Using Line Charts in Forex Trading

The most commonly used type of chart in Forex trading, is known as the line chart. They are quite popular, especially among beginners. One of the reasons why these kinds of charts are popular among beginners, is because not only can they be very effective, but they are very simple and easy to use. The Forex line chart is a style of chart that is constructed by connecting a series of data points together, in other words currency pair prices, over a specified time period in order to form a line. The line chart is the most basic style of chart used in Forex trading and in finance, in general. They allow currency traders to see how a particular currency pair’s price has moved over a specific period of time, as specified by the individual trader. For example, a Forex trader might use a line chart to see the price action of GBP/USD over the past 6 months. Line charts are generally better for Forex traders who wish to take advantage and ride long-term trends, but also for those who wish to find correlations between different currency pairs and other variables, including commodities and trade defects. These sorts of charts tend to be provided by all good online Forex brokers. If you have a good broker, you should be able to access line charts from within your trading platform. These are better to use, since the prices you will see on the ones provided to you by your broker’s trading platform, will reflect the prices that you are actually given. Also, it is obviously a lot more convenient to...

How Technical Analysis Can Fail

Although there are other aspects of technical analysis in Forex trading, it mainly comes down to price charts, graphs and indicators. Some Forex traders rely heavily on the use of this type of analysis, but it doesn’t always work. Technical analysis is all about past price history and those who use this type of analysis a lot, try to look out for forming trends and patterns, in the Forex market. These trends and patterns allow Forex traders to profit, by riding them. They are identified predominantly through the use of technical indicators in conjunction with price charts and graphs. The problem is that technical analysis is all about the past and the histories of currency pair prices; history doesn’t always repeat itself and especially not in the financial markets, which includes the currency market. Some trends and patterns do of course repeat themselves and continue to grow over time, allowing many to take advantage of them and profit. However, technical Forex traders are always subject to the risk of their trends and patterns failing on them. Technical analysis can definitely work, but it is debatable whether or not it works most of the time. There are a number of ways in which technical Forex traders can make profits, using technical analysis. They can use support and resistance lines, candlesticks and wave patterns – just to name a few ways. There are many, many ways in which a Forex trader can conduct technical analysis. There are many technical currency traders and each one will their own different methodologies, when conducting their technical analysis. So, ultimately it is the individual Forex...

Twelve Candlestick Patterns That Can Signal Trading Opportunities

Ever since candlesticks have become a major trading tool, users of the systems have continually tracked and monitored the different candle patterns and have developed 12 major candle types that you should be aware of, in order to use them effectively. These patterns must be learned so that when they appear you can take advantage of market pricing that usually occurs next. These candles are called major patterns because they occur with such frequency that you can have profitable trades when they occur. Utilizing just these major candles can provide you with an efficient and profitable trading system. Subsequent patterns do have an effect on what happens so you cannot live in an isolated bubble when using candlestick trading patterns. The Doji is a pattern that has the open and close very close together. The Doji is most often occurs when there is indecision in the market and is usually a sign to stay out for the moment. The Gravestone Doji occurs when the open and the close are both very close together and occur as the low price of the day. This candle is most often found marking the end of an upward trend and is usually seen as a reversal candle. A Long-Legged Doji is marked by the opening and the closing price being very close together but with the high and low price having moved significantly in each direction. This type candle often marks the beginning of consolidation in the markets as the majority of traders have lost their sense of direction. A Bullish Engulfing candle is usually found at the end of a downward trend....

Candlestick Patterns for Forex Trading Profits

Originally developed for predicting and projecting future rice prices, Japanese Candlesticks have been used by traders in all types of equities, commodities and financial markets for centuries. The exact point and time this tool was developed remains a mystery but it has become one of the most used technical trading tools available for use today. They have proven to be reliable over time and that is why they are still used today. After centuries of refinement candlestick trading has become a science that can be used to make you a more profitable trader. Forex traders often refuse to take time to learn the history of the tactics and technical tools that they use on a daily basis. This leads them to not understanding the limitations of the tools and how to best utilize the limitations of the tool in an effort to profit. The quote begins “If we fail to learn from history,” says a lot about learning the background of the tools that can make us the most money. Often traders refuse to look at what makes a tool work and today we will see the history of the candlesticks that make them work. Japanese rice merchant Munehisa Homma started to plot the price of rice in the 18th century. At the time the markets were ruled by fear, greed and a herd mentality (much like there are today). However, he found a way that by tracking the price at certain points he was able to see patterns that developed during the day that provided him information on how the market would react the next day. He tracked...

Simple Moving Averages Explained

The simple moving average (SMA) has been around for as long as there have been trading markets and is one of the most common indicators in all financial markets. This indicator is used to smooth the visual effect of price volatility allowing you to see a very clear picture of the price movement and of changing trends in the market. The SMA is often use in conjunction with another moving average in an effort to find a confirmation signal of a changing trend. The SMA is comprised of two variables, the first being the period and the second being the price of the currency pair. The time period can be any period but if you are dealing with short time frames it is best to use 20 time periods or less and for longer time frames you should use more than 20 time periods. The price can be calculated using the open, close, high or low price, however, the most common price used is the closing price of the currency pair. The simple moving average is calculated by choosing a number of periods of time and then choosing the setting of the price. By adding up the price during those time periods and dividing this sum by the number of time periods you get an average that can be plotted on the chart. By moving forward you begin to develop a group of average prices that will give you a plot on the price chart. However, the simplest way of doing this is to allow your charting software to plot the SMA for whatever time periods that you desire....

Picking Tops and Bottoms to Maximize Your Profits in the Forex Market

The pinnacle of being a great trader is often thought of as being able to foretell the absolute top of a trend or the pure depth at the bottom of the market and then being able to place an order that rides all the way to the absolute end of the trend, before getting out with maximum profits in both directions. While this is the scenario dancing around in the heads of many traders, both novice and experienced alike, it rarely if ever happens regardless of the hype produced by hucksters trying to sell you their latest Forex trading course or proving that their paid signals provide the best profit for your dollars. Picking tops and bottoms is a futile and losing exercise and leads to frustration and capital losses that are almost irrecoverable. Many traders today are more interested in how many winning trades versus how many losing trades that they have when what they should be worried about is how much they profit from winning trades and controlling their losses so that any profits are not given back. Over trading, emotional trading and trading without discipline are the main components that make up a losing trader. Over trading occurs when someone has a string of 2 or maybe 3 successful trades and believes they have the market in their pocket. Emotional trading picks up on this and kicks in when a trader wants to get revenge on the market for a recent loss or is caught up in the euphoria of their winning trades. Undisciplined trading is a combination of all these but usually starts with impatience...