FOREX Video | New York Session Review | May 29, 2008
Oil was the story today. Not only did it move, but it moved the stock market and the yen pairs. This video shows how to use Andrews Pitchfork and Weekly Pivot Point analysis.
Free Forex Trading Strategy
Trading Forex requires learning technical analysis for currency pair price. Many technical indicators exist that can be used for technical analysis. In the forex trading strategy presented here we use two main indicators and one more indicator that is used as confirmation for the price trend.
The two indicators that are used in the strategy are pivot point analysis and stochastic indicator. The confirmation indicator is the relative strength index (RSI). Let us see first an overview of these indicators and see then how are they applied together in the trading strategy to make decision on whether to buy or sell.
The pivot point analysis involves determining support and resistance level. The support level is defined as a level the currency pair cannot go below it for a large time period. Similarly, the resistance level is defined as a level the currency pair cannot go above it for a large time period. The pivot point analysis defines many levels at different strengths. The higher support or resistance levels the strongest level which means it is more likely that the currency price reverse direction at this level. This is the first indicator in our forex trading strategy.
The stochastic is an indicator that determines the degree of increase or decrease for a given period. The higher the value, the more the currency price increases over the period. The lower the value, the less the price is going. If the price is continuously rising over the specified period, the stochastic will be high for a large period and this is called overbought. Te reverse is true and will result in oversold condition. If this indicator is more than 80 % for large period, we say this is overbought condition. Also if it is less than 20% t is oversold condition. This is the second indicator that will be used in our forex trading strategy.
The RSI is like the stochastic but uses different calculations. It can be used to determine the overbought and oversold conditions. It is also used to determine the price trend. If it is more than 50 % the price is going high and the reverse is true. This is a confirmation indicator in our forex trading strategy.
The forex trading strategy given uses the pivot point analysis and the stochastic as the main indicators. The trader must first check the stochastic indicator. If it is high for long time (especially more than 80%) then it is overbought condition. Similarly, if the stochastic is low for long time(less than 20 %), then it is oversold condition. The trader must expect a reverse in the price when those two conditions are seen.
Once overbought or oversold conditions are seen on the price curve, the trader can see the pivot level at which the price reaches. The more the level the price reaches, the more likely that the price will reverse. For example, if the price is overbought and we see that the price reaches the R3 level or a higher resistance level, then a very strong probability that the price at certain point will reverse. The price also at this condition will change very strong which will make many pips.
The entry point of the trade at this forex strategy can be determined by the RSI. When the price is overbought or oversold and reached the highest pivot level (or break out that level) the RSI can be monitored to determine when to enter a trade. If it is higher than 50 %, the price is going high. If it less than 50 %, the price is going low.
Forex Trading : Best Trading Strategy
One way to make desision when trading forex to buy or sell is to wait until the currency price goes very high for a certain period. the price will go high because there are too much demand on it with respect to the quote currency. when this is the case, the trader can sell it because the buying power will be reached and there will many sells for this currency. Simillary, the trader can wait for the price to go very short. when this is the case, it will mean that the traders are selling this price with respect to the quote currency and the selling power has been reached. then the trader will buy this currency very much because there are no remaining sellers exist. this concept represents our forex trading strategy The question now is how to determine the extreme points for the currency price on the graph. this will be monitored through techniqual indicators that can be drawn on the charts. the indicators that can be used are the pivot point analysis, the Stochastic, and the RSI. these indicators will be used for our forex trading strategy The trader can monitor at which pivot level the price has reached. if it goes at higher level, this can be assumed as extreme point for the price, the trader tehn must check the stochastic va;ue. if it is higher than 80 percent for long time, this will be indicator that the currency is overbought and the trader can go short. the currency will go short to much at this case. If the price goes to very low pivot level and the stochastic value is lower than 20 percent for long time, this will be indicator of oversold condition where the price will go high too much. the trader can buy then that currency. As a confirmation, the trader should exist an indicator called RSI. from the above indicators, the trader knows that there will be price reverse but cannot determine at which point he can buy or sell. this is because when the price is at overbought, it may continue to go high further for a short time and the trader cannot enter the trade once he see it in overbought. the same is true when the price is at oversold condition. To determine the entry point for the trade, the trader must check the RSI. if is is higher than 50 percent, he can enter the trade with buying the currency. this will be also when the stochasic is above than 20 percent. also the trader cam sell the currency when the RSI is lower than 50 percent and the stochastic is below 80 perent
