Technology advances like the internet have spawned a new craze, where anyone with a secure internet connection prepared to undertake a small amount of training can engage in trading foreign exchange on the forex market.
Just as a day trader will closely track stock price movements on the Dow Jones Industrial Average, all over the world forex traders monitor currency fluctuations in a similar fashion.
Forex traders have the aim of using the smallest amount of one currency, say the US dollar, to purchase another currency like the British Pound. If supply of the pound lessens in a busy market, it will cost more dollars to buy pounds, and the forex trader hopes to sell their pounds at a higher than their purchase price. In many respects, this type of trading behaviour is very similar to trading in stocks, where the aim of nearly all traders is to buy low and sell high.
The trading process works under a bid/ask system. In the above example, a forex trader might bid 10 dollars in return for 5.7 British pounds, and the seller of the pounds could be asking 11 dollars for the same amount of pounds. If the seller accepts the bid, the trader then hopes the pound continues to increase in price, so that when time comes to sell, they can get in excess of the 10 dollars initially paid.
As only registered traders have access to this auction process, most online speculators will trade through a bank or broking house. Such brokerages charge a commission for facilitating the trades, and forex traders should consider these transaction costs when calculating their selling offer when time comes to exit their position, as this will influence their profit margin.
The global foreign exchange market can trade in excess of a trillion dollars a day. Sheer market size means there is considerable money to be made, and lost, through miscalculation. It is neither a guaranteed, nor easy path to riches, so traders should be educated in how to play the market. Instructional packages are available, and should be carefully reviewed as they can easily range in quality and price.
Forex Avenue: The Road to Riches
In my continuing quest to provide visitors of my site with a large amount of options to chose from when considering working from home I have done some research on Forex trading. I first learned of Forex trading while pursuing my MBA program. For those of you who have never heard of this, Forex trading is the exchange of foreign currency.
I know I would have never even know this was an option for making money had I not found out in class. Most of the really big corporations have departments of people that do this for a living because it can be very lucrative if done correctly. The best news I have learned about this process of exchanging currencies is that many of the websites that you can sign up with to do this offer free trial accounts to help you learn before you invest your money into trying it. You won’t make any money in the trial accounts if you do well, it is just pretend money essentially but with the real market conditions. If you do well in the trial account you will know if this is something you want to try on your own.
Benefits to Forex trading are that is can be done 24/7 whereas the stock market is a business hours only exchange. It is 24/7 because it is done with countries around the world so clearly there are countries that are awake and working while we sleep. Another benefit is you are in control of the trading on your account. You do not need to hire a licensed broker to make your trades and charge you fees. Along those same lines, anyone who does any investing most likely knows that some funds require you to own then for a certain period of time or pay early withdrawal fees. You do not need to concern yourself with this either. One last benefit that I would like to point out is the fact that Forex is not really subject to the same kinds of swings in the market that stocks are subject to. Of course if you always buy and sell the same currencies then there will be market swings. But, because there are hundreds of currencies out there, there is always going to be something for you to make money on because while one currency is up in value another one is down and vice versa.
I know I would have never even know this was an option for making money had I not found out in class. Most of the really big corporations have departments of people that do this for a living because it can be very lucrative if done correctly. The best news I have learned about this process of exchanging currencies is that many of the websites that you can sign up with to do this offer free trial accounts to help you learn before you invest your money into trying it. You won’t make any money in the trial accounts if you do well, it is just pretend money essentially but with the real market conditions. If you do well in the trial account you will know if this is something you want to try on your own.
Benefits to Forex trading are that is can be done 24/7 whereas the stock market is a business hours only exchange. It is 24/7 because it is done with countries around the world so clearly there are countries that are awake and working while we sleep. Another benefit is you are in control of the trading on your account. You do not need to hire a licensed broker to make your trades and charge you fees. Along those same lines, anyone who does any investing most likely knows that some funds require you to own then for a certain period of time or pay early withdrawal fees. You do not need to concern yourself with this either. One last benefit that I would like to point out is the fact that Forex is not really subject to the same kinds of swings in the market that stocks are subject to. Of course if you always buy and sell the same currencies then there will be market swings. But, because there are hundreds of currencies out there, there is always going to be something for you to make money on because while one currency is up in value another one is down and vice versa.
Forex Currency Trading, A Great Work At Home Opportunity.
Everyday more and more people looking for a work at home opportunity and the possibility of braking free from the corporate world without losing their current lifestyle and even improving it, realize that the world of forex currency trading could be the answer to what they have been looking for.
Some of the great reasons why FOREX trading is such a great way of entering the capital markets are; it's easy accessibility thanks to the widespread use of the internet, the fact that currency trading is all commission-free and also the low transaction costs involved. All the best forex brokers will facilitate you a trading account with these characteristics and even Mini Forex traders (i.e., traders starting with accounts having a capital as low as $250), who are just starting in this field, can buy and sell currencies online always commission-free.
When trading the forex markets you don't have to worry everyday about fees you may have to pay your broker; there are also none of the usual fees to which futures and equity traders are used to pay every day the enter a trade; no exchange or clearing fees, no NFA or SEC fees.
You may be asking how forex brokers make money if they don't charge you fees for placing trades. They make money thanks to one characteristic of currency markets, this is, they are over-the-counter markets and trading them involves a bid/ask spread and that's how the brokers make money. Thankfully the currency markets are capable of offering you a round-the-clock liquidity and this way you will receive tight, competitive spreads both in intra-day and night trades, without worrying about having big spreads in prices.
Once you have decided to enter and learn how to trade forex, always remember that practice and more practice makes the master and one of the best ways to get a feel for the market is to paper trade. No one wants to experiment with their own hard earned money; this is why many brokers came up with an innovative idea that would take all the risk from trying out forex trading. This way of trading is called simulation trading or paper trading as mentioned above, and the premise is simple. The program is an exact copy of the broker or trading systems real-time trading program. The main difference is that they allow you to “play” the market just as you would if you were actually investing, but obviously without the persistent worry of losing your money. You can do a simulation trade with a set amount of money, usually around $50,000 dollars. You can practice setting bid and ask prices, and using their various analysis tools provided by the broker software, which is the same you would have in a real account.
From all these facts you can see there are many advantages, and lots of money to be made, if you decide to enter the world of forex currency trading and learn the basics of the markets behavior.
Some of the great reasons why FOREX trading is such a great way of entering the capital markets are; it's easy accessibility thanks to the widespread use of the internet, the fact that currency trading is all commission-free and also the low transaction costs involved. All the best forex brokers will facilitate you a trading account with these characteristics and even Mini Forex traders (i.e., traders starting with accounts having a capital as low as $250), who are just starting in this field, can buy and sell currencies online always commission-free.
When trading the forex markets you don't have to worry everyday about fees you may have to pay your broker; there are also none of the usual fees to which futures and equity traders are used to pay every day the enter a trade; no exchange or clearing fees, no NFA or SEC fees.
You may be asking how forex brokers make money if they don't charge you fees for placing trades. They make money thanks to one characteristic of currency markets, this is, they are over-the-counter markets and trading them involves a bid/ask spread and that's how the brokers make money. Thankfully the currency markets are capable of offering you a round-the-clock liquidity and this way you will receive tight, competitive spreads both in intra-day and night trades, without worrying about having big spreads in prices.
Once you have decided to enter and learn how to trade forex, always remember that practice and more practice makes the master and one of the best ways to get a feel for the market is to paper trade. No one wants to experiment with their own hard earned money; this is why many brokers came up with an innovative idea that would take all the risk from trying out forex trading. This way of trading is called simulation trading or paper trading as mentioned above, and the premise is simple. The program is an exact copy of the broker or trading systems real-time trading program. The main difference is that they allow you to “play” the market just as you would if you were actually investing, but obviously without the persistent worry of losing your money. You can do a simulation trade with a set amount of money, usually around $50,000 dollars. You can practice setting bid and ask prices, and using their various analysis tools provided by the broker software, which is the same you would have in a real account.
From all these facts you can see there are many advantages, and lots of money to be made, if you decide to enter the world of forex currency trading and learn the basics of the markets behavior.
Forex Trading Guide
Like many people I am sure you are interested to know more about Forex trading. To put it bluntly Forex trading can be either one the best ways to make or lose LOTS of money. Only those who take the Forex market seriously will be able to make money with it in the long term. The Forex trading market is beyond a doubt the world’s largest market where all exchanges happen instantaneously. Thus, trades are a key challenge for even the most knowledgeable Forex bankers and traders. They have to learn and consider many factors before performing even a single trade. At first when currencies began to be traded openly, only large banks were allowed to perform trades. These days, due to the advent of internet trading and margin accounts almost anybody can begin Forex trading. This in turn, has added to the liquidity of the Forex market, and has resulted in a huge increase in the number of individuals who are now active in the market. So, does this mean it is easy to earn money through Forex trading? To answer this we must consider a few things. Some data by Forex brokers seems to suggest that 90 percent of traders end up of losing their capital, 5 percent of traders have been able to break even and only 5 percent of them attain steady beneficial results. Thus, it seems that trading successfully is no simple task. However, if you can learn to be among the 5 percent who make consistent money you can do extremely well by using Forex trading. To help you in this end I have listed five key ways to improve your odds dramatically of making money in the Forex market. 1. Education Successful traders are knowledgeable about the Forex market. They have chosen to educate themselves about every single vital detail of Forex trading. The best traders know that every trade that they perform is an opportunity to learn something new. 2. Forex Trading System All of the profitable traders have a Forex trading system or strategy. Furthermore, they have the will power to stick strictly to that system, because the best traders know that by sticking with their system they stand a far greater chance of earning money. 3. Price Behavior Knowledgeable and successful traders also include price behavior in their systems. They have learned that prices can change quickly and suddenly but are prepared to deal with those situations when they arrive. 4. Trading Psychology First-rate traders are aware of psychological issues that affect the choices of other traders make when Forex trading. They know that people do not always act rationally, and as a result this can alter the expected outcome of a trade. This can help them both when deciding to enter into a trade or when to exit. 5. Money Management This is far and away the most important factor that will determine whether or not you become a successful trader. Averting the hazard of financial ruin is the main concern of all top traders. This means both adequately funding your trading account (only with money you can afford to live without of course) and never entering into trades that can potentially wipe out all of your assets. Better to start trading small and always use stop-loss orders to guarantee that your first trades are not also your last. This is by no means an exhaustive list of everything you need to know but it outlines some of the areas you need to consider before making even that first trade. Now you know that it is not easy to earn money in the Forex market, however it is achievable. However, success does not happen overnight and anyone promising you that it can is trying to sell you snake oil. It is an ongoing processes not something you pick up in a weekend. Trading success depends on the trader, and how hard you are willing to work to achieve your Forex trading goals. Also, remember to try to have some fun. The clearest sign that Forex trading is not for you is if you find the prospect of learning about how the Forex market works boring or dull. If this is the case you won’t stick with it long enough to make money and you will be among the 90 percent who fail. Just remember these three important things: be disciplined in your trading habits, manager your money wisely and enjoy the experience of Forex trading.
The Dangers Of Highly Leveraged Trading In Forex
If you are a forex trader considering one of these '400-1 leverage' offers, you should first know: 1. The rules of the game you are about to play. 2. About leverage in Forex and how it works, not for you, but for the broker. Here is how it works: Leverage can be beneficial but it can be your worst enemy. 400-1 means that US$1000 can control a $400,000 position say against the Yen. This is great but it also means that even a small move against your position can wipe your account clean. This is obviously very bad news for you but great news for the broker! Why Is It Great News For Them? Well, the first thing that traders must realise is that Forex firms make their own markets - they make the bid-offer price to clients. They use the assumption that as most highly leveraged speculators lose then it's good business to take the opposite position to them. This is done automatically, so when a client buys Dollars against the Yen, the broker sells short the Dollar. When the client covers the position (either for a profit or loss) the broker is taken out also. If the client wins the broker loses and vice-versa. This is how the leverage game is played. So, who do you think usually wins in this game? No, not you. It’s the broker. It’s a statistics game and the statistics say highly leveraged speculators lose. Ok then. If the brokers stand to gain when a client loses, what is the best way to make sure that the clients lose Bigtime? Easy, let them trade huge positions on a limited amount of capital so that the odds even for the best and most talented traders are pretty much - ZERO. Why do you think that the ads of '400-1 leverage' are splashed all over the brokers websites? They are selling you the supposed ‘benefit’ when in turn, the reality is that the only ‘benefit’ is to them. Conclusion: If you want to play the leverage game in forex, understand how the game works. The game basically works this way: The broker is the shark. The retail trader is shark food. If you are serious in your quest to make money currency trading – educate yourself on the risks involved.
“Stop Hunting” - a Simple FOREX Strategy
Today FOREX world is built around large leverage and constant use of margin, in equities, standard margin is set at 2:1, in options, the leverage increases to 10:1, in the futures market, the leverage factor is increased to 20:1, but in the FOREX market the leverage sets the highest bar by increasing to 100:1 ratio and can climb up to 200:1 meaning that you can invest $100 for a $20,000 value control! An experienced trader would limit his leverage to no more than 10:1. Alongside leverage usage, or as in many FOREX rookies’ cases using too much leverage, comes the opportunity for either extremely profitable or extraordinarily dangerous and huge loses. You can double your account overnight or lose it all in a matter of hours if you make use of the full margin at your disposal. Considering that fact, most FOREX traders use “stops” order / “stop-loss” - they simply do not have the luxury of nursing a losing trade for too long because their positions are highly leveraged, and here you can step in and take advantage of this knowledge. Stop order in a nutshell is a form of insurance or security measure that is given to buy or sell when a currencies' price surpasses a particular point. Using stop loss is critical for long-term survival. By setting a predetermined entry or exit price, investors usually use this system to minimize their loses when off for the business day or any other situation in which they are unable to monitor their portfolio for an extended period. The main FOREX strategy which takes advantage of this knowledge is “Stop Hunting” , which attempts to force some foreign currency exchange investors out of their positions by driving the price of a currency pair to a level where many investors have chosen to set their stop-loss orders (aka “weak longs”), by understanding that the human mind naturally seeks order, most stops are clustered around round numbers ending in "00" (i.e. if the EUR/USD pair was trading at 1.1380 and rising in value, most stops would reside within one or two points of the 1.1400 price point rather than, say, 1.1417). Absorbing that fact alone is priceless knowledge (the price of a currency pair can experience sharp moves when many stop losses are triggered); professional traders place their stops at less crowded and more unusual locations. The possibility of profit from these unique dynamics of the foreign currency market is huge and proven.
A Synopsis Of What It Takes To Trade The Forex Market With Success!
This is the first article of a series whose purpose is both educational and practical.And above all they aim to be interactive meaning that any comments suggestions or ideas are more than welcome. Lets start from the basics.The first thing someone needs is very good education.And this requires a lot of thorough research as there are many sources but not all are worth the money for their services.So in this sense an online forex course could be a good idea along with some books.But here comes the first major problem.Which course and which books,which aspects to cover?The technical analysis issue?The maxim go with the trend?The candlesticks analysis?And which system to use and follow?There are thousands of them!So before we even begin a trader is confused.And confusion is a very bad enemy but it can be arranged.How it can be arranged?With some simple steps.Such as simplicity.The more you know the better chances you have to succeed trading forex and it all comes down to probabilities. Education is a must to all trading aspects from stocks to futures to forex.But forex has two unique features.High liquidity and extremely high leverage.And although the liquidity is a very good feature high leverage is not.At least not until you know what you are doing.Here we focus again on education.Besides a participation in a forex course either online or not,an amount that will be put away as an investment for education is the first thing a trader must do.Some ideas are to focus on analyzing the current conditions of the market and to have a bias for a specific currency pair.A system such as following the trend could be the core of a trading strategy.And a demo account with many virtual trades as many as possible for a long period of time is the next step. Now the most important part of the trading action is to make a plan,stick to it and apply very strict money management rules because if the capital is finished and it very easy this to happen then our trading career will finish within a few days,months or even hours. Lets face the truth that trading is not easy.It is unfortunately far more easy for someone to lose all his account rather than make wild profits beyond each expectation.That is because emotions and psychology are very crucial for success.Some of the most important emotions are fear,uncertainty,euphoria and revenge.Revenge comes into play very very often as when someone loses an amount wants desperately to get it back and often the outcome is that more loses come simply because the trader is on the wrong side of the trend! Discipline and patience are virtues that distinguish a good trader from a mediocre trader.Without specific goals and a written procedure a trader is like a cargo ship that has sailed without any destination.Someday the fuel will be exhausted and many dangers from the weather to the potential physical damages may happen.Risks exist all the time.The point is how to deal with them. One of the most useful phrases is taken from the movie Forrest Gump.Life is like a box of chocolates,you never know what you gonna get! It is true.Be as prepared as possible.Do not let the brokers excite you promising very high returns and extremely high leverage.Do some very thorough research before opening an account funded with real money.Compare the bid-ask spreads and technical support to name only a few aspects. Be very skeptical to previous results as offered from many signal services.The major aim should be to learn to trade and make your own decisions and not blindly follow some others decisions and opinions. Confidense and experience come with the passage of time. So we mentioned simplicity before.Being realistic and having a controlled life balance is very important.One major goal should be consistency so as to have the ability to make profits each month and keep them. Fundamental news are another important issue and in essence the technical analysis is the mirror of fundamentals.Expectations change rapidly and emotions also.And if you think about it emotions and expectations mainly move the forex market.Most times like the recent Fed rate hike decision a move is under way but the danger is when it will be finished and certainly not getting in at the wrong time after all the move is completed. The best approach for a trader would be to set specific goals and if achieved then stop trading.The worst idea is to trade in a choppy market where random noise will make it difficult to get specific profits. So a tested system with very precise rules such as entering exiting and having stop-loss orders may not be a holly grail but is surely one very good approach to start with and focus on it.Pivot points are such a system.At least it is a good start.They encompass education,discipline,strict criteria,targets and are a proven system that major players use.They are not foolproof always as nothing is certain but they deal with high probabilities and this is very important. Also a very practical way is to act as organizes as possible.Meaning that : 1.Develop your own trading journal where you will be writing down your trades and a brief explanation of what made you place a particular trade so as to evaluate performance.Note each day the major economic releases if any because it is often wise to be out of the market before the release of the news and trade only after having a much clearer opinion of what price action may be.Remember it is all about high probabilities. 2.A risk/reward ratio of 1:2 meaning that you risk an amount to get at least the twice if all go well is suggested but sometimes it is best to be conservative and even apply an 1:1 ratio by applying very strict risk management risking no more than 2-3% of total capital per trade.Survival is everything. 3.It would be a good idea from time to time to have breaks from trading.Opportunities exist always so stopping trading when losses of 10-20% maximum of trading capital have accumulated is a good way to revaluate what is going on before a large amount of capital is lost.Trading is not gambling it is a way of investment.The philosophy should be to define realistic goals such as a number of pips per day and if achieved then stop trading.Greed is another bad enemy of traders.On the contrary the notion of compounding profits and retiring a portion of them each month is a good way to build a solid account and keep monitoring its growth. So in this first article we touched briefly many ideas from education to psychology to a proven trading system etc.Each idea will have more in depth analysis in the very near future.Your comments and suggestions will help us a lot to focus on what you need or want to analyze.Above all interactive communication brings the best results.
Earn Unlimited Money Trading in Global Forex
Global money trading involves the buying and selling of world's currencies, par excellence the most formidable ones on the fx markets. Initially only the privileged few like the enormous banks and big shot financiers had access to this remarkably lucrative market. But with the ubiquitous presence of internet, the suitable time for trading in global forex is not restricted in the hands of the big players. The hobby investors can also tap the high profit potential of the forex market to make some great money. There are some typical advantages related with trading money in the global forex market that has made it the world's largest money spinning market. foremost of all, while the national stock market operates with work hours, the Global forex stays open 24 hours a day. The fx-market opens every day in Sydney moving westward as the day advances. A truly globalized market, the trading moves around the globe as the trading opens in each major center, first to Tokyo, London, and New York. Thus, unlike any other financial market, you can instantly correspond to any type of fluctuations in any currency followed by economic, social and political events. And you can easily take decision the time they occur---day or night. Unlike the domestic stock market, you do not have to deal with a share agent and do not have to pay any commsiion for making the trade. The FX market is Over the Counter type of market. It operates on the 'interbank' basis. Thus transactions are conducted between two parties in two different parts of the world via internet or over the telephone. Then leverage is also essentially high in this market and practically you can make deals 100 times greater than the value of your deposit money. You do not have to be present in person in the market to carry on the trade. As this market is not like any other markets you can think of. Trading is not restricted to any centralized location. Trading occurs worldwide and Forex is the world's largest and most intense market. The currency trading involves the business on the spot between the US dollar and the six major currencies (Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar). Thus it is a enormous market which can not be controlled by any single factor or player. There is impossible for one man to control and manipulate the market in his favors. This trait makes it the most exciting market in the world. beside the major players like Central banks, private banks, multinational corporations, and money managers the little man in the street can also make unlimited money in the forex market. So you can clearly see that there are significant opportunities of making money in this biggest market of the world. But there are risk factors as well. The aggressive day traders might experience substantial profit-loss swings per day. Fortunately, there are no daily limits on foreign exchange trading and no restrictions on trading hours other than the weekend. This implies you will always get an opportunity to react to the particular trends and a lower risk of getting trapped into bad deals without the opportunity of getting out.
Success On Forex With Forex Trading Strategies
To become involved in the wonderful and sometimes addictive world of Forex, you will need to have a strategy in place to succeed. There are many forex trading strategies that will help you to push forward in the game, it is just a matter of going out there and finding one that works for you. To begin with, it is wise to consult with the experts about various forex trading strategies that might help you understand the Forex trading system a bit better. You can find many online forums that will help and you can take part in seminars where highly experienced instructors will explain the whole system and various strategies in detail. You might even be able to practice some of the forex trading strategies with a demo account. You must also understand the forex charts in order to gain information about certain trends. This is probably one of the most important factors in forex trading strategies. Once you understand the way trends are moving and changing, and you are able to recognize and predict the patterns within these charts, you are well on your way to begin trading with success on the Forex. Some strategies are very technical and require practice and understanding initially. At least at first, do not think that the forex is a way to get rich quickly. Initially, quick riches may not be possible as the exchange rate fluctuations will be slight, and it will take time for you to get the hang of it and make profits. Also be prepared, because you cannot win all of the time. Hopefully by using some of the online forex strategies you will win more often than not. One of the forex trading strategies that you can start with is to learn which markets or trends to target. After learning a little bit more about the forex, you should be able to choose a market or trend that is more likely to be profitable. Be careful not to put all of your cash into one trend though, as this could backfire. Rather put smaller, more logical amounts of money into different trends so that you have a better chance of at least some of your investments profiting. If you have any doubts at all about the forex trading strategies and trading on a specific trend then listen to your instincts. You should feel 100 percent comfortable with everything that you are trading on and not have any hesitations at all. If you don't feel comfortable, then make sure you learn as much as you can before you begin trading. Information is king, and the more you know the higher your earning potential.
Momentum Trading
One of the most basic and widely used indicators is that of momentum. Before I go on to tell you how we can use the momentum indicator to trade with, I want to explain the difference between a leading and a lagging indictor.Nearly all indicators are lagging indicators. That is to say that the price must first move in order for the indicators to react. So you will inevitable get a situation e.g. where the market will rise shortly followed by the indicator. This is where the term lagging comes form in trading.On the other hand, an indictor that forecasts the move before it happens is called a leading indictor. If for example the indictor peaks and then turns down before price peaks and turns down then that would be a leading indictor.You can use most indicators as both depending on how you mix them with time frames and settings. The reason I mention this is that momentum can be a very good leading indictor when used in a particular way.Let's first talk about what a momentum indictor is - simply a visual reference point of whether a security is rising or falling and how fast that rise or fall is. Construction of the indictor is simple - just subtract the close of the security X (whatever period you want)days ago from today's close.The resulting number can then be plotted around a zero line. For example let's say we were looking at a 10 period momentum indictor. You would simply deduct today's close from the close 10 days ago. If the close was higher than the close 10 days ago then it would be plotted above the zero line. If on the other hand the close was lower than the close 10 days ago, the it would be plotted below the zero line.As you would expect - if the momentum line is rising and above the zero line we can interpret that as a strong bullish trend. If the momentum line is below the zero line and falling we can interpret that as a strong bearish trend.As you can see from our first chart, momentum can be a ver y good confirmation indictor. If you were using a moving average or a trend line to help determine trend, then a cross above or below the zero line could be just the confirmation you need.In the example above I was using a 34 period exponential average of the close. Price came back up and closed above the average and shortly afterwards the momentum indictor also closed above the zero line confirming the move. Not only that but the momentum line has remained above the zero line since the cross over. This would give you confidence that the trend is still in force.In our next chart there are two important points I want you to take note of - the first is that of divergence.Divergence is when an indictor does the opposite of what the price on the chart is doing. In our example the momentum indictor started to turn down but the price continued up. This is bearish divergence. Often when this happens it is an early warning that the market is in an exhaust move. The indictor is giving us an advanced warning that the market might be getting ready for a move in the opposite direction from which it was previously heading. The opposite is obviously true for bullish divergence.Next I want you to look at the three points I have marked as extreme on the chart. For get the reading at these points - visually you can see that the three points are lower than the other points around them. When you have an extremely low reading in an uptrend then you have a good trading opportunity to go lon g. If you h ave an extremely high reading in a downtrend then you have a good opportunity to go short.You could further confirm this by a shorter moving average crossing a lon ger aver age or as I have done with a little trend line. Nice, simple technique that will keep you on the right side of the trend and give you some great entry points.
High Low Breakout Technique
This technique can be used for any market that has a decent daily range. If you look at any chart, what do you see? You should see a succession of bars that are doing one of three things. 1. Going up 2. Going down 3. Going sideways Unless today's bar turns out to be an inside day or very rarely the high and low of today are exactly the same as the high and low as yesterday, then we will have a new high or low. Think about it. Today's bar, in all probability will make a higher high than yesterday's bar or a lower low than yesterday's bar. This information is very powerful.For example, company XYZ had a range of 200 points (high minus the low) yesterday. Today the high might be 50 points higher than yesterday's bar or 50 points lower than yesterday's bar. If we can find the average daily distance between the high of yesterday's bar to the high of today's bar and the average daily distance between the low of yesterday's bar and the low of today's bar, then we might have a trading opportunity. Make yourself a little excel sheet or grab a pen and paper and start tracking the high and lows of each day. Then deduct the high of today from yesterday's high and the low of today from yesterday's low. After you have a few days worth of data you can get an average. On the excel sheet, below the first five columns are the date, open, high, low and close. "DR" is daily range, "TH-YH" is today's high minus yesterday's high and "YL-TL" is yesterday's low minus today's low. In the "TH-YH" column, I only record an entry if today's high is greater than yesterday's high and in the "YL-TL" I only record an entry if today's low is lower than yesterday's low. All pretty simple stuff. OK, as you can see, the example of the GBP/USD (Pound/Dollar). The average breakout up was 54 pips and the average breakout down was 60 pips. The next thing to do is apply this knowledge to our trading.On the 2nd September the high was 1.7972 and the low was 1.7864. We are looking for a breakout of either of these points. It doesn't matter which way. So on the 3rd September you mark the previous day's high and low and monitor what happens when it reaches these points. The way I trade this setup is to wait for the market to test the low or high of the previous day and then pullback. I don't enter on a break of the previous day's high/low, I wait for a pullback of either a test of the high/low or a break of the high/low. As you can see from the chart, the market came down and tested the low of 1.7864 and then pulled back. The low that was made was just a few pips lower than the previous day's low and formed a little support area. That support area is the breakout point. You can place an entry order a couple of pips below the support area with a target of the average "YL-TL" as a target, which in this case was 60 pips. The stop is a bit more tricky. If the pullback is not too big you can place your stop just above the pullback area (resistance). If the distance is too great, then just use Dollar stop. You can even take this down to a 1 minute chart and scalp the market with a very tight stop. There are loads of ways to trade this setup. You could add some indicators for confirmation. You could use the entry as setup for a position trade. You could even concentrate on inside day's where the breakout might have a much larger range. However you decide to trade it, at least take note of the previous day's high and low.
Intraday Trading Tactics
In this lesson I want to discuss intraday tactics that you should be aware of when you start to trade intraday.By intraday I mean very short time frames such as 1 minute, 5 minute and 15 minute charts. This will apply to traders who actively trade and probably trade frequently during the course of the day.Regardless of what technique you use to enter and exit the market this approach will aid you in deciding if you are on the wrong or right side of the market.The first thing you should do when trading intraday regardless of the security is to have some general idea of where the market has been recently. You cannot of course start the day with a strong directional bias. The reason you cannot start the day with a strong bias is that intraday the markets can be very volatile and if you have stubbornly decided the market will go one way and it starts to go another you will find it difficult to change direction. This is because you will try and convince yourself that the move against you is temporary.To overcome this directional bias I use the following discipline to help tell me when the market is doing something different from what I expect. To analyze the market first think of what happens in a typical up trend or down trend.Let's say that in an up trend the last two-day have made higher highs and higher lows. The close has also been higher for the last two days.In order for that little up trend to continue what should happen? For the up trend to continue on day 3 you would expect a higher low, a higher high and a higher close right! So lets look at what should happen on the third day. On day 3 I would first like to see a low in place in the early part of the day. I often find that when an up trend is continuing the low is made first. In a down trend I like to see the high of the day made in the early part of the session.As you can see from the chart above of day 3. We had the open then early in the day a low was made. As the d ay progressed the high of the day was made towards the later part of the day and then finally the close.So how does this information help me? Well, if for example the low of day three continued lower than the low of day 2 I would begin to wonder if the market was retracing or reversing.If the low of day three took out the low of day 2 when I expected it not too I would stand aside until I had a clearer picture of where the market was headed. It may just be that the market will continue up after making a low lower than day 2 but why take the risk.I also like to see the low of day 3 tested in some way. As you can see from the chart the low was made then the market made some progress upward and then came back down to near the newly formed low where it found support (buyers).This for me is a great indication that there is some demand at that level and gives me an opportunity to enter th e market with very little risk as I can place my stop under the newly formed low.As openings can be volatile I like to watch the first 30 minutes to 60 minutes to see how the market is shaping up before taking a position. I start with no definite directional bias but I am aware of what has been happening in the last few days and if it does what I assume it will do then I am ready to take action.If it does not do what I assume it will do then I know that I may have miss-read the market and am ready to rethink my tactics for the rest of the day. As you should know by now the market is always right so its OK to have an opinion but don't get married to it. If the market takes out the low of day 2, stand aside and rethink your approach for the rest of the day particularly if the move is a strong move in the opposite direction from where you thought the market would go.The one thing you shouldn't do is wake up thinking that the market is going up (or down) and just keeps trading in that direction. Don't fight the market, it will always win. Just go with the flow and realize when you are not going your way.
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