What You Need To Know About Forex Trading

by dmeadows

No matter how you choose to learn and improve your forex trading skills, you need to understand 4 basic elements of Technical Analysis to be able to trade for profit with any forex trading system. No matter what your forex system is, when learning to trade forex, you must know these 4 basic key elements:

1st:

You have to understand how to pick the TREND of the market session that you are trading in.

2nd:

To help you trade with the trend of the session you need to understand price action and how to use OSCILLATORS, as they help to smooth out the trend.

3rd:

You will have to have a working knowledge of FIBONACCI's.

4th:

The last element is being able to look in the past at previous SUPPORT & RESISTANCE price points in the market.

1. Trend

How do you pick the TREND of the Day or more important the TREND of the Market Session that you are trading in?

When you start your trading for the day, the first question you have to you ask yourself is: Which way am I trading today? In other words: Am I buying or selling? Is the market going to go up or down?

If you don't know that answer within the first 2 minutes of looking at your charts, then you are guessing and that means you will probably trade wrong and you will probably loose.

You need to understand that there are 4 trading sessions in each 24 hour day (Sydney, Tokyo, London, and New York). Each session has its own characteristics in direct relationship with Daily Range, Areas of Support and Resistance also known as (Swing Highs and Swing Lows) and actual Price Action Movement.

In order to properly determine the trend you have to look at multiple time frames at least (3) i.e. 5min chart, 15min, 1hr chart. This will help you to see a longer term trend and a shorter term trend so that you can understand how to trade with and against, meaning you will learn how to trade Counter Trend Trade as well as With the Trend Trade. This is very important because the market does not move strait up or strait down.

You need a MENTOR that will teach you how to determine the TREND.

2. OSCILLATORS
To help you trade with the trend of the session you need to understand price action and how to use OSCILLATORS, as they help to smooth out the trend.

Oscillators are momentum indicators that help us to see when the market is moving from an overbought or oversold position. In other words they help us to see when the market has moved in one direction long enough to merit a retrace or pullback.

There are two types: Those that show Momentum and those that show Price Exhaustion.

Momentum Oscillators are typically some sort of Moving Average. There are: Simple, Exponential, Smoothed, and Linear Weighted to name a few. These are supposed to filter out the "noise of the market" and help you to determine a more smoothed out trend movement.

Price Exhaustion Oscillators are available by the dozens like: Stochastics, Relative Strength Index, Average True Range, Ichimoku Kinko Hyo, MACD and many, many others.

The problem with Oscillators is that they are all LAGGING, meaning that they follow price action as the market moves up and down the Oscillator will follow the price up and down. They do not predict, they cannot predict, they will never predict with accuracy the way price is going to move. In other words, there is no such thing as a "leading Indicator".

They simply show us that a trend has been established and thus help us to pick the direction that we should be looking to trade in accordance with Price Action.

As such you should never use more than 1 Momentum Oscillator and 1 Price Exhaustion Oscillator. If you use multiple Oscillators you will always be behind the trade, meaning that the move up or down will be over before you can react and enter trying to follow the trend. Multiple Oscillators create what is known as "Analysis Paralysis".

Your MENTOR should show you which OSCILLATORS to choose and how to use them properly.

So before joining any forex brokers, forex charts or forex opportunity, it is extremely important to find and talk to a forex mentor that will teach you these parts of technical analysis in order for you to be able to trade for profit.

About the Author

The author of this article is a proven 7 year forex trader and has trained new and experienced traders all over the world. For more information on this incredible forex mentor and the remaining 2 key elements **CLICK HERE**

Article Source: Content for Reprint

Do Not Use Pivot Points When Trading The Forex!

by dmeadows

The biggest financial market in the world is the FOREX! If you are looking to get into forex trading or are looking for a forex opportunity, make sure you do not take any forex training or forex training systems that include methods that use pivot points. I DO NOT USE PIVOT POINTS! I DO NOT USE PIVOT POINTS AND YOU SHOULD NOT USE PIVOT POINTS!!

Here is why! First what is a pivot point? A pivot point is a technical indicator derived by calculating the numerical average of any financial instrument, using the high, low and closing prices.

How to Calculate Pivot Points
There are several different methods for calculating pivot points, the most common of which is the five-point system. This system uses the previous days high, low and close, along with two support levels and two resistance levels (totaling five price points) to derive a pivot point. The equations are as follows:

R2 = P + (H - L) = P + (R1 - S1)

R1 = (P x 2) - L
P = (H + L + C) / 3
S1 = (P x 2) - H
S2 = P - (H - L) = P - (R1 - S1)

Here, "S" represents the support levels, "R" the resistance levels and "P" the pivot point. High, low and close are represented by the "H", "L" and "C" respectively. Note that the high, low and close in 24-hour markets (such as the FOREIGN EXCHANGE) are often calculated using New York closing time (4pm EST) on a 24-hour cycle. Limited markets (such as the NYSE) simply use the high, low and close from the day's standard trading hours.

THE reason I don't use pivot points is because they are nothing more than a FIBONACCI. YOU SHOULD NOT USE PIVOT POINTS FOR POINTS OF ENTRY, which is what a lot of trainers are teaching their students to do!

Many forex trading strategies use a combination of pivot points and Fibonacci's. HOW ARE Fibonacci's SIMILAR TO PIVOT POINTS?

Fibonacci's

In technical analysis this tool is used by most to try and predict a retracement of two extreme points (a low to high or high to low move) to a Fibonacci ratio of 23.6%, 38.2%, 50%, 61.8%, 78.6% or 100%. There are also Fib extensions such as the 1.27%, 1.618% and 2.618%.

The thought is that a trader will be able to identify a strategic or specific point in a market price pull back and in effect target price positions for stop losses or take profits.

While it is true that the above can and does happen, the truth of the matter is that NO one can tell exactly which Fib Level (price point) will be the one that turns the market. When you look at them they all look good. So what traders have done in an effort to find the magic fib level that will turn the market is to employ other strategies to help them pin point the exact Fib (price point) that will be there target.

These strategies include: Looking in the past at previous price points of Support and Resistance. They use Trend Lines that overlap on a Fib Level. They will look for overlapping Fib Levels. They will look for Moving Averages and other Lagging Indicators to help them see which Fib Level is going to turn the market.

While there may be some success with using these techniques the reality is no one knows which fib level will turn the market! The same holds true for those who use pivot points, they do not know at which pivot point the market will reverse or continue! This is why I do not use pivot points as points of entry!

About the Author

The author of this article is a proven 7 year forex trader and has trained new and experienced traders all over the world. For more information on this incredible forex mentor and 3 other key forex trading elements **CLICK HERE**

Article Source: Content for Reprint

Forex Tips

Always use Stop Loss Orders. If you don't use them, it will kill you financially. We recommend stops 30 pips above or below your entry price.

Don't loose more than 5%-10% of your total capital in each trade. Adjust your stop orders and leverage if needed.

Let the profits run, cut the losses. Instead of using Take Profit orders, it's better to use a "Trailing Stop". If your broker doesn't support it, you can do it manually. Set the stop price at 30 pips (or the amount that you have chosen) above/below the maximum/minimum price since your entry. You will have to adjust the stop level continuously, but you will get much better results.

Don't go against the trend. Go with the trend.

Capitalize well. Fund your account with enough money. For standard accounts, at least $5000 (for mini accounts $500).

It's less risky to don't let trades opened overnight.