Technical Analysis – an Introduction

Technical analysis is the study of market data such as historical and current price data and volume in an effort to forecast future market activity. Historical price data is the most commonly used available data that is implemented into the analysis.
Historical market data is saved and forms charts over various periods of time. The technical trader can analyze varying periodical charts over a specific length of time for the basic purpose of picking the entry and exit levels of a trade. By studying the chart the chartist is able to get information at a glance that will hopefully represent the direction of the instrument in the future.
There is a never ending argument between fundamentalists and technical analysts about which method of analysis will show the best results. Technical analysts will claim that all the fundamentals are already built into the price, and so apart from natural disasters and unexpected world events the current price shows the market's expected value taking all the known information into consideration. The chartists are in fact looking for patterns or repetitions in price movements to guess the likely outcome of future prices – in a word they are looking for trends. Technical analysis assumes three main points,
1. Fundamentals are already built into the price
2. History has a habit of repeating itself – find what happened in the past and project it into the future.
3. Trends are key – establish whether the instrument is moving in a trend, and then follow it. Typically there are three variations upward, downward or side wards. Once the type of trend is established an entry point is picked for the commencement of the trade.
Over the years various mathematical manipulations were placed upon market prices and volumes. Theses manipulations (known as studies) helped the technical analyst focus on identifying the trend and the entry and exit levels.
As with any analysis, discipline is the most important aspect of the study. If your studies showed that something was to occur, then follow your studies – do not let the market change your plan. If you were wrong then you were wrong, but stick to your game plan. (see Technical Trading Tips and Guide to Trading for helpful hints to trade).


Charts - Types
There are three main types of charts, line, bar and candle.
Line charts are the most basic and simply join one period closing price to another.
Bar charts give more detail then a regular line chart in that each period is represented by a bar. The bar not only shows price movements from one period to the next, they also show price movements within the period itself.
Candlestick charts. These are very similar to bar charts except there colored bodies are able to give the viewer greater detail in movements within the period at a glance. Each period is made up of a candlestick – the candlestick is made up of a body and a wick on both ends. The candle body is then colored (typically red and either blue or green). The wick represents the high and low of the period, while the body represents the open and close of the period, the color lets us know if the price rose or fell in that period. If the candle body is red then the top of the candle represents the opening price and the bottom the closing, a green or blue candle would represent the opposite, the top of the candle would be the closing while the bottom would be the opening.



Periods
Charts are viewed as a sequence of periodical prices. The fastest moving chart is a tick chart. Tick charts can only be seen in a line format since the low, high, opening and closing price during that period are one and the same. Every point on the chart represents one tick or one price quote. The next period is usually a 1 minute chart and then periodically higher 5 min, 10 min, 30 min, 1 hour, 4 hour, daily, weekly and monthly.
The longer the period the slower the chart, longer period charts tend to show more stable trends, shorter period charts tend to be used to pick entry and exit points.


Technical Indicators
There are many different types of technical indicators; however they can be grouped into five types.
1. Trend Indicators: As mentioned before trends show the persistence of price directions, either upwards, downwards or side wards. Trend indicators smooth out the historical prices to show market direction. The most common of these are Moving Averages. Simple trend lines can also be used to the same affect by drawing a line that joins the low and high points over a section of time; these are also used to form tunnels and triangles as popular analysis. Trend lines are also used to pick support and resistance levels.
2. Strength Indicators: This is essentially a volume indicator and more popular in futures markets then foreign exchange. The most popular of these is Volume.
3. Volatility: Measures and shows fluctuations over a section of time. These indicators help to pinpoint support and resistance levels, the most popular of these is Bollinger Bands.
4. Cycle: These indicators tend to find patterns or more correctly repetitious cycles. Once again more popular in other financial markets. The most popular Cycle indicator is the Elliot Wave.
5. Momentum or Oscillators: These indicators map the speed at which prices move over a given section of time. Momentum indicators determine the strength or weakness of a trend as it progresses over time. Momentum is highest at the beginning of a trend and lowest at trend turning points. Any divergence of directions in price and momentum is a warning of weakness; if price extremes occur with weak momentum, it signals an end of movement in that direction. If momentum is trending strongly and prices are flat, it signals a potential change in price direction. The most popular momentum indicators are the Stochastic, MACD and RSI.


Commonly used technical indicators
Moving Averages
Moving averages are trend indicators and are used by traders as a tool to verify existing trends, identify emerging trends and signify the end of trends. Moving averages are smooth lines that enable the trader to view long term price movements without the short term fluctuations.Of the three types of moving averages, the most common is the simple moving average; the other two are the weighted and exponential moving averages.
All the moving averages are calculated as the average of a specified number of either low, high or closing price of the period. The difference between the three types is the weighting or importance placed on each particular period. For example the weighted and exponential moving averages give greater importance to the latest prices whereas the simple gives equal importance to all the periods chosen.
Each new point of the moving average drops off the oldest period and brings in the newest period. A moving average line will change depending upon the number of periods chosen, the greater the number the slower the average. Some traders will play with a different number of moving averages all with different periods until they find a series of moving averages that they feel best indicate the behavior of the particular instrument being studied.
When choosing a moving average to work with, ideally in an upward trending market the current price should not fall beneath the moving average line chosen more then once. The moving average should form a support line during upward trends and a resistance during down trends. If the upward trend continues yet it breaks the moving average line on more then one occasion, then this is a good indication that the moving average line chosen is too fast, and has not been smoothed out enough. If for example a 30-day moving average was used then a 45-day moving average may be more appropriate for this particular instrument.
Once a trader is content with the behavior of the moving average line against the actual prices he may use the line to signify the continuation of a trend or the end of a trend. If the price closes below the moving average line on two occasions in an upward trending market – this is an indication of the end of the trend and time to exit a long position. The same logic follows in a downward trending market except in reverse; the current price needs to close above the moving average on two occasions to indicate that the downtrend is over.
Another way of using moving averages is in pairs. Many traders will first find the long-term moving average as described above and add a faster moving average (smaller period) as an even earlier indication of the end of a trend. I the shorter moving average crosses the slower moving average this may signal an earlier exit point for a trend.

Stochastics
The most commonly used stochastic is the slow stochastic. Stochastic oscillators are also used to determine either the strength of a trend or when the end of a trend is approaching. Stochastics are displayed by two lines known as %K (Faster) and %D (Slower) that oscillate between a scale ranging from 0 to 100.
The mathematics behind the oscillators is unimportant, what is important is the meaning and placement of the lines. When the lines cross above the 80 line, this is a representation of a strong upward trend, when they cross below the 20 line it is a representation of a strong downward trend. When the %K line crosses over the %D line this could be an indication of a change in the trend, and a possible exit point. When prices are fluctuating a normal appearance for the stochastics will be for them to be crossing over one another in mid range – here what is being shown is a lack of a trend.
The stochastics give their best signal when both the lines are moving to new ground at the same time as the actual price; this is a good indication of a continuation of a trend. However when the stochastics cross in a different direction of a prolonged trend this could be an indication to either exit or switch directions.

Relative Strength Index (RSI)
RSI is another momentum oscillator. RSI attempts to pick reversals in the trend. As with Stochastics they are read on a scale between 0 and 100. A Reading above 80 indicates an overbought market and readings below 20 indicate an oversold market. Trading on RSI's should occur only when there is a direction change above or below the 80 and 20 lines; as RSI lines can often remain above or below the 80, 20 levels for prolonged periods of time during strong trending markets.
The shorter the RSI period, the faster it will be and the more signals will be issued. Here a trader needs to find his balance. Day-traders will often use shorter lines for more regular signals and longer term traders will use longer RSI's.

Bollinger Bands
Bollinger Bands are volatility indicators and are used to identify extreme highs or lows in relation to the current price.
Bollinger Bands are based on a set number of standard deviations from the moving average. It essentially tries to indicate support and resistance levels or bands of expected trading.
As with the moving average, here too the trader can pick and adjust the moving average to base his Bollinger Bands on and the number of standard deviations to use. The trader can adjust these over time to suit his individual trading style. The default used is usual a 20-day moving average and two standard deviations from the moving average.
A break above or below the Bollinger Bands may show an exit point or a reversal.

Moving Average Convergence Divergence (MACD)
MACD is an enhanced study of the moving averages and behave as an oscillator. The MACD plots the difference between a 26-day exponential moving average and a 12-day exponential moving average. A 9-day moving average is generally used as a trigger line, meaning when the MACD crosses below this trigger it is a bearish signal and when it crosses above it, it's a bullish signal.
Traders use the MACD for trend reversals. For instance if the MACD indicator turns higher while prices are still falling this could be an exit point and a possible reverse trade.

Fibonacci Retracements
Fibonacci retracement levels are a sequence of numbers that indicate changes in trends from previous peaks or troughs. After a significant price move, prices will often retrace a significant portion of the original move. As prices retrace, support and resistance levels often occur at or near the Fibonacci retracement levels.
In the currency markets, the commonly used sequence of ratios is 23.6%, 38.2%, 50% and 61.8%. Fibonacci retracement levels are drawn by joining a trend line from a significant high point to a significant low point. The pullback simply represents a correction in the trend and not an end to the trend. The most significant pullbacks are the 38.2%, and 61.8% levels.

Technical Analysis – an Introduction

Technical analysis is the study of market data such as historical and current price data and volume in an effort to forecast future market activity. Historical price data is the most commonly used available data that is implemented into the analysis.
Historical market data is saved and forms charts over various periods of time. The technical trader can analyze varying periodical charts over a specific length of time for the basic purpose of picking the entry and exit levels of a trade. By studying the chart the chartist is able to get information at a glance that will hopefully represent the direction of the instrument in the future.
There is a never ending argument between fundamentalists and technical analysts about which method of analysis will show the best results. Technical analysts will claim that all the fundamentals are already built into the price, and so apart from natural disasters and unexpected world events the current price shows the market's expected value taking all the known information into consideration. The chartists are in fact looking for patterns or repetitions in price movements to guess the likely outcome of future prices – in a word they are looking for trends. Technical analysis assumes three main points,
1. Fundamentals are already built into the price
2. History has a habit of repeating itself – find what happened in the past and project it into the future.
3. Trends are key – establish whether the instrument is moving in a trend, and then follow it. Typically there are three variations upward, downward or side wards. Once the type of trend is established an entry point is picked for the commencement of the trade.
Over the years various mathematical manipulations were placed upon market prices and volumes. Theses manipulations (known as studies) helped the technical analyst focus on identifying the trend and the entry and exit levels.
As with any analysis, discipline is the most important aspect of the study. If your studies showed that something was to occur, then follow your studies – do not let the market change your plan. If you were wrong then you were wrong, but stick to your game plan. (see Technical Trading Tips and Guide to Trading for helpful hints to trade).


Charts - Types
There are three main types of charts, line, bar and candle.
Line charts are the most basic and simply join one period closing price to another.
Bar charts give more detail then a regular line chart in that each period is represented by a bar. The bar not only shows price movements from one period to the next, they also show price movements within the period itself.
Candlestick charts. These are very similar to bar charts except there colored bodies are able to give the viewer greater detail in movements within the period at a glance. Each period is made up of a candlestick – the candlestick is made up of a body and a wick on both ends. The candle body is then colored (typically red and either blue or green). The wick represents the high and low of the period, while the body represents the open and close of the period, the color lets us know if the price rose or fell in that period. If the candle body is red then the top of the candle represents the opening price and the bottom the closing, a green or blue candle would represent the opposite, the top of the candle would be the closing while the bottom would be the opening.



Periods
Charts are viewed as a sequence of periodical prices. The fastest moving chart is a tick chart. Tick charts can only be seen in a line format since the low, high, opening and closing price during that period are one and the same. Every point on the chart represents one tick or one price quote. The next period is usually a 1 minute chart and then periodically higher 5 min, 10 min, 30 min, 1 hour, 4 hour, daily, weekly and monthly.
The longer the period the slower the chart, longer period charts tend to show more stable trends, shorter period charts tend to be used to pick entry and exit points.


Technical Indicators
There are many different types of technical indicators; however they can be grouped into five types.
1. Trend Indicators: As mentioned before trends show the persistence of price directions, either upwards, downwards or side wards. Trend indicators smooth out the historical prices to show market direction. The most common of these are Moving Averages. Simple trend lines can also be used to the same affect by drawing a line that joins the low and high points over a section of time; these are also used to form tunnels and triangles as popular analysis. Trend lines are also used to pick support and resistance levels.
2. Strength Indicators: This is essentially a volume indicator and more popular in futures markets then foreign exchange. The most popular of these is Volume.
3. Volatility: Measures and shows fluctuations over a section of time. These indicators help to pinpoint support and resistance levels, the most popular of these is Bollinger Bands.
4. Cycle: These indicators tend to find patterns or more correctly repetitious cycles. Once again more popular in other financial markets. The most popular Cycle indicator is the Elliot Wave.
5. Momentum or Oscillators: These indicators map the speed at which prices move over a given section of time. Momentum indicators determine the strength or weakness of a trend as it progresses over time. Momentum is highest at the beginning of a trend and lowest at trend turning points. Any divergence of directions in price and momentum is a warning of weakness; if price extremes occur with weak momentum, it signals an end of movement in that direction. If momentum is trending strongly and prices are flat, it signals a potential change in price direction. The most popular momentum indicators are the Stochastic, MACD and RSI.


Commonly used technical indicators
Moving Averages
Moving averages are trend indicators and are used by traders as a tool to verify existing trends, identify emerging trends and signify the end of trends. Moving averages are smooth lines that enable the trader to view long term price movements without the short term fluctuations.Of the three types of moving averages, the most common is the simple moving average; the other two are the weighted and exponential moving averages.
All the moving averages are calculated as the average of a specified number of either low, high or closing price of the period. The difference between the three types is the weighting or importance placed on each particular period. For example the weighted and exponential moving averages give greater importance to the latest prices whereas the simple gives equal importance to all the periods chosen.
Each new point of the moving average drops off the oldest period and brings in the newest period. A moving average line will change depending upon the number of periods chosen, the greater the number the slower the average. Some traders will play with a different number of moving averages all with different periods until they find a series of moving averages that they feel best indicate the behavior of the particular instrument being studied.
When choosing a moving average to work with, ideally in an upward trending market the current price should not fall beneath the moving average line chosen more then once. The moving average should form a support line during upward trends and a resistance during down trends. If the upward trend continues yet it breaks the moving average line on more then one occasion, then this is a good indication that the moving average line chosen is too fast, and has not been smoothed out enough. If for example a 30-day moving average was used then a 45-day moving average may be more appropriate for this particular instrument.
Once a trader is content with the behavior of the moving average line against the actual prices he may use the line to signify the continuation of a trend or the end of a trend. If the price closes below the moving average line on two occasions in an upward trending market – this is an indication of the end of the trend and time to exit a long position. The same logic follows in a downward trending market except in reverse; the current price needs to close above the moving average on two occasions to indicate that the downtrend is over.
Another way of using moving averages is in pairs. Many traders will first find the long-term moving average as described above and add a faster moving average (smaller period) as an even earlier indication of the end of a trend. I the shorter moving average crosses the slower moving average this may signal an earlier exit point for a trend.

Stochastics
The most commonly used stochastic is the slow stochastic. Stochastic oscillators are also used to determine either the strength of a trend or when the end of a trend is approaching. Stochastics are displayed by two lines known as %K (Faster) and %D (Slower) that oscillate between a scale ranging from 0 to 100.
The mathematics behind the oscillators is unimportant, what is important is the meaning and placement of the lines. When the lines cross above the 80 line, this is a representation of a strong upward trend, when they cross below the 20 line it is a representation of a strong downward trend. When the %K line crosses over the %D line this could be an indication of a change in the trend, and a possible exit point. When prices are fluctuating a normal appearance for the stochastics will be for them to be crossing over one another in mid range – here what is being shown is a lack of a trend.
The stochastics give their best signal when both the lines are moving to new ground at the same time as the actual price; this is a good indication of a continuation of a trend. However when the stochastics cross in a different direction of a prolonged trend this could be an indication to either exit or switch directions.

Relative Strength Index (RSI)
RSI is another momentum oscillator. RSI attempts to pick reversals in the trend. As with Stochastics they are read on a scale between 0 and 100. A Reading above 80 indicates an overbought market and readings below 20 indicate an oversold market. Trading on RSI's should occur only when there is a direction change above or below the 80 and 20 lines; as RSI lines can often remain above or below the 80, 20 levels for prolonged periods of time during strong trending markets.
The shorter the RSI period, the faster it will be and the more signals will be issued. Here a trader needs to find his balance. Day-traders will often use shorter lines for more regular signals and longer term traders will use longer RSI's.

Bollinger Bands
Bollinger Bands are volatility indicators and are used to identify extreme highs or lows in relation to the current price.
Bollinger Bands are based on a set number of standard deviations from the moving average. It essentially tries to indicate support and resistance levels or bands of expected trading.
As with the moving average, here too the trader can pick and adjust the moving average to base his Bollinger Bands on and the number of standard deviations to use. The trader can adjust these over time to suit his individual trading style. The default used is usual a 20-day moving average and two standard deviations from the moving average.
A break above or below the Bollinger Bands may show an exit point or a reversal.

Moving Average Convergence Divergence (MACD)
MACD is an enhanced study of the moving averages and behave as an oscillator. The MACD plots the difference between a 26-day exponential moving average and a 12-day exponential moving average. A 9-day moving average is generally used as a trigger line, meaning when the MACD crosses below this trigger it is a bearish signal and when it crosses above it, it's a bullish signal.
Traders use the MACD for trend reversals. For instance if the MACD indicator turns higher while prices are still falling this could be an exit point and a possible reverse trade.

Fibonacci Retracements
Fibonacci retracement levels are a sequence of numbers that indicate changes in trends from previous peaks or troughs. After a significant price move, prices will often retrace a significant portion of the original move. As prices retrace, support and resistance levels often occur at or near the Fibonacci retracement levels.
In the currency markets, the commonly used sequence of ratios is 23.6%, 38.2%, 50% and 61.8%. Fibonacci retracement levels are drawn by joining a trend line from a significant high point to a significant low point. The pullback simply represents a correction in the trend and not an end to the trend. The most significant pullbacks are the 38.2%, and 61.8% levels.

Fundamental Analysis – an Introduction

Fundamental analysis is the study of economic, social and political data that represents and quantifies the economy in question with the goal of determining future movements in a financial market.

Analysts have been grouped into either Technical of Fundamental camps for many years but if truth be told there are very few pure technicians or fundamentalists. Technical analysts cannot really ignore the effect and timing of economic announcements and fundamental analysts cannot really ignore various signals derived from the study of historic prices and volatility.

It is fairly difficult to take into account all the different economic announcements as well as the political and social situations that affect an economy particularly in today's global market, however by understanding the basics and delving deeper into the various fundamentals of the economies one will likely find that his understanding of the financial markets improves dramatically.

There are a myriad of economic announcements and while it may be important to be familiar with schedules and understand the nature and possible impact of the announcements it would be very easy to be too bogged down by the various information until such time as there is too much and one may simply not be able to come up with an effective basis for trading.

Because of the vast number of fundamentals out there, it may be more important to focus on the main price movers as a basis, rather then try to know a little about a lot.

Technical Trading Guide

1. Chart the Trends and Range Bound Markets

Use long term charts to decide trends or range bound markets. Begin a chart analysis with daily, weekly and even monthly charts spanning several years if possible. A larger scale chart essentially shows the life of the market and provides clearer visibility and a better long-term perspective on a market. Once the long-term has been established, consult daily and intra-day charts, these charts can include anything from say 10 minute to daily charts. A short-term market view alone can often be deceptive. Even if you only trade the very short term, you will do better if you're trading in the same direction as the intermediate and longer-term trends. If there is no trend then a different strategy is necessary, possibly playing the range until the market begins to trend once more.
As can be seen in the 1-hour EUR/USD candle chart below there has been an uptrend with three peaks and three troughs. Long entry positions would at 1.2700, 1.2760 and 1.2800.


2. Follow the Trend

If you determine the trend, then follow it. Market trends come in a variety of terms - long-term, intermediate-term and short-term. The first thing you have to determine is what type of a trader are you, long term or day trader, that decision will determine which charts you should be using. For instance, if you're day trading, use the daily and intra-day charts, but always use the longer-range chart to determine the trend, and then use the shorter-term chart for timing. Make sure you trade in the direction of that trend and then buy on dips if the trend is up and sell on rallies if the trend is down.

3. Locate Support and Resistance Levels

Find the support and resistance levels. As above when you want to buy an instrument, its best to buy near support levels. The support is usually a previous reaction low. Using the same logic, the best place to sell an instrument would be near its resistance levels. The resistance level is usually a previous peak. After a resistance peak has been broken, it will usually provide support on subsequent pullbacks. In other words, the old high becomes the new low. In the same way, when a support level has been broken, it will usually produce selling on subsequent rallies - the old low can then become the new high.

4. Retracements

Measure retracements in percentage terms. Market corrections up or down often retrace a significant portion of the previous trend. One can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retracements of 38% and 62% are also worth watching. Therefore popular buy points in an uptrend are usually between 33-38% retracement of the original trend.
As can be seen from the chart below, when joining the trough at 1.2750 to the peak at 1.2890 in the 1-hour EUR/USD chart we can see the Fibonacci levels drawn out. The first retracement ended at the 38% line and the major retracement at the 62% line.

5. Trend Lines

One of the simplest and most effective charting tools are trend lines – use them. Draw a straight line that join two points on the chart. Up trend lines are drawn along two successive lows and down trend lines are drawn along two successive peaks. Prices will often pull back to trend lines before resuming their trend. The breaking of trend lines often signals a change in a trend. The longer a trend line has been in effect, and the more times it has been tested, the more significant it becomes; a trend line becomes valid if it is touched at least three times.

6. Moving Averages

Moving averages often provide objective buy and sell signals, hence they should be watched. They show you if an existing trend is still in motion and help confirm a trend change. Do not rely on moving averages to tell you in advance if there is a trend change imminent; use it as a back-up to your chart analysis for trend identification. A combination chart of two moving averages is the most popular way of finding trading signals. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day and 200-day moving average also provide good trading signals. Since moving average chart lines are trend-following indicators, they work best in a trending market.
As can be seen in the EUR/USD 1-hour chart below the 5-period and 25-period moving averages project and confirm the trend in progress. The 5-period moving average crosses over the slower 25-period moving average at 1.2715 confirming the up-trend with an exit point at 1.2770. The same rate 1.2770 is another indication of a resume in the up-trend with an exit at 1.2850.

7. Oscillators

Oscillators help identify overbought and oversold markets. While moving averages offer confirmation of a trending market, oscillators can often warn us in advance that a market has rallied or fallen too far and will soon turn or retrace. Two of the most popular oscillators are the Relative Strength Index or RSI and the Stochastics. Both these oscillators work on a scale of 0 to 100. With the RSI, readings over 70 are overbought while readings below 30 are oversold. The overbought and oversold values for Stochastics are 80 and 20. Oscillator divergences often warn of market turns and as opposed to moving averages they work best in range bound markets. Weekly signals can be used as filters on daily signals. Daily signals can be used as filters for intra-day charts.
As can be seen in the EUR/USD 1-hour chart below, the Stochastics break through the 80-20 barriers and cross over themselves on corrections of the price. This occurs several times.


8. Know the Warning Signs

The Moving Average Convergence Divergence (MACD) indicator combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line. Longer-period signals take precedence over shorter-period signals. The MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It's called a histogram because vertical bars are used to show the difference between the two lines on the chart.
As can be seen in the EUR/USD 1-hour chart below, the MACD indicators cross over one another beneath the zero line to show a buy signal and vice versa for the sell signal. This occurs most prominently at 1.2760 to buy, 1.2870 to sell.

9. Trend or Range Bound Market

The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or range bound phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.

10. Study

Technical analysis is a skill that improves with experience and study. The more you learn and practice the better you'll be, keep studying, fine tune methods, learn what works for you and what doesn't and remain technical and not emotional.

Fundamental Analysis – an Introduction

Fundamental analysis is the study of economic, social and political data that represents and quantifies the economy in question with the goal of determining future movements in a financial market.

Analysts have been grouped into either Technical of Fundamental camps for many years but if truth be told there are very few pure technicians or fundamentalists. Technical analysts cannot really ignore the effect and timing of economic announcements and fundamental analysts cannot really ignore various signals derived from the study of historic prices and volatility.

It is fairly difficult to take into account all the different economic announcements as well as the political and social situations that affect an economy particularly in today's global market, however by understanding the basics and delving deeper into the various fundamentals of the economies one will likely find that his understanding of the financial markets improves dramatically.

There are a myriad of economic announcements and while it may be important to be familiar with schedules and understand the nature and possible impact of the announcements it would be very easy to be too bogged down by the various information until such time as there is too much and one may simply not be able to come up with an effective basis for trading.

Because of the vast number of fundamentals out there, it may be more important to focus on the main price movers as a basis, rather then try to know a little about a lot.

Technical Trading Guide

1. Chart the Trends and Range Bound Markets

Use long term charts to decide trends or range bound markets. Begin a chart analysis with daily, weekly and even monthly charts spanning several years if possible. A larger scale chart essentially shows the life of the market and provides clearer visibility and a better long-term perspective on a market. Once the long-term has been established, consult daily and intra-day charts, these charts can include anything from say 10 minute to daily charts. A short-term market view alone can often be deceptive. Even if you only trade the very short term, you will do better if you're trading in the same direction as the intermediate and longer-term trends. If there is no trend then a different strategy is necessary, possibly playing the range until the market begins to trend once more.
As can be seen in the 1-hour EUR/USD candle chart below there has been an uptrend with three peaks and three troughs. Long entry positions would at 1.2700, 1.2760 and 1.2800.


2. Follow the Trend

If you determine the trend, then follow it. Market trends come in a variety of terms - long-term, intermediate-term and short-term. The first thing you have to determine is what type of a trader are you, long term or day trader, that decision will determine which charts you should be using. For instance, if you're day trading, use the daily and intra-day charts, but always use the longer-range chart to determine the trend, and then use the shorter-term chart for timing. Make sure you trade in the direction of that trend and then buy on dips if the trend is up and sell on rallies if the trend is down.

3. Locate Support and Resistance Levels

Find the support and resistance levels. As above when you want to buy an instrument, its best to buy near support levels. The support is usually a previous reaction low. Using the same logic, the best place to sell an instrument would be near its resistance levels. The resistance level is usually a previous peak. After a resistance peak has been broken, it will usually provide support on subsequent pullbacks. In other words, the old high becomes the new low. In the same way, when a support level has been broken, it will usually produce selling on subsequent rallies - the old low can then become the new high.

4. Retracements

Measure retracements in percentage terms. Market corrections up or down often retrace a significant portion of the previous trend. One can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retracements of 38% and 62% are also worth watching. Therefore popular buy points in an uptrend are usually between 33-38% retracement of the original trend.
As can be seen from the chart below, when joining the trough at 1.2750 to the peak at 1.2890 in the 1-hour EUR/USD chart we can see the Fibonacci levels drawn out. The first retracement ended at the 38% line and the major retracement at the 62% line.

5. Trend Lines

One of the simplest and most effective charting tools are trend lines – use them. Draw a straight line that join two points on the chart. Up trend lines are drawn along two successive lows and down trend lines are drawn along two successive peaks. Prices will often pull back to trend lines before resuming their trend. The breaking of trend lines often signals a change in a trend. The longer a trend line has been in effect, and the more times it has been tested, the more significant it becomes; a trend line becomes valid if it is touched at least three times.

6. Moving Averages

Moving averages often provide objective buy and sell signals, hence they should be watched. They show you if an existing trend is still in motion and help confirm a trend change. Do not rely on moving averages to tell you in advance if there is a trend change imminent; use it as a back-up to your chart analysis for trend identification. A combination chart of two moving averages is the most popular way of finding trading signals. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day and 200-day moving average also provide good trading signals. Since moving average chart lines are trend-following indicators, they work best in a trending market.
As can be seen in the EUR/USD 1-hour chart below the 5-period and 25-period moving averages project and confirm the trend in progress. The 5-period moving average crosses over the slower 25-period moving average at 1.2715 confirming the up-trend with an exit point at 1.2770. The same rate 1.2770 is another indication of a resume in the up-trend with an exit at 1.2850.

7. Oscillators

Oscillators help identify overbought and oversold markets. While moving averages offer confirmation of a trending market, oscillators can often warn us in advance that a market has rallied or fallen too far and will soon turn or retrace. Two of the most popular oscillators are the Relative Strength Index or RSI and the Stochastics. Both these oscillators work on a scale of 0 to 100. With the RSI, readings over 70 are overbought while readings below 30 are oversold. The overbought and oversold values for Stochastics are 80 and 20. Oscillator divergences often warn of market turns and as opposed to moving averages they work best in range bound markets. Weekly signals can be used as filters on daily signals. Daily signals can be used as filters for intra-day charts.
As can be seen in the EUR/USD 1-hour chart below, the Stochastics break through the 80-20 barriers and cross over themselves on corrections of the price. This occurs several times.


8. Know the Warning Signs

The Moving Average Convergence Divergence (MACD) indicator combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line. Longer-period signals take precedence over shorter-period signals. The MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It's called a histogram because vertical bars are used to show the difference between the two lines on the chart.
As can be seen in the EUR/USD 1-hour chart below, the MACD indicators cross over one another beneath the zero line to show a buy signal and vice versa for the sell signal. This occurs most prominently at 1.2760 to buy, 1.2870 to sell.

9. Trend or Range Bound Market

The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or range bound phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.

10. Study

Technical analysis is a skill that improves with experience and study. The more you learn and practice the better you'll be, keep studying, fine tune methods, learn what works for you and what doesn't and remain technical and not emotional.

How To Do Forex Trading?

by Bing Zou

Forex, the word, means FOReign EXchange market. This is an international market where the buying and selling of money is done freely and 24 hours a day. All forex trading involve the buying of one currency and the selling of another, simultaneously. Currency quotes are given as exchange rates; that is, the value of one currency relative to another. The relative supply and demand of both currencies will determine the value of the exchange rate.

Forex Trading, as with any other form of investing, you must be knowledgeable of what you are trading before you can expect to turn a profit and not trade yourself into a financial hole.

Forex trading looks simple but few succeed. A lot of the so called investment wisdom doesn't work and is given by people who have never traded in their lives. You must always remind yourself that forex trading is so high profitable and riskful that you must do it carefully.

Remember it is margin trading and expanded more than 100 times as your normal investment. You need to ask yourself how much you can afford to lose. Be extremely honest with yourself about this, in fact, be more than honest so that you are sure to not overextend your budget and cost yourself the family home.

Here are some simple tips that will help you increase your profit potential and prevent you from losing money.

1. Select your first broker

When you first decide to trade Forex you will need to locate a reliable broker. It's very important that you familiarize yourself with the software the broker uses for making trades, analyzing the market and any other features they may offer. Many have a training, or tutorial, account that will allow you to signup and make trades for free. Use this to your advantage before just jumping in and tossing your money in.

2. Get a simple method you understand

In forex trading many people think that the more complicated a method they use in forex trading the more likely they are to make money.
The fact is that is not a truth and the simple systems work best.As you know, there are two main ways to analysis the currency rate:
fundamental and technical analysis.Simple systems are more robust and easier to trade with discipline, as you understand the logic and can therefore follow it with confidence when it has a losing period.

3. Trade the big trends and not trade frequently

Although short term trading and long term trading are both good, you have to catch the big long term trends that make the big profits.The big moves in forex trading, with optimum risk to reward, come just few times a year, so don't trade for the sake of trading and wait for these moves - These are the ones that will make you the big profits and that's why you're trading.

4. Work smart and not hard

Once you have a system your happy with that's it. People go on about working hard in forex trading to educate yourself but once you have your system stick with it. The market doesn't give you extra dollars for effort, you get your reward for trading correctly.
Forex trading is risky, so you need to manage your money and place your stop order far enough away from the market action to allow for volatility.Placing stops too close to entry and not taking enough risk dooms most traders to fail.
Also when you have a profit don't move the stop up to quickly, be patient and give the trade room to breathe.

5. The formula to success

The formula to success in forex trading is to do the following:

Using Simple Method + With Discipline + Control Risks = Forex Trading Success

Keep these simple tips in your mind and you could make some big profits on forex trading.Visit SoloInvest and Forexmentor to know more.

About the Author

Bing Zou is the blogger of Make Money Online, Online Investment and Work At Home.Featured information for you to work at home and make money online.You can contact him at email:paulzou@yahoo.com

How To Do Forex Trading?

by Bing Zou

Forex, the word, means FOReign EXchange market. This is an international market where the buying and selling of money is done freely and 24 hours a day. All forex trading involve the buying of one currency and the selling of another, simultaneously. Currency quotes are given as exchange rates; that is, the value of one currency relative to another. The relative supply and demand of both currencies will determine the value of the exchange rate.

Forex Trading, as with any other form of investing, you must be knowledgeable of what you are trading before you can expect to turn a profit and not trade yourself into a financial hole.

Forex trading looks simple but few succeed. A lot of the so called investment wisdom doesn't work and is given by people who have never traded in their lives. You must always remind yourself that forex trading is so high profitable and riskful that you must do it carefully.

Remember it is margin trading and expanded more than 100 times as your normal investment. You need to ask yourself how much you can afford to lose. Be extremely honest with yourself about this, in fact, be more than honest so that you are sure to not overextend your budget and cost yourself the family home.

Here are some simple tips that will help you increase your profit potential and prevent you from losing money.

1. Select your first broker

When you first decide to trade Forex you will need to locate a reliable broker. It's very important that you familiarize yourself with the software the broker uses for making trades, analyzing the market and any other features they may offer. Many have a training, or tutorial, account that will allow you to signup and make trades for free. Use this to your advantage before just jumping in and tossing your money in.

2. Get a simple method you understand

In forex trading many people think that the more complicated a method they use in forex trading the more likely they are to make money.
The fact is that is not a truth and the simple systems work best.As you know, there are two main ways to analysis the currency rate:
fundamental and technical analysis.Simple systems are more robust and easier to trade with discipline, as you understand the logic and can therefore follow it with confidence when it has a losing period.

3. Trade the big trends and not trade frequently

Although short term trading and long term trading are both good, you have to catch the big long term trends that make the big profits.The big moves in forex trading, with optimum risk to reward, come just few times a year, so don't trade for the sake of trading and wait for these moves - These are the ones that will make you the big profits and that's why you're trading.

4. Work smart and not hard

Once you have a system your happy with that's it. People go on about working hard in forex trading to educate yourself but once you have your system stick with it. The market doesn't give you extra dollars for effort, you get your reward for trading correctly.
Forex trading is risky, so you need to manage your money and place your stop order far enough away from the market action to allow for volatility.Placing stops too close to entry and not taking enough risk dooms most traders to fail.
Also when you have a profit don't move the stop up to quickly, be patient and give the trade room to breathe.

5. The formula to success

The formula to success in forex trading is to do the following:

Using Simple Method + With Discipline + Control Risks = Forex Trading Success

Keep these simple tips in your mind and you could make some big profits on forex trading.Visit SoloInvest and Forexmentor to know more.

About the Author

Bing Zou is the blogger of Make Money Online, Online Investment and Work At Home.Featured information for you to work at home and make money online.You can contact him at email:paulzou@yahoo.com

45 way to avoid losing money trading forex

1) Knowledge Deficiency – Most new FOREX traders don’t take the time to learn what drives currency rates (primarily fundamentals). When news or a statement is due out they must close out their positions and sit out the best trading opportunities. They are taught to only trade after the market calms down. So essentially they miss the whole move and then trade the random noise that follows a fundamental price move. Just think for a moment about technically trading the aftermath of a price move; there is no potential. FOREX TRADING .
.
.
2) Overtrading - Trading often with tight stops and tiny profit targets will only make the broker rich. The desire to “just” make a few hundred dollars a day by locking in tiny profits whenever possible is a losing strategy. FOREX MARKETING .
.

3) Over leveraged - Leverage is a two way street. The brokers want you to use high leverage because that means more spread income because your position size determines the amount of spread income; the biggerthe position the more spread income the broker earns. FOREX TIPS .

.
4) Relying on Others – Real traders play a lone hand; they make their own decisions and don’t rely on othersto make their trading decisions for them; there is no halfway; either trade for yourself or have someone elsetrade for you. FOREX CHARTS .

5) Stop Losses – Putting tight stop losses with retail brokers is a recipe for disaster. When you put on a trade commit to a reasonable stop loss limit that allows your trade a fair chance to develop. FOREX ONLINE .

6) Demo Accounts – Broker demo accounts are a shill game of sorts; they’re not as time sensitive as realaccounts and therefore give the impression that time sensitive trading systems, such as short-term movingaverage crossovers can be consistently profitably traded; once you start dealing with real money reality is quick to set in. FOREX SOFTWARE .


7) Trading During Off Hours – Bank FX traders, option traders, and hedge funds have a huge advantageduring off hours; they can push the currencies around when no volume is going through and the end game isnew traders get fleeced trying to trade signals. There is only one signal during off hours – stay out.8) Trading a Currency, Not a Pair – Being right about a currency is half a trade; success or failure dependsupon being right about the second currency that makes up the pair.

9) No Trading Plan - Make money is not a trading plan. A trading plan is a blueprint for trading success; it spells out what you see your edge as being; if you don’t have an edge, you don’t have a plan, and likely you’ll wind up a statistic (part of the 95% of new traders that lose and quit).

10) Trading Against Prevailing Trend – There is a huge difference between buying cheaply on the waydown and buying cheaply. What was a low price quickly becomes a high price when you’re trading against thetrend.

11) Exiting Trades Poorly – If you put on a trade and it’s not working make sure you exit properly; don’t compound the damage. If you’re in a winning trade don’t talk yourself out of the position because you’re bored or want to relieve stress; stress is a natural part of trading; get use to it.

12) Trading Too Short-term – If you’re profit target is less than 20 points don’t do the trade; the spread you pay to enter the trade makes the odds way against you when you go for these tiny profits.

13) Picking Tops and Bottoms - Looking for bargains works well at the supermarket but not trading foreign exchange; try to trade in the direction the price is going and you’re results will improve.

14) Being Too Smart – The most successful traders I know are high school graduates. They keep it simple and don’t look beyond the obvious; their results are excellent.

15) Not Trading Around News Time – Most of the big moves occur around news time. The volume is high and the moves are real; there is no better time to trade fundamentally or technically than when news is released; this is when the real money adjusts their positions and as a result the prices changes reflect serious currency flow (compared to quiet times when Bank traders rule the market with their customer order flow).


16) Ignore Technical Condition – Determining whether the market is over-extended long or over-extended short is a key determinant of near time price action. Spike moves often occur when the market is all one way.

17) Emotional Trading – When you don’t pre-plan you’re trades essentially it’s a thought and not an idea; thoughts are emotions and a very poor basis for doing trades. Do people generally say intelligent things when they are upset and emotional; I don’t think so.

18) Lack of Confidence – Confidence only comes from successful trading. If you lose money early in your trading career it’s very difficult to gain true confidence; the trick is don’t go off half-cocked; learn the business before you trade.

19) Lack of Courage to Take a Loss – There is nothing macho or gutsy about riding a loss, just stupidity and cowardice. It takes guts to accept your loss and wait for tomorrow to try again. Getting married to a bad position ruins lots of traders. The thing to remember is the market does crazy things often so don’t get married to any one trade; it’s just a trade. One good trade will not make you a trading success; rather it’s monthly and annual performance that defines a good trader.


20) Not Focusing on the Trade at Hand – There is no room for fantasizing in successful trading. Counting up and mentally spending profits you haven’t made yet is mental masturbation and does you no good. Same with worrying about a loss that hasn’t happened yet. Focus on your position and have a reasonable stop loss in place at the time you do the trade. Then be like an astronaut – sit back and enjoy the ride; no sense worrying because you have no real control; the market will do what it wants to do.

21) Interpreting FOREX News Incorrectly – Fact is the press only has a very superficial understanding of the news they are reporting and tend to focus on one element and miss the point. Learn to read the source documents and understand it for real.

22) Lucky or Good – Your account balance changes don’t tell you the whole story about your trading; fact is if your taking a lot of risk and making money you will eventually crash and burn. Look at the individual trade details; focus on your big loses and losing streaks. Ask yourself this; if I had a couple of consecutive losing streaks or a couple of consecutive big loses, how would my account balance look. Generally, traders making money without big daily loses have the best chance of sustaining positive performance. The others are accidents waiting to happen.

23) Too Many Charity Trades – When you make money on a well thought out trade don’t give back half on a whim; invest your profits from good trades on the next good trade.

24) Courage Under Fire – When a policeman breaks down the door to a drug dealers apartment he is scared but he does it anyway. When a fireman climbs onto the roof of a burning building he is scared but does it anyway; and gets the job done. Same with trading; it’s ok to be scared but you have to pull the trigger; no trigger – no trades – no profits – no trader.

25) Quality Trading Time – I suggest 3 hours a day of quality, focused trading time; that’s about all your brain allows. When your trading being 100% focused; half way is bullshit’ it doesn’t work. Don’t even think that time spent in front of the computer watching the rates has any correlation to profitability; it doesn’t. Spend less time but when your trading be 100% focused on trading.


26) Rationalizing – Killer. Absolute Killer. Put your trade on and let it run. If it hits your reasonable pre-determined stop your out. Think of yourself as a prizefighter; you just got knocked out. Moving your stop is like getting up after being crushed with a knockout blow; it’s pointless; things will only get worse. Don’t ignore the obvious; your wrong – get out. Come back the next day and try again. A small loss will not hurt you; a catastrophic loss will.

27) Mixing Apples and Oranges – Have you ever done this; you see the EURUSD trading higher so you buy GBPUSD because it “hasn’t moved yet”. That’s a mistake. Most of the time the reason the GBPUSD hasn’t moved yet is because its already overbought or some 4:30am UK news was bearish. Don’t mix apples and oranges; if EURUSD looks bid buy EURUSD.

28) Avoiding the Hard Trades – Bank FX traders have an axiom; the harder the trade is to do the better the trade. This I learned from experience; when I needed to buy EURUSD and it was hard to get them that’s when it’s necessary to pay up and get the business done. When it’s easy to get them then sit back and wait for better levels. So if your trying to get into a trade or more importantly get out of a trade don’t putz around for a few points; get your business done.

29) Too Much Detail – If your trading more than 2 indicators then you need to clean house. Having many indicators stifles trading and finds reasons not to trade. A setup and a trigger is all you need.

30) Giving Up Too Easy – Your first trade of the day may not be your best but certainly it’s no reason to quit. I have a preset daily trading limit and I use it; you can’t make money by making excuses; getting trades wrong is natural and should be expected.


31) Jumping the Gun – Don’t be penny wise and dollar foolish; wait for your trade signal to be clear; put on your trade and give it a decent size stop loss so that you don’t get knocked out by random noise. Do trades don’t’ buy lottery tickets (extremely tight stops).

32) Afraid to Take a Loss - trading is not personal; it’s business. Don’t think that a poor trade is a reflection on you. It could be your just ahead of your time or a commercial order hits the market and temporarily creates a small unexpected move. Again, place your stop beforehand and NEVER increase your pre-determined risk; if it’s going bad it will probably get worse; I think that’s Einstein “in motion stays in motion…”

33) Over-Relying on Risk Reward – There is zero advantage in risk reward; if you put a 20 point stop and a 60 point profit your chances are probably 3-1 that you will lose; actually with the spread its more like 4 to 1 (from entry point if it goes down 17 points you lose or up 63 you win; 17/63 is close to 4-1).

34) Trading for Wrong Reasons – Because the EURUSD is going up is not in itself a reason to buy. Buying EURUSD because its not moving so little risk is even worse; you’re paying the toll (spread) without even a hint that you will get a directional move. If your bored don’t trade; the reason your bored is there is no trade to do in the first place.

35) Rumors – Rumors are rumors almost 100% of the time; think about where in the motion you heard the rumor; if EURUSD is up 50 points in last 15 minutes and the rumor is dollar negative, well then you missed it. Whenever you trades determine where in the motion you are entering.


36) Trading Short-term Moving Average Crossovers – This is the money sucker of the century. When the shorter term moving average cross the longer term moving average it only means that the average price in the short run is equal to the average price in the longer run. For the life of me I cannot understand why this is bullish or bearish. Easy to set up on software, complete with lights, bells and whistles, and good for the seller getting thousands for the software but in terms of creating profit it’s a zero.

37) Stochastic – Another money sucker. Personally I think this indicator is used backwards; when it first signals an overdone condition that’s when I think the big spike in the “overdone” currency pair occurs. To be overbought means strong and oversold means weak. Try buying on the first sign of overbought and selling on the first sign of oversold; you’ll be with the trend and likely have identified a move with plenty of juice left. So if %k and %d are both crossing 80; buy! (Same on sell side; sell at 20) .

38) Wrong Broker – A lot of FOREX brokers are horrible; get a good one. Read forums and chats in several different places to get an unbiased opinion.

39) Simulated Results – Watch out for “black box” systems; these are trading systems that don’t divulge how the trade signals are generated. Great majority of them are absolute garbage. They show you a track record of extraordinary results but think about it; if you could build a trading system with half a dozen filters using the benefit of hindsight, couldn’t you too come up with a great system. Of course going forward is an entirely different story. High-speed number crunching capabilities allows for building great hindsight trading systems; BEWARE.

40) Inconsistency – Every business (FOREX trading included) requires a business plan (trading plan). Unless you have taken the time to write down a set of rules that you can and will follow, it’s likely your trading will remain unfocused and directionless. Make a plan, have rules, follow them set goals that are realistic and you will achieve them.


41) Master of None – Focus on one currency for technical trading; each currency has a unique way of trading and unless you get intimate with it you will never truly understand its underlying idiosyncrasies. Don’t spread yourself too thin – focus – master one currency at a time.

42) Thinking Long Term – Don’t do it. Stay in the moment. Especially if you’re a day trader. It doesn’t matter what happens next week or next month, if your trading with 30 to 50 point stops restrict your thought process to what’s happening right now. That is not to stay the long-term trend is not important; it is to say the long-term trend will not always help you when your trading a significantly shorter time frame.

43) Overconfidence – Trading is not easy; statistics show 95% failure rate. If your doing well don’t take your success for granted; always be on the lookout for ways to improve what you’re doing.

44) Getting Pumped Up – The trick is to maintain an even keel; when you are in a trade you want to think exactly as you would if you didn’t have a trade on. To do this requires a relaxed disposition; this is not a football game; don’t get psyched up; relax and try to enjoy it.

45) Staying in the Game – I don’t recommend demo trading because traders learn bad habits when trading with play money. I also don’t think “letting it all hang out” right away is wise either. Start off doing trades and taking risk that is relatively small but still makes a difference to you if you win or lose; about a quarter to a third of what you expect to reach as your trading matures is reasonable.

45 way to avoid losing money trading forex

1) Knowledge Deficiency – Most new FOREX traders don’t take the time to learn what drives currency rates (primarily fundamentals). When news or a statement is due out they must close out their positions and sit out the best trading opportunities. They are taught to only trade after the market calms down. So essentially they miss the whole move and then trade the random noise that follows a fundamental price move. Just think for a moment about technically trading the aftermath of a price move; there is no potential. FOREX TRADING .
.
.
2) Overtrading - Trading often with tight stops and tiny profit targets will only make the broker rich. The desire to “just” make a few hundred dollars a day by locking in tiny profits whenever possible is a losing strategy. FOREX MARKETING .
.

3) Over leveraged - Leverage is a two way street. The brokers want you to use high leverage because that means more spread income because your position size determines the amount of spread income; the biggerthe position the more spread income the broker earns. FOREX TIPS .

.
4) Relying on Others – Real traders play a lone hand; they make their own decisions and don’t rely on othersto make their trading decisions for them; there is no halfway; either trade for yourself or have someone elsetrade for you. FOREX CHARTS .

5) Stop Losses – Putting tight stop losses with retail brokers is a recipe for disaster. When you put on a trade commit to a reasonable stop loss limit that allows your trade a fair chance to develop. FOREX ONLINE .

6) Demo Accounts – Broker demo accounts are a shill game of sorts; they’re not as time sensitive as realaccounts and therefore give the impression that time sensitive trading systems, such as short-term movingaverage crossovers can be consistently profitably traded; once you start dealing with real money reality is quick to set in. FOREX SOFTWARE .


7) Trading During Off Hours – Bank FX traders, option traders, and hedge funds have a huge advantageduring off hours; they can push the currencies around when no volume is going through and the end game isnew traders get fleeced trying to trade signals. There is only one signal during off hours – stay out.8) Trading a Currency, Not a Pair – Being right about a currency is half a trade; success or failure dependsupon being right about the second currency that makes up the pair.

9) No Trading Plan - Make money is not a trading plan. A trading plan is a blueprint for trading success; it spells out what you see your edge as being; if you don’t have an edge, you don’t have a plan, and likely you’ll wind up a statistic (part of the 95% of new traders that lose and quit).

10) Trading Against Prevailing Trend – There is a huge difference between buying cheaply on the waydown and buying cheaply. What was a low price quickly becomes a high price when you’re trading against thetrend.

11) Exiting Trades Poorly – If you put on a trade and it’s not working make sure you exit properly; don’t compound the damage. If you’re in a winning trade don’t talk yourself out of the position because you’re bored or want to relieve stress; stress is a natural part of trading; get use to it.

12) Trading Too Short-term – If you’re profit target is less than 20 points don’t do the trade; the spread you pay to enter the trade makes the odds way against you when you go for these tiny profits.

13) Picking Tops and Bottoms - Looking for bargains works well at the supermarket but not trading foreign exchange; try to trade in the direction the price is going and you’re results will improve.

14) Being Too Smart – The most successful traders I know are high school graduates. They keep it simple and don’t look beyond the obvious; their results are excellent.

15) Not Trading Around News Time – Most of the big moves occur around news time. The volume is high and the moves are real; there is no better time to trade fundamentally or technically than when news is released; this is when the real money adjusts their positions and as a result the prices changes reflect serious currency flow (compared to quiet times when Bank traders rule the market with their customer order flow).


16) Ignore Technical Condition – Determining whether the market is over-extended long or over-extended short is a key determinant of near time price action. Spike moves often occur when the market is all one way.

17) Emotional Trading – When you don’t pre-plan you’re trades essentially it’s a thought and not an idea; thoughts are emotions and a very poor basis for doing trades. Do people generally say intelligent things when they are upset and emotional; I don’t think so.

18) Lack of Confidence – Confidence only comes from successful trading. If you lose money early in your trading career it’s very difficult to gain true confidence; the trick is don’t go off half-cocked; learn the business before you trade.

19) Lack of Courage to Take a Loss – There is nothing macho or gutsy about riding a loss, just stupidity and cowardice. It takes guts to accept your loss and wait for tomorrow to try again. Getting married to a bad position ruins lots of traders. The thing to remember is the market does crazy things often so don’t get married to any one trade; it’s just a trade. One good trade will not make you a trading success; rather it’s monthly and annual performance that defines a good trader.


20) Not Focusing on the Trade at Hand – There is no room for fantasizing in successful trading. Counting up and mentally spending profits you haven’t made yet is mental masturbation and does you no good. Same with worrying about a loss that hasn’t happened yet. Focus on your position and have a reasonable stop loss in place at the time you do the trade. Then be like an astronaut – sit back and enjoy the ride; no sense worrying because you have no real control; the market will do what it wants to do.

21) Interpreting FOREX News Incorrectly – Fact is the press only has a very superficial understanding of the news they are reporting and tend to focus on one element and miss the point. Learn to read the source documents and understand it for real.

22) Lucky or Good – Your account balance changes don’t tell you the whole story about your trading; fact is if your taking a lot of risk and making money you will eventually crash and burn. Look at the individual trade details; focus on your big loses and losing streaks. Ask yourself this; if I had a couple of consecutive losing streaks or a couple of consecutive big loses, how would my account balance look. Generally, traders making money without big daily loses have the best chance of sustaining positive performance. The others are accidents waiting to happen.

23) Too Many Charity Trades – When you make money on a well thought out trade don’t give back half on a whim; invest your profits from good trades on the next good trade.

24) Courage Under Fire – When a policeman breaks down the door to a drug dealers apartment he is scared but he does it anyway. When a fireman climbs onto the roof of a burning building he is scared but does it anyway; and gets the job done. Same with trading; it’s ok to be scared but you have to pull the trigger; no trigger – no trades – no profits – no trader.

25) Quality Trading Time – I suggest 3 hours a day of quality, focused trading time; that’s about all your brain allows. When your trading being 100% focused; half way is bullshit’ it doesn’t work. Don’t even think that time spent in front of the computer watching the rates has any correlation to profitability; it doesn’t. Spend less time but when your trading be 100% focused on trading.


26) Rationalizing – Killer. Absolute Killer. Put your trade on and let it run. If it hits your reasonable pre-determined stop your out. Think of yourself as a prizefighter; you just got knocked out. Moving your stop is like getting up after being crushed with a knockout blow; it’s pointless; things will only get worse. Don’t ignore the obvious; your wrong – get out. Come back the next day and try again. A small loss will not hurt you; a catastrophic loss will.

27) Mixing Apples and Oranges – Have you ever done this; you see the EURUSD trading higher so you buy GBPUSD because it “hasn’t moved yet”. That’s a mistake. Most of the time the reason the GBPUSD hasn’t moved yet is because its already overbought or some 4:30am UK news was bearish. Don’t mix apples and oranges; if EURUSD looks bid buy EURUSD.

28) Avoiding the Hard Trades – Bank FX traders have an axiom; the harder the trade is to do the better the trade. This I learned from experience; when I needed to buy EURUSD and it was hard to get them that’s when it’s necessary to pay up and get the business done. When it’s easy to get them then sit back and wait for better levels. So if your trying to get into a trade or more importantly get out of a trade don’t putz around for a few points; get your business done.

29) Too Much Detail – If your trading more than 2 indicators then you need to clean house. Having many indicators stifles trading and finds reasons not to trade. A setup and a trigger is all you need.

30) Giving Up Too Easy – Your first trade of the day may not be your best but certainly it’s no reason to quit. I have a preset daily trading limit and I use it; you can’t make money by making excuses; getting trades wrong is natural and should be expected.


31) Jumping the Gun – Don’t be penny wise and dollar foolish; wait for your trade signal to be clear; put on your trade and give it a decent size stop loss so that you don’t get knocked out by random noise. Do trades don’t’ buy lottery tickets (extremely tight stops).

32) Afraid to Take a Loss - trading is not personal; it’s business. Don’t think that a poor trade is a reflection on you. It could be your just ahead of your time or a commercial order hits the market and temporarily creates a small unexpected move. Again, place your stop beforehand and NEVER increase your pre-determined risk; if it’s going bad it will probably get worse; I think that’s Einstein “in motion stays in motion…”

33) Over-Relying on Risk Reward – There is zero advantage in risk reward; if you put a 20 point stop and a 60 point profit your chances are probably 3-1 that you will lose; actually with the spread its more like 4 to 1 (from entry point if it goes down 17 points you lose or up 63 you win; 17/63 is close to 4-1).

34) Trading for Wrong Reasons – Because the EURUSD is going up is not in itself a reason to buy. Buying EURUSD because its not moving so little risk is even worse; you’re paying the toll (spread) without even a hint that you will get a directional move. If your bored don’t trade; the reason your bored is there is no trade to do in the first place.

35) Rumors – Rumors are rumors almost 100% of the time; think about where in the motion you heard the rumor; if EURUSD is up 50 points in last 15 minutes and the rumor is dollar negative, well then you missed it. Whenever you trades determine where in the motion you are entering.


36) Trading Short-term Moving Average Crossovers – This is the money sucker of the century. When the shorter term moving average cross the longer term moving average it only means that the average price in the short run is equal to the average price in the longer run. For the life of me I cannot understand why this is bullish or bearish. Easy to set up on software, complete with lights, bells and whistles, and good for the seller getting thousands for the software but in terms of creating profit it’s a zero.

37) Stochastic – Another money sucker. Personally I think this indicator is used backwards; when it first signals an overdone condition that’s when I think the big spike in the “overdone” currency pair occurs. To be overbought means strong and oversold means weak. Try buying on the first sign of overbought and selling on the first sign of oversold; you’ll be with the trend and likely have identified a move with plenty of juice left. So if %k and %d are both crossing 80; buy! (Same on sell side; sell at 20) .

38) Wrong Broker – A lot of FOREX brokers are horrible; get a good one. Read forums and chats in several different places to get an unbiased opinion.

39) Simulated Results – Watch out for “black box” systems; these are trading systems that don’t divulge how the trade signals are generated. Great majority of them are absolute garbage. They show you a track record of extraordinary results but think about it; if you could build a trading system with half a dozen filters using the benefit of hindsight, couldn’t you too come up with a great system. Of course going forward is an entirely different story. High-speed number crunching capabilities allows for building great hindsight trading systems; BEWARE.

40) Inconsistency – Every business (FOREX trading included) requires a business plan (trading plan). Unless you have taken the time to write down a set of rules that you can and will follow, it’s likely your trading will remain unfocused and directionless. Make a plan, have rules, follow them set goals that are realistic and you will achieve them.


41) Master of None – Focus on one currency for technical trading; each currency has a unique way of trading and unless you get intimate with it you will never truly understand its underlying idiosyncrasies. Don’t spread yourself too thin – focus – master one currency at a time.

42) Thinking Long Term – Don’t do it. Stay in the moment. Especially if you’re a day trader. It doesn’t matter what happens next week or next month, if your trading with 30 to 50 point stops restrict your thought process to what’s happening right now. That is not to stay the long-term trend is not important; it is to say the long-term trend will not always help you when your trading a significantly shorter time frame.

43) Overconfidence – Trading is not easy; statistics show 95% failure rate. If your doing well don’t take your success for granted; always be on the lookout for ways to improve what you’re doing.

44) Getting Pumped Up – The trick is to maintain an even keel; when you are in a trade you want to think exactly as you would if you didn’t have a trade on. To do this requires a relaxed disposition; this is not a football game; don’t get psyched up; relax and try to enjoy it.

45) Staying in the Game – I don’t recommend demo trading because traders learn bad habits when trading with play money. I also don’t think “letting it all hang out” right away is wise either. Start off doing trades and taking risk that is relatively small but still makes a difference to you if you win or lose; about a quarter to a third of what you expect to reach as your trading matures is reasonable.

Top Tips and Resources for Forex Trading Success

by Ben Franklin

Forex trading has slowly but surely become one of the most popular online activities in the past few years. Most people, when they are asked about an online money making opportunity, don't hesitate and nominate the Forex market. But many people don't know anything about it. So, what is Forex trading and what makes it the most important online money exchange option?

Although it has indeed gained notoriety, the word "forex" is still mostly associated with the words "risk," "exposure" or even "gamble." There is some truth to that, because Forex trading is not for the faint hearted, but its undeniable advantages make it a great income opportunity for people who are willing to take some chances.

The first one that would pop on top of anyone's head is the impressive amount of liquidity volume. An awe-inspiring sum of about 2 trillion dollars is being speculated everyday. That's a lot of money that changes hands and it, in turn, generates more money, similar to a snowball effect. The market is therefore very stable and it allows the traders to get the money in and out without any problems at all.

Then, there is the time table which is very convenient. The company offers an around the clock and very dynamic market. The trading begins on Sunday at 3 o'clock PM EST when New Zealand begins operating. It lasts until Friday 5 PM when EST when San Francisco closes operations. You can practically work in any time zone you desire.

It also has the advantage of a low initial investment. This is another appealing factor to people who consider starting trading. You will actually need a far smaller amount of money to get you on your way than in any other existing market. As little as 300$ can get you started. This basically means an absolutely minimum investment risk.

Then, you can trade from anywhere in the world and this is another important advantage. Worldwide trading allows you to make your trading offers from anywhere in the world, and all you need is a computer with and an internet connection. Your trusty laptop is all you need even if you plan your dream vacation but you still want to be able to do some trading in between two cocktails.

The market's specialization results in the majority of transactions being made in the most important seven currencies. This means that you will get good at it much faster than usual, and you will manage to get the feel of it in no time.

These five important advantages are what determine most people to consider starting a trading business. The risks involved are also worthy of attention, because if you are not aware of them, it's better that you stay away. It's not easy, but once you become an expert, Forex trading can turn into an impressive money making machine.

Top Tips and Resources for Forex Trading Success

by Ben Franklin

Forex trading has slowly but surely become one of the most popular online activities in the past few years. Most people, when they are asked about an online money making opportunity, don't hesitate and nominate the Forex market. But many people don't know anything about it. So, what is Forex trading and what makes it the most important online money exchange option?

Although it has indeed gained notoriety, the word "forex" is still mostly associated with the words "risk," "exposure" or even "gamble." There is some truth to that, because Forex trading is not for the faint hearted, but its undeniable advantages make it a great income opportunity for people who are willing to take some chances.

The first one that would pop on top of anyone's head is the impressive amount of liquidity volume. An awe-inspiring sum of about 2 trillion dollars is being speculated everyday. That's a lot of money that changes hands and it, in turn, generates more money, similar to a snowball effect. The market is therefore very stable and it allows the traders to get the money in and out without any problems at all.

Then, there is the time table which is very convenient. The company offers an around the clock and very dynamic market. The trading begins on Sunday at 3 o'clock PM EST when New Zealand begins operating. It lasts until Friday 5 PM when EST when San Francisco closes operations. You can practically work in any time zone you desire.

It also has the advantage of a low initial investment. This is another appealing factor to people who consider starting trading. You will actually need a far smaller amount of money to get you on your way than in any other existing market. As little as 300$ can get you started. This basically means an absolutely minimum investment risk.

Then, you can trade from anywhere in the world and this is another important advantage. Worldwide trading allows you to make your trading offers from anywhere in the world, and all you need is a computer with and an internet connection. Your trusty laptop is all you need even if you plan your dream vacation but you still want to be able to do some trading in between two cocktails.

The market's specialization results in the majority of transactions being made in the most important seven currencies. This means that you will get good at it much faster than usual, and you will manage to get the feel of it in no time.

These five important advantages are what determine most people to consider starting a trading business. The risks involved are also worthy of attention, because if you are not aware of them, it's better that you stay away. It's not easy, but once you become an expert, Forex trading can turn into an impressive money making machine.

Internet Marketers Are Cash Rich But Assets Poor- Creating Assets From Trading Financial Instruments

by Peter Lim

Why is it that most successful internet marketers are cash rich but assets poor?

As investing and trading the financial markets such as the forex, stocks and shares and commodity futures market is one of the cornerstones of personal wealth creation, how can the internet marketer address this dilemma to gain more assets?

Internet Marketers Are Cash Rich But Assets Poor

When the internet marketer makes his cash from his marketing efforts through his "thousand dollar" or "million-dollar" launches, or just his daily sales blitz that brings in the constant income, he becomes cash rich, but assets poor, other than his virtual assets like his rights to domains, websites and his info-products. So if you are an internet marketer, and you have a good cash flow from your internet marketing business, it is never too late to start right now to transit and also move into investing in the financial markets such as forex, stocks and shares or futures and commodities to start creating the assets flow - to own more liquid assets to your name.

Trading Instruments As Assets For The Internet Marketer

Among these financial instruments, stocks and shares are considered the original paper assets, giving you rights over part ownership in the companies you invest in. The other instruments confer short term ownership rights, because it is the nature of these instruments that they are subjected to price fluctuations over short periods of time, so that you may wish to trade in them rather than keep them for long term investment over years. That is why forex will rank the top choice for you if you are an internet marketer and wish to create a newer source of income- to create personal wealth within a short period of time. This is because the forex market is open everyday at any time, and the price of your currencies is subjected to fluctuations at any time, so that you can exploit these price fluctuations to your advantage by trading them.

Anecdotal Success Stories Of Internet Marketers - The Reason For Their Success

I have seen many internet marketers scrape through hand to mouth monthly from their marketing efforts, not making huge sums of money from their marketing activities, no matter how hard they have tried to set up blogs, post articles, send press releases, applied social bookmarking, even doing blackhat search engine optimisation on their sites, including cloaking.

But they have been some stunning success stories when these same internet marketers who have been struggling all the time, make a tiny adjustment to their marketing efforts. Sort of calling this a "butterfly effect" where the fluttering of the wings of a butterfly would cause the movement of tiny waves in the air which can cascade and multiply to be a part of a cyclonic effect elsewhere, a tiny re-adjustment to these internet marketers have spurn them on to fantastic success in their marketing.

Looking at these spectacular successes, there is a dominant factor which is discernible. What was the tiny adjustment that these internet marketers performed in these few internet marketers that I studied who became spectacular successes?

They re-apprised their role, so that as an internet marketer, their duty was to be responsible for idea generation and marketing project management - leaving everything else in between to outsourcing. They concentrated on the product generation -outsourcing the other marketing work to some cheap economic freelancers or sources. As a result of this outsourcing, their marketing promotion goes into overdrive, and they get massive targeted traffic that resulted in sales as they could concentrate on product generation. In other words, they get their role and their strategy correct!

The Crucial Key For Internet Marketers Moving Into TradingIt is crucial that you get this understanding at the very onset, if you are an internet marketer wishing to move into forex trading, shares or commodities trading.

Your main duty in forex trading is to get your trades correct. Your main duty is NOT to make money in forex trading, because no matter how hard you try to force the markets to give you money, the market is not going to grant what you desire. However, when you get your trades correct, when you have the correct trading strategy, and you are able to execute that trading plan with discipline, then success will follow and the markets will provide you the profits naturally. Profits will flow naturally as a result of you making the correct trades!

So your first step to move into forex trading, or shares trading and investment or futures and commodities trading is to get the correct training in terms of strategy, and learning to trade professionally as a business. Do not be penny wise and pound foolish in your education and training as a forex trader. Be very stringent on yourself, and pick the best mentor you can afford to learn how to trade and invest. Learn the successful trading techniques from a proven trader who has the trading experience. This is your first key to create personal wealth in forex trading or any other trading.

Part #2 of this special article will be posted shortly (which will include important tips on an important trading strategy every potential trader must know about).

About the Author

Peter Lim is a Certified Financial Planner. If you can't wait to get Part #2 , and other powerful reports, you can get to read the direct report here from The Forex Trading Machine Strategy website or several more revealing reports from my blog http://1forex-trading.blogspot.com