Thursday, 15 June 2017

Know The Best Time To Trade Currency Pairs


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 embodiment 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 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. 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.Since I am a trader that loves EURUSD,GBPUSD and USDJPY, My favourite time of trading is London-New York cross over. You should determine the period that is optimal form your styles, and you will succeed when you have good strategy and discipline.


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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 moves almost sinusoidally on a chart. As such, the chart is characterised with maximum series of turning points called resistance levels and minimum turning points called support.
Support simply implies low price at which currency price stops going lower and reverses 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 prices is about net force of attraction or repulsion generated around a support  and  resistance levels.

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 one that we will look into and apply today is horizontal support and resistance.

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.That is a resistance-turned-support.



The two  swing lows  above present a strong price support levels that the price is now find hard to break.. Conservatively speaking, any break below this support will introduce heavy momentum and is highly likely to give sellers nice pips in return. Generally, price can either break through a support and fall below it or fail to break through it 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.
It is conservative that a bounce off support makes the support stronger and a future break  of such level leads to huge momentum.However, if such bounce does not produce enough rally 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 expected, this was a significant move which gave rise to  huge momentum. The fall actually gave about 270 pips to the sellers that sold at the right time.That is the power of horizontal supports and how they are traded.
 The turning point labelled with an arrow pointing down above is a swing high or price resistance level on a EURUSD daily chart. A smooth horizontal line drawn through it clearly shows the resistance line through the chart.We can see another swing low  formed after price fell from the resistance and how price is now rising up towards the resistance (swing high).Whenever this kind of formation occurs, traders usually expect price to either breakout above the resistance or bounce off away from it like a tennis ball hitting a ceiling. It either breaks the ceiling and go further up or bounces off the ceiling and fall back down.
The chart above shows that the bulls (buyers) are in charge as the price broke down the resistance and went further up.

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.

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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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Saturday, 13 May 2017

How to use 50 and 200 EMA

Moving averages are indicators widely used by forex traders.Although there is no optimum parameter for any technical indicators such as moving averages, yet experience has proved that 50 and 200 are reliable and good settings that can be used to identify the general market direction.It is also to the best of my knowledge that professional traders pay careful attention to price action and reaction around the 50 EMA and 200 EMA.The next question is, how do senior traders apply these moving averages?

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The market movers (experts and large fund managers) do use 50EMA and 200EMA to filter noise and determine trend direction.Noise occurs when there is no clear-cut direction in the market.This is usually a sideway or ranging market scenario. Trend traders tend to stay out of this kind of situation and so they need to know when buyers are leading or when they are lagging or when the buyers and sellers are in phase.This is where the moving average plays a pivotal role.It is generally accepted among traders that when the 50 EMA is moving above the 200 EMA and the market price is moving above the 50EMA, then we have an uptrend.So traders should wait for the bearish retracement towards a value area which is the best level to buy the pair.


The  daily chart above shows that the blue moving average which  is the 50EMA is moving above  the red  moving average which  is the 200EMA. Also, the blue  candle is moving above the blue moving average.This means the pair is in an uptrend.

Similarly, when the 50 EMA is moving below the 200EMA and the market price is moving below the 50EMA, then we have a downtrend.So traders should wait for the best bullish retracement level to sell the pair.





The EURUSD daily chart above shows that the blue moving average which  is the 50EMA is moving below  the red  moving average which  is the 200EMA. Also, the red  candle is moving below the blue moving average.This means the pair is in a downtrend.It is a safe practice to sell high in a confirmed downtrend.So, we need a bullish retracement in a downtrend to open a short position.

It is not enough to know the trend, in order to trade sensibly, we need to know where it is safe and profitable for us to join the trend even though we know that the trend is our friend.The simple rule is to "buy low and sell high and sell high and buy low."
To do this we need to switch to lower time frames like 4 hour and check what is happening.When 50 and 200 EMA indicates uptrend on daily chart, we will switch our chart down to 4hour time frame and wait for the 50 and 200 EMA to indicate downtrend.This means that we have a downtrend on 4 hour and uptrend on daily chart.The  downtrend on the 4 hour chart is  the bearish retracement of the bullish move on daily. We need patience to wait until  we have confluence on the 4hour time frame. That is , we need to wait for the expiration of the bearish move on 4 hour and grab any logical selling opportunity that occurs at the break above either 50 EMA or 200 EMA on 4hour time scale.
Then we will buy just above the 50 EMA or 200 EMA with  our take profit on the next resistance on daily time frame.

The chart above shows that USDCHF is just bullish on daily chart.It is bullish because the price is moving above the blue and the blue is moving above the red moving average. By interpretation of the relative movement of price with respect to the moving averages, we say the trend is up.Hence the daily trend is up.The next effort is to determine where to join the trend using the 4 hour chart.




The chart above is USDCHF 4hour chart in which the trend was down and now bullish. Now we have a confluence on daily and 4hour charts.The decision is to buy on 4hour as the blue candle rises above the red moving average and place take profit at 0.9997 which is the next resistance on daily chart. Our stop loss should not exceed half of our take profit and a good trailing stop like 80 pips should be applied.

Another good example is the signal from the EURUSD daily chart below, we know that the prevailing trend is down.
Switching down to the 4hour chart we have the chart below:
 
The chart above is EURUSD 4hour chart in which the trend was up and now bearish. So the two charts (daily and 4hour) are indicating downtrend.Thus we have a confluence on daily and 4hour charts.The decision is to sell on 4hour as the red candle falls below the red moving average and place take profit at  the next support on daily chart. 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.