Lines of trends, support and resistance

The trendline. A trendline is a main initial element for the price chart analysis. While the market moves in any direction not along a straight line but along a zigzag, the mutual placement of upper and bottom points of those zigzags permits to plot a line connecting the significant highs (peaks) or the significant lows (troughs) of an appropriate zigzag using technical tools of the computer program. To draw a trendline only two points are necessary and the third one is the contact point confirmation. On a bullish trend chart it should be drawn using troughs, on a bearish پ using peaks. The trendline and a line which is about parallel to it and drawn on the opposite side (through peaks on a bullish trend and through troughs on a bearish) form the trade channel. Both lines are then channel's borders.Lines of support and resistance. The upper and the bottom borders of trade channels are called accordingly support and resistance lines. The peaks represent the price levels at which the selling pressure exceeds the buying pressure. They are known as resistance levels. The troughs, on the other hand, represent the levels at which the selling pressure succumbs to the buying pressure. They are called support levels. In an uptrend, the consecutive support and resistance levels must exceed each other respectively. The reverse is true in a downtrend. Although minor exceptions are acceptable, these failures should be considered as warning signals for trend changing.The significance of trends is a function of time and volume. The longer the prices bounce off the support and resistance levels, the more significant the trend becomes. Trading volume is also very important, especially at the critical support and resistance levels. When the currency bounces off these levels under heavy volume, the significance of the trend increases.The importance of support and resistance levels goes beyond their original functions. If these levels are convincingly penetrated, they tend to turn into just the opposite. A firm support level, once it is penetrated on heavy volume, will likely turn into a strong resistance level. Conversely, a strong resistance turns into a firm support after being penetrated. In general, to evaluate the reliability (that is the possibility of a break) of the trade channel borders taking a decision to close or to save an existing position one should govern himself with following rules:1. A channel is the more reliable the longer it exists. Hence, the solidity of very old channels (e.g. existing more than 1 year) decreased sharply.2. A channel is the more reliable the more is his width.3. The resistance may be broken if it is bounced on the background of a growing volume.4. A steep channel is less reliable in compare to a gentle one.5. The support may be broken independent on the volume.

Technical Indicators In Forex Trading - Understanding Their Limitations

Forex traders often look at indicators such as Bollinger Bands, Pivot Points, MACD, Moving Averages and the such to help them determine where to enter or exit trades. Using technical indicators is fine, however many traders overemphasize their importance or just plain misunderstand them.Many forex traders think that they can simply download an indicator and then mechanically apply it into their trading and do so profitably. This is just a plain illusion. Successful traders realize that there is a lot more to using indicators than just asking them to generate buy/sell signals or pin-point exact entry points. Technical indicators for them represent just one part of their trading strategy.Let،¯s take a look at some of the reasons why you should not put all your faith into those sometimes confusing little indicators.Take Moving Averages (MA،¯s) for example. They are "supposed" to show the direction of the trend. The most common and often used are the simple 200day MA, 100day MA, 50day MA, 35day MA and the 21day MA but they are only valid on daily graphs. Some forex day traders say that a good signal is when the 50day MA is crossed by the 13day MA and that when this occurs you should trade in the direction of the cross.The problem with this (apart from the fact that it only works on daily graphs) is that these types of ،°crosses،± do not occur often enough for traders to exploit them. This can often lead to a situation where traders are seeing what they thought was a cross now reverse and uncross. Even worse, it can lead to a situation where day traders are "chasing" and trying to anticipate a cross. If you are doing this, you are distancing yourself from the market which you are trying to trade. Not only are you trying to guess what the price is going to do next but you are guessing what the indicator, based on the prices, is going to do next.Other problems with technical indicators involve issues with the quotes and prices given to you by your broker. Forex brokers are market makers and as such different brokers will give you different quotes and prices at a specific point in time. Naturally, a different price could lead to a situation where different traders, trading the same market have the same indicators giving them different responses. That،¯s how arbitrary technical indicators can be.Finally, a lot of these technical indicators were developed by people trading the stock market. With the growth of computers and software packages that incorporate these indicators, technical analysis has become very popular and spread to other markets such as the forex market. What currency traders should be aware of however, is that as these indicators were developed in a time where real time information did not exist. As such, the limitations of technical analysis becomes even more exaggerated in forex trading ¨C not only is technical analysis an interpretation of historical events but it becomes even more so in the forex market, a market moved by real time events.Conclusion:Successful forex traders understand the limitations of technical indicators and realize that technical analysis should incorporate just one part of their trading strategy. In a recent international Forex market event visited by the major banks and institutions - the main players that influence the foreign currency market ¨C a survey was done to better understand what analysis they use. The results might be surprising to some tarders. The survey showed that a mere 26% use technical analysis and indicators compared to 41% who said they use fundamental analysis.

Forex News Trading Tip: How To Trade The FOMC

The Federal Open Market Committee (FOMC) decision on interest rates is one of the most powerful market movers in the forex market and when the markets move traders trading the news have the opportunity to make money.The FOMC sets the discount rate or federal funds rate and because interest rates are set higher to induce foreign investment and therefore fight inflation during times of prosperity and lower to increase spending during recessions they are one of the main factors influencing the strength of the dollar.Economic indicators play a huge role in the forex trading especially for traders who approach the market through fundamental analysis and trade the news. The Federal Open Market Committee (FOMC) interest rate decision is one of the most influential indicators for the US dollar and you can be sure after the news is released there is going to be volatility in the markets and volatility is what traders thrive on.I have heard many 'traders' say never to trade the news and especially the FOMC. Although the FOMC interest decision is a news event and can fall under the category of through fundamental analysis I am a technician and I believe that charts always price everything in. However I guarantee the market does not know what exactly the Feds comments and decision will be, therefore it is not priced in yet and this will cause the markets to react when they do find out. This is confirmed by the change in price after the decision and the continuation in the days following.I have been trading the Fed for eight years now and yes I have been burnt in the past and that is exactly how I have come to learn how to trade it properly. The most common pattern to trade the Fed is the whip-saw. But do not be fearful of it, embrace it. Here is how it happens, first there is a large spike one direction (traders come in and follow that direction)followed by a large spike in the opposite direction (those same traders now sell their first position at a loss and reverse their position - this is when I take a position in the direction of the original move)followed by an extended move back in the direction of the original spike (all the emotional trades are left sick to their stomachs) and I am left holding a very nice position setting myself up to capture a larger than average market move.If this pattern does not play out exactly as outlined I stand on the sidelines and do not trade at all. Because the markets are moving fast in the period following the FOMC interest rate decision I am watching a very short time frame, mainly the one and five minute charts.

Swing Trading Strategy

Swing trading is a popular method of capitalizing on the short-term price variations of the stock market. It has earned a reputation of being a powerful method of maximizing profits at lower risks. The best swing trading strategy involves choosing the right stock and the right market. Swing traders usually choose the stocks that fluctuate at extreme ends. Swing trading strategy is employed in a stable market, because here the prices tend to have minor variations on which the swing trader can capitalize. In a rapidly rising or crashing market, swing trading strategy cannot be employed.Newcomers to the stock market often choose swing trading owing to the low risk and shorter period involved. To achieve higher profits in this short period, the right swing trading strategy is to trade in stocks of big companies. These stocks, usually called large cap stocks, are widely traded on most stock exchanges. Their prices show higher variations compared to other stocks. This translates into more profits for the swing traders. A swing trader may follow a stock during its upward journey for a few days. In case the stock reverses its trend, the trader simply switches over to another rising stock. The choice of the right stock thus forms an inseparable part of a successful swing trading strategy.Apart from the choice of stock, the choice of market plays a key role while deciding on a proper swing trading strategy. In a market that is on a rising or falling trend, the stock prices generally move in a single direction. There is not much of a variation by which the swing trader can profit. The best strategy here is to trade on the long term basis. A swing trader best operates on a stable market, where the index rises for some days and falls over the next few days. Although the value of major stocks remains roughly the same, the short-term variations provide the much required opportunity for the swing trader. The best swing trading strategy is thus the proper choice of the right stock and right market.

Learn Forex Trading - Which Forex Strategy Is Right For Me

Learning to trade Forex is not an easy task, but by no means is it difficult either. Learning to trade Forex does not require a great intellect or a college degree. Doctors have failed as traders and construction workers have become millionaires. Trading is all about discipline, determination and perseverance.The key is to understand who you are as a trader and trade to your strength. Leveraging your strength can be magnified by deploying the appropriate Forex trading strategy. There are hundreds, if not thousands of Forex trading strategies out there. Logic will tell us that there is a currency strategy out there which leverages our strengths. It is not a one-size-fits-all world. To immediately cut to the chase and take away the magic, it all comes down to two basic Forex strategies; trend-following and range-bound. All Forex trading strategies use a variety of indicators and combinations, MACD, Moving Averages, Stochastic, Chart Patterns, Candlesticks, Pivot Points, Fibonacci ratios, Elliott Wave analysis, Bollinger Bands and the list goes on and on. Let،¯s take away the magic again. These indicators and studies are merely measuring support and resistance and trend in the Forex market.But which strategy really works? This is the age old question?First, we must understand who we are as traders. Does our personality fit the pip sniper mode or does our disposition attract us more towards swing trading. Finding your trading personality will mean studying and experiencing the different time frames and associated Forex trading strategies. Over time you will notice a higher level of success and/or comfort trading one style over others. Pay attention! The market is telling you where your skill is more capable of extract consistent profits for the market. This is why journaling is so important to your Forex trading routine.Secondly, if you are using someone else،¯s strategy, a most of us are, deploy this strategy without change until you fully and completely understand all aspect of the strategy through back-testing and actual experience. As I was told; dance the dance you have been taught until you learn a dance of your own!Don،¯t fall into the trap of jumping from strategy to strategy or combining different strategies when the one you are using doesn،¯t yield immediate success. This is only a recipe for disaster. Take the time to really understand the trading strategy. Study the components individually so a deeper understanding of the strategic mechanisms is mastered.Above all, know when and when not to deploy this strategy. You will not find consistent success implementing a trend following system in a range-bound currency market.So what،¯s the right strategy for you? It is simple, the one that works. It doesn،¯t matter if it is complicated or simple, trend-following or range-bound, uses Fibonacci studies, pivot points or both. If you understand the components, internalize its use, and drive consistent profits into your trading account, then you have your Forex trading strategy.It doesn،¯t matter what the experts say, your account balance is the ultimate judge and jury for your Forex trading strategy.

Online Forex Trading Strategies

Forex trading strategies are the key to successful forex trading or online currency trading. A knowledge of these forex trading strategies can mean the difference between a profit and a loss and it is therefore imperative that you fully understand the strategies used in forex trading.Forex trading is very different from trading in stocks and using forex trading strategies will give you more advantages and help you realize even greater profits in the short term. There are a wide range of forex trading strategies available to investors and one of the most useful of these forex trading strategies is a strategy known as leverage.This forex trading strategy is designed to allow online currency traders to avail of more funds than are deposited and by using this forex trading strategy you can maximize the forex trading benefits. Using this strategy you can actually utilize as much as 100 times the amount in your deposit account against any forex trade which will make backing higher yielding transactions even easier and therefore allowing better results in your forex tradingThe leverage forex trading strategy is used on a regular basis and allows investors to take advantage of short term fluctuations in the forex market.Another commonly used forex trading strategy is known as the stop loss order. This forex trading strategy is used to protect investors and it creates a predetermined point at which the investor will not trade. Using this forex trading strategy allows investors to minimize losses. This strategy can however, backfire and the investor can run the risk of stopping their forex trading which could actually go higher and it really is up to the individual trader to choose whether or not to use this forex trading strategy.An automatic entry order is another of the forex trading strategies that is commonly used and this strategy is used to allow investors to enter into forex trading when the price is right for them. The price is predetermined and once reached the investor will automatically enter into the trading.All these forex trading strategies are designed to help investors get the most from their forex trading and help to minimize their losses. As mentioned earlier knowledge of these forex trading strategies is vital if you wish to be successful in forex trading.

Bollinger Bands Can Give You a Huge Trading Edge

One of the critical pieces of forex education for any Forex trader is to understand the concept of standard deviation of price and how to use volatility to their advantage.If you understand the concept you can easily apply it with Bollinger bands which are an essential tool for all forex traders.Let،¯s look at why Bollinger Bands are so useful and profitable, when incorporated in your Forex Strategy.If you don،¯t know what standard deviation is simply check our article on the concept ¨C right, let،¯s take a look at Bollinger bands.Bollinger Bands DefinedBollinger bands are simply volatility bands drawn either side of a moving average.You calculate Bollinger bands using the standard deviation of price over the same period as moving averages the mean price, then the volatility bands are plotted above and below the moving average.Moving averages are used to identify the underlying trend of currencies and Bollinger bands take this one step further by:Combining the moving average of the currency with the volatility of the individual market (or the standard deviation) ¨C this then creates a trading envelope ¨C with a middle mean price (moving average and 2 x bands (expanding or contracting) either side that reflect volatility or standard deviation.As prices move away from the longer-term average, the standard deviation rises - and thus the bands will fluctuate in varying amounts, away from the average.Why they workIn any market, the value of a currency traded tends to rise slowly over the longer term.Prices can and do spike quickly in the short term, but will normally return to the longer term moving average - which represents fair value.The standard deviation of the outer bands (how far they are from the mean) shows how far prices are from longer-term value.Most price spikes are caused by trader psychology with greed and fear to the fore and this can be graphically seen with Bollinger bands.So how should you use Bollinger bands?There are 3 main ways to use them.1. Spotting price spikesWhen the bands are a long way from the mean you can use Bollinger bands as profit taking signal on existing trades or use them to spot contrary trades.2. Enter exisiting trendsIf you have a good trend in the forex markets then you can use dips to the middle band to buy at fair value.3. Entering new trendsWhen prices are trading in tight range and start to breakout with a change in volatility a great new trend could be emerging.Bollinger bands can certainly give you a new dimension to your forex trading strategy and any currency trading system can benefit from the extra insight that they can give you.A word of warningLike all technical indicators you should not use Bollinger bands in isolation to enter trades, however combined with timing indicators such as, the stochastic or RSI, then you have a powerful combination for greater FX profits.With regard to forex education, knowing what standard deviation is and how to apply the concept through Bollinger Bands, will give you a huge trading edge, so make sure you use them.

FOREX Trading Strategy - The Secret of Timing

Once you،¯ve identified a trading opportunity, the next step is to decide EXACTLY when to buy - and this is where many traders go wrong.Here we explain how to incorporate better market timing into your FOREX strategy - so that you can make bigger profits.Most traders time their entry levels incorrectly, so here،¯s the right way to do it:Using Support and Resistance CorrectlyA basic wisdom of market timing is ،°buy low, sell high،± - well, the reality is, if you try this in FOREX trading, you،¯ll end up losing money. First, let،¯s define what support and resistance meansA support level is a historical price that traders come in, and buy to ،°support the market،± ¨C and the more times it،¯s tested, the more valid the support will be.Conversely, a resistance level is a level on the charts that ،°resisted prices from moving higher،±- again the more times it،¯s tested, the more significant it becomes.Why Buy Low and Sell High doesn،¯t Work،°Buy low, sell high،± is accepted wisdom by the majority of traders - but this logic is fundamentally flawed - use it in FOREX trading, and you،¯re asking for trouble. Why? - If you wait for a pullback, you،¯re going to miss some of the biggest moves.Think about it - what if a currency starts to trend and doesn،¯t pullback? (How often have you seen this?) If you،¯re waiting for a pullback that never comes, you،¯ll never get in on the trade ¨C and you،¯ll miss a major opportunity.You Need to Feel UncomfortableWhen Trading in the FOREX market, you should usually feel uncomfortable (and that،¯s why most traders don،¯t make these trades) - as no one likes to buy or sell after the market has started trending - but doing this will make you money.The fact is, the more comfortable you feel when entering a trade at support, the less likely the trade will be a big winner.During any given year, most of the big moves in currencies, take place from new MARKET HIGHS with NO pullback.If you base your FOREX Trading strategy around waiting for a warm comfy entry, at key support, you،¯re going to miss the biggest and most profitable trades ¨C so step away from the losing majority of traders.Your FOREX trading strategy should give you a different mindset - most traders ،°buy low and sell high،± - so you should ،°buy high and sell higher،± ¨C i.e. you should be doing the opposite of what the crowd are doing.Don،¯t worry - most traders lose money, and their FOREX Trading strategy is based on the flawed logic we have just discussed - so not doing what they do makes total sense. Therefore, look for breakouts through support and resistance - and sell and buy respectively.Its Tough Mentally - But it Makes Money!Sure, it،¯s hard to do - the majority don،¯t agree with you - and no one likes to go against the majority. However, it،¯s the right thing to do, to make your FOREX trading successful. Think about what we،¯ve just said, and you،¯ll see it makes logical sense.Has this Happened to You?How many times do traders buy into support, and the market breaks support, stops them out and continues to decline. On the other hand, another common scenario is, price never get to support - it simply goes higher - and the trader misses the chance to get in on the trend.This type of trading is tough mentally - that،¯s why 90% of traders don،¯t do it - they want to be comfortable - well being comfortable is great, but you،¯ll lose money.Breakouts work, and if you use them in your FOREX Trading strategy, you won،¯t be comfortable on entry - but you،¯ll make money - and that will more than compensate.The way to succeed in FOREX trading is to do what the losing majority don،¯t do - then you can join the elite 10% of traders who make the big profits - try it and see!

Forex Trading System - A Key To Successful Forex Trading And Trading For A Living

Losing money in forex?Every one has his days when no matter how well he has planned out his trades, he may find some of his trades not performing to what is planned. It is only natural for one to feel upset, but for the follower of a forex trading system, making money or losing money from that trade is not the paramount objective.Why is this so?For the trader who employs a forex trading system, he can still face the losing trade with a smile, because he has had followed through the trading signals in a disciplined way, and it is only when a trader follows a system, he can be sure of keeping his losses small and to live to trade again another day.By using a forex trading system, the trader can have a cool head, and can face his trades rather unemotionally. He can execute his trades following pre-determined price levels of initial stop loss, trailing loss and computed and projected price profit.He knows his tolerable level of loss, his threshold of pain - and of course, his risk to reward ratio even before he trades.Now when a trader has a trading system and follows through the trading plan, making profits is a natural result when he makes a correct trade. But when his trade is wrong, his forex trading system will very quickly show him that the direction of his trade is wrong, so that he is out of the game fairly quickly.I am often flabbergasted at some very broad claims of some traders who condemn day trading systems and relegate them to the garbage bin. When you look at forex trading systems, review them quickly by peer recommendation whenever possible. By peer recommendation, I mean you can ask existing traders their experience on the trading system, and how they are doing with it. Posting to the numerous reliable trading forums will allow you to receive some independent reviews fairly quickly. At the same time, my personal experience, and that of many other professional traders is that day trading can be profitable, though it is never easy to day trade. Otherwise, how is it that so many day traders are able to earn their income day trading the short swings of the market daily for a living? So it is important for you to have a broad view of forex trading systems if you are contemplating of learning or purchasing any trading system that relates to day trading.If you ever wish to trade successfully, whether you day trade or swing trade, it is important that you have a trading system that will allow you to approach trading in a disciplined manner. It is only when you are a disciplined trader that you can see consistent large gains and small losses.