Tag: currency trading

Forex Trading – Japanese Candlestick Patterns Pt 1

~ Vera J.

On your journey to learn more about Forex trading, today you can read about basic Japanese candlesticks patterns.Forex TradingSpinning Tops
Japanese candlesticks with a long upper shadow, long lower shadow and small real bodies are called spinning tops.

The color of the real body is not very important. The pattern indicates the indecision between the buyers and sellers.
Forex TradingThe small real body (whether hollow or filled) shows little movement from open to close, and the shadows indicate that both buyers and sellers were fighting but nobody could gain the upper hand.

Even though the session opened and closed with little change, prices moved significantly higher and lower in the meantime.

– If a spinning top forms during an uptrend, this usually means there aren’t many buyers left and a possible reversal in direction could occur.
– If a spinning top forms during a downtrend, this usually means there aren’t many sellers left and a possible reversal in direction could occur.

Marubozu
Sounds like some kind of voodoo magic, huh? Fortunately, that’s not what it means. Marubozu means there are no shadows from the bodies.

Depending on whether the candlestick’s body is filled or hollow, the high and low are the same as its open or close. Check out the two types of Marubozus in the picture below.
Trading ForexA White Marubozu contains a long white body with no shadows. The open price equals the low price and the close price equals the high price.

This is a very bullish candle as it shows that buyers were in control the entire session. It usually becomes the first part of a bullish continuation or a bullish reversal pattern.

A Black Marubozu contains a long black body with no shadows. The open equals the high price and the close equals the low price.

This is a very bearish candle as it shows that sellers controlled the price action the entire session. It usually implies bearish continuation or bearish reversal.

Doji
Doji candlesticks have the same open and close price or at least their bodies are extremely short. A doji should have a very small body that appears as a thin line.

Doji candles suggest indecision or a struggle for turf positioning between buyers and sellers.

Prices move above and below the open price during the session, but close at or very near the open price.

There are FOUR special types of Doji candlesticks. The length of the upper and lower shadows can vary and the resulting Forex candlestick looks like a cross, inverted cross or plus sign.
Forex tradingWhen a Doji forms on your chart, pay special attention to the preceding candlesticks.

If a Doji forms after a series of candlesticks with long hollow bodies (like White Marubozus), the Doji signals that the buyers are becoming exhausted and weakening.

In order for price to continue rising, more buyers are needed but there aren’t anymore! Sellers are looking to come in and drive the price back down.
ForexIf a Doji forms after a series of candlesticks with long filled bodies (like Black Marubozus), the Doji signals that sellers are becoming exhausted and weak.

In order for price to continue falling, more sellers are needed but sellers are all tapped out! Buyers are foaming in the mouth for a chance to get in cheap.
ForexWhile the decline is sputtering due to lack of new sellers, further buying strength is required to confirm any reversal. Look for a white candlestick to close above the long black candlestick’s open.

Hopefully it will help you to know how to recognize different types of Japanese candlestick patterns and make sound trading decisions based on them.

Source: BabyPips

 

 

 

Don’t Let Regret Keep You From Forex Trading

~ Vera J.

No matter what, whether a five dollar roll of toilet paper or a new car, we always feel buyer’s regret when making a purchase.

Forex trading can be very similar. We put our money (real or demo) on the line in the pursuits of financial gain and happiness.

Our trades are placed plentiful when the potential for profit is there, and we scurry away with lightning speed when the crowd starts selling off in great numbers. “Hurry, everybody out!”

This fear (and greed for some) becomes a controlling emotion, dictating their currency trading decisions and behavior. Just as powerful an emotion as fear and greed, is regret too.

Regret is similarly controlling, it can keep us from placing a trade because we don’t want make a mistake. We want to feel good about our decisions and strategies.

In our attempt to do feel this way, we find it more painless to steer clear of making a trade all together, avoiding any risk of failure. Taking this mindset of avoidance, however, will definitely not lead us to the potential for profits that we seek.

Regret comes about after we make a decision and we then start picturing the things that could have gone differently.

When trading, regret is an easy feeling to have because it can occur both when making a move or when doing absolutely nothing.
Forex TradingFor instance, you open a trade with the best intentions, only to have it stop out for a loss of your entire account balance. You automatically feel regret for ever taking the position and now being poor.

On the other side, you don’t take a position because you’re allergic to risk. Your missed opportunity turns out to be the trade of the century, and it would have made you a gazillionaire! Arrrgghh! You seep into a state of utter regret.

For both examples, it’s easy to imagine the could-have-beens. We envision ourselves in those “winning” realities and how everything is so heavenly. But then we come back to Earth where things are definitely not paradise.

Sometimes regret can give us that extra kick in the ribs to get off the floor and back on our feet. It compels us to get right what we initially did wrong.

When the going gets tough and you lose yet another Forex trade, the right response to your mistake is too re-evaluate your strategy and the market. You do more testing and try your skills on another new trade. You want that losing trade back!

In the last example, we used the regret we felt for our errors to motivate and encourage ourselves to try again.

Taking this new perspective when things don’t go as planned will have a positive impact on your mental attitude and your trading as a whole. Don’t get hung up on the loss. Forget about it and move on!

Some Forex traders have an issue with feeling regret even before a trade is made. No action has been taken, but the worry starts to consume the mind. All they can think about is making a mistake. In this instance, the possibility of a regrettable outcome is stopping them from acting.

To help, we must remind ourselves that it isn’t the end of the world and that there’s still time to fix what’s not working. We can’t change our past trades but we can definitely make new ones to take those profits back.

Again, the key here is action; the point is to make the trade. Don’t let regret hold you back from progressing by means of action.

And remember, not all risk is bad. Taking risks that are minimal and calculated are integral to growing into a successful Forex trader.

Source: Baby Pips

 

Your Worst Trades Can Help You Become a Better Forex Trader

~ Vera J.

In life we usually develop repetitive behavior. We develop daily routines that help us get through the day. And as creatures of habit, we also go through patterns in forex trading. Over time, we form a routine in the way we process and react to information thrown at us.
Forex TradingTry looking at the worst trade you’ve ever had in your trade journal. It’s not easy, I know, but could be a good lesson.

Review the trade setup that you saw, think about what went wrong, and ask yourself, “Why the heck did I ever take that trade in the first place? What was I thinking?!”

More importantly, “Was I even thinking?!”

You probably just took that trade automatically based on a familiar setup. In this case, your decision was a result of your own way of thinking rather than what the market was telling you.

Your worst trade isn’t necessarily the one where you’ve incurred your largest loss.

It can be in the form of a missed opportunity, when you hesitated to long to take what could’ve been your trade of the year, or when you locked in profits too early instead of letting it ride. You might’ve wimped out because of your fear of losing, even when the markets gave every indication that this next trade would be a winner.

Another negative thought pattern is when you become absolutely indifferent to losing that you end up blindly taking one trade after another just to make up for your losses.

In this case, you keep insisting that you’re right and you believe that you will eventually beat the market. Revenge trading turns into a nasty habit and could result in large drawdowns if not corrected.

The usual response to bad trades is just shrugging them off. Much like the memory of getting rejected by crushes in high school. It’s easier to simply push the memory of a bad trade at the back of our heads, and falsely reassure yourself that you’ll prepare better next time, and then move on to the next trade.

But THAT’S NOT ENOUGH!

You have to REALLY dig in into the problem and review the nitty-gritty of your bad trades. Otherwise, you run the risk of repeating your mistakes. No matter how painful or discouraging the task is, you must force yourself to open your trade journal and ask yourself questions like:

“Why did I take the trade?”

“Did I follow valid signals when I closed my position?”

You get the idea?

In forcing yourself to identify the emotions you felt when you made bad trading decisions, you might be able to see a negative pattern in your behavior and take actions to correct it.

Unlearning bad habits and trading practices can be difficult, but they will certainly bring you one step closer to controlling your emotions and becoming a better trader.

Source: Baby Pips

 

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Forex Trading Abbreviations and Symbols

~ Vera J.

If you are a Forex trader beginner, than you need to know all the Forex trading abbreviations and Forex trading symbols, so you can fully understand what your fellow Forex traders are talking about. It might be a big help for you to make right decisions.

Forex Trading Abbreviations and Symbols
Forex trading
For example, today I was trading GA/ 

Happy Trading!

 

 

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Forex Trading – More About Revenge Trading

~ Vera J.

Revenge trading is mainly driven by the fear of being wrong. It’s usually when a trader, coming from a particularly frustrating loss, decides to make up for it by being more aggressive in his/her next trades.

This is dangerous for your account for two main reasons. First, it forces you to throw your trading discipline out the window. It shifts your focus from your trading process and good risk management to trying to make enough money to recover your losses with less thought out trades.

Trading based on emotions and luck is not trading. It’s gambling. Without any risk management plan, it can bleed your account one trade at a time.
Revenge tradingIt’s also a lose-lose situation. If you lose a revenge trade, you deepen your drawdown with a trade that you had barely planned for.

Revenge trades come in many forms but the most common one is when traders take impulsive (and usually bigger) trades after a particularly frustrating loss in the hopes of making back the money they’ve lost.

Luckily, there are ways to recover from a bout of revenge trading.

Step Out and Clear Your Head After a Frustrating Loss
Do non-trading related activities and come back only once you’ve acknowledged that losing is part of the game.

Document the Reasons Why You Lost Your Trade
Identifying what went wrong with your trade and focusing on improving your trading process helps lessen the feeling that the market is against you.

Take Note of Your Triggers and Tells on Your Trading Journal
Do you do it when you’re trading big positions or when you got taken out by unexpected catalysts? Do you do usually bite your fingernails or scream at your cat before doing it? Knowing your triggers helps you prevent yourself from taking on more revenge trades.

Trust in Your System!
If you’ve tested your system and follow your trading plan 100%, then you won’t mind the losses much because you know that the end numbers will add up in your favor in the end.

Practice Risk Management
If you make risk management a habit, then you’ll have better trading discipline and are less likely to take impulsive trades. If you’re not used to it yet though, then you can start with following strict rules on position sizes and trade duration.

Remember that even the most consistently profitable traders have bad trading days. It’s all part of the game after all. Don’t take losses to mean that the market is against you. It doesn’t care about your feelings or how sound your trade ideas are. It’s not you, it’s just Forex trading.

By Dr. Pipslow

Source: Baby Pips

 

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Why Trade Forex – Advantages Of Forex Trading

~ Vera J.

There are many benefits and advantages of Forex trading. Here below are just a few reasons why so many people are choosing this market.
Forex TradingNo Commissions
No clearing fees, no exchange fees, no government fees, no brokerage fees. Most retail Forex brokers are compensated for their services through something called the “spread“.

No Fixed Lot Size
In spot Forex, you determine your own lot, or position size. This allows traders to participate with accounts as small as $25 (although we’ll explain later why a $25 account is a bad idea).

Low Transaction Costs
The retail transaction cost (the bid/ask spread) is typically less than 0.1% under normal market conditions. For larger transactions, the spread could be as low as 0.07%. Of course, this depends on your leverage.

A 24-Hour Market
There is no waiting for the opening bell. From the Monday morning opening in Australia to the Friday afternoon close in New York, the Forex market never sleeps.

This is awesome for those who want to trade on a part-time basis because you can choose when you want to trade: morning, noon, night, during breakfast, or in your sleep.

No One Can Corner the Market
The foreign exchange market is so huge and has so many participants that no single entity (not even a central bank) can control the market price for an extended period of time.

Leverage
In Forex trading, a small deposit can control a much larger total contract value. Leverage gives the trader the ability to make nice profits, and at the same time keep risk capital to a minimum.

For example, a Forex broker may offer 50-to-1 leverage, which means that a $50 dollar margin deposit would enable a trader to buy or sell $2,500 worth of currencies. Similarly, with $500 dollars, one could trade with $25,000 dollars and so on.

However, remember that leverage is a double-edged sword.Without proper risk management, this high degree of leverage can lead to large losses as well as gains.

High Liquidity
Because the Forex market is so enormous, it is also extremely liquid. This is an advantage because it means that under normal market conditions, with a click of a mouse you can instantaneously buy and sell at will as there will usually be someone in the market willing to take the other side of your trade.

You are never “stuck” in a trade. You can even set your online trading platform to automatically close your position once your desired profit level (a limit order) has been reached, and/or close a trade if a trade is going against you (a stop loss order).

Low Barriers to Entry
You would think that getting started as a currency trader would cost a ton of money. The fact is, when compared to trading stocks, options or futures, it doesn’t. Online Forex brokers offer “mini” and “micro” trading accounts, some with a minimum account deposit of $25.

We’re not saying you should open an account with the bare minimum, but it does make Forex trading much more accessible to the average individual who doesn’t have a lot of start-up trading capital.

Free Stuff Everywhere!
Most online Forex brokers offer free “demo” accounts to practice trading and build your skills, along with free real-time Forex news and charting services.

Demo accounts are very valuable resources for those who are “financially hampered” and would like to hone their trading skills with “play money” before opening a live trading account and risking real money.

Source: Baby Pips

 

Forex

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Forex Trading – Trade Forex Like a Hunter

~ Vera J.

In many trading-related books we often see the markets become associated with a jungle. And why not? Every day traders battle it out with animal references such as the bulls and the bears, the hawks and the doves, and the wolves and the sharks.

This is likely why traders love referencing themselves as the modern-day hunters. Some say that they’re like the cheetahs who catch their prey using sheer speed while others see themselves as crocodiles who lie in wait for a big, fat catch.
forex trading
So what does it take to become a successful hunter? And for traders, what does it take to consistently make pips?

1. Know Your Prey
When a lion wants to eat a buffalo, it doesn’t attack the first one it sees. It studies and analyses the herd’s behavior patterns and looks for its potential weaknesses. By the time the lion is ready to strike, it already knows what makes the herd tick, where to attack, and how to get the fattest buffalo with the least amount of effort.
forex trading
Like in the lion’s case, it’s essential for traders to collect data before striking. Before you enter a EUR/USD short, for example, you must first know which factors can influence its price action and which levels present the best reward-to-risk ratios.

Ask yourself questions such as “Which economic reports does the pair usually respond to? When does the pair move the most? What factors can shift its current trend?” Collect data and turn them into probabilities.

2. Wait for the Best Opportunity to Strike
Once you’ve gathered information on your prey, use it to your advantage by striking at the best possible opportunity. After all, hunters usually just get one chance.

Maximize your gains while minimizing your effort and your risk. The difference between an average and a skilled hunter is that the skilled hunter waits until the odds are overwhelmingly in his favor.

3. Execute According to Plan
For traders, the time to think about what could happen and what you would do in an alternate scenario has passed. In this stage, it’s all about just doing what needs to be done.

Be quick, aggressive, accurate, and confident in your execution. Don’t let fear and greed get in the way of your performance. Of course, it would help if you’ve already back and forward tested your trading strategy and that you’re confident that the numbers will add up in the end.

4. Monitor and Adjust
At any given day a leopard could encounter an extraordinarily resilient gazelle or a similar scenario that could change the outcome of its attack. Should the leopard use a different approach? Or should it abort its plan and wait for another opportunity?

If the actual trading scenario is different from the one you initially envisioned, then it’s time to make adjustments. The first step is to consult your play book for any alternative strategies you might have written or executed before. Then, weigh the outcomes of your options.

Should you cut your losses or let your profits run? Should you add to your position or close it and wait for another opportunity? Whatever your decision is, remember to choose the path of minimum risk and maximum gains.

5. Learn and Earn
The best hunters are ones that have learned the most from their previous experiences. In the jungle, you eat what you kill.

As in the jungle, the consistently profitable traders are not the ones who have the most trades, but those who have learned from their experiences and continue to improve their skills with each trade.

One way to speed up your learning process is to engage in deliberate practice. The process of journaling, recording, and reviewing your trades turns one experience into many and makes it easier to correct your mistakes.

Surviving the Forex jungle doesn’t require expensive tools or a fancy trading course. Sometimes it just takes simple processes such as the one stated above, repeated day in and day out, to become slowly but consistently profitable.

By Dr. Pipslow

Source: BabyPips

Images: Vera J.

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Forex Trading – The Best Time to Trade Forex

~ Vera J.

Currency trading is unique because of its hours of operation. The week begins at 6 p.m. EST on Sunday and runs until 5 p.m. EST on Friday. Not all hours of the day are equally good for trading. The best time to trade is when the market is most active.

When more than one of the four markets are open simultaneously, there will be a heightened trading atmosphere, which means there will be greater fluctuation in currency pairs.
Forex Trading Hours
When only one market is open, currency pairs tend to get locked in a tight pip spread of roughly 30 pips of movement. Two markets opening at once can easily see movement worth of 70 pips, particularly when big news is released.

Overlaps in Forex Trading Times
The best time to trade Forex is during overlaps in trading times between open markets. Overlaps equal higher price ranges, resulting in greater opportunities. Here is a closer look at the three overlaps that happen each day:

U.S./London (8 a.m. to noon): The heaviest overlap within the markets occurs in the U.S./London markets. More than 70% of all trades happen when these markets overlap because the U.S.Dollar and the Euro are the two most popular currencies to trade, according to Lien. This is the most optimal time to trade since volatility is high.

Sydney/Tokyo (2 a.m. to 4 a.m.): This time period is not as volatile as the U.S./London overlap, but it still offers a chance to trade in a period of higher pip fluctuation. EUR/JPY is the ideal currency pair to aim for, as these are the two main currencies influenced.

London/Tokyo (3 a.m. to 4 a.m.): This overlap sees the least amount of action of the three because of the time (most U.S.-based traders won’t be awake at this time), and the one-hour overlap gives little opportunity to watch large pip changes occur.

Impact of News Releases on Forex Markets
While understanding the markets and their overlaps can aid a trader in arranging his or her trading schedule, there is one influence that should not be forgotten: the release of news.

A big news release has the power to enhance a normally slow trading period. When a major announcement is made regarding economic data – especially when it goes against the predicted forecast – currency can lose or gain value within a matter of seconds.

You will find people who do technical analysis only and they kill it very well, but they will all tell you how the news killed their trades.
Crash1
Even though dozens of economic releases happen each weekday in all time zones and affect all currencies, a trader does not need to be aware of all of them. It is important to prioritize news releases between those that need to be watched versus those that should be monitored.

Source: Investopedia

 

 

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More About the Japanese Candlesticks

~ Vera J.

The Japanese candlesticks trading is one of the most powerful trading systems in history. It was invented by Homma Munehisa. The father of candlestick chart patterns.

This trader is considered to be the most successful trader in history, he was known as the God of markets in his days, his discovery made him more than $10 billion in today’s dollar.

Learning Japanese candlesticks is like learning a new language. Imagine you got a book which is written in a foreign language, you look at the pages but you get nothing from what is written.
The same thing when it comes to financial markets. If you don’t know how to read Japanese candlesticks, you will never be able to trade the market.

Japanese candlesticks are the language of financial markets, if you get the skill of reading charts, you will understand what the market is telling you, and you will be able to make the right decision in the right time.

More importantly, learning the principals of market psychology underlying the candlestick methodology will change your overall trading psych forever.

Just as humans, candlesticks have different body sizes, and when it comes to trading, it’s important to check out the bodies of candlesticks and understand the psychology behind it.

The human behavior in relation to money is always dominated by fear, greed and hope. Candlestick analysis will help you understand these changing psychological factors by showing you how buyers and sellers interact with each other.

Source: The Candlestick Trading Bible

 

 

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The History of the Japanese Candlesticks

~ Vera J.

Candlesticks have been around a lot longer than anything similar in the Western world. The Japanese were looking at charts as far back as the 17th century, whereas the earliest known charts in the US appeared in the late 19th century.

Rice trading had been established in Japan in 1654, with gold, silver and rape seed oil following soon after. Rice markets dominated Japan at this time and the commodity became, it seems, more important than hard currency.forexMunehisa Homma (aka Sokyu Homma), a Japanese rice trader born in the early 1700s, is widely credited as being one of the early exponents of tracking price action. He understood basic supply and demand dynamics, but also identified the fact that emotion played a part in the setting of price. He wanted to track the emotion of the market players, and this work became the basis of candlestick analysis. He was extremely well respected, to the point of being promoted to Samurai status.

The Japanese did an extremely good job of keeping candlesticks quiet from the Western world, right up until the 1980s, when suddenly there was a large cross-pollination of banks and financial institutions around the world. This is when Westerners suddenly got wind of these mystical charts.

Obviously, this was also about the time that charting in general suddenly became a lot easier, due to the widespread use of the PC. In the late 1980s several Western analysts became interested in candlesticks. In the UK Michael Feeny, who was then head of TA in London for Sumitomo, began using candlesticks in his daily work, and
started introducing the ideas to London professionals.

In the December 1989 edition of Futures magazine Steve Nison, who was a technical analyst at Merrill Lynch in New York, produced a paper that showed a series of candlestick reversal patterns and explained their predictive powers. He went on to write a book on the subject, and a fine book it is too. Thank you Mr Feeny and Mr Nison.

Since then candlesticks have gained in popularity by the year, and these days they seem to be the standard template that most analysts work from.

Source: The Candlestick Trading Bible

 

 

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The Need to Exchange Currencies

~ Vera J.

The need to exchange currencies is the primary reason why the Forex Market is the largest, most liquid financial market in the world. Currencies are important to most people around the world, because currencies need to be exchanged in order to conduct foreign trade and business. The foreign exchange market is the “place” where currencies are traded.

Like a Pro 1

Currency trading is conducted electronically, which means that all transactions occur via computer networks between traders around the world, rather than on one centralized exchange. The market is open 24 hours a day, five and a half days a week. Currencies are traded worldwide in the major financial centers of the world.

 

 

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