Learning Trade Forex

Candlestick is a method of reading the market based on pattern. If you search the net which I suggest you do, you will find a lot article on candlestick pattern. Do your reading to understand it and what happen to the price that forces a certain pattern to the candlestick. What type of pattern you need to remember and how to use it. I personally only remember 3 types of pattern. They are doji, hammer and engulfing pattern.

What I am going to tell you today is a different story about candlestick. A different way how to view them and how to use them. It may not be 100% accurate but it is enough to make profit and stay profitable in the long run.

Apart from 3 candlestick pattern which I remember, I see candlestick as a momentum indicator. Would it be nice if you can have 2 strategy from a single indicator? Like me I use 4 indicator and when they combine I have 8 strategy combined into 1. Candlestick, Moving Average, RSI and Stochastic all put on top of gridlines.

A DIFFERENT VIEW

Imagine that the price is an invisible, self propelling arrow. You cannot see it and surely you dont know where its going but when it moves, it leaves trails in the form of candlestick. If the arrow is moving too fast, we will see long candlestick. The arrow itself has momentum once it moved, so it will take time to slow down and turn. In short, a long CS indicates the arrow is moving very fast and will not turn soon but because forex is influences by many things we see the arrow just turn at certain point leaving CS pointing up or down here and there. Those CS that points up or down is a clue to where the arrow is going.

ALL TALK NO ACTION IS BORING

Now lets see some example, refer the last NzdUsd Hourly charts that I posted on Trade of The Day. Look at the drop when NU breaks the red line. Long candlestick pointing down. Meaning it is at full speed and will not stop. At the 1st correction, we can see that the lowest CS is a bull CS but because the bull CS is shorter than the previous CS, it dont have enough force to stop the arrow instead it only slowed it down. Then we can see all the next correction has bear CS pointing down including the last low CS is a bear meaning price will break the last low but it is slowing down. At this point, it is a very good idea to exit for us technical small fish else we may get fried during price swing.

According to NU charts, I forecast that NU will break the last low of 0.7834 and will make it way to 0.7800. This is because turing point usually happens at big numbers as the last turning point happens at 0.8100. My theory on this behaviour is that master traders that have lots of money are so busy counting money, they dont bother looking at price with small number at the back. So they focus on big numbers such as 0.8100, 0.7800 or the least 0.7850. Those 2 digit at the back is what we small fish are eating but they take the 1st 3 digit. How small and insignificant are we??

NzdUsd last week made a last minute drop. The drop was expected but the time it took to move is unexpected. Next week should be a clear direction to some pairs. I will post direction of pairs so that you can make your trade easier

NzdUsd
Last minute drop, at the moment its in downtrend mode. Still have some room to go down. Short NzdUsd based on candle stick pattern

UsChf
This is a slow and steady moving pair. At the moment on thin uptrend. Long UsdChf based on candlestick and grid lines. Do you know that if you monitor UsdChf you can actually catch EurUsd, GbpUsd, AudUsd and NzdUsd trade by going the opposite way.

EurJpy
Last minute drop last week has actually turned EJ from uptrend to downtrend. At the moment I got a short signal and based on grid it would be short @ 157.20 or better.

Good Luck and remember always trade to the direction of trend.

For those of you who trade purely on technical study, you must avoid news hours. During news release, a different kind of traders will enter the market. They are aggressive, fast and well equip. They work in groups and using syndicate trading to force the market to their favour. They enter and leave the market in short period of time taking whatever profit they can. They do not stay in the market.

Compare to us technical small fish, these news traders are much bigger. In order to avoid getting fried, technical small fish must leave the arena when the news traders enter. In order to know when these news trader enter we must know when important news release are made and for that reason I use Forex Factory calendar.

Funny how people try to trade during news hour while I try to avoid them. Look at the calendar and understand when high impact news are released. Pay very close attention to red and orange icon.

For today I will choose a slower pair to trade. It is my opinion that NZD/USD is a good pair to short. Based on grid trading, if anyone is reading the signal should be:

short NZD/USD @ 0.8065 or better
Stop loss @ 0.8090 (Minimum)
Take profit at each of the grid lines.

Btw that is my full trading chart. By the end of the lesson you will get ideas how to combine every trading method from each indicators and grid. Its not the system, its the people who use it.

Anyone here got the GJ drop?? I do :D

UPDATE



After a drop off over 200 pips it is my opinion to exit and stay aside. It is now beginning of a new month and first friday of the month holds too much surprise, too much for me anyway. As of now, I have exited all my position and plan to stay aside. If I do enter the market it would be based on RSI swing strategy. Fast in fast out, take what ever you can and stay out.

When we are born in this world. We are all born naked. We do not carry money or bond certificate or even Rolex watches. All are born equal. It is what we do when we are growing up made us what we are today. Some are powerful men while others, just a waste of time.

When we start in Forex, most of us started at the same place. A blank chart with candlestick and grid. Simple and clear but because of greed, ambition etc, most of us jump straight to advance system. Advance system with colourful indicators here and there and through all those we forgot to pay attention to the very basic of Forex charts that is ..... PRICE.

THE NAKED TRUTH



What you see above is the very basic of forex charting. Its candlestick and grid. Plain and simple yet how many of you actually take a look at it and try to understand it. Not much in it yet not many people care to look at it and try to understand it. Let me lay this out one by one.

First we have the grid. Its the horizontal line with price at the right side. When we talk about forex, price is the most important thing...period. If Forex has no price then I wouldn't be here wasting my time for nothing. Its the soul purpose of trading forex. If you look at the chart closely, you will see that I have traded short with 2 take profit point of same place but at different time. You can also see where my stop loss and take profit was. That's why I love Marketiva charts. Its shows you everything.

The chart is divided by the grid with many horizontal line. Each horizontal line has its own price and the grid changes according to the market. If the market is active, the grid will become bigger and vice verse. If you look at the chart properly, you will see that the price actually responded to the grid. The price will move up and break the line one at a time during slow uptrend and break a few line at once during heavy trading. Now, the question is what can we do with that behaviour?

Let me explain to you my previous short trade. When and why I took the trade. I entered GJ short at 200.40 with 2 position and immediately put stop loss at 201.00. During my last entry the grid was at 200.40 and the top line was at 200.98. That is 58 pip grid wide. Meaning that my stop loss and take profit will be at 58 pip each. So I took the short trade at 200.40 with SL @ 201.00 (rounded numbers, easier to remember) with 1st TP @ 199.80 (rounded number to nearest line). My 1st TP was hit and closed 1 position. The 2nd position SL was moved to 200.41 and eventually 199.80 when price broke the next line.

Its all about numbers. 199.80, 200.40 and 201.00. What a coincidence. They are all 60 pips apart. Meaning 2 post win at 60 pip each, so far tonite I got 120 pip in the bag from grid trading alone. Currently I have a stop order to short GJ @ 200.60 and SL @ 201.00. Now that is 40 pip wide. What happen to 60 pips apart??? As I said before, the grid changes according to the market so pay attention. The stop order may not get hit but at the time of writing, the grid at 200.56 is already hit and missed my order by just a few pips.

I am sure by this time, some of you will have lots of question and doubt. Put all those question and doubt at rest and look at the naked chart. You may find that the hardest question may have the simplest answer. You just have to tackle the problem one at a time.

IT IS A RISKY BUSINESS

As of this morning, my stop order on GJ is filled. Currently GJ has already broke the 1st TP. SL will be move to 200.56 in due time. The plan currently is to follow the price at each level.



1st TP is broken if the current candle close below 200.14 and SL will be move to 200.56. When price broke the next level at 199.72, SL will be move again to 200.14 and so on. Moving the SL to the previous level each time price breaks a new level. That is the game plan. Btw, I am writing this in real time and this article will be updated from time to time until this chapter is finish.

I wont lie to you, Forex is a risky business. The risk is so great that every businessman will avoid it once they knew the level of risk involved. In order to be profitable in Forex you must control the risk and maximize the return. The only question is how much risk are you willing to take? As for me my risk tolerance is around 60 pip. So in order to find a trade that suit my risk, I would cycle through different chart and timeframe until I find a chart with grid small enough to suit my risk tolerance. Meaning this kind of trading doesnt require you to stick to any timeframe. Timeframe depends on the level of risk you are willing to trade. You can even trade GJ off weekly chart if you can stand the risk of 585 pips.

Current GJ position has initial risk of 40 pips only. If GJ decided to turn around and go the other way, I will surely lose 40 pips only but if GJ move according to plan, my minimum profit will be 40 pips. That is 1:1 risk/reward ratio. With the plan of following the price at previous level, I should get a better ratio than that. You cannot win everytime but make sure that when you win, you win big.

In anything we do, when it comes to problem solving. We must go back to basic. We must understand the basic and solve the problem from basic and improvise in between.

When it comes to forex, we must do the same. Forex nowadays have become so complicated with advance platform, charting and indicators. We can easily become lost in all of that.

In order to understand it, we must look at it in the simplest way possible. Use the basic at it full extend and only after that we can advance to the next level.

In this few weeks I am going to post a simple system consisting of basic chart with no indicator at all. Only after we understand the basic will we add on indicators to improve the accuracy of trading. In the end we will have a few system combine into 1.

No matter how good a system is, it will all goes down to the trader. In order to learn something new, we must first change our self. It is by far the hardest part to do. It is where most traders fail.

One of the first trading strategies I was taught when I started trading was the simple 123 pattern. Whilst I cannot trade every system I write about every day, the 123 system can give exact entries and tight stops.

The 123 trading system is a break out system where we label the current high or low point 1 the next high or low is point 2 and the pull back high or low is point 3. Our entry point for the trade is always the break of point 2.Lets look at a GBP/USD 15 min chart where I have Identified a number of trades based on the 123pattern.

I have labeled the 123 patterns and high-lighted the the first trade blue. The market broke short then retraced and made a new high. At this stage the market could have gone in any direction but when it failed to continue down past the previous low this was a good indication of a reversal but not a confirmation, the confirmation would only come at the break of point 2 provided the price does not go below point 1 of the pattern.

At the break of point 2 in our pattern the new trend was confirmed and we entered the trade long at 2.0312 with our immediate target the previous high in the market at 2.0390 about 70 pips above. The stop loss was placed just below 2.0239.

The risk reward ratio was not great on the trade at 1:1 but the profit target was achieved.

The Next trade, orange high lights we again entered the break of 2 at 2.0275 with a much tighter stop at 2.0312. The target on this trade the previous low at 2.0090. The down move stopped at 2.0098 just short of our target. The trade was closed when price broke above the high of the retracement 115 pips from our entry.

There was also a third trade, (Blue High Lites) as we can see the pattern is fairly common and can appear a number of times a week. The method can also be used effectively across all time frames.

As with all trading systems they can be more effective when used in conjunction with other indicators. A popular indicator to use with the 123 pattern is a 21 exponential moving average which I have added to the same chart. In this case we enter the market when the 123 pattern is confirmed by a break of the 21 ema.

We can stay in the trade until we hit a predefined target or until price breaks above or below the 21 ema which confirms the reversal. The initial stop loss is the same as the normal method.
The pink moving average line has been added to the same chart and confirmed all the above trades when price broke our point 2 it had also breached the 21 ema to give further confirmation of the trade.

Another effective indicator to use with the 1 2 3 formation is Bollinger bands. On the next chart I have added a standard Bollinger band. Using Bollinger bands we wait until the price hits or penetrates and outer band or or center line before breaking point 2.
Looking at trade 1 price penetrated the lower band before retracing and forming the high at point 2 then dropped again to form point 3 which was higher than point 1. When price broke point 2 our Bollinger bands started to widen further confirming the up move.

Trade 2 also penetrated the upper band before retracing and forming point 2. Point 3 stalled at the center band before breaking short. Our stop loss is the same as in the other methods but here our target can be the lower band or until we get a reversal pattern.

All the other trades are also confirmed with the Bollinger bands.

Summary

1. Exercise patience whilst waiting for the pattern to form
2. Only enter the trade at the break of point 2
3. Set Stop loss above point 3.
4. If using the 21 ema strategy then only enter the trade when price breaks the ema line as well as point 2 in the pattern.
5. If using the Bollinger band method price must first touch an outer or center band then reverse to form point 2.
6. The better trades will be when the entry is confirmed by the widening of the Bollinger Bands and a bounce off one of the center line of the band.

The measurement of time in analysis. Can be in periods of minutes and hours or daily, weekly, monthly and yearly either way Time Frame must be specified. It can also be more generally referred to as Short, Medium or Long Term. In forex trading software platform you will find that the charts are divided in several set of time frames i.e. 5, 15, 30 minutes, 1 & 4 hourly, daily, weekly, and monthly. By dividing the chart it provide the flexibility of analysis for traders either they want short, medium, or long-term.

Don't be confused even though there are divided this way actually the chart is inter-connected with each other. The lower time frames i.e. 5 minutes is actually the zoomed-in version of the major time frames. And Monthly time frame is simply the general display of all the time frames. Using candlestick chart we can simply explain by taking 1 candle equal to 1 month of movement that is consist of 4 candlesticks of weekly time frame as 1 month is equivalent to 4 weeks.

Why important to understand time frame?

Perhaps one of the the ultimate achievement of every technical trader is being able to master the all time frames available. This is very important in order to success especially if you are short-term daily traders. You will be able to see the details and the bigger picture of the market directions. For example if you are 15 minutes trader you will have to look for 4 hourly or daily time frames to look for the overall positions and directions of the market. This will gives you the overall picture where will the big movements will be heading to after all small fluctuations are done.

Higher Time Frame Increase Chances of Success

Most traders do not want to get themselves involve in complicated situation especially the multiple time frames. Still they being able to have great success in trading by using only a single time frame. Yes this is possible!! By looking at the big picture of the market using the higher time frame such as daily, weekly, and monthly. This is the method used by the long-term traders who relied on trend to make decision which usually bring them healthy successful trading career.

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The measurement of time in analysis. Can be in periods of minutes and hours or daily, weekly, monthly and yearly either way Time Frame must be specified. It can also be more generally referred to as Short, Medium or Long Term. In forex trading software platform you will find that the charts are divided in several set of time frames i.e. 5, 15, 30 minutes, 1 & 4 hourly, daily, weekly, and monthly. By dividing the chart it provide the flexibility of analysis for traders either they want short, medium, or long-term.

Don't be confused even though there are divided this way actually the chart is inter-connected with each other. The lower time frames i.e. 5 minutes is actually the zoomed-in version of the major time frames. And Monthly time frame is simply the general display of all the time frames. Using candlestick chart we can simply explain by taking 1 candle equal to 1 month of movement that is consist of 4 candlesticks of weekly time frame as 1 month is equivalent to 4 weeks.

Why important to understand time frame?

Perhaps one of the the ultimate achievement of every technical trader is being able to master the all time frames available. This is very important in order to success especially if you are short-term daily traders. You will be able to see the details and the bigger picture of the market directions. For example if you are 15 minutes trader you will have to look for 4 hourly or daily time frames to look for the overall positions and directions of the market. This will gives you the overall picture where will the big movements will be heading to after all small fluctuations are done.

Higher Time Frame Increase Chances of Success

Most traders do not want to get themselves involve in complicated situation especially the multiple time frames. Still they being able to have great success in trading by using only a single time frame. Yes this is possible!! By looking at the big picture of the market using the higher time frame such as daily, weekly, and monthly. This is the method used by the long-term traders who relied on trend to make decision which usually bring them healthy successful trading career.

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The slow stochastic is constructed with two lines moving average just like MACD. Likewise the application is also exactly the same as MACD that is when both line is moving upwards meaning the market is going up or vice versa. The interception point of slow stochastic signal a reversal of direction just like MACD.

Despite of the exact application of the two, slow stochastic has a major advantage over MACD. It's speed of movement faster than MACD and it moves closely following the real live chart movement. Therefore it is heavily used by daily traders to take advantage of the short-term volatility movement of the chart. See the chart below as MACD moving downwards once but stochastic has already take two cycle to downwards direction. This major advantage making slow stochastic as the most popular indicator of all.

Slow stochastic is almost universal usage, and every traders who have known about its application will use it. The most effective application of this indicator is by combining with other indicators and also the in depth understanding of multiple time frame

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The slow stochastic is constructed with two lines moving average just like MACD. Likewise the application is also exactly the same as MACD that is when both line is moving upwards meaning the market is going up or vice versa. The interception point of slow stochastic signal a reversal of direction just like MACD.

Despite of the exact application of the two, slow stochastic has a major advantage over MACD. It's speed of movement faster than MACD and it moves closely following the real live chart movement. Therefore it is heavily used by daily traders to take advantage of the short-term volatility movement of the chart. See the chart below as MACD moving downwards once but stochastic has already take two cycle to downwards direction. This major advantage making slow stochastic as the most popular indicator of all.

Slow stochastic is almost universal usage, and every traders who have known about its application will use it. The most effective application of this indicator is by combining with other indicators and also the in depth understanding of multiple time frame

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The Bollinger Band is one the most popular used by traders to determine trend and the limit of movement (support & resistance level). It is constructed using three moving average lines designated by the upper band, middle band, and lower band. These three bands are the ideal setups or targets profit for trading or commonly known as support and resistance level. Apart from that it is also can be used to signal break-outs.

How to use Bollinger Band?

As you may notice in everyday trading, the chart/market generally moving within the limit boundary of the bollinger bands. For example it moves from bottom to top and top to bottom passing by the middle band where usually there is a break taking place. The bollinger band is simply a dynamic support & resistance level.

The band is very dynamic where sometimes it can get wider or squeeze narrower. Using this behavior technical traders use it to determine the break-out of the market. Usually when the band squeeze and getting narrower the probability of break-out is near. As the break out occur the band become wider and eventually develop narrower gap before making another break-out.

Another application of the Bollinger Band is use to determine a continuation of a trend. Using an up-trend example the candlestick chart move closely along the upper band marching upwards. There will be time that traders wants to get profit from every movement a correction will occur. As the correction occur the chart/movement will fall at the middle band instead of the bottom. This indicate that a trend is still underway. If the chart fall on the bottom it signals a trend reverse is about to begin. Read more on this go to here "Using Bollinger Band "Bands" To Gauge Trends"

In complex application bollinger bands need more than just of the applications mentioned above. And a vital success of using this tool will also depend on how far you are familiar with multiple time frames application.

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The Bollinger Band is one the most popular used by traders to determine trend and the limit of movement (support & resistance level). It is constructed using three moving average lines designated by the upper band, middle band, and lower band. These three bands are the ideal setups or targets profit for trading or commonly known as support and resistance level. Apart from that it is also can be used to signal break-outs.

How to use Bollinger Band?

As you may notice in everyday trading, the chart/market generally moving within the limit boundary of the bollinger bands. For example it moves from bottom to top and top to bottom passing by the middle band where usually there is a break taking place. The bollinger band is simply a dynamic support & resistance level.

The band is very dynamic where sometimes it can get wider or squeeze narrower. Using this behavior technical traders use it to determine the break-out of the market. Usually when the band squeeze and getting narrower the probability of break-out is near. As the break out occur the band become wider and eventually develop narrower gap before making another break-out.

Another application of the Bollinger Band is use to determine a continuation of a trend. Using an up-trend example the candlestick chart move closely along the upper band marching upwards. There will be time that traders wants to get profit from every movement a correction will occur. As the correction occur the chart/movement will fall at the middle band instead of the bottom. This indicate that a trend is still underway. If the chart fall on the bottom it signals a trend reverse is about to begin. Read more on this go to here "Using Bollinger Band "Bands" To Gauge Trends"

In complex application bollinger bands need more than just of the applications mentioned above. And a vital success of using this tool will also depend on how far you are familiar with multiple time frames application.

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Been a busy week. I am involve in the ACDM providing logistic and technical support. Hopefully everything will be over by end of this week. I am going to post a simple system for beginners. Its a simple system but requires good dicipline. See you later

Moving Average Convergence/Divergence or MACD in short is one the most classic technical indicators that is still being popularly used in analyzing forex trading. It is called the lagging indicator because it always move behind the real chart movement.

How to use MACD?

In simple application MACD is very easy to use as it is only constructed with two moving average lines. The two lines is usually colored in blue and red where blue is upward direction signal and red is the opposite. When the red line moving up parallel with the blue line this signal upward direction or the opposite downward when the blue line moving down parallel with the red line. Every movement has an end and reversal which signal by the interception of the two line.

Advantage of MACD

Since the MACD is one of the most used indicators we can make assumption that most traders will have similar intention when make decision for example they will make buy or sell on the interception point. In complex application MACD is more than just that we need to include the element of emotion in our decision.

Disadvantage of MACD

Since it is a lagging indicators it takes quite sometimes to wait which can be very frustrating. Furthermore in most occasion the market always moving ahead of MACD and by that time you will miss the big hit and waste your time waiting. Many traders use multiple indicators to reduce the flaw gap of a single indicators.

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Moving Average Convergence/Divergence or MACD in short is one the most classic technical indicators that is still being popularly used in analyzing forex trading. It is called the lagging indicator because it always move behind the real chart movement.

How to use MACD?

In simple application MACD is very easy to use as it is only constructed with two moving average lines. The two lines is usually colored in blue and red where blue is upward direction signal and red is the opposite. When the red line moving up parallel with the blue line this signal upward direction or the opposite downward when the blue line moving down parallel with the red line. Every movement has an end and reversal which signal by the interception of the two line.

Advantage of MACD

Since the MACD is one of the most used indicators we can make assumption that most traders will have similar intention when make decision for example they will make buy or sell on the interception point. In complex application MACD is more than just that we need to include the element of emotion in our decision.

Disadvantage of MACD

Since it is a lagging indicators it takes quite sometimes to wait which can be very frustrating. Furthermore in most occasion the market always moving ahead of MACD and by that time you will miss the big hit and waste your time waiting. Many traders use multiple indicators to reduce the flaw gap of a single indicators.

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There are two types of traders in the forex market namely the technical and fundamental traders. Some traders are a little more extreme to believe that one is better than the other or vice versa. The fact is none better than the as both have its own flaws in the system.

The Fundamental Traders

They relied on the economic data such as trade balance, interest rates, non-farm payrolls, etc to predict the future directions of the forex market movement (read more on fundamental of forex fundamental). Usually their success will come only if they trade the long-term of the market direction. This is because it takes sometimes for any economic data to take effects. There are short-term effects though, but it is highly unpredictable.

Source: ForexFactory.com

The Technical Traders

Technical traders relied heavily on indicators and also the physical patterns of the market movement such as Bollinger Bands, Slow Stochastic, MACD, Trend, etc. Short-term traders are usually very keen on using it because they want precision within short time period. Although they cannot predict precisely the market movement, moving average is used to estimate the average size of the market. Thus using the average they can determine the boundary limit of movement called support and resistance level.

Source: FxStreet.com

Summary

In summary both technical and fundamental are equally reliable as well as flawed. Our objectives to study them both is to increase reliability and reduce the flawed of a system that we are using in trading. And for those extremist who claimed that one system better than the other because they are fanatic of their own system without analyzing others.

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There are two types of traders in the forex market namely the technical and fundamental traders. Some traders are a little more extreme to believe that one is better than the other or vice versa. The fact is none better than the as both have its own flaws in the system.

The Fundamental Traders

They relied on the economic data such as trade balance, interest rates, non-farm payrolls, etc to predict the future directions of the forex market movement (read more on fundamental of forex fundamental). Usually their success will come only if they trade the long-term of the market direction. This is because it takes sometimes for any economic data to take effects. There are short-term effects though, but it is highly unpredictable.

Source: ForexFactory.com

The Technical Traders

Technical traders relied heavily on indicators and also the physical patterns of the market movement such as Bollinger Bands, Slow Stochastic, MACD, Trend, etc. Short-term traders are usually very keen on using it because they want precision within short time period. Although they cannot predict precisely the market movement, moving average is used to estimate the average size of the market. Thus using the average they can determine the boundary limit of movement called support and resistance level.

Source: FxStreet.com

Summary

In summary both technical and fundamental are equally reliable as well as flawed. Our objectives to study them both is to increase reliability and reduce the flawed of a system that we are using in trading. And for those extremist who claimed that one system better than the other because they are fanatic of their own system without analyzing others.

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As far as forex is concern this is the most liquid and dynamic market on the planet. There are billions of money are traded every second or minutes as you can notice on the volatility of the chart movement. This volatility creates great opportunities for traders to make money as quickly within minutes of trading. The opposite also true as traders can lose their money within minutes. Our goals as traders are to minimize risks and maximize profits with the help of all the tools and experiences available to master the dynamic market.

There are no 100% precise or exact setups any traders can make in their trading activities. The reason behind this is because trading involves emotions as reflected on the candlestick chart designated by the tails of the candles. Everyone has their own analytical formula and amount of money they going to spend on the trading, thus there is no way we can predict when and how much money they are going to use for trading. As a result any trader will never have 100% setup otherwise only by chance sometimes.

Fortunately today every trading platform is equipped with many technical tools available to help traders to analyze the market physic. And most importantly using these technical tools we are able to estimate the size of the entire market volume dynamically and therefore be able to determine the ultimate limit of every movement. I shall discuss further on this in the later chapter of this blog on technical analysis tools.

An interesting historical event called “Black Wednesday” has taken place in September 1992, where George Soros a CEO of hedge fund company has ripped a profit of $1 Billion USD by shorting/selling the GBP-USD pair which a day period. And the Bank of England went panic as they loss 3.4 Billion Pound Sterling to the currency speculators and most of the money goes to Soros of course. Read more of this story from wikipedia "Black Wednesday"

As far as forex is concern this is the most liquid and dynamic market on the planet. There are billions of money are traded every second or minutes as you can notice on the volatility of the chart movement. This volatility creates great opportunities for traders to make money as quickly within minutes of trading. The opposite also true as traders can lose their money within minutes. Our goals as traders are to minimize risks and maximize profits with the help of all the tools and experiences available to master the dynamic market.

There are no 100% precise or exact setups any traders can make in their trading activities. The reason behind this is because trading involves emotions as reflected on the candlestick chart designated by the tails of the candles. Everyone has their own analytical formula and amount of money they going to spend on the trading, thus there is no way we can predict when and how much money they are going to use for trading. As a result any trader will never have 100% setup otherwise only by chance sometimes.

Fortunately today every trading platform is equipped with many technical tools available to help traders to analyze the market physic. And most importantly using these technical tools we are able to estimate the size of the entire market volume dynamically and therefore be able to determine the ultimate limit of every movement. I shall discuss further on this in the later chapter of this blog on technical analysis tools.

An interesting historical event called “Black Wednesday” has taken place in September 1992, where George Soros a CEO of hedge fund company has ripped a profit of $1 Billion USD by shorting/selling the GBP-USD pair which a day period. And the Bank of England went panic as they loss 3.4 Billion Pound Sterling to the currency speculators and most of the money goes to Soros of course. Read more of this story from wikipedia "Black Wednesday"

There are three different forms of common chart used to display the currency market movement which include the line chart, bar chart, and the famous candlestick chart. Despite of the same usages traders are very particular in selecting their chart to use in trading due to certain used.

The Line Chart

The line chart simply reflects the market in its general movement as shown below. It is rather more general compare to bar chart and candlestick chart. Therefore traders have less preference in using it for their trading.

The bar chart is actually the simplify version of the candlestick chart. Instead of using colored body as In the candlestick chart line the bar line is used to represent high, low, open, and close of the market movement.

The Candlestick Chart

Sometimes it is called Japanese candlestick chart, the most popular chart used by the Japanese traders. In its early days this type of chart was not very popular to the western traders until it is popularized by a book author named “Steve Nison”. Today the candlestick chart is used worldwide by any traders, and in fact it is one of the most powerful tools to aid traders in their technical analysis. In the later stage i will discuss about this powerful charting techniques used by traders to aid them in their trading activities.

There are three different forms of common chart used to display the currency market movement which include the line chart, bar chart, and the famous candlestick chart. Despite of the same usages traders are very particular in selecting their chart to use in trading due to certain used.

The Line Chart

The line chart simply reflects the market in its general movement as shown below. It is rather more general compare to bar chart and candlestick chart. Therefore traders have less preference in using it for their trading.

The bar chart is actually the simplify version of the candlestick chart. Instead of using colored body as In the candlestick chart line the bar line is used to represent high, low, open, and close of the market movement.

The Candlestick Chart

Sometimes it is called Japanese candlestick chart, the most popular chart used by the Japanese traders. In its early days this type of chart was not very popular to the western traders until it is popularized by a book author named “Steve Nison”. Today the candlestick chart is used worldwide by any traders, and in fact it is one of the most powerful tools to aid traders in their technical analysis. In the later stage i will discuss about this powerful charting techniques used by traders to aid them in their trading activities.

Before Enter Live Trading!!

If you have not seen how the forex is traded before then you should have yourself get the touch of it by applying for demo account to any forex brokers available. This will provide you an experience of familiarizing yourself of the forex trading works and also getting to know the available tools to help you in trading. Usually brokers demo account will provide you some amount of practice money $10,000 or $100,000 for you to try their platforms. They are all FREE of CHARGE

Open your demo account to any of the following brokers

1. Marketiva - $10,000 Practice money + $5 Free Live Trading
2. OANDA - $50,000 Practice money
3. FXCM - $50,000 Practice money
4. InterbankFX
5. North Finance
6. DukasCopy

1. Internet Connection & Computers
   
2. Money
3. Brokers
   

There are pros and cons in all forex brokers usually determine by their trading platform effectiveness, spreads charge, customer support services, etc. You can read more about selecting brokers at this site Fxstreet.

Before Enter Live Trading!!

If you have not seen how the forex is traded before then you should have yourself get the touch of it by applying for demo account to any forex brokers available. This will provide you an experience of familiarizing yourself of the forex trading works and also getting to know the available tools to help you in trading. Usually brokers demo account will provide you some amount of practice money $10,000 or $100,000 for you to try their platforms. They are all FREE of CHARGE

Open your demo account to any of the following brokers

1. Marketiva - $10,000 Practice money + $5 Free Live Trading
2. OANDA - $50,000 Practice money
3. FXCM - $50,000 Practice money
4. InterbankFX
5. North Finance
6. DukasCopy

1. Internet Connection & Computers
   
2. Money
3. Brokers
   

There are pros and cons in all forex brokers usually determine by their trading platform effectiveness, spreads charge, customer support services, etc. You can read more about selecting brokers at this site Fxstreet.

Previously RSI 8 was shown as possible reverse point. It needs more filter since on a trending market, price tends to continue following the trend.

The filter inserted is LWMA with the value of 8, 24, 48 and 192. Generally 8 and 24 gives the signal when it crosses and the rest is dynamic support and resistance. 8/24 cross should be inline with RSI8. Meaning when the cross happens, RSI8 value should be < 50.

If you see the chart, I entered 2 position based on RSI8 max. The price hovers above my entry point and at the end 8/24 cross + RSI8 <50. I enter another post. Guess what, my early entry is only 10 pips lower then after i got the signal. Hopefully next week EG will continue to drop.

BTW, I found that MV indicators are different from MT4 brokers. Its seems that MV indicators are much more accurate and less prone to whipshaw. Furthermore MV has the last piece of the puzzle which is not available on MT4 platform.

Maybe next time I will post the last piece.

Scaling In for Extra Profits

Often when the market starts trending in a new direction it can be difficult to determine the full extent of the rally and know when to add positions to existing ones or enter new positions during the current rally.

By using Dynamic Trend lines to help us find entry points we can take full advantage of the rally. By dynamic I mean placing new trend lines as the market moves.

On the first GBP/USD 15 min chart I have drawn in the channel lines for the down run and will be looking for either a continuation of the down move or a breakout of the channel to go long.

As we can see the market continued down until it hit the lower support (blue line) established earlier and bounced before stalling temporarily at the top channel resistance line.

Once price broke through the channel resistance we had our first entry long at 1.9833 with our stop at 1.9800 below the channel line and about 10 pips below the last low.

The market rallied and formed a new high at 1.9966 before retracing. At this point I added Fibonacci retracements expecting price to drop to at least the .382 retracement before continuing the rally. As we can see price stalled round the 23.6 retracement area and the question was "where to enter should the rally continue?" and "how high will the market go?"

At this point we are able to add an up trend line (which becomes our support) and draw a channel line running parallel with the last high in the market. The top of the new channel becomes our possible target on the upside in conjunction with the Fib 1.618 target.

1. Establish the original break out point.
2. Wait for a retracement to draw in the initial Dynamic Trend Line.
3. Scale in a second order
4. Place stops beneath the Dynamic Trend line and last low.
5. Repeat the process until the target is reached or the market takes you out on stop.
   
   

FX Active Liquidation
Following the article and appeal I made on my fxtraderman blog earlier today another drama involving Forex scams in South Africa is about to unfold. FxActive a prominent Forex Market Maker in South Africa closed their trading platform to traders and fund managers under the pretext of system maintenance about six weeks ago.

No explanation was offered or notification sent to clients explaining the necessity for the closure or maintenance of the platform. (I wonder how many traders had open positions at the time of the closure possibly wiping out their accounts with margin calls.)

Attempts by investors to contact the company to ascertain the reasons for the closure have failed. Strangely the company still maintains offices and pay staff every month, one can only speculate that investors funds are being used to fund this extravagance.

Traders from all over the country are now reporting that they have been unable to withdraw their funds from the company. The excuses for non payment offered by the company range from "Audits" due to a pending takeover by a large European Trading Platform and the imminent sale of the company.

None of these excuses can be verified or have come to fruition and can only be regarded as tactics to stall investors whilst the company milks every last cent out of investors funds.

In recent years South African investors have been devastated by the closure of Forex Trading Companies. Leadergard the largest company a few years ago, closed owing investors three hundred million Rand or more. Recent scams in Durban involving Forex Direct CC, Tyraz Investments cc, and Inrex Forex relieved investors of millions of $'s

In every case the perpetrators of these scams have lived a life of luxury whilst the investors they have stolen from are left penniless. New laws governing Financial Advisers have been introduced by the Financial Services Board to protect investors from unscrupulous brokers, however the effect of these laws will take time before everyone is fully regulated.

As FxActive were the only Forex Trading Market Maker in the country, many South African traders had no option but to deal with them due to currency control regulations governing the amount of funds individuals are allowed to take out of the country.

Whilst I have no direct evidence of any fraud commited by any member of FxActive I can only speculate about the reasons for their demise.

As I was an active participant as a trader on the FxActive platform, I have a vested interest in the outcome of any pending Liquidation and possible criminal actions brought against the company. Unfortunately I am not optimistic of any reasonable outcome, and can only assume that FxActive will probably become another statistic of the greed and corruption that has been so prevalent in the Forex Industry in our country.