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Hai everyone......
Just call me Viz je...I've just started forex ni...just opened a real account early April '09 ...capital small je.....start from USD500.. it's the only amount that I'm willing to spend for this forex matter...hahaha..okidoki...I start this blog just to share with you all out there about my trades...I hope you all out there have the same mindset like me...positive & discipline when trading wooikey...
Ok.. for the start I wanna share my live....mmmmm not live but recorded live trading sesion from mypast few weeks experience..hhmmmmm quit horrible man...when the1st time I wanna enter the market, when it just negative 10-20 pips I started to sweat......hahaha..but until 21st May '09 my account equity is now at USD7,992.32...and it's still increasing.....mmmmm it's cool right.....You can view my updated statement here.... I'm willing to share it with you...If you wanna know more about how it's work, please register through form below...only registered member that I will entertain ok...REGISTRATION IS STILL FREE..!!You all can monitor my recorded "LIVE" trade at link attached.ooppss I've forgot.....I've opened a real account at www.FxPro.comMoney Management & Trading habits:
Maximum 5% risk per pair.
Your risk to profit ratio has to be minimum 1:2. That means if you are taking a 5% risk on a trade make sure your profit target would be at least 10%.Always have realistic targets.
More trades you take the more you expose your account for losses. No trader in this world can profit from every single market move.
Patience plays a big part in trading. Take the trades only if you are at least 90% sure of profiting from it. If you are not sure stay away from the trade. Staying on the sideline is as good as winning.
Always have a trading strategy … make a habit to stick to it doesn’t matter how desperate you are. Always trust your strategy but not bloomberg or some statement from citibank.
Your charts are your forex 'GURU'. Everything what you need to know about forex is on your charts. You will learn something new everyday from your charts.
Specialize in one or two pairs. Every single pair has it’s own characteristics. No two pairs are the same. Don’t trade all the pairs your broker can offer. If you specialize in one or two pairs very soon you will be able to read the pair like a road map. Stay away from the ranging markets.
Enjoy your trades yaaaa...wish U all a SUCCESS & PROFITABLE TRADESMY FEATURED "LIVE" RECORDED VIDEO21st May '0918th May '0915th May '09 -
Viz Forex Tips and Advice
Which way is the market moving? How far up or down will it go? And when will it go the other way? These are the basic concerns of the technical analyst. Behind the charts and graphs and mathematical formulas used to analyze market trends are some basic concepts that apply to most of the theories employed by today’s technical analysts.These precepts define the key tools of technical analysis and how to use them to identify buyingand selling opportunities.Money Management & Trading habits:
Maximum 5% risk per pair.Your risk to profit ratio has to be minimum 1:2. That means if you are taking a 5% risk on a trade make sure your profit target would be at least 10%.Always have realistic targets.
More trades you take the more you expose your account for losses. No trader in this world can profit from every single market move.
Patience plays a big part in trading. Take the trades only if you are at least 90% sure of profiting from it. If you are not sure stay away from the trade. Staying on the sideline is as good as winning.
Always have a trading strategy … make a habit to stick to it doesn’t matter how desperate you are. Always trust your strategy but not bloomberg or some statement from citibank.
Your charts are your forex 'GURU'. Everything what you need to know about forex is on your charts. You will learn something new everyday from you charts.
Specialize in one or two pairs. Every single pair has it’s own characteristics. No two pairs are the same. Don’t trade all the pairs your broker can offer. If you specialize in one or two pairs very soon you will be able to read the pair like a road map. Stay away from the ranging markets.
1. Map the TrendsStudy long-term charts. Begin a chart analysis with monthly andweekly charts spanning severalyears. A larger scale map of the market provides more visibility
and a better long-term perspective on a market. Once the long-term has been established, then consult daily and intra-day charts. A short-term market view alone can often be deceptive. Even if you only trade the very short term, you will do better if you’re trading in the same direction as the intermediate and longer term trends.2. Spot the Trend and Go With It
Determine the trend and follow it. Market trends come in many sizes – long-term, intermediate-term and short-term. First, determine which one you’re going to trade and use the appropriate chart. Make sure you trade in the direction of that trend. Buy dips if the trend is up. Sell rallies if the trend is down. If you’re trading the intermediate trend, use daily and weekly charts. If you’re day trading, use daily and intra-day charts. But in each case, let the longer range chart determine the trend, and then use the shorter term chart for timing.
3. Find the Low and High of It
Find support and resistance levels. The best place to buy a market is near support levels. That support is usually a previous reaction low. The best place to sell a market is near resistance levels. Resistance is usually a previous peak. After a resistance peak has been broken, it will usually provide support on subsequent pullbacks. In other words, the old “high” becomes the new low. In the same way, when a support level has been broken, it will usually produce selling on subsequent rallies – the old “low” can become the new “high.”
4. Know How Far to Backtrack
Measure percentage retracements. Market corrections up or down usually retrace a significant portion of the previous trend. You can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retracements of 38% and 62% are also worth watching. During a pullback in an uptrend, therefore, initial buy points are in the 33-38% retracement area.
5. Draw the Line
Draw trend lines. Trend lines are one of the simplest and most effective charting tools. All you need is a straight edge and two points on the chart. Up trend lines are drawn along two successive lows. Down trend lines are drawn along two successive peaks. Prices will often pull back to trend lines before resuming their trend. The breaking of trend lines usually signals a change in trend. A valid trend line should be touched at least three times. The longer a trend line has been in effect, and the more times it has been tested, the more important it becomes.
6. Follow that Average
Follow moving averages. Moving averages provide objective buy and sell signals. They tell you if existing trend is still in motion and help confirm a trend change. Moving averages do not tell you in advance, however, that a trend change is imminent. A combination chart of two moving averages is the most popular way of finding trading signals. Some popular futures combinations are 4- and 9-day moving averages, 9- and 18-day, 5- and 20-day. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day moving average also provide good trading signals. Since moving average chart lines are trend-following indicators, they work best in a trending market.
7. Learn the Turns
Track oscillators. Oscillators help identify overbought and oversold markets. While moving averages offer confirmation of a market trend change, oscillators often help warn us in advance that a market has rallied or fallen too far and will soon turn. Two of the most popular are the Relative Strength Index (RSI) and Stochastics. They both work on a scale of 0 to 100. With the RSI, readings over 70 are overbought while readings below 30 are oversold. The overbought and oversold values for Stochastics are 80 and 20. Most traders use 14-days or weeks for stochastics and either 9 or 14 days or weeks for RSI. Oscillator divergences often warn of market turns. These tools work best in a trading market range. Weekly signals can be used as filters on daily signals. Daily signals can be used as filters for intra-day charts.
8. Know the Warning Signs
Trade MACD. The Moving Average Convergence Divergence (MACD) indicator (developed by Gerald Appel) combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line. Weekly signals take precedence over daily signals. An MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It’s called a “histogram” because vertical bars are used to show the difference between the two lines on the chart.
9. Trend or Not a Trend
Use ADX. The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or a trading phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.
10. Know the Confirming Signs
Include volume and open interest. Volume and open interest are important confirming indicators in futures markets. Volume precedes price. It’s important to ensure that heavier volume is taking place in the direction of the prevailing trend. In an uptrend, heavier volume should be seen on up days. Rising open interest confirms that new money is supporting the prevailing trend. Declining open interest is often a warning that the trend is near completion. A solid price uptrend should be accompanied by rising volume and rising open interest.
“11.”
Technical analysis is a skill that improves with experience and study. Always be a student and keep learning.
- John Murphy
Definitions: Leonardo Fibonacci was a thirteenth century mathematician who “rediscovered” a precise and almost constant relationship between Hindu-Arabic numbers in a sequence (1,1,2,3,5,8,13,21,34,55,89,144,etc. to infinity). The sum of any two consecutive numbers in this sequence equals the next higher number. After the first four, the ratio of any number in the sequence to its next higher number approaches .618. That ratio was known to the ancient Greek and Egyptian mathematicians as the “Golden Mean” which had critical applications in art, architecture and in nature.
Stochastics - an oscillator popularized by George Lane in an article on the subject which appeared in 1984. It is based on the observation that as prices increase, closing prices tend to be closer to the upper end of the price range; conversely, in down trends, closing prices tend to be near the lower end of the range. Stochastics has slightly wider overbought and oversold boundaries than the RSI and is therefore a more volatile indicator. The term “stochastic” refers to the location of a current futures price in relation to its range over a set period of time (usually 14 days).
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Viz Daily Live Trade
Viz Daily Live Trade
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Viz Expert Advisor (EA)
Viz Expert Advisor (EA)
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Viz Forex Indicators
A simple method that I'm using daily to forecast Trend & Position to enter.more
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Viz Forex Daily Forecast
Viz Forex Daily Forecast
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Creating Your Fx SystemThere are several things we want to achieve when creating Forex trading system:1. Find entry points as early as possible.2. Find exit points securing maximum gains.3. Avoid fake entry and exit signals.If accomplished, these three goals will yield a profitable trading system.So, where to start from?# 1 Choosing your Time FrameThis is the first step, where you will need to answer yourself: how many hours you want to dedicate to trading? Would you prefer sitting in front of the monitor constantly for several hours trading short (5, 15, 30 minutes) time frames that would require constant market monitoring and quick reaction to price moves OR you would be more comfortable with setting up your charts once or twice a day and never turn your monitor on during the rest of the time?This is pretty much about the comfort and free time you have on your hands that could be spend in the Forex currency world, however, while testing your new strategies you may want to find out about their performance in different time frames and then choose the most accurate and profitable option.# 2 Choosing Trading ToolsThere are plenty of trading tools and indicators available to Forex traders, but not all of them could give the fastest signal about upcoming trading opportunities. And traders’ goal, of course, is to get into the trade as early as possible and take maximum advantage of price moves.Among indicators that could provide traders with a fast signal about upcoming changes and possible trading opportunities are such indicators as EMA (Exponential Moving Average), SMA (Simple Moving Average), Parabolic SAR; Fast, Slow or Full Stochastic, MACD and others. The key moment here is to fully understand the principles of their work to be able to take maximum advantage of signals those indicators produce.One of the common ways to spot a trend reversal as fast as possible is to use Moving Averages. Such simple strategy as using 5 EMA and 10 EMA crossover will show trend reversal and new trading opportunity at its earliest stage.Another example would be Stochastic lines crossover or MACD lines crossover. The idea behind it is simple: when two line cross each other the trend is changing to the opposite and new opportunity for entry arises. Stochastic and MACD indicators also use moving averages.Combining indicators on the one chart and experimenting with indicators values, traders can create an optimal and the fastest way to spot the early trading opportunities.# 3 Choosing a currency pair and finding its active trading hoursCurrencies have their own “characters” or behavior. Some are extremely active like GBP/USD or GBP/CHF, some are quite consistent and steady trending like EUR/JPY or EUR/GBP.Different indicator set-ups, different values may be used to achieve best results for each currency pair.Also a good idea is to find the most active hours for a chosen currency pair. Those hours of currency highest activity are easy to spot on the chart and should be used to get maximum profits during the trading session.# 4 Choosing additional trading tools to confirm signals received earlierOnce we found time frame, indicators and currency pair(s) that respond the best it is time for the most crucial step — finding additional tools/indicators that will confirm received earlier signals and give either a green light for action or save Trader from fake-outs.As a confirmation indicator Trader can use again any indicator or trading tool he/she is well familiar with. It is recommended to be more sophisticated in choosing additional tool to confirm the prior signal. It could be also the same indicator but with different settings.For example, with our initial 5 EMA and 10 EMA crossover method we could use additional 20 EMA line and wait until 5 EMA crosses 10 EMA (which is the first signal) and continues through 20 EMA (which would be our confirmation for action).Or instead, we could opt for MACD indicator – it is a very good Forex indicator that can reveal a lot of useful information. Finding the best working value set-up for MACD (it has initial settings are (12, 26, 9) ) that will perfectly match our time frame and particular currency behavior we can use it as a great confirmation indicator to separate most promising trades from fake, loosing ones.Other good indicators/tools to confirm the signals are RSI, Stochastic, Fibonacci etc. Improvising and learning Trader can find the one that produce best results.
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What is Day Trading / Intraday?Day trading / Intraday is defined as the buying and selling of a security within a single trading day. This can occur in any marketplace but is most common in the foreign-exchange (forex) market and stock market. Typically, day traders are well educated and well funded. They utilize high amounts of leverage and short-term trading strategies to capitalize on small price movements in highly liquid stocks or currencies. Day traders serve two critical functions in the marketplace - they keep the markets running efficiently via arbitrage and they provide much of the markets' liquidity (especially in the stock market). This article will take an objective look at day trading, who does it and how it is done.The ControversySearch "day trading" on Google and you will see why there is controversy! The profit potential of day trading is perhaps one of the most debated (and misunderstood) topics on Wall Street. Countless internet scams have capitalized on this confusion by promising enormous returns in a short period. Meanwhile, the media continues to promote this type of trading as a get-rich-quick scheme that always works. The truth lies somewhere in the middle. There are those who engage in this type of trading without sufficient knowledge (or some even admittedly for a gambler's high!); however, there are day traders who are able to make a successful living.Many professional money managers and financial advisors shy away from day trading, arguing that in most cases the reward does not justify the risk. They often cite that no day trader is world renown, whereas icons like Warren Buffett and Peter Lynch (see The Greatest Investors) are a testament to the success that can be attained by more traditional forms of investing. Conversely, those who do day trade insist there is profit to be made. They say the success rate is inherently lower as a result of the higher complexity and necessary risk of day trading, combined with all the related scams.Overall, the street remains divided on the issue. At the very least they agree that day trading is not for everyone and involves significant risks. Moreover, it demands an in-depth understanding of how the markets work and various strategies for profiting in the short term. Now we'll take a look at the various aspects of day trading.Characteristics of a Day TraderThis article will focus on professional day traders - that is, those that trade for a living, not simply as a hobby or for a “gambling high”. These traders are typically well-established in the field and have in-depth knowledge of the marketplace. Here are some of the prerequisites to day trading:Knowledge and Experience in the MarketplaceIndividuals who attempt to day trade without an understanding of market fundamentals often end up losing money.Sufficient CapitalOne cannot expect to make money day trading. Day traders use only risk capital, which they can afford to lose. Not only does this protect them from financial ruin, but it also helps eliminate emotion from their trading. A large amount of capital is often necessary to capitalize effectively on intra-day price movements.A StrategyA trader needs an edge over the rest of the market. There are several different strategies that day traders utilize, including: swing trading, arbitrage as well as trading news, among others. These strategies are refined until they produce consistent profits and effectively limit losses.DisciplineA profitable strategy is useless without discipline. Many day traders end up losing a lot of money because they fail to make trades that meet their own criteria. As they say, “Plan the trade and trade the plan.” Success is impossible without discipline.Day Trading for a LivingThere are two primary divisions of professional day traders: those who work alone and/or those who work for a larger institution. Most day traders who trade for a living work for a large institution. The fact is these people have access to things individual traders could only dream of: a direct line to a dealing desk, large amounts of capital and leverage, expensive analytical software and much more. These traders are typically the ones looking for easy profits that can be made from arbitrage opportunities and news events. The resources to which they have access allow them to capitalize on these less risky day trades before individual traders can react. Individual traders often manage other people's money or simply trade with their own. Few of them have access to a dealing desk; however, they often have strong ties to a brokerage (due to the large amounts of commission spending) and access to other resources. However, the limited scope of these resources prevents them from competing directly with institutional day traders; instead, they are forced to take more risks. Individual traders typically day trade using technical analysis and swing trades - combined with some leverage - to generate adequate profits on such small price movements in highly liquid stocks.TradingDay trading demands access to some of the most complex financial services and instruments in the marketplace. Day traders require:Access to the Trading DeskThis is usually reserved for traders working for larger institutions or those who manage large amounts of money. The dealing desk provides these traders with instantaneous order executions, which can become important, especially when sharp price movements occur. For example, when an acquisition is announced, day traders looking at merger arbitrage can get their orders in before the rest of the market, taking advantage of the price differential.Multiple News SourcesIn the move "Wall Street" Gordon Gekko says that 'information is the most important commodity when trading’. News provides the majority of opportunities day traders capitalize on, so it is imperative to be the first to know when something big happens. The typical trading room contains access to the Dow Jones Newswire, televisions showing CNBC and other news agencies, as well as software that constantly analyzes various other news sources for important stories.Analytical SoftwareTrading software is an expensive necessity for most day traders. Those who rely on technical indicators or swing trades rely more on software than news. This software typically contains many features, including:Automatic pattern recognition - This means that the trading program identifies technical indicators like flags, channels and even more complex indicators like Elliott Wave patterns.Genetic and neural applications - These are programs that utilize neural networks and genetic algorithms to perfect trading systems to make more accurate predictions of future price movements. (see Neural Trading: Biological Keys to Profit.)Broker integration - Some of these applications even interface directly with the brokerage, which allows for instantaneous and even automatic execution of trades. This is helpful for eliminating emotion from trading and improving execution times.Back testing - This allows traders to look at how a certain strategy would have performed in the past in order to predict more accurately how it will perform in the future (although past performance is not always indicative of future results).Combined these tools provide traders with an edge over the rest of the marketplace. It is easy to see why, without them, so many inexperienced traders lose money.ConclusionAlthough day trading has become somewhat of a controversial phenomenon, its prevalence is undeniable. Day traders, both institutional and individual, play an important role in the marketplace by keeping the markets efficient and liquid. Some argue that individuals should stay away from day trading, while others argue that it is a viable means to profit. And although it is becoming increasingly popular among inexperienced traders, it should be left primarily to those with the skills and resources needed to succeed.
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Technical Analysis FoundationTechnical analysis attempts to forecast future price movements by examining past market data.Most traders use technical analysis to get a "big picture" on an investment's price history. Even fundamental traders will glance at a chart to see if they're buying at a fair price, selling at a cyclical top or entering a choppy, sideways market.Technical analysts make a few key assumptions:All market fundamentals are reflected in price data. Moods, differing opinions, and other market fundamentals need not be studied.History repeats itself in regular, fairly predictable patterns. These patterns, generated by price movements, are called signals. A technical analyst's goal is to uncover a current market's signals by examining past market signals.Prices move in trends. Technical analysts believe price fluctuations are not random and unpredictable. Once an up, down or sideways trend has been established, it usually will continue for a period.Get in and get out - at the right timeTraders rely on price charts, volume charts and other mathematical representations of market data (called studies) to find the ideal entry and exit points for a trade. Some studies help identify a trend, while others help determine the strength and sustainability of that trend over time.Technical analysis can add discipline and minimize emotion in your trading plan. It can be hard to screen out fundamental impressions and stick with your entry and exit points as planned. While no system is perfect, technical analysis helps you see your trading plan through more objectively and dispassionately.Price chart typesBar chartsThe most common type of chart showing price action. Each bar represents a period of time - a "period" as short as 1 minute or as long as several years. Over time, bar charts show distinct price patterns.Candlestick chartsInstead of a simple bar, each candlestick shows the high, low, opening and closing price for that period of time it represents. Candlestick patterns provide greater visual detail as they develop.Point & figure chartsPoint & figure patterns resemble bar chart patterns, except Xs and Os are used to mark changes in price direction. Point & figure charts make no use of time scale to associate a certain day with a certain price action.Technical indicator typesTrendTrend indicators smooth price data out, so that a persistent up, down or sideways trend can be easily seen. (Examples: moving averages, trend lines)StrengthStrength indicators describe the intensity of market opinion on a certain price by examining the market positions taken by various market participants. Volume or open interest are the basic ingredients of strength indicators.Volatility"Volatility" refers to the magnitude of day-to-day price fluctuations, whatever their directional trend. Changes in volatility tend to anticipate changes in prices. (Example: Bollinger Bands)CycleCycle indicators indicate repeating market patterns from recurrent events such as seasons or elections. Cycle indicators determine the timing of a particular market pattern. (Example: Elliott Wave)Support/resistanceSupport and resistance describes the price levels where markets repeatedly rise or fall and then reverse. This phenomenon is attributed to basic supply and demand. (Example: Trend Lines)MomentumMomentum indicators determine the strength or weakness of a trend as it progresses over time. Momentum is highest when a trend starts and lowest when the trend changes.When price and momentum diverge, it suggests weakness. If price extremes occur with weak momentum, it signals an end of movement in that direction. If momentum is trending strongly and prices are flat, it signals a potential change in price direction. (Example: Stochastic, MACD, RSI)Using Technical IndicatorsPrice charts help traders identify trade-able market trends - while technical indicators help them judge a trend's strength and sustainability.If an indicator suggests a reversal, confirm the shift before you act. That might mean waiting for another period to confirm the same indicator's signal, or checking out another indicator. Patience will help you read the signals accurately and respond accordingly.Moving AveragesTypes of Moving AveragesOne of the most widely used indicators, moving averages help traders verify existing trends, identify emerging trends, and view overextended trends about to reverse. As the name suggests, these are lines overlaid on a chart that "average out" short-term price fluctuations, so you can see the long-term price trend.A simple moving average weighs each price point over the specified period equally. The trader defines whether the high, low, or close is used, and these price points are added together and averaged, forming a line.A weighted moving average gives more emphasis to the latest data. It smoothes out a price curve, while making the average more responsive to recent price changes.An exponential moving average weighs more recent price data in a different way. An exponential moving average multiplies a percentage of the most recent price by the previous period's average price.Finding the best moving averages and period for your pairIt can take a while to find the best combination of moving average and period length for your currency pair. The right combo will make the trend you're looking for clearly visible, as it develops. Finding that optimal fit is called curve fitting.Usually traders start by comparing a few timeframes for their moving averages over a historical chart. Then you can compare how well and how early each timeframe signaled changes in the price data as they developed, then adjust accordingly.When you've found a moving average that works well for your currency pair, you can consider this as a line of support for long positions or resistance for short positions. If prices cross this line, that often signals a currency is reversing course. Here's an example:Longer-term moving averages define a trend, but shorter-term MAs can signal its shift faster. That's why many traders watch moving averages with different timeframes at once. If a short-term MA crosses your longer-term MA, it can signal your trend is ending - and time to pare back your position.StochasticsStochastic studies, or oscillators, help monitor a trend's sustainability and signal reversals in prices. Stochastics come in two types, %K and %D, measured on a scale from 0 to 100. %K is the "fast", more sensitive indicator, while %D is "slow" and takes more time to turn.Stochastic studies aren't useful in choppy, sideways markets. In these conditions %K and %D lines might cross too frequently to signal anything.Relative Strength Index (RSI)Like stochastics, RSI measures momentum of price movements on a scale of 0 to 100.Always confirm RSI signals with other indicators. RSI can remain at lofty or sunken levels for a long time, without prices reversing course. All that means is that a market is quite strong or weak - and likely to stay so for a while.Adjust your RSI to the right timeframe for you. A short-term RSI will be very sensitive and give out many signals, not all of them sustainable; a longer-term RSI will be less choppy. Try to match your RSI timeframe to your own trading style: short-term for day traders, longer-term for position traders.Divergences between prices and RSI may suggest a trend reversal. Of course, make sure you confirm your signals before acting.Bollinger BandsBollinger Bands are volatility curves used to identify extreme highs or lows in price. Bollinger Bands establish "bands" around a currency's moving average, using a set number of standard deviations around the moving average. Creator Jon Bollinger recommends the following:Touching a high or low band doesn't necessarily mean an immediate trend reversal. Bollinger Bands adjust dynamically as volatility changes, so touching the band just means prices are extremely volatile. Use Bollinger Bands with other indicators to determine the trend's strength.MACD - Moving Average Convergence DivergenceDeveloped by Gerald Appel, MACD (pronounced "Mac-Dee") plots the difference between 26-day and 12-day exponential MAs.A 9-day MA serves as a trigger line: when MACD crosses below the trigger, it's a bearish signal; when MACD crosses above the trigger, it's a bullish signal.If MACD turns positive and makes higher lows while prices are still tanking, this could be a strong buy signal. Conversely, if MACD makes lower highs while prices are making new highs, this could be a strong bearish divergence and a sell signal.Fibonacci RetracementsFibonacci retracement levels are a sequence of numbers discovered by the noted mathematician Leonardo da Pisa in the 12th century. These numbers describe cycles found throughout nature; technical analysts use them to find pullbacks in the currency market.After a significant price move, up or down, prices often "retrace" most or all of the original move. As prices retrace, support and resistance levels often occur at or near the Fibonacci Retracement levels. For currencies, that means retracements usually happen at 23.6%, 38.2%, 50% or 61.8% of the previous move.Cashing in on Short-Term Currency TrendsMost of the time, markets don't show a clear trend - they bounce back and forth between support and resistance levels. This sideways movement is called a trading range. Below is a strategy that can help you identify entry points on short-term trends, while protecting your profits with trailing stops.+Trade Set-upThe strategy uses two charts with different time periods (10-minute and hourly), along with two technical indicators: a 200-bar moving average and a 14-bar slow stochastic study.Step 1: Identify a trendCompare the moving averages on both charts. A trend may be developing when price is consistently above or below the moving averages on both charts.Step 2: Pinpoint entryOnce you've identified a trend, look for the following two conditions at the same time on the 10-minute chart:Price is no more than 20 pips above (to buy) or 20 pips below (to sell) the MA.The "fast" stochastic (%K) crosses above the "slow" stochastic (%D) below 20 (to buy), or crosses below the "slow" stochastic above 80 (to sell).Step 3: Ride the trendSet a trailing stop after the trade entry.On a LONG position, the stop order should be 10 pips BELOW the 200-period MA on the 10-minute chart. You'll RAISE the stop as the trade goes in your favor.On a SHORT position, place the stop 10 pips ABOVE the MA. You'll LOWER the stop as the trade goes in your favor.An example: EUR/USD, June 2002Step 1: compare the hourly and 10-minute EUR/USD charts. Look for a time when price is above the 200-period moving averages on both charts.On the hourly chart, price is almost exclusively above the 200-hour moving average, indicating a persistent uptrend.On the 10-minute chart, price moves (and remains above) the moving average in the last third of the chart.Step 2: pinpoint the entry zone - when the market is within 20 pips of the moving average on the 10- minute chart, and the stochastic lines cross. As indicated in the chart, conditions are right around 8pm on June 27.Buy EUR/USD at .9883Protective t-stop set at .9858 (10 pips below MA)Sell EUR/USD at .9992Protective t-stop has moved up to .9967Profit = 84 pips, or US $840+ Placing contingent orders may not necessarily limit your losses.Using Indicators to Identify TrendsYou've probably heard the expression "the trend is your friend" - but what does it mean? If your trend takes a sudden counter-move and your trailing stop activates at a loss, it's natural to ask yourself: how can you be sure the next trend will be more friendly?Confirm the trend is realUsing technical indicators in combination can help ensure a potential trend has staying power - a good habit for all kinds of technical trading, but especially in forex. Currencies tend to move in trends naturally due to long-term macroeconomic factors and short-term international capital flows. All of this makes it that much harder to see a trade-able trend that will last.TrendlinesFrom a trader's perspective, a trend is a predictable price response at levels of support or resistance that change over time. Trendlines mark these levels, with support acting as the "floor" and resistance as the "ceiling". When prices break through either of these levels, that signals a trend for that movement to continue.It's easy to draw perfect trendlines on historical charts - but harder to be right when the trend is still developing. Still trendlines help focus your attention on finding support and resistance levels, the first step to identifying a new trend.Start by drawing trendlines over longer timeframes (daily or weekly charts) and then carry them forward into shorter timeframes (hourly or 4-hourly). That way you'll highlight the most important support and resistance levels first and not lose the major trend development by chasing a short-term, minor one.Directional Movement Indicator (DMI)Developed by J. Welles Wilder, the DMI minimizes the guesswork in spotting trends and helps confirm trendline analysis.The DMI system has two parts:ADX (average directional movement index). If the ADX reading is above 20, that indicates a "real" or sustainable trend. The ADX also measures the trend's strength: the >higher the ADX, the stronger the trend.The ADX also provides an early indicator of a trend's end. When it drops from its highest level, it may be time to exit the position and wait for a fresh signal from the the DI+/DI-.DI+ and DI- lines. When DI+ crosses up through DI-, that's considered a buy sign. When the opposite happens, that's usually a sell sign.Wilder recommends following the "extreme point rule" to confirm the signals. Note the extreme point for that period in the direction of the crossover (the high if DI+ crosses up over DI-; the low if DI- crosses up over DI+). Only if that extreme point is breached in the subsequent period is a trade signal confirmed.Many traders use the parabolic indicator along with the ADX to identify a trend's end. The parabolic indicator follows the price action but accelerates its own rate of increase over time and in response to the trend. The parabolic continually closes in on the price, and only a steadily accelerating price rise (the essence of a trend) will prevent the price from falling below the parabolic, signaling an end to the trend.Trading short-termThe methods above can be used for short-term decision making, even in markets that are trading sideways - a "trendless" market.However, if you're trading short-term, don't ignore the big picture entirely. There's no point in trying to ride a short-term trend that is counter to the larger trend.
