Beating the Market with Forex Charts

As you read forex charts, remember that the two fundamental approaches for online forex trading: fundamental analysis and technical analysis.

Fundamental analysis doesn’t rely on forex charts. It scrutinizes political and economic indicators to determine trades. Charts here are deployed as used as a secondary reference.

Technical analysis on the other hand, attempts to predict price swings by analysis of historical price activity. Those who use technical analysis study the relationship between price and time.

The most actively traded pair of currencies is the Euro and the US dollar, so we will use them in our example. The dollar is on the right hand side of the chart and the Euro is on the left hand side. The currencies are expressed in relationship to each other in pairing. Forex charges will always display how much of the currency on the right hand side is necessary to buy a unit of the currency on the left side. Looking at the typical EU-USD, chart you will notice the last price displayed per given date. This number is always emphasized. The time is tabbed horizontally across the bottom of a chart and the price scale is displayed vertically along the right hand edge of the chart. The time and the price are set in all caps to help the trader remember that technical analysis rests upon the relationship between time and price.

The trader observes the price and time movement on a chart. These include bars, lines, point and figure, and Japanese candle sticks-- the most favored method. With the candlestick method there is a large, red section that is the body of the candlestick. Lines protrude from the top and bottom and they are the upper and lower wicks. When you look at all the candles on a chart it is apparent that bodies come by difference sizes. Sometimes no body exists at all.

The same is true with wicks. Candle wicks come by many difference sizes; there may be no wick at all. The length of the body and the length of the wick are determined by the price range for the candle. Longer candles will have had more price movement during the time that they were open. The top of a candle wick is the highest price for that currency while the wick’s bottom is the lowest price. A currency is bullish when the close of the candle is higher than the open. In simple terms this means that there were more buyers than there were sales during the opening time period. Sometimes the candles will not have wicks. The price opened and it dropped off until it closed.

Forex charts don’t offer bullet proof trading hints, but they can help a trader. Past trends do have their place in forex trading as most traders will admit, and using the charts to track historical trends can assist a trader in making a snap decision.

The online investor typically joins a service that provides realtime charts that updates on currency activity. Charts can be checked on a minute to minute basis. For those who primarily do their trading based on historical accuracy this can ease the burden of prediction.

Most forex traders however use a combination of fundamental and technical analysis. They may chart historical trends, but they will also pay close attention to political, cultural and economic indicators within a region. They might use charts and other techniques to check correlation between political climate and currency fluctuations. But even the most sophisticated technical analysis software or tool has its limitations. A trader must be prepared to take risks… and invest money that is not needed for the immediate future.

Fear of Failing in Trading

This question was sent to me from one of our students: What if you can’t help it, but you are really afraid to fail as a trader. You have put so much into your desire to trade. You have a wall full of books. You have invested most of your money. You don’t dare fail now, but you fear you will. How do you deal with your fear of failing?

How you think and how you approach life affects how you approach trading. If you are extremely fearful, you are not going to be willing to take risks. The ultimate result of this is that you may be afraid to put on a trade. Your expectations, whether conscious or unconscious, have a powerful influence on your trading performance.

As traders we face many common fears. We are afraid of being wrong. We fear losing money. One of the greatest fears is that of missing a trade. Some of us are afraid we are leaving money on the table. All of these are different sides of the same box – fear of failure.

So how do we handle fear of failure? We have to rec

Will I Get Rich Trading?...Probably Not

Don't throw that coffee cup at your screen, I'm only being honest. Do some people get rich trading?...Absolutely. The internet is filled with talented pitch men that can hype anything from watching the stars to the latest and greatest make you rich on auto-pilot software program for your trading signals. (but the stars thing does work great with my wife) Well, here today on the World Wide Web I am going to reveal the Holy Grail of trading. The surprise is it won't be found sold on the 'net in fact it is not a trading system at all. It is (drum roll please) being honest with yourself. My goodness, that's not very exciting after all the hype we've been fed by the guru's.

The truth is there are many trading systems that work, but there are precious few people can be honest enough with themselves to pick a system correctly. Most people that want to trade start off by looking for that system that will beat the market. Now I know that some systems out perform others and by all means you should seek the best one. Where many struggling traders miss the boat is they don't understand the best system is the one that matches your own personality. If one trader has good discipline he may not need a system that is very rigid. On other side of the discipline spectrum, a trader would need many rules to protect him. If either of these traders try to trade with other's system they would probably fail. When you try to trade a system that does not align with your need for discipline as an individual you are destined to fight the very system your trading. The holy grail that many seek is the ability to correctly identify their strengths and weaknesses. This sounds simple but you would be surprised at how many people will disregard certain weaknesses that they do not want to admit to anyone, even themselves. If more traders would first be brutally honest with themselves and then design a system tailored to their own attributes we would have many more Rich traders.

Day Trading: 7th June 2006

I'm liking it. Things are heading downward but we're not at the bottom of the trough yet. I think we'll be there at the end of today or tomorrow; I know by price, not time. I know what stocks I'm going to pick up then: my Limit Orders are in place.

Then I am hoping / think that things will pick up again - at least for a few days at some point. So with the buy low and sell higher strategy, I'll make some money. That's if it all goes my way.

Just look at Japan. At close, they were their lowest for 6 months. Is that a signal or what? Sometimes bad news is good news.

They stay day trading is exciting, but in my experience it is...well....quite boring: the winning way is to be patient, wait for the bargain, not let loose to emotion and consider not making money / taking a risk as an option. Sometimes you end up on top by not doing anything.

Bid, Ask, And Size Secrets For Greater Profits When Trading

Bid, Ask, And Size

When you enter an order to buy or sell a stock, you see the bid and ask for a stock and some numbers. What are the bid and ask, and what do those numbers mean? One, the bid, is what you need to know when you are selling a stock. The other, the ask (or offer) is what you need to know when you're buying. But you also need to know those numbers. Here's how it works:

If an investor looks at a computer screen for a quote on the stock of XYZ, it might look something like this: Last: Bid: 20 Ask: 20 1/4 BSize: 12 ASize: 5. The translation: the stock of XYZ is being bid at $20 a share and offered at $20 1/4 per share. There are 1200 shares bid for and 500 shares offered. If you are looking to sell stock, now you know there is a firm willing to pay (that's the bid side of the market) $20 for your stock, and that you could sell at least 1200 shares of stock at that price. Those are the two parts of the bid side of a market on a stock: the price and the quantity of shares at that price.

If you are looking to buy XYZ stock, you would have to pay $20.25 and could buy at least 500 shares of stock. Again, there are two parts to the ask side of the market: the price at which you can buy stock and the amount of stock you can buy.

When you look at a quote for a stock, it's only good for the time at which you check it. The bid and ask and the sizes for each side change constantly. If you were to check back in two minutes and you'd like to sell your XYZ at $20, the $20 bid may not be there because the stock may have moved up or down in that time frame. So each time you trade, you'll need to check the bid and ask to see where your particular stock is trading.

Whenever you enter an online trade, a "live" quote will be shown so you'll know where the stock is trading and what to expect if you buy or sell your stock. However, be aware that the stock can move very fast and that you may not get the price shown on your screen. That's because by the time your order is sent to the floor to be executed, the bid and ask may have changed because there was an order that came in ahead of yours and wiped out the bid or offer. Then the stock moves to a new level and the bid and ask will be different from what your screen showed when you entered the order. This doesn't happen very often, but it does happen. And when investors enter their market orders (meaning they will buy or sell stock at the market, no matter where the market for the stock is), look at the bid or ask, and then see their execution price is different from the stock prices they saw, they have to realize that stocks can be very dynamic, sometimes changing just as their orders are entered.

Another bit of jargon: the words ask and offer are the same thing. This is the side of the market where investors can buy stock. So when you hear: Where's the stock offered? Or what's the "ask" on the stock? They're both asking the same thing.

The size of the market can help you decide on the timing of your purchase or the price. For example, if good old XYZ is trading at $20, and the bid size for the stock is 200 and the offer size is 5, that means there are 20,000 shares bid for and only 500 for sale (when you see the amount of stock bid for or offered, just multiply it by 100 for the actual amount of stock. If you see 999, that means there are at least 100,000 shares). If you're looking to buy the stock, you might want to get your order in quickly because if the buyer of the 20,000 shares gets excited and starts to buy all the stock around, no matter what the price, it will push up the price. On the other side of the trade, if you are a seller, you may want to wait a little while because that kind of size to buy suggests that maybe the price will be moving up if the buyer doesn't have patience and wants that XYZ stock NOW.

Of course, the buyer may not move from the $20 price, or may find another stock that is more attractive and buy that one instead. So you can't know with certainty what will happen with the stock's price. But then, except for death and taxes, certainty just isn't part of life or investing.

Average Directional Index System

Directional system was developed by J. Wilder in the middle of 1970s as an addition to the system PARABOLIC SAR, and then it was advanced by a number of the analysts. ADX defines the tendency and shows, whether it moves quickly enough to follow it. ADX helps to take benefit, being still in the middle of important trends.

There are three lines in the indicator graph, a trend following line, a positive directional line (+DI) and a negative directional line (-DI). The Blue line tracks trends, the green line (+DI) is a signal to go long and the red line (-DI) is a signal line to go short. What we do is to wait for the blue line (trend line) to rise from below 20 to above 20. That means a trend is being developed.

Then we watch for other lines. When the green line (+DI) crosses above the red line (-DI), it is a signal to go long. And vise versa, when the red line (-DI) crosses above the green line (+DI), it is a signal to go short.

Moving Average (50)

Simple Moving Averages are one of the most popular and easy to use tools available to the technical analyst. They smooth a data series and make it easier to spot trends, something that is especially helpful in volatile markets.

Let’s discuss MA (50). ‘50’ means that the indicator uses 50 latest days to make its average. And I use 1H of time scale in implementing the indicator. The moving average represents the consensus of investor’s expectations over the indicated period of time. If the instrument price is above its moving average, it means that investor’s current expectations are higher than their average ones over the last 50 days, and that investors are becoming increasingly bullish on the instrument. Conversely, if today’s price is below its moving average, it shows that current expectations are below the average ones over the last 50 days.

The classic interpretation of a moving average is to use it in observing changes in prices. Investors typically buy when the price of an instrument rises above its moving average and sell when it falls below its moving average. That’s it!

Click here to see an example of implementing MA(50) on chart.

But unfortunately all moving averages are lagging indicators and will always be "behind" the price.

But however, I use MA(50) to help me indicating long term bullish trend and bearish trend. But please be very careful when you see sideways market. Usually, using MA(50) to enter sideways market will potentially make your trades ended with loss. This is the weakness of using MA indicator.

Introduction to Forex

Do you ever feel like you know just enough about Forex to be dangerous? Let's see if we can fill in some of the gaps with the latest info from Forex experts.

The Foreign Exchange Market – better known as FOREX - is a world wide market for buying and selling currencies. The Foreign Exchange Market was established in 1971 with the abolishment of fixed currency exchanges. Businesses use the market to buy and sell products in other countries, but most of the activity on the FOREX is from currency traders who use it to generate profits from small movements in the market.

There was a time when forex trading was limited to banks and large financial institutions. The most important is trading in multiple currencies in multiple markets. Online trading has made the market fully transparent. The trading is instantaneous. This makes online trading both exciting and dangerous. The traders don’t have sufficient time to reflect. The best is through full-time educational programs that teach the working of forex markets. This involves working with a forex brokerage or with a forex trading firm.

The forex market is the largest market in the world where trade is conducted round the clock in real time. The entire trade is seamless, and works across time zones and across countries.

The most important forex markets are London, New York and Tokyo, and the most traded currencies are the US Dollar, European Euro, Japanese Yen, Swiss Franc and British Pound. These currencies are traded in pairs. A few traders rely on their instinct and experience while making these trades. The forex market is by far the world’s most volatile market. It is also the most unpredictable market where all trading happens in real time. Forex trading therefore becomes a major challenge for even the most experienced forex bankers and traders. Earlier, only large banks were allowed to trade in currencies. Today anyone can become a forex trader. There is someone or some organization always trading in foreign currency in some market or the other.

All these markets work seamlessly. There is no central location from where trading in currency is conducted. The volumes of currency that get traded during this period jumps; so does the number of trades.

Forex traders rely on several parameters to conduct their trade. The more successful or experienced traders follow their instincts based on years of experience of trading in the forex market. The traders who are not technology-savvy buy trading signals from online brokerages or forex research firms.

Trading In Black And White Forex Trading Newsletter – 6/6/06

In case you were wondering, though, we did not get into any trade. So, you didn’t miss any profits.

On another note, please keep an eye on your inbox today. We are going to be sending you all an invitation to join us for the “Trading In Black And White Forex Trading Contest”. This is a brand new contest, and if we may be so bold, a great opportunity for all of you to win some prizes. You’ll see on the webpage that we send you to that there is a reward for just signing up.

So, let’s move on to the trading part of the broadcast.

We had another test of the high 1.8800’s which failed. Not a huge surprise, considering the obvious bearish divergence between the MACD and the price on the Hourly chart.

Over the last few weeks, we have been trading at levels that are very difficult for us to read. The majority of the indicators that we favor have been worthless over this time.

We remain within these “difficult” levels today. So, we tread lightly with our trading as to avoid any major losses.

It is important to know when to put the fuel on the fire and when not to.

With all that being said, let’s move on to looking at tonight’s trading.

While in this “no-man’s” land we tend to favor one sided trading. This means that we do not look for both long and short trades. We look only for one or the other.

We have decided to look for a short trade, but this in no way means that there isn’t a good long trade to be had. This, again, shows why it is so important for you to learn and perfect YOUR OWN trading style.

Several of our traders believe that there are good support levels at 1.8650 and 1.8600. They have valid reasons to believe this, but they do not meet our standards of entering trades.

We, on the other hand are going to look towards the high 1.8700’s and low 1.8800’s for a chance to short Cable.

We know that this has not been one of our most informative newsletters, but we try to share with you our personal thoughts. And, tonight we have not been able to confidently decide anything.

These trading levels are confusing to us. In fact, some of the traders are looking forward to sleeping in tomorrow, since they won’t be making any trades tonight.

This just goes to show you that different trading styles exist, and many of them work. It’s just a matter of finding what makes the most sense to you.

That wraps up the newsletter for tonight. We are sure that you know that are much more information packed ones to come (just like the hundreds you have already received).

We find these support and resistance levels using a set of technical indicators and other variables that we have found to be most successful for us. We use several other indicators and a variety of technical analysis techniques to enter and exit all of our trades. Every trader will have a different combination of indicators that makes the most sense to them. Learn how to develop your own successful Forex Trading style with this Elite Forex Trading Course.

Winning at Future Trading

A futures market is where commodities — to be delivered some time in the future are bought and sold. These include coffee, soybeans, silk, pork bellies, rubber, fur, grains, gold, eggs and government bonds.

The rationale behind this marketplace is to allow commodity producers to sell their produce in advance of delivering them. By doing this they are able to 'hedge' ie. ensure a minimum price which they will receive, and hence secure financing from their bank.

Future trading, also known as commodity trading, is based on the principle of supply and demand. When goods are in abundance prices fall, when goods are scarce prices rise. Future trading allows both buyers and sellers to take advantage of these variances.

A speculator risks capital for a spectacular gain - on the future price that commodities will fetch on the cash market. It doesn’t matter if the price moves up, or, down - as long as it moves. Prices vary due to both internal and external influences eg weather conditions, and political change, or unrest.

The participation of these speculators increases the likelihood that a sale can be made ie. that a current market price exists. It also places into the market an additional party willing to accept risk in return for an expected margin. Relatively risk-averse producers are complemented by specialists whose livelihood is made by managing risk.

With stock and share trading, traders only sell securities which they already possess - 'short-selling' is generally prohibited. In future trading there is no such limitation, and therefore speculators can enter the market as buyers or as sellers.

In addition to speculators, both the commodity's commercial producers and commercial consumers also participate. The principal economic purpose of the future market is for these commercial participants to eliminate their risk from changing prices.