Forex Technical Analysis

If you have traded in Forex before, or if you want to, one of the things you are going to need to know about is technical analysis.

There are two types of analysis you need to know about when it comes to Forex trading. Fundamental analysis is “big picture” analysis, whereby you take into account a country’s social, economic and political health to determine the stability of its currency. A country that is stable in these areas is going to have a stronger currency, in general than a country that is not stable in these areas, and therefore a stronger country is going to be a better bet when it comes to Forex trading.

What is technical analysis?

Technical analysis is a little bit different. With technical analysis, you analyze a particular currency’s patterns and trends over a specific period of time. For example, if a particular currency has been performing strongly in its recent history, it’s probably going to continue to do so. Similarly, if it’s been doing poorly in its recent history, it’s probably going to continue to do that too. You chart currencies’ trends and patterns, and make predictions as to how a particular currency is going to continue to do against another. You place trades with “currency pairs” based on this information, in essence betting that one currency is going to do better than another and therefore “winning” on that trade.

Does Forex technical analysis really work?

Absolutely, Forex technical analysis works to produce winning trades; many successful traders encourage taking a twofold approach by using both fundamental and technical analysis to determine which trades are going to produce profits.

Becoming an experienced Forex technical trader

To become an experienced Forex technical trader, you should learn your way around the Forex market by using a “demo” account first. Most good Forex brokers will allow you to open a demo account with no money; then, you “trade” in “demo” mode until you’ve become very experienced in placing trades. Once you begin to win on trades with this type of “pretend” trading, you can begin to place real trades with real money so that you can make a profit. It’s very important, though, that you do demo trading first. This gives you the opportunity to learn your way around the market just as you would if you were really trading, and it teaches you how to handle both wins and losses on trades.

What being an experienced Forex technical trader can do for you

As an experienced Forex technical trader, you have the opportunity to make trades based upon the patterns and trends you see (as well based upon your own gut reaction, once you become experienced), instead of on an emotional basis. Why is this important? Because if you make trades based upon an emotional basis instead of on what your data tells you, you’re going to lose on trades, and you may even lose your shirt. That’s a simple fact.

Trading based upon what your charts and data tell you, on the other hand, is simply smart. That means that you make decisions based upon data, not upon emotions. In practical terms, that means you may get out of a trade that’s still winning because your data tells you it’s time, or your data may tell you to get out of a trade that you’re losing on, even though your emotions would tell you to stay “in the trade” in the hopes that you could make back the money you have already lost.

Successful Forex traders know that they are always going to lose on some of their trades, but they follow their data, their charts and analyses, and they do what this information tells them. This helps them be successful because they win on more trades than they lose on – and that helps them break a profit and be successful overall. Learning Forex technical analysis can help you do the same.

By: Chris Hayden

Picture being able to work any hours you like, day or night, from home. Picture if most of the work concerned with this dream job was reading and thinking. No heavy manual work and no going to bed early so that you can get up early, unless you want to. Well, these jobs do exist. The newer ones are all Internet based, but you appear to be on the Internet anyway. You could build websites, blog, play the stock markets or you could try Forex trading.

Although each of these new jobs has its own virtues, I want to talk about the Internet and Forex trading, because it has the most potential. Blogging and websites will make you some money and there is little financial risk. The stock markets are only open about nine hours a day, but Forex never stops.

It is live literally twenty-four hours a day. This is because Forex exists only in machines, there is no Forex Building in the same sense that there is a London or New York Stock Exchange, where people actually, physically go to work five days a week.

At this juncture of the game, I will assume that you are not going to give up your full-time job and that Forex will be a hobby. Hopefully a profitable one, but first you have to learn how to get started. Go to your favourite search engine and type in ‘forex brokers’ or ‘forex platforms’.

A dozen or more will crop up and you ought to visit the individual websites and save three or four that you like in a Favourites Folder. Then write down there names, for example, AC Markets, and type into the SE: ‘AC Markets problems’. You may want to discard a few from your chosen ones after doing this. Anyway, eventually, you will come up with a Forex broker that you are happy with.

Pick a broker that gives a free Forex trading account and a free practice trading account as well. A good Forex trader will provide you with free online charting services and access to information on the currencies that they deal with. So begins the protracted process of learning the principals of Forex trading. The point is that you should be able to learn how to place Forex trades sensibly based on knowledge that you have gleaned and test your ideas all free of charge, until you feel confident enough to risk some of your own, hard-earned, real money.

One of the good elements of Forex trading is ‘set and forget’. For example, your investigation may lead you to suppose that over the next month, the GBP will rise by two cents against the USD and then fall back to being one cent ahead of where it is now. These trades can be programmed in automatically, so that if the GBP starts rising, the software buys for you and then sells for you at a given price, waits for a given fall and then buys back again. This is very useful, if you are confident but you have other things to do, like a real job to get on with.

The main thing to keep in mind is that you have all the time in the world, so take your time and be careful. Learn how to play the game before you take a seat at the table and you should find yourself earning a nice little extra pay packet.

By: Owen Jones

Reading forex quotes correctly is essential to forex trading but it can be quite confusing for the new comer. Actually, they are quite simple to read and understand. Here is a guideline to reading forex quotes correctly.

Let us look at an example of how a forex rate quote looks like:

EUR/USD = 1.2526

The above looks simple enough, right? This is an example of a foreign exchange rate between the Euro and the US Dollar.

Do not forget that in all forex quotes, there are always two currencies quoted. The forex quote is displayed such because when you make a trade in forex trading, you are always buying one currency and selling another at the same time.

In all forex quotes, the first currency listed is known as the base currency while the second is known as the quote currency. Forex quotes are meant to show us the price relationship between the two currencies.

The foreign exchange rate gives us an indication of how many units of the quote currency we have to pay to get one unit of the base currency.

The above example shows us that the base currency is the Euro and the quote currency is the US dollar. The forex quote tells us how each currency is trading relative to the other. In order to purchase one unit of Euros you will have to sell 1.2526 units of US Dollars.

It should be easy to understand so far. Now let’s add an additional thing to our example and that is the bid ask spread.

Forex brokers are paid not on the trades placed in the forex market but on the bid/ask spread instead.

We shall add the bid/ask spread to our example above:

EUR/USD = 1.2526/1.2528

This can be simplified to:

EUR/USD = 1.2526/8

Forex brokers make their commissions by selling currencies at a slightly higher rate than they buy them. This is perfectly legal and all forex brokers do it, though the amount of the spread may vary.

As a forex trader, you will be buying at the bid price, which is the first price quoted. You will then sell at the ask price which is the second price listed. This difference between the two prices is called the spread which is retained by the forex broker as their profit on the trade.

In our above example, you will buy at 1.2526 and sell at 1.2528. The 0.0002 (2 pips) will go to the forex broker as a payment for executing the trade for you.

The bid/ask spread is an easy to understand and clear-cut way for calculating trading fees and expenses.

With a good understanding of how to read forex quotes correctly, it can go a long way in helping you achieve success in forex trading.

By: Duncan Lee

Considering the forex market, it is necessary for you to avoid the noise of price action and isolate the trend if you want to earn some money. Here is beneficial information for this particular trade. The forex market makes up one of the most liquid and profitable trading arenas in the world. In general, leverage is subject to new regulations but this is what traders use to earn from the trade of forex. What comes with a position in the forex market is a low cost of entry.

24/7 is how this particular market operates. Thanks to this, currencies can be traded non-stop. Especially for newcomers, the forex market is a way by which they can achieve their goal to one day become big players in this highly profitable game.

When it comes to the forex market, yes you can earn money but remember that losses are part of the game as well. There are two sides to the story when you are talking about the exchange of currencies where you can profit from your decisions or you can lose big leading you to the kind of trade equity that no one desires. It is necessary that you accept the existence of both winnings and losing when you participate in the forex trade because this is something that you need to familiarize yourself with as a long-term trader.

It is the forex trade that is somewhat unpredictable. If you don’t have a plan for risk control, these volatile moves can bleed your trade equity dry. A lot of people fail to act in accordance with the market’s movements thus causing them to fail expensively. Profit earning in this case depends on how well you can react to any situation during the trade.

What is absent in this case is the charging of commissions by forex brokers. Instead, you pay a bid ask spread that could run anywhere from two to five pips, on average. Remember that you need to be watchful of risks at all times.

It is possible to lose money even with the leverage. You are risking more than the value of your initial purchases when it comes to the forex market as this is not similar to the kind of trade where you can buy and hold stocks indefinitely and only risk the amount which you initially paid for. Watching out for trends will really help you out in this case.

Currencies join together at one point before moving towards their separate trends and this is what is known as the concepts of contraction and expansion. This is something that cannot be removed from the forex trade. The forex market represents the best of what trading has to offer which is high leverage, strong price movement and huge profit potential.

You should always be ready when it comes to the forex market considering its high volatility. Take this into consideration and be a profitable trader. Never forget about the risks you are taking in this case. This is where haste and impulse is not welcome.

By: Gloria Harmon

So what advantage does the forex foreign exchange market have over other investment vehicles?

When people usually think about different types of investments, the one that comes to most minds is the stock market. Although the stock market is a valuable investment avenue, it miserably fails to compare to the profit opportunities available in the forex market.

The forex foreign exchange market is like no other market. It is open 24 hours a day, where the stock market is not. Most other investments also take a large sum of capital for you to actually make any money from investing. To trade the forex, an investor only needs a small amount of capital due to the leverage that all the forex brokers offer. Some brokers allow traders to open an account with as little as $250. With this amount a trader can and most reasonably want to invest in a “mini” account. This account size lets the trader buy lots of 10,000 units of currency. When the currency moves in any direction , each point (pip) equals to $1. The most common lot size is 100,000 units of currency which is a standard account.

With 2.5 trillion traded globally each day the forex foreign exchange market has very high liquidity.

Most other types of investments are designed to keep your money bundled up for long periods of time. This can come at a cost to the investor if they need to use the capital. It could be rather difficult to gain access with out taking an substantial loss out of there account.

Forex trading also allows the trader to make money when the market is bullish and when the market is bearish. When you invest into the stock market, you need the stock market to gain in price for you to ever take any profits. Like all other investments there are risks involved. But with the great volatility of the forex market, the profit potential far outweighs the risk when followed by a sound forex system.

Forex traders have the opportunity to open up demo accounts and trade with what people call “paper money”. This allows the traders to practice their trading skills in live market conditions without ever risking their own real money. All you do is find a broker that you are interested in and sign up for there demo account. Then you download their trading station software and you are on your way. This gives the trader valuable experience in the market without ever blowing their own real money. This gives a huge advantage for the learning curve aspect of it. You will also be able to find many forex courses and online seminars that can broaden your knowledge further.

By: Adam Hefner