Technical Analysis

Technical Analysis Presented in cooperation with Forex-Training.com

Technical Analysis is probably the most common and successful means of making trading decisions and analyzing forex and commodities markets.   

Technical analysis differs from fundamental analysis in that technical analysis is applied only to the price action of the market, ignoring fundamental factors.  As fundamental data can often provide only a long-term or "delayed" forecast of exchange rate movements, technical analysis has become the primary tool with which to successfully trade shorter-term price movements, and to set stop loss and profit targets.

Technical analysis consists primarily of a variety of technical studies, each of which can be interpreted to generate buy and sell signals or to predict market direction.  

Click on the technical study below for a definition and to learn how it may be applied to trading:

Bollinger Bands

Moving Averages

Parabolic SAR

MACD

RSI

Momentum

Stochastic

Slow Stochastic

CCI ("Commodity Channel Index")

ATR ("Average True Range")

Rate of Change

Standard Deviation

Most of the studies listed above are generated automatically by the charting software available on this (Forex Charts).

Additional training from http://www.forex-markets.com/training.htm

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Trading Strategy and Decision Making

Trading Strategy and Decision Making Presented in cooperation with Forex-Training.com

Making trading decisions and developing a sound and effective trading strategy is an important foundation of trading.  Before developing a trading strategy, a trader should have a working knowledge of technical analysis as well as knowledge of some of the more popular technical studies.  Please visit these pages for detailed information.
 

Sample Strategy 1 - Simple Moving Average

Successful trading is often described as optimizing your risk with respect to your reward, or upside.  Any trading strategy should have a disciplined method of limiting risk while making the most out of favorable market moves.  We will illustrate one decision making model which uses a Simple Moving Average ("SMA") technical study, based on a 12-period SMA, where each period is 15 minutes. This is one example of a trading decision making strategy, and we encourage any trader to research other strategies as thoroughly as possible.

We will use a simple algorithm: when the price of the currency crosses above the 12-period SMA, it will be taken as a signal to buy at the market.  When the currency price crosses below the 12-period SMA, it will be a signal to "Stop and Reverse" ("SAR").  In other words, a long position will be liquidated and a short position will be established, both with market orders.  Thus this system will keep the traders "always in" the market - he will always have either a long or short position after the first signal.  In the chart below, the white line represents the price of USDJPY, the purple line represents the 12-period SMA of USDJPY, and the red line indicates where USDJPY crosses above the SMA, generating a buy signal at approximately 129.90:

This is a simple example of technical analysis applied to trading.  Many strategies used by professional traders make use of moving averages along with other indicators or "filters".  Note that the moving average method has an element of risk control built in: a long position will be stopped out fairly quickly in a falling market because the price will drop below the SMA, generating a stop-and-reverse signal.  The same holds true for a sell signal in a rising market.  Note that the SMA is generated automatically by GCI's integrated charting application.

 

Sample Strategy 2 - Support and Resistance Levels

One use of technical analysis, apart from technical studies, is in deriving "support" and "resistance" levels.  The concept here is that the market will tend to trade above its support levels and trade below its resistance levels.  If a support or resistance level is broken, the market is then expected to follow through in that direction.  These levels are determined by analyzing the chart and assessing where the market has encountered unbroken support or resistance in the past.

For example, in chart below EURUSD has established a resistance level at approximately .9015.  In other words, EURUSD has risen up to .9015 repeatedly, but has been unable to move beyond that point:

The trading strategy would then be to sell EURUSD the next time it gets close to .9015, with a stop placed just above .9015, say at .9025.  This would have indeed been a good trade as EURUSD proceeded to fall sharply, without breaking the .9015 resistance.  Hence a substantial upside can be achieved while only risking 10 or 15 pips (.0010 or .0015 in EURUSD).

  Additional training from http://www.forex-markets.com/training.htm

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Forex Market Background

Forex Market Background

Presented in cooperation with Forex-Training.com

The global marketplace has changed dramatically over the past several years. New investment strategies are becoming more important in order to minimize risk, as well as to maintain high portfolio returns. Among the most rewarding of the markets opening up to traders is the Foreign Exchange market. Identifiable trading patterns, as well as comparatively low margin requirements, have rewarding trading opportunities for many.  

In contrast to the world’s stock markets, foreign exchange is traded without the constraints of a central physical exchange. Transactions are instead conducted via telephone or online.  With this transaction structure as its foundation, the Foreign Exchange Market has become by far the largest marketplace in the world.  Average volume in foreign exchange exceeds $1.5 trillion per day versus only $25 billion per day traded on the New York Stock Exchange. This high volume is advantageous from a trading standpoint because transactions can be executed quickly and with low transaction costs (i.e., a small bid/ask spread).  

As a result, foreign exchange trading has long been recognized as a superior investment opportunity by major banks, multinational corporations and other institutions.  Today, this market is more widely available to the individual trader than ever before. 

Spot foreign exchange is always traded as one currency in relation to another.  So a trader who believes that the dollar will rise in relation to the Euro, would sell EURUSD.  That is, sell Euros and buy US dollars.  Forex-Training.com has compiled the following guide for quoting conventions:

Symbol		Currency Pair		Trading Terminology
GBPUSD		British Pound / US Dollar		"Cable"
EURUSD		Euro / US Dollar		"Euro"
USDJPY		US Dollar / Japanese Yen		"Dollar Yen"
USDCHF		US Dollar / Swiss Franc		"Dollar Swiss", or "Swissy"
USDCAD		US Dollar / Canadian Dollar		"Dollar Canada"
AUDUSD		Australian Dollar / US Dollar		"Aussie Dollar"
EURGBP		Euro / British Pound		"Euro Sterling"
EURJPY		Euro / Japanese Yen		"Euro Yen"
EURCHF		Euro / Swiss Franc		"Euro Swiss"
GBPCHF		British Pound / Swiss Franc		"Sterling Swiss"
GBPJPY		British Pound / Japanese Yen		"Sterling Yen"
CHFJPY		Swiss Franc / Japanese Yen		"Swiss Yen"
NZDUSD		New Zealand Dollar / US Dollar		"New Zealand Dollar" or "Kiwi"
USDZAR		US Dollar / South African Rand		"Dollar Zar" or "South African Rand"
GLDUSD		Spot Gold		"Gold"
SLVUSD		Spot Silver		"Silver"

 
Spot Forex versus Currency Futures

Many traders have made the switch from currency futures to spot foreign exchange ("forex") trading.  Spot foreign exchange offers better liquidity and generally a lower cost of trading than currency futures.  Banks and brokers in spot foreign exchange can quote markets 24 hours a day.  Furthermore, the spot foreign exchange market is not burdened by exchange and NFA ("National Futures Association") fees, which are generally passed on to the customer in the form of higher commissions.  For these reasons, virtually all professional traders and institutions conduct most of their foreign exchange dealing in the spot forex market, not in currency futures.

The mechanics of trading spot forex are similar to those of currency futures.  The most important initial difference is the way in which currency pairs are quoted.  Currency futures are always quoted as the currency versus the US dollar.  In Spot forex, some currencies are quoted this way, while others are quoted as the US dollar versus the currency.  For example, in spot forex, EURUSD is quoted the same way as Euro futures.  In other words, if the Euro is strengthening, EURUSD will rise just as Euro futures will rise.  On the other hand, USDCHF is quoted as US dollars with respect to Swiss Francs, the opposite of Swiss Franc futures. So if the Swiss Franc strengthens with respect to the US dollar, USDCHF will fall, while Swiss Franc futures will rise.  The rule in spot forex is that the first currency shown is the currency that is being quoted in terms of direction.  For example, "EUR" in EURUSD and "USD" in USDCHF is the currency that is being quoted.

The table below illustrates which spot currencies move parallel to the futures contract and which move inversely (opposite):

Forex Symbol		Currency Pair		Futures Symbol		Directional Relationship
GBPUSD		British Pound / US Dollar		BP		Parallel
EURUSD		Euro / US Dollar		EU		Parallel
USDJPY		US Dollar / Japanese Yen		JY		Inverse
USDCHF		US Dollar / Swiss Franc		SF		Inverse
USDCAD		US Dollar / Canadian Dollar		CD		Inverse
AUDUSD		Australian Dollar / US Dollar		AD		Parallel
NZDUSD		New Zealand Dollar / US Dollar		ND		Paralle

Additional training from http://www.forex-markets.com/training.htm

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What is Forex?

The World's Biggest Liquidity Market

The foreign exchange (Forex) is the direct exchange of currency between various countries. Presently, the trading volume of the Forex market has achieved 190 billion dollar, which is equal to 46 times larger than the futures market, based on this reason, this is the world’s biggest liquidity market. In most of the developed countries, the financial system is fully open and the Forex is being traded freely, Forex has become one of the markets which closely linked to the individual life.

In the past the Forex market is being carried out by the large funding banks and other huge fund managers, but along with the technology innovation and the development of the online transaction platform, the small Forex traders could also directly participate and makes profit from the Forex trading.

The Function of the Forex Market

The function of the Forex market relies on:

1. To balance the prescription of the Forex fund.
   
   
2. Provides method to avoid risk from the Forex market. Some companies or banks, because have the forward revenue and the expenditure activity from the Forex market, to avoid lost from the forward fluctuation, it is possible to do forward trading from the Forex market, to avoid the exchange risk.
   
   
3. To provide convenience for the Central Bank to stabilize exchange rate. Because Forex market can be intervened by the large inflow of short-term fund from worldwide which will cause the Forex market to be bullish or bearish, so the Central Bank must intervene in the Forex market, the Central Bank could stabilize the currency through the Forex market by buying and selling the currency in a very large amount. 

thank article by http://www.forex2u.com

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learn Forex Option Trading Education Day Online UK Article

Forex2u Forex Strategy On Successful Forex Trading
By Forex2u.com, Thu Dec 8th

The essence of the FX2u Forex strategy is that it does not have any Forex trading system but could forecast the market trend accurately.

Every set of Forex trading system available has its disadvantages. The market trend could not be forecasted. If the market could be forecasted, by depending on the RSI, PAR, MOM analysis techniques and some other theories, Forex traders could easily make a fortune.

Many Forex traders could not obtain the anticipated outcome by using these analysis tools, and suffer huge losses. The main reason is relying on some imperfect tools to forecast the unpredictable market trend is just a waste of effort. There forethe FX2u Forex strategy spirit is to abolish the entire subjective analysis tool.

To survive in the market is to follow the market trend,following the market trend is the essence of the FX2u Forexstrategy. By using the opposite theory to enter the market, will only lead to lost. The reason is that if the market rises, it may continue to rise. If the market drops, it may continue to drop. No one is able to forecast when the market trend will stop.

By following the market trend, the market risk could be reduce to the lowest, the FX2u Forex strategy will advance the following the ten principles:

fully understand the how market function and the market trend,else don’t trade

After entering the market, the Forex trader MUST immediately put a market stop.

If the stop order has been hit it MUST be executed immediately,NEVER make changes by lowering the stop order price.

If the forecast is wrong, Forex traders should leave the market immediately, then analyze again.

If the forecast is wrong, Forex

fibonacci trader forex
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traders should stop loss and should not increase trading.

Forex traders should admit mistakes, do not continuously make mistakes.

All analysis tools are imperfect, mistakes could always occur.

If the market rises Forex traders should buy, if the market drops Forex traders should sell, always follow the market trend.

Forex traders should not forecast the market price because such forecast will not be as easy as forecasting the market trend.

If the forecast is wrong, once the loss reach 10%, Forex traders must stop loss immediately, do not let it surpasses 10%,otherwise it would be difficult to recoup the capital again.aLvinHan is the editor of www.forex2u.com

http://www.forex2u.com/fx2u-forex-strategy.html

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