Tag Archives: trading

Forex Trading For Beginners – Fundamental Analysis & Forex Trading Strategies #5

Having a basic knowledge of Fundamental analysis will give you a better foundation for your investment decisions on the Forex Market. It looks to measure a company’s true value, in which the Forex trader evaluate the country and its currencies just like companies. With Fundamental analysis, it shows the true value of the currency.

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

In order to have an idea of the currency’s value, Forex traders will take note on the economic reports issued by the country, political events, and other significant reports that could be at play in affecting the movement of the currency. The value is in a constant move due to many possible factors (such as economic growth and financial strength). With all of these factors, a Forex trader could start doing Fundamental analysis.

What is Fundamental Analysis?

A fundamental analysis is all about getting an understanding of a country, the health of its business and its future prospects. It includes reading and analyzing annual reports and financial statements to get an understanding of the country’s comparative advantages, competitors and its market environment.

Forex Trading Strategies – Carry Trade:

There are plenty of Forex Trading Strategies out there but I would like to focus more on “Carry Trade”:

A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage used.

In simple words, you borrow at a low rate and lend at a higher rate. A Forex trader could make a highly profitable trade when leverage is used because even with a small difference between two rates it could yield a higher profit. A good example is the “Yen Carry Trade” during the 1990’s. Japan decreased its interest rate to almost zero. Forex traders borrow at a very low rate large sum of Japanese yen, then converted into U.S. dollars (which are used to buy U.S. Treasury bonds which yields and coupons at around 4.5 – 5%). With this, Forex traders earn almost all the yield from the U.S. Treasury bonds. Not only that, with leverage, returns are greatly increased.

For example, if you have a U.S. $1,000 in your trading account and have a 10 times leverage, you can control a position of U.S. $10,000. If you would use the currency carry trade with the example above, you will earn 3% per year, or $300 gain annually, if and only if the currency pair’s value remains constant or appreciates. Hence, Forex carry traders look not only to earn the interest rate differential but also capital appreciation.

Read more about Forex Trading Strategy – Price Action For Dummies

In reality, the exchange rates between two countries are ever changing. There is an erratic movement of price that is why most carry traders would prefer lower-yielding safer currency since the carry trade strategy is longer term in nature, it is much susceptible to a variety of changes over time.

Bottom line is that acquiring an idea of the fundamental factors that affect the movement of price of currencies and applying Best Forex Trading Strategies are important steps to a well-informed investment decision. With your on-going reading of  our free Forex Course for Beginners, you will in no time have a good foundation of the Forex Market and be able to trade successfully. Learning Forex Trading for Beginners is a continuous effort so I hope you will not skip on your daily reading diet of Forex Strategies and Free Forex Tips! Once again, Happy investing!

Source:

  • Forex Tutorial: Fundamental Analysis & Fundamentals Trading Strategies. Retrieved April 14, 2013. http://www.investopedia.com/university/forexmarket/forex6.asp

FOREX TRADING FOR BEGINNERS:

  1. Introduction to Forex Market
  2. History Of Forex Market
  3. Common Used Forex Terms
  4. Risk And Benefits
  5. Fundamental Analysis & Forex Trading Strategies

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.

Read more about Forex Trading Strategy Made Very Simple – Price Action

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.

Read more about Forex Trading Strategy: Price Action Trading Patterns

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.

Read more about Forex Trading Strategy – Price Action For Dummies

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 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.

Read more about Forex Trading Strategy Made Very Simple – Price Action

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.

Read more about Forex Trading Strategy: Price Action Trading Patterns

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 Strategy: Price Action Trading Patterns

One of the most fundamental Forex Trading Strategies that every trader should be familiar of is the Forex Signal that pertains to Price Action. In relation to this, I would like to share the three common price action Forex trading strategies that would give you an edge as a Forex trader. These are the Pin Bar, Inside Bar and Fakey, likely to called, Mr. Inside, Ms. Pin and Doctor Fakey for easier retention. These three trading patterns are quite simple to understand yet very powerful, with discipline and determination combined. Therefore, it should not be taken for granted because it is a very potent tool for successful Forex trading.

Read more about Forex Trading Strategy Made Very Simple – Price Action

Forex Trading Strategy: Pin Bar Setup

pinbar1

Pin Bars typically have a very high accuracy rate in trending markets, especially when they occur at significant confluence levels such as support and resistance levels. Pins may be taken against the trend if they are well defined and if they significantly exceed surrounding price bars. See example below, to see how the pin bar appears in a bullish trendline from a bearish trendline.

pinbar2

Forex Trading Strategy: Fakey Setup

Fakey1

The Fakey trading setup indicates rejection of an important level within the market, and it can offer some overwhelming moves in the market. Oftentimes, the market will appear to move in one direction and then a reversal motion happens, and the price will go back in the opposite direction. In the example below, it consists of an inside bar then followed by a false break of the inside bar and then a close back within its range.

It is seen that in the example below, the market is moving higher before the Fakey forms. The Fakey is formed on the false break of an inside bar setup that occurred as all the amateurs tried to pick the market top, then the pros stepped in and interrupted the amateurs through a series of buying.

Fakey2

Forex Trading Strategy: Inside Bar Setup

Insidebar1

The Inside Bars are a very common pattern on the chart. It is a great trend continuation signal, but can also be as a turning point signal. In here, I will discuss about the inside bar that acts as a continuation signal. In the example below, the inside bar is completely contained within the range of the previous bar. It shows a brief consolidation and then it breaks out in the dominant trend direction. With inside bars best being played on daily and weekly charts, it also allows for very small risks and yet offers large rewards.  Furthermore, the inside bar setup in the example, comes off to the downside with the existing bearish market momentum. After the market breaks down below a key support level, a good inside bar is formed.

Insidebar2

Bottom line is that most charts conveys a very complicated and intricate lines yet when these basic patterns will be understood, then it is easier to predict the outcome of your trade. It will easily give you a good Forex signal to guide you in every step of your trading career. Once you have mastered a few solid price action Forex Strategy like the ones above, you are on the right track on becoming a more confident and well-informed trader. Happy investing!

Forex Trading Strategy Made Very Simple – Price Action

priceaciton1

If you plan to trade in the market using the technical analysis perspective of trading, you have to keep in mind the basic Forex Trading Strategy that most profound trader would use, which is price action. It is the use of “lagging indicators” as a primary decision making tool. With the knowledge and application of price action, a trader can technically analyze the market without the much exhaustion of other indicators. More importantly, it could guide traders in controlling the possible risk in trading.

The goal in this article is to teach you one of the important Forex trading strategies in relation on how to analyze and grade trends, enter trades, and manage risk while looking at support and resistance. Before we begin in depth, there are few important points to establish first.

Forex Trading Strategy: Price Action

Analyzing Trends

Before jumping in, you should observe and analyze if there are any trends that are occurring on the chart. After a thorough assessment, by then you have already distinguished any biases that may exist or how the attitude is fluctuating at the time.

Refer to the Diagram A-1, it depicts the higher-highs and higher-lows in currency pairs to denote up-trends, lower-lows, and lower-highs to qualify for a downtrend.

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Diagram A-1

Entering Trades

After the trend analysis, you are well equipped to look for trades in the market since you already have an idea of the sentiment on the chart and also the trend in currency pair.

Here are some of the different Forex Trading Strategies in entering trade that you can use:

1. Price Action Pin Bars – The Pin Bar is highlighted by the elongated wick that ‘sticks out’ from price action. It is a reversal price bar on a chart which shows an obvious change in sentiment during that period. The price bar has a long tail with the close price near the open.  Pin Bar occurs after an extended move up or down.  The bar looks like a pin thus the name Pin Bar. To visualize what a Pin Bar looks like, refer to Diagram A-2.

 

2

Diagram A-2

2. Fake Pin Bars – If the long wick does not stick out from previous price action; they are not a genuine Pin Bar, but rather ‘Fake Pin Bars’, which differs Fake Pin Bars from Pin Bars. Basically, the difference between a Pin Bar and a Fake Pin Bar is determined by recent price action. Trading Fake Pin Bars requires additional analysis, as the signal of a short-term reversal in prices may not be as consistent as that of a genuine pin bar. To visualize what a Fake Pin Bar looks like, refer to Diagram A-3.

3

Diagram A-3

3. Double-Spikes – There are two types of Double-Spikes that you should know of: Double-Spike Breakout and Double-Spike Fade.

  • Double-Spike Breakout – If the price is rebuked for more than once by the support or resistance then the trader should anticipate a Double-Spike Breakout.
  • 4Double-Spike Fade – If there is a continuous anticipation of support and resistance then it is considered to be Double-Spike Fade.

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Managing Risks

  • Identify Price Action swings

6

  • Identify an up-trend

7

  • Identify Positive Risk-Reward Ratios

8

 

Bottom line is that the price action is one of the most important Forex Trading Strategies out there in relation to analyzing the trend, trading and managing risks.

Moving Average Crossover Trading

Moving Average Crossover Trading

We now know by plotting moving average on a chart can help us determine if trends are going up or down.

We have determined how at some instance, certain events can cause a sudden surge on price action so you will have to be leery about “fake outs”.

And to avoid this, traders need to plot more than one moving averages on a chart. If the moving averages cross over one another, this signals that the trend is changing.

In basketball, crossover is a very important move, and the same is true in forex trading. A chart plotted well with moving averages showing crossover provide you a better entry – a chance for you to gain more pips.

Here’s another look at the daily chart for UD/JPY to explain crossover trading.

moving average crossover

From April to June, the trend is going up and peaks in July at around 124.00. Then it shows to go down. In the middle of July, we are seeing 10 SMA crossed below the 20 SMA. Right after that is a straight downtrend.

If you made the right decisions and analysis at the crossover of the moving averages then you just won yourself almost a thousand pips!