Forex Trading Strategy – Buy The Rumor Sell The Fact In Price Action

Most people who have been involved in trading in the markets for a significant length of time surely have heard about the saying “Buy The Rumor Sell The Fact”. It is an old trading rule, but highly misunderstood, and often quoted by traders that explains price declines that occur after an anticipated positive event has happened.

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Many traders stumble on buying the rumors without any in depth analysis, just based on pure emotions. Assessing the direction of the market based on economic news update doesn’t mean it is not good but the veracity of it should be confirmed first before doing any drastic moves. Traders should not let greed overwhelm their judgement because most of the time it doesn’t bring positive outcomes. Sometimes, focusing too much on the news, creates an opposite result from what the news imply.

A good example is the paired currencies EUR and US Dollars during the monthly U.S. Non-Farm Payrolls. Some traders thought that the news being released will place them on an advantageous position based on the implications of the report, however, they were mistaken. Price counters to what one might expect from the report. It knows no advantage.

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With this kind of trading strategy of basing one’s decision on rumors, emotions and even luck, will not bring you anywhere. It is no more than guessing your fate by flipping a coin. Also, the market possesses a contrarian nature, where in the price will move in an opposite direction of the majority’s emotional perception. This is one of the reasons why most impulsive traders lose plenty of money. It is important to have a good strategic plan by learning proven Forex Trading Strategies – coming from reputable traders and of course, in this website which offers Free Forex Entry Strategies and Free Forex Tips. There is no specific style in trading but through experience, patience and logic, one could develop a good Forex Trading Strategy especially in the utilization of Price Action.

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Always remember that the price action is an important tool in predicting the market. It contains all the information you need to become an effective trader and it reflects everything that is affecting the market. Always remember “KISS”, keep it simple stupid! By making things simple (freeing oneself from the complex market indicators and trading software), one could save oneself from wasting time and effort. Stop losing your money, start getting yourself a solid education in price action analysis. It is a proven Forex Trading Strategy that I recommend without doubts.

Bottom line is there is nothing more than a simple and solid plan to reach your goal of becoming a successful trader by learning one Forex Trading Strategy at a time, avoiding making decisions based on rumors, emotions, and most importantly greed. Once again, Happy Investing and keep on reading our articles about Forex Trading Strategies for Beginners and Professional Forex Trading Strategies. With our everyday motto, learning should be fun!

Source:

  • Don’t Trade The News – Trade Price Action Instead by Nial Fuller. Retrieved April 13, 2013. http://www.learntotradethemarket.com/forex-trading-strategies/dont-trade-news-trade-price-action
  • Webster’s New World Finance and Investment Dictionary (2010). Wiley Publishing, Inc., Indianapolis, Indiana.

Forex Trading Strategy – Price Action For Dummies

In trading in the Forex Market, you should remember the word “KISS” which means “KEEP IT SIMPLE STUPID”. With almost every Forex trader utilizing trade off indicators and trading software, he somehow neglects one of the basic Forex Trading Strategy which is the Price Action.

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Forex Trading Strategy – Price Action Definition

Price Action is a Forex Trader’s way of looking at the market’s movement without using any technical indicators. It is basically the footprint of money. The exchange of money in the market leaves a trail and this trail is considered as the price action which is apparent on the price chart. If you will use the Price Action as a Forex Trading Strategy, you will be harnessing the power of price and be considered as a price action trader.

Forex Trading Strategy – Price Action VS. Technical Indicators

Most Forex trading systems are made of  technical indicators or trade off indicators such as Moving Average Crossover, Overbought Conditions, Oversold Conditions and many more. Technical indicators are series of data points plotted on the price chart and these points are derived from a mathematical formula applied to the price of any given paired currencies. In short, it helps us see the other aspects of price.

Because of all these overwhelming technical indicators, one might be focusing more in using trading tools which draws him away from using the Price Action itself. Similarly to following other people’s hunches, one might hold on to these technical indicators to hope for a positive outcome of the movement in the market even though they really don’t understand or don’t feel confident about their decision in their trading.

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The reality of the Forex Market is that the price action itself is the end result of everything including all the variables connected to the market, so taking the price action for granted is considered to be a bad move. Most traders if not all tend to fall in the traps of easy money schemes through widely advertised Forex technical indicators, trading tools and other software which give off false promises. The truth is there is no easy way to success.

In order not to delay one’s success in Forex trading, it is strictly prescribed to use Price Action in Forex Trading. It is a strategy to eliminate useless tools and focus on important things. Not only that your time is saved and effort is lessen, it gives you a more accurate edge in identifying the direction of where the market is going. With that being said, the use of Price Action will give you a less hassle, no frill, type of trading from a naked chart than all the technical indicators combined.

Forex Trading Strategy –  Three Points In Learning Price Action

  1. One Price Action Strategy At A Time  – It is better to focus and master on one thing first then the next than having to learn plenty of things with little mastery of it.
  2. High Time Frames First – It is a way to prevent oneself from doing an over trade. With over trading, it will lead you to a natural death in the Forex Market. It is better to focus on high time frames first because you can benefit from the filtered price movement “noise” coming from the lower time frames hence improving your position towards the winning side.
  3. Learn From The Best – A wise Forex trader always learn from other people’s trading mistakes as to avoid any trial and error style of trading. It is a way to control the risk that trading poses. Mistakes that are made once are okay but when repeated, it is way beyond tolerable. Always learn from the best and proven Forex trader.

Bottom line is always remember the word “KISS” (one of the Best Forex Day Trading Strategies) and you will have an easier time in the Forex Market. Also, never ignore Price Action Forex Trading Strategy because it is one of the Winning Forex Strategies out there. For more Free Forex Trading Strategies, keep on reading! Happy investing everyone.

Source:

  • Price Action Basics. Retrieved April 11, 2013. http://www.stratsforextrading.com/dokuwiki/doku.php?id=path_of_learning:price_action_basics
  • A Beginner’s Guide to Forex Price Action Trading. Retrieved April 11, 2013. http://www.learntotradethemarket.com/forex-trading-strategies/a-beginners-guide-to-forex-price-action-trading

Forex Trading Strategy – Basics Of Support and Resistance

Forex Trading Strategy – Basics Of Support and Resistance

When dealing with technical analysis, the concepts of support and resistance are commonly discussed and studied, and could be regarded as complicated by traders who are still learning to trade. In this article, I would like to point out the basics in order to simplify the complexities that surround these concepts. At the end of this article, you will be able to learn how these concepts are being used by traders to predict the potential market movements. In the picture below is a simple example of a chart that shows resistance and support:

support-resistance-basics

Source: Babypips

True to most financial markets, the price of a stock, future, or currency is ultimately determined by supply and demand. To put simply, if there is an increase demand for supply then price will rise, and if the demand for supply drops then price will fall. Therefore, support and resistance are price levels where the supply and demand equation is expected to fluctuate.

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Forex Trading Strategy – Support

Support is the price level of a particular currency in the Forex market where there is enough demand which increments the price and prevents it from declining. In the chart below, it illustrates the strength of the base currency, the Euro, relative to the quote currency, the US Dollar.

SupportSource: Fxstreet

Forex Trading Strategy – Resistance

Resistance is the price level of a particular currency in the Forex Market where there is not enough demand which decrements price and prevents it from rising.

Forex Trading Strategy – Support and Resistance in a Range Market

Support and Resistance

Source: Informed Trades

There are plenty of ways to determine support and resistance on the chart however the most basic way is to look for areas where the price has touched multiple times without breaking through that level  (Refer to the above chart). With this Forex Trading Strategy, the more valid it is to determine whether it is a support or a resistance to be able to predict accurately the outcome of the trade.

Forex Trading Strategy – Support and Resistance in a Trend

Support and Resistance

 Source: Informed Trades

In the example above, it shows a trendline of support and resistance. When the market is trending upward, resistance levels are formed as the price action slows and starts to pull back toward the trendline. This is because of selling or profit taking by traders. The resulting price action undergoes a plateau effect in price, creating a short term top.

On the other hand, when the trend of the marketing is declining, you should watch for a series of declining peaks and connect these peaks with a trendline. When the price is consistent with the trendline, most will be pressured to sell. It will therefore continue to decline as demand is decreasing.

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With the identified support and resistance levels, it helps in creating a strategic entry or exit points that will be in favor towards the trader’s profitability.

Bottom line is determining support and resistance when reviewing charts will help improve returns of short term investing because it could provide traders an accurate picture of the movements in price. Also, it helps long term investors to foresee possible hindrance to their long term investing by discovering a decline in the trend of a particular investment. It is definitely one of the Forex trading strategies to follow!

Source:

  • The Basics of Support and Resistance in Trading. Retrieved April 08, 2013. http://informedtrades.hubpages.com/hub/The-Basics-of-Support-and-Resistance-in-Trading
  • Support and Resistance Basics. Retrieved April 08, 2013. http://www.investopedia.com/articles/technical/061801.asp
  • Support and Resistance. Retrieved April 08, 2013. http://www.babypips.com/school/support-and-resistance.html

Forex Trading For Beginners – History Of Forex Market #2

Forex Trading For Beginners – History Of Forex Market

Here is a walk along memory lane on how the Forex Market transpired to the largest and liquid market of the world. It is inevitable that reading about archaic stuff is quite boring and non-palatable to our taste yet it would be a handful of learning to know about its beginning and background. It will be your foundation to your Forex Trading Strategies. Without further a do, I bring to you the brief history of the Forex Market.

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  • In 1876, the gold exchange standard was implemented, which in turn makes solid gold important in producing paper currencies. The goal was to stabilize world currencies by equating its value to the price of gold. Theoretically, it was a good idea but it created a boom-bust patterns which led to its demise eventually.
  • Beginning World War 2, the gold exchange standard was changed due to the reason that some European countries didn’t have enough gold reserves to support the production of paper currencies that they needed to allocate on military projects. Despite the gold exchange standard’s demise, it remained up until now, a form of monetary value.

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  • After World War II, economies across Europe were in deep coma. In order to help these economies jump back to life, the Bretton Woods Accord was convened in July 1944.
  • Because of Bretton Woods, several resolutions were made to peg foreign currencies to the U.S. dollar that arguably had the greatest immediate impact on the global economy. It resulted in the U.S. dollar to be the primary reserve currency, and the only currency to be backed by gold.
  • Several resolutions arose from Bretton Woods, but it was the “pegging” of foreign currencies to the U.S. dollar that arguably had the greatest immediate impact on the global economy.
  • In 1971, the U.S. declared that it will no longer exchange gold for U.S. dollars which ended the Bretton Woods. U.S. President Richard Nixon eliminated the gold standard for the U.S. dollar to combat rising gold prices contributing to high inflation levels. This action led directly to free-floating currency exchange rates and gave rise to the modern currency OTC market.

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  • The CME launched the International Monetary Market (IMM) in 1971.
  • With the end of the Bretton Woods System, the floating foreign exchange was born in 1976.
  • The Chicago Mercantile Exchange (CME) became the first exchange to offer currency trading.
  • Until the mid  1990s, that electronic trading was widely used by traders.
  • In recent years, new developments in web-related technologies have made it possible for a number of independent brokers to develop internet-based trading platforms. These brokers serve as market-makers and provide a two-way quote for each currency pair they support.

Read more about Basic Forex Trading Strategies For Beginners Revealed

As we move on to the next chapter, we will further learn more about the basics of Forex trading strategies, its common used terms and other important things to equip you to be a well-informed trader. Also, there are plenty of Free Forex Trading Strategies and Free Forex Tips that are widely available all over the internet. All you have to do is be wise in being selective with the resources available.

Source:

  • What is Forex Trading? – A Definition & Introduction by Nial Fuller. Retrieved April 08, 2013. http://www.learntotradethemarket.com/forex-university/introduction-what-is-forex-trading
  • Introduction to the Currency Market. Retrieved April 08, 2013. http://fxtrade.oanda.com/learn/intro-to-currency-trading/currency-market/?srccont=breadcrumb

FOREX TRADING FOR BEGINNERS – CHAPTERS:

  1. Introduction to Forex Market
  2. History of Forex Market
  3. Common Used Forex Terms

Forex Trading For Beginners – Common Used Forex Terms #3

Forex Trading For Beginners – Common Used Forex Terms #3

In the world of Forex, there are plenty of jargon that you will likely to encounter. It is important that you should be able to familiarize first with the common used Forex terms before delving into deeper level to learn to trade Forex in general and use the many major Forex trading strategy / strategies available.

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Common Used Terms:

  • Cross Rate – The currency exchange rate between two currencies, both of which are not the official currencies of the country in which the exchange rate quote is given in. This phrase is also sometimes used to refer to currency quotes which do not involve the U.S. dollar, regardless of which country the quote is provided in.

For example, if an exchange rate between the Australian Dollar and the Korean Won was quoted in an American newspaper, this would be considered a cross rate in this context, because neither the Australian Dollar or the Korean Won is the standard currency of the U.S. However, if the exchange rate between the Australian Dollar and the U.S. dollar were quoted in that same newspaper, it would not be considered a cross rate because the quote involves the U.S. official currency.

  • Leverage – The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

For example, if a trader opens an account with a $200,000 position from a $2,000 margin, his leverage accounts for a 1:100 ratio.

  • Margin – The capital required to hold on a certain position in the market. It is either “free” or “used” margin, where in the “free” margin is the available money to be allocated for future positions, while “used” margin is the money already invested in a certain position.
  • Exchange Rate – It is the price of one country’s currency expressed in another country’s currency.
  • Pip – The movement of price that a given currency can make.
  • Spread – The difference between the bid and ask price.
  • Bid Price – The bid is the price that you will quote a broker.
  • Ask Price – The ask price is the price that your broker will quote you.
  • Currency Pair – The quotation and pricing structure of the currencies traded in the forex market: the value of a currency is determined by its comparison to another currency. The first currency of a currency pair is called the “base currency”, and the second currency is called the “quote currency”. The currency pair shows how much of the quote currency is needed to purchase one unit of the base currency.

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The ones mentioned are the most common terms being used but there are more terms that you need to learn as we go along with our journey to learn to trade Forex. I would recommend the site Investopedia for more Forex terminology for a good reference and also Learn What Is the Forex Exchange and Learn How to Trade Currencies. I understand that it is difficult Learning Forex but with great perseverance and determination, nothing is impossible. With this being said, Understanding Forex Trading should be an everyday goal! Don’t worry there are many resources available online to Learn to Trade Forex Free of charge. What are you waiting for? Learn and invest!

Source:

  • Forex Trading Terminology by Nial Fuller. Retrieved April 08, 2013. http://www.learntotradethemarket.com/forex-university/forex-trading-terminology
  • Forex Trading Terms. Retrieved April 08, 2013. http://www.investopedia.com/categories/forex.asp

FOREX TRADING FOR BEGINNERS:

  1. Introduction to Forex Market
  2. History of Forex Market
  3. Common Used Forex Terms

Forex Trading For Beginners – Introduction to Forex Market #1

Forex Trading For Beginners – Introduction to Forex Market #1

Least volatile financial market in existence, the Foreign Market is one of the most dynamic, fast paced and exciting place to engage financial transactions – currency exchange. Here I am going to give you a concise introduction to the complex world of the Forex Market. It will be a step-by-step beginner guide to learn to trade Forex.  As much as possible, I’ll make things simple and of course, fun because learning is supposed to be fun!

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Forex Market also known as Forex Exchange Market, FX Market, Currency Market, Foreign Exchange Currency Market, or Foreign Currency Market, is a place where currencies are traded. It has been a place for currency speculation of large financial institutions, corporations, banks, governments, investors, hedge funds and of course, traders. This speculation and exchanges of currencies are important in order for countries to thrive through foreign trades and businesses. For example, an exporter from the Philippines will sell corn and wheat to the U.S., the consumer country needs to pay the seller country in Philippine pesos. With this, the U.S. importer will need to exchange the equivalent value of U.S. dollars into Philippines pesos. The same principle goes for traveling as well.

The Forex Market is the largest, and most liquid financial market in the world. With an average traded value of around $2,000 billion per day, it somehow belittles other markets including the stock market. As of August 2012, the Bank of International Settlements (BIS), reported that the Forex Market traded beyond U.S. $4.9 trillion per day. It is open 24 hours a day, 5 times a week, with its world trading centers located in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney.

With the advent of technology and emergence of the internet, it is possible for average investors to engage in currency exchanges easily within a click of a mouse through online brokerage firms. One unique aspect to be noted is that there is no central marketplace for the Forex Market. Currency trading is conducted “Over the counter”, where in all transactions are made online between traders through out the world. Unlike stocks where in there is a central market with all orders processed, the Forex Market relies on the different quotations made by all major banks in differing prices, then the brokerage firms take all these quotes from these banks. The quotes are an approximate average of the exact price. Basically, the broker is the one making the market for you. When you buy a currency, the broker is the one selling it for you and not another trader.

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In order to be a successful currency trader, one has to understand the basics behind currency movements and fluctuations. It is definitely a place that could provide vast opportunities but also it could be a double-edge sword, which poses threats for large losses.

Bottom line is the goal of this step by step learn to trade Forex for Beginners tutorial is to lay down a good and firm foundation for traders, who are still new to the Forex Market. In the coming chapters of our Forex Trading Tutorial, I’ll be sharing  the history of Forex Market, Terminologies, Basic Exchange Rates and many more! There are just plenty of things to learn from Best Forex Platform for Beginners to Best Forex Trading Strategies. All we need is time and a warm cup of coffee to be able to sit back, relax and enjoy every learning that we get from reading. Above all, happy investing and most importantly happy learning Forex Trading For Beginners!

Source:

  • What is Forex Trading? – A Definition & Introduction by Nial Fuller. Retrieved April 02, 2013. http://www.learntotradethemarket.com/forex-university/introduction-what-is-forex-trading
  • Forex Tutorial: Introduction to Currency Trading. Retrieved April 02, 2013. http://www.investopedia.com/university/forexmarket/

FOREX TRADING FOR BEGINNERS:

  1. Introduction to Forex Market
  2. History Of Forex Market
  3. Common Used Forex Terms