The Zurich Axioms – If You Want To Get Rich at FX Trading Learn Them!

The Zurich Axioms by Max Gunther are not just applicable to forex trading there for any speculator who wants to make big gains. This book is simply one of the best ever written on making money lets look at it in more detail.Max Gunther states some interesting facts about Switzerland that will make you think and set the tone of the book.“Consider the puzzle of Switzerland. This ancestral home of mine is a rocky little place about half the size of Maine. It has not one inch of seacoast. It is one of the most mineral-poor lands on earth. It possesses not a drop of oil to call its own, barely a bucket of coal. As for farming, its climate and topography are inhospitable to just about everything.Yet the Swiss are among the most affluent people in the world. How do the Swiss do it”?Quite simply over the years Switzerland has produced some of the world's cleverest investors, speculators, and gamblers and the book will help you get into the mindset of these traders. The traders who wrote the Axioms got rich following them so here are 12 to boost not just your FX profits but profits in anything you speculate in.1. “Worry is not a sickness but a sign of health. If you are not worried, you are not risking enough”.Today in investing its fashionable to keep risk small but fact is most investors try so hard to restrict risk they actually create it – if you don’t take calculated risks you won’t win and if you don’t risk enough you won’t win big.2. "Always take your profit too soon".Always get out to soon the bulk of traders simply stay in to long let the risk reward go against them and give back their profits.3. "When the ship starts to sink, don't pray. Jump".When your wrong – that’s it get out and don’t come back. 4. "Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly".One of my favorites and true. Today people will tell you they can predict the future and in FX trading it will cost you a few hundred dollars – get real. Markets are not scientific and cannot be predicted in advance. 5. "Chaos is not dangerous until it begins to look orderly"Markets are chaotic by nature as humans are involved if they look to easy or orderly get worried there could be a big change on the cards. 6. "Avoid putting down roots. They impede motion".Don’t see the currency see the opportunity and this changes all the time don’t fall in love with one pair when there is a better opportunity elsewhere. 7. "A hunch can be trusted if it can be explained."Keep your emotions out of trading if you fall victim to them you will trade on hope rather than reality 8. "It is unlikely that God's plan for the universe includes making you rich".No one can make you rich not even god! And neither can anyone else – its all up to you to take charge of your destiny no blaming your broker, the news or the guy you bought an e-book from. Take responsibility for your actions.9 "Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic".If you are not confident about what you do and stick with your plan through the bad times and stay in the game you will lose. Confidence comes from self knowledge of who you are and what you are doing and you need it to succeed. 10 "Disregard the majority opinion. It is probably wrong"Of course it is - as the bulk of traders lose but how many traders try and follow news stories or opinions and don’t come to their own conclusions? The vast majority don’t join them.11 "If it doesn't pay off the first time, forget it"Don’t indulge in revenge trading or continuing with a system that’s plainly not working. Perseverance is great but only if the logic is soundly based. 12. "Long-range plans engender the dangerous belief that the future is under control. It is important never to take your own long-range plans, or other people's, seriously"How many times have I seen traders make neat plans 2 years forward about how they are going to compound up to a huge sum? Loads of times but the markets don’t see it that way. There in a constant state of flux like the world we live in and you need to take each small step as it comes. The book has much to enjoy but what I like about it is that it tells you to things that most guru’s or writers frown upon but the guys who devised these Axioms got rich – its not a book on theory it’s a book on mindset and if you want to bet and you want to win in anything (including forex) get this book and read it and make it an essential part of your forex education. FREE! TRADER PDF'S NEWSLETTERS & PRO FOREX TRADER COURSE!Get newsletters, systems and some critical FREE FOREX Trading PDF's to give you the facts on how to become a professional trader and get more great forex info at: http://www.learncurrencytradingonline.com/index.html

What is Forex trading system?

Forex trading systems are very popular as a method of investing money to make more money. Forex trading is all about putting your money into another currency for long or short term to earn more money. Many forex trading systems are based on how a stock exchange works. What you will find is that a forex trading system will permit you to invest at your currency rate, have your currency changed to another currency and then invest in a company that is foreign to your own country. A forex trading system is built upon worldwide investors, and worldwide companies, as well as world wide currencies.

A forex trading system online
A forex trading system online will give you the same results as a forex trading system offline, but you can access and see your money faster. You can invest, move, trade, and remove your money faster online with a forex trading system than you can offline, while you wait for paperwork to be completed. Forex systems are going to build wealth for investors who are willing to take the time to learn about their investments, and who are going to trust their brokers to make additional decisions.

What type of forex trading system or broker should you trust?
As with any investment company or trading system, you want to be able to trust who you are dealing with. If you can't reach the forex trading system representative when you want by phone, by fax, in person, or even by email you are working with the wrong company. A company that uses forex trading systems and gives you opportunities to world wide investments should be able to communicate with you during various times of the business day.

In addition, you want to work and invest with a forex trading system company that will put your money first, that will listen to what you want to do, and how you want to do it. Forex trading companies that are calling you all the time, that give you very little room to make decisions and that are considered to be pushy in your mind, is the forex trading systems company you should avoid doing further business with. Any investment company should realize you, as the consumer and end user for any trading system, should be able to take your time and learn about any investment before making that investment.

If a forex trading system representative calls you and asks for large sums of money, that you need to get involved in this action right now, you should be suspicious. Any broker or forex trading consultant should give you time, and their best information, not demands on your time and money. Search for a forex trading system you are comfortable with before investing money.


Kenneth Langlet is an independent writer and owner of the website http://www.broker-trading-system.com/ where you can get more information about forex trading system.

Forex Trading Software

If you are looking to get started trading the Forex, you will find that there are numerous software programs available (both web based and desktop based) for you to use in your trading. In fact, most brokers offer clients a software package for free or as part of their trading account. Usually the software that comes with your trading account is a very basic "bare bones" model. Sometimes, more features are available for a price. The software packages your broker provides can be an important consideration in choosing a broker. You may want to download and try some different packages using a demo account. This will give you a better idea of which software package you find most suitable to your unique style of trading.

Forex trading software comes in two basic flavors - desktop software, and web based software. Which one you choose to work with depends on your preference and other more technical factors. Obviously, the Forex market is very dynamic and you need to have the most reliable up to date connection to the data as possible. Your internet connection speed is a factor here, and if you can afford it, you really should be connecting via broadband.

Your internet connection speed is just one of the factors you should consider when selecting forex trading software. The biggest consideration should be one of security.

Generally speaking, web based forex software is more secure than a desktop based software package. Why is that? Well, with a desktop software, your information and data is stored on your hard drive thus making it vulnerable to numerous security issues. If your computer became infected by a virus, your personal data and the integrity of your trading system can become compromised. Likewise, in the event of hard drive failure, your important data can be lost. Then there is the threat of prying eyes accessing your trading systems.

Luckily, if you choose to go with a desktop based software for your forex trading, you can do some things to limit the risks. For starters, a dedicated computer just for trading the forex would be a wise investment. Due to the popularity of forex trading, there are computers made specifically with a forex traders needs in mind. Even if you cant afford a dedicated machine, you should still apply the following tips to your trading computer:

* Password protect your trading software and personal data
* Make regular backups of your trading data
* Use a anti virus program and keep it up to date
* Update your trading software regularly

If you choose to go with a web based trading software, allot of the security and maintenance issues are handled by the provider. Online based forex systems are hosted on secure servers, the same type of servers credit card processing is handled on. This gives you a great deal of protection, as your data is encrypted. Also, backups and mirrors of your account data are made by your software provider to protect you from data loss.

Aside from the security considerations, you may find that an online based trading software is simply more convenient. There is no software to download as the software runs in your regular web browser. This means that you always will have access to the latest versions and features. Also, if you travel you will certainly appreciate the ability to log in and trade from any computer with an internet connection.

As you can see, there are many options in forex trading software. You ultimately should choose to work with the software that you personally find easiest and most intuitive to use.

About The Author:

For more information on Forex software and Forex trading systems, visit: http://www.forexpolis.com

The Benefits of Trading The Forex Market

Historically, the FX market was available most to major banks, multinational corporations and other participants who traded in large transaction sizes and volumes. Small-scale traders including individuals like you and I, had little access to this market for such a long time. Now with the advent of the Internet and technology, FX trading is becoming an increasingly popular investment alternative for the general public.

The benefits of trading the currency market:

1. It is open 24-hours and it closes only on the weekends;
   
2. It is very liquid and efficient;
   
3. It is very volatile;
   
4. It has very low transaction costs;
   
5. You can use a high level of leverage (borrowed money) with ease; and
   
6. You can profit from a bull or a bear market.
   

Continuous, 24-Hour Trading

The currency exchange is a 24-hour market. You may decide to trade after you come home from work. Regardless of what time-frame you want to trade at whatever time of the day, there would be enough buyers and sellers to take the other side of your trade. This feature of the market gives you enough flexibility to manage your trading around your daily routine.

Liquidity And Efficiency

When there are a lot of buyers and a lot of sellers, you can expect to buy or sell at a price that is very close to the last market price. The currency market is the most liquid market in the world. Trading volume in the currency markets can be between 50 and 100 times larger than the New York Stock Exchange (Source: Oanda.)

When you are trading stocks, you may have experienced events where one piece of news accelerates or decelerates the price of the underlying stock you may have bought into. Perhaps a director has been kicked out by the shareholders of a company or the company has just released a new product and big investors are buying the shares of a particular company. Share prices can be drastically affected by the actions or inactions of one or a few individuals. So if you are relying on television reports and newspapers to get your news, most of the opportunities or warnings will have come too late for you to take advantage by the time you get them.

The value of currencies on the other hand is affected by so many factors and so many participants that the likelihood of any one individual or group of individuals drastically affecting the value of a currency is minute. Because of its sheer size, the currency market is hard to manipulate. The ability for people to engage in 'insider trading' is virtually eliminated. As an average trader, you are less disadvantaged. You are likely to be playing on relatively equal ground along with all the other traders and investors whom you are competing against.

Note about price gaps:

For those people who have already traded other markets, you probably know about price 'gaps'. 'Gaps' occur when prices 'jump' from one price level to another without having taken any incremental steps to get there. For example, you may be trading a share that closes at $10 at the end of today but due to some event that happens overnight; it opens tomorrow at $5 and continues to go downwards for the rest of the day.

Gaps bring about another degree of uncertainty that may meddle with a trader's strategy. Probably one of the most worrying aspects of this is when a trader uses stop-losses. In this case, if a trader puts a stop-loss at $7 because he no longer wants to be in a trade if the share price hits $7, his trade will remain open overnight and the trader wakes up tomorrow with a loss bigger than he may have been prepared for.

After looking at a couple of forex charts, you will realize that there are little price 'gaps' or none at all, especially on the longer-term charts like the 3-hour, 4-hour or the daily charts.

Volatility

Trading opportunities exist when prices fluctuate. If you buy a share for $2 and it stays there, there is no opportunity to make a profit. The magnitude of level of this fluctuation and its frequency is referred to as volatility. As a trader, it is volatility that you profit from. Large volume transactions and high liquidity combined with fewer trading instruments generate greater intra-day volatility in the currency market that can be exploited by day-traders. The high volatility of the currency market indicates that a trader can potentially earn 5 times more money from currency trading than trading the most liquid shares.

Volatility is a measure of maximum return that a trader can generate with perfect foresight. Volatility for the most liquid stocks are between 60 to 100. Volatility for currency trading is 500. (Source: Oanda.)

In this respect, currencies make a better trading vehicle for day-traders than the equity markets.

Low Transaction Costs

A currency transaction typically incurs no commission or transaction fees. For a forex trader, the spread is the only cost he or she needs to cover in taking on a position. In addition, because of the currency market's efficiency, there is little or no 'slippage' costs.

'Slippage' is the cost involved when traders enter the market at a price worse than the level they wanted to get into. For example, a trader wants to buy a share at $2.00 but by the time, the order gets executed, his gets to buy the shares at $2.50. That fifty cents difference is his slippage cost. Slippage cost affects large-volume traders a lot. When they buy large quantities of a commodity, it oversupplies the market with buy orders. This applies a pressure for the price to go up. By the time they get to buy all the quantities they wanted, the average price they got their commodities would be higher than the price they intended to get them for. Conversely, when they sell large quantities of a commodity, they oversupply the market with sell orders. This applies a pressure for the price to go down. By the time they finish selling all their commodities, their average selling price is less than what they initially intended to sell them for.

Due to lower transaction costs, minimum slippage and strong intra-day volatility, individuals can trade frequently at small costs. As an approximate, you may only expect to have a spread of 0.03% of your position size. To give you an example, you can buy and sell 10,000 US Dollars and this will only incur a 3-point spread, equivalent to $3.

Leverage

There are not a lot of banks or people who would lend you money so that you can use it to trade shares. And if there are, it would be very hard for you to convince them to invest in you and in your idea that a certain share is going to go up or down. Therefore, most of the time, if you have a $10,000 account, you can only really afford to buy $10,000 worth of stocks.

In currency trading however, because you use 'borrowed money', you can trade $10,000 of a currency and you only need anywhere between fifty (For a margin lending ratio of 200:1) to two hundred dollars ( For a margin lending ratio of 50:1) in your trading account. This makes it possible for an average trader with a small trading account, under $10,000 to be able to profit sufficiently from the movements of the currency exchange rates. This concept is explained further in The Part-Time Currency Trader.

Profit From A Bull And Bear Market

When you are trading shares, you can only profit when the price of a stock goes up. When you suspect that it is about to go down or that it is just going to be moving sideways, then the only thing you can do is sell your shares and stand aside. One of the frustrations of trading shares is that an individual cannot profit when prices are going down. In the currency market, it is easy for you to trade a currency downward so that you can profit when you think it is going to lose value. This is easy to do because currency trading simply involves buying one currency and selling another, there is no structural bias that makes it difficult to trade 'downwards'. This is why the currency market has been occasionally referred to as the eternal bull market.

This is an excerpt, modified from the book: The Part-Time Currency Trader.

- END OF ARTICLE -

Please include the paragraph below if you are republishing this article online or in print.

About The Author:

Marquez Comelab is the author of the book: The Part-Time Currency Trader . It is a guide for working men and women interested in trading currencies in the forex market. It explains everything you need to know to create your own trading methodology; touching on the basics and preparation before expanding onto the topics of market analysis, tools, trading systems, risk management strategies, discipline and psychology. See: http://www.marquezcomelab.com . His other articles can also be found at http://www.thefreedomtochoose.com ; along with other helpful trading, business, investing and self-improvement articles.

How To Read Forex Charts: 5 Things You Must Know

Learning the basic skills in forex, such as how to read forex charts, is really important.

This is because once you have this vital skill under your belt, it will be a lot easier and quicker when the time comes for you to learn and practice an actual forex trading system.

By the time you finish this article, you'll learn how to read forex charts, as well as know the pitfalls that can occur when reading them, especially if you haven't traded forex before.

Firstly, let's revise the basics of a forex trading as this relates directly to how to reade forex charts.

Each currency pair is always quoted in the same way. For example, the EURUSD currency pair is always as EURUSD, with the EUR being the base currency, and the USD being the terms currency, not the other way round with the USD first. Therefore if the chart of the EURUSD shows that the current price is fluctuating around 1.2155, this means that 1 EURO will buy around 1.2155 US dollars.

And your trade size (face value) is the amount of base currency that you're trading. In this example, if you want to buy 100 000 EURUSD, you're buying 100 000 EUROs.

Now let's have a look at the 5 important steps on how to read a forex chart:

1. If you buy the currency pair, that is, you're long the position, realise that you're looking for the chart of that currency pair to go up, to make a profit on the trade. That is, you want the base currency to strengthen against the terms currency.

On the other hand if you sell the currency pair to short the position, then you're looking for the chart of that currency pair to go down, to make a profit. That is, you want the base currency to weaken against the terms currency.

Pretty simple so far.

2. Always check the time frame displayed. Many trading systems will use multiple time frames to determine the entry of a trade. For example, a system may use a 4 hour and a 30 minute chart to determine the overall trend of the currency pair by using indicators such as MACD, momentum, or support and resistance lines, and then a 5 minute chart to look for a rise from a temporary dip to determine the actual entry.

So ensure that the chart you're looking at has the correct time frame for your analysis. The best way to do this is to set up your charts with the correct time frames and indicators on them for the system you're trading, and to save and reuse this layout.

3. On most forex charts, it is the BID price rather than the ask price that's displayed on the chart. Remember that a price is always quoted with a bid and an ask (or offer). For example, the current price of EURUSD may be 1.2055 bid and 1.2058 ask (or offer). When you buy, you buy at the ask, which is the higher of the 2 prices in the spread, and when you sell, you sell at the bid, which is the lower of the two prices.

If you use the chart price to determine an entry or exit, realise that when you place an order to sell when the chart price is say 1.330, then this is the price that you'll sell at assuming no slippage.

If on the other hand, you place an order to buy when the chart price is the same price, then you'll actually buy at 1.3333. A forex system will often determine whether your orders will be placed simply according to the chart price or whether you need to add a buffer when buying or selling.

Also note that on many platforms, when you're placing stop orders (to buy if the price rises above a certain price, or sell when the price falls below a certain price) you can select either "stop if bid" or "stop if offered".

4. Realise that the times shown on the bottom of forex charts are set to the particular time zone that the forex provider's charts are set to, be it GMT, New York time, or other time zones.

It's handy to have a world clock available on your computer desktop in order to convert the different time zones. This is important when you're trading major economic announcements.

You'll need to convert the time of an announcement to your local time, and the chart time, so you'll know when the announcement is going to happen, and therefore when you need to trade.

5. Finally, check whether the times on your forex charts corresponds to when the candle opens or when the candle closes. Your charting software may be different to someone else's in this way.

The reason I mention this, is that if you need to trade major economic announcements, either by entering a trade based on the movements that happen after the announcement, or to exit a trade before the announcement in avoid getting stopped out during it, then you need to be precise (to the minute!) as these trades are performed according to what happens at the 1 minute immediately after the announcement, not the candle afterwards!

So there you have it.

You now have the 5 essential keys to how to properly read forex charts, which will help you to avoid the common mistakes which many forex beginners make when looking at charts, and which will speed up your progress when you're looking at forex charting packages, and forex trading systems that you want to trade!

Now that you know this, practice looking at forex charts with each of these 5 points in mind.

So get to it!

About The Author:

Mark Hamburg helps you to go from forex novice, to actually understanding what you need to know about forex, quickly and easily. To learn more valuable forex tips, tricks and hints, go now to his site to continue your tutorial on forex charting software, and much more.

Forex Trading Guide

Like many people I am sure you are interested to know more about Forex trading. To put it bluntly Forex trading can be either one the best ways to make or lose LOTS of money. Only those who take the Forex market seriously will be able to make money with it in the long term.

The Forex trading market is beyond a doubt the world's largest market where all exchanges happen instantaneously. Thus, trades are a key challenge for even the most knowledgeable Forex bankers and traders. They have to learn and consider many factors before performing even a single trade.

At first when currencies began to be traded openly, only large banks were allowed to perform trades. These days, due to the advent of internet trading and margin accounts almost anybody can begin Forex trading. This in turn, has added to the liquidity of the Forex market, and has resulted in a huge increase in the number of individuals who are now active in the market.

So, does this mean it is easy to earn money through Forex trading? To answer this we must consider a few things.

Some data by Forex brokers seems to suggest that 90 percent of traders end up of losing their capital, 5 percent of traders have been able to break even and only 5 percent of them attain steady beneficial results. Thus, it seems that trading successfully is no simple task.

However, if you can learn to be among the 5 percent who make consistent money you can do extremely well by using Forex trading. To help you in this end I have listed five key ways to improve your odds dramatically of making money in the Forex market.

1. Education

Successful traders are knowledgeable about the Forex market. They have chosen to educate themselves about every single vital detail of Forex trading. The best traders know that every trade that they perform is an opportunity to learn something new.

2. Forex Trading System

All of the profitable traders have a Forex trading system or strategy. Furthermore, they have the will power to stick strictly to that system, because the best traders know that by sticking with their system they stand a far greater chance of earning money.

3. Price Behavior

Knowledgeable and successful traders also include price behavior in their systems. They have learned that prices can change quickly and suddenly but are prepared to deal with those situations when they arrive.

4. Trading Psychology

First-rate traders are aware of psychological issues that affect the choices of other traders make when Forex trading. They know that people do not always act rationally, and as a result this can alter the expected outcome of a trade. This can help them both when deciding to enter into a trade or when to exit.

5. Money Management

This is far and away the most important factor that will determine whether or not you become a successful trader. Averting the hazard of financial ruin is the main concern of all top traders. This means both adequately funding your trading account (only with money you can afford to live without of course) and never entering into trades that can potentially wipe out all of your assets. Better to start trading small and always use stop-loss orders to guarantee that your first trades are not also your last.

This is by no means an exhaustive list of everything you need to know but it outlines some of the areas you need to consider before making even that first trade. Now you know that it is not easy to earn money in the Forex market, however it is achievable.

However, success does not happen overnight and anyone promising you that it can is trying to sell you snake oil. It is an ongoing processes not something you pick up in a weekend. Trading success depends on the trader, and how hard you are willing to work to achieve your Forex trading goals.

Also, remember to try to have some fun. The clearest sign that Forex trading is not for you is if you find the prospect of learning about how the Forex market works boring or dull. If this is the case you won't stick with it long enough to make money and you will be among the 90 percent who fail. Just remember these three important things: be disciplined in your trading habits, manager your money wisely and enjoy the experience of Forex trading.

Ian Wright has always been fascinated with all forms of investing. Most recently, he has created a Free Forex Training Guide and has started a Forex Trading blog.

What Would You Rather Do: Read About Someone Elses Forex Success or Experience Your Own

You can draw some useful parallels between running a business and Forex trading. For instance, most successful businesses keep statistics on everything from their conversion rate, to their average dollar sale, to the number of people that come in the door. Businesses do this to keep on top of how they are doing on a day-to-day basis and businesses must first take score before begining to improve on that score. Using a Forex back testing plan in your trading works exactly the same way.

Now that you`re looking at Forex trading as a business, you need to learn some valuable statistics about your system so you can improve it`s performance. You would use a Forex back testing method. You can`t improve your system unless you have something to measure it against. How could you expect to improve your trading unless you knew what it was you were looking to improve? You can discover these measurements and other valuable information about your trading system, by using a Forex back testing plan.

There are two ways that you can use a Forex back testing plan to back test a system. You can do it manually, which can be a drawn-out and labour-intensive process, or you can do it with the aid of some software packages. Unfortunately, I recommend you do it by hand when you first start out. You`ll get a much better feel for your system, and you`ll understand exactly how using a Forex back testing plan works in all its intricacies. Once you have the Forex back testing plan and the in-depth knowledge, you could look at finding a software package that does it for you.

There are a few major statistics on your Forex back testing plan that you need that you will uncover through back testing. The first statistic you need to become familiar with is the R multiple principal. R stands for risk, the risk you take on any trade when you enter the market. The R multiple of a trade is the ratio of the profit or loss compared to the amount of money risked to make the profit or loss.

Therefore, if you risk $200 dollars in your initial purchase, and you make a profit of $1,000, you have made five times the amount you risked in the trade. You have an R multiple of five. This statistic gives you a good idea of the relative size of your profits to your losses. You can compare the average size of your winning trades with the average size of your losing trades.

The next statistic you`ll find useful is your win to loss ratio. This is how many times you get a winning trade in proportion to how many times you get a losing trade. For example, if you had ten trades, four of those trades were winners, and six were losers, your win to loss ratio is simply four to six. This is your hit rate; you`ll get 40% of your trades correct.

With these two simple statistics, you can calculate the average size of your profits and of your losses, multiply these figures with your win to loss ratio, and calculate on average how much money you make with every dollar you risk.

For those of you who think this sounds like a too much work, particularly using a Forex back testing plan that you need to do to uncover these statistics, consider this scenario: Imagine yourself trading a system that you knew had a win to loss ratio of 60/40. You made profit on every six trades and lost one out of every four. How do you think you would feel, where would your confidence level be, after you traded the system for a little while and you received a string of 11 losses in a row?

Now, you know that this system has a win to loss ratio of six to four. Would you have the confidence to open another trade if your system brought up another buy signal after getting 11 trades wrong?

Unless you use Forex back testing plan to back tested your system, I doubt that your confidence level will remain high. That trading system may be a fantastic profitable system. However, since you didn`t use your Forex back testing plan to back test it, you don`t know that historically this system received up to 13 losses in a row, but was still profitable.

Here`s another point you may not have picked up unless you used your Forex back testing plan. Once you`ve set your money management rules and you begin to trade, you will likely experience a string of losses. Countless times, I`ve had clients who get disheartened by this fact because they don`t understand the nature of setting good management. If you`re adhering to the rules of cutting your losses short and letting your profits run, because you`re cutting your losses short, those trades are going to last for a shorter amount of time.

This means once you begin trading the odds of getting losses early in the game are much higher than getting a winning trade. This is particularly true when you consider that many successful trading systems run on a 40/60 win to loss ratio. However, you will never know the intricacies of your system unless you use a Forex back testing plan and back test it.

Using a Forex back testing plan, will help you to understand what works and what doesn`t. It will give you the statistics to gauge the effectiveness of your trades. It fills in your scorecard, and allows you to make improvements. But, you shouldn`t simply believe everything I`ve told you. Instead, you need to prove it to yourself by using some Forex back testing plans and back test your system.


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Forex Trading – Knowledge Is Power Not in FOREX Trading It Isn’t!

I read all the time about how important it is to learn lots of information to trade forex and how you continually need to learn, but this is NOT true.

Succesful Forex trading is actually very simple and the knowledge is easy to acquire, yet 90% of traders lose - so why is this ?

Because knowledge alone is not enough, furthermore you need to learn the right knowledge and most forex traders don’t.

There are plenty of very smart people who lose and plenty of small potato investors who make a lot. The fact you have a lot of knowledge or are clever does not ensure success and in most cases ensures you lose.

Let’s look at this in more detail.

The right knowledge

Is not hard to acquire and starts from learning yourself and not trying to get a short cut to success by buying it - if you think you can buy success you are going to lose.

Trading means getting knowledge that works and you can have confidence in.

Your aim is to make money, not be clever and you can build a simple system from free resources on the net.

Simple systems beat complicated systems as they are easier to understand, easier to apply and make more money as they are more robust.

Fact is most of the top traders in the world use simple systems.

We have been traders for over 22 years and our system is simple:

Trend lines, support and resistance to spot trends and 3 confirming indicators and that’s it and it works.

The right knowledge is easy to acquire but the trick is you MUST understand it, to have confidence and this gives you the trait that most traders lack.

Discipline

If you try and follow someone else you won’t have confidence and you won’t be able to follow a system with discipline.

Unless your knowledge is acquired by you and you have confidence, you won’t be able to follow your trading system through losing periods. You will simply throw in the towel

Discipline sounds easy to acquire but it isn’t – it’s extremely hard to hold your emotions in check.

How do I get the RIGHT Knowledge

Forget all the e-books, courses and other forex education sold on the net.

Go to Amazon and get some books by top traders, who have walked the walk rather than simply talk the talk.

Most sold info on the net is not worth the money and you can get far better knowledge cheaper at your local bookstore.

Good books to start with are Jack Schwager – Market Wizards and New Market Wizards – the interviews here are all with legendary traders and is a great inspiring read.

Then get some books on trader psychology.

I am a big fan of Jake Bernstein who really shows how important and elusive getting the right trading psychology is and really hits it home.

Another favourite of mine is Trader Vic by Victor Sperandeo, a fantastic book covering all you need to know from money management to system building.

Done that?

Then go on the net and build a simple system based around technical analysis, a breakout methodology find a few indicators you like to confirm trend momentum and you’re all set to go.

Sounds simple?

Building the system is the easy part – getting the right mindset is the hard part - good luck.

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Currency Trading Systems - Building a Profitable One in 4 Steps

If you want to trade currencies then you need a currency trading system that will get the odds in your favour and here we will show the basics that make a successful one. Anyone can build one and incorporate it in their Forex trading strategy and it's easy to do - Let's look at the basics.


1. Identifying the Opportunity

The best way to identify an opportunity is to use support and resistance and good old trend lines. We won't explain support and resistance here - but if you are not familiar with it look it up on the net - Here we want you to keep in mind one key point:

When you trade be selective and only trade valid support and resistance.

What do we mean by valid?

- The more tests the better

- The more time frames involved the better

- The longer the duration between the time frame the better

The above are just general guidelines - you can use 2 tests but 3 tests or more, are better and look for resistance or support that is considered important by the market.

You then need to decide after spotting the opportunity on your forex charts when to trade.

2. Executing the Trading Signal

Never simply buy into support or sell into resistance with your currency trading system.

This wont work, as your predicting what may happen and as you can't predict the future ( despite what many guru's will tell you), you are simply hoping or guessing and the market will kill you.

You need confirmation.

If you don't know what momentum indicators are look them up - you need them and there an essential part of your forex education.

You only need a couple to confirm the move - more is not better as you need a simple system - more complicated ones have more elements to break.

The way to use them is to watch for a level to hold and when momentum shifts away from the level then you trade.

Don't just look for support or resistance to hold though - incorporate breakout methodology. It's a fact that most trends start form new market highs NOT Market lows. So, if prices breakout supported by momentum buy them!

Most traders can't do this they want to get back in on a pullback that never comes - don't make this mistake trade the breakouts like the pros do.

Finally be very selective and only trade the best set ups - in forex trading you don't get paid for how often you trade you get paid for being RIGHT.

Trade sparingly and only trade the big high odds trades.

3. Stops and Profits

Stops are easy and behind support and resistance. Place them as soon as your currency trading system gives a signal.

If you are long term trend following, keep your stop well back and give the market room to breathe, so you don't get stopped out by random volatility.

You are going to miss the turn but as you can't predict that anyway, that's fine.

Catch 50 - 60% of the big trends and you will become very rich.

Swing trading is another matter.

You're looking for smaller moves and they can disappear quickly, so use a profit target and take your profit early!

Don't worry about perfection of what you might have made - concentrate on making money - no one is perfect but that won't stop you enjoying currency trading success.

4. Managing Your Money

Forex trading is risky, that's why the rewards are so high. Many traders however try and restrict risk so much they create it.

They trade to often have stops to close and move them too quickly and end up losing.

Confront risk cheerfully!

Forget all the common wisdom about risking 2% per trade- if you're trading a $10,000 account that's 200! If you don't risk much you wont win.

If you have a high odds trade risk 20% and have the courage of your conviction.

If you take calculated risks at the right time you can enjoy currency trading success.

FINALLY REMEMBER THIS!

So there you have it the above is a simple system - support resistance and a few confirming indicators and the best systems are.

Keep in mind that forex trading is as much to do with mindset as method and you need to maintain discipline.

Simple currency trading systems are easier to understand, apply and have confidence in which leads to the discipline to follow your currency trading system to long term currency trading success.

BECOME A PROFESSIONAL FOREX TRADER FROM HOME

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Chart Pattern Secrets

Chart patterns

We could probably fill close to 500 Web pages on this topic. There are about as many chart (or price) patterns as there are stock market analysts, and there are many of them! To give you an idea of the different patterns available to you, here is a partial listing: trend lines, support/resistance, fan lines, channel lines, retracement, speed resistance, gaps, reversal patterns, head and shoulder patterns, double tops/bottoms, triple tops/bottoms, saucers or rounding patterns, cup and handle, V-formations, triangles, diamonds, flags and pennants, wedge formation and trading ranges. Candlestick charts have their own series of price patterns such as hammers, doji, stars, dragonfly doji, spinning tops, and we could go on and on for a while. The most widely used charting methods are bar charts and candlestick charts; some traders also use point and figure charts.
Fortunately it is not necessary to understand all these patterns to be a successful trader, however, you should be aware of their existence. Tonight we will look at some of the most widely used patterns and some of the patterns we use in our trading system for huge profits.

Support/resistance and breakout patterns

Suppose a stock is declining and at a certain level it starts to rebound. Let's say that this rebound happens at $40. What happened is that buyers were waiting to buy at that price. The stock now starts to climb because buyers are stepping in. Imagine someone had planned to purchase but at the last minute decided against it. After seeing the price rise, he vows to not let the stock get away from him again. In the meantime, the stock continues to rise some more till many traders start taking profits, the stock declines and comes close to $40 again. Remember the traders that didn't buy the stock before? They are now buying! This will push the stock up again. An area of support has now been formed. At this point the market at large will develop a frame of mind that $40 is a good place to buy this stock and the $40 "support" level becomes a self fulfilling prophecy.

Similarly with resistance levels. An advance to a price, say $45, which is repeatedly followed by a pullback to lower prices creates an emotional barrier. The market develops a mental picture that says that you should sell at $45 if you don't want to lose your money. You can also imagine that it is quite significant if the stock breaks through these support or resistance levels. It can drive some serious follow through in the trend because the expectation did not come true and now all bets are off. One strategy is to attempt to purchase near support and take profits near resistance. Another is to wait for an "upside breakout" where the stock penetrates a previous resistance level. After a breakout above resistance, resistance becomes the new price level for support. The longer the prices are trading in a support or resistance area, the more significant that area becomes. Prices often trade in a "congestion" area for quite a while before they breakout again. Volume is an important indicator to measure how significant the support level is. When a lot of shares change hands at a support price level it clearly indicates that many traders view that level as a significant buying opportunity. to be continued...

Volume and breakout

Volume is an important indicator in breakouts above resistance levels (or breakouts below support levels). Volume often spikes sharply when a breakout occurs.

A surge in volume often precedes a price breakout, then the breakout point through the area of resistance becomes a level of support a few days later. A decline in volume during down days is often a sign that the sell off is only a temporary setback in a generally upward trend.

There is a tendency for round numbers to stop advances or declines, at least in the short term. These round numbers, such as 50, 80, 100 will often act as psychological support or resistance levels. A trader can use this information to his or her advantage and begin taking profits, or enter the market, when round numbers are approached.

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The Power of the TRIN

What is the TRIN anyway?

The TRIN (an acronym for TRading INdex) is an indicator which helps to determine the breadth, or sentiment, of the market. Developed in 1967, it is often referred to as the Arms Index after it's author, Richard Arms. The TRIN measures the number of advancing issues divided by the number of declining issues, which is then divided by the advancing volume divided by the declining volume. This may sound confusing, but the equation below should make it clear:

TRIN = ( Advancing Issues / Declining Issues ) / ( Advancing Volume / Declining Volume )

Interpreting the TRIN

Most commonly, traders will look to the value of the TRIN. When at 1.0, the market is considered balanced. Any value below 1.0 is considered bullish, while any value above 1.0 is considered bearish. This may be confusing at first, but you just have to remember that the direction of the TRIN is basically showing the inverse of the direction of the market.

While many only pay attention to the value of the TRIN when gauging market sentiment, I believe that its direction is of far greater importance. If you do not pay attention to where the TRIN has been, you can easily be deceived by the market. Here is a good example:

A trader is looking to place a trade and sees that the value of the TRIN is currently at 0.84, indicating the market is bullish. A few moments later, the trader sees the TRIN has lowered down to 0.68, while the market is starting to rise. At this point, he decides to take a long position, only to see the market swiftly turn back around and stop him out.

What went wrong here? Although the value of the TRIN was portraying a bullish market, this trader didn't take into account that it was hitting a major trendline (drawn from the previous lows) at 0.68. As soon as he executed the trade, the TRIN began to turn and slope upwards, and continued to follow its trend.

Slope, Trendlines and Divergence

In order to see the slope of the TRIN, you will want to make sure it is shown as a line based on the close of whatever time interval you choose. The slope is simply which direction the TRIN is currently heading in. A sharp change in slope, especially off of an extreme level or a trendline, will give you a strong indication of the market sentiment. Always pay attention to the slope rather than the value.

Trendlines drawn from the highs and the lows of the TRIN are just as valid as trendlines drawn on price. A strong bounce off of a trendline indicates that the trend the market is currently following will continue. On the other hand, a strong break indicates a possible change of trend in the market. Truthfully, The best way to learn about trendlines is through experience, and once you begin draw them and see how the TRIN interacts with each one, the better you'll understand which bounces and breaks are valid and which ones are meant to 'fake you out'.

Divergence is simply the difference between the highs or lows of the TRIN in relation to the highs or lows of the market you're trading. It is a bit different than looking at divergence on the MACD or the RSI because the TRIN is an inverse of price. So, instead of looking for price to make a lower low while another indicator, say the MACD, makes a higher low, you will want price to be making a higher high while the TRIN is making a higher low or vice versa. Divergence is an extremely powerful pattern, and will very often occur when the trend is changing and result in large moves.

I hope that this information has helped, and remember, the best way to understand the TRIN is through experience!

Conner Hayes is a full time day trader and developer of the Simple Trend Trading methodology. To learn how he trades the e-Mini S&P 500 futures with a 75%+ win ratio, please visit Simple Trend Trading

Forex Trend Following - Using Breakouts Huge Profits

The most lucrative form of trading is locking into and following long term trends in forex that can last for months or years. Most traders have no idea how to profit from forex trend following so we will show you how to do it in 5 simple steps.

1. Be Selective

The first point to keep in mind is that the big trades don’t come around very often so you need to be patient and selective. You don’t get rewarded for trading frequently; you get rewarded for being right.

You can trade less than a dozen times a year and make triple digit gains, if you pick the right trades. So don’t be tempted to get in the market for the sake of it be patient.

2. Watch Breakouts

Forget buying low and selling high – most great trends start from new market highs and you have to be ready to buy these breaks.

If you wait for a pullback you will simply miss the best trends, because when a new trend breaks out - it moves quickly.

The best risk/ reward is offered on the these breaks. Most traders can’t buy breakouts, as they want to buy at a lower better price and wait for a pullback and they never get in and miss the trade.

3. Use a Simple System

To trend follow and catch breakouts you don’t need a complicated system.

All you need to understand are basic trend lines and the concept of support and resistance and that’s it.

A simple forex trading system is best, as it’s easy to understand and easy to apply – if you complicate your system, it will be less robust and will have too many elements which will break in trading.

All the best forex trading systems are simple and yours should be to.

4. Trade Valid Support and resistance only

Keep in mind, you only want to trade breaks that are considered important by the market.

This means that levels have been tested several times, in at least two time frames, preferably a few months.

When these levels are broken, chances are there are stops behind the level wating to be hit and new trend followers waiting to kick in which will accelerate the price trend.


5. Confirm – Confirm – Confirm!

Make sure that any breakout is confirmed by momentum oscillators – this will ensure you filter out false breakouts.

If you are not trading with price momentum, you’re not trading the odds and you won’t win – period.

Only take breakouts confirmed by a rise in price momentum.

We don’t have time to discuss the indicators to use here - but look up: RSI, ADX and the stochastic, as a good place to start.

6. Accept Short Term volatility

Breakout trading can see huge volatility after the initial breakout has occurred, don’t be tempted to move your stop to quickly WAIT.

You’re trying to catch the big trends so accept that you will see counter moves eat into your profits by several thousand a day.

If you want to catch the big trends and make $10, $20, $30,000 or more - accept the drawdowns in the short term and keep your eyes on the bigger prize if you dont you will be stopped out early and miss the big profit you were aiming at.

So there you have it.

A simple, logical system, that can and will pile up huge profits in under an hour a day.

You won’t have to spend much time on this system and you won’t trade very often – but you will make a lot of money and that at the end of the day, is what forex trading is all about.

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A Profitable Forex Strategy

Copyright 2006 Timothy Rohrer

Making money in the forex market is not an easy task by any means. However, given a bit of education and knowledge of the market, it can become quite easy to profit in the forex market. Most traders end up learning that it's the simply systems that create the wealth. Over analyzing and over thinking can sometimes affect your trading methods and strategy.

The trading method I am going to explain here is probably going to upset you a little and will most likely go against everything you have ever been taught about forex. However, you have to remember that this is my personal strategy and its how I make money. It may not work for the next person, but it has shown me a way to make a substantial amount of money in the forex market.

Through your forex training you might have heard traders tell you to always trade with a stop-loss. If you don't know what a stop-loss is, it's simply an order telling the broker when you would like to cut your losses. I don't trade with a stop-loss period. How is this so? How can I make money without using a stop-loss? I tend to believe that the big players in the forex market like to drive this market in certain directions to take out other traders stop-loss positions. In order for the banks to make money, they have to take other traders monies, therefore taking out stop-loss orders in the market. I don't allow the banks to do this to me personally.

Secondly, on each trade look to make only a few pips. In some cases this is known as scalping the market. On each trade I am only looking to get 3 to maybe 6 pips or as I like to say, get in and get out.

Your next question might be, "how do I know when to enter and exit the market?" I use a set of indicators combine with a detailed analysis of trend lines and channels. The indicators tell me when to get in and get out and the trend lines give me the overall direction of the market for the next month to few years. Having a good idea of where the market is heading over the course of a few years gives me a good idea whether I am in buy mode or sell mode on a daily basis.

How is it possible to survive without using a stop-loss? Very simply put, do not risk large amounts on each trade. I only risk one tenth of my account balance per trade. For example, I only trade $1 lots on a $10,000 account. What this enables me to do is use no stop-loss. If the market moves 200 points no problem. By the time the market moves 200 points, I've already made 100 other trades in profit all for 3 to 6 pips each. If the market continues to get away from me, I continue trading each day gaining which eventually compensates for the few losers and eventually overrides them. When the market comes back in my favor, those losing trades are making profit every step of the way.


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Tim Rohrer is an established writer and forex trader. To learn more about forex strategies, visit http://www.forex-investing.us

The Advantages of Technical Analysis for Currency Trading

We have already looked at the difference between fundamental and technical analysis of currency trading in our "currency trading success" article, here we will concentrate more on the advantages of technical analysis for currency trading and how to build a successful system.

There are many different methods and tools utilized in technical analysis, but they all rely on the same principles - that price patterns and price trends exist in the market and that they can be identified and turned into profit opportunities.

Technical Analysis in currency trading is based on three core principles:

Markets Discount

The actual price is a reflection of everything known to the market that could possibly have an affect on price movement and includes supply and demand, political factors, and the market sentiment.

The pure technical analyst is only concerned with price movements, NOT the reasons behind the price movements.

Prices Move in Trends

Prices can move in three directions - they can move up, down or sideways.

Once a trend in any of these directions is in effect it usually, will persist and create a trend.

The market trend is simply defined as the direction of market prices, a concept that is essential to the success of technical analysis in currency trading.

Identifying trends in theory is simple; a price chart will usually indicate the prevailing trend as characterized by a series of waves with obvious peaks and troughs.

It is the direction of these peaks and troughs that constitutes the market trend, if they move up, the trend is bullish, if they move down the trend is bearish and of course if they move sideways then the market is in a period of consolidation.

History Tends to Repeat Itself

To a technical analyst in currency trading, the trader psychology that affects prices is extremely important, as human nature is repetitive and this shows up in repetitive price patterns.

This allows anyone using technical analysis in currency trading to predict where prices are likely to go next and traders can then act upon this information for profit.

The market price reflects everything

Technical analysis in currency trading is primarily concerned with price trends and everything that can possibly affect a currency is reflected in price action.

Technical Indicators

The logic of technical analysis for currency trading is universally accepted, and there are numerous ways to execute technical trading systems, with the huge amount of available indictors used either alone, or in combination.

We will look at the different indicators below and some that have proved highly effective in the technical analysis of currency trading. Any traders, who wish to profit from the currency markets, should consider these indicators.

Trend Indicators

A trend is a term used to describe the persistence of price movement in one direction over time. The easiest way to spot trends is via trend lines, drawn below price lows or above price highs.

While basic trend lines have gone out of fashion in recent years in favor of more complicated indicators, they are still one of the most effective ways to technically analyze currency movements.

Support/Resistance Indicators

Support and resistance describes the price levels where markets repeatedly rise or fall and then reverse. This phenomenon reflects basic supply and demand and when prices break above or below significant support or resistance, a big move can follow very quickly.

Again, the best method for spotting and acting on these breaks is the humble trend line.

We believe that trend lines should be the basis on which ANY technical analysis of currencies should be based on - and the indicators below are for confirmation:

Volatility Indicators

Volatility is a general term used to describe the magnitude, or size, of day-to-day price fluctuations independent of their direction. Generally, changes in volatility tend to lead changes in prices.

One great indicator to use is the Bollinger band.

Any trader should look at Bollinger Bands, as they represent one of the most effective indicators for the technical analysis of currency markets.

Not only is it good for predicting trend movements, but also it is useful for timing entry and exit levels, as well as when to increase or decrease position size.

Cycle Indicators

A cycle is a term to indicate repeating patterns of market movement, specific to recurrent events, such as elections, year-end monetary repatriation etc.

Cycle indicators determine the timing of a particular market patterns. A good example would be Elliott Wave theory. Cycle indicators however in our view are of little or no use, in the technical analysis of currencies.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over given time periods.

Momentum indicators determine the strength or weakness of a trend as it progresses over time. Momentum is generally highest at the start of a trend and lowest at market turning points.

Any divergence of directions in price and momentum is a warning of weakness; if price extremes occur with weak momentum, then an end of movement in the current direction could occur.

If however momentum is trending strongly and prices are flat, it signals a potential change in price direction. Examples of momentum indicators include Stochastics, MACD and RSI.

The most effective momentum indictor is the stochastic and using stochastic crossovers to time entry and exit levels, can be highly effective.

Sentiment Indicators

Many technical analysts in currency trading monitor surveys of investor sentiment such as net trader's positions and bullish consensus.

These indicators attempt to gauge the general attitude of the investment community, to determine whether investors are bearish or bullish.

These indicators are only to be used when extremes of sentiment are reached, either bullish or bearish.

If used in this way, they are one of the most powerful warning signs of significant market turning points and can be used in technical analysis of currency markets to huge effect.

Putting it all Together

Traders make money from the technical analysis of currency markets in many different ways, however we believe that trend lines backed up by just a few additional indicators (to help time market entry exit and stop levels) can be very effective.

The ones we favor are: Bollinger bands, stochastics and market sentiment indicators, as filters for traditional trend lines.

The best way to succeed in technical analysis of currency trading is to use a simple robust system based on trendlines and just a few filter indicators such as the ones above and you will soon find yourself catching the big trends that yield the big profits.

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Trading Channeling Stocks

Channeling is one of the most reliable and accurate trading techniques that provide traders with precise entry and exit points as well as stop-losses and take-profit recommendations.

Channeling stock is a stock that moves up and down in repeated waves between two parallel lines. A lower line is called a support trendline and an upper - a resistance trendline. A support trendline connects the series of lows and resistance connects the highs. The area between these two lines is referred to as the channel. We need at least 4 dots (2 lows and 2 highs) to draw the channel. The more times the price touches and rebounds from the support and resistance lines without penetration, the more significant and reliable the channel becomes.

There are three types of channels

- An ascending or a rising channel makes consecutive higher highs and higher lows
- A descending or a falling channel makes consecutive lower highs and lower lows
- A horizontal channel or a rectangle channel makes horizontal highs and lows

Channeling offers several different efficient techniques for each type of channels. The most effective way of trading channel is to trade in the direction of the channel, going long at rising channel and shorting the falling channel. There are following basic rules of channel trading

- Buy (or cover short position) at support level
- sell (or take a short position) at resistance level

Channel is considered 'trade-able' if it consists of at least two lows and two highs.

Following is the real life example of how you can profit using this simple technique. Let's look at the chart of QQQQ for the period from the January 2004. We can easily locate two relative highs: 38.54 in January 2004 (1/20/2004) and 40.33 in December (12/15/2004) and two relative lows: 32.52in August 2004 (8/13/2004) and 34.98 in April 2005 (4/29/2005). Now we are able to draw two trend lines - a resistance line connecting two highs and a support line connecting two lows. These lines are near parallel giving as a perfect channel. Following our basic trading rules we can place a buy order when the price crosses the support trend line and sell when the price crosses the resistance trend line. This simple technique will provide you with the perfect trading entry/exit points: sell on January 6, 2006 at 42.5 and buy on May 23, 2006 at 38.65.

There are several ways to locate the channeling stocks. You can manually look through charts or utilize the pattern recognition services. Following links provide you with the list of channeling stocks and ETFs.
Rising channel
Falling channel

To narrow your search you can use an advanced technical analysis filter to find a list of channeling stocks and ETFs with price testing the support or resistance line. For example, use the following links to find a list of equities with rising channel pattern with price near support level and equities with falling channel near resistance.

Rising Channel Support
Falling Channel Resistance

In addition to the basic trading rules a channeling technique provides risk management in form of stop-loss ules:

1. If you enter a long position at a channel support level, set a moving stop-loss slightly below the support.

2. If you open a short position at a channel resistance level, set a moving stop-loss slightly above the resistance.

There are additional trading rules and techniques that can help to improve performance and reduce the risk in case of the channel breakout, false breakout and channel narrowing.

Breakout appears when price breaks through the support or resistance line. You can tight protected stop-loss order to limit your risk. Some traders use channel breakout as a trend seversal confirmation to open a new position in the direction of the new trend. To estimate the minimum breakout target some chartists suggest measuring the vertical distance from the trendline to the latest high/low and projecting it from the breakpoint into the direction of the breakout.

In example with QQQQ above, if a trader opens a long position at channel support 38.65 on May 23, 2006 he immediately places a moving stop-loss order slightly below the support. When a price breaks the support line and a stop order is executed, a trader can also enter a short position to profit from the channel breakdown.

While a channel breakout terminates the current channel, the false breakout appears when a price just pierces the channel trendline and then moves back into the channel area. Usually a false breakout scares traders out of the stock and makes breakout traders enter the wrong position.

In opposite to the false breakout - the channel narrowing appears when price drifts inside the channel area without touching the support or resistance trendlines. In this case the narrower channel could be considered or other techniques can be used to enhance the accuracy.

There are several techniques you can use in conjunction with channeling to help verifying the channel strength, recognizing the price reversal and predicting breakouts.

1. Overbought/oversold momentum oscillators and bullish/bearish divergence are useful for providing early
warning signals of trend reversal.

2. Candlestick patterns can be useful to confirm the price reversal or a channel breakout.

3. Fibonacci technique is helpful in finding hidden channel cyclicity to spot an intermediate support/resistance within the channel area as well as for estimating the breakout target.

4. Analyzing chart trends in several different time frames can also help you accurately determine the price reversal and a channel breakout.

5 Channeling trend often presents an Elliot waves structure. The sub waves in the direction of a major trend have a five-waves impulse structure while sub waves in the opposite direction have corrective three-wave zigzag structure. Using Elliot Wave analysis with channeling stocks can provide a valuable trading strategy for an experienced trader.

Channeling works the best for short and medium-term trading with ETFs and medium volatility stocks. Channeling provides one of the most accurate and reliable market timing techniques especially when it is used in conjunction with other technical indicators.

Seven Reasons Why The Trend Is Your Friend

We spend a great deal of time trying to spot stocks heading in the right trend, or direction. Careful attention needs to be given to the support and resistance lines. These lines are also called trend lines. Here are seven reasons why the trend can be your friend in investing:

1. These lines draw the general trend, or direction, the stock is heading. They're not used for daily tracking, they're more of a longer-term direction that the stock, mutual fund or commodity is heading. If you are using a longer term approach, the trend is what you really want to know, not necessarily the day to day wiggles in a stock.


2. Often times, the trend line will give you guidance in a stock for years, not just weeks or months. But these support and resistance lines are often bumpers, or guardrails, along the way. Stocks often drift toward their support or resistance lines and then bounce back in the opposite direction.


3. If you can pick off a stock you find attractive as it is bounces off the support line, it could be a terrific time to buy. The reason is you have a strong, logical place for your stop point...just under the support line, which is really close by. This helps minimize the amount you have at risk.


4. Some of the best winners come from stocks that are purchased just as the stock breaks through overhead resistance and forms new patterns. Holding the stock until it breaks support line (which might be possibly many months, or even years later) can really help your overall performance!


5. The reasons behind why a stock jumps through a brick wall are often not clearly visible. The reasons for the move may emerge days or weeks (or even a year!) down the road. But when a stock or a mutual fund breaks through the trend line, either up or down, it's important news.


6. If a stock or mutual fund we are following breaks through it's overhead resistance, we have a high level of confidence that the stock will continue to climb upward.


7. Lastly, if the support line of your mutual fund or your stock is broken, beware! This is a very clear signal we should consider selling a portion (or maybe even the entire) position. Breaking the support line is the ultimate sign that supply is now clearly in command. Your principal is now at risk.

Thomas P. Mullooly, President of Mullooly Asset Management, LLC (www.mullooly.net) has spent over twenty years in the investment industry, as a broker and as an investment advisor. Feel free to contact us to check out the relative strength of your portfolio by sending an email to tom@mullooly.net or visiting http://www.mullooly.net/403b-plan.html or sign up to receive the market report and tips on how you can soundly invest your money at www.mullooly.net.

Forex: Technical analysis vs fundamental analysis

The technical analysis is a method based on the study of charts which get attention to the price of the

instruments, the volume of the trading and, when that is possible, open interest of the instruments. The

fundamental analysis is a method founded on economic, political, environmental factors and any other factor.

In practice, much of actors of the forex market use the technical analysis in conjunction with the fundamental

analysis to determine their strategy in forex trading.

One of the principal advantages of the technical analysis is that the experienced analysts can follow several

instruments of market, whereas the fundamental analyst needs to know narrowly a market in particular.

The Indicators used on Forex Trading Charts by Technical analysts

The index of relative force (RSI):

This index is the most popular indicator of the Forex Market. The RSI measures the report/ratio of the upward

trends compared to downward trends and standardizes calculation so that the index is expressed by a figure

between 1 and 100. If the RSI is 70 or superior then the instrument is perceived in overbought (a situation in

which the prices increased well beyond the expectations of the market). A RSI lower or equal to 30 announces an

instrument in a position of oversold (a situation in which the prices fell much more than the market expected

it).

Moving Average Convergence Divergence (MACD):

This indicator consists in tracing two lines of momentum. Line MACD is the difference between two moving average

exponential and the line of signal which is an exponential moving average of the difference. If line MACD and

the line of signal cross, this is regarded as a sign of very probable change of tendency.

The stochastic oscillator:

It is used to indicate the conditions of overbought/oversold on a scale from 0 to 100 %. This indicator is based

on the made observation that on a strong upward trend, the closing prices tend to concentrate on the highest

part of extended of the period. Conversely, when the prices are in strong downtrend tendency, the closing prices

tend to concentrate on the lowest part of extended of the period. Stochastic calculations produce two lines, %K

and %D which is used to indicate the zones of overbought/oversold on a graph. The divergence between the

stochastic lines and the price of the action of the subjacent instrument provides a very powerful signal.

The theory of numbers - Fibonacci:

Fibonacci list numbers (1,1,2,3,5,8,13,21,34.....) is built by the addition of two numbers to get a third. The

proportion of any number compared to the following is 62 %, which is a popular figure of fold of Fibonacci. The

reverse of 62%, which is 38%, is also used in Forex Trading like a figure of fold of Fibonacci (used with the

Theory of the Waves of Elliott)

The theory of Elliott Waves:

The theory of Elliott Waves is an approach with the forex market research which bases on the repetitions of

patterns waves and on the Fibonacci theorie. An ideal pattern of vagueness of Elliott comprises five followed

rising waves of three declining waves.

The Gann angles:

W.D. Gann was a trader in stock and values who worked in the Fifties and which would have made more than 50

billion dollars on the market. It made fortune by using methods that he developed as tools of trade based on the

relations between the movement of price and the time, known as a price/time equivalences. There is no simple

explanation for the methods of Gann: it used the angles in the graphs to define the zones of supports and

resistances and to predict the moments of future changes of tendencies. It used also lines on the graphs to

define the zones of supports and resistances.

Tendencies

A tendency refers to the direction of the prices. The peaks and the hollows of rise constitute the upward

trends; the peaks and the hollows of fall constitute the downward trends, which define the slope of the current

tendency. The rupture of a line of tendency generally indicates an inversion of tendency. A variation of trade

is characterized by horizontal peaks and hollows. Moving average is used to harmonize information about price so

as to confirm the tendencies and the levels of support and resistance. It is always useful to decide on a Forex

Trading strategy or particularly for future trades or markets presenting a strong upward trend or downward. For

simple moving averages, the price is realised on a certain number of days. Day after day, the oldest price is

withdrawn and replaced by the price of the current day - thus the average changes every days. For moving average

exponential or balanced, use the same system but balance the figures - the weighting coefficient low for the

oldest price and the highest coefficient for the most recent price.

Gaps

The gaps are the spaces left on the histograms where no trade took place. A up-gap, or ditch of rise, is formed

when the price low of a day of exchanges is higher than the highest price of the previous day. A down-gap, or

ditch of fall, is formed when the price highest of a day is lower than the price low of the previous day. A

up-gap is generally a sign of force of market, whereas a down-gap is a sign of weakness of market. A gap or

ditch of rupture is a ditch of price which is constituted when a pattern important price is supplemented. This

announces the beginning of a movement of important price. A gap or ditch of exhaust is a ditch of price which

generally occurs about the middle of an important tendency of market. For this reason, it is also called a ditch

of measurement. A gap or ditch of breathlessness is a ditch of price which occurs at the end of an important

tendency and which announces that the tendency arrives at its end.

Trend Lines Amazing Technical Analysis Tool

Drawing Trend Lines are one of the best ways to analyze the Forex Market. It is also simple to learn and easy to apply. Trend lines are a useful tool to predict future price movements. They dissect the market into two trading zones � a Buy Zone and a Sell Zone. These zones help indicate the prevailing trend of the market.

Every Trader must determine the current trend. To trade against a trend is committing financial suicide � you may win on several occasions but ultimately market momentum is stacked heavily against you. In the Forex Market, trading against the trend is like swimming against a Tsunami. You are exposing yourself to huge risks.

By simply drawing trend lines you can quickly determine market direction and flow with current momentum. Trend Lines clearly provide visible boundaries. Charts are dissected into trading zones � for example, candlesticks above, or north, of the trend line is what I call the "Buy Zone" � only look for buy entry opportunities to move in an upward fashion. By trading in this manner you are flowing with the trend and increase your chances of success. After all, trading is about finding high probability trades. The same applies when the candlesticks are below, or south, of the trend line: this is the "Sell Zone" and only look for sell entry opportunities.

To take advantage of the market a Trader should learn to draw COUNTER Trend Lines,
This line is drawn from the top left hand point to the bottom right hand point, at roughly a 45 degree angle � this line is opposite to the main upward Trend Line. For example, the Forex Market flows in a wave pattern. This wave is a 4-Point A-B-C-D pattern. If you are in the "Buy Zone" the market will rally from point A to B. After significant price movements, the market will naturally retrace from B to C. As the market retraces, draw the counter trend line from B to C. When the market breaks through this counter trend line prices will accelerate and extend from C to D. This is the most lucrative and profitable part of the wave pattern. Counter Trend Line breaks are hugely profitable!

Trend Lines also help to determine when the market will change direction. Broken trend lines immediately tell a trader that future price movements are "likely" to shift direction. Candlesticks will move to the other side of the line to begin a reversal and enter the "Sell Zone". Momentum has changed.

Many Traders rely too heavily on computerized charting programs to make decisions. Their programs can provide conflicting indicators and increase the level of confusion. Trend lines are a quick and reliable tool for market analysis. By following a simple methodology with Trend Lines you will increase the likelihood of profitable trades.

Erik Teh

Learn more on the Forex by getting a free eReport at http://www.forexrookie.com
Excellent site for Forex resources.

A Candle Is Better Than a Bar Any Day

There are various ways that stock prices are represented on charts.

The most common charts are what are known as:
" line
" bar
" candlestick.

Line charts are what you typically see on the TV or in newspapers. They represent price action by a single line.

They only show the closing prices of the stock and are of little use to traders. Because they do not show what has happened during the day.

Bar charts represent both the open and close prices. In addition, they include the high and low of the day. These four prices are critical for your full analysis of a stock's price action.

Candlestick charts show us all the price information of a bar chart but in a far more graphical and clear way.

The "story' of the stock literally jumps out at you.

When we were first introduced to trading it was with bar charts. However, when we discovered candlesticks a few years back we immediately saw the clarity and detail that they provided.

They may seem a little strange to you at first but do persevere. We can assure you that they are the only sort of chart to use!

In addition, candlestick patterns, particularly reversal patterns are one of our favorite tools in chart analysis. Doji, shooting stars and inverted hammers may sound a bit weird at first but they are some of the best friends a trader can ever have!

Therefore, if you are not familiar with candlestick charts and patterns I would strongly suggest that you learn more, now.

In addition, the VERY BEST explanation of candlesticks [apart from the SMG Tutorials of course!] is Louise Bedford's "The Secret of Candlestick Charting". It is on our booklist in: www.stockmarketgenie.com/resources

The above comments are offered for educational purposes only. We are not providing you with financial advice. We are simply sharing with you what has and has not worked for us personally. If you wish to trade or invest in the stock market, you should obtain advice from a registered licensed advisor.


About The Author:

David Chandler
www.stockmarketgenie.com
For your FREE Stock Market Trading Mini Course:
"What The Wall Street Hot Shots Won't Tell You!" go to: www.stockmarketgenie.com

Candlestick Charting Adding a Visual Dimension To Your Trading

Candlestick charting is great for traders wanting an extra edge in their quest for profits - this is due to the way the candle bodies are drawn, that gives a better insight that is visual, and shows trader psychology.

More traders than ever are using candlestick charts due to the extra trading edge they can get with this form of charting - if you have not used them before, then this article is for you.

Candlestick charts are not new, and have been used for hundreds of years by Japanese traders to predict and act on market movements.

Candlestick charting giving greater insight into human psychology

In the 1700's, Homma, a Japanese trader in rice, noticed how the price of rice was influenced by human psychology as much as the supply and demand situation. Homma used candlestick charts to trade rice and amassed a huge fortune in the markets. In fact, it was rumored he never to have had a single losing trade!

Human psychology has never changed, and has remained constant over time - candlestick charting is therefore just as useful today, as it was hundreds of years ago.

The Re-emergence of Candlestick Charting

Steve Nison, book, "Japanese charting techniques," bought candlestick charting back into the public domain in the 1990s. Currency traders soon started using candlestick charting instead of bar charts for greater insight into market movements.

So why use Candlestick Charts?

1. They complement other Technical Tools

You can use candlestick charts as you would use the common bar chart, and you can combine them with traditional market indicators. Candlestick charts are a great way to spot opportunities, and then filter, and time trades with other indicators.

2. Spotting trend changes

Because of the way candlestick charts are viewed, they can give warnings of market reversals, far more visually than traditional bar charts.

If you look at candlestick charting, the human psychology of the move literally jumps out the page at you.

3. Straightforward to use

Candlestick charts use, the same open, high, low and close data that traditional bar charts use, and are easy to draw.

In addition, there are many packages like supercharts and tradestation that will draw them automatically for traders.

The different candle names are also easy to remember.

4. Define market momentums

The way the candlestick chart is drawn not only gives the direction of price, but also the momentum behind the move.

The candlestick chart graphically illustrates the relationship behind the open, high, low, and close by the body - and adds an extra visual edge, due to the way they are drawn.

The candlestick has a wide part, called the "real body." This real body represents the range between the open and close of that day's trading.

When filled in black, the real body means the close was lower than the open.

If the real body is empty, it means the opposite - the close was higher than the open.

Above and below the real body we see the "shadows." We see these as the wicks of the candle (which give them their name), and the shadows actually show the high and the low of the day's trading.

If the upper shadow on the filled-in body is short, it indicates that the open that day was closer to the high of the day. On the other hand, a short upper shadow on a white, or unfilled body shows the close was near the high.

A Visual Aid to Give You an Edge

Candlestick charts should be used rather than traditional bar charts because they give you an extra visual dimension.

Regardless, of whether you are a day trader, position trader, system trader or a trader who likes to make your own trades, there is really nothing to dislike about candlestick charts!

Easy and fun to use, and providing a greater insight into market moves, along with the ability to use in any type of trading, means if you aren't already using candlestick charting, then its time to start.

New! A valuable FREE Currency Trader CD containing 9 critical trading reports, tips, strategies and candlestick charting Visit our web site now and grab your CD http://www.tradercurrencies.com

Forex Trading – A Simple, Easy Tip to Increase Your Profits

Forex trading is all about getting the odds in your favor to reduce rsik and increase reward.

The simple tip below is ignored by most traders - yet if you include it in your trading plan, will see your risk decrease and profits increase and that’s what all traders want!

Most novice traders don’t use this tip and lose.

Learn the significance of this tip and use it and it is simply:

Trade with Price Momentum

Many traders like to predict where prices are going to go – but they should really be trading on the facts and that’s exactly what looking at shifts in price momentum does.

It gives you clues to where prices may go next.

Lets Loom at a common error that novice traders make to illustrate the point.

Many traders love to buy dips to support and many will use trend lines or moving averages.

As prices approach the support level, they buy into the support and hope that it holds.

This is a huge mistake!

If you rely on “hope” you are going to lose.

This is why looking at price momentum is so important.

If the momentum of price starts to weaken into support and turns the odds of support holding have increased.

Acting on the Facts

To watch prices come into support and rather than diving in and taking a position - WAIT for price momentum to weaken into support and turn back up away from support.

This is the cue to take a position, as price momentum is now moving away from support and odds favour the bulls.

Why dont traders fo this more often?

Traders find this hard to do, as they don’t like the fact they missed a bit of the move by waiting, but this is the only way to get the odds on your side.

Consider this:

Support obviously can either hold or break and you don’t know which will occur in advance it’s impossible to predict – you are simply guessing and that’s a good way to lose.

If you look at price momentum you will be acting on confirmation that the odds are in your favour.

A trader who is patent and disciplined and acts on confirmation has a far better chance of success than one who guesses or predicts where prices may go.

So what are good indicators to look at?

The best indicator by far in our opinion is the stochastic indicator – we don’t have enough room to cover it in detail here but it’s a great indicator for graphically showing shifts in price momentum.

We like to combine the above indicator with the Relative Strength Index(RSI), another great momentum indicator.

We never take a trade unless price momentum points the same way as our trade.

Forex trading is an odds game and by using momentum indicators you will increase your chances of success and of course your profit potential.

GRAB 3 X FREE TRADER PDF'S AND MUCH MORE!

On all aspects of becoming a profitable trader including features, downloads and some critical FREE Trader PDF's and more FREE Forex Education visit our website at http://www.net-planet.org/index.html

Spot Forex Trading Part 1: Trading with the Trend

This article is Part 1 of a series of 9 articles dedicated to help anyone to trade the foreign
exchange.

There are a lot of books available on trading the markets in general. Many of the books focus on always trading with the trend. The book by Covel (1) is excellent and I strongly recommend reading it.

If anyone attempts to trade the spot forex the very first task at hand is to determine if they currency pair they are buying or selling is in a trend. The next step would be to wait for an entry point into the existing trend and ride the trend as far as possible.

How far is as far as possible? Well, the stronger the trend the longer you ride it. Short term trends are fine too but the length of the move will not be as far and your trade entries will be more frequent. If you trade larger trends you will trade less frequently and ride each trade much longer. The choice is yours.

Trend indicators and tools are available in commercial packages, trading platforms and software packages. Many of them are good but not well understood.

If you always trade with the trend you will always enjoy some level of success. I can equate trading with the trend to sailing with the wind instead of against it.

On the other hand ignorance of the trend will cause an insurmountable obstacle to profitable trading. If you don’t know what the trend is for the currency pair you are trading you will never consistently make money trading the spot forex.

What is worse is that if you make a trade on the spot forex and have a profitable trade or losing trade you wont be able to pinpoint why.

Always knowing the trend and always trade in the direction of the trend.

Being a trend trader is NOT scalping, and it is NOT trading the news. If you choose to scalp the spot forex knowing the trend is still extremely beneficial. Most scalpers eventually quit scalping because it is too tiresome and eventually become trend traders anyway, so why not start out where you are going to wind up??

Also if you trade the news you can also do this in the direction of the trend and it is amazing how often the
trend is right about an expected news event, so why risk ever trading against the trend at all.

Also its common sense. Trading against the trend or when there is no established trend will only cause grief and losses.

If no trend is present on a currency pair it is usually range bound. This means that the pair is
trading in a small or large pip range and appears to be bouncing up and down within the range. It cannot
move higher or lower because it is stuck in the range.

When the pair moves up and down within the range two things are possible. One possibility is that the pair is bouncing up and down in a ragged fashion that is difficult to trade. The second possibility is that the pair is oscillating in clear smooth cycles up and down within the range. When a pair is oscillating it can be traded fairly easily. Just wait until it reaches the top or bottom of a cycle and trade it when it starts
going the other direction. This occurs very frequently in the spot forex. When a pair is in a smooth
oscillation even a beginner trader can trade these oscillating pairs very safely.

So now we have our foundation for trading the spot forex. We must always trade with the trend. Traders who go with the trend will always have some level of success. Consistently trading against the trend or ignorance of the trend will result in consistent losing trades.

Author's information:Mark Mc Donnell is the lead trading plan writer for www.forexearlywarning.com, an inexpensive trading plans service available to all spot forex traders. He has many years of experience trading stocks, equity options and the spot forex. He has spent the last four years of his career devoted solely in studying the movements of the spot forex, conducting trend analysis, and determining how this impacts retail level forex traders.

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