One of the most common mistakes new Forex traders do, is that they have no trading strategy. Because of the many appealing characteristics (24 hours, trade both short and long, leverage etc) most of the new traders entering the market are eager to prove themselves in an often egoistic approach. Egoistic in that they believe that they can become very profitable and make a fortune in the short term, but soon enough they end up with a bad psychology which at the end accelerates their loosing pattern. In fact, the most successful Forex traders are people recognized for their humility and discipline. These qualities are acquired trough experience and accepting some simple realities of the Forex market.
The first step towards becoming profitable in the Forex market is to devise a trading strategy/plan. Creating a trading strategy is of paramount importance and is actually very easy.
To create a successful trading strategy, traders should address the following considerations:
1. Reasoning of the trade: Why buy or sell? Which pair? 2. Timing of the trade: Why now? Before economic news releases or after? Day or night?3. Trading objective: What is the take profit target? What is the stop loss? 4. Money management. 5. Documentation and analysis of the results.
Before entering a trade there should be a good reason. Many times traders are entering a position because of boredom or just to feel the excitement of being long or short. This is a recipe for disaster! You should always buy or sell any pair on a reason that makes sense to you.Whether this reason is fundamental or technical or both, always make sure there is a reason.
What currency pairs will you trade?
This sounds simple, but it is easy to get confused if you don’t define this. From our experience we strongly believe that is best to concentrate on some (not all) major pairs (such as EURUSD, GBPUSD and USDJPY) and don’t waste time with illiquid, choppy pairs.
You also have to determine when you will trade and how often you will trade. Are you going to be a day trader or hold positions for a longer period of time? Your schedule and responsibilities may have some impact on that.
Should you trade before economic releases or after? Should you trade heavily on nights, during UK open and close etc?
It is important to define these basic ideas to begin to form some consistency and discipline.
The second step is to define your trading objectives. What is your end goal? What is your take profit target and your stop loss limit?
Try to place your take profit and stop loss before entering the trade as you can always change that, if something important happens in the markets in the meantime.Most traders tend to take their profits early while letting their losses run. This is because in the inexperienced traders mindset is very difficult to accept that he/she is wrong.Placing your stop loss at the time you open a trade will help you create discipline and learn that sometimes you will be wrong. Furthermore, most new traders have completely unrealistic goals. Making big returns in the first year of trading is possible but highly improbable. These unrealistic Placing your stop loss at the time you open a trade will help you create discipline and learn that sometimes you will be wrong. Furthermore, most new traders have completely unrealistic goals. Making big returns in the first year of trading is possible but highly improbable. These unrealistic expectations wipe out a lot of traders before they even had the chance to learn the market. Breaking even in the first year is an admirable goal; many traders do not do that. If a trader makes 20-30% on their initial investment in their first year, that is outstanding.
Money management is probably the most important aspect of trading.
First you have to accept that in trading nobody can have a 100% winning ratio and everybody (even the most experienced traders) are sometimes wrong. Accepting that sometimes you might be wrong is again of paramount importance.The key here is accepting you are wrong before your mistake becomes too big. To do that you need to determine how much equity you have to fund you account. Then you must determine how much risk you are willing to take on each trade. Most experienced traders risk 1-4 % of their account balance on each trade. This may look too low to the new Forex traders, but will definitely help you avoid big losses, create the necessary discipline and keep you in the market in order to get the necessary experience. Also very important is to have a positive percentage of winning trades compared to losing trades and a positive average profit compared to the average loss ratio. If your average loss is two times your average profit that means you need to make 10 profitable trades to cover 5 losing trades. Keep this in mind.
Along with money management, it is vital to keep track of your past trading and results in order to recognize past mistakes and avoid them in the future.
This is just a basic start to having a successful trading strategy in the long run but will definitely help new traders get the discipline required to be profitable in the very exciting Forex market.
Solid Trading Tips part 2: Optimizing your trading strategy by analyzing your Risk/Reward Ratio.
As we have said in our previous article, one of the most important aspects of trading in any market and especially Forex, is Money Management.oney Management can be defined as the way a trader manages his equity, number and size of trades, open positions, stop loss limits and take profit targets and optimizing its Risk/Reward ratio in order to yield positive results in the long run.
To understand this, first you have to recognize that no one can always get it right and we all get losing trades. This is a fact in a traders life and the soonest a trader accepts it the better his chances of being profitable in the long run.We often hear traders speak as if they are certain what the markets will do next. We try to view the markets in probabilities and always have an analysis to support our opinion.
Whether you are looking at fundamental news announcements, a combination of technical tools, or a simple moving average, what traders are looking for are patterns that put the probabilities in their favor so they will profit in the long run. In other words, we are looking for how the market has reacted in the past to certain conditions, and speculating how the market will react in the future to similar conditions. When it comes to trading, there is no absolute certainty. That is why good money management is essential in making trading profits grow over time.
To take an extreme example lets suppose someone has inside information about an interest rate change ahead of its release. Can this fact alone predict exactly how the market will react? What if other insiders also knew this information and acted in advance as well? What happens if there are real orders from big corporate or banks that need to buy or sell after the announcement? What if enough market participants felt the rate would move higher and bought prior to the announcement - they took profits after the announcement causing the currency to move lower (buy the rumor, sell the fact)?
So the big question is how to put the probabilities on our side? Actually any trading plan that is profitable in the long run is good enough. Some traders lose far more trades than they profit, but when they profit , they usually profit big. Some traders utilize a strategy targeting to profit the vast majority of their trades while risking a lot, but gaining little.
We try to use a more calculated approach in our trading tactics by applying money management considerations to our analysis of the market situation. First we recognize that the market is always trading on a trend or a range and that we have much better probabilities of being profitable if our trades are following the trend..
- If the market is on a trend we try to follow the trend on the vast majority of our trades (usually around 80% of our trades are following the trend).In this case we apply a risk:reward ratio of 1:2 with a big stop loss (usually more than 150 pips) and a big take profit target (usually more than 300 pips).
- If we have a trend and still decide to go against the trend for the correction we apply a risk reward ratio of 1:1 but with much smaller stop loss and take profit (usually around 50 pips).
- In the case the market trades within a range we are trading the extremes of the range applying a risk:reward ratio of 1:1.5 with a medium stop loss (less than 100 pips) and take profit target (usually more than 150 pips).
Since in both market situations (trend or range) the risk:reward ratio is ranging between 1:1.5 and 1:2 (except when trading corrections which is a rare situation), even if we trade profitably just 50% (or even less) then this model gives very good returns over time. Anything above 50% profitable trades would be outstanding. Based on this model, it is pretty easy to see why it makes little sense to get very excited when a trade wins or very upset when a trade loses which results in one more very important added advantage in forex trading- much better trading psychology.
Charis Charilaou is the Head Treasurer for TFI fx - www.tfifx.com
Treasurer
Thursday
Get Yourself a Strategy!
Contrary to popular belief, one cannot expect to be successful in the Forex market if they do not find and maintain a properly tested, rules-based trading strategy. It is unbelievable how many traders rush into leveraged currency trading giving little thought to how they will trade, when and with what size (volume). Everyone knows that anything worth doing in life is worth doing right, and Forex trading is clearly no exception. Therefore, new traders are encouraged to first thoroughly understand the Forex market, completely explore the myriad of options available and find a solid, battle-tested mentor or coach who can not only speed up your progress but can teach you numerous valuable lessons without you having to risk any actual capital.
However, the focus of today’s discussion really revolves around the critical need for traders to find and use a proven, rules-based trading strategy in order to be successful. Without a proper strategy you are doomed to be subjected to the marvelous randomness that is the Forex market. Trading three trillion dollars in a 24 hour market, Forex is the quintessential investment market. As we have seen since the advent of the internet, the Forex market can allow even the tiniest investors on the smallest budgets to potentially gain a piece of faster and larger returns on their investment capital. Certainly, risk abounds and it is crucial to be ultra-conservative, however, with the reckless behavior of so many so-called investment professionals over the past few years and the dismal performance posted in the traditional buy-and-hold investment markets since the 1990’s, no one can really trust their precious capital to just one manager or investment instrument. That is why the Forex market has become so popular with people everywhere.
That brings us to the crux of today’s article. Typically speaking, Forex strategies are forged through years of dedicated study and active trading. There is not any easy way to make money in the Forex market and those who hesitate to spend the time, effort and money to develop a real trading strategy risk losing their funds. I cannot tell you how many traders I have come across over the years who have completely bypassed the entire education, training and practice required to trade successfully. When asked some even claim to rely on their ‘gut’ or ‘instincts’. Now don’t get me wrong, ultimately instinct can and does play a critical role in trading, but it is only developed through continuous trading and putting in the requisite time to accumulate the knowledge and the ‘looks’ you will need to gain a grasp on the psychology and subtle behavior/nuance of the Forex market.
That is why developing and deploying a real, tested, rules-based Forex trading system is imperative to succeed. To that purpose we suggest a few important approaches. One must do research, actively demo trade and make new friends who are truly (and verifiably) successful traders. That may be easier said than done, however, it is a must if you expect to make money consistently. One should not be in a rush. The market will always be there and to force or rush your development is to risk failure. It is more important to put in the work necessary to lay a solid foundation for the long haul. In forex trading, you are your own best investment. Everyone needs money right now, but educating and training yourself properly with legitimate professionals is critical. If you need guidance as to who and what are the more prominent and legitimate Forex trading resources you can easily visit an active forum such as the Forex Peace Army, Babypips or Fxdaily.com. If you need to understand the basics about what a Forex trading strategy consists of you can visit a very nice site http://forex-strategies-revealed.com/ and learn about a number of different types of strategies to see which might suit you (i have no affiliation to this site).
Happy trading!
However, the focus of today’s discussion really revolves around the critical need for traders to find and use a proven, rules-based trading strategy in order to be successful. Without a proper strategy you are doomed to be subjected to the marvelous randomness that is the Forex market. Trading three trillion dollars in a 24 hour market, Forex is the quintessential investment market. As we have seen since the advent of the internet, the Forex market can allow even the tiniest investors on the smallest budgets to potentially gain a piece of faster and larger returns on their investment capital. Certainly, risk abounds and it is crucial to be ultra-conservative, however, with the reckless behavior of so many so-called investment professionals over the past few years and the dismal performance posted in the traditional buy-and-hold investment markets since the 1990’s, no one can really trust their precious capital to just one manager or investment instrument. That is why the Forex market has become so popular with people everywhere.
That brings us to the crux of today’s article. Typically speaking, Forex strategies are forged through years of dedicated study and active trading. There is not any easy way to make money in the Forex market and those who hesitate to spend the time, effort and money to develop a real trading strategy risk losing their funds. I cannot tell you how many traders I have come across over the years who have completely bypassed the entire education, training and practice required to trade successfully. When asked some even claim to rely on their ‘gut’ or ‘instincts’. Now don’t get me wrong, ultimately instinct can and does play a critical role in trading, but it is only developed through continuous trading and putting in the requisite time to accumulate the knowledge and the ‘looks’ you will need to gain a grasp on the psychology and subtle behavior/nuance of the Forex market.
That is why developing and deploying a real, tested, rules-based Forex trading system is imperative to succeed. To that purpose we suggest a few important approaches. One must do research, actively demo trade and make new friends who are truly (and verifiably) successful traders. That may be easier said than done, however, it is a must if you expect to make money consistently. One should not be in a rush. The market will always be there and to force or rush your development is to risk failure. It is more important to put in the work necessary to lay a solid foundation for the long haul. In forex trading, you are your own best investment. Everyone needs money right now, but educating and training yourself properly with legitimate professionals is critical. If you need guidance as to who and what are the more prominent and legitimate Forex trading resources you can easily visit an active forum such as the Forex Peace Army, Babypips or Fxdaily.com. If you need to understand the basics about what a Forex trading strategy consists of you can visit a very nice site http://forex-strategies-revealed.com/ and learn about a number of different types of strategies to see which might suit you (i have no affiliation to this site).
Happy trading!
Tuesday
Hedge Is Prohibited.
Do You Know The Meaning Of Hedge Is Prohibited?
If you are thinking to open an account.Do you know the meaning of hedge is prohibited?When i opened my account i did not know the meaning and i opened account and funded my account after that only i knew that my forex brokerage firm do not allow two trades,means i can not buy and sell the same currency pair.you can hold the only one either buy or sale trade.
If i knew already this.i don't think that i opened my account with them.so,if you are going to open an account and you want to open an account where hedge is not prohibited.first ask with them whether they allow or not.
and if you have information on this.please share your knowledge with us and give your comments.
If you are thinking to open an account.Do you know the meaning of hedge is prohibited?When i opened my account i did not know the meaning and i opened account and funded my account after that only i knew that my forex brokerage firm do not allow two trades,means i can not buy and sell the same currency pair.you can hold the only one either buy or sale trade.
If i knew already this.i don't think that i opened my account with them.so,if you are going to open an account and you want to open an account where hedge is not prohibited.first ask with them whether they allow or not.
and if you have information on this.please share your knowledge with us and give your comments.
Friday
The #1 Reason Why Gold Collapsed.
To See The Video Of The #1 Reason Why Gold Collapsed. Simply Click On The Following Link. http://www.ino.com/insider/?affid=CD4414
Get Free Candlestick Book.
Wednesday
Cent or Nano Account.
For a new trader who are less experienced and who wants to try their strategies.for them,cent account is very useful and it is a good opportunity to be a professional from this account,with less risk of money.
i heartly recommend for new traders to start with cent account unless you know this market.it is very risky and reports shows that at starting 95% forex traders loss their money.so it is good to loss only in cents and make your self as a invest for your profitable forex trading.
D not jump into real money trading.first try on demo and after open a cent account.
what is cent account?cent account is also known as nano account.
On cent account a trader can trade 0.01=100 where the value of one pip is just only one cent.
Cent account provides by few brokers only.The brokeres whom i know are below
1.www.gomarkets.com
2.www.fxopen.com
3.http://instaforex.com?x=centbroker(insta forex)
4.www.ibfx.com
Please give your comments on cent/nano accounts and if you know the brokers who are providing cent accounts.please let us know.your information will be very useful for traders and please share your trading knowledge with us.
i heartly recommend for new traders to start with cent account unless you know this market.it is very risky and reports shows that at starting 95% forex traders loss their money.so it is good to loss only in cents and make your self as a invest for your profitable forex trading.
D not jump into real money trading.first try on demo and after open a cent account.
what is cent account?cent account is also known as nano account.
On cent account a trader can trade 0.01=100 where the value of one pip is just only one cent.
Cent account provides by few brokers only.The brokeres whom i know are below
1.www.gomarkets.com
2.www.fxopen.com
3.http://instaforex.com?x=centbroker(insta forex)
4.www.ibfx.com
Please give your comments on cent/nano accounts and if you know the brokers who are providing cent accounts.please let us know.your information will be very useful for traders and please share your trading knowledge with us.
Tuesday
Want to Become a Winning Trader? Avoid Doing This...
Denial is an insidious and serious human condition that can be extremely dangerous to traders. I think out of all the human conditions, denial is one of the most harmful.
Denial keeps us stuck in doing a negative event over and over again regardless of the outcome. Have you ever heard the saying that madness is doing exactly the same thing over and over again and expecting a different result? Denial is usually why people do this!
Are you a losing trader who is trading the same way over and over again expecting different results? If so, you could be in denial. Look at the list below and see which of these apply to you:
- Poor or no record keeping
- Consistently losing month after month
- Not profitable
- Feeling helpless
- Frustrated and stuck
- Lying about your trading results to others
- Creating diversions to distract you from reality
- Needing to appear successful to feel successful
- Spending out of control
- Drinking or wild behavior
- Anxious when alone, can't sit still
If you can identify with two on the above list then you may have a denial issue. If you identify with three or more you have a denial issue. There are different degrees of denial and the idea is that to be a successful trader you must objectively look at yourself and your trading. If you are in denial, or flirting with denial, you are not being objective and are stacking the odds against you that you will be a successful trader.
Denial is insidious, meaning that it begins without you really being aware that has begun. Be on guard for denial. To catch denial before it get out of control, look for the occasional twisting of the truth about your trading results or being lazy about keeping good trading records all indicate that you may not want to face the truth about your trading.
Denial is a disease in that it rarely gets better on its own. Denial rarely just goes away without being proactive and taking conscious action to intervene. Always seek the truth in yourself, your trading and in life and you will be less likely to have a denial problem. Seeking the truth usually takes energy and at times is the harder path to follow and accept, but this is the path you must always follow to avoid denial. As a trader you will not be successful living in denial. Do whatever it takes so that you do not live in denial. If you cannot fix it on your own, get help. You must learn to deal with reality and get a better result!
Bennett A. McDowell, founder of www.TradersCoach.com, began his financial career on Wall Street in 1984, and later became a Registered Securities Broker and Financial Advisor for Prudential Securities and Morgan Stanley. Bennett is considered an expert in technical analysis; he frequently lectures and recently authored the bestselling book The ART of Trading.)
Tip of the Day.
Foreign Exchange Intervention Focus:
How can this be used?
Although it has been rumored that BOJ has increased the level at which they will support the pair's price, the steady increase recently does not give us a great trading opportunity.
However, if price does drop in the near future, you may expect to see sharp and quick increases, mainly due to the BOJ.
Foreign Exchange intervention is defined as FX transactions conducted by monetary authorities with the intention of influencing exchange rates. With the demise of Japan's economy, the Bank of Japan has frequently intervened in the open market to maintain a weak yen policy against the USD. They do this because a weak yen against the dollar will increase the American demand for Japanese goods. It has been reported that the BOJ stepped in with over $50 billion in currency interventions in 2003. It has also been reported that they are getting the most bang for their buck, by leveraging their trades.
The Ministry of Finance is responsible for all of the details of the intervention, including the amount, currency pair to trade, and the method of intervention. The Foreign Exchange Special Account provides the funds. The Bank of Japan conducts the foreign exchange operations as an agent for the Ministry of Finance.
How can this be used?
The Bank of Japan, like any other government or institution, cannot control the price of a currency in the long run. What they must do is choose significant levels and times to intervene, and hope that they will cause a snowballing effect of yen selling. This incorporates technical analysis with fundamental strategy. What a trader must do is anticipate when and at what price levels they will come into the market, as this can lead to profitable opportunities in the short run.
This graph shows a three-year chart of USD/JPY. You will clearly see a head and shoulders formation, with 115 being a long-term neckline. This was a very important technical level, as a break of this level brought many sellers into the market. The natural inclination of the market for the past few years has been USD selling, which would make one think that the market should have driven USD/JPY down. However, BOJ intervention has actively kept the level from dropping below that rate. In fact, on May 19, 2003, the price reached a low of 115.07 (its lowest level since February of 2001) before shooting up almost 200 pips in a few hours, and reaching an intra-day high of 117.50.
Although it has been rumored that BOJ has increased the level at which they will support the pair's price, the steady increase recently does not give us a great trading opportunity.
However, if price does drop in the near future, you may expect to see sharp and quick increases, mainly due to the BOJ.
The Only Free Magazine For Forex Traders.
The October issue |
|
- It's free! Sign up now and receive a free subscription.
- User friendly: Currency Trader is available in the easy-to-use Adobe Acrobat Reader (PDF) format. This free reader combines the high-quality look and feel of print magazines with electronic interactive features. Read articles on your screen or print them out to take with you.
- Instantly available: There's no waiting for a magazine to arrive in the mail each month. You'll receive an email alert with download instructions as soon as the latest issue is ready.
- Currency Trader is brought to you by the publishers of Active Trader and Futures & Options Trader magazines, the premier sources of trading concepts, market analysis and the news for stock, futures, and options traders.
- Check it out: Each issue provides a wide range of strategies, market analysis, commentary and news for currency traders around the globe.
Friday
Currency Trading for Dummies.
Currency Trading for Dummies - Getting Started Edition, will help you get the most out of your practice account. Learn how to set up a practical step by step action plan. Get to know the mechanics of forex trading. Learn the fundamental factors that drive currency markets, and how to develop a risk aware trading plan.
Click below to get free eBook.
Thursday
Methods of risk management.
Trading on Forex the investor has opportunities to multiply his money, but he also risks losing future profit and, moreover, invested capital. Deviation from expected profit average is what determines the investor's risk on the financial market.
This deviation can bring both high profits and big losses.
Financial risk management does not automatically imply successful trading, but influences it to a great extent. Every currency transaction is subjected to risks, therefore, it is possible to reduce potential losses by applying general methods of risk management:
- Using stop-orders;
- Partial investment (investing some part of the money);
- Trend-oriented trade;
- Managing emotions.
Risk management methods are applied after positions are opened. The main risk management method is making orders reducing losses. Stop-loss is a point when the trader leaves the market in order to avoid an unfavourable situation. When opening a position it's better to use stop-loss to insure against extra losses.
There are several types of stop-signals:- Initial stop. It determines the percentage of the amount of the deposit that the trader is prepared to lose. With a price moving against position and reaching a level of the position settled by trader, the position is closed with losses.
- Trailing stop. With a price moving together with the position, the stop-signal is used right after it in a proportion determined by the trader. In the case of changing of this tendency the price reaches this signal and the trader leaves the market, but maybe even with some profit (depending on the time this change of price started).
- Withdrawal profit. The position is closed after pay-profit is received.
- Timed stop. If the market can not provide the expected percentage of profit within a certain period of time, the position is closed.
Methods of money management.
Working in Forex traders should be able to distribute capital correctly, calculate the amount of money involved in a deal to get sufficient profit; and in case of losses not to lose all deposited money.
For these purposes special methods of money management exist:
- Absence of money management. Many traders who open a position don't count money used in operations, don't calculate approximate profit and possible losses. This is one of the tactics. But if the capital is not large it will disappear after several deals.
- Multilateral contracts. Opening several positions of different instruments on Forex, such as EURUSD and EURGBP in the case of prices moving in the right direction, the trader can get good profits from these contracts. Both profit and loss in such deals can be significant.
- Fixed sum of money. Depending on the amount of money in his account the trader decides how much he can put at risk when opening one or another position. The trader doesn't exceed the limit he has fixed himself.
- Fixed percentage of capital. This method is similar to the previous one with the only difference being that the trader sets the percentage of the capital and not the amount of the capital itself.
- Coordination of profits and losses. It is necessary to keep statistics of all operations (number of losses, wins and their connection). This connection shows that losses and wins take turns or several losses are followed by several successful operations. It makes sense to increase the volume of the position after a number of losses hoping for winning and, on the contrary, decrease after a positive period expecting losses again.
- Intersection of the curved moving capital average. The principle is based on the well-known method of moving average as a signal for entering the market or leaving it. Moving averages (long one and short one) are used for estimating the results of arranged deals. If the short curved is above the long one it's a signal for opening positions to gain profit; and if it's below it then better times are still to come.
Money and Risk Management.
Theoretical knowledge and experience are needed in order to earn money on any financial market. This work experience includes:
- Fundamental analysis
- Technical analysis
- Money and risk management
Fundamental analysis allows to determine the dependence of exchange rates of different currencies on the economic situation of countries; explains the purposes and instruments of central bank's financial policy; and reveals the proportion of different financial markets, reasons for their development and stagnation. Fundamental analysis is used for middle and long-term prognosis; it evaluates the perspectives of a market situation. It is built on fundamental mutually intertwined economic factors. The biggest difficulty lies in the fact that changes in one of those factors can influence all the rest, the number of which varies from 20 to 50 depending on the country. That's why fundamental analysis is not used by everyone. Only 10-20 % of traders apply it in their practice.
Technical analysis includes examination of price diagrams, price history, and the number of changes in quotation within a certain period of time. It's very convenient to use because data on prices is available online. Technical analysis mainly gives information about market activity and only conditionally about market volume considering only short periods of time called time-frames.
Money and risk management is the third and also very important aspect of the trading system. Financial operations on Forex are very risky, and often the higher the supposed profit the higher the risk. Following all rules of money and risk management helps reduce losses and increase profits.
Money and risk management appeared in 18th century, when it was applied in gambling to raise the chances for winning. Mature players followed their own strategies, incurred losses to enjoy profits later. Working on financial markets is similar to gambling because both profits and losses are not predictable. That's why principles of money and risk managements started to be used in the financial sphere.
It often happens that beginner traders do not take aspects of money and risk management seriously; but this mistake can lead to failure even with a good trade strategy. Not just sums of earned money are important in trading; amounts of losses during work add to success as well. That's why it's recommended to calculate the portion of risk-subjected capital for successful trading.
Support & Resistance.
Support and resistance are the foundation of all chart formations.
Identification of key support and resistance levels is an essential ingredient to successful and profitable trading.
Think of currency prices as the result of a head-to-head battle between a bull (the buyer) and a bear (the seller).
The bulls push prices higher and the bears push prices lower.
The direction prices actually move reveals who is winning the battle. Support is commonly defined as "a price level or area at which the demand for currency traders will likely overwhelm the existing supply and halt the current decline."
Resistance is defined as "a price level or area at which currency traders will likely overwhelm the existing demand and halt the current advance."
Trading Strategy on tests of Resistance
One of the most-common and best-known trading strategies is this: "Buy at the support level and sell at the resistance level."
As you can see from the chart below, the ability to identify a level of support can also coincide with a good buying opportunity Other Indicators In technical analysis; many indicators have been developed for to identify barriers to future price action.
These indicators seem complicated at first and it often takes practice and experience to use them effectively.
Regardless of an indicator's complexity, however, the interpretation of the identified barrier should be consistent to those achieved through simpler methods.
Identification of key support and resistance levels is an essential ingredient to successful and profitable trading.
Think of currency prices as the result of a head-to-head battle between a bull (the buyer) and a bear (the seller).
The bulls push prices higher and the bears push prices lower.
The direction prices actually move reveals who is winning the battle. Support is commonly defined as "a price level or area at which the demand for currency traders will likely overwhelm the existing supply and halt the current decline."
Resistance is defined as "a price level or area at which currency traders will likely overwhelm the existing demand and halt the current advance."
Trading Strategy on tests of ResistanceOne of the most-common and best-known trading strategies is this: "Buy at the support level and sell at the resistance level."
As you can see from the chart below, the ability to identify a level of support can also coincide with a good buying opportunity Other Indicators In technical analysis; many indicators have been developed for to identify barriers to future price action.
These indicators seem complicated at first and it often takes practice and experience to use them effectively.
Regardless of an indicator's complexity, however, the interpretation of the identified barrier should be consistent to those achieved through simpler methods.
Top 10 Mistakes Traders Make.
| |||||
|
Subscribe to:
Posts (Atom)