Hundreds of Currency Trading Indicators, Which One to Use?

You probably have looked at your trading platform in the past or even recently and wondered which currency trading indicator or indicators are the best one(s) to use. It's not easy to decide because most traders do not understand how and why they were developed. And many of the indicators that were designed for a particular purpose, do a poor job of meeting that purpose.

How does a trader decide which indicator or indicators to use? First, using too many indicators is a recipe for disaster. One of the 26 Reasons Why People Fail In Forex, is the use of too many indicators. There is a plausible reason for this. The short answer is that the indicator that gives you the best percentage signal for a trade is the best indicator for you to use. So, if you have 3 indicators all telling you to trade and one has a 45% win percentage and the other two have less, then the 45% winning percentage is the one you should use. Adding up all 3 of your indicators does not give you an increased chance of winning. I explain this more completely in the book.

Second, which indicator is the best one to use? There are going to be many arguments regarding this. Many professional traders use some kind of momentum indicator or oscillator in their trading decisions. The best one in my opinion and in the opinion of many is RSI, the Relative Strength Index. However, as in most cases when it comes to indicators is that people are using the wrong information when it comes to reading what they say or mean.

For example, RSIs best use is not overbought and oversold readings. In fact, it can be easily proved that in most cases these reading are false. Nor is it the location of divergences simply because many traders today believe that divergences are signals for price to reverse when in fact they are signals that price is about to do the opposite.

The best use of RSI and momentum is a signal that is produced called a Reversal. I have written about Reversals here on this site and extensively in RSI Fundamentals: Beginning to Advanced (You can order this now and get a FREE copy of RSI Trading Examples Vol. 1 until January 2nd, 2011.)

If you learn about Reversals and where they occur you will be on your way to trading Forex in a successful way and the currency trading indicators question will no longer be an issue for you.

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Currency Trading For Beginners Made Easy

If you are a new trader looking for currency trading tips, this currency trading for beginners article is definitely one you should not miss. As a beginner, it can be quite tough as you are not well versed in the arena of forex trading. Therefore it is extremely important for you to have a good education so that you can have a good foundation in future.

Currency trading is not as simple as what you have seen in the advertisement. It is not something that can make you money with the click of a button, it requires you to put in time and efforts to learn and practice until you manage to get it right. Therefore I have decided to write this currency trading for beginners article to share with you things that I know.

Below are some of the things you need to learn as a beginner

1) Trend Line - The trend line forms the fundamental of trading and it is something that all currency traders must know. The trend line represents an area of support and resistance where the bulls and bears fought for territory.

2) Choice of Forex Indicators - There are over a hundred different indicators available for traders to use but it is impossible for anyone to use them all. Therefore you need to have a good understand of the various type of indicators in order to know which are the suitable one for your trading.

3) Types of Forex Strategies - As a trader, you definitely need to know the different ways you can trade the currency market. You can choose to be a breakout trader, scalper, range trader or position trader depending on your time availability and trading style. Therefore you need to spend some time to learn the various types of forex strategies and see which one suits your best.

There are a lot to learn in trading but the above are 3 most important things that you need to learn now in order to proceed. I hope that this currency trading for beginners article is of help to you by showing you the important things to take note so that you will not be lost.

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Currency Trading Charts - How to Use the Main Indicators to Forecast Price Movements

Even if you're new to currency trading (or forex) then you'll certainly have come across currency trading charts. And with them invariably come a number of indicators designed to help you interpret what's been happening on the chart and, more importantly, what's most likely to happen in the future. This article will help you decide which of these indicators can help you the most and which can be ignored.

1. Simple Moving Average (SMA)

If, for example, you have a 30 period simple moving average setting then it shows you the average price over the previous 30 accounting periods. So if it is an hourly chart, i.e. where each bar, or "candlestick" represents the price movement of one hour, then the SMA shows the average price of the last 30 hours.

You can tell at a glance from this whether the price has been rising or falling over that period. This in turn shows you what the current "trend" is. If you trade following the "trend", as many successful traders do, then the SMA is your guide.

It's normal to use two SMAs, for example a 5 period and a 30 period, if you're a short term trader, or a 25 period and a 150 period, if you're a long term trader. You then watch out for the shorter period SMA crossing over the longer period SMA, which is often a signal to go long or short, as the case may be. The strongest signal is where the current price goes through both the SMAs at a steep angle.

2. Bollinger Bands

Bollinger Bands are two lines that reflect the volatility of the market, very similar to support and resistance levels. It is frequently found that when the market price touches or goes through one of the two lines that it then tends to return to the middle ground between the two. If the lines are close together it means there is a lack of activity in the market, with little buying and selling. Increased activity causes the lines to spread further apart in the direction the price is moving.

One thing to look out for is where the Bollinger Band lines are close together for a period of time. This indicates a lack of buying and selling, where traders are as yet undecided as to whether the price is too high or too low. Very often, once the price moves through one of the lines there is a strong movement in price in that direction, market activity increases and the lines accordingly move further apart. They are more of a short term indicator.

3. Stochastics

Stochastics uses the moving average principle to determine whether the market is overbought or oversold. The theory is that if the moving average lines are above 70 the market is overbought (which means you should buy) and if they are under 30 the market is oversold (so you should sell, or go short).

4. Relative Strength Index (RSI)

This is similar to stochastics in that it shows if a market is overbought or oversold. It uses the markers of 80 and 20, rather than 70 and 30, but the principle is the same. If your stochastics and RSI indicators agree on an overbought or oversold market then it's a very strong signal to buy or sell, as the case may be.

5. Parabolic Stop And Reversal (SAR)

Everyone would like to buy at the bottom of the market and sell at the top, or go short at the top and long at the bottom. In this case, Parabolic Stop And Reversal is probably the best indicator for spotting reversals in trend. It comes into its own in long term trading. The signal appears on your chart as a series of dots. When the market price crosses the dotted line going up it's a signal to buy, and vice versa.

There are other indicators, and all have their strong points and drawbacks. But your knowledge of these five will help you make a majority of correct decisions on your currency trading account, both for going into the market and coming out with a profit.

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Which Forex Currency Pairs Are the Best For Range Trading?

Have you ever noticed that one trading strategy may work absolutely beautifully with one currency pair, but it may fail miserably with another? That is because each currency pair has its own personality, special behaviors, and idiosyncrasies. And if you don't understand and pay attention to these differences, you will be leaving money on the table. So let's look at which currency pairs are the absolute best for range trading.

Every currency will range at one time or another. Especially after large moves, traders need to take a break and step away, and so the currency tends to range back and forth. But some currency pairs are absolute goldmines for trading ranges.

Let's start here - you know that interest rates are a huge factor (in fact, maybe the single most important factor) when it comes to the foreign exchange. You will get the best range trading opportunities on currency pairs where each country's interest rate is similar.

So that means that currency pairs like the EUR/CHF and the CHF/JPY are going to be good excellent range trading pairs. That is because their interest rates are very similar, so money is not flowing strongly into either currency in comparison to another. Bring up a chart of the either of these currencies and you will see that they do not move around that much.

On the other hand, currency pairs whose countries have large interest rate differentials between each other (i.e. AUD/JPY and AUD/CHF) will tend to range much less.

Some quick basics on range trading:

1) You don't have to wait for the price to actually hit the top and bottom of the range to enter a trade. Divide the range into 4 even sections, wait for the price to reach the upper or lower quartile, and then look for indications the market is turning.

2) Use Bollinger bands, the ADX indicator, or the Average True Range indicator to tell you then the market may turn.

3) Always put your stop loss outside of the range - never inside.

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Currency Trading Tips - How to Choose the Best Pair For Forex Currency Trade

Does anyone of you have an idea on which currency pairs are the best to trade in forex? Is it the major currency pairs, the cross pairs or the exotic pairs? Well there isn't really a right and wrong answer; it depends on how you define 'best'. If a currency pair has tight spreads, it may be considered the best trading currency pair for you, but may not apply for others. So now we'll discuss on various factors on choosing a forex pair:

1. Spreads - There is always an advantage to trade currency pairs that have a tight spread in forex trading. It means that lesser spreads equal to more profit, lesser spreads give you more room for price fluctuation if you have a tight stop loss and lesser spreads may help you to breakeven your forex trade earlier. Does that make sense to you? EUR/USD has the tightest spread of 2 to 3 pips for most forex brokers and even 1 pip for some brokers, while GBP/JPY has spread of 6 to 10 pips. For some forex traders who care a lot on spreads, he will certainly choose the formal over the latter.

2. Trendiness - For chartist traders like me, I depend mostly on technical indicators to help me decide which forex currency pair to trade. Although volatility is considered good, but it is then more risky and need a wider range of stop loss. e.g. is GBP/USD. On my forex trading screen, I have 7 to 8 currency pairs in smaller windows, so that I'm able to decide which pair is the trendiest, even when all pairs seem to have a trend. Though EUR/USD and USD/CHF is negatively correlated 90% of the time, you will sometimes find either of the pairs trending better than the other. Therefore you will want to choose the more trendy pair to trade with the help of some forex technical indicators.

3. Trading Sessions - The best time to trade forex is when the market is the most active and therefore has the biggest volume of trades. During Asian hours when Tokyo opens, the better trading time is from 7PM EST to 10PM EST. But since not all the currency pairs are actively moving, you may want to trade AUD/USD as it starts to move during the stated timing. When London market opens, this is where you can trade almost all the currency pairs. I will trade from 3AM EST to 6AM EST depending on the trendiness of the pair; example is GBP/USD, EUR/USD etc. Another trading session which will experience high volatility is from 8AM EST to 12PM EST where both the London and U.S. markets are open at the same time.

After looking at the above factors, do you think there is a right and wrong answer on choosing the best forex currency pair? I doubt so. As long as you are using a reliable forex trading system to help you, all currency pairs can be profitable. To know more on the behavior of the currency pairs, you can find it in my FREE forex ebook with a forex trading system that can help you generate profits consistently.

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What's the Best Currency Trading Strategy?

Ironically, I believe the best currency trading strategy is the one that is right now being extremely underused. The strategy that I am referring to is called price action. The concept is as old as the free market itself. You could research on traders like Jesse Livermore, who at the turn of the 20th century, became millionaires just by being able to follow the price movement of a stock, caused by the other floor traders.

Sure, the technology has changed, but the concept still remains the same. The only difference now is that many mainstream traders have gotten, quite frankly, too lazy for their own good.

Instead of sitting down and trying to figure out what makes the market really tick, they instead prefer just to blast their charts with a bunch of useless indicators that don't provide any kind of insight to market, but somehow traders use them to "analyze" the market.

You can judge for yourself how well this kind of trading methodology works. by looking at the famous statistic, which is: 95% of forex traders end up losing money. Hopefully when you read that statistic, you'll realize that you just can''t let technology do the work for you. You are going to have to get your feet wet, if you want to succeed trading forex.

Basically when you have indicators telling you when and how to trade, you take yourself out of the equation. You minus well be a robot if that is the case.

When YOU become the indicator is when you really learn how to read a chart properly. That starts and ends with the best currency trading strategy: price action.

Read more...

Currency Trading Tips - How to Choose the Best Pair For Forex Currency Trade

Does anyone of you have an idea on which currency pairs are the best to trade in forex? Is it the major currency pairs, the cross pairs or the exotic pairs? Well there isn't really a right and wrong answer; it depends on how you define 'best'. If a currency pair has tight spreads, it may be considered the best trading currency pair for you, but may not apply for others. So now we'll discuss on various factors on choosing a forex pair:

1. Spreads - There is always an advantage to trade currency pairs that have a tight spread in forex trading. It means that lesser spreads equal to more profit, lesser spreads give you more room for price fluctuation if you have a tight stop loss and lesser spreads may help you to breakeven your forex trade earlier. Does that make sense to you? EUR/USD has the tightest spread of 2 to 3 pips for most forex brokers and even 1 pip for some brokers, while GBP/JPY has spread of 6 to 10 pips. For some forex traders who care a lot on spreads, he will certainly choose the formal over the latter.

2. Trendiness - For chartist traders like me, I depend mostly on technical indicators to help me decide which forex currency pair to trade. Although volatility is considered good, but it is then more risky and need a wider range of stop loss. e.g. is GBP/USD. On my forex trading screen, I have 7 to 8 currency pairs in smaller windows, so that I'm able to decide which pair is the trendiest, even when all pairs seem to have a trend. Though EUR/USD and USD/CHF is negatively correlated 90% of the time, you will sometimes find either of the pairs trending better than the other. Therefore you will want to choose the more trendy pair to trade with the help of some forex technical indicators.

3. Trading Sessions - The best time to trade forex is when the market is the most active and therefore has the biggest volume of trades. During Asian hours when Tokyo opens, the better trading time is from 7PM EST to 10PM EST. But since not all the currency pairs are actively moving, you may want to trade AUD/USD as it starts to move during the stated timing. When London market opens, this is where you can trade almost all the currency pairs. I will trade from 3AM EST to 6AM EST depending on the trendiness of the pair; example is GBP/USD, EUR/USD etc. Another trading session which will experience high volatility is from 8AM EST to 12PM EST where both the London and U.S. markets are open at the same time.

After looking at the above factors, do you think there is a right and wrong answer on choosing the best forex currency pair? I doubt so. As long as you are using a reliable forex trading system to help you, all currency pairs can be profitable. To know more on the behavior of the currency pairs, you can find it in my FREE forex ebook with a forex trading system that can help you generate profits consistently.

Read more...

Forex Currency Trading Software Types - Robots and Indicators

Looking for the best Forex currency trading software?  Well, nothing is perfect, but there is software out there that will get you pretty darn close!

This is a very volatile time, with world economies under great stress and fluctuations.  So the currency exchange market can be quite lucrative, if you know what you are doing.  But unless you are willing to learn the intricacies of the exchange process, follow the Forex market, and monitor business news real time, so you can somehow "predict" the future movement, you risk loosing your investment.

That is why Forex currency trading software has become so popular.  No longer do you have to spend years learning the system and sit at your terminal to monitor the exchange rates and analyze their trends, you can make use of the power of the computer to reliably do this for you.

Robots and Indicators

There are two types of Forex currency trading software: robots and indicators.  The (almost) sure fire Forex trading robots will make instant decisions based on the market conditions and automatically execute buy/sell orders within the parameters you set, even while you are asleep!  If you prefer more of a "hands on" approach, there is also indicator software available that merely tell you the right times to buy/sell based on the current market conditions, leaving you in complete control of the decision making.

Besides being accurate, a big benefit of the Forex currency trading software is that they take the emotions out of trading.  It is very easy to panic when you see a currency crashing, or to over react when the currency is rising.  The latest systems remove the ego from the equation, allowing you to make profitable trades based on proven algorithms with 80% to 96% success rates.

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How to Use Leading and Lagging Indicators in Currency Trading?

Technical analysis uses charts and indicators to predict the future direction of the market. As a trader, you must master both how to read the different charts as well as how to use the different technical indicators. Technical indicators are basically of two types: 1) Leading and 2) Lagging. Understading how to use both the leading and lagging indicators can give you the edge as a trader. Some of the these indicators are highly useful and considered to be an important weapon in the hands of a skilled and savvy trader.

What are leading indicators? As the name suggests, a leading indicator leads the price action in the market and gives buy or sell signals ahead of the reversal in the trend or ahead of the start of a new trend in the market. Leading indicators are considered to be very important as they give you the trading signal ahead of time. One of the most popular leading indicator is the pivot points. There is a whole method of trading called pivot point trading that has been developed over time. Pivot points combined with fibonacci retracement can be highly effective. Pivot points can be calculated for any market. The other popular leading indicators are the oscillators like the Relative Strength Index (RSI) and the Stochastics. However, the problem with most of these leading indicators is that they often give false buy or sell signals. They need confirmation from other indicators.

On the other hand, as the name suggests lagging indicators are lagging behind the price action. Lagging indicators are often later. Sometime too late in giving the buy or sell signals. Since these indicators are lagging, they tell you about the reversal in the trend or the start of a new trend afterwards that might be late for you. Most popular lagging indicators are the Moving Averages. Moving averages are of three types; 1) Simple, 2) Exponential and 3)Weighted. Another very important lagging indicator is the MACD ( Moving Average Convergence Divergence). Moving averages and MACD are widley used by stock traders, forex traders, futures traders and options traders!

Stochastics is one of the popular leading indicators that is used in different markets like stocks, forex, futures, commodities, options almost all the markets. Stochastics is based on a complex statistical formula that you need not go into. You just need to know this that it gives an overbought or oversold conditions in the market. It is scaled from 0 to 100. When it touches 80, the market is considered to be overbough and when it touches 20 level at the bottom, the market is thought to be oversold.

On the other had the MACD ( pronounced Mac Dee) is a lagging indicator that uses three exponential moving averages 12,26 and 9. 12 represent the faster exponential moving average that uses the prices in the last 12 time periods. 26 represents the slower exponential moving average. 9 represent the difference between the two.

So what indicators to use? Professional traders combine the leading indicator with the lagging indicator to make the buy or sell decision. The best combination is combining Stochastics with MACD on 1 Hourly charts to identify the trend of the day. You must master these leading and lagging indicators if you want to make a successful trader.

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A Good Forex Currency Trading System - Trade These Economic Indicators

It seems everyone is looking for a good forex currency trading system. Well before jumping into the big time it is important to lay a foundation. Before we get into currency trading system let's start with looking at what drives the currency market. Let's look at a list of economic indicators. It may not be fun but I can assure you that a good working knowledge of these indicators (used in the USA) will help you in the long run and allow you to fully utilize your forex currency trading system to the fullest potential.

It is important to remember that the numbers are not as important as the anticipation of these numbers, this drives the market. When you learn how to use these indicators you will also improve your currency trading system.

Let's take a look at a few of these with a brief explanation. This is part one of an ongoing series

CCI - Consumer Confidence Index

The Conference Board; Last Tuesday of each month, 10:00am EST, covers current month's data. The CCI is a survey based on a sample of 5,000 U.S. households and is considered one of the most accurate indicators of confidence. The idea behind consumer confidence is that when the economy warrants more jobs, increased wages, and lower interest rates, it increases our confidence and spending power. The respondents answer questions about their income, the market condition as they see it, and the chances to see increase in their income. Confidence is looked at closely by the Federal Reserve when determining interest rates. It is considered to be a big market mover as private consumption is two thirds of the American economy. If you are looking for an effective forex currency trading system, then using this report can make it even better.

CPI - Consumer Price Index; Core-CPI

Bureau of Labor and Statistics; Around the 20th of each month, 8:30am EST, covers previous month's data.

The CPI is considered the most widely used measure of inflation and is regarded as an indicator of the effectiveness of government policy. The CPI is a basket of consumer goods (and services) tracked from month to month (excluding taxes). The CPI is one of the most followed economic indicators and considered to be a very big market mover. A rising CPI indicates inflation. The Core-CPI (CPI, excluding food and energy, expense items which are subject to seasonal fluctuations) gives a more stringent measure of general prices.

In the next article we will look at the following economic indicators: Employment Report, Employment Situation Report, and the FOMC Meeting (Federal Open Market Committee): Rate announcement.

If you really want to improve your trading then be sure to click on the link below, you will be glad you did. Good luck trading.

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What's the Best Currency Trading Strategy?

Ironically, I believe the best currency trading strategy is the one that is right now being extremely underused. The strategy that I am referring to is called price action. The concept is as old as the free market itself. You could research on traders like Jesse Livermore, who at the turn of the 20th century, became millionaires just by being able to follow the price movement of a stock, caused by the other floor traders.

Sure, the technology has changed, but the concept still remains the same. The only difference now is that many mainstream traders have gotten, quite frankly, too lazy for their own good.

Instead of sitting down and trying to figure out what makes the market really tick, they instead prefer just to blast their charts with a bunch of useless indicators that don't provide any kind of insight to market, but somehow traders use them to "analyze" the market.

You can judge for yourself how well this kind of trading methodology works. by looking at the famous statistic, which is: 95% of forex traders end up losing money. Hopefully when you read that statistic, you'll realize that you just can''t let technology do the work for you. You are going to have to get your feet wet, if you want to succeed trading forex.

Basically when you have indicators telling you when and how to trade, you take yourself out of the equation. You minus well be a robot if that is the case.

When YOU become the indicator is when you really learn how to read a chart properly. That starts and ends with the best currency trading strategy: price action.

Read more...

Forex Currency Trading System Education - The Best Forex Plan For The Forex Currency Trading System

When entering the Forex currency trading system it is imperative that you devise the best Forex plan. This includes getting the best Forex education training you possibly can before jumping headfirst into the Forex currency trading system. This article will give you a guideline for devising the best Forex plan for fast profits with a proven Forex currency trading system that really works.

The Forex market is the largest trading market in the world. The Forex market is said to turn over more than $1.5 trillion dollars each and every day.

When stepping into the Forex arena it is critical that you have an effective and proven Forex plan to follow to help you perfect the Forex currency trading system and to get the best Forex education as you possibly can.

Step one of any Forex plan is becoming as informed and education as you possibly can on how the Forex currency trading system actually operates. There are many fundamentals and strategies involved with the Forex currency trading system. In order to begin and expand your Forex education you need to enrol in a reputable Forex trading system course online and familarize yourself with the Forex currency market with a Forex simulated trading account.

A Forex simulated trading account does not require any investment of capital. What it does do though is train Forex beginners in the strategies and fundamentals of consistent and profitable Forex trading.

Step two involves expanding your Forex education. A Forex currency trading beginner must learn not to be too greedy too soon. By analysing world and political news and taking all the clues from Forex pivot points a Forex currency trading beginner can learn to minimize his losses with stop loss orders and to maximize his profits.

Step three of the Forex plan involves learning sound Forex investment strategies including the buy signals that the Forex charts frequently give Forex traders.

Step four of the Forex plan involves knowing when the rally for the Euro begins. The busiest hours in the Forex are the London hours which are after 2am New York time.

Step five of the Forex plan for beginners is to actually select that amount that you are willing to make on every Forex trade before you begin trading. This amount ought to be more than or equal to the earnings that you are willing to lose in the Forex trade.

It is tempting to dive into the Forex currency trading market headfirst and make trading decisions without any experience or sound strategies in place. If you want to join the ranks of 90 percent of Forex traders who are consistently unsuccessful then I suggest you ditch this Forex plan and dive right in.

On the other hand, if you want to learn to be a successful trader with a proven and effective Forex currency trading system in place and an almost fool-proof Forex plan then check out the website below where we can help you become the successful Forex trader you long to be.

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How to Use Leading and Lagging Indicators in Currency Trading?

Technical analysis uses charts and indicators to predict the future direction of the market. As a trader, you must master both how to read the different charts as well as how to use the different technical indicators. Technical indicators are basically of two types: 1) Leading and 2) Lagging. Understading how to use both the leading and lagging indicators can give you the edge as a trader. Some of the these indicators are highly useful and considered to be an important weapon in the hands of a skilled and savvy trader.

What are leading indicators? As the name suggests, a leading indicator leads the price action in the market and gives buy or sell signals ahead of the reversal in the trend or ahead of the start of a new trend in the market. Leading indicators are considered to be very important as they give you the trading signal ahead of time. One of the most popular leading indicator is the pivot points. There is a whole method of trading called pivot point trading that has been developed over time. Pivot points combined with fibonacci retracement can be highly effective. Pivot points can be calculated for any market. The other popular leading indicators are the oscillators like the Relative Strength Index (RSI) and the Stochastics. However, the problem with most of these leading indicators is that they often give false buy or sell signals. They need confirmation from other indicators.

On the other hand, as the name suggests lagging indicators are lagging behind the price action. Lagging indicators are often later. Sometime too late in giving the buy or sell signals. Since these indicators are lagging, they tell you about the reversal in the trend or the start of a new trend afterwards that might be late for you. Most popular lagging indicators are the Moving Averages. Moving averages are of three types; 1) Simple, 2) Exponential and 3)Weighted. Another very important lagging indicator is the MACD ( Moving Average Convergence Divergence). Moving averages and MACD are widley used by stock traders, forex traders, futures traders and options traders!

Stochastics is one of the popular leading indicators that is used in different markets like stocks, forex, futures, commodities, options almost all the markets. Stochastics is based on a complex statistical formula that you need not go into. You just need to know this that it gives an overbought or oversold conditions in the market. It is scaled from 0 to 100. When it touches 80, the market is considered to be overbough and when it touches 20 level at the bottom, the market is thought to be oversold.

On the other had the MACD ( pronounced Mac Dee) is a lagging indicator that uses three exponential moving averages 12,26 and 9. 12 represent the faster exponential moving average that uses the prices in the last 12 time periods. 26 represents the slower exponential moving average. 9 represent the difference between the two.

So what indicators to use? Professional traders combine the leading indicator with the lagging indicator to make the buy or sell decision. The best combination is combining Stochastics with MACD on 1 Hourly charts to identify the trend of the day. You must master these leading and lagging indicators if you want to make a successful trader.

Read more...

Currency Trading Charts - How to Use the Main Indicators to Forecast Price Movements

Even if you're new to currency trading (or forex) then you'll certainly have come across currency trading charts. And with them invariably come a number of indicators designed to help you interpret what's been happening on the chart and, more importantly, what's most likely to happen in the future. This article will help you decide which of these indicators can help you the most and which can be ignored.

1. Simple Moving Average (SMA)

If, for example, you have a 30 period simple moving average setting then it shows you the average price over the previous 30 accounting periods. So if it is an hourly chart, i.e. where each bar, or "candlestick" represents the price movement of one hour, then the SMA shows the average price of the last 30 hours.

You can tell at a glance from this whether the price has been rising or falling over that period. This in turn shows you what the current "trend" is. If you trade following the "trend", as many successful traders do, then the SMA is your guide.

It's normal to use two SMAs, for example a 5 period and a 30 period, if you're a short term trader, or a 25 period and a 150 period, if you're a long term trader. You then watch out for the shorter period SMA crossing over the longer period SMA, which is often a signal to go long or short, as the case may be. The strongest signal is where the current price goes through both the SMAs at a steep angle.

2. Bollinger Bands

Bollinger Bands are two lines that reflect the volatility of the market, very similar to support and resistance levels. It is frequently found that when the market price touches or goes through one of the two lines that it then tends to return to the middle ground between the two. If the lines are close together it means there is a lack of activity in the market, with little buying and selling. Increased activity causes the lines to spread further apart in the direction the price is moving.

One thing to look out for is where the Bollinger Band lines are close together for a period of time. This indicates a lack of buying and selling, where traders are as yet undecided as to whether the price is too high or too low. Very often, once the price moves through one of the lines there is a strong movement in price in that direction, market activity increases and the lines accordingly move further apart. They are more of a short term indicator.

3. Stochastics

Stochastics uses the moving average principle to determine whether the market is overbought or oversold. The theory is that if the moving average lines are above 70 the market is overbought (which means you should buy) and if they are under 30 the market is oversold (so you should sell, or go short).

4. Relative Strength Index (RSI)

This is similar to stochastics in that it shows if a market is overbought or oversold. It uses the markers of 80 and 20, rather than 70 and 30, but the principle is the same. If your stochastics and RSI indicators agree on an overbought or oversold market then it's a very strong signal to buy or sell, as the case may be.

5. Parabolic Stop And Reversal (SAR)

Everyone would like to buy at the bottom of the market and sell at the top, or go short at the top and long at the bottom. In this case, Parabolic Stop And Reversal is probably the best indicator for spotting reversals in trend. It comes into its own in long term trading. The signal appears on your chart as a series of dots. When the market price crosses the dotted line going up it's a signal to buy, and vice versa.

There are other indicators, and all have their strong points and drawbacks. But your knowledge of these five will help you make a majority of correct decisions on your currency trading account, both for going into the market and coming out with a profit.

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A Good Forex Currency Trading System - Trade These Economic Indicators

It seems everyone is looking for a good forex currency trading system. Well before jumping into the big time it is important to lay a foundation. Before we get into currency trading system let's start with looking at what drives the currency market. Let's look at a list of economic indicators. It may not be fun but I can assure you that a good working knowledge of these indicators (used in the USA) will help you in the long run and allow you to fully utilize your forex currency trading system to the fullest potential.

It is important to remember that the numbers are not as important as the anticipation of these numbers, this drives the market. When you learn how to use these indicators you will also improve your currency trading system.

Let's take a look at a few of these with a brief explanation. This is part one of an ongoing series

CCI - Consumer Confidence Index

The Conference Board; Last Tuesday of each month, 10:00am EST, covers current month's data. The CCI is a survey based on a sample of 5,000 U.S. households and is considered one of the most accurate indicators of confidence. The idea behind consumer confidence is that when the economy warrants more jobs, increased wages, and lower interest rates, it increases our confidence and spending power. The respondents answer questions about their income, the market condition as they see it, and the chances to see increase in their income. Confidence is looked at closely by the Federal Reserve when determining interest rates. It is considered to be a big market mover as private consumption is two thirds of the American economy. If you are looking for an effective forex currency trading system, then using this report can make it even better.

CPI - Consumer Price Index; Core-CPI

Bureau of Labor and Statistics; Around the 20th of each month, 8:30am EST, covers previous month's data.

The CPI is considered the most widely used measure of inflation and is regarded as an indicator of the effectiveness of government policy. The CPI is a basket of consumer goods (and services) tracked from month to month (excluding taxes). The CPI is one of the most followed economic indicators and considered to be a very big market mover. A rising CPI indicates inflation. The Core-CPI (CPI, excluding food and energy, expense items which are subject to seasonal fluctuations) gives a more stringent measure of general prices.

In the next article we will look at the following economic indicators: Employment Report, Employment Situation Report, and the FOMC Meeting (Federal Open Market Committee): Rate announcement.

If you really want to improve your trading then be sure to click on the link below, you will be glad you did. Good luck trading.

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What's the Best Currency Trading Strategy?

Ironically, I believe the best currency trading strategy is the one that is right now being extremely underused. The strategy that I am referring to is called price action. The concept is as old as the free market itself. You could research on traders like Jesse Livermore, who at the turn of the 20th century, became millionaires just by being able to follow the price movement of a stock, caused by the other floor traders.

Sure, the technology has changed, but the concept still remains the same. The only difference now is that many mainstream traders have gotten, quite frankly, too lazy for their own good.

Instead of sitting down and trying to figure out what makes the market really tick, they instead prefer just to blast their charts with a bunch of useless indicators that don't provide any kind of insight to market, but somehow traders use them to "analyze" the market.

You can judge for yourself how well this kind of trading methodology works. by looking at the famous statistic, which is: 95% of forex traders end up losing money. Hopefully when you read that statistic, you'll realize that you just can''t let technology do the work for you. You are going to have to get your feet wet, if you want to succeed trading forex.

Basically when you have indicators telling you when and how to trade, you take yourself out of the equation. You minus well be a robot if that is the case.

When YOU become the indicator is when you really learn how to read a chart properly. That starts and ends with the best currency trading strategy: price action.

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Best Forex Currency Trading Course

Many beginning forex traders choose to get their trading education from a forex educational course. Such courses can be very good mediums to obtain your forex trading training through, however there are some general concepts that you want to make sure the forex trading course you are thinking about buying hits upon. Unfortunately, not all trading courses are equal in their effectiveness or relevancy; therefore it is imperative that you do the proper research to find the best forex trading course out here. This article will give you an idea of some of the more important factors that you should look for when researching to find the best forex trading course.

• Simple yet Effective Trading Method

One of the more important features that you need to look for to qualify any forex trading course as the "best" is that it teaches a simple yet effective trading method. The bottom-line here is that the majority of forex trading systems and educational courses available on the internet and elsewhere teach people overly complicated methods that just end up causing you to lose money in the long run. Simple trading methods like price action analysis provide you with a time-tested trading strategy that is not going to lose relevance or effectiveness. Trying to interpret numerous lagging indicators or paying thousands of dollars for some forex trading robot software program is simply a waste of your time and money. Any professional trader will tell you that simplicity is the key to success in any financial market; once you start over-thinking your strategy you begin to kick start emotional trading mistakes. Thus, the best forex trading course will teach a simple method

• Higher Time Frame Trading

It is a statistical fact that longer-term swing traders and traders who hold positions for more than a few hours at a time make more money on a yearly basis than "day traders". There are far too many advantages to trading off higher time frames to even begin touching upon in this article. Just keep in mind that over-trading is one of the main causes of blown out trading accounts. And when you start looking at time frames under 1 hour, you are setting yourself up for the perils of over-trading. The best forex trading course will teach a method that works just as good, if not better, on daily charts as it does on 1 hour charts. As a general rule of thumb, the higher the time frame the more accurate the signal.

• Works in All Market Conditions

One of the main issues with lagging indicator-based trading methods and software "robot" trading programs is that they are optimized for a specific market condition. The inherent flaw with this logic is that markets are constantly ebbing and flowing, going from calm to volatile and from consolidation to trending in a matter of hours. The best forex currency trading course out there will teach a trading method that provides you with accurate entries in all market conditions, not just in strong trends. Finding a forex course that teaches such a method will provide you with many more quality opportunities to profit off from the 24 hour nature of the forex market.

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Which Forex Currency Pairs Are the Best For Range Trading?

Have you ever noticed that one trading strategy may work absolutely beautifully with one currency pair, but it may fail miserably with another? That is because each currency pair has its own personality, special behaviors, and idiosyncrasies. And if you don't understand and pay attention to these differences, you will be leaving money on the table. So let's look at which currency pairs are the absolute best for range trading.

Every currency will range at one time or another. Especially after large moves, traders need to take a break and step away, and so the currency tends to range back and forth. But some currency pairs are absolute goldmines for trading ranges.

Let's start here - you know that interest rates are a huge factor (in fact, maybe the single most important factor) when it comes to the foreign exchange. You will get the best range trading opportunities on currency pairs where each country's interest rate is similar.

So that means that currency pairs like the EUR/CHF and the CHF/JPY are going to be good excellent range trading pairs. That is because their interest rates are very similar, so money is not flowing strongly into either currency in comparison to another. Bring up a chart of the either of these currencies and you will see that they do not move around that much.

On the other hand, currency pairs whose countries have large interest rate differentials between each other (i.e. AUD/JPY and AUD/CHF) will tend to range much less.

Some quick basics on range trading:

1) You don't have to wait for the price to actually hit the top and bottom of the range to enter a trade. Divide the range into 4 even sections, wait for the price to reach the upper or lower quartile, and then look for indications the market is turning.

2) Use Bollinger bands, the ADX indicator, or the Average True Range indicator to tell you then the market may turn.

3) Always put your stop loss outside of the range - never inside.

Read more...

Which Forex Currency Pairs Are the Best For Range Trading?

Have you ever noticed that one trading strategy may work absolutely beautifully with one currency pair, but it may fail miserably with another? That is because each currency pair has its own personality, special behaviors, and idiosyncrasies. And if you don't understand and pay attention to these differences, you will be leaving money on the table. So let's look at which currency pairs are the absolute best for range trading.

Every currency will range at one time or another. Especially after large moves, traders need to take a break and step away, and so the currency tends to range back and forth. But some currency pairs are absolute goldmines for trading ranges.

Let's start here - you know that interest rates are a huge factor (in fact, maybe the single most important factor) when it comes to the foreign exchange. You will get the best range trading opportunities on currency pairs where each country's interest rate is similar.

So that means that currency pairs like the EUR/CHF and the CHF/JPY are going to be good excellent range trading pairs. That is because their interest rates are very similar, so money is not flowing strongly into either currency in comparison to another. Bring up a chart of the either of these currencies and you will see that they do not move around that much.

On the other hand, currency pairs whose countries have large interest rate differentials between each other (i.e. AUD/JPY and AUD/CHF) will tend to range much less.

Some quick basics on range trading:

1) You don't have to wait for the price to actually hit the top and bottom of the range to enter a trade. Divide the range into 4 even sections, wait for the price to reach the upper or lower quartile, and then look for indications the market is turning.

2) Use Bollinger bands, the ADX indicator, or the Average True Range indicator to tell you then the market may turn.

3) Always put your stop loss outside of the range - never inside.

Read more...