Sunday, 25 June 2017

How To Buy Low And Sell High Using Fibonacci Zone

One of the best technical tools that a forex  trader can use during a clear trend is the Fibonacci retracement tools.

Though many forex swing traders like this tools, they are however faced with  confusion as to what degree a retracement may extend.This is because a strong retracement may eventually become a major trend reversal while  weak retracements tend to fail most of the time.
The Fibonacci retracement level 38.2% may mean weak retracement while  61.8% level normally implies strong retracement. So, we need to shift ground alittle between both 38.2% and 61.8% to ensure equilibrium.

Fibonacci retracement level 50% becomes the central point of price retracement and it is more likely to hold  than the other ones. It is therefore very reasonable to use Fibonacci zone instead of a particular price because price tends to oscillate in a zone while negotiating a change of direction. 
In order to trade in a zone, we need to determine a real retracement zone first.

Therefore, it becomes logical for us to consider  the price movement and close of bar beyond Fibonacci retracement level 50% as overbought during a downtrend and oversold during an  uptrend. Also, we shall consider the space between Fibonacci retracement level  50% and 61.8% as the Fibonacci retracement zone.Now we know where the real retracement zone exists. A zone is more important than a single price level as it gives a clue of characteristic price range that contains general fluctuations. 

A strong uptrend is characterized by strong bullish breakouts above  swing highs. When such trend occurs, we will expect a reasonable retracement to extend into the zone between 50% and 61.8%. If price  falls into that zone, the next thing is to place a long order ( buy ) above the first bullish bar that closes above the zone. It means we are buying low in an uptrend.



The chart above is a typical example of the  buy signal  that this post presents. It is the kind of buy signals that one should anticipate when applying forex swing strategy  by using Fibonacci zone in an uptrend.

One can see how price rose and broke the swing high and then moved higher  to an appreciable height. That is the first requirement.Price must break a swing high and move strongly above it in the first place.The price then began to fall down in retracement of the strong bullish move and dived into the  fibo zone which is the space between Fibonacci retracement levels 50% and 61.8% .
The next effort is to prepare to buy once price falls into the fibonacci retracement zone during an uptrend.

The entry procedure is to buy above the first bullish candle that broke out up above the zone.
The stop loss can be set below the bullish candle. That is how to use this strategy. A good discipline will enhance the successful performance of this strategy.
 A strong downtrend is characterized by strong bearish breakouts below  swing lows. When such trend occurs, we will expect a reasonable retracement to extend into the zone between 50% and 61.8%. If price  rises into that zone, the next thing is to place a short order below the first bearish bar which closes below the zone.By this,you are buying low in an uptrend which is the way forward.


Thursday, 15 June 2017

The Best Forex Trading Session


The fact that the forex market opens 24 hours a day does not mean that it gives profitable trading signals throughout. Besides, the entire market is an integral entity of several markets from other parts of the world. Each country has her own operational market duration which is essentially bank hours.So, success in this business has a lot to do with perfect timing. It is crucial for a trader to know when to enter the market and when to either safely or profitably leave the market. Out of all the sessions that we have, only three are most profitable for trading currencies.

The three major forex market sessions are the Asian, the European,and the North American sessions.The currency pair that you trade should determine which session is good for you. Also, traders that love high volatility will enjoy the cross-over between European  and North American sessions. Huge momentum that sustains  the average direction of the market is usually released during this cross-overs or market overlapping periods. The Asian trading interval is also known as the Tokyo, the North American is regarded as the New York while we call the European the London session.

The Asian session runs from 11pm to 8am GMT. It is usually a quiet market which is very good for range traders. 7am to 4pm GMT is the operational time for the London session while New York session runs from 1pm to 10pm GMT. A careful look shows reveals that the first half of New York session overlaps with the last half of the London session. That could produce either a destructive or constructive interference on the pair traded. It is constructive when the same trend continues in both sessions. It is destructive when there is change of trend as the session changes.

Yen pairs are very good for trading during Tokyo period while EURUSD and GBPUSD are very active during the London and New York periods.Some of us that love EURUSD,GBPUSD and USDJPY will find London-New York cross over more valuable. Every trader needs to determine the period that is optimal for his /her style of trading. I am sure that you will succeed when you have good trading strategy and discipline.


Saturday, 10 June 2017

What is forex trading?


Forex simply stands for foreign exchange market. We can also call it currency market.Currencies are bought and sold in forex at market or preset prices. It has the reputation of being the largest market in the world.By comparism, forex market is by far bigger than the New York stock exchange on the balance of transactions. While the stock exchange market deals in billions of dollar, forex market involves trillions of dollar on daily transactions. Now the question is; what really is forex trading?


A good example that makes the definition of forex trading simple is that of a traveller leaving the city of London for Texas.He will have to exchange his local currency which is GBP for the currency of the country of his destination which is USD. Such exchange usually takes place in banks. By interpretation, we`ll say he has to sell GBP and buy USD.This is forex trading simplified.We can further say that forex trading involves pairs of currencies in which each pair consists of two currencies of two different countries.

The players in this market are banks and financial institutions all around the world.Other participants are the retail traders. These are individuals that speculate on the exchange rate of different national currencies. The simple ideology of trading is that traders buy the uptrend and sell the downtrend.A seller will make money when price falls more than the price at which he sells while  a buyer registers profit when price rises higher than the price at which he buys.


 So many trading strategies have been designed to make the art of trading forex very simple and profitable. A forex trader only needs to learn the simple methodology of trading sensibly and commit himself to the demands of success which is discipline. This is what forex business is all about.


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The way of the successful forex traders

Forex trading is a beautiful career and it can be the ultimate business for anyone who is willing and ready to pay the price.Now the price is not too expensive that only very few can afford it.It is only a matter of attitude.Attitude is everything in forex trading.A forex trader must have a good trading system and also possess the ability to execute it satisfactorily.This faithful execution of the trading plan is what we call discipline.

You cannot be more successful  than you are disciplined.Many forex traders spend most of their time, effort and money in search of a perfect trading system.Hmm, there is nothing wrong in looking for such, only that there is something else that deserves that kind of pursuits.It is called "discipline." Discipline is what differentiates the successful traders from the unsuccessful ones. It is the only quality that a trader can develop perfectly.


Two traders may use the same strategies simultaneously and come up with opposite results.One may be successful and the other unsuccessful.The reason is that no matter how excellent a trading system may appear, its performance is directly proportional to the level of discipline of the trader involved.For example, a strategy may stipulates the entry price as well as stop loss and take profit for buy and sell orders.It takes a disciplined trader to allow a trading system to run its course as designed.





In conclusion, disciplined traders will succeed, it will only take time.Also, undisciplined traders will fail woefully, it will only take time as well.It is therefore important that every forex trader works more on their attitude than they do on their trading strategies.



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Monday, 22 May 2017

How to trade forex support and resistance

Currency price is  continuously on the move and its speed at one time may vary from another time. The movement of price is roughly sinusoidal on  charts. As such, the chart is normally  characterised with maximum series of turning points called resistance levels and minimum turning points called support levels.

Support  is the low price at which currency price temporarily stops going lower and momentarily reverses from downward direction to the upward.

Resistance on the other hand is the high price at which a currency price stops going higher and starts going down.

The general direction of the forex market price is about net force of attraction or repulsion generated around  support  and  resistance levels. Traders expect any significant support to repel bearish tendency in an uptrend. Similarly, they expect a resistance to repel bullish tendency in a downtrend.
Careful observations have shown that prices are reluctant to break major support but are eager to break resistance during an uptrend. The converse of the statement is also true.

The diagram below clearly shows typical price support and resistance levels.There are various kinds of support and resistance which include Fibonacci levels, moving average support and resistance, horizontal support and resistance as well as trendline support and resistance.The ones that we will look into and apply today are horizontal support and resistance levels.

Horizontal support and resistance levels are the clearest price level on a chart as it can be drawn through swing lows or swing highs or just candle`s highs or lows.
It depends on the scenario and the time scale of choice. The basic rule is that when price breaks a support level, it automatically becomes a resistance level and when price breaks a resistance level, it automatically becomes a support level.When a resistance is broken by price, we have what we call a "resistance-turned-support".



The two  swing lows  above present a strong price support levels that the price  finds hard to break. Conservative traders believe that when price successfully breaks below this kind of support that the market will experience a significant fall for a good amount of time which could run for hours por days or weeks.
 Generally, price can either break down  a support and fall through it tradeably. Occasionaly, it may also fail to break through the support upon one attempt or two and bounces up further.This is obvious from the blue candle above which slightly bounced of the support  and moved back up.

The evergreen rule of thumb is that the frequency of bounce from a particular price level is a measure of the strength of that level. Hence, it implies that a bounce off support makes the support stronger and a future break  of such level leads to huge momentum.
Furthermore, if a bounce from a support does not produce enough rally (upward movement) then a major breakout below the support is looming.



As shown above, a major breakout occured which went far below the support that has been existing for some days.
As seen, neither of the bounces above produced any significant bullish breakout. Hence, the huge bearish breakout happened eventually as expected.
 The red arrow above labels the high of a blue candle. Coincidentally, the arrow also labels the turning point which we call a "swing high or price resistance level".
A smooth horizontal line drawn through  a swing high will clearly show the  resistance line on the chart.
The chart above also shows how price later formed a swing low after the swing high.It can be seen that price is now moving up from the recent swing low and heading towards the  resistance
(swing high) again.
Whenever this kind of formation occurs, some traders  expect price to  break the swing high and move up above it  while some anticipate that price will bounce off away from the swing high and return downwards significantly like a tennis ball hitting a ceiling.
The chart above shows that the bulls (buyers) are in charge as the price broke down the resistance and went further up.It means no show for the bears at that time.

A practical example:
Price bounces off an old support now turned resistance:
Our effort is to determine how to use the explanation above in our day to day forex trading.

 The  EURUSD daily  chart above shows that price is moving below the current support red line and also below the most recent resistance blue line.Remember that any broken support automatically becomes resistance. Hence, the red line has now become resistance to any upward tendency of price.
The upthrust made by price enabled it only to kiss  the red line. It only kissed it and bounced off back to the down side.Price action traders strategically place preset sell orders about 10 pips below the red line with the expectation of it falling to atleast about 50 percent of the distance between the red line  and the newest support formed on 2016/10/25 at 1.0850.It is normal to ensure that  stop loss is atleast half of  take profit.
You may please forward your question or leave a comment. I am the author of this blog. I can write for you on your forex blog too for a token.

Trade sensibly!
Oyewole Olatunbosun



 

How to use fibonacci retracement to enter trade during uptrend

We need to make it clear to forex traders, especially the new ones, that Fibonacci tool functions per excellence in a trending market.
Traders go long at the support in an uptrend and go short at the resistance in a downtrend.The Fibonacci retracement levels also indicate the significant support levels in an uptrend and show resistance in a downtrend.Therefore, traders need to know how to draw this tool correctly on an MT4 chart.

Bearish retracement is expected to occur in an uptrend.And the Fibonacci tools can be used to gauge the extent of such retracements.
This particular post is written to explain how to draw and use the tool in spotting support levels during bearish retracement of an uptrend. Major retracement levels are levels 38.2%  and 61.8%. These two numbers indicate  the most important value areas during retracement. Market tends not to retrace more than 38.2% during a very strong trend.However, most retracements get to level 61.8%.
We know that fibo 38.2%  and 61.8% are not perfect levels and we equally know that  there is no perfect tool in the market. However, we can say it again and again that the majority of traders do watch these two golden numbers.That is why they work! Remember that trend also means  the direction of transactions of the majority.

One needs to determine the recent swing high and swing low before drawing the tool.During uptrend, Fibonacci retracement is drawn by
-Pick the Fibonacci retracement tool and
- Drag from from swing low, then
-Drop it on the swing low.
By doing these we will have the 100% on the swing low and the 0% on the swing high.This is because we can only have bearish retracements in uptrends.So, we consider the swing high as the origin of the bearish retracement (0 % ) and and swing low as the ultimate end of the retracement (100%).
The chart below shows fibo retracement 38.2% in action.



When traders apply fibonacci retracement tool to the  chart  like the one above,they expect that the fibo 38.2% is support level that is highly likely to halt the fall and usher in another rise in price.

Fibonacci retracement is drawn by picking the Fibonacci retracement tool and dragging it from swing low to swing high and then drop, we have the level 0.0%  placed on the recent swing high and level 100.0%  placed on the recent swing low. A trader therefore reads that the price has retraced the level 38.2%.

 It is widely accepted among traders that levels 38.2%  and 61.8%  are the most important retracement levels.The sellers will be closing their positions in profit around these levels or atleast protect them. Also, buyers will be watching out for price actions around this level to know when exactly to join the upward price movement.

The forces that move the market do not exist in a vacuum.The market is 100%  psychological and psychology is a vector quantity which means that it has  direction and size.People look for reasons to buy or sell a given pair at a particular time.This is what we call either technical or fundamental  analysis.This psychological nature of the  market is what empowers technical indicators to work. Therefore, any form of analysis that is used by the majority will dictate the net market direction.The market moves in the direction of the net market force which in turn comes from the majority. A conservative use of popular  technical indicators is what enables traders to make the same analysis of the market as the majority at any time. One of such most used technical indicators is Fibonacci tools. This tool has been discovered for over a century and they still work like fire.

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Sunday, 14 May 2017

How to trade forex support and resistance breakout

Market prices are always on the move in the market and what drive them are demands and supplies.
The high price from where price tends to go down is called resistance while the low price from where price tends to rise is called support.

Price action traders build their trading strategies around support and resistance levels.Most of them are able to trade creatively and successfully even by using naked charts.

Naked Chart Trading Strategy is simple to understand, powerful in action and reliable in returns.
It is the practice of trading without using the numerous technical indicators that abound on MT4 platform. This method is considered necessary due to the complex and lagging nature of the technical indicators.

Typical support and resistance are significant horizontal price levels.Such level is the clearest line on the chart which shows most significant value areas and it is drawn through the swing highs or swing lows on any time frame of any currency pair.

 The chart above shows a red horizontal line drawn through a swing high.The turning point where a rising price reverses and starts falling  is called "swing high." Every swing  high will remain a resistance until it is broken. A resistance becomes support once it is broken.
Resistance is a point at or around which bullish momentum ceases and bearish momentum springs up.

 The  diagram above  is EURUSD hourly chart. It shows that price was moving slowly and sideway below the resistance (red) line and later gained upward momentum which facilitated the collapse of the resistance.The resistance was tested and broken by price.The price broke through and rose strongly above the the purple swing high (the red circle indicates the breakout point). Historically,this move came in resonance with the activities surrounding the US presidential election in 2016.
It rose to as high as 1.1299.This is about 155 pips in few hours.

The support and resistance breakout strategey is a technique which works well and it upholds that traders are to buy above the swing high and set take profit at the next higher swing high.

The EURUSD chart above shows where I bought the pair and fixed my take profit level when I was using the breakout strategy.
In the event that you are new to forex trading and you wish that more light is shed on this post, please do not hesitate to send your email to me.


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