How to pick tops and bottoms on forex market using technical analysis

September 7, 2010 by  
Filed under Forex Trading

A discussion of what to be aware of, when choosing a trend following strategy on forex market, or if you try to locate tops and bottoms. Technical analysis should be applied in conjunction with fundamentals no matter what. Do not try to pick tops and bottoms if you are not ready to let your profits run.
A favorite Forex trading saying is “the trend is your friend”. In other words, if you trade with the trend then you have more chances of selecting winning trades. The idea is logic in that you “go with the crowd”. However, a very popular forex trading strategy involves “picking bottoms and tops”. This trading method normally involves using a forex technical indicator to determine trend reversals. More specifically, traders are searching for positive signs that either a bull buying channel is about to top or that a bear selling channel is about to bottom. The idea of pursuing such a strategy seems obvious in that the sooner you can pinpoint such an event, the more profit you can make following the reversal. However, top and bottom picking does seem like a dangerous practice on the surface because you are about to pit your skills against the entire forex market which is moving in the opposite direction; this is often referred to a “trying to catch a falling knife” in the sense that you are likely to cut yourself.  
Most traders consider that a forex market trend is a predictable price response defined by bull buying or bear selling channels which can exist for some time. A new forex market trend is quite often born when the forex market price breaks through either a support or resistance level and reaches new lows or new highs respectively.  
When you attempt to detect the top or bottom of a trend you are embarking on a complex and quite dangerous exercise, since you are about to trade in the opposite direction of the market. However, many traders still attempt to master this technique because the rewards can be so great. In other words, many traders are prepared to accept the high risks associated with ‘picking tops and bottoms’ because of the tremendous rewards that are potentially available. The mental attraction is that if they can detect a top, for instance, then they can ride the selling channel down and so achieve a considerable profit.  
However, if you are going to accept such trades with a high level of risks then you must perform this strategy correctly. Obviously I am not talking about “risk” in the sense of money management, but more so, that the trend is more likely to continue than to reverse. This implies that you should apply appropriate money management. So when you attempt to locate a top or bottom, you will engage a large risk factor as you are about to trade against the entire market. Hence you must be skilled in detecting a possible reversal, and manage your risk: reward accordingly.  
As a result, fear often arises which can produce significant negative psychological effects that cause you to snatch at quick profits e. g. 50 to 100 pips after entering a trade once a possible top or bottom has been formed. The reason for this action is that knowing that you are swimming against the tide makes you fear that the market will suddenly reverse back towards its original direction. However, this is a bad trading practice, especially over the long haul, because you would be subjecting yourself to intense risk without letting your profits run when there is a good chance to ride the trade for a long time.
So, in order to be successful with this technique, you must commit yourself completely to its inherent concepts. As such, you must be prepared to steel yourself and let your profits run (risk free, if possible) until the channel shows signs of exhaustion. By doing this, your trading strategy will enjoy a good risk: reward ratio over the long haul which it would not do if you continuously snatched at small profits.  
You will soon realize that you can only develop profitable forex trading strategies through your own hard work which will undoubtedly include the study of other people’s forex experiences.  
 In a broad sense, the forex market tracks the stock market, which in turn, responds to global economic movements. When the Dow Jones Index rises, the EURO and GBP tend to rise whilst the USD and the YEN tend to fall. Conversely, when the Dow Jones Index falls, the USD and YEN rise whilst the EURO and GBP fall. As you undoubtedly know, the stock market tends to fall in response to “bad news” whilst it tends to rise on “good news”. Forex trading analysis is used in order to design forex trading systems and consists basically of two elements which are forex fundamental trading analysis and technical analysis. Ideally, both should be used in combination to grasp a better understanding of the forex market, and possible trades. Monitor the trade for possible reversals and exit points using both forex technical and fundamental analysis.  
In summary, forex technical analysis involves examining currency prices over a period of time to try and identify forex trends and their potential reversals by detecting tops and bottoms. For example, if the value of a particular currency has been steadily increasing over a period of several weeks, then it is likely that the trend will continue in the future, at least for the short term. If you can correctly identify a trend, and trade in the same direction you are likely to make profitable trades. Also, the earlier you can identify a trend‘s reversal, the more chance you have of making larger profits.  

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Currency Trading Method – The Best Strategy to Use For Triple Digit Gains Quickly!

August 22, 2010 by  
Filed under Currency

Here we will outline a simple currency trading method which makes big gains and will get you in on all the best trends and profits. Most traders don’t use this strategy but don’t let that worry you, most traders lose – let’s look at our proven method for success. Most Forex traders believe the way to make money in the Forex market is to “buy low and sell high” but the problem is it doesn’t work. If you want to try and buy an exact low, you are going to have to predict it and this is really just a guess, traders who try this method, soon lose. The way to really make money in currency trading is to “buy high and sell higher” by buying important breaks of resistance and if you look at ANY Forex trend you will see why. . . If you look at the big trends they start by breaking out to new highs and as the trend continues, they keep breaking resistance so the way to win at Forex trading is to not bother trying to predict when prices might trend and simply, wait for confirmation. If you have a resistance level which has been tested several times or more and traders feel it’s important, chances are when it breaks you will have a high odds trading signal. You miss the start of the move but your not worried about that, you can’t predict it anyway but if the break is a good one, it will continue and you will be in on a big trend with leverage on your side and that means a lot of profit. Most of the world’s top traders base their trading strategy on breakouts and it’s obvious why, it works and makes a lot of money. The losing trader tried to predict and never gets in on the really big trends and profits, because he is obsessed with getting in right at the turn – that’s not possible of course but it doesn’t matter, because if you buy important breakouts you can make huge gains. In breakout trading the more times a level has been tested the better it is likely to be in terms of generating a high odds trading signal when it eventually breaks – look for 6 – 10 tests or even more and this will get the odds on your side. Use breakouts in your trading strategy and you could be on the way to a triple digit income, in 30 minutes a day or even less.

Free Forex Trading Strategy

August 20, 2010 by  
Filed under Currency

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.

Edward Youssef is an electrical engineer and he is the owner-made-easy tips. He studied information site too Forex Trading. Read more about this strategy Songs Forex Trading. Discover also the Best Forex Trading Strategy

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