Saturday, July 11, 2009
forex
Monday, May 11, 2009
How to trade trend lines in the Forex market
- Step 1
Forex chart with a trendline break.When trading the forex
market you want to use 5 minute to 30 minute charts if you are daytrading.If you are trading longer term then 60 minute to a 1 day forex chart work best. Up Trend Line
An up trend line has a positive slope and is formed by connecting two of more low points. The second low must be higher than the first for the line to have a positive slope. Up trend lines act as support and indicate that demand is increasing even as the price rises. A rising price combined with increasing demand is very bullish and shows a strong determination on the part of the buyers. As long as prices remain above the trend line, the up trend is considered solid and intact. A break below the up trend line indicates that demand has weakened and a change in trend could occur.
Down Trend Line
A down trend line has a negative slope and is formed by connecting two or more high points. The second high must be lower than the first for the line to have a negative slope. Down trend lines act as resistance and indicate that supply is increasing even as the price declines. A declining price combined with increasing supply is very bearish and shows the strong resolve of the sellers. As long as prices remain below the down trend line, the downtrend is considered solid and intact. A break above the down trend line indicates that net-supply is decreasing and a change of trend could occur.
When you draw an up trend line, you connect the lows of the bars or candlesticks if you are using candlestick charts.
Drawing a down trend line, you connect the highs. The first step in constructing a trend line is to choose the time frame: 5 minute,30 minute or longer chart time frames. A long-term time frame can be from 1 day or up to a year, an intermediate period several weeks to several months, and short term will be less than a day to several weeks. The periodicity of the charts, intraday, daily, or weekly will depend on the time frame chosen for trading, in any case, the procedure for drawing the trend line will be the same.
Remember you can draw horizontal trend lines to define support andresistance levels.These levels are very important and most forex traders will trade off the support and resistance chart levels. - Step 2
Forex chart with a uptrend lineShown in this forex chart you can see a uptrend break. You draw your trend lines depending on the time frame you are using from the low point of the candle stick at around 1.2360 through the high of the day which shows the uptrend. As you can see there is a kiss point where the forex market will likely bounce higher.
- Step 3 Forex chart EMA break down for short trade
This forex chart shows that the EMA and the CCI are breaking down and the CCI is below the 100 line for a possible short trade. The EMA lines are set at 9 and 18 when you set up your forex chart. On the CCI Commodity Channel Index indicator you look for divergences above and below the 100 lines and use the 0 line to look for retraces instead of getting higher lows with price going down which is a divergence. As you can see we use a CCI set at 14 this is the length you should use when you start out with a plus 100 line and minus 100 line which can be set in most charting systems.
How to Learn Currency Forex Online Trading
- Step 1
Study currency forex online trading through books, DVD courses, and online. Join online forums to pick up tips and tricks from active day traders. For a quick start on your learning curve, see Resources below.
- Step 2
Practice currency forex online trading by signing up for a practice account at forex.com. This is a free service, which allows you to make virtual trades for 30 days. As you are learning forex, apply your knew trading skills without the risk of actually losing money.
- Step 3
To begin currency forex online trading with real money, sign up with a reputable broker. If possible, get referrals from people you know. Check the FTC website to make sure your broker is honest and professional.
- Step 4
Complete the comprehensive training offered by your brokerage firm. If your broker offers no training, get another broker. You should have no problem finding a company that will teach you currency forex online trading.
- Step 5
When you are ready to invest your own money, start small. Set aside no more money than you are willing to lose while you are perfecting your currency forex online trading system.
- Step 6
For more information on currency forex online trading, check out Resources below or the section on this page titled More Articles Like This.
About Forex Trading
- Each nation's currency has an exchange value compared to other currencies which fluctuates in response to market forces. Currencies are traded in pairs. A good example is the US dollar/Euro pair, which is the largest volume currency pair. You'll see it quoted as EUR/USD 1.3755, meaning at the time o of the quote it cost $1.3755 to buy one Euro. The foreign exchange
market exists to allow businesses, financial institutions, and governments to quickly and easily move funds from one country to another. However, traders hoping to make money off changes in exchange rates account for 80% of Forex trading volume. - The modern Forex market had its beginning in 1971 when fixed exchange rates were abandoned and currencies were allowed to float against each other, a step taken to make international trade more flexible. International trade combined with the growth of the Eurodollar market (US dollars deposited in non-US banks) created a $70 billion a day market in the 1980s. The advent of electronic funds transfers in the 1990s opened the door to speculative trading and rapid growth. By 2004 Forex trading reached nearly $2 trillion a day and passed $3 trillion daily in 2007.
- Like other securities transactions, Forex is based on a "bid/ask" system. A buyer states a bid and a seller an asking price. The difference, called the spread, is small. For wholesale dealers it is often no more than $.0001 (this is the smallest possible change in price and is called a pip). Retail dealers mark the spread up to 3-20 pips and keep the difference, instead of charging commissions. In Forex trading the goal is to correctly anticipate the direction (up or down) of a currency exchange rate and hope the change is greater than the spread. If that happens the trader makes a profit.
- Forex trading is done with extremely low margin requirements. This is the source of the high profit potential and high risk. The ratio of currency value to the margin requirement is usually 30, 100, and up to 400 to 1. In other words, in Forex trading you can "buy" a lot of $100,000 of a currency with as little as $250 cash. The rest is borrowed from the currency dealer. With such extreme margins, even very small changes in currency exchange rates spell the difference between a big profit and losing all of the money you put up.
- Currency exchange rates change in response to economic factors such as a nation's monetary policy, balance of trade, inflation rate, and breaking news. Market trends driven by trading also influences exchange rates. Before you attempt Forex trading, you should educate yourself about these market forces. The Forex market is unregulated, so it's wise to choose a dealer who is a member of a self-regulating body like the National Futures Association.
Identification
History
Function
Risks
Considerations
How to Read Forex Candlesticks Charts
- Step 1
WHAT ARE CANDLESTICKS? Candlestick are a type of chart used to monitor a currency's performance over a given time. The chart indicates the opening and closing rates, daily profit or loss, and the entire range from high to low for the given period. It is a system developed by the Japanese, and introduced to Western brokers by Steve Nison, a western investor.
- Step 2
THE REAL BODY. The 'Real Body' of a
forex candlestick chart is the large rectangle that is positioned with a vertical line extending upward from the top and downward from the bottom. The center rectangle, or 'Real Body' shows where the currency was positioned at the beginning of a trading period and where it was positioned when the same period closed. If the rectangle, or 'Real Body', is hollow, it indicates that the currency increased in value over the given time period. A dark rectangle, or 'Real Body' indicates the currency's value decreased. - Step 3
DARK REAL BODIES. When the 'Real Body' of a Forex candlestick chart is dark, it indicates that the currency has lost value during the given time. In a dark 'Real Body' the opening value is indicated by the value shown at the top of the rectangle. The closing value is indicated at the bottom of the dark 'Real Body'.
- Step 4
HOLLOW REAL BODIES. A hollow 'Real Body' indicates that the currency has increased in value over the given period. The opening value of the currency is indicated at the base of the hollow 'Real Body' and the closing value is indicated at the top.
- Step 5
SHADOWS. The vertical lines that extend up and down from the 'Real Body' in a Forex Candlestick chart indicate the range of movement a currency's value has traveled over the given period. The lowest point of the line extending downward from the base of the 'Real Body', called the 'Lower Shadow', shows the lowest value the currency reached during the given time. Likewise, the highest point of the 'Upper Shadow', or the line extending upward from the top of the 'Real Body', shows the highest value the currency reached during the given period.
How to determine the value of a PIPs in forex buy and sell trades
- Step 1
A pip is one "Percent of Interest Point". In hopefully easier language, it is 1/100th of one percent (in other words one percent of one percent, which is 1/10000th) of a given amount. Since one percent of $100 is $1, then one PIP of an amout of $100 is $0.01 (one cent). Notice that one PIP of $10000 is $1, and that one PIP of $1 is 0.0001. (also notice that 1 appears on the 4th decimal in the value of a PIP for $1)
- Step 2
Suppose that you bought 10000 units of EUR/USD. If EUR/USD were 1.5000, then this means you bought 10000 euros, and paid for that purchase(1.5*10000)USD, which USD15000. If EUR/USD were to move to 1.5001 (which is (1.5000+0.0001)), then your EUR holdings are now valued in dollars at $15001 (which is 1.5001 times 10000 units of EUR). If you were to sell them then your profit in dollars will be $1, for the size you bought. If you want to calculate your profits in EUR, when EUR/USD is 1.5001, then it would be (1/1.5001) EUR. In this example we say that EUR/USD has increased by 1 PIP. If you bought 50000 EUR/USD instead of 100000 EUR/USd, your position would have made $5, or (5/1.5001) EUR. Also note that $5 is 1/100th of one percent of 50000, because one percent of 5000 is 500, and 1/100th of the latter is 5. In general one PIP of EUR/USD is valued (in USD) at: (0.001*Size) where size is the number of units of your EUR/USD buy and sell trades.
- Step 3
The value of a PIP the depends on three things: the size of your position, the currency you want to value it at, and (in certain cases) the conversion rate. For instance in case of EUR/USD, one PIP in USD is (0.001*Size) in USD dollar, but if we want to value it in EUR, one has to divide the value of the PIP of USD by the conversion rate of EUR/USD. For instance of EUR/USD were to move from 1.5000 to 1.5100 (which is one 100 PIPS) and you were to determine how much you have made in EUR as profit for each 10000 units of EUR/USD you bought, then it would be: 100*(0.0001)*(10000)/1.5100, which is $100 divided by 1.51 to obtained the amount in EUR. Notice that your profit is the same in USD for a give size and amount of PIPS, but it will change (decrease) if you were to measure it in EUR as when EUR/USD rises, as the conversion rate back to EUR is rising.
How to Trade Forex And Keep Your Shirt
- Step 1
Analyze the market. You shouldn't make uninformed guesses. That's called gambling. You should learn what makes currencies move before you start to trade.
- Step 2
Get a practice account. You can trade a Forex practice account for free as you learn analysis and before you jump into actual trading.
- Step 3
When you do open a real account, only place money in it that you can afford to lose. And, when you start active trading, only invest a certain percentage of that money.
- Step 4
Follow a trend. When you're just starting out, learn what trends are and follow those. Sometimes you have to follow the herd before you start to lead.
- Step 5
Always trade cool and calm.
- Step 6
If you can't keep your emotions out of trading and don't have the time and resources to trade Forex, you could consider using an Automated Trading system for Forex.
How to Learn Forex Trading
- Step 1
Read about the basics of currency trading, along with the best options for most consumers at Bankrate, a trusted site with a wealth of money and investment advice.
- Step 2
Find out about scams that are prevalent in this industry at the Federal Trade Commission (FTC) website. This agency makes regulations to protect consumers from unscrupulous dealers who promise everything and deliver zip. The FTC monitors the industry very closely and issues regular updates on important developments.
- Step 3
Sign up for a free practice account at the Forex website. Make virtual currency trades using your free practice account for thirty days. Continue to follow the market as long as necessary for you to understand what you know and what you don't know.
- Step 4
Get tips and tricks delivered to you mailbox by TopForexReview. Get news feeds or alerts on topics that may affect the currencies that you are considering trading. Start with only a few currencies, so you can keep track of changes and the possible causes.
- Step 5
Join one or two forex traders forums and discuss the trends, problems and traps in the industry. Ask questions in the forums. Most users are friendly and helpful to newbies. Benefit from other people's experiences and develop your game plan before moving forward.
- Step 6
Set aside a small sum of real practice cash over a one-month period. Use money that you have already allocated to discretionary income., such as savings from your morning coffee run (get regular instead of latte and pocket the savings), lunch for a month (you'll have to pack lunch) or break open your coin jar and cash in half (not all) at your local grocery change center.
- Step 7
Select a reputable currency trading site or broker, after you evaluate recommendations from other traders and investigate them on the FTC website. Try to stick to your budget and the game plan that you made when practicing.
How to Make Money by Trading Forex
- Step 1
Select a firm you want to trade with. When you are selecting a Forex trading firm, check the commissions they charge, the spreads they give, the amount of money that is needed to open a account and their requirements for depositing and withdrawing money.
- Step 2
Set up a Demo Trading account. Demo trading is basically paper trading or fake trading. Most firms allow you to set this up with only a email. Install the software platform and your ready to go.
- Step 3
Practice makes perfect. Trade and trade. Experiment, with new things and new ideas. Random guess, big risks, small risks and find out what works and what doesn't. REMEMBER this is fake and its better to make mistakes here than when trading with real money.
- Step 4
Learn to love stop and limits. Stops are predetermined cancellation orders. At the beginning of a trade tell yourself how much are you willing to lose and then set you cancel order. Also, Limits are cancel orders when you take profits. Don't get greedy. Tell yourself ahead of time where you want to take your profits at and stick with it.
- Step 5
Open micro or mini account. Once you've perfected your trading style. open a micro or mini account. Most good firms offer this and you can trade real money for as little as $10. This is key, because making the transition for fake trading to real, can be emotional disturbing for some. Plus, this gives you a chance to see the firm in action for real.
- Step 6
When your ready, progress to a full account. This step can take months for some or days or weeks for others. If at any time you feel your firm isn't performing at acceptable levels, go back to step 1 and start again.
