Article sourced from: THEFREELIBRARY.COM
Like the stock market, Fx trading market also passes through various stages and many ups and downs at different periods of time. Diverse price movements of the currencies in the past help the forex brokers in analyzing the future trends.
Like the stock market, Fx trading market also passes through various stages and many ups and downs at different periods of time. Diverse price movements of the currencies in the past help the forex brokers in analyzing the future trends. There are a lot of forex trading technical analysis tools that are used to analyze future fx trading situation, such as indicators, softwares, market trends and charts.
Those who are into foreign exchange training must have an idea about forex technical analysis.
A lot of traders in fx trading lose a lot more than they usually profit, the reason behind that is the lack of proper knowledge about the forex technical analysis. Forex technical analysis is very important tool in FX trading which can help forex brokers to predict the future price movement of the currency they are trading in, on the basis of the past data that is well compiled and stored.
The primary thing to be aware of about forex trading is that it is the combination of both fundamental and technical analysis. Fundamental analysis determines the existing price of any currency through diverse factors such as: demand, supply, economic conditions, fundamentals, political condition of a country, market sentiments etc.
While forex technical analysis method is used to predict the changes in foreign currencies with the help of various samples, charts and indicators. It generally forecasts the direction of the market and provides precise information about currencies. Forex charts show the existing trading state in the forex trading market while forex technical indicators are used for allocating diverse goals to establish the forex trends. However, most beginners in the forex exchange trading are not able to make use of forex technical analysis because of the use of mathematics and statistics in it.
It is seen that the trends that were seen in the past usually occur in future too with hardly any difference and that is when the forex technical analysis comes into limelight. In short, forex technical analysis can be a great support in the forex exchange trading and maximizes the profits if used intelligently and with complete knowledge!Kingdom Forex is the fastest growing forex broker among Asset Managers and Introducing Brokers. As a regulated STP/ECN they provide spreads as low as 0.3 with 99% execution for forex trading with leverage up to 500:1 and full hedging capability.
Showing posts with label forex trading. Show all posts
Showing posts with label forex trading. Show all posts
Tuesday, February 8, 2011
The Day Trade Forex System
The Day Trade Forex System
The Forex Profit System is specifically designed for use with the 1, 5 or 10 minute charts, with the goal of taking 5-20 pip profits per trade—closing bad trades out using tight stops, or hedging any losing trades. The following steps will show you how to do this.
Set up your charts:
One the left hand side of screen you will be able to choose your chart. Choose EUR/USD (or whatever currency pair you like), 5 min, line and the chart will appear on the right hand side. Maximize the chart to fill the right hand side. Now if you want to make the price line darker, you can right click right on the price line and a properties box will appear. You can adjust the thickness of the line.
Now we will add the Moving Averages to the chart. We will be using the Exponential Moving Average 10, the Bollinger Band Exponential Set at 20, and the Exponential Moving Average 50.
Click on Moving Average on the left hand side under Studies. Set your first MA to 10, close, exponential and you can make it red with line width 2 under the Color/Style Tab.
Click on Moving Average again and add your MA 50, close, exponential and make this line blue with line width 2.
Now we will add 3 more indicators below the chart to help us confirm the trend, and to help us identify exact entry and exit buy or sell signals. The following indicators give us insight into the momentum, direction and overbought/sold indicators. Used along with the Exponential Moving Averages, Parabolic SAR and Bollinger Bands—these indicators can be very helpful to the day trader.
MACD Histogram.
Read about how to trade the MACD Histogram here: http://www.incrediblecharts.com/technical/macd_histogram.htm
Relative Strength Index (RSI)
Read about how to trade the RSI here: http://www.incrediblecharts.com/technical/relative_strength_index.htm
Slow Stochastic
Read about how to trade the Slow Stochastic here: http://www.incrediblecharts.com/technical/slow_stochastic.htm
Now add these studies to your charts.
Under Studies click on MACD Histogram and use the default settings (9,Exponential, 12, 26, Close, Exponential) and set the line width to 2. Your study will automatically open under your chart.
Under Studies click on Relative Strength Index and set it to 14 and set the line width to 2. Your study will automatically open under your chart.
Under Studies click on Slow Stochastic and set it to (5,3,3, Exponential) and make the %K line blue with line width 2, and the %D line red with line width 2.
Your chart, with all the studies on it should now look like this (example of USD/CAD 10 min chart): I clicked on the zoom in button a couple of times.
**tip: If you are in a winning trade, you can move your stop to your entry level, so that if your trade moves against you, the platform closes your position without any losses.
**tip: You should be comfortable setting your stop Order at 15-20 pips. If you can’t handle a 15-20 pip loss, then you are need to trade smaller amounts. This will help you from over leveraging your trading account.
Limit Order: Is a price you enter into an open position for the trading platform to automatically close your position at a profit.
For example, you might set your limit order at a 15 pip profit. If the exchange rate never hits that level, then the Order doesn’t get filled.
When to Enter and Exit Your Trades:
We will be looking at 3 different ways to day trade the Forex Markets. In a trading session, you may look for 1 or more of these approaches. The 3 techniques are as follows:\
When is the best time to trade?
Because the Forex Market is open 24hrs a day, and traded on a global scale, the question to ask is, ‘when should I trade?’. The good news is that no matter what time zone or hemisphere you live in globally, there are always good opportunities to trade.
The three major trading ‘sessions’ are as follows (all in Eastern Standard Time):
The first DayTradeForex.com trading technique we will look at is the easiest to recognize on the charts. We will call it ‘Trade the Breakout’. You can use the 5, 10 or 15 minute charts for this method. The indicators on the 5 minute charts are the fastest. Practice until you feel comfortable with the time frame that suits you best.
1. Trade the Breakout
The principle behind trading the breakout is to enter a trade when the price ‘breaks out’ of a tight range, because often it tends to keep moving in the same direction. We use our Bollinger Bands on our charts to spot this trading opportunity.
The second DayTradeForex.com trading technique uses the same principles, but is less extreme. This trading method is best traded on the 5 or 10 min charts, but can be applied to the 1 minute charts (See the “Micro Trading” strategy at the end of this trading course)
2. Trade the Trend
Trading the trend is just like trading the breakout, except in less volatile market conditions. Start with going to the 15 minute chart of the currency pair of your choice and ask yourself this question: ‘Is the exchange rate line (brown) above or below the EMA 50 (blue)?
**If the price line is currently below the EMA 50, and the EMA 10 and BB 20 are also below the EMA 50, then you will be looking at Selling opportunities in the trading session.
If the price line is currently above the EMA 50, and the EMA 10 and BB 20 are above the EMA 50, then you will be looking at buying opportunities in the trading session.
Often, when you are ‘trading the trend’, you will notice that the price line will bounce off the EMA 10 or the middle BB line or the EMA 50. These lines sometimes act as supports and resistances in a trading session. Therefore you can look to sell shorts when the price line bounces down off the EMA 10, BB 20 or EMA 50, or buy longs when the price line bounces up off the EMA 10 BB 20 or EMA 50.
When you trade the trend, it is important to trade with the Parabolic SAR, MACD, RSI and Slow Stochastic all signaling together.
The Forex Profit System is specifically designed for use with the 1, 5 or 10 minute charts, with the goal of taking 5-20 pip profits per trade—closing bad trades out using tight stops, or hedging any losing trades. The following steps will show you how to do this.
Set up your charts:
One the left hand side of screen you will be able to choose your chart. Choose EUR/USD (or whatever currency pair you like), 5 min, line and the chart will appear on the right hand side. Maximize the chart to fill the right hand side. Now if you want to make the price line darker, you can right click right on the price line and a properties box will appear. You can adjust the thickness of the line.
Now we will add the Moving Averages to the chart. We will be using the Exponential Moving Average 10, the Bollinger Band Exponential Set at 20, and the Exponential Moving Average 50.
Click on Moving Average on the left hand side under Studies. Set your first MA to 10, close, exponential and you can make it red with line width 2 under the Color/Style Tab.
Click on Moving Average again and add your MA 50, close, exponential and make this line blue with line width 2.
Now we will add 3 more indicators below the chart to help us confirm the trend, and to help us identify exact entry and exit buy or sell signals. The following indicators give us insight into the momentum, direction and overbought/sold indicators. Used along with the Exponential Moving Averages, Parabolic SAR and Bollinger Bands—these indicators can be very helpful to the day trader.
MACD Histogram.
Read about how to trade the MACD Histogram here: http://www.incrediblecharts.com/technical/macd_histogram.htm
Relative Strength Index (RSI)
Read about how to trade the RSI here: http://www.incrediblecharts.com/technical/relative_strength_index.htm
Slow Stochastic
Read about how to trade the Slow Stochastic here: http://www.incrediblecharts.com/technical/slow_stochastic.htm
Now add these studies to your charts.
Under Studies click on MACD Histogram and use the default settings (9,Exponential, 12, 26, Close, Exponential) and set the line width to 2. Your study will automatically open under your chart.
Under Studies click on Relative Strength Index and set it to 14 and set the line width to 2. Your study will automatically open under your chart.
Under Studies click on Slow Stochastic and set it to (5,3,3, Exponential) and make the %K line blue with line width 2, and the %D line red with line width 2.
Your chart, with all the studies on it should now look like this (example of USD/CAD 10 min chart): I clicked on the zoom in button a couple of times.
**tip: If you are in a winning trade, you can move your stop to your entry level, so that if your trade moves against you, the platform closes your position without any losses.
**tip: You should be comfortable setting your stop Order at 15-20 pips. If you can’t handle a 15-20 pip loss, then you are need to trade smaller amounts. This will help you from over leveraging your trading account.
Limit Order: Is a price you enter into an open position for the trading platform to automatically close your position at a profit.
For example, you might set your limit order at a 15 pip profit. If the exchange rate never hits that level, then the Order doesn’t get filled.
When to Enter and Exit Your Trades:
We will be looking at 3 different ways to day trade the Forex Markets. In a trading session, you may look for 1 or more of these approaches. The 3 techniques are as follows:\
- Trade the Breakout
- Trade the Trend
- Trading Tops and Bottoms
- Micro Trading
When is the best time to trade?
Because the Forex Market is open 24hrs a day, and traded on a global scale, the question to ask is, ‘when should I trade?’. The good news is that no matter what time zone or hemisphere you live in globally, there are always good opportunities to trade.
The three major trading ‘sessions’ are as follows (all in Eastern Standard Time):
- New York open 8:00 AM to 4:00 PM
- Japanese/Australian open 7:00 PM to 3:00 AM
- London open 3:00 AM to 8:00 AM
The first DayTradeForex.com trading technique we will look at is the easiest to recognize on the charts. We will call it ‘Trade the Breakout’. You can use the 5, 10 or 15 minute charts for this method. The indicators on the 5 minute charts are the fastest. Practice until you feel comfortable with the time frame that suits you best.
1. Trade the Breakout
The principle behind trading the breakout is to enter a trade when the price ‘breaks out’ of a tight range, because often it tends to keep moving in the same direction. We use our Bollinger Bands on our charts to spot this trading opportunity.
The second DayTradeForex.com trading technique uses the same principles, but is less extreme. This trading method is best traded on the 5 or 10 min charts, but can be applied to the 1 minute charts (See the “Micro Trading” strategy at the end of this trading course)
2. Trade the Trend
Trading the trend is just like trading the breakout, except in less volatile market conditions. Start with going to the 15 minute chart of the currency pair of your choice and ask yourself this question: ‘Is the exchange rate line (brown) above or below the EMA 50 (blue)?
**If the price line is currently below the EMA 50, and the EMA 10 and BB 20 are also below the EMA 50, then you will be looking at Selling opportunities in the trading session.
If the price line is currently above the EMA 50, and the EMA 10 and BB 20 are above the EMA 50, then you will be looking at buying opportunities in the trading session.
Often, when you are ‘trading the trend’, you will notice that the price line will bounce off the EMA 10 or the middle BB line or the EMA 50. These lines sometimes act as supports and resistances in a trading session. Therefore you can look to sell shorts when the price line bounces down off the EMA 10, BB 20 or EMA 50, or buy longs when the price line bounces up off the EMA 10 BB 20 or EMA 50.
When you trade the trend, it is important to trade with the Parabolic SAR, MACD, RSI and Slow Stochastic all signaling together.
Moving Average Intraday System
Moving Average Intraday System
The Setup:
Now before I explain what you are doing with this setup I would like you to set up the chart as I have indicated, and take a good solid look at the history of the data. Do you see any telltale signs yet, or have a clue as to what the point of the setup is yet? If you do not, do not worry or feel inferior, as this has slipped past some of the best. I happen to be great with numbers and have a strong background in analysis, so I was able to pick up on this trend mostly by dumb luck but good fortune and a keen eye for detail.
Now that you have stared at your screen looking for it, I’ll explain myself. What you are looking for is the moving average line, or herein referred to as the MA, that you set up on your chart to cross through the price line. You are probably saying to yourself, “This happens like every hour or so, what gives?”. Well, it does happen fairly often, maybe not that drastically, but it does. The key point is where the MA crosses the price line. You don’t need to worry or care about it crossing the thin peaks of the high/low lines on the candle, but you want to concentrate on it crossing through the middle of the wide, filled part of the candle, the openclose
prices. And further yet, it must cross in around the middle of this center section. If it crosses at the top or bottom of the candle centre area, than you can pretty much disregard the trade. It may be profitable, but not worth the risk. Stick with thecenter of the central region and you will be much safer.
Now, when the MA indeed crosses the price line through the centre of the central wide part of the candle, a trade signal is triggered. You should try and wait at least one more candle before entering a position just to ensure that the cross wasn’t a blip on the radar and its not about to recant its previous move. The chart is set to the 30 minute timeframe, so generally wait 30 minutes or so, unless the market suddenly takes a quick shift in that direction. Then you can open the position to catch the swing.
Now to determine direction. If the MA moves from above the price line to below it, the trade is going to be long. And likewise, if the MA moves through the candle from below the price line, the trade will be short. This can be verified by checking your indicators that you have set up to corroborate with your MA. To better clarify this direction idea, if after the cross the price is below the MA, the price is most likely dropping or SHORT. If the after the cross the price is above the MA, the price is considered to be rising and the trade is LONG.
Another important factor to consider. While an MACD is a great too to determine market direction and activity, in this case it helps to build on the strength of the trend that we are pointing out here. If the MA crosses the price line from above to below, so that the trade we have forecasted is long, we can compare this with the MACD. If the MACD average lines are above the zero line, then you can expect a large climb. If the trade was reported as short, and the average lines on the MACD screen were below the zero line, you could expect to a see a rather large drop. When I say large drop or gain, I am speaking of 75, 100, 150 point gains. This is not to say that if, on a long trade for instance, the average lines on the MACD are BELOW the zero that you will NOT see a gain. It generally will provide a gain, but of 20, 30, or maybe even 50 points. Where you exit the trade is up to you and how much you can tolerate and are willing to risk. If you feel comfortable taking 30 points and are okay with yourself if it does end up going to 150 points above your buy price, then good for you. If you are a thrill-seeker and go for the 150, I wish you all the best of luck! You may or may not need it.
That’s it! It’s just that simple! If you move back through the history of the chart and look at when and where the MA crosses the price line, you can see for yourself that it seems to catch every big movement, and almost all of the smaller ones. This set can be used on the 60minute chart for mid-term trades and further yet on the daily chart for longer term setups.
Make sure that you are using your regular technical indicators to monitor market activity and ensure the trade is on target. If you are looking to enter a short and your MACD says long, or the 30 minute chart is oversold, you are asking for trouble. You need checks and balances with any system to eliminate as much of the margin of error as possible.
The Setup:
- Open up your trading platform and open a chart.
- Set the instrument to the currency pair of your choice.
- Set the chart pattern to filled candle.
- Set the timeframe to 30 minutes
- Set up a moving average line in your indicators menu. -set period to 11 days
Now before I explain what you are doing with this setup I would like you to set up the chart as I have indicated, and take a good solid look at the history of the data. Do you see any telltale signs yet, or have a clue as to what the point of the setup is yet? If you do not, do not worry or feel inferior, as this has slipped past some of the best. I happen to be great with numbers and have a strong background in analysis, so I was able to pick up on this trend mostly by dumb luck but good fortune and a keen eye for detail.
Now that you have stared at your screen looking for it, I’ll explain myself. What you are looking for is the moving average line, or herein referred to as the MA, that you set up on your chart to cross through the price line. You are probably saying to yourself, “This happens like every hour or so, what gives?”. Well, it does happen fairly often, maybe not that drastically, but it does. The key point is where the MA crosses the price line. You don’t need to worry or care about it crossing the thin peaks of the high/low lines on the candle, but you want to concentrate on it crossing through the middle of the wide, filled part of the candle, the openclose
prices. And further yet, it must cross in around the middle of this center section. If it crosses at the top or bottom of the candle centre area, than you can pretty much disregard the trade. It may be profitable, but not worth the risk. Stick with thecenter of the central region and you will be much safer.
Now, when the MA indeed crosses the price line through the centre of the central wide part of the candle, a trade signal is triggered. You should try and wait at least one more candle before entering a position just to ensure that the cross wasn’t a blip on the radar and its not about to recant its previous move. The chart is set to the 30 minute timeframe, so generally wait 30 minutes or so, unless the market suddenly takes a quick shift in that direction. Then you can open the position to catch the swing.
Now to determine direction. If the MA moves from above the price line to below it, the trade is going to be long. And likewise, if the MA moves through the candle from below the price line, the trade will be short. This can be verified by checking your indicators that you have set up to corroborate with your MA. To better clarify this direction idea, if after the cross the price is below the MA, the price is most likely dropping or SHORT. If the after the cross the price is above the MA, the price is considered to be rising and the trade is LONG.
Another important factor to consider. While an MACD is a great too to determine market direction and activity, in this case it helps to build on the strength of the trend that we are pointing out here. If the MA crosses the price line from above to below, so that the trade we have forecasted is long, we can compare this with the MACD. If the MACD average lines are above the zero line, then you can expect a large climb. If the trade was reported as short, and the average lines on the MACD screen were below the zero line, you could expect to a see a rather large drop. When I say large drop or gain, I am speaking of 75, 100, 150 point gains. This is not to say that if, on a long trade for instance, the average lines on the MACD are BELOW the zero that you will NOT see a gain. It generally will provide a gain, but of 20, 30, or maybe even 50 points. Where you exit the trade is up to you and how much you can tolerate and are willing to risk. If you feel comfortable taking 30 points and are okay with yourself if it does end up going to 150 points above your buy price, then good for you. If you are a thrill-seeker and go for the 150, I wish you all the best of luck! You may or may not need it.
That’s it! It’s just that simple! If you move back through the history of the chart and look at when and where the MA crosses the price line, you can see for yourself that it seems to catch every big movement, and almost all of the smaller ones. This set can be used on the 60minute chart for mid-term trades and further yet on the daily chart for longer term setups.
Make sure that you are using your regular technical indicators to monitor market activity and ensure the trade is on target. If you are looking to enter a short and your MACD says long, or the 30 minute chart is oversold, you are asking for trouble. You need checks and balances with any system to eliminate as much of the margin of error as possible.
‘Scalp’ Trading the 1min Charts System
‘Scalp’ Trading the 1min Charts System
Scalp trading is when you use the 1 to 5 min charts to ‘scalp’ small profits. These trades usually only last a few minutes to an hour.
You can use the FPS to scalp trade Forex on the 1 min charts. Here is how:
Instead of using the 10, 25, 50 EMA’s like we did in the above examples, put on the 25, 50 and 100 EMA’s.
Often it is best to scalp trade at the London Open (3:00AM EST) or the New York open (8:00 AM EST) because that is generally when the currency pairs will start to move more in one direction.
When the actual price crosses all three indicators, you enter your trade, long or short. If the price crosses down through the 100 EMA, enter short, if the price crosses up through the 100 EMA go long.
Make sure that you book a 5-10 pip profit. That is a $50-$100 dollar profit on a regular account, and more if you bought more lots. Don’t try to hang on to you winning position too long, because the price can whipsaw back and you can lose. Take your 5-10 pip profit as soon as you can. Here is an example on the 1 min charts:
Notice that at 10:30 EST you could have entered USD/JPY long (big circle) when the price crossed up through the 100 EMA and at 10:45 you could have closed your position (little circle) and made a 10 pip profit. Then again the price crossed back down the 100 EMA at 11:30 EST. You could have sold the Yen short (big circle) and then ten minutes later made another 10 pip profit. (little circle)
Scalp trading is when you use the 1 to 5 min charts to ‘scalp’ small profits. These trades usually only last a few minutes to an hour.
You can use the FPS to scalp trade Forex on the 1 min charts. Here is how:
Instead of using the 10, 25, 50 EMA’s like we did in the above examples, put on the 25, 50 and 100 EMA’s.
Often it is best to scalp trade at the London Open (3:00AM EST) or the New York open (8:00 AM EST) because that is generally when the currency pairs will start to move more in one direction.
When the actual price crosses all three indicators, you enter your trade, long or short. If the price crosses down through the 100 EMA, enter short, if the price crosses up through the 100 EMA go long.
Make sure that you book a 5-10 pip profit. That is a $50-$100 dollar profit on a regular account, and more if you bought more lots. Don’t try to hang on to you winning position too long, because the price can whipsaw back and you can lose. Take your 5-10 pip profit as soon as you can. Here is an example on the 1 min charts:
Notice that at 10:30 EST you could have entered USD/JPY long (big circle) when the price crossed up through the 100 EMA and at 10:45 you could have closed your position (little circle) and made a 10 pip profit. Then again the price crossed back down the 100 EMA at 11:30 EST. You could have sold the Yen short (big circle) and then ten minutes later made another 10 pip profit. (little circle)
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