Forex Technical Analysis

As you probably know, the Forex currency exchange is the world’s largest financial market tipping the financial scale at more than 150 times the size of the New York Stock Exchange.

With the growth and expansion of the Internet, this mega-market has become accessible for individual retail traders all over the world.

But it was not always that way. In fact, for most of its existence since 1971; the Forex currency market was only available to international banks, hedge funds, other giant financial institutions and a few of the world’s richest individuals.

For those with the knowledge and the money to access that market, profit potential was exceptional and, presumably, that was one of the reasons, most trades required a minimum investment account in the million dollar range for any transactions in the currency futures or spot Forex markets – both of which exposed you to unlimited risk.

As an investor, you had to have a high risk threshold and you had to continuously monitor the market. If a trade happened to go against you, you could admittance was restricted for so long. Of course, there was the fact that you had to have a huge bankroll in order to play in the Forex currency exchange game. A few years ago, potentially you could lose your entire investment; plus you might get a margin call that could cost you even more. Back then, your downside risk was a very frightening thing.

But these days everyone, including you, can participate in this huge and potentially profitable market, taking advantage of new investment vehicles that give investors immediate, limited-risk access to the world’s huge currency markets. And that only begins to describe the tremendous advantages of investing in the currency markets. A complete list would be a long one, but here are a half dozen of the best reasons the Forex currency exchange is attracting so many investors.

It works great on a part time basis. Since the Forex market is open 24 hours, there are plenty of trading opportunities every day. No large investor can corner the market and control the forex trading. The forex market is too large and too liquid for that. When one currency depreciates there is always another that goes up. So, unlike any other market, Forex cannot crash. Both rising and falling currencies offer you a profit opportunity. Whether going long or short, if your predictions are correct you will make money. You do not have to have a lot of investment capital. If you use the available high leverage properly, you can make significant profits without having a large trading account. No commission charges are the rule rather than the exception for most Forex brokers. They get paid on the spread which keep your costs down.

The Forex currency exchange market is capitalism in its purest form. It is completely driven by supply and demand. That means that it is the competition among major banks of the world, which sets the prices…and that’s a very good thing!

In this article, we have presented some guidelines to assist you in working your way through the many adverts you see for Forex, FX or foreign currency exchange trading. If you will keep these points in mind, it is likely that you will be able to find a trading system or Forex strategy that meets your individual goals.

By: Jamie Doyle

I’m sure you have heard of the great mathematician Leonardo of Pisa, also known as Leonardo Fibonacci? He was a highly influential Italian who lived almost 800 years ago, so you’re probably wondering what Fibonacci has to do with forex trading, I’ll get to that shortly.

He is most famous for developing the numerical sequence that is widely known as the Fibonacci Numbers or the Fibonacci Sequence (he is also credited with introducing the decimal system in Europe).

The very first number of the sequence is 0 and the second is 1. The sequence develops as each subsequent number is the sum total of the previous two numbers. In mathematics it’s known as a recurrance relation. Below are the first numbers in the sequence:

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, 4181, and so on.

e.g. 2 + 3 = 5, 3 + 5 = 8, 5 + 8 = 13 etc.

Leonardo Fibonacci discover that the Fibonacci sequence and their ratios could be found everywhere throughout the natural world, existing in the most unlikely places, almost as universal rule.

So how does Fibonacci and forex trading go hand in hand?

The Fibonacci numbers are important for charting, spotting patterns and indicators in the forex markets, and are used as an important method of analysis

Why?

When you analyse the currency markets carefully, you often find the same ratios as those in the Fibonacci number sequence. You’ll also find them in investments such as stocks.

The main three numbers you need to be aware of, and ideally should commit to memory are 0.618, 0.500 and 0.382. There are other numbers, but for starters these are the big 3 and most important.

So what are they used for?

The Fibonacci numbers are used by forex traders to calculate what are known are retracement levels, which are used to determine when to place buy orders or sell orders. It works like this:

If a currency pair is trending upward lets assume, then history will tell us then at some point it’s going to hit a peak and go into at least a temporary decline or reversal, and then resume the upward trend. When it starts the reversal, that’s where the Fibonacci numbers come into play.

The prices of the currency pair that are following the upward trend is usually predicted to reverse/decline backwards to one of the key Fibonacci numbers, and then bounce back again to follow the upward trend. The key is to forecast this point accurately so that you can buy in before the trend continues upward, so that you capitalise on the reversal and then profit.

You should have a charting mechanism built into your online trading platform which will chart the Fibonacci numbers. Your retracement levels should be automatically mapped on your chart when you simply draw a line up from the low point to the high point.

Obviously there are other things to take into account, it’s not as simple as just buying into a trade when the price hits a Fibonacci number.

For a start you never know which retracement level the price will drop to and stop at. If you opted for 0.382 and the price ended up dropping to 0.618, you’ve just lost a whole load of pips.

Conversely, if you buy in at the wrong high or low points, the retracement levels are going to be completely out of sync.

It can be problematic. They sometimes don’t work at all. The forex market is such a dynamic complex system with so many variables at play it would be foolish to rely solely on one method to predict price changes.

Moral of the story?

Find a trading system or strategy that incorporates as many elements and variables as possible, do lots of research, data mining and plenty of good old hard work.

By: Justen Robert Case

There are lots of different technical indicators that people like to use to trade the forex markets. Some use the old favourites such as the RSI, Stochastics and MACD indicators whilst others, like myself, like to use some of the lesser known ones such as the Supertrend and Smoothed Repulse indicators. However in this article I want to discuss the ADX indicator in particular.

ADX stands for average directional index and it is an indicator that was created by J. Welles Wilder, one of the most renowned technical analysis experts. It is primarily used to detect trends in the markets, and more specifically the strength of the prevailing trend. It should be pointed out that it doesn’t tell you the direction of the trend. You have to figure this out for yourself.

So why is this indicator useful for forex traders?

Well it basically tells you when you should be out of the markets completely, and when you should either be in a position or thinking about taking a position. In simple terms, if the ADX indicator is below 20, this indicates a trendless market and is often highlighted by a narrow trading range on your price chart. You should therefore be out of the market at this time.

If, however, the ADX is above 20 (and preferably above 25) and heading higher, this indicates a strengthening trend. So if the price is moving either upwards or downwards on your price chart, you should consider entering a position at this point. Of course you may want to use other indicators to confirm your entry point.

In general the higher the value of the ADX indicator, the stronger the trend. However that doesn’t necessarily mean you should enter positions when this indicator is at it’s highest, because very often the indicator will reverse when it gets above 50 or 60, for instance, and the trend will start to weaken.

The best time to enter a position is generally when the ADX is moving upwards from the 20 or 25 area because this is where a lot of the strong trends will begin. It doesn’t always work out this way of course, but if you wait for this to happen at the same time as the price makes a new high or low for the day, then you can find some excellent high probability breakout trades.

So overall I can definitely recommend you consider using the ADX indicator when trading currencies. It really is a very useful indicator for highlighting the strength of trends, and alerting you to the start (and end) of new trends.

By: James Woolley

With over 6 million global searches, “Forex” is basically about teaching people and companies how to profit with foreign currency trading.

The Forex markets are huge, with over $4 trillion traded daily. Most of this is traded by huge organizations – central banks, hedge funds and the like – but individuals can also trade Forex, and it’s these individuals that the “how to trade with Forex market caters to. Teaching people is big business.

What’s Forex?

“Forex” stands for FOReign EXchange; it’s also known as FX. In a Forex trade, you buy one currency while simultaneously selling another. Currencies trade in pairs, like the Euro-US Dollar (EUR/USD) or US Dollar / Japanese Yen (USD/JPY). Forex trading is used to speculate on the relative strength of one currency against another. The foreign exchange market is an over-the-counter market, which means that it is a decentralized market with no central exchange.

Most traders focus on the biggest, most liquid currency pairs. “The Majors” include US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. In fact, more than 85% of daily Forex trading happens in the major currency pairs.

The world’s most traded market, trading 24 hours a day With average daily turnover of US$3.2 trillion, Forex is the most traded market in the world. A true 24-hour market from Sunday 10 PM GMT to Friday 10 PM GMT, Forex trading begins in Sydney, and moves around the globe as the business day begins, first to Tokyo, London, and New York.
Unlike other financial markets, investors can respond immediately to currency fluctuations, whenever they occur – day or night.

Successful Trading?

To be successful in trading the Forex market you would have to have a system in place that would take care of your trades. There are such services available, and require you to purchase their services.
You could learn to do it yourself with wealth of information available on the Internet and with help of a few tools.

Forex Trading Tools

Fibonacci Retracement Calculator

Fibonacci Retracements Levels are known are not only the most popular but also the most effective retracement levels currency traders can use. The provided Fibonacci Calculator allows you to calculate Fibonacci Levels on up to 4 currency pairs at the same time.

Pivot Point Calculator

Pivot Points have been proven to be very helpful for all kind of trading styles. Not knowing the actual Pivot Points is an absolutely “no go” for traders who want to succeed. The Pivot Point Calculator helps to calculate Pivots quickly.

Woodie Calculator

If you ever heard or participated in the Woodie CCi Club from Ken Wood you already know that the Woodie Levels are a very good alternative to Pivot Points and Fibonacci Levels as well. The provided Woodie Calculator can be used to determine “Woodies” support and resistance levels with one click.

Camarilla Calculator

Usage from Camarilla support and resistance levels where first used from day trading legend Nick Scott and has been proven to be a powerful way to calculate possible market turning points. The Camarilla calculator can be used to calculate Camarilla levels on multiple Forex trading pairs.

What Next?

It all can be very complicated if you are new to the Forex Market, but it doesn’t have to be. You don’t need to know anything about the Forex market or how to trade it. You can learn how to profit from the Forex Market with little or no experience go to Resource Box or my profile page.

Forex trading can involve the risk of loss beyond your initial deposit. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary

By: Martin H Homer

Forex refers to trading in the Foreign Exchange of currencies, and it can be a really great method for investing funds and increasing your money relatively quickly. You don’t even need to start out with much money to make a killing by exchanging currencies, which is why it is such a popular investment method.

Essentially, what you are going to be doing is buying and selling currencies according to their current value and aiming to make money off of the difference in exchange rates. Simply put, trading currency through the Forex market is little more than the most common formula for making money- buying low and selling high. But instead of purchasing products like a shopkeeper or shares like a stock trader, you are going to be attempting to purchase currencies at a lower value than you ultimately sell them, leveraging the extremely liquid world currency market.

There’s nothing inherently new about this way to make money, but the currency markets offer a great opportunity for the savvy trader. There are a lot of people who think that the only way to succeed in trading foreign currencies is to have a lot of experience already with other forms of trading and investing. This actually isn’t true at all. There is all the information you could ever want out there on the internet. All you have to do is search for what you want to learn and it will come right up for you.

For example, if all you do is search for the term “Forex currency exchange” you will get tens of thousands, if not hundreds of thousands of links coming up filled with information on the market and the practice and all the opportunities waiting for you. Of course you don’t need to read through hundreds of thousands of websites to make money on the market, but it’s good to know that all the information you could ever want is already out there on the web waiting for you to read it and learn.

While it’s natural to feel excited about trading on the Forex markets and it’s natural to want to dive in headfirst, it’s better to show some moderation and patience when starting out. The market both goes up and down, and it’s important that you don’t overextend yourself or feel invincible just because you made some money quickly right off the bat.Knowing how to leverage both highs and lows in the markets is one of the keys to succeeding at currency exchange.

Note the trends and leverage them in your favor. Know that the market is going to keep changing and moving liquidly, and move with it to maximize your gains.

By: Closson M