressive comeback.
A long upper and lower shadow indicates that the both the Bears and the Bulls had their moments during the game, but neither could put the other away, resulting in a standoff.

What Candlesticks Don't Tell You

Candlesticks do not reflect the sequence of events between the open and close, only the relationship between the open and the close. The high and the low are obvious and indisputable, but candlesticks (and bar charts) cannot tell us which came first.

With a long white candlestick, the assumption is that prices advanced most of the session. However, based on the high/low sequence, the session could have been more volatile. The example above depicts two possible high/low sequences that would form the same candlestick. The first sequence shows two small moves and one large move: a small decline off the open to form the low, a sharp advance to form the high, and a small decline to form the close. The second sequence shows three rather sharp moves: a sharp advance off the open to form the high, a sharp decline to form the low, and a sharp advance to form the close. The first sequence portrays strong, sustained buying pressure, and would be considered more bullish. The second sequence reflects more volatility and some selling pressure. These are just two examples, and there are hundreds of potential combinations that could result in the same candlestick. Candlesticks still offer valuable information on the relative positions of the open, high, low and close. However, the trading activity that forms a particular candlestick can vary.

Prior Trend

In his book, Candlestick Charting Explained, Greg Morris notes that for a pattern to qualify as a reversal pattern, there should be a prior trend to reverse. Bullish reversals require a preceding downtrend and bearish reversals require a prior uptrend. The direction of the trend can be determined using trend lines, moving averages, peak/trough analysis or other aspects of technical analysis. A downtrend might exist as long as the security was trading below its down trend line, below its previous reaction high or below a specific moving average. The length and duration will depend on individual preferences. However, because candlesticks are short-term in nature, it is usually best to consider the last 1-4 weeks of price action.

Candlestick Positioning

Star Position

A candlestick that gaps away from the previous candlestick is said to be in star position. The first candlestick usually has a large real body, but not always, and the second candlestick in star position has a small real body. Depending on the previous candlestick, the star position candlestick gaps up or down and appears isolated from previous price action. The two candlesticks can be any combination of white and black. Doji, hammers, shooting stars and spinning tops have small real bodies, and can form in the star position. Later we will examine 2- and 3-candlestick patterns that utilize the star position.

Harami Position

A candlestick that forms within the real body of the previous candlestick is in Harami position. Harami means pregnant in Japanese and the second candlestick is nestled inside the first. The first candlestick usually has a large real body and the second a smaller real body than the first. The shadows (high/low) of the second candlestick do not have to be contained within the first, though it's preferable if they are. Doji and spinning tops have small real bodies, and can form in the harami position as well. Later we will examine candlestick patterns that utilize the harami position.

Long Shadow Reversals

There are two pairs of single candlestick reversal patterns made up of a small real body, one long shadow and one short or non-existent shadow. Generally, the long shadow should be at least twice the length of the real body, which can be either black or white. The location of the long shadow and preceding price action determine the classification.

The first pair, Hammer and Hanging Man, consists of identical candlesticks with small bodies and long lower shadows. The second pair, Shooting Star and Inverted Hammer, also contains identical candlesticks, except, in this case, they have small bodies and long upper shadows. Only preceding price action and further confirmation determine the bullish or bearish nature of these candlesticks. The Hammer and Inverted Hammer form after a decline and are bullish reversal patterns, while the Shooting Star and Hanging Man form after an advance and are bearish reversal patterns.

Hammer and Hanging Man

The Hammer and Hanging Man look exactly alike, but have different implications based on the preceding price action. Both have small real bodies (black or white), long lower shadows and short or non-existent upper shadows. As with most single and double candlestick formations, the Hammer and Hanging Man require confirmation before action.

The Hammer is a bullish reversal pattern that forms after a decline. In addition to a potential trend reversal, hammers can mark bottoms or support levels. After a decline, hammers signal a bullish revival. The low of the long lower shadow implies that sellers drove prices lower during the session. However, the strong finish indicates that buyers regained their footing to end the session on a strong note. While this may seem enough to act on, hammers require further bullish confirmation. The low of the hammer shows that plenty of sellers remain. Further buying pressure, and preferably on expanding volume, is needed before acting. Such confirmation could come from a gap up or long white candlestick. Hammers are similar to selling climaxes, and heavy volume can serve to reinforce the validity of the reversal.

The Hanging Man is a bearish reversal pattern that can also mark a top or resistance level. Forming after an advance, a Hanging Man signals that selling pressure is starting to increase. The low of the long lower shadow confirms that sellers pushed prices lower during the session. Even though the bulls regained their footing and drove prices higher by the finish, the appearance of selling pressure raises the yellow flag. As with the Hammer, a Hanging Man requires bearish confirmation before action. Such confirmation can come as a gap down or long black candlestick on heavy volume.

Inverted Hammer and Shooting Star

The Inverted Hammer and Shooting Star look exactly alike, but have different implications based on previous price action. Both candlesticks have small real bodies (black or white), long upper shadows and small or nonexistent lower shadows. These candlesticks mark potential trend reversals, but require confirmation before action.

The Shooting Star is a bearish reversal pattern that forms after an advance and in the star position, hence its name. A Shooting Star can mark a potential trend reversal or resistance level. The candlestick forms when prices gap higher on the open, advance during the session and close well off their highs. The resulting candlestick has a long upper shadow and small black or white body. After a large advance (the upper shadow), the ability of the bears to force prices down raises the yellow flag. To indicate a substantial reversal, the upper shadow should relatively long and at least 2 times the length of the body. Bearish confirmation is required after the Shooting Star and can take the form of a gap down or long black candlestick on heavy volume.

The Inverted Hammer looks exactly like a Shooting Star, but forms after a decline or downtrend. Inverted Hammers represent a potential trend reversal or support levels. After a decline, the long upper shadow indicates buying pressure during the session. However, the bulls were not able to sustain this buying pressure and prices closed well off of their highs to create the long upper shadow. Because of this failure, bullish confirmation is required before action. An Inverted Hammer followed by a gap up or long white candlestick with heavy volume could act as bullish confirmation.

Blending Candlesticks

Candlestick patterns are made up of one or more candlesticks and these can be blended together to form one candlestick. This blended candlestick captures the essence of the pattern and can be formed using the following:

The open of first candlestick
The close of the last candlestick
The high and low of the pattern

By using the open of the first candlestick, close of the second candlestick, and high/low of the pattern, a Bullish Engulfing Pattern or Piercing Pattern blends into a Hammer. The long lower shadow of the Hammer signals a potential bullish reversal. As with the Hammer, both the Bullish Engulfing Pattern and the Piercing Pattern require bullish confirmation.

Blending the candlesticks of a Bearish Engulfing Pattern or Dark Cloud Cover Pattern creates a Shooting Star. The long, upper shadow of the Shooting Star indicates a potential bearish reversal. As with the Shooting Star, Bearish Engulfing, and Dark Cloud Cover Patterns require bearish confirmation.

More than two candlesticks can be blended using the same guidelines: open from the first, close from the last and high/low of the pattern. Blending Three White Soldiers creates a long white candlestick and blending Three Black Crows creates a long black candlestick.

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Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets, prices are driven by excessive supply(down)and demand(up).

Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. These terms are used interchangeably throughout this and other articles. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control.

What Is Support?

Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand will overcome supply and prevent the price from falling below support.

Support does not always hold and a break below support signals that the bears have won out over the bulls. A decline below support indicates a new willingness to sell and/or a lack of incentive to buy. Support breaks and new lows signal that sellers have reduced their expectations and are willing sell at even lower prices. In addition, buyers could not be coerced into buying until prices declined below support or below the previous low. Once support is broken, another support level will have to be established at a lower level.

Where Is Support Established?

Support levels are usually below the current price, but it is not uncommon for a security to trade at or near support. Technical analysis is not an exact science and it is sometimes difficult to set exact support levels. In addition, price movements can be volatile and dip below support briefly. Sometimes it does not seem logical to consider a support level broken if the price closes 1/8 below the established support level. For this reason, some traders and investors establish support zones.

What Is Resistance?

Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further. The logic dictates that as the price advances towards resistance, sellers become more inclined to sell and buyers become less inclined to buy. By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from rising above resistance.

Resistance does not always hold and a break above resistance signals that the bulls have won out over the bears. A break above resistance shows a new willingness to buy and/or a lack of incentive to sell. Resistance breaks and new highs indicate buyers have increased their expectations and are willing to buy at even higher prices. In addition, sellers could not be coerced into selling until prices rose above resistance or above the previous high. Once resistance is broken, another resistance level will have to be established at a higher level.

Where Is Resistance Established?

Resistance levels are usually above the current price, but it is not uncommon for a security to trade at or near resistance. In addition, price movements can be volatile and rise above resistance briefly. Sometimes it does not seem logical to consider a resistance level broken if the price closes 1/8 above the established resistance level. For this reason, some traders and investors establish resistance zones.

Methods to Establish Support and Resistance?

Support and resistance are like mirror images and have many common characteristics.

Highs and Lows

Support can be established with the previous reaction lows. Resistance can be established by using the previous reaction highs.

The above chart shows a large trading range between Dec-99 and Mar-00. Support was established with the October low around 33. In December, the stock returned to support in the mid-thirties and formed a low around 34. Finally, in February the stock again returned to the support scene and formed a low around 33 1/2.

After each bounce off support, the stock traded all the way up to resistance. Resistance was first established by the September support break at 42.5. After a support level is broken, it can turn into a resistance level. From the October lows, the stock advanced to the new support-turned-resistance level around 42.5. When the stock failed to advance past 42.5, the resistance level was confirmed. The stock subsequently traded up to 42.5 two more times after that and failed to surpass resistance both times.

Support Equals Resistance

Another principle of technical analysis stipulates that support can turn into resistance and visa versa. Once the price breaks below a support level, the broken support level can turn into resistance. The break of support signals that the forces of supply have overcome the forces of demand. Therefore, if the price returns to this level, there is likely to be an increase in supply, and hence resistance.

The other turn of the coin is resistance turning into support. As the price advances above resistance, it signals changes in supply and demand. The breakout above resistance proves that the forces of demand have overwhelmed the forces of supply. If the price returns to this level, there is likely to be an increase in demand and support will be found.

In this example , the stock broke resistance at 935 in May-97 and traded just above this resistance level for over a month. The ability to remain above resistance established 935 as a new support level. The stock subsequently rose to 1150, but then fell back to test support at 935. After the second test of support at 935, this level is well established.

From this example, we can see that support can turn into resistance and then back into support. PeopleSoft found support at 18 from Oct-98 to Jan-99 (green oval), but broke below support in Mar-99 as the bears overpowered the bulls. When the stock rebounded (red oval), there was still overhead supply at 18 and resistance was met from Jun-99 to Oct-99.

Where does this overhead supply come from? Demand was obviously increasing around 18 from Oct-98 to Mar-99 (green oval). Therefore, there were a lot of buyers in the stock around 18. When the price declined past 18 and to around 14, many of these buyers were probably still holding the stock. This left a supply overhang (commonly known as resistance) around 18. When the stock rebounded to 18, many of the green-oval-buyers (who bought around 18) probably took the opportunity to sell. When this supply was exhausted, the demand was able to overpower supply and advance above resistance at 18.

Trading Range

Trading ranges can play an important role in determining support and resistance as turning points or as continuation patterns. A trading range is a period of time when prices move within a relatively tight range. This signals that the forces of supply and demand are evenly balanced. When the price breaks out of the trading range, above or below, it signals that a winner has emerged. A break above is a victory for the bulls (demand) and a break below is a victory for the bears (supply).

After an extended advance from 27 to 64, the stock entered into a trading range between 55 and 63 for about 5 months. There was a false breakout in mid-June when the stock briefly poked its head above 62 (red oval). This did not last long and a gap down a few days later nullified the breakout (black arrow). The stock then proceeded to break support at 55 in Aug-99 and trade as low as 50. Here is another example of support turned resistance as the stock bounced off 55 two more times before heading lower. While this does not always happen, a return to the new resistance level offers a second chance for longs to get out and shorts to enter the fray.

In Nov/Dec-99, the stock formed a trading range that resembled a head and shoulders pattern (red oval). When the stock broke support at 60, there was little or no time to exit. Even though the there is a long black candlestick indicating an open at 59, the stock fell so fast that it was impossible to exit above 44. In hindsight, the support line could have been drawn as an upward sloping neckline (blue line), and the support break would have come at 61. This is only 1 point higher and a trader would have had to take action immediately to avoid a sharp fall. However, the lows match up rather nicely on the neckline, and it is something to consider when drawing support lines.

After Lucent declined, a trading range was established between 40.5 and 47.5 for almost two months (green oval). The resistance level of the trading range was well marked by three reaction peaks at 47.5. The support level was not as clearly marked, but appeared to be between 40 and 41. Some buying interest began to become evident around 44 in mid- to late-February. Notice the array of candlesticks with long lower shadows, or hammers, as they are known. The stock then proceeded to form two up gaps on 24-Feb and 25-Feb, and finally closed above resistance at 48. This was a clear indication of demand winning out over supply. There were still two more opportunities (days) to get in on the action. On the third day after the breakout, the stock gapped up and moved above 56.

Support and Resistance Zones

Because technical analysis is not an exact science, it is useful to create support and resistance zones. This is contrary to the strategy mapped out for Lucent Technologies (LU), but it is sometimes the case. Each security has its own characteristics, and analysis should reflect the intricacies of the security. Sometimes, exact support and resistance levels are best, and, sometimes, zones work better. Generally, the tighter the range, the more exact the level. If the trading range spans less than 2 months and the price range is relatively tight, then more exact support and resistance levels are best suited. If a trading range spans many months and the price range is relatively large, then it is best to use support and resistance zones. These are only meant as general guidelines, and each trading range should be judged on its own merits.

Returning to the analysis , we can see that the November high of the trading range (33 to 44) extended more than 20% past the low, making the range quite large relative to the price. Because the September support break forms our first resistance level, we are ready to set up a resistance zone after the November high is formed, probably around early December. At this point though, we are still unsure if a large trading range will develop. The subsequent low in December, which was just higher than the October low, offers evidence that a trading range is forming, and we are ready to set the support zone. As long as the stock trades within the boundaries set by the support and resistance zone, we will consider the trading range to be valid. Support may be looked upon as an opportunity to buy, and resistance as an opportunity to sell.

Conclusion

Identification of key support and resistance levels is an essential ingredient to successful technical analysis. Even though it is sometimes difficult to establish exact support and resistance levels, being aware of their existence and location can greatly enhance analysis and forecasting abilities. If a security is approaching an important support level, it can serve as an alert to be extra vigilant in looking for signs of increased buying pressure and a potential reversal. If a security is approaching a resistance level, it can act as an alert to look for signs of increased selling pressure and potential reversal. If a support or resistance level is broken, it signals that the relationship between supply and demand has changed. A resistance breakout signals that demand (bulls) has gained the upper hand and a support break signals that supply (bears) has won the battle.

Trend Lines

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Technical analysis is built on the assumption that prices trend. Trend Lines are an important tool in technical analysis for both trend identification and confirmation. A trend line is a straight line that connects two or more price points and then extends into the future to act as a line of support or resistance. Many of the principles applicable to support and resistance levels can be applied to trend lines as well. It is important that you understand all of the concepts presented in our Support and Resistance article before you continue.

Definition

Uptrend Line

An uptrend line has a positive Slope (A simple indicator equal to the change in price divided by the number of time periods. A positive slope begins low and rises over time with a steeper rise illustrating a greater slope. A negative slope begins high and declines over time with a steeper decline illustrating a more negative slope.) and is formed by connecting two or more low points. The second low must be higher than the first for the line to have a positive slope. Uptrend lines act as support and indicate that net-demand (demand less supply) is increasing even as the price rises. A rising price combined with increasing demand is very bullish, and shows a strong determination on the part of the buyers. As long as prices remain above the trend line, the uptrend is considered solid and intact. A break below the uptrend line indicates that net-demand has weakened and a change in trend could be imminent.

Downtrend Line

A downtrend line has a negative slope and is formed by connecting two or more high points. The second high must be lower than the first for the line to have a negative slope. Downtrend lines act as resistance, and indicate that net-supply (supply less demand) is increasing even as the price declines. A declining price combined with increasing supply is very bearish, and shows the strong resolve of the sellers. As long as prices remain below the downtrend line, the downtrend is solid and intact. A break above the downtrend line indicates that net-supply is decreasing and that a change of trend could be imminent.

Scale Settings

High points and low points appear to line up better for trend lines when prices are displayed using a semi-log scale. This is especially true when long-term trend lines are being drawn or when there is a large change in price. Most charting programs allow users to set the scale as arithmetic or semi-log. An arithmetic scale displays incremental values (5,10,15,20,25,30) evenly as they move up the y-axis. A $10 movement in price will look the same from $10 to $20 or from $100 to $110. A semi-log scale displays incremental values in percentage terms as they move up the y-axis. A move from $10 to $20 is a 100% gain, and would appear to be a much larger than a move from $100 to $110, which is only a 10% gain.

In this case there was a large price change over a long period of time. While there were not any false breaks below the uptrend line on the arithmetic scale, the rate of ascent appears smoother on the semi-log scale. EMC doubled three times in less than two years. On the semi-log scale, the trend line fits all the way up. On the arithmetic scale, three different trend lines were required to keep pace with the advance.

In this case there were two false breaks above the downtrend line as the stock declined during 2000 and 2001. These false break outs could have led to premature buying as the stock continued to decline after each one. The stock lost 60% of its value three times over a two year period. The semi-log scale reflects the percentage loss evenly, and the downtrend line was never broken.

Validation

It takes two or more points to draw a trend line The more points used to draw the trend line, the more validity attached to the support or resistance level represented by the trend line. It can sometimes be difficult to find more than 2 points from which to construct a trend line Even though trend lines are an important aspect of technical analysis, it is not always possible to draw trend lines on every price chart. Sometimes the lows or highs just don't match up, and it is best not to force the issue. The general rule in technical analysis is that it takes two points to draw a trend line and the third point confirms the validity.

This chart shows an uptrend line that has been touched 4 times. After the third touch in Nov-99, the trend line was considered a valid line of support. Now that the stock has bounced off of this level a fourth time, the soundness of the support level is enhanced even more. As long as the stock remains above the trend line (support), the trend will remain in control of the bulls. A break below would signal that net-supply was increasing and that a change in trend could be imminent.

Spacing of Points

The lows used to form an uptrend line and the highs used to form a downtrend line should not be too far apart, or too close together. The most suitable distance apart will depend on the time frame, the degree of price movement, and personal preferences. If the lows (highs) are too close together, the validity of the reaction low (high) may be in question. If the lows are too far apart, the relationship between the two points could be suspect. An ideal trend line is made up of relatively evenly spaced lows (or highs). The trend line in the above MSFT example represents well-spaced low points.

On this example, the second high point appears to be too close to the first high point for a valid trend line; however, it would be feasible to draw a trend line beginning at point 2 and extending down to the February reaction high.

Angles

As the steepness of a trend line increases, the validity of the support or resistance level decreases. A steep trend line results from a sharp advance (or decline) over a brief period of time. The angle of a trend line created from such sharp moves is unlikely to offer a meaningful support or resistance level. Even if the trend line is formed with three seemingly valid points, attempting to play a trend line break or to use the support and resistance level established it will often prove difficult.

The trend line here was touched four times over a 5-month period. The spacing between the points appears OK, but the steepness of the trend line is unsustainable, and the price is more likely than not to drop below the trend line. However, trying to time this drop or make a play after the trend line is broken is a difficult task. The amount of data displayed and the size of the chart can also affect the angle of a trend line. Short and wide charts are less likely to have steep trend lines than long and narrow charts. Keep that in mind when assessing the validity and sustainability of a trend line.

Internal Trend Lines

Sometimes there appears to be the possibility for drawing a trend line, but the exact points do not match up cleanly. The highs or lows might be out of whack, the angle might be too steep or the points might be too close together. If one or two points could be ignored, then a fitted trend line could be formed. With the volatility present in the market, prices can over-react, and produce spikes that distort the highs and lows. One method for dealing with over-reactions is to draw internal trend lines. Even though an internal trend line ignores price spikes, the ignoring should be within reason.

The long-term trend line for the stock extends up from the end of 1994, and passes through low points in Jul-96, Sept-98 and Oct-98. These lows were formed with selling climaxes, and represented extreme price movements that protrude beneath the trend line. By drawing the trend line through the lows, the line appears to be at a reasonable angle, and the other lows match up extremely well.

Sometimes, there is a price cluster with a high or low spike sticking out. A price cluster is an area where prices are grouped within a tight range over a period of time. The price cluster can be used to draw the trend line, and the spike can be ignored. The above chart shows an internal trend line that is formed by ignoring price spikes and using the price clusters, instead. In October and November 1998, Coke formed a peak, with the November peak just higher than the October peak (1). If the November peak had been used to draw a trend line, then the slope would have been more negative, and there would have appeared to be a breakout in Dec-98 (gray line). However, this would have only been a two-point trend line, because the May-June highs are too close together (black arrows). Once the Dec-99 peak formed (green arrow), it would have been possible to draw an internal trend line based on the price clusters around the Oct/Nov-98 and the Dec-99 peaks (blue line). This trend line is based on three solid touches, and it accurately forecasts resistance in Jan-00 (blue arrow).

Conclusion

Trend lines can offer great insight, but if used improperly, they can also produce false signals. Other items - such as horizontal support and resistance levels or peak-and-trough analysis - should be employed to validate trend line breaks. While trend lines have become a very popular aspect of technical analysis, they are merely one tool for establishing, analyzing, and confirming a trend. Trend lines should not be the final arbiter, but should serve merely as a warning that a change in trend may be imminent. By using trend line breaks for warnings, investors and traders can pay closer attention to other confirming signals for a potential change in trend.

The uptrend line for this stock was touched 4 times, and seemed to be a valid support level. Even though the trend line was broken in Jan-00, the previous reaction low held, and did not confirm the trend line break. In addition, the stock recorded a new higher high prior to the trend line break.

2007-11-04T07:34:00.000+02:00

COMMITMENT OF TRADERS (COT) SENTIMENT CHART
WHAT DOES IT MEASURE?

The Commitment of Traders (COT) Sentiment indicator measures how bullish or bearish large institutional forex investors are toward a particular currency.

Each week---on Friday---the Commodity Futures Trading Commission (CFTC) releases the COT report. This report provides a breakdown of who is buying contracts and who is selling contracts. These numbers reflect the information from the previous Tuesday. Everybody hates the delay in information, but the CFTC still insists on holding the information for three days.

We have taken this information and created the COT Sentiment indicator to help you profit from this information in your forex investing.

WHY IS IT IMPORTANT?

Large, institutional investors drive the movement of currencies in the forex market. When they decide to buy a currency, the value of that currency rises. When they decide to sell a currency, the value of that currency drops.

If you can see what the big investors are doing, you have an opportunity to get out in front of them and take advantage of the price movement they are going to generate.

HOW TO USE IT

The COT Sentiment Indicator measures sentiment in two ways: it illustrates if investors are net long or net short their positions and it illustrates the strength of their commitment.

Net Long vs. Net Short---Net long means more investors are buying the currency than are selling the currency. Net short means more investors are selling the currency than are buying the currency.

The black line on the COT Sentiment indicator illustrates if investors are net long or net short their positions.

If the black line is above the horizontal grey signal line, investors are net long their positions.

If the black line is below the horizontal grey signal line, investors are net short their positions.

Strength of Commitment---Knowing whether investors are net long or net short their positions is only part of the equation. You also need to know how commited they are to their current positions. Are they net long but starting to doubt the validity or their position, or are they net long and continuing to add on to their position.

The orange line on the COT Sentiment indicator illustrates how confident investors are in their positions.

If the orange line is above the horizontal grey signal line, investors are still confident in their positions.

If the orange line is below the horizontal grey signal line, investors are losing confidence in their positions.

You can also watch the trend of the orange line to give you advanced warning of how investors feel about their positions.

If the orange line is above the horizontal grey signal line and is trending down, you know investor sentiment may be turning negative.

If the orange line is below the horizontal grey signal line and is trending up, you know investor sentiment may be turning positive.

Make sure to check the Bond Yield Seesaw regularly to see if the bond yields have changed and what that might do to your trades.

EUR/USD
GBP/USD
USD/CHF
USD/JPY
USD/CAD
NZD/USD
GBP/JPY

Forex Broker Commissions

2007-11-01T10:04:00.001+02:00

Most forex brokers do not charge commissions. GFT Forex Brokers, like other forex brokers, are compensated by revenues from their activities as currency dealers, including proceeds from buying, selling, converting and holding currencies, interest on deposited funds, and rollover fees.

Many may wonder how brokers work without commissions. The forex dealer is like a middleman. Let's consider the case of a bread middleman. He buys bread at a “wholesale” price and he sells it at a “retail” price. So if one is a baker, he can ask the middleman how much he would buy his bread for. Let's say the middleman quotes $1, so he's willing to pay $1 per loaf.

On the other side of the equation, let's say you just finished his last slice of bread, and you needs a new loaf. So you call up the local middleman, and ask him how much he's willing to sell you (a customer) a loaf of bread for. And he quotes the baker $1.25. That sounds reasonable, so you tell him to drop one off for you.

In this example, the bread middleman didn't charge you a commission to either the baker or you, the customer. Instead he bought at one price and sold at another. He will let you buy from him at $1.25, and let you sell to him at $1. So every time the baker has bread to sell, he checks the middleman's sell price. And when you want to buy a loaf of bread, you check the buy price. In trading, this is known as the “bid” and “ask”. The bid is the price you can sell at, and the ask is the price you can buy at.

Considering forex broker commissions, the forex dealer will let the trader buy from him at 1.1971 and will let the trader sell to him at 1.1967. The difference 0.0004 is known as the spread. And this spread is where the forex “middleman” makes his money.

If the trader were to buy at 1.1971, then the instant the trader buys, he is “down” 0.0004, because if the trader wanted out of the trade, the best price he could sell it for is 1.1967. So as the forex dealer takes varying trades from people, each buying or selling, he can make money from this price gap. Each minimum increment, 0.0001 is referred to as a “pip”. So the spread in this example is 4 pips. In terms of dollars, for a forex contract of $100,000, this transaction would cost you $40 ($100,000 x 0.0004) or 4 pips. So the trader will find that some companies will advertise a spread of 3 pips on some currencies, usually ranging up to five on others. In forex trading, the tighter the spread is, the better.

Do I Really Need One?

2007-11-01T09:54:00.000+02:00

Being involved in the Forex market you may have heard the term Forex broker many times before. But do you really know what this individual does or what it means? A Forex broker is one who assists not only traders and firms, but also individuals involved in the Forex market. The Forex broker's assistance can be in providing information or may be actually trading for the person or company they are representing. A Forex broker does charge a fee for any services they provide, depending on which one it is.

A list of services that a Forex broker can provide can range from general advice to real time quotes to news feeds. There are different ways that these brokers can give advice. Some Forex brokers use their own personal experience and understanding. While others rely on software to provide the information their service provides.

There have been some advantages and new benefits allowed for Forex brokers and the Forex market since the Internet has evolved. Because of this the individual Forex broker can better provide accessibility to the Forex market, impossibility in previous years. This meant that only banks or large financial institutions would have any access to the Forex market.

There has been a huge growth since then of Forex brokers, which can make it hard to choose, especially for beginning or new traders to the market. The best advice when looking for your Forex broker is to get as many referrals and recommendations as you can. This can better help you decide in finding a reputable and competent Forex broker.

In the instance where you cannot get a referral or recommendation, it is up to you to do your own thorough and careful research. You should find out the amount of trades they are conducting and with how many clients. Of course you should also find out the Forex broker's amount of experience. The most important thing to look for in your own research is a Forex broker who has learned by experience over several years and has the right amount of instinct to give the right advice. Of course you should also examine what kind of services and what variety they provide, such as mini accounts, market intelligence, market analysis, news feeds and real time quotes.

When deciding if you would like to use a broker or not, you need to take all advantages as well as disadvantages into consideration. This is a personal decision, one in which referrals and recommendations are highly recommended when looking, or at the very least extensive research on your part. Choosing the right Forex broker, in the end, can make the difference between success and failure in the Forex market.

Forex Broker List

2007-11-01T09:30:00.001+02:00

Forex ECN's - No dealing desk

What is an ECN?

Forex Market Makers

CMC Markets - Rate CMC Markets | Compare | CMC Markets Reviews
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What is a Market Maker?

MetaTrader Platforms

How to Choose a Trading System That Actually Works

2007-10-31T22:28:00.000+02:00

Finding a good trading system can be a very difficult process. So it becomes necessary to have a way of distinguishing good systems from the rest. Fortunately, there is a way to do this by using a demanding set of criteria that I believe must be met in order for you to consider using the system.

STEPS

1. Mechanical System: The trading system must be 100% mechanical without any human input or overrides. It must also not be tweaked or adjusted as time goes on to fit current data. Also, the system algorithms or rules must not be curve-fitting or tailored to short term, non-repetitive patterns of past data that eliminate otherwise losing trades. A good way to screen for curve-fitting is to look for consistently good results over a minimum of 5 years of past data that meet all of the other criteria outlined in this report as well.
2. Liquid Markets: The trading system should be aimed at liquid markets where sufficient daily volume exists to easily and consistently execute orders as intended by the system with a minimum of slippage. For example, the S&P 500 Index Futures Market is highly liquid, whereas the Orange Juice Futures Market is far less liquid.
3. Market Direction Independence: A good trading system will not be dependent on a bull market for its success. It should have the potential to generate successful trading performance in all market conditions; bull, bear, and sideways trading range.
4. Hypothetical Performance Results: The primary way of evaluating a trading system is based on its historical back tested performance (�hypothetical performance�). But the performance record must include real world trading commission and slippage assumptions. Commission and slippage can cause an otherwise winning performance to actually be a net loser. Beware of any futures trading system performance data where commission and slippage assumptions are not included or are understated.
5. Maximum Drawdown: An inherent characteristic of investing in general and in trading systems in particular is the maximum drawdown in account value from the most recent peak. This is a very important factor in assessing the risk associated with any system. There are two aspects to consider; the dollar amount of the drawdown as a percentage of the total account value (should not exceed � of the average annual return) and the duration of the drawdown until a new peak level in equity is realized (should not exceed 6 months). Some trading systems hype great profits over the past several years, but don�t disclose drawdowns that sometimes exceed the initial capital invested and last for a year or more. Before selecting a trading system, you must be able to quantify the drawdown risk and find it suitable, both financially and emotionally.
6. Beginning Account Size: The maximum past drawdown (over a minimum five year period) plus the margin required for one contract is the absolute minimum account size required to trade a system. And to be conservative, it is prudent to add a buffer since the maximum drawdown for any trading system is always in the future.
7. Annual Returns: Annual returns are measured as net profit after commissions and slippage, divided by the beginning account size which gives you annual percent return on beginning account size. Two things are important here. First, the average annual net profit should be a minimum of twice the maximum drawdown over a period of at least 5 years. Second, ideally there should be no losing years.
8. Trade Profile: There are two aspects important here. First, the percent of profitable trades should be in the 40-60% range and the ratio of average win to average loss should be in the 1.3 - 2.0 range. Second, the average trade net profit (total net profits divided by the total number of all trades) should be at a minimum 3 times greater than real world per trade slippage and commission assumptions. Beware of systems claiming to deliver greater than 60% winners. Such systems usually exhibit a very poor average win to average loss ratio where a few losing trades can easily wipe out profits from several winning trades.
9. If you want to learn more about developing the forex strategy that is right for you, consider your options carefully. Studies have shown that people learn more effectively when they watch demonstrations of live trading. Also, when you have the ability to use a demo account to make practice traders you can test your new strategy and work with your forex trading system to ensure that it is configured the way that you need it to work.

TIPS

* By following the guidelines in this report, I believe you are now in a position to distinguish the difference between good systems that have the potential to deliver superior returns and the rest. Remember, a trading system must meet all of the criteria elements outlined here to qualify as a system that you would consider trading for your own account.
* Know yourself and you will know how to trade successfully. Be ready for a totally surprising outcome, because no two peoples psychologies are the same. For sure your successful way of trading will be a hybrid, so take other people "Ways of doing it" with a pinch of salt and go with what feels instintively right.
* If your system works, you don't need to start big, rather start as small as possible, using the principle that if your system really is right,(and not dumb luck), compounding a cent 21 times, will make you very rich. Never start big.

WARNINGS

Futures, forex, stocks, and option trading is not appropriate for everyone. There is a substantial risk of loss associated with trading futures. Losses can and will occur. No system or methodology has ever been developed that can guarantee profits or ensure freedom from losses. No representation or implication is being made that using the Instant Profits methodology or system will generate profits or ensure freedom from losses.

How to select a good quality forex broker

2007-10-31T22:25:00.001+02:00

How to choose a good quality forex broker

After you are confident in the way you will go about trading the forex market, along with the money management rules you will implement, it might be time to find a good forex broker.

There are many brokers out there to choose from so, it is worth while doing some initial research before choosing a forex broker. Some things to look out for when choosing a forex broker include:

Low Spreads

The spread is the main way forex brokers generate their profits. The spread is the difference between the price at which you can buy a currency, and the price at which it can be sold at any particular point in time. When looking for a broker, keep an eye out on their spread costs. The less the spread, the more money you will save and the faster you will be making a profit in a trade.

Quality registered institution

In the United States, forex brokers should be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) http://www.cftc.gov. They should also be a member of the National Futures Association. You can verify the brokers CFTC registration and NFA membership status at http://www.nfa.futures.org/basicnet/. If the broker is not backed up by a reliable institution, don’t bother with them it’s not worth the risk.

A wide range of leverage options

Leverage is needed to trade currencies due to the fact that price movements are only fractions of a cent. In general, leverage is expressed as a ratio between the amount of capital you provide to the amount a forex broker will lend you. For example, take the example of the ratio of 200:1. What this means is that the forex broker will lend you 200 times the amount of money you provide. Just keep in mind the more leverage you use, the more risk there is in getting a margin call, however you also have the potential for larger profits and vice-versa. In general, when starting out with a small amount of capital, make sure that the forex broker you are using offers a wide range of leverage options. This will give you more control over the risk exposure you should be prepared to take.

A wide range of tools

The majority of the larger forex brokers offer a range of trading tools to their clients. Most brokers can provide you with real-time currency prices along with other various tools. Ensure that your forex broker provides all the tools you need to trade successfully. Other tools could include:

• Real-time currency price charting • Technical analysis tools • Fundamental analysis commentaries • Economic calendars

The good forex brokers offer two or more types of accounts. For example the smallest account size is known as a mini account. Mini accounts require you to provide at least say $500, and with that you are offered a high amount of leverage. Leverage is required to profit from such small amounts of trading capital. Standard accounts also have a minimum capital requirement, usually somewhere between $1,000 and $2,000. In the end it’s important to choose a broker that has the right leverage and services that suit your needs to go with the amount of capital you have dedicated to trading the currency market.

Customer Support

Forex is a 24-hour market; therefore 24-hour support is essential. Can you contact the firm by phone, email, chat, etc? Do the customer support representatives seem to know what their on about? The quality of customer support can vary considerably from broker to broker, so be sure to check it out before opening an account.

One thing you could do is contact a number of forex brokers to get a feel of how quickly they can respond to enquiries. If they don’t respond quickly, and with a reasonable answer don’t give them your business.

Miscellaneous

It’s a good idea to talk to other forex traders in an effort to find out who are the better forex brokers out there. As in any industry or business, there are some dodgy ones. Forex brokers are no exception. There are many forums on the internet these days that are dedicated to discussing all areas of forex trading, including the discussion of forex brokers. These are great resources you can use allowing you to find some valuable information that could just save you being ripped off by some unscrupulous forex broker.

Conclusion

By taking the time and effort to do some initial research, you will be able to choose a reliable forex broker. This might just save you a lot of stress and troubles you may encounter if you were to choose any old forex broker.

Williams %R

2007-10-29T22:54:00.003+02:00

Overview

Developed by Larry Williams, the Williams %R (pronounced "percent R") indicator is a momemtum oscillator used to measure overbought and oversold levels. It's very similar to the Stochastic Oscillator except that the %R is plotted upside-down on a negative scale from 0 to -100 and has no internal smoothing. The %R defines the relationship of the close price relative to the High-Low range over n-Periods. The nearer the close price is to the highest high of the range the nearer to zero the reading will be. Alternatively, the nearer the close price is to the lowest low of the range the nearer to -100 the reading will be. If the close price equals the highest high of the range the reading will be 0; if the close price equals the lowest low of the range to reading will be -100.

Interpretation

As an overbought/oversold indicator, Williams %R values from 0 to -20 are considered overbought while values from -80 to -100 are considered oversold. An interesting phenomena of the %R indicator is its uncanny ability to anticipate a reversal in the underlying trading instrument's price.

Volume

2007-10-29T22:53:00.002+02:00

Overview

"Volume" is representative of the number of incoming price ticks provided from the brokerage's quote stream during any given bar. Because forex is unregulated there is no way to centrally guage how much volume is being moved (in $ value). In the absense of traditional volume, "tick" volume is often used as a substitute (or proxy) to guage market participants' activity.

On that assumption, if the number of ticks per bar is inceasing it is likely that there are more market participants entering the market trying to position themselves; more market participants typically equals more orders which means more money flow (or $ volume). The oppisite is true if the number of ticks per bar is decreasing, it is likely that there are fewer market participants which signifies less orders and less money flow.

True Strength Index (TSI)

2007-10-29T22:53:00.001+02:00

The True Strength Index (TSI) is a variation of the Relative Strength indicator developed by William Blau. It is a momentum-based indicator that combines the leading characteristic of a differencing momentum calculation with the lagging characteristic of an averaging function to create an indicator that reflects price direction and is more in sync with market turns. The TSI can be used to determine general trend direction as well as overbought-oversold conditions.

Triple Exponential Moving Average (TEMA)

2007-10-29T22:52:00.002+02:00

Overview:

Developed by Patrick Mulloy and introduced in the January 1994 issue of Technical Analysis of Stocks & Commodities magazine, this trend indicator is an acronym standing for “Triple Exponential Moving Average”. TEMA was designed to lessen the lag of a regular exponential moving average. It is a composite of a single exponential MA, a double exponential MA, and a triple exponential MA that produces less lag than any of its three components individually; it is NOT a moving average of a moving average of a moving average.

Interpretation:

The TEMA can be used in place of traditional moving averages. (see the "Moving Average" indicator for additional details)

TRIX

2007-10-29T22:52:00.001+02:00

Overview

Developed by Jack Hutson, the TRIX indicator is a triple-smoothed oscillator designed to eliminate cycles shorter than the selected indicator period. TRIX oscillates above and below a zero line like many other oscillators. However, it can also be used as a momentum indicator. When being used as a momentum indicator, positive values suggest that momemtum may be increasing while negative values suggest that momemtum may be decreasing.

Trades can be initiated when the TRIX indicator crosses the zero line. A signal line can also be used to generate trade signals. Divergence between the TRIX and price can also be an effective method of generating trades.

Trend Trigger Factor (TTF)

2007-10-29T22:51:00.001+02:00

Overview:

M.H. Pee's article "Trend Trigger Factor" in the December 2004 issue of Technical Analysis of Stocks and Commodities magazine (TASC) presents the Trend Trigger Factor (TTF) indicator.

The TTF is a method of detecting uptrends and downtrends using buy power and sell power calculations derived over the previous n-periods.

Uses:

Typical uses include creating an always-in-the-market system whereby Sell trades are generated when the TTF crosses down through the 100 level and Buy signals are generated when the TTF crosses up through the -100 level.

trend intensity index (TII)

2007-10-29T22:50:00.002+02:00

Overview:

The trend intensity index (TII), developed by M.H. Pee, is used to indicate the strength of a current trend in the market. It was introduced in the June 2002 issue of TASC.

TII determines the current strength of a price trend based on deviations of previous prices from a current moving average.

The stronger the current trend, the more likely the market will continue moving in its current direction instead of changing course.

According to M.H. Pee, values >80 and <20 indicate strong trends.

Trend Continuation Factor (TCF)

2007-10-29T22:50:00.001+02:00

Overview:

The Trend Continuation Factor (TCF) was introduced by M. H. Pee. in the article "Trend Continuation Factor".

It was designed to help identify the market trend and direction. Positive values of either the PlusTCF or MinusTCF lines indicates a strong prevailing trend. Positive values of PlusTCF indicate a strong UpTrend, while positive values of MinusTCF indicate a strong DownTrend.

Both PlusTCF and MinusTCF cannot be positive at the same time since an uptrend and a downtrend cannot occur simultaneously. However, PlusTCF and MinusTCF can both be negative; this signifies market consolidation (the absence of a prevailing trend).

Uses:

Typical trading strategies include entering Buy positions when PlusTCF is positive and entering Sell positions when MinusTCF is postive.

An alternative trading strategy may include entering trades based on the crossings of PlusTCF and MinusTCF.

T3 Moving Average

2007-10-29T22:49:00.002+02:00

Overview

The T3 Moving Average was described by Tim Tillson in the January, 1998 issue of 'Technical Analysis of Stocks & Commodities' article "Smoothing Techniques for More Accurate Signals". The T3 is a significant improvement over traditional moving averages; it's smoother with much less lag. However, it can "overshoot" price as it attempts to re-align itself with current market prices.

Support and Resistance

2007-10-29T22:49:00.001+02:00

Think of security prices as the result of a head-to-head battle between a bull (the buyer) and a bear (the seller). The bulls push prices higher and the bears push prices lower. The direction prices actually move reveals who is winning the battle.

Support levels indicate the price where the majority of investors believe that prices will move higher, and resistance levels indicate the price at which a majority of investors feel prices will move lower.

To use this formula most effectively, use the parameters dialogue to change the style to a dotted line while increasing the line weighting.

Stoller Average Range Channels

2007-10-29T22:48:00.002+02:00

Overview

The Stoller Average Range Channels (a.k.a. STARC Bands) indicator was developed by Manning Stoller in the 1980's. Similar to Bollinger Bands, the STARC bands are designed to interpret market volatility using a measure of the Average True Range (ATR). The STARC Bands create a channel above and below a moving average of the instrument's underlying price; the width of the channel expands and contracts depending on the fluctuation in the ATR.

The upper STARC band is calculated by adding a value of the (ATR * ATRMultiplier) to the moving average. The lower STARC band is calculated by subtracting a value of the (ATR * ATR Multiplier) to the moving average.

Interpretation

The STARC Bands are considered to encapsulate the majority of the instrument's price action between the bands allowing the bands to define the normal upper and lower limits of price action. This helps the trader determine higher probability, lower risk trading opportunities using the general assumption that price often returns to its median (the moving average).

* Price action that rises to the upper band offers a lower risk selling opportunity (and a high risk buying opportunity.

* Price action that declines to the lower band offers a lower risk buying opportunity (and a high risk selling opportunity.

These assumptions are not to say that the price action will not go against these rules. In fact, some traders believe that a penetration of the upper or lower STARC band indicates an increased momentum in the direction of the band penetration.

Implementation

The ATR Periods and ATR Multiplier as well as the STARC Bands Price, Periods, and Band Type inputs have been parameterized to allow the user full customization of this indicator.

Stochastic Oscillator (Fast, Slow, Full)

2007-10-29T22:48:00.001+02:00

Overview

Developed by George C. Lane in the 1950's, the Stochastic Oscillator comes in 3 flavors: Fast, Slow, and Full. The Stochastic Oscillator is a momentum indicator designed to show the relation of the current close price relative to the high/low range over a given number of periods using a scale of 0-100. It is based on the assumption that in a rising market the price(s) will close near the high of the range and in a declining market the price(s) will close near the low of the range.

The Stochastic Oscillators are typically plotted as 2 lines: %K and %D. %K is the main (fast) line and %D is the signal (slow) line.

The Fast Stochastic Oscillator is calculated by the formula:

Fast %K = ((Today's Close - Lowest Low in %K Periods) / (Highest High in %K Periods - Lowest Low in %K Periods)) * 100
%D = 3-period simple moving average of Fast %K

The Slow Stochastic Oscillator is calculated by the formula:

Fast %K = ((Today's Close - Lowest Low in %K Periods) / (Highest High in %K Periods - Lowest Low in %K Periods)) * 100
Slowing %K = 3-period simple moving average of Fast %K
%D = 3-period simple moving average of Slowing %K

The Full Stochastic Oscillator is calculated by the formula:

Fast %K = ((Today's Close - Lowest Low in %K Periods) / (Highest High in %K Periods - Lowest Low in %K Periods)) * 100
Slowing %K = N-period moving average of Fast %K
%D = N-period simple moving average of Slowing %K

Interpretation

There are three basic techniques for using the various Stochastic Oscillators to generate trading signals.

Crossovers: 1) %K line / %D line Crossover: A buy signal occurs When the %K line crosses above the %D line and a sell signal occurs when the %K line crosses below the %D line. 2) %K line / 50-level Crossover: When the %K line crosses above 50 a buy signal is given. Alternatively, when the %K line crosses below 50 a sell signal is given.

Divergence: Looking for divergences between the Stochastic Oscillator and price can prove to be very effective in identifying potential reversal points in price movement. Trade long on Classic Bullish Divergence: Lower lows in price and higher lows in the Stochastic Oscillator; Trade short on Classic Bearish Divergence: Higher highs in price and lower highs in the Stochastic Oscillator.

Overbought/Oversold Conditions: The Stochastic Oscillator can be used to identify potential overbought and oversold conditions in price movements. An Overbought condition is generally described as the Stochastic Oscillator being greater than or equal to the 80% level while an oversold condition is generally described as the Stochastic Oscillator being less than or equal to the 20% level. Trades can generated when the Stochastic Oscillator crosses these levels. A buy signal occurs when the Stochastic Oscillator declines below 20% and then rises above that level. A sell signal occurs when the Stochastic Oscillator rises above 80% and then declines below that level.

Implementation

Fast Stochastic Oscillator: The %K Periods, %D Periods, and %D Method have been parameterized to allow the user full customization of the Fast Stochastic Oscillator indicator. The %K line is plotted as a solid green line; The %D line is plotted as a dashed green line; Horizontal dashed lines identifying common overbought and oversold levels are displayed at the 80/20 levels.

Slow Stochastic Oscillator: The %K Periods, %K Slowing Periods, %K Slowing Method, %D Periods, and %D Method have been parameterized to allow the user full customization of the Slow Stochastic Oscillator indicator. The %K line is plotted as a solid blue line; The %D line is plotted as a dashed blue line; Horizontal dashed lines identifying common overbought and oversold levels are displayed at the 80/20 levels.

Full Stochastic Oscillator: The %K Periods, %K Slowing Periods, %K Slowing Method, %D Periods, and %D Method have been parameterized to allow the user full customization of the Slow Stochastic Oscillator indicator. The %K line is plotted as a solid blue line; The %D line is plotted as a dashed blue line; Horizontal dashed lines identifying common overbought and oversold levels are displayed at the 80/20 levels.

Stochastic Momentum Index

2007-10-29T22:47:00.001+02:00

Overview

Created by William Blau, the Stochastic Momentum Index was described in the January 1993 issue of Stocks & Commodities magazine.

The SMI is a smoother vesrion of the classic Stochastic Oscillator with an interesting twist. Instead of calculating the distance the current price relative to the recent n-period high/low range,the SMI is calculated by comparing the price to the midpoint average of the n-period high/low range. The raw price differences are then smoothed by a double EMA (an EMA of an EMA of the raw price differences). When the close is greater than the midpoint of the range, the SMI is positive. When the close is less than the midpoint of the range, it is negative.

The result is an oscillator that ranges between +/- 100 and is less erratic than an equal period Stochastic Oscillator.

Uses

Popular methods for interpreting the Stochastic Momentum Index include:

1. Overbought/Oversold Level Crossovers: +/- 40 are popular levels. Buy when the SMI falls below the oversold and then rises above that level; Sell when the SMI rises above the overbought level and then falls below that level.

2. Signal Line Crossovers: Buy when the SMI rises above its signal line and sell when the SMI falls below the signal line.

3. Divergences: For example, where prices are making a series of new highs and the SMI is failing to surpass its previous highs.

Implementation

The Lookback Periods, Smoothing Periods, Double Smoothing Periods, and Signal Line Periods inputs have been parameterized to allow the user full customization of this indicator.

Schaff Trend Cycle

2007-10-29T22:46:00.000+02:00

Overview

Developed by Doug Schaff in the 1990's, the Schaff Trend Cycle bases its method on the fact that trends, like price, exhibit repeating high and low patterns (cycles). This indicator is a modified MACD line run through a mofidied stochastic algorithm smoothed with Wilders' smoothing to calculate the final STC indicator.

Interpretation

The Schaff Trend Cycle uses three inputs:

Sh: Shorter-term Exponential Moving Average.
Default: 23.

Lg: Longer-term Exponential Moving Average.
Default: 50.

Cycle: Set at half the cycle length.
Default: 10.

The Schaff Trend Cycle helps to identify:

1. Direction a Trend Cycle is moving.
2. Tops and Bottoms within a Trend Cycle.

When the Schaff Trend Cycle Indicator is declining, the trend cycle is falling and prices tend to stabilize or follow the cycle down. When the STC is rising, the trend cycle is rising and prices tend to stabilize or follow the cycle higher.

Relative Vigor Index (RVI)

2007-10-29T22:45:00.002+02:00

Ehlers Relative Vigor Index

Overview

The Relative Vigor Index (RVI) was descibed in the January 2002 edition of TASC in an article titled, "Something Old, Something New - Relative Vigor Index (RVI)" by John Ehlers.

The RVI merges the older concepts of technical analysis with modern digital signal processing theory and filters to create a practical and useful indicator.

The basic principle behind the RVI is simple -- prices tend to close higher than they open in uptrending markets and close lower than they open in downtrending markets. The energy (vigor) of the move is thereby established by where the prices end up at the close.

The RVI is essentially based on the measure of the average difference between the close and open, normalized to the average daily trading range.

The end result is a responsive oscillator with crisp turning points that is basically in phase with the cyclic component of market prices.

Interpretation

The Relative Vigor Index is a unique indicator. The basic method of interpreting the RVI is to use the crossovers of the RVI and the RVI Signal Line. A buy signal occurs When the RVI crosses above the RVI Signal Line and a sell signal occurs when the RVI crosses below the RVI Signal Line.

Implementation

The Periods input has been parameterized to allow the user full customization of this indicator.

Relative Strength Index (RSI)

2007-10-29T22:45:00.001+02:00

Relative Strength Index

Overview

The Relative Strength Index (RSI) is a popular oscillator. It was first introduced by Welles Wilder in an article in Commodities (now known as Futures) Magazine in June, 1978. Step-by-step instructions on calculating and interpreting the RSI are also provided in Mr. Wilder's book, New Concepts in Technical Trading Systems.

The name "Relative Strength Index" is slightly misleading as the RSI does not compare the relative strength of two securities, but rather the internal strength of a single security. A more appropriate name might be "Internal Strength Index." Relative strength charts that compare two market indices, which are often referred to as Comparative Relative Strength.

Interpretation

When Wilder introduced the RSI, he recommended using a 14-day RSI. Since then, the 9-day and 25-day RSIs have also gained popularity. Because you can vary the number of time periods in the RSI calculation, I suggest that you experiment to find the period that works best for you. (The fewer days used to calculate the RSI, the more volatile the indicator.)

The RSI is a price-following oscillator that ranges between 0 and 100. A popular method of analyzing the RSI is to look for a divergence in which the security is making a new high, but the RSI is failing to surpass its previous high. This divergence is an indication of an impending reversal. When the RSI then turns down and falls below its most recent trough, it is said to have completed a "failure swing." The failure swing is considered a confirmation of the impending reversal.

In Mr. Wilder's book, he discusses five uses of the RSI in analyzing commodity charts. These methods can be applied to other security types as well.

Tops and Bottoms. The RSI usually tops above 70 and bottoms below 30. It usually forms these tops and bottoms before the underlying price chart.
Chart Formations. The RSI often forms chart patterns such as head and shoulders (page 215) or triangles (page 216) that may or may not be visible on the price chart.
Failure Swings (also known as support or resistance penetrations or breakouts). This is where the RSI surpasses a previous high (peak) or falls below a recent low (trough).
Support and Resistance. The RSI shows, sometimes more clearly than price themselves, levels of support and resistance.
Divergences. As discussed above, divergences occur when the price makes a new high (or low) that is not confirmed by a new high (or low) in the RSI. Prices usually correct and move in the direction of the RSI.

Relative Momentum Index (RMI)

2007-10-29T22:44:00.003+02:00

Overview

The Relative Momentum Index (RMI) was developed by Roger Altman. It was first introduced in the February 1993 issue of Technical Analysis of Stocks & Commodities magazine.

The RMI is a variation of the RSI indicator. The RMI counts up and down days from the close relative to the close x-days ago (where x is not limited to 1 as is required by the RSI) instead of counting up and down days from close to close as the RSI does.

Note that an RMI with parameters of C, 14, 1 is equivalent to a 14 period RSI of the Close price. This is because the momentum parameter is calculating only a 1-day price change (which the RSI does by default). As the momentum periods are increased the RMI fluctuations become smoother.

Since the RMI is an oscillator it exhibits the same strengths and weaknesses of other overbought / oversold indicators. During strong trending markets it is likely that the RMI will remain at overbought or oversold levels for an extended period of time. However, during non-trending markets the RMI tends to oscillate more predictably between an overbought level of 70 to 90 and an oversold level of 10 to 30.

Rate of Change (ROC)

2007-10-29T22:44:00.001+02:00

Overview

The Rate of Change (ROC) indicator calculates how price has changed within a specified number of time periods by calculating the difference between the current bar's price and the price a selected number of bars ago. The difference is calculated in "Points" or as a "Percentage". The ROC moves in a wave-like fashion (similar to that of price), but it oscillates above and below an equilibrium level set at zero. The ROC rises as prices rise; The ROC declines as prices decline. The greater the change in prices, the greater the change in the ROC indicator.

To calculate the ROC in Points:

ROCPoints = Today's Price - Price n-Periods Ago

To calculate the ROC as a Percentage:

ROCPercentage = ((Today's Price - Price n-Periods Ago) / Price n-Periods Ago) * 100

Interpretation

The ROC indicator is a simple indicator capable of producing a myriad of buy and sell signals. However, there are four basic methods of interpreting the ROC indicator:

Zero-Level Crossovers: A buy signal occurs When the ROC crosses above zero and a sell signal occurs when the ROC crosses below zero.

OverBought/Oversold Levels: To use ROC as an overbought/oversold indicator, generally a few assumptions are made: The higher the ROC readings the more overbought a trading instrument is and the lower the ROC readings the more oversold a trading instrument is. Readings above the overbought level imply an overbought condition (and a pending price correction) while readings below the oversold level imply an oversold condition (and a pending rally). However, it is worth remembering that prices may remain overbought or oversold for extended periods of time. When this happens, it may actually suggest that the trend will continue rather than reverse.

Trend Line Breakouts: Trend lines can be drawn connecting the peaks and troughs of the ROC indicator. Often ROC begins to turn before price thereby making it a leading indicator. ROC readings breaking above a declining trend line warns of a possible bullish reversal while momentum readings breaking below a rising trend line warns of a possible bearish reversal.

Divergence: Looking for divergences between the ROC indicator and price can prove to be very effective in identifying potential reversal points in price movement. Trade long on Classic Bullish Divergence: Lower lows in price and higher lows in the ROC; Trade short on Classic Bearish Divergence: Higher highs in price and lower highs in the ROC.

Implementation

The Price, Periods, and Calculation Method inputs have been parameterized to allow the user full customization of this indicator.

Rainbow Charts

2007-10-29T22:43:00.001+02:00

Overview

The Rainbow Charts and Rainbow Oscillator indicators were created by Mel Widner, Ph.D. and originally introduced in the July 1997 issue of Stocks and Commodities magazine.

The Rainbow Charts indicators is trend-following indicator. The basis of the Rainbow Charts indicator is a 2-period simple moving average. Recursive smoothing is then applied to the original moving average thereby creating 9 additional moving averages; Each new moving average is based on the previous moving average. Through this use of recursive smoothing a full spectrum of trends is created that, when plotted using continuous colors, have the appearance of a rainbow.

The Rainbow Oscillator is also a trend-following indicator that is based on the same calculations used to create the Rainbow Charts. The Rainbow Oscillator is derived from a consensus of the Rainbow Charts trends. It defines the highest high and lowest low of those moving averages to create an oscillator and bandwidth lines based on those calculations.

Interpretation

One simple interpretation of the Rainbow Charts indicator is:

When the market is rising and the trend is up, the least smoothed line is at the top of the Rainbow (the red line) and the most smoothed line is at the bottom of the Rainbow (the violet line). When the market is declining and the trend is down the order of the Rainbow is reversed; the most smoothed line is at the bottom and the least smoothed line is at the top.

As the underlying market price moves up or down, the moving averages follow and cross in sequence as the move continues. Price moves away from the Rainbow are seen as potential trend continuations leading to a greater Rainbow width, while price moves towards (or into) the Rainbow are seen as potential reversals leading to a contraction of the Rainbow width. The depth that price penetrates into the Rainbow can be used to judge the strength of the move.

Implementation

The Price, Periods, and MA Type inputs of the initial trend line (moving average) have been parameterized to allow the user full customization of the Rainbow Charts indicator. The Rainbow Oscillator also allows the user to adjust the Oscillator Periods for further customization of that indicator. However, in both indicators the recursive smoothing for the additional trend lines (moving averages) remains as a 2-period simple moving average of the previous moving average.

Price Volume Trend (PVT)

2007-10-29T22:42:00.000+02:00

Overview

The Price Volume Trend (PVT) is a cummulative total of volume adjusted to the relative changes in the intrument's prices. It is similar in nature to the On Balance Volume (OBV) indicator. However, unlike the OBV the PVT adds or subtracts only a portion of volume from the cummulative total in relation to the percentage of change in prices whereas the OBV adds all volume when prices close higher and subtracts all volume when prices close lower. Many traders feel this difference is a key component of the PVT that allows it to more accurately reflect the volume of money flow in and out of a trading instrument.

Interpretation

The PVT can be considered a leading indicator of future price movements. A rising PVT value indicates new volume (money) flowing into the market while a declining PVT value indicates volume (money) leaving the market.

Trading signals can be generated in a few different ways using the PVT, although it is often recommended that the PVT be used in conjuction with other indicators.

In a ranging market, rising PVT values may signal a potential upward breakout while declining PVT values may signal and downward breakout.

In a trending market, the main signals from the PVT are generated by looking for divergence between the PVT indicator and the price. A bullish divergence may be an early warning sign of a market bottom and a potential upwards move in price. A bearish divergence may be an early warning sign of a market top and a potential downwards move in price.

Implementation

The lookback periods and price inputs are adjustable to allow the user the flexibility to apply this indicator to various data arrays including price and even other indicators. The lookback periods has a default value of 1 which is used in the standard calculation of the PVT; the 1 refers to the price value 1 bar ago; However, this parameter is ajustable so the user may experiment with other non-traditional values.

Daily - Pivot Points

2007-10-29T22:41:00.000+02:00

PLEASE READ ALL NOTES BEFORE USING!

If the chart window shrinks the price bars too much when the pivot point indicator is added, remove the pivot point indicator from the chart and then DISABLE the Auto-Size Vertically option before reattaching the indicator. Once reattached, you can manually Zoom In Vertically to re-adjust the chart scaling as desired.

Attaching this indicator to a tick Chart Interval is NOT possible due to the limitation of history data available in VTtrader. Attaching this indicator to a Daily, Weekly, or Monthly chart is also NOT possible since the pivot calculations are not designed for those intervals.

It is suggested to increase the number of bars loaded into the charts before using this indicator. The History Length can be Set using:

VTtrader > Navigator Window > Options Bookmark > Properties > General > General Properties > Communication Bookmark

Recommended History Lengths:

600+ bars are required for 5-Minute chart intervals or higher intraday intervals
3,000+ bars are required for 1-Minute chart interval

The Pivot Points daily auto-update time (in EST) is user-adjustable. Using the default settings, the Daily Pivot Points are calculated at 5:00 PM EST each day (StartHour=17 and StartMinute=0) using the previous 24 hour period. If calculating the pivots on Friday (for use on Sunday and Monday), it is recommended to use 4:00 PM EST (StartHour=16) instead of 5:00 PM EST; Why? Your particular forex broker may close the market earlier than 5:00 PM EST on Friday; if this happens there is no value for 5:00 PM EST which causes the indicator to NOT display.

IMPORTANT NOTE: If the user-chosen StartHour value and/or StartMinute value does not exist on the chart interval being used, the pivots will NOT display! For example, on a 2H chart using StartHour=17 and/or StartMinute=22 would NOT be acceptable; however, StartHour=18 and StartMinute=0 would be acceptable.