Trends
The Forex markets have been studied for over 100 years and over that
time trends have repeated themselves and patterns have become
consistent and fairly reliable. It is very important to understand
that prices move in Trends and those traders who trade with the trend
are more successful. Finding the trend will help you become more aware
of the market direction.
Always find the trend and trade with it, not against it. This applies
even if it takes days or weeks for a new trend to become obvious.
Looking at the charts and drawing trend lines is the most common form
of technical analysis. A trend is usually when 3 or more lows line up.
A market that is trending up is making a series of higher highs and
higher lows and you can draw a line connecting the bottoms (roughly),
this is a support line.
The market is trending down when it is making lower lows and lower
highs, if you draw a line connecting the tops you have drawn a
resistance line.
Charts
Traders have different times they wish to trade in, some are
comfortable using 1 and 5 minute time frame charts others prefer 15
min or 1 hour charts placing 4 to 10 trades daily and others prefer to
place a trade and let it run for several days, weeks or longer. This
is a personal decision. There is not one time period that makes more
money than the others.
When reading the charts it is a good idea to look at 3 different time
frames. The reason for this is the largest time gives a general over
view of what is happening, the direction of the market, then zooming
in to the next level shows what is going on more recently and when you
should enter the market and the third and closest time frame is the
one where you would actually monitor your trade.
The 3 different time frames can be any combination depending on your
chosen trading time. A daily chart might show a downward trend but the
5 minute charts could show an upward trend and the 1 minute charts
show a downward trend, these charts would be of no interest to anyone
leaving a trade to run for weeks. Again there are software programs
available to help identify trends and placement of orders. Having some
knowledge I believe is useful even with automated programs.
There are 3 main types of Charts,the candlestick chart, bar charts and
line charts.
They all come in many different time periods, 1 minute, 5 minutes, 10
minutes, 30 minutes, 1 hour, 2 hours, 4 hours, 1 day, 1 week and 1
month plus others.
With the bar chart each bar represents one period of time (as above)
and on each bar there are 4 marks. The highest point reached in that
time frame, the lowest point, the opening point and the closing point.
Those 4 points tell you what has happened in the market for that time.
The candlestick charts give exactly the same information with the
candlestick body changing colour on a high(bullish) and changing back
on a low (bearish) market
The line charts simply chart the direction of the market moving up,
down or sideways. You usually have a choice of what sort of chart you
want from the broker of your choice.
Trade in the time frame you feel comfortable with. There is no right
or wrong time frame.
Pips
This is the smallest increment the value of the currency can change
by. The pricing of the currency is always showing the value of one
currency against another. For example EUR: USD 1.4443 (1 Euro is worth
USD 1.4443) The last number shown on a price (for example the 3 in the
following price 1.4443) is known as a pip.
If the value of the Euro went up 20 pips it would be shown as EUR: USD
1.4463. All value changes are referred to as pip changes.
The main objective of trading is to gain as many profitable pips as
possible. The more dollars you are trading and the higher your
leverage the higher the value of the pip is worth to you. Trading a
full lot of 100,000 with leverage the pip value is around $10 however
with a mini account you are trading 1/10th of the size therefore a pip
is worth $1.00.
Traders have different goals, short term traders might look at gains
of 20 pips per trade, for a longer term Traders will be looking at 100
plus pips.
Good luck with your trading.
Trade With Japanese Candlesticks... http://candlemaxprf.blogspot.com/#
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