Online Riches Exposed

This article will explain some of the differences between Technical Analysis and Fundamentals and explain a bit about each type of trading. Excerpts are taken from the best-selling book ‘Market Wizards’ where Jack Schwager interviews Ed Seykota and Bruce Kovner.

Ed is a trend trader (uses technical analysis) and also relies on hunches from 20 years of experience. He definitely emphasizes his reliance on technical analysis. While reading this, I liken, the ‘hunches’ to knowing the effect fundamentals can have on a market although I could be mistaken, they could be purely from reading lots of charts so well. Here are is exact words “Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them ‘funny-mentals.’ However, if you catch on early, before others believe, then you might have valuable ’surprise-a-mentals.’”

Ed says his priorities when trading are the long term trend, the current charts and picking a good spot to buy or sell, in that order.

Bruce says technical is awesome and very useful but by no means disregards fundamentals.

It’s important to note that technical analysis is a critical method of understanding the history of market movements and hence useful to identify trends. It doesn’t actually tell us where the currency is going but analyses historical data. We then need to use our own intelligence to see what the activity of trading says about future trades.

Technical Analysis can be compared to taking a patient’s temperature. To ignore it is ignorance and it can tell you whether a market is active, or cold and dormant.

It also picks up unusual behaviour. Anything that creates a new chart pattern is something unusual. He also says “Studying the charts is absolutely crucial and alerts me to existing disequilibria and potential changes.”

It’s the fundamentals that will help to indicate whether a trading value will increase or decrease.

Everything that makes a country tick, in Forex terms. Consumer spending, government spending, employment cost index, government policy, political concerns and even an individual event can influence the market heavily.

In summary, the fundamentals will indicate the direction of a price but not exact prices. The chart analysis or technical analysis is better for that, so together you can really increase your chances of coming away with some pips.

The reason technical analysis is so emphasized is that many traders use charts to trade and at any given time, will be drawing the same lines of resistance and same lines of support. So if you can read the charts well, you have an awesome chance of predicting market movements. The best way to learn about the effect of fundamentals is to learn one piece of economic data at a time. This will help you make better-educated trades.

by Sorna Devadas

Why did the currency cross the road? No this has nothing to do with the term crossing currency

Crossing currency on the Forex is one of the most profitable ways to earn money for many investors. The Forex is unlike any other type of market in the world. The foreign exchange market is extremely liquid and involves over two trillion dollars everyday. The top three currencies that are most traded on the Forex are the US dollar, the Japanese yen and the Euro. All of these currencies are traded the most out of all other forms of currency.

With the foreign exchange currency being so large, it is very liquid. Crossing currency using the Forex allows a large amount of flexibility for the trader and investor. The Forex gives the trade the ability to buy and sell currency quickly so that they are never stuck in any investment. When investors use online trading as their form of crossing currency, the trading platform can be pre-set to the preferences of the trader. If the trade is not going as expected, the platform can be set to stop the trade, allowing the trader to lose less money while using the Forex.

Learning to trade on the foreign exchange, also called the Forex, market can be both exciting and profitable. In order to trade successfully on the Forex it is essential to understand the way the market works, the terminology and the trends. Brokers and financial institutions are often the best way for traders to learn how to use the Forex for profit.

When an investor or individual wants to trade one type of currency for another, it is called exchanging currency, or crossing currency. Currency crossing is the main goal of trading on the Forex. For example, if a business or investor has US dollars and needs to trade those into Japanese yens, a broker would do this on the Forex. Many investors trade currency to make a profit. When a certain type of currency is bought at a low exchange rate, the currency can be sold once the rate increases to turn a profit.

Learning to cross currency in the Forex can be complicated. The biggest factor in trading on the Forex is having knowledge about the Forex and how it works. In addition, there are many benefits of using the Forex for trading. Crossing currency gives traders the leverage to make large profits while keeping the risk of losing capital to a minimum. In ideal conditions, an investor that puts in $500 could potentially make over $100,000.

Crossing currency also allows traders and investors to profit in rising and falling markets. This is another difference between the stock market and the foreign exchange market. With the stock market, an investor can only make money when the shares are on the rise. When there is a falling “bear” market or the stocks decline, investors cannot make money on the stock market. When crossing currency in the Forex, this is not true. This is one appealing factor of trading on the Forex. Investors can make large amounts of profits when a currency pair is either up or down. Crossing currency in the right direction can always make profits.

Another benefit of using the Forex for currency crossing, or trading is that the Forex is always open. When investing the in the stock market, the trading is limited to when the market is open. It has a definite closing time during the business week. This is not true of the foreign exchange currency. The Forex is open all the time and does not close. Traders benefit from the ability to trade twenty-four hours a day using the Internet.

Learning to trade on the Forex can be easy when new investors go through an experienced broker or financial institution. Also, there are many ways to learn how to trade on the Forex using free demo accounts available on the Internet. These websites offer valuable resources and free ways for the new investor to practice using the Forex. This is very important for those who want to learn the ins and outs of crossing currency before opening an actual account. Mini Forex accounts are also a good way for the new investor to trade currency without having the risk of a regular account. A mini account allows traders to use a smaller amount of money as their initial investment.

by David Mclauchlan

http://www.forex-article-directory.com/

Tags: crossing currency, forex traders

First what is Forex: The FOREX or Foreign Exchange market is the largest financial market in the world, with an volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another.

When you choose to start trading in the Forex market, which is often called the foreign exchange market, you will need to know a little trading vocabulary. Learning specific terms and what they mean are essential before you even think about using real money to trade. You would never get into a pilot’s seat and try to fly a plane without ever having taken flying lessons. The same goes for foreign exchange market trading. You need to be fully aware of what you are doing. This is a market that is not quickly learned, so you should never assume that once you jump into it, you will learn as you go. While some people opt to do that, they typically end up losing an adequate sum of money because they were not as prepared as they should have been. Knowing the importance of trading trends and ranges in Forex trading is very important. If you are thinking of trading in the Forex market, be sure you know what these terms mean and their implications.

Trading Trend

When price moves consistently in one direction in the Forex, a trend occurs. When the direction is higher, the trend is often called bullish. When the direction of the price is moving lower, the trend is often called bearish. These terms are relative of course. When you define a trend, you should always remember that price peaks and troughs are in the same direction. When you are dealing with a bearish trend, remember that price highs and lows are moving lower. Likewise when you are dealing with a bullish trend, they are moving higher.

Often when trends occur, it is possible to draw support lines under one that is moving higher (an uptrend). You can also often draw resistant lines above one that is moving lower (a downtrend). Once you see these lines break, it can be assumed that the trend is complete. At this point there is a possibility that the trend will begin to reverse. When it does reverse, you will need to know the pattern of what that entails.

Trend Reversal

When you hear of a trend reversal, it simply means that the direction of market prices is changing. Often you will see trend reversals following a four step pattern. Usually, this includes the market making a new high, the trend line being broken, the market making an intermediate low, and a new rally that does not match the first high. Many times you will see prices break the previous low however. You may come across terms such as Double, Triple Tops, and Bottoms, which are all trend reversal patterns. Head and shoulders patterns are also popular reversal patterns.

Trading Range

The trading range is actually a sideways chart pattern. It is often used to represent a resting period before the original trend is resumed. You may see these when you are charting trends and should know what they imply.

Often trends are very important to investors. Those who engage in trend-following are people who look at major trends and make decisions in the direction of the trend. This can be a good strategy, but you must know a great deal about trends and the market in general in order to use this technique successfully. Beginners are not usually very good at tracking trends and using trend-following techniques. One thing that you should also note is that some price movements are trendless. This means that they have no clear direction, which makes trend-following nearly impossible.

Remember, that in order to fully understand trends, you must be educated in the ways of the market and foreign exchange in general. Beginners should not rely heavily on foreign exchange market trend tracking. Once you get more experience you can begin looking into tracking more and more. However, be aware that different things affect and influence the Forex. These influences can change what people expect trends to be. Therefore, you should be a seasoned trader in order to rely on the trends and ranges alone. Educate yourself on these terms and learn to recognize them in the actual market. After all, learning the terms is one thing and being able to see them in reality is different.

by David Mclauchlan

http://www.forex-article-directory.com/

Tags: , trading trend and ranges

It was mentioned in a past article that Fibonacci forex trading is the basis of many forex trading systems used around the world by profitable forex traders. These systems are all based on the famous Fibonacci ratios (.236, .50, .382, .618, etc.) and each of them can specialize in a particular ratio along with other minor indicators in order to make the pinpointing of the entry and exit levels as accurate and profitable as possible.

One of the widely used Fibonacci ratios is the 0.382 ratio. As it can be easily seen on any forex chart, currency prices are continually changing and they follow an oscillatory pattern with peaks and valleys. The limit of the peak is usually called a resistance level while the valley is usually called a support.

In order to find the 0.382 ratio level what you do is, first; measure the size of the drop or rise over your time of interest. Once you have that value you multiply this by 0.382. Now depending on what you are looking at, a rise or a drop on the price of the particular “currency pair” you are trading, you will add the last value you calculated to the total drop or subtract the value from the total rise.

These operations will give you the 0.382 Fibonacci ratio level, either for a rise or a drop on the chart you are analyzing. Once you have the value you can then start planning the strategy you will follow in order to make a high probability profit from this valuable information. For the 0.382 ratio level calculated for a recent rise in the “currency pair” exchange price, your calculated level will be a highly probable support and for the case of a level calculated for a recent drop of the prices your level will be a highly probable resistance.

Knowing this ahead of the market and having the proper secondary indicators, will give you a huge advantage over most forex traders, and that’s something any trader would like they could count on. That’s why Fibonacci trading is so widely accepted over the world, and of course, why it’s so profitable and successful.

Free chapters of a forex day trading system can be downloaded at http://www.1-forex.com in case you are interested in learning more about Fibonacci forex trading.

by Adrian Pablo

http://www.1-forex.com

Tags: fibonacci ratio in forex trading

It`s not always easy to know what to look for in a forex broker, especially in any market, much less a market as complex as currency. But, if you want to trade in the market you need a good firm to work with. While it might be tempting to simply ask the brokers what they can do for you, you can`t always depend on them to give you a straight answer. So instead, I`ve put together a few things to consider when choosing your forex broker. You will want a forex broker that has low spreads. The spread, which is calculated in pips, is the difference between the price at which a currency can be bought and the price at which it can be sold at any specific point in time. Since forex brokers don`t charge a commission, this difference is how they make money. Low spreads will save you money. Along with this, you should be looking for a forex broker attached to a reputable institution. Unlike equity brokers, they are usually attached to large banks or lending institutions. The firm should also be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC). Once you`ve narrowed your choices down to brokers that won`t cost you too much, and that are reputable, consider the trading tools that they are offering you. Forex brokers have many different trading platforms for their clients, just like brokers in other markets. These often show real time charts, technical analysis tools, real time news and data, and may even offer support for the various trading systems. Before you commit to any one company, request free trials of their tools. Brokers generally provide technical as well as fundamental commentaries, economic calendars, and other research to help you make good trades. Shop around until you find a forex broker who will give you everything that you need to succeed. The next item that you will need to evaluate carefully is the number of leverage options your potential partner has. Leverage is a necessity in forex trading because the price deviations in the currencies are set at fractions of a cent. Leverage is expressed as a ratio between the total capital that is available to be traded and your actual capital. For example, when you have a ratio of 100:1, your forex broker will lend you $100 for every $1 of actual capital you have. Many brokerage firms will offer you as much as 250:1. If you have low levels of capital you will need a brokerage with high levels of leverage to make reasonable profits. If capital is not a problem, any forex broker that has a wide variety of leverage options would be a good choice for you. A variety of options will let you vary the amount of risk you choose to take. For example, less leverage (and therefore less risk) may be preferable if you are dealing with highly volatile (exotic) currency pairs. Along with different levels of leverage, look for brokers that offer different types of accounts. Many brokers will offer you two or more types. The smallest account is known as a mini account and it requires you to trade with a minimum of around $300. The mini account also generally offers a high amount of leverage. The standard account allows you to trade at a variety of different leverages, but it requires minimum initial capital of $2,000. And finally, there are premium accounts, which often require significant amounts of capital. They also generally have different levels of leverage available to the traders who use them, and often offer additional tools and services. You will need to make sure that the partner you choose has the right leverage, tools, and services for the amount of capital that you are able to work with. A brokerage firm that meets all of these needs should be a good forex broker for you, but you still need to be certain that they are honest. Dishonest brokers can be prone to prematurely buying or selling near preset points (commonly referred to as sniping and hunting) or may indulge in other habits that will cost you money. Obviously, no brokerage firm admits to doing things like these, but there are ways to know if they have. The best ways to find out more about your potential forex broker is to talk to fellow traders. There is no list or organization that reports dishonest activity, but a visit to online discussion forums, or a simple conversation will often reveal who is an honest forex broker. You should also watch to see if a brokerage firm has strict margin rules. Since you are trading with borrowed money, your forex broker has a say in how much risk you are able to take. You agree to this when you sign a margin agreement for your account. This means your firm can buy or sell at his discretion, to cover the brokerage firm’s interests, which could have repercussions for you. Say you have a margin account, and your position takes a headlong nosedive before it begins to rebound to all time highs. Even if you have enough cash to cover it, some brokers will liquidate your position on a margin call at that low point. This action on their part can cost you dearly. You can only find out whether the firm is prone to this kind of activity by talking to other traders. Being informed on all aspects of a forex broker before you make the decision to trade with them will allow you to start trading the forex market with confidence. by Jimmy Cox http://www.forextradingstrategies.org

Currency: GBP/USD (preferred) or any other.
Time frame: 3 hours (preferred) or 4 hours.
Indicators:
SMA 200, SMA 100 – these are two influential SMAs; you will find price “obeying” their boundaries.
SMA 15, EMA 5
MACD (12, 26, 9)

Trading Rules:
Since we are dealing with “unpredictable until set” indicators (EMA, SMA, MACD) we will always be using signals AFTER the current signaling candle is closed.

1. Never open a trade if price is less than 25 pips away from 100 SMA or 200 SMA.

2. Do enter the market when price has crossed either 100 SMA (expect large move) or 200 SMA (expect very large move) and only after the current candle has closed on the opposite side of the SMA. SMAs this big do not get crossed very often.

3. Set stop loss initially at 50 pips. Look for nearest support/resistance level and adjust it accordingly – it could grow up to 70-90 pips but it should not be less than 40 pips. Anyway this measure is taken only to save us from sudden “exploding market”, in all other cases it will not be hit as our system will take you earlier from the trade.

4. Enter in the direction of 5 EMA once two conditions are met:
1) 5 EMA crosses 15 SMA “permanently” – which means the current candle is closed and lines are “locked” and will not move misleading us.
2) MACD lines are crossed, and the current candle is closed.
The 2 crosses do not have to happen simultaneously. MACD lines can cross earlier than EMA and SMA or shortly after, but there should be no more than 5 candles in between 2 crosses.
If “2-cross” condition is not met – no entry.

Exit rules: exit with the same rules as for entry: when two crosses are in place. If we have only one cross – we are still in trade.

Profit target:
a) can be set to a desired amount of pips and followed with trailing stop further once the target is reached.
b) or use 50 pips profit target – do start chasing the price with trailing stop after gaining 50 pips.
c) or you may not use trailing stop and set no profit targets, then exit according to Exit rules – on the next “2-cross”.

Let’s walk through the numbers:

#1 – EMA 5 crosses 15 SMA, MACD lines also crossed, price is not close to SMA 100 – we place Long order.

#2 – again we have 2 crosses: moving averages cross and MACD – we exit Long and immediately place Short order.

# 3 – 2 crosses are in place, by the time our current signaling candle is closed we are already far enough from 100 SMA, so we close Short and open Long position.
Yes, till this point we were trading in sideways moving market – so no profits here, may be some small negative results. Solution – trading only during active hours, for GBP/USD it is London and New York sessions.

#4 – As we were Long – this point is our exit (“2-cross” condition is met again)
and immediately place Sell order.

#5 – moving averages on the chart have crossed, however MACD – does not, we stay in trade.
We watch price passing 100 SMA and closing below it – it is a good sell signal, but we are already trading it.

#6 – first appears MACD crossover, followed by moving averages crossover – at this point we close our Short position. Do we open Long position immediately? No, because we are very close to 100 SMA. We need to wait until candle passes and closes above 100 SMA to open a Long trade. Once it happens we are in trading Long.

#7 – MACD lines has attempted to cross, but nothing to worry as there is no second cross from moving averages.

#8 – same as #7.

#9 – time to finally close Long position and go Short.

—- by;Edward Revy – FxStrtgyRvl ——–

Tags: EMA, forex trading, MACD, SMA

After saying so much about the statistical Forex systems, I think it’s time to give an example of one. But first, I have to warn that this exert advisor «as is» wasn’t profitable during tests — it had its losses and gains, but spread losses took over eventually, so I can’t suggest using it on your real money account. This expert advisor is good only as an example of an actual statistical Forex system. It uses Tom DeMark’s pivot points calculated over the last 5 bars, which are then normalized by subtracting the current Open price. I used it on EUR/USD H1 chart, but I believe that it can be used on any other currency pair and timeframe. It consists of two .mq4 files:

The first file is StatGathererExample.mq4 — as it appears from its name, this MetaTrader EA will only gather statistics. Run it via strategy tester on a 1-2 year history period (it doesn’t have to be a good quality history, because it has nothing to do with price ticks, and uses just your OHLC data from bars; just be sure to have enough bars in your chart). This EA gathers statistics over a period of time and stores it to MapPath file («rl.txt» by default) in your /tester/files/ directory. Copy it to /experts/files/ for further use by the actual expert advisor.

And the second file is StatRunnerExample.mq4 — this EA is used for the actual trading and on-the-fly statistics gathering. This EA uses MapPath file («rl.txt» by default) from your /tester/files/ (for strategy tester) or /experts/files/ (for actual use) to get the initial statistics. It also continues to gather its own statistics and appends it to the initial file, saving it after deinitilizing.

You can freely use these examples to construct your own statistical Forex systems. I am also currently developing a statistical expert advisor that would be profitable and I promise to share it after the testing period.

Tags: download, expert advisors, Forex system, MT4, statistics

In one of the previous posts I’ve introduced the statistical Forex system definition and marked up the important problems that should be solved in the process of its creation. Here I will try to explain more about the problem of the statistics gathering.

Choosing the timeframe for the statistics that will be gathered for your system consists of two parts — choosing the chart timeframe discreteness and choosing the length of the period over which the statistics will be gathered.

Choosing the right chart timeframe is a matter of balance between the uninformative short-term data with many samples and the small quantity of the more specific information. If you choose a tick or 1-minute timeframe discreteness you’ll have to face a large amount of data and a lot of CPU power used up on gathering, calculating and finding this data; finding some patterns in these vast arrays of information wouldn’t be an easy task and the further strategy building will very complicated in this case. On the other hand, using daily or weekly periods will give you too little information. For example, one year of the market analysis of D1 charts will give you just a little more than 200 data samples. In my opinion, considering the 24 hours a day and 5 days a week nature of the Forex market, the best choices here are M30, H1 or H4 timeframes as they give you a fair amount of samples with a decent informativity, because such samples will have a greater variation. Alternatively you can use multi-timeframe statistics, but that would lead to a really complex system, which, of course, will have a better potential.

Sampling period’s length is an important parameter of the statistics gathering. Using a small period will allow you to recognize the most up-to-date rate patterns and your strategy will probably benefit from them in the short to medium term. Unfortunately, short sampling period can contain too little of these patterns and if the market changes they will probably fail to help with the recognition of the changed price dependencies. Long sampling period will give a very wide array of patterns which can be used in comparing. But the difference between the market today and the market several years ago can bee too large, so those patterns can lead your system to a high inaccuracy ratio. Getting statistics over the past 2-3 years is a balanced decision here. You catch more than one long-term trend and you get a lot of the medium- and short-term trends caught into your statistics with such period, while really outdated data isn’t spoiling your statistics.

Of course, these decisions should also depend on your system, the nature of the data you will be collecting and the timeframe that it will use in the actual trading. But don’t forget the negative and positive sides of the different data timeframe and the sampling periods — try to avoid the extreme values that could possibly ruin your strategy.

Tags: forex strategy, Forex system, statistics

Earlier I’ve described the statistical Forex systems and introduced the problem of choosing the right timeframe to gather the statistics for such systems. Today I will try to describe the problem of choosing the right information that is collected for the statistical trading system. Gathering the statistics over a chosen period of time for the given market instrument is the next step to create a successful statistical Forex strategy. But what data should be used for this statistics? Is it a good idea to record bare chart data? Should you gather any additional information? Here is my view on all possible statistics type that can be used in the process: Pure market quotes. This includes high, low, close and open rates for bars and bid or ask rates for ticks (if you think that tick-based statistics is a good idea). This method of statistics gathering is the most obvious. You gather the market quotes then compare them with the current situation and decide whether to buy, sell or hold. But there is a problem with the changing of quotes range. For instance, 1 year ago EUR/USD was in 1.4000-1.5500 range, a month ago it was far above 1.5500 level, so the data gathered in another price range would be completely useless. Alternatively a normalization of some sort can be used to store such statistics — e.g. store not a quote like 1.5404 but its relation to the next bar’s open price — 1.5404/1.5423 = 0.998768073. This way you’ll have data that is informative in any price range, but still uses no indicators or other complex calculations. Indicators. These are probably the best data to be recorded as the statistics. Even standard MetaTrader indicators allow recording a lot of information and then using it to compare with real-time current market situation. With a large part of the indicators the normalization similar to the one used with the raw market data will be necessary. It’s probably a good idea to use indicators that change in the certain range — like RSI, DeMarker, Stochastics, Larry William’s Percentage Range, Money Flow Index, etc. The length of the arrays of the indicator values recorded for each tick or bar is also an important parameter of the statistics gathering. Remember that the longer this length is the more uninformative this statistics becomes. Ideally, it’s better to use single value of each indicator that is unique for the current bar or tick. Additional information. It can include the time of the day to capture the trends and patterns that are specific for some trading sessions only. Another parameter that fall into this category is the day of the week — trading usually differs depending on the busyness of the day (often with less price action on Fridays). The statistics can also note if the day is some major holiday, current daylight saving time mode for the major countries and the volumes of the trades (although in Forex they are not very informative). Complex calculations. This can include not only calculations based on the market data and indicators, but incorporate the additional information such as time and the day of the week into the calculations. In this case the produced number-formatted statistics would be easy to compare to the real market data. Considering the current development level of the PC industry it wouldn’t be a hard task to incorporate even the most complex calculations in the MetaTrader expert advisor that utilizes a statistical Forex strategy. Additionally these calculations can be accompanied by the various pivot points and resistance/support levels to help with choosing the position’s parameters.

Tags: Forex system, Metatrader indicators, statistics

EUR/USD continued to fall today after a very sharp decline yesterday. Many traders got surprised by the ADP employment report, which helped to strengthen the dollar, but the greenback gained even before the report release. This is the second day this week when EUR/USD falls. Monday gave some uprise to this currency pair, but it’s nothing compared to the current decline. EUR/USD is currently trading near 1.5542 level.

ADP employment report showed that the nonfarm private employment increased by 9,000 from June to July after having decreased by 79,000 a month ago. The median forecast for the change in June was -60,000 — so, that’s quite a nice surprise for every dollar bull-trader.

Crude oil invetories dropped 0.1 million barrels last week and are in the lower half of the average range for this time of year. Last week they lost almost 1.6 million barrels.

Tags: ADP employment, crude oil inventories