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Thursday, October 31, 2013

How To Avoid Being Killed By Choppy Forex Markets


One of the reasons why 95% of the people lose money in the forex market is that currency trading is not always trending.
Choppy markets is a major killer to most forex traders because it may look as though it’s starting to trend in the beginning, but the fact is that it is only a false movement of the price. Forex signals may indicate a correct move in your direction for one moment but move against you the next moment and hit your stop loss.
In other words, you have been whipsawed. With the lack of forex trading techniques in the beginning, I have also personally experienced many whipsaws many years back when I was learning how to trade forex. Below are some forex trading strategies I've learned that can help you overcame the whipsaws or false moves and ensure the safety of your forex account.
1. Train your eyesAgain, you need to provide forex training, in this case to your eyes, to look at the forex charts and see if it’s trendy. If it’s not trendy and you do not have much experience in forex trading, it’s advisable to stay away from the forex market for the time being until the market gets trendy again. What you can see in choppy markets is that the past few candlesticks are not really bullish nor are they bearish.
For example, the price may be up for two candlesticks and down for two candlesticks after that. You can’t really see where the price is going and therefore the forex chart is said to be choppy.
2. Indicators flat or steep? Besides just looking at the charts, I will also use forex indicators like stochastic and MACD to judge whether the market is choppy. This forex strategy may be very simple, but it certainly helps forex traders to filter whipsaws.
For example, if you are using stochastic and/or MACD to generate forex trading signals in technical analysis, you should expect the indicators to cross up/down with some steep angle, this means it’s a trend forming. While the indicators are looking flat, it simply means there is no trend and it’s a no trade zone.
3. Check higher timeframe – This is another one of the good forex tips to help you filter off whipsaws. If you are trading using 1 hourly time frame and there is signal to buy or sell, you should switch to 4 hour time frame to check whether the stochastic is pointing up or down respectively.
The longer the time frame means that in the shorter time frame, you are trading along the direction of the long term trend. Hope I did not confuse you. I use this method vigorously in my forex trading systems.
Though the above 3 forex trading tips can help you filter off whipsaws, but it’s still in your best interest to avoid trading in choppy markets as there are not many good opportunities for you to gain huge profits. I hope you are clearer now on spotting choppy markets.

Wednesday, October 30, 2013

Points, Ticks, and Pips



Definition:
Points, ticks, and pips, are all ways of describing an amount of price change. The term that is used depends upon the market being discussed, and sometimes on the amount of price change in question.

Definitions

The definitions of points, ticks, and pips are as follows:
  • Points - A point is the largest of the three terms, and is the smallest possible price change on the left side of the decimal point. For example, the ES futures market might experience a price change from 1314.00 to 1315.00, which would be a price change of 1 point.
  • Ticks - A tick is the smallest possible price change for the market in question, and may be anywhere on the right side of the decimal point. For example, the ES might experience a price change from 1314.00 to 1314.25, which would be a price change of 1 tick.
  • Pips - A pip is the same as a tick (the smallest possible price change for the market in question), but is specifically used for the Forex markets. For example, the EURUSD (EUR to USD currency market) might experience a price change from 1.2500 to 1.2501, which would be a price change of 1 pip.

Which Markets Use Which Term?

Points are used for markets that trade in whole points (i.e. 1 point is the smallest price change that the market can experience), such as the YM futures market in the US, and the SMI futures market in Europe.
Ticks are used for markets that trade in any amount less than 1 point (tenths (0.1), hundredths (0.01), etc.). Examles of popular day trading markets that trade in ticks would be the NQ futures market, which trades in ticks of 0.25 points, and the DAX futures market, which trades in ticks of 0.5 points.
Pips are used specifically for the Forex markets, such as the EURUSD currency market, which trades in ticks of 0.0001 points, and the USDJPY currency market, which trades in pips of 0.000001 points.

Tuesday, October 29, 2013

Forex market hours. When to trade and when not to

Forex market is open 24 hours a day. It provides a great opportunity for traders to trade at any time of the day or night. However, when it seems to be not so important at the beginning, the right time to trade is one of the most crucial points in becoming a successful Forex trader.
So, when should one consider trading and why?

The best time to trade is when the market is the most active and therefore has the biggest volume of trades. Actively traded markets will create a good chance to catch a good trading opportunity and make profits.



Forex trading hours, Forex trading time:

New York opens at 8:00 am to 5:00 pm EST (EDT)

Tokyo opens at 7:00 pm to 4:00 am EST (EDT)

Sydney opens at 5:00 pm to 2:00 am EST (EDT)

London opens at 3:00 am to 12:00 noon EST (EDT)

And so, there are hours when two sessions overlap:

New York and London: between 8:00 am — 12:00 noon EST (EDT)

Sydney and Tokyo: between 7:00 pm — 2:00 am EST (EDT)

London and Tokyo: between 3:00 am — 4:00am EST (EDT)


For example, trading EUR/USD, GBP/USD currency pairs would give good results between 8:00 am and 12:00 noon EST when two markets for those currencies are active.

At those overlapping trading hours you'll find the highest volume of  trades and therefore more chances to win in the foreign currency exchange market.

What about your Forex broker?

Your broker will offer a trading platform wih a certain time frame (the time frame will depend on the country where broker operates).

When focusing on market hours, you should ignore the time frame on your platform (in most cases it'll be irrelevant), and instead use the universal clock (EST/EDT) or the Market Hours Monitor to identify trading sessions.

Saturday, October 26, 2013

Day Trading Strategies for Beginners



A forex day trader is one who buys and sells currencies multiple times during any single trading day period without leaving any overnight positions.

This means the day trader will usually trade during a single time zone. An exception is when two time zones overlap, such as what happens when the US market opens in the morning and it is still afternoon in Europe.

Day trading is not as easy as it may seem and forex beginners have to be especially careful to acquire the right skills and tools before venturing into day trading.

Market Timing

A day trader needs to be well conversant with technical and fundamental analysis to be successful.

This should be combined with money and risk management strategies to ensure long term profitability. Click here to read more on risk management.

A viable risk/reward ratio is necessary for one to enjoy long term profitability as a day trader. When using a market timing strategy, a trader needs to have high levels of discipline in order to capture the right trades at the right moment.

The day trader should be adept at following price charts and accurately reading price movements, price volumes, and price trends.

It is necessary for the trader to know all about different candlestick patterns to determine the most ideal trade entry and exit points.

As a day trader, one should know when the markets are most liquid and dynamic with the highest volumes traded.

One should also know which types of economic data have the potential to change currency prices and which time frames are most favorable for their chosen currency pairs.

Trading Price Swings

Many currencies experience erratic price movements at certain times, especially when there is a release of important economic information.

A day trader seeks to predict such movements before they happen so that he can make trades just before the price swings occur.

Trading such short term price swings is ideal for day traders and small investors because they usually do not have to compete with large investors such as banks.

Margin Trading

Day trading involves the taking advantage of small pip movements to make a profit on short term trades.

However, to gain a substantial profit on just a few pips is very hard to achieve unless you are trading a very large amount of money.

That is why most day traders trade on margin. By borrowing at high leverage levels such as 300:1, 400:1, or even 500:1, a trader controls a much larger trade and stands to benefit so much more from small pip movements.

To trade on margin, the trader needs to open a margin account and deposit money into it. The deposit amount is usually an amount pre-agreed between the trader and the broker.

Typically, no interest is charged on this margin account unless the trader does not close the position by the delivery date and it gets rolled over.

Interest may then be charged depending on the trader’s position and the underlying currencies’ short term interest rates.

To illustrate margin trading, assume a forex investor has $1,000 in his margin account and needs to trade a standard lot worth $100,000.

The margin will be 1% and the leverage will be 100:1, which means the trader will have to borrow $99,000 from the broker to complete the trade.

The broker will use the trader’s $1,000 as security and if the trader undergoes losses that reach the $1,000 mark, the broker initiates a “margin call” which closes out the position unless the trader deposits some more funds into the margin account.

If the trade closes out profitably, the trader gets to keep the profits and repays the borrowed funds without interest.

Momentum Trading

Many beginners enter the forex market with the idea that to be profitable they have to predict future prices. Actually, this is not quite right. To be profitable, a trader has to ride on the market’s price momentum.

A common axiom in technical analysis is that price may often lie, but momentum will always tell the truth.

A Moving Average Convergence Divergence (MACD) histogram is especially handy in trading on momentum in forex trading.

Other useful indicators for measuring momentum include a stochastic oscillator, Commodity Channel Index (CCI), or a Relative Strength Index (RSI).

Scalping

One of the most profitable day trading strategies is scalping. A forex trader buys a currency and holds it for a very short period of time, gaining just a few pips, before s/he sells the currency.

Forex scalping time frames usually last between one minute and 5 minutes. This process is repeated over and over again throughout the trading day.

To be profitable, the trader has to learn how to look for trade signals and accurately interpret them to know when to buy and when to sell.

Additionally, since the pip gains are usually very small, the trader has to rely on very high leverage levels to make substantial profits.

There are forex robots used for forex scalping and offer the trader a fully automated system.

The trader has to teach the robot which signals to look out for and how to react to them.

Hedging

One way to minimize losses in forex trading and ensure a gradual increase in day trading profits is by hedging.

This involves the buying of one currency pair in one trade while at the same time selling the same currency pair in another trade then dropping the loser and going with the winner.

Instead of selling the same currency pair, one may also buy a currency pair that inversely correlates with the bought currency pair.

Summary

When formulating a day trading strategy that works, most traders will find that their system will be a combination of the above day trading strategies.

One should focus more on formulating a strategy that has practical and well thought out risk management strategies which employ favorable risk/reward ratios.

Friday, October 25, 2013

Simple Moving Average


The Simple Moving Average is arguably the most popular technical analysis tool used by traders. The Simple Moving Average (SMA) is used mainly to identify trend direction, but is commonly used to generate buy and sell signals. The SMA is an average, or in statistical speak - the mean. An example of a Simple Moving Average is presented below:

The prices for the last 5 days were 25, 28, 26, 24, 25. The average would be (25+28+26+26+27)/5 = 26.4. Therefore, the SMA line below the last days price of 27 would be 26.4. In this case, since prices are generally moving higher, the SMA line of 26.4 would be acting as support (see: Support & Resistance).
The chart below of the Dow Jones Industrial Average exchange traded fund (DIA) shows a 20-day Simple Moving Average acting as support for prices.



Moving Average Acting as Support - Buy Signal
When price is in an uptrend and subsequently, the moving average is in an uptrend, and the moving average has been tested by price and price has bounced off the moving average a few times (i.e. the moving average is serving as a support line), then buy on the next pullbacks back to the Simple Moving Average.

A Simple Moving Average can serve as a line of resistance as the chart of the DIA shows:









Moving Average Acting as Resistance Sell Signal
At times when price is in a downtrend and the moving average is in a downtrend as well, and price tests the SMA above and is rejected a few consecutive times (i.e. the moving average is serving as a resistance line), then buy on the next rally up to the Simple Moving Average.


Thursday, October 24, 2013

Currency Trading Basics


The foreign exchange market is the term given to the worldwide financial market which is both decentralized and over-the-counter, which specializes in trading back and forth between different types of currencies. This market is also known as the Forex market. In recent times, both investors and traders located all around the world have begun to notice and recognize the foreign exchange market as an area of interest, which is speculated to contain opportunity.
However, before considering treading these waters, it is important to first understand how transactions are conducted within the foreign exchange market. It is also necessary to first explain what the basics are of trading foreign currency. Failure to fully and completely understand this art prior to journeying off into this market would render a person lost in a matter of minutes, just where they would never expect it. Thus, this article has been presented, intending to explain currency trading basics thoroughly.
What is traded within the foreign exchange market?
The one instrument that foreign exchange market investors and traders constantly utilize are currency pairs. This is a term used to describe what the rate of exchange for one currency is over another currency. In the whole of the market, the following are the currency pairs that of which are traded most often:
  • EUR / USD – Euro
  • GBP / USD – Pound
  • USD / CAD – Canadian Dollar
  • USD / JPY – Yen
  • USD / CHF – Swiss Franc and
  • AUD / USD – Aussie
In the whole of the foreign exchange market, the previously listed currency pairs generate up to 85% of the volume.
If a trader ends up going long or goes ahead and buys the Euro, he or she is also, at the same time, buying Euro and selling the United States Dollar. In the event that this same trader ends up going short or goes ahead and buys the Aussie, he or she will also, at the same time, be selling the Aussie and purchasing the United States Dollar.
In each currency pair, the former currency is the base currency, where the latter currency is typically in reference to the quote or the counter currency. Each pair is generally expressed in units of the quote or the counter currency that of which are needed in order to receive a single unit of the base currency.
To illustrate, if the quote or the price of a EUR / USD currency pair is 1.2545, this would mean that one would require 1.2545 United States Dollars in order to receive a single Euro.
Bid / Ask Spread
It is common for any currency pair to be quoted with both a bid and an ask price. The former, which is always a lower price than the ask, is the price at which a broker is ready and willing to buy, which is the price at which the trader should sell. The ask price, on the other hand, is the price at which the broker is ready and willing to sell, meaning the trader should jump at that price and buy.
To illustrate, if the following pair were provided as such:
EUR / USD 1.2545/48 OR 1.2545/8
Then the bidding price is set for 1.2545 with the ask price set to 1.2548.
Pip
The minimum incremental move that of which is made possible by a currency pair is otherwise known as a pip, which simply stands for price interest point. For example, a move in the EUR / USD currency pair from 1.2545 to 1.2560 would be equivalent to 15 pips, whereas a move in the USD / JPY currency pair from 112.05 to 113.05 would be equivalent to 105 pips.
Margin Trading (Leverage)
In other financial markets, it would generally be required to have the full deposit of the amount that of which is traded. However, in the foreign exchange market, all that of which is required would be a margin deposit, with the remainder being granted by the broker.
Some brokers will provide leverage that will rise up to 400:1. In essence, this means only 1/400 in balance is required to open a position, or .25%. The majority of brokers, however, will only offer 100:1, meaning 1% is required in balance in order to open a position.
A typical lot size within the foreign exchange market is roughly $100,000 United States Dollars.
When a trader would desire obtaining a long lot within the EUR / USD currency pair, where the leverage amounts to about 100:1, in order to open such a position would require $1,000 United States Dollars in balance, or 1%.
It is not recommended, of course, to open such a position when the trading balance retains such limited funds. In the event that the trade should go against the trader, the broker will close the position. This will bring the focus onto the next term.
Margin Call
In the event that the balance of a trading account should end up falling below the maintenance margin, which is the capital required to open a position (1% in a 100:1 leverage, 2% in a 50:1 leverage, so on and so forth), a margin call will occur. At the moment that this margin call occurs, the broker will either sell off all of the trades or buy back in the event of short positions. This will theoretically leave the trader with the maintenance margin.
Margin calls generally occur in the event that money management is not applied in a proper manner.
What are the mechanics of a foreign exchange market trade?
To illustrate an example, after extensive analysis, a trader concludes it is likely for the British pound to rise in price. This trader decides it is worth going long and risking 30 pips, intending to wind up being rewarded with 60 pips. In the event that the market goes against this trader�s decision, they will end up losing 30 pips. However, should the market go as intended, they will gain 60 pips.
The British pound has a quote that is precisely 1.8524/27, 4 pips spread. The trader in question will go long at 1.8530, or ask. Once the market either reaches the target or the risk point, the trader will need to sell it at the bid price. To make 40 pips, the profit level would need to be 1.8590. Should the target be hit by the market, then the market has run 64 pips. Otherwise, the market will have run 30 against.
As one may have gathered at this point, it is generally a very good idea in order to fully understand the basics of currency trading, from the very basic concepts to the more complex issues, before deciding to tread the waters of the foreign exchange market. Make sure every single aspect of the subject is mastered, including trading psychology, trade and risk management, as well as everything else, prior to making the decision to opening a live trading account. Best of luck.

Wednesday, October 23, 2013

Short Term Forex Trading Tips And Tricks


Successful Short Term Forex Trading

Successful short term Forex trading is the goal of many new traders who enter the Forex markets each year. For them, life begins and ends on the one or five minute chart. It is important to understand that the trend on a small time frame chart may only be a retracement of the primary trend from a higher time frame chart. As a result, understanding the higher time frame trend is an important step in becoming a successful, short term Forex trader.

Range Bound Vs. Trend Bound

Certain asset classes tend to be range bound and others tend to move in trends. One asset that does trend well is the spot Forex market. Currencies are based on economies, and it takes a long time for economies to complete the four stage business cycle of expansion, peak, contraction, and trough. While the primary trend marches on for months and years, there can be several intermediate term trends lasting days and weeks.

These intermediate term trends offer short term Forex traders many opportunities to trade long and short with the primary trend, or counter to the primary trend. Each type of trading has specific rules. Counter trend traders must exit a position quickly in the event that the primary trend resumes. Currency traders all over the world like to observe the trend from the previous trading session, and pile on in that direction during their session.

The previous session can be Asia’s session transitioning into the Europe and UK session, followed by the UK session transitioning into the US session. Currency traders will observe the direction from the previous session and attempt to trade with that intraday trend. Most short term movements in the Forex markets are driven by news stories and economic reports which are released at various times of the trading day. Prior to news being released, price consolidates as traders wait to see what the impact of the announcement will be.

If the announcement is completely unexpected, a possible reversal of the primary trend may occur. If the news is within the boundaries of what was expected, a period of wild reaction to the announcement will eventually be followed by a resumption of the primary trend.

No Economic Data
What about the times when no economic data is scheduled to be released?

Price has to move. If no news is scheduled, price will consolidate during quiet trading periods and then breakout either in the direction of the intraday trend, or in the direction of the primary trend. Sometimes price will pull back to a support area before resuming the primary trend which can be an opportunity for a short term trader to enter a longer term swing trade. Being aware of the primary trend is the only way for the short term trader to recognize this opportunity. Other times, price will rally into resistance before the intraday trend resumes.

This entry is typically a low risk opportunity to enter a counter trend trade with a definite idea of where to place a stop loss in the event the primary trend resumes. In preparation for the Extended Learning Track (XLT) Forex midnight session on June 25, 2009, a possible shorting opportunity in the GBPUSD was identified on the 5 minute chart at the start of the Europe and UK trading day. A plan was made to enter a short trade on a throwback to a small area of supply above current price, or on a breakdown below the first target support level.

This trade was counter to the direction of the primary trend in the GBPUSD which has been trending up for several months. The GBPUSD did rally into a previous resistance level near 1.66 the day before when the Federal Reserve interest rate decision was announced. This meant that the direction of the intraday trend was down. One XLT student, Carlos, did manage to take the breakdown below the support level during the session.

Retracement
The retracement to the higher resistance short entry occurred before the start of the XLT session, so the breakdown short entry was the next best trade. Since Carlos was counter trend trading, he exited the trade for a 44 pip gain. The GBPUSD gave Carlos the opportunity to take a long trade bounce for 30 pips during the same session using our XLT Bollinger Band CCI rules.

Carlos followed his rules on those trades, but I managed to get stopped out for losses on both entries. The lesson here is it is better to focus on trading rather than to try to teach and trade at the same time. Opportunities to trade with the trend and counter to the trend come along everyday in all markets if the trader understands the difference between the primary trend and the secondary trends of the market they are trading. We will explore more of these types of trades in future newsletters.

Tuesday, October 22, 2013

Relative Strength Index RSI Technical Indicator


The Relative Strength Index, RSI indicator is the most popular indicator and it is a momentum oscillator and a trend following indicator. The RSI indicator compares a trading currency magnitude of the recent price gains against its magnitude of recent losses price losses and plots this data on a scale of values that ranges between 0-100.

The RSI indicator measures the momentum of a currency pair; values above 50 signify bullish momentum while values below 50 center-line signify bearish momentum.


  • The RSI Indicator is plotted as a green line
  • Horizontal dashed lines are drawn to identifying overbought and oversold levels are i.e. 70/30 levels respectively.


 Technical Analysis of RSI Technical Indicator
 There are several methods used to trade with the RSI technical indicator, these are:

50-level Crossover Signals
  • Buy signal - when the RSI indicator crosses above 50 a buy/bullish signal is given.
  • Sell Signal - when the RSI indicator crosses below 50 a sell/bearish signal is given.

Saturday, October 19, 2013

Technical Indicators : Bollinger Bands


Bollinger bands were created by John Bollinger in the early 1980s. The bands have similar theory and application with the Moving Average Envelopes. It has a set of three curves, the typical parameters are:
  • Middle Bollinger Band = 20-period simple moving average
  • Upper Bollinger Band = Middle Bollinger Band + 2 * 20-period standard deviation
  • Lower Bollinger Band = Middle Bollinger Band - 2 * 20-period standard deviation
The theory behind Bollinger Bands is that, in a normal distribution data set, 68% of data should fall within one standard deviation and that roughly 95% should fall within two standard deviations. So 95% of the price should fall within the 2-width standard deviation, which is within the upper and lower band.
Bollinger bands are often used to forecast reversals in rangebound markets. When the price is close to the upper band, the market is more likely to be in overbought condition, and is likely to reverse. The same holds for the lower band condition.
In the chart below, you can see that prices are likely to reverse at the upper and lower bands. Since 95% of the prices should fall within the band, the price should move back within the envelope if it rises above the top band or falls below the bottom one.
Because standard deviation is also a measure of volatility, traders can know the market condition by observing the Bollinger bandwidth. The bands widen, meaning moves further away from the middle band, when the market is more volatile. The bands contact, meaning moves closer to the middle band, when the market is less volatile.
The Bollinger bands are best to use in ranging markets, but are of limited value in trending markets. As shown on the above chart, when the market is in strong trend, the price can move along the upper or lower band, resulting in many false signals. Traders are better to combine Bollinger bands with other indicators or candlestick patterns to determine a trade.

Friday, October 18, 2013

Trading GDP Like A Currency Trader

Economic data releases are essential for a foreign exchange trader. These important economic indicators create volatility, and plenty of speculation is always surrounding them, and The United States' gross domestic product (GDP) is one such report. Not only do forex (FX) traders continue to monitor this important piece of economic data, they use it to either establish a new position or support a current one.

What Goes into the GDP Report


 Gross domestic product is simply the total market value of all goods and services produced in a particular country. In the case of the United States, this total can be broken down into four main categories: consumption, investment, government expenditures (or spending) and net exports.
Consumption: Final consumption expenditures by households. These can include things like food, rent, fuel and other personal spending.
Investment: Business spending on new plants and equipment, as well as household investment in property.
Government spending and investment: The total of all government spending, including public employee salaries and defense or social program benefits.
Net Exports: Total final exports, minus total imports. A higher net export number is more productive for the economy.

 The sum of these numbers is the United States' total gross domestic product, which can be compared to another year's performance in order to derive a percentage of GDP growth or contraction in a particular period.

Making the Comparison


 Gross domestic product figures can be released on a monthly or quarterly basis. For the United States, the Bureau of Economic Analysis (BEA), a branch of the U.S. Commerce Department, releases final quarterly domestic figures – along with additional advanced or preliminary figures toward the end of each month. This report can also be released in either real or nominal conditions, the former being adjusted for the effects of inflation. The BEA also releases its GDP price index that has been used in competition with both consumer price index (CPI) and the personal consumption expenditures deflator as a gauge of consumer inflation.

Trading the Foreign Exchange Markets


 Like any other piece of important economic data, the gross domestic product report holds a lot of weight for currency traders. It serves as evidence of growth in a productive economy, while signaling contraction in a withering one. As a result, currency traders will tend to seek higher rates of GDP or growth in a belief that interest rates will follow the same direction. If an economy is experiencing a good rate of growth, the benefits will trickle down to the consumer – increasing the likelihood of spending and expansion. In turn, higher spending leads to rising prices, which central banks attempt to tame through interest rate hikes.


 Although there are three versions – advanced, preliminary and final – it's the relation between the three that is important, not just the individual releases. Currency professionals will emphasize the advanced reading when trading. But, they won't dismiss any differences when it comes to comparing the advanced with both the preliminary and final readings.


 For example, a final reading of 1.5% growth compared to an earlier advanced release of 3.5% is worse off when compared to a similar 1.5% print in both advanced and final readings. A positive growth figure is always good for the economy, but not when a final GDP figure dips below the advanced reading.

What Investors Can Expect


 There are three basic reactions to price action that a trader or investor can expect:


 1. A lower-than-expected GDP reading will likely result in a selloff of the domestic currency relative to other currencies. In the case of the U.S., a lower GDP figure would signal an economic contraction and hurt the chances of a rise in U.S. interest rates – lowering the value or attractiveness of U.S. dollar based assets. Additionally, the further below an actual GDP reading is from the estimate, the sharper the decline in the dollar.


 2. An expected reading requires a bit more comparison by the FX investor. Here, the analyst or trader will want to compare the current reading to the previous quarter's reading – maybe even the previous year's reading. This way, a better evaluation of the situation can be gathered. Given this factor, you can expect that the resulting price action will tend to be mixed as the market sorts out the details.


 3. A higher-than-expected reading will tend to strengthen the underlying currency versus other currencies. Therefore, a higher U.S. GDP figure will benefit the greenback, lending to some appreciation in the U.S. dollar against counter currencies; the higher an actual GDP reading is, the sharper the incline of the dollar's appreciation.

Putting It All Together

 So, let's take a quick look at a recent example:
 

 In Figure 1, the EUR/USD currency pair fell from the 1.4200 big figure over the past couple of sessions (far right handside of the chart) to establish support just below 1.4050 in the 60-minute time frame. Observe how the euro appreciated by about 50 pips, immediately following the March 28, 2011, release at 8:30 a.m. At that time, it was revealed that the world's largest economy grew by less than what was expected. Instead of rising by an estimated 1.9%, the U.S. grew by an advance figure of only 1.8%. This was also less than the 3.1% from the previous quarter – a visual slowdown in growth. As a result, traders sided with selling a weaker U.S. dollar, helping the euro to retrace its losses and climb even higher through the 1.4200 resistance barrier.


 A currency trader looking to take advantage of this opportunity could easily place a buy entry near the support level – adding a relatively narrow stop order of 30-40 pips for risk management sake.

The Bottom Line

 The U.S. gross domestic product report is (and always will be) an important release to consider when it comes to trading the foreign exchange markets. And, it's the traders that understand how to interpret the data and apply its relevance to a particular trade that come out on top.

Thursday, October 17, 2013

Introduction to Candlestick and its patterns


What is a candlestick chart?
Candlestick charts shows information about the price action and the movement of the currency price over a specified period of time. It contains the market's open, closing, low and high of that specific time frame.
Below is an analysis of a candlestick chart and its components.



On a daily chart, each candle represents a 24 hours period. It contains information of the daily open and daily closing price, the highest and lowest price during that day. On an hourly chart, each candle represents an hour and so on. Since the forex market is a 24 hours market, there is no real daily open or closing price. The chart provider will decide a time, 5pm EST for instance, as the daily open and closing time. Different chart providers may have different choices for the open and closing time. Traders may find the charts from different providers are slightly different to each other.
What are candlestick patterns?
Technical analysts found that, by observing the candlesticks, there are recurring patterns on the candlestick charts. Such patterns are like recurring pictures on the candlestick charts and they tend to occur when a trend is about to end or reverse its direction. The patterns are very good visual representation of the price movements and give traders a good grasp of what is going on in the market.
Why are candlestick patterns so important?
Why are candlesticks so important? It is because they are the best gauge of what is going on in the market at the present time. If a candlestick is very short, it implies that the range for the trading day was very tight. If this candle appears after a strong up-trend, it may suggest that sellers have now begun to enter the market more aggressively, and thus the price may be on its way back down.
Eventually, candlesticks patterns can easily be used to identify potential reversals of trends in the market - especially when used in conjunction with other indicators. By observing the candlestick patterns, traders can speculate potential reversals of trends and entering the market with strong reference to the patterns.
The following are key patterns to watch out for:
Piercing Line
Bullish reversal patterns which shows sellers are losing their dominance.
Dark Cloud Cover



Bearish pattern showing slower buying momentum.
Shooting Star
Reversal patterns that occurs after gaps. Buyers make new high but are fail to sustain then.
Harami




Wednesday, October 16, 2013

MT4 Shortcut Keys

Function Keys

F1 � open "Userguide" (i.e. Help)

F2 � open the "History Center" window

F3 � open the "Global Variables" window

F4 � open MetaEditor

F6 � call the "Tester" window for testing the expert attached to the chart window

F7 � call the "Properties" window of the expert attached to their chart window in order to change settings

F8 � call the "Chart Setup" window

F9 � call the "New Order" window

F10 � open the "Popup prices" window

F11 � enable/disable the full screen mode

F12 � move the chart by one bar to the left

Shift Combinations

Shift+F12 � move the chart by one bar to the right
Shift+F5 � switch to the previous profile


Alt Combinations

Alt+1 � display the chart as a sequence of bars (transform into bar chart)

Alt+2 � display the chart as a sequence of candlesticks (transform into candlesticks)

Alt+3 � display the chart as a broken line (transform into line chart)

Alt+A � copy all test/optimization results into the clipboard

Alt+W � call the chart managing window

Alt+F4 � close the client terminal

Alt+Backspace or Ctrl+Z � undo object deletion


Ctrl Combinations


Ctrl+A � arrange all indicator windows heights by default

Ctrl+B � call the "Objects List" window

Ctrl+C or Ctrl+Insert � copy to the clipboard

Ctrl+E � enable/disable expert advisor

Ctrl+F � enable "Crosshair"

Ctrl+G � show/hide grid

Ctrl+H � show/hide OHLC line

Ctrl+I � call the "Indicators List" window

Ctrl+L � show/hide volumes

Ctrl+P � print the chart

Ctrl+S � save the chart in a file having extensions: "CSV", "PRN", "HTM"

Ctrl+W or Ctrl+F4 � close the chart window

Ctrl+Y� show/hide period separators

Ctrl+Z or Alt+Backspace � undo the object deletion

Ctrl+D � open/close the "Data Window"

Ctrl+M � open/close the "Market Watch" window

Ctrl+N � open/close the "Navigator" window

Ctrl+O � open the "Options" window

Ctrl+R � open/close the "Tester" window

Ctrl+T � open/close the "Terminal" window

Ctrl+F5 � switch to the next profile

Ctrl+F6 � activate the next chart window

Ctrl+F9 � open the "Terminal � Trade" window and switch the focus into it. After this, the trading activities can be managed with keyboard

Other Keys and/or Combinations
"left arrow" � chart scrolling to the left

"right arrow" � chart scrolling to the right

"up arrow" � fast chart scrolling to the left or, if the scale is defined, chart scrolling up

"down arrow" � fast chart scrolling to the right or, if the scale is defined, chart scrolling down

Numpad 5 � restoring of automatic chart vertical scale after its being changed. If the scale was defined, this hot key will return the chart into the visible range

Page Up � fast chart scrolling to the left

Page Down � fast chart scrolling to the right

Home � move the chart to the start point

End � move the chart to the end point

"-" � chart zoom out

"+" � chart zoom in

Delete � delete all selected graphical objects

Backspace � delete the latest objects imposed into the chart window

Enter � open/close fast navigation window

Esc � close the dialog window