Forex Trading Tips and Strategy Tutorial

THE STOCHASTIC OSCILLATOR

2007-02-28T22:58:00.000Z

The stochastic oscillator measures the velocity of price movement and therefore is a MOMENTUM oscillator. Most indicators that traders use, such as moving averages, move after the price has moved. The stochastic oscillator is a LEADING INDICATOR, meaning that it always changes BEFORE price does.

Look at the first example below. The stochastic started to turn up 8 bars before price climbed a full 6 points. In the second example the stochastic turned down 11 bars before price turned down. Two beautiful examples of a leading indicator!

EXAMPLE One

EXAMPLE Two

George Lane made the stochastic oscillator popular and he told a funny story about how it came to be. Apparently, in the 1950's traders were so desperate for new indicators that they were willing to try anything. An engineer had come up with a formula for getting just the right amount of limestone in the mix to make steel. A trader looked at this and said "Well why not try it?" and it worked!

Most traders buy when the price goes up through the 20 line and sell when it hits the 80 line. The Edge does not use this commonly used methodology, but uses the stochastic in several unique ways…

CHART SET UP FOR STOCHASTICS

On your one-minute and three-minute charts, and any others, put on a regular"Slow Stochastic," which should come with all charting packages. However, I useTradestation and these charts are created using this platform.

The default inputs for the stochastic that come with your charting software will usually be something like this:

Change the Inputs as follows:

Then make %D blue or yellow or purple; do not make it green or red if your charts show candlesticks in green and red.

When you have finished that, apply the indicator to the screen that you have your futures contract or stock or index in candlestick format. Take your mouse and left click on the stochastic %D and drag it up to the price bars.

Voila! You should have the stochastic overlaid on the candlesticks. Most charting software is capable of doing this but if you have trouble with it call your service provider's technical support.

Micro Trading the 1 minute Charts

2007-02-11T03:01:00.000Z

Now that you have opened a demo account and familiarized yourself with the VT trading platform we would like to introduce you to the Forex trading technique of 'scalping' for small profits. If you only have a small amount of time to trade each day, then this strategy might be the right one for you. Everyone will settle into their own style of trading.

This technique is for traders who like getting in and out of trades in a matter of minutes instead of hours. Stock Index Futures traders often use the 1minute charts to enter and exit trades. Forex day traders can also gain an advantage by getting in on a move right as it happens by watching the 1 minute charts.

SET UP YOUR CHARTS

Open a new EUR/USD 1 minute candlestick chart.
Add Bollinger Bands set at 18, Exponential. Change the color of the middle band to bright green.
Add a moving average 3 Exponential, Close and change the color to black.
Add the MACD Histogram Study (default settings)
Add the Relative Strength Index Study set at 14.
Zoom in or out to your liking.

The Key to catching the “Micro Trends” on the 1 minute charts:

Wait for the 3 EMA to cross through the 18 Bollinger Bands Middle
line.
Wait for the Relative Strength Index and MACD Histogram to line up:
Above 0 (MACD) and above 50 (RSI) for BUY signal. Below 0 (MACD) and below 50 (RSI) for SELL signal.
Remember to take small profits.
Practice this strategy on your demo account.

Good Luck

MOVING AVERAGE EXPONENTIAL OR EXPONENTIAL MOVING AVERAGE

2007-02-07T15:56:00.000Z

Put the moving average exponential on your chart. It will lie right across your candlestick bars. Make sure that the color is different from your stochastic indicator. Change the default input (usually 14) to 21.

Once you are in a trade, the 21 period EMA will help you stay in the trade to capture the maximum profit possible. Should a trend develop after your entry the price bars should stay above or below the EMA until the trend is over. A cross above or below the EMA usually signals the end of the trend. You will see many examples throughout this course of how effective the 21 period EMA is.

The above chart shows the 21 period exponential moving average laid over top of the price bars.

The above chart shows how your chart should look when all the indicators are added.

Thanks for reading,....

THE RELATIVE STRENGTH INDEX ( RSI ) GUIDE

2007-02-07T15:39:00.000Z

The RSI was developed by Welles Wilder and indicates when conditions are overbought and oversold. We consider the market overbought when the RSI is over 70 and oversold when it is under 30. We use the overbought and oversold signals on the RSI in conjunction with divergence on our other indicators and this gives us about an 85% success rate trade. See in the chart below how oversold and over bought conditions in the RSI also often lead to big moves in the other direction.

The above chart shows that the RSI is RED when in the overbought area and BLUE when in the oversold area.

The above chart is an example of the RSI in an oversold position followed by an overbought situation.

The above chart show the RSI in an overbought position followed by a fall in price and then in an oversold position followed by a rise in price.

THE MOVING AVERAGE CONVERGENCE/DIVERGENCE ( MACD )

2007-02-07T14:04:00.000Z

The MACD is two moving averages that are produced using exponential smoothing, and their difference is the MACD value. This is further smoothed to give a signal line which is again smoothed. The trend of the MACD pattern is often a leading indicator of price change. Here is an example of the MACD changing before price changes. As in the stochastic example, you can see the MACD is a leading indicator of price change.

Here is an example of the MACD turning down before price.

Price fell 26% in 29 trading days.

CHART SETUP FOR THE MACD

Put the MACD on your chart. As with the stochastic inputs you need to change the MACD inputs as follows:

Fast Length : 4
Slow Length : 8
MACD Length : 3

Then under the section where you can change the color, blackout the MACD, change the MACDAvg to a color such as yellow or purple (but not the same color you made the stochastic) and blackout the MACDDiff as you did with the %K in the stochastic. Apply to your screen below the price bars as in the above examples. Your screen should now look like this:

The Next: Six Steps to Success ,.. What the hell are they....

2007-02-07T13:07:00.000Z

The goal of this guide is to instruct and teach potential traders how to day trade the currency markets. The objective of day trading is to trade the intra day market moves to try to gain small to medium sized profits in any given trading day. This is how this guide will help. Most readers will not have the time or resources to ‘position trade’ like the major institutions and banks do. They tend to look at the big picture holding onto trades for weeks or months.

The Forex Profit System is specifically designed for use with the 1, 5 or 10 minute charts, with the goal of taking 5-20 pip profits per trade—closing bad trades out using tight stops, or hedging any losing trades. The following steps will show you how to do this.

Step 1. Choose an online Forex Firm

Low Spreads. In Forex Trading the ‘spread’ is the difference between the buy and sell price of any given currency pair. The lower the spread saves the trader money. Most firms offer 4-5 pip spreads in the Major Currency pairs. The best firms offer clients 3-5 pips.
Low minimum account openings. For those that are new to trading, and for those that don’t have thousands of dollars in risk capital to trade, being able to open a mini trading account with only $200 is a great feature for new traders.
Instant automatic execution of your orders. This is very important when choosing a Forex firm. You want instant execution of your orders and the price you see and ‘click’ is the price that you should get. Don’t settle with a firm that re-quotes you when you click on a price or a firm that allows for price ‘slippage’. This is very important when trading for small profits.
Free charting and technical analysis. You need a firm that gives you access to the best charting and technical analysis available to active traders. The firm that I recommend gives clients FREE professional charting services and even allows traders to trade directly on the charts!
High Leverage. You want high leverage—the ability to trade a large amount with a small margin deposit. Some of the best firms offer .25% or 400:1 leverage.
Hedging Capability. You want the flexibility of opening positions on the same currency pair in opposite directions without them eliminating each other and without margin increase!

Personally I recommend you to open one account at Marketiva as your forex broker.

Wellcome to my new blog, Lets talk about what is forex?

2007-02-07T03:37:00.000Z

What is Forex?
Do you know Forex..?, how much do you know about forex?

The Foreign Exchange, also referred to as the "Forex" or "Spot FX" market, is the largest financial market in the world, with over $1.2 trillion changing hands every single day. If you compare that to the $25 billion a day volume that the New York Stock Exchange trades, you see how giant the Foreign Exchange really is. In fact it is three times larger than all of the US Equity and Treasury markets combined!

What is traded on the Foreign Exchange? The answer is money. Forex trading is where the currency of one nation is traded for that of another. Therefore, Forex trading is always traded in pairs. The most commonly traded currency pairs are traded against the US Dollar (USD). They are called ‘the Majors'. The major currency pairs are the Euro Dollar (EUR/USD); the British Pound (GBP/USD); the Japanese Yen (USD/JPY); and the Swiss Franc (USD/CHF).

The notable ‘commodity’ currency pairs that trade are the Canadian Dollar (USD/CAD) and the Australian Dollar AUD/USD. Because there is not a central exchange for the Forex market, these pairs and their crosses are traded over the telephone and online through a global network of banks, multinational corporations, importers and exporters, brokers and currency traders.

Traditionally, currency trading has been a 'professionals only' market available exclusively to banks and large institutions, however, because of the rise of the new E-economy, online Forex trading firms are now able to offer trading accounts to 'retail' traders like you and I. Now almost anyone with a computer and an Internet connection can trade currencies just like the world's largest banks do. There are now over 6 million trading accounts worldwide up from 1.7 million in 1997.

That's it, simple description about Forex. At least now you understand what is Forex meaning. Ok now, what's benefit of Forex Trading,...

There are many benefits and advantages to trading Forex. Here are just a few reasons why so many people are choosing this market as a business opportunity:

1.LEVERAGE: In Forex trading, a small margin deposit can control a much larger total contract value. Leverage gives the trader the ability to make extraordinary profits and at the same time keep risk capital to a minimum. Some Forex firms offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable a trader to buy or sell $10,000 worth of currencies. Similarly, with $500 dollars, one could trade with $100,000 dollars and so on.

2.LIQUIDITY: Because the Forex Market is so large, it is also extremely liquid. This means that with a click of a mouse you can instantaneously buy and sell at will. You are never 'stuck' in a trade. You can even set the online trading platform to automatically close your position at your desired profit level (limit order), and/or close a trade if a trade is going against you (stop order).

3.PROFIT IN BOTH 'RISING' AND 'FALLING' MARKETS: On the stock markets, you can only make money if shares are rising, but in economic recession and falling 'bear' markets, there is little chance of making big money.
Forex is different. One of the most exciting advantages of FX trading is the ability to generate profits whether a currency pair is 'up' or 'down'. A trader can profit by taking a 'long' position, (buying the currency pair at one price and selling it later at a higher price), or a 'short' position, (selling the currency pair and buying it back at a lower price). For example, if you think the US dollar will increase in value vs. the Japanese Yen then you will buy Dollars and sell Yen (go long). If you think the Yen will increase in value against the Dollar then you will sell Dollars and buy yen (go short). As long as the trader picks the right direction, a potential for profit always exists.

4. 24HRS: From Sunday evening to Friday Afternoon EST the Forex market never sleeps. This is very desirable for those who want to trade on a part-time basis, because you can choose when you want to trade--morning, noon or night.

5. FREE 'DEMO' ACCOUNTS, NEWS, CHARTS AND ANALYSIS: Most Online Forex firms offer free 'Demo' accounts to practice trading, along with breaking Forex news and charting services. These are very valuable resources for traders who would like to hone their trading skills with 'virtual' money before opening a live trading account.

6.'MINI' TRADING: One might think that getting started as a currency trader would cost a lot of money. The fact is, it doesn't. Online Forex Firms now offer 'mini' trading accounts with a minimum account deposit of only $200-$500 with no commission trading. This makes Forex much more accessible to the average individual, without large, start-up capital.

I think its enough to tell you about Forex Trading Benefit.. Let's Continue

Foundation Of Forex Trade System

What's this?......Before we begin looking at the specifics of the FPS and how it works, let’s look at
4 building blocks that I believe to be foundations to the Forex Profit System.

Just keep reading guy/girl,... Serious Mode: ON

Foundation #1: Currency Trading is not a Get-Rich - Quick Scheme.
Currency trading is a SKILL that takes TIME to learn. Skilled Traders can and do make money in this field, however like any other occupation or career, success doesn’t just happen overnight. Here is a great ‘formula’ for success:

Practice + Patience + Persistence = Profits

As they say, there is no substitute for hard work and diligence. Practice trading on a demo account and pretend the virtual money is your own real money. Do not open a live trading account until you are profitable trading on a demo account. Stick to the plan and you can be successful.

Foundation #2: I highly recommend that you follow 1 or maybe 2 major currency pairs.
It gets far too complicated to keep tabs on all four. I also recommend thattraders choose one of the majors because the spread is the best and theyare the most liquid. The Euro/USD is the most commonly traded pair and usually has the best ‘spread’ because of its liquidity. The USD/Swiss Franc is usually the most volatile and moves the most during the trading week. The
USD/Yen moves a lot on the news out of Japan and normally the Pound Sterling/USD is more stable in it’s moves than the other three.

Foundation #3: Follow and understand the daily Forex News and Analysis of the professional currency analysts.

Even though this system is based solely on technical analysis of charts, it is important to get a birds-eye view of the currency markets and the news that affects the prices. It is also important that you know and understand what the key technical ‘support’ and ‘resistance’ levels are in the currency pair that you want to trade. Support is a predicted level to buy (where currency pair should move up on the charts), resistance is a predicted level to sell (where the currency pair should move down on the charts).

Foundation #4: Learn how to use the technical indicators in this course and always trade with stop losses!

It is worth your time to be patient and learn how to use the technical indicators on the charts that you will be reading about shortly. It is important when you are trading Forex, to be disciplined and to stick to a plan. Don’t just trade your ‘gut’ feeling. Use the technical indicators
outlined and always enter in stop losses on every trade. Remember that everyone who trades has a different tolerance for losses. Depending on your risk capital, and strategy, set your stop losses accordingly.

Thanks for reading, I hope it will be helpfull for you,...