Tag Archives: foreign exchange

Trading the Lines

Trading the Lines

Now that you are aware of fundamentals, you’re ready to apply these fundamental but very helpful technical tools inside your trading. Because at tradeadvisorpro.com you want to make things clear to see, we’ve divided trading support and resistance levels into two simple ideas: the Bounce and also the Break.

The Bounce

As the title indicates, one way of trading support and resistance levels is appropriate following the bounce.

Many retail traders result in the error of setting their orders on support and resistance levels after which just waiting to for his or her trade to materialize. Sure, this might work on occasions however this type of trading  method assumes that the support or level of resistance holds without cost really getting there yet.

You may be thinking, “How about if I simply set an entry order directly on the road? This way, I’m assured the perfect cost.”

When playing the bounce you want to tilt the chances within our favor and discover some kind of confirmation the support or resistance holds. Rather than simply purchasing or selling quickly the softball bat, wait for this to bounce first before entering. Using this method, you avoid individuals moments where cost moves fast and break through support and resistance levels. From experience, catching a falling knife could possibly get really bloody…

bounce of trend line

The Break

Inside a perfect world, support and resistance levels would hold forever, McDonalds could be healthy, and we’d have the ability to jetpacks. Inside a perfect trading world, we’re able to just jump out and in whenever cost hits individuals major support and resistance levels and produce lots of money. The simple fact is the fact that these levels break… frequently.

So, it isn’t enough to simply play bounces. It’s also wise to get sound advice whenever support and resistance levels cave in! You will find two methods to play breaks: the aggressive way or even the conservative way.

The Aggressive Way

The easiest method to play outbreaks is to find or sell whenever cost passes well via a support or resistance zone. The important thing here’s well because we simply want to enter when cost goes through a substantial support or level of resistance effortlessly.

We would like the support or resistance area to do something as though it simply received a Chuck Norris karate chop: We would like it to wilt in discomfort as cost breaks through it.

The Aggressive Way

The Conservative Way

Picture this hypothetical situation: you made the decision to visit lengthy EUR/USD wishing it might rise after bouncing from the support level. Right after, support breaks and you’re simply now holding onto a losing position, together with your balance gradually falling.

Would you…

1. Accept defeat, obtain the heck out, and liquidate your situation?

OR

2. Hold onto your trade and hope cost increases up again?

In case your option is the 2nd one, then you’ll easily understand this kind of trading method. Remember, if you close out a situation, you are taking the other side from the trade. Closing your EUR/USD lengthy trade at or near breakeven means you’ll have to short the EUR/USD through the same amount. Now, if enough selling and liquidiation of losing postions happen in the damaged support level, cost will reverse and begin falling again. This phenomenon may be the primary reason damaged support levels become resistance every time they break.

While you would have suspected, benefiting from this phenomenon is about being patient. Rather than entering directly on the break, waiting for cost to create a “pullback” towards the damaged support or level of resistance and enter following after the price bounces.

The Conservative Way

A couple of words of caution… This Doesn’t HAPPEN Constantly. “RETESTS” OF Damaged SUPPORT AND RESISTANCE LEVELS Don’t HAPPEN Constantly. You Will See Occasions THAT Price WILL JUST MOVE One Way And Then Leave YOU BEHIND. Due To THIS, Always Employ Stop-loss ORDERS AND Never HOLD Onto A TRADE JUST Due To HOPE.

Trend Lines

Trend Lines

Trend line is most likely the most typical type of technical analysis. They’re most likely the most underutilized ones too.

If attracted properly, they may be as accurate just like any other method. Regrettably, most traders don’t draw them properly or come up with the road fit the marketplace rather than the other way round.

Within their most fundamental form, an uptrend lines are attracted along the foot of easily identifiable support areas (valleys). Inside a downtrend, the trend lines are attracted along the top of easily identifiable resistance areas (peaks).

How can you draw trend lines?

To attract trend lines correctly, all you need to do is locate two major tops or bottoms and fasten them.

What’s next?

Nothing.

Yep, it’s that easy.

Listed here are trend lines for action! Take a look at these waves!

Examples of Uptrend, downtrend & sideways trend lines

Kinds of Trends

You will find three kinds of trends:

Uptrend (greater lows)

Downtrend (lower levels)

Sideways trends (varying)

Here are a few important thing to remember about trend lines:

1. It requires a minimum of two tops or bottoms to attract a legitimate trend line however it takes THREE to verify a trend line.

2. The STEEPER the popularity line you draw, the less reliable it will be and the much more likely it’ll break.

3. Like horizontal support and resistance levels, trend lines become more powerful the greater occasions they’re examined.

4. And more importantly, Never draw trend lines by forcing these to fit the marketplace. If they don’t fit right, then that trend line is not a legitimate one!

London Session

London Session

London Session

From the time the Asian market or Tokyo market starts to close the shop, the European market known as the London session is just starting their day.

Market participants keep their eyes on London session in spite of the other financial centers all around the Europe.

Even before, London has always been at the center of every trade, this is because of their strategical location. Due to its strategic location, London has been considered to be the forex capital of the world with thousands of businessmen trade every single minute. During the London session, about 30% of all the foreign exchange transactions happen.

Look at the table below. It shows the London session ranges of the major currency pairs.

London Currency Pairs

The values above were calculated using averages if past data from the month of May 2012. Depending on liquidity and other market conditions, these values may vary. Thus, considered to be not absolute values. If you are going back to the table, you will notice that the session range for EUR/CHF has not been included since the Swiss currency Franc has been nailed to the Euro at 1.2000 during that time.

Hear are some of the conceptions about the European session or London session:

1. London session crosses with the two other major trading session. London session is also the key financial center in Europe. A lot of forex transactions take place during this period. With this kind of situation, high liquidity and potential lower transaction costs are expected.

2. London trading session is considered to be the most volatile session due to the large amount of transactions that take place.

3. During the London session, most of the trends begin and continue until the New York session starts.

4. At lunch time, volatility tends to slow down during the middle of the London session because traders go on break while waiting for the New York session to start.

5. Trends can sometimes reverse at the end of the London session, as European traders may decide to lock in profits.

Which Pair Should You Trade during London Session?

During the London session, there is so much liquidity that any pair can be traded. This is due to the volume of transactions that take place.

It is best to stick with the major currency pairs such as EUR/USD, GBP/USD, USD/JPY, and USD/CHF. These currency pairs normally have the tightest spreads.

Also, it is these pairs that are normally directly influenced by any news reports that come out during the European session.

Yen crosses are also a good choice. These currency pairs EUR/JPY and GBP/JPY are pretty volatile during this time. However, you have to bear in mind that cross pairs may cause spreads to be a little wider.

That’s all about the London Session. It’s now time to learn the New York session. 

Proceed to the next lesson: New York Session

Go back to the previous lesson: Tokyo Sesssion