Free Forex Strategies: Where to Get Started?

Forex trading is a specialist job. It requires a good understanding of the market trends and forex news. However, the timing of entry and exit plays a crucial role in determining your profit levels. With free forex strategies, you can time your investments properly and ensure profitable trading.

Five Most Popular Free Forex Strategies

Here are some free forex strategies that will assist you in improving your chances of trading profitably:

Buying on margins: When buying on margins, the broker allows a higher degree of leverage to the trader. Thus, the trader can invest an amount higher than the actual value of his live trading account. However, the trader faces high risks, as profits are highly dependent on trading entry and exit. Only an experienced trader can make good profits while buying on margins.

Historical levels: It refers to the maximum and minimum range in which the value of a currency pair has fluctuated during a given period in time. Analyzing the level gives a general idea of the possible values of the currency in the near future. Analyzing historical values is a time taking task, but it is the safest strategy for novice traders. There is a very low probability of a currency value deviating from the historical levels without any major news outbreak.

Loss Order: With the stop loss order strategy, a trader determines the value of a currency pair in advance. This helps to minimize the risk of major losses and increases the possibility of trading profitably.

Managed accounts: This strategy is aimed at those individuals who want to invest in the currency market, rather than being interested in physical trading. Managed accounts work similar to the mutual funds arrangement. The individual invests money with a forex trading company. Experienced traders with the company use investors' money for forex trading. The profit generated or loss incurred is shared among the individual investors. Although managed accounts are not very profitable, they save investors' time and efforts required for trading profitably.

Simple Moving Average: Also known as SMA, it is the average exchange value for a specific pair of currency over a period of time. You can make investment decisions by relying on SMA values for any given currency. Investing in currencies that have stable SMA values is a safe way to trade forex.

Emotions And Forex Trading Don't Mix

The key to making money in the currency exchange market is to avoid emotional decisions and to follow a carefully thought out strategy that takes the current market and history into account. Going with your gut is not the way to go in the Forex market. Going with your gut could cost you money. Forex trading is a highly volatile market where emotions tend to run high. Emotions can influence your trading decisions, unless you have a strategy planned in advance, and stick to it, no matter what you think you're seeing at the moment. The keys to success in Forex are system, analysis and perseverance.

Most experienced traders tell novice traders that they need to develop a system — and stick to it no matter what. Letting your emotions rule your decisions can hurt your trading in a number of ways. The system tells you when to buy, what to buy, when to trade and what to trade for. By sticking to your system you'll maximize your profits. A system based on technical analysis of historical market trends is one of the most potent tools that you can utilize if you're just getting started in Forex trading. Many traders, with years of experience, continue to use this system to keep the profits rolling in. Many traders will tell you that when their gut instinct and their system collide, the system is almost always right.

Using a mechanical system takes the emotion out of your trading, eliminating one of the reasons people fail. Your system doesn't sway with emotions. It sticks to a tried and true course. To be effective, your system — whether you develop your own or adopt one created by someone else — should identify the entry and exit point of your trade, mitigating factors, and an exit strategy. In general terms this is as follows:

Under what conditions should I acquire a currency?

For instance, you may have a buy order for when a particular currency drops more than 5 pips because your analysis tells you that that's likely to be as low as it goes.

When should I trade one currency for another and for which one?

There are two reasons to exit — to maximize your profit, or minimize your loss. That means you have a set stop-loss order and a set take-profit order at which point you cash out your trade.

What factors will I allow to change that decision?

While the money market moves in predictable patterns, there are always individual variations of a trend within those patterns. If you've taken those variations into account, it will be far easier to decide when a factor really does make a difference, and when it's just wishful thinking. If you're not careful however this is where emotion could come into play and sour deals for you.

How will I trade out of a currency?

Your exit strategy may be as simple as a stop-loss order when my loss hits 5% or a take-profit order when I make 40% profit'.

Another key is perseverance. Analysis of trends in the market will show you that the market moves in dips and spurts within overall patterns that are predictable. No trend moves smoothly in an up or down line — there are inevitable periods of time when values suddenly spiral up or down based on some outside factor. These are the times when emotion can hurt your portfolio. When a currency that you're holding takes a sudden dip south, it's tempting to succumb to panic trading, cut your losses and run even if your system tells you to hold on. On the other hand, it's easy to catch the rising excitement as a trade starts increasing in value and scramble to buy more of the same. These are exactly the times to rely most heavily on your trading system. It will tell you exactly when to trade for maximum profit.

If you control your emotions and stick to the system you'll maximize your profits andall should be smooth sailing.

How to Take Advantage of Forexnews

The forex market is the most vulnerable investment platform, which is considerably impacted by news from around the world. Consequently, by learning to take advantage of forexnews, investors can avoid several costly trading mistakes and improve their profitability. In fact, the ability to foresee and analyze forexnews is what separates an experienced forex investor from a novice one.

Tips for Using Forexnews

The first thing to consider while forexnews trading is that the news itself holds little importance. What matters more is the trader's analysis of the same. Remember, traders may draw varying inferences from the same news. Since forex news analysis is not objective, the safest thing to do is to take an overview of the news and draw your own inference. To trade like a pro through forexnews, simply review the news and evaluate how it moves currency prices. Keep a look out for potential trend changes, which generally occurs when bullish news fails to push the prices up or bearish news fails to lower the prices.

Additionally, to trade on forexnews like a pro, watch out for only high-impact news releases. Do not waste your time analyzing trivial forex-related events. High-impact news releases are those that have a high probability of:

• Moving the market: Not all events are capable of moving the market. Note that sometimes forex is sentiment driven. As a result, lesser news reports may not have an impact significant enough to change the predominant forex market trend.
• Predictable reaction: On the basis of historical reactions, high impact news releases will typically move a particular currency pair by certain pips (or points). Therefore, while trading on forexnews, it is crucial to pick the appropriate news releases to trade.

Events that affect the value of key currencies like the US dollar, Euro and Sterling are also considered high-impact news. This is because the status and movement of these currencies, directly and indirectly, impact the value of most currencies on the forex market.

While trading currencies on the basis of forexnews is an excellent strategy, the important thing to bear in mind is that relevant forex news often arrives too late to be taken advantage of fully. Often, by the time high-impact news becomes available to general traders, it has been analyzed by several professional traders and financial institutions, which increases the vulnerability to personal and institutional biases.

Energy Prices, Inflation and Forex

Oil futures surged to a record intraday high of $70.85 on August 30th, the day after Hurricane Katrina made landfall on the Gulf Coast. While prices have moderated in subsequent weeks, it's worth examining how higher commodity prices and the specter of inflation impacts the foreign exchange (FX) market, particularly the U.S. dollar.

Traditional supply and demand factors certainly have contributed to the longer term trend in energy prices. The demand side of the equation has been getting plenty of press this year, with focus on the rapidly growing thirst for oil in both China and India. However, the recent spike in oil can primarily be attributed to hurricane related speculation in the futures market and the limited and centralized (on the Gulf Coast) refining capacity of the U.S.

Economic data released in recent weeks has begun to reflect the effects of hurricanes Katrina and Rita, which ravaged the U.S. Gulf Coast in August and September. These data reinforce what the Fed has been implying all along; that the economy is growing at a brisk pace and that inflation, not recession, should be the concern.

September jobs data showed the first net job losses since May of 2003, but the decline of 35,000 jobs was much smaller than the decline that was anticipated. September CPI showed the largest monthly gain in 25 years. However, when the volatile food and energy components are removed, inflation was a rather mild 0.1%. That was quite a bit less than the market was anticipating and suggests that the higher energy prices are not being passed through to the core number yet.

Similarly, the September PPI headline number exceeded expectation and was the largest monthly gain in 15 years. However, again we remove food and energy and see that wholesale prices were up a relatively restrained 0.3%. This core number did beat expectations though, so one might deduce that higher energy prices are starting to impact prices at the wholesale level and it's just a matter of time before these higher prices are passed along to consumers. Weaker than expected retail sales and a new 13 year low in Consumer Sentiment suggests that higher energy prices are indeed weighing on the American consumer's mind. How that will play out, particularly in the retail sector going into the holiday season is now a major focus on Wall Street.

With the word 'inflation' seemingly on everyone's lips these days, we expect the Fed to continue on its tightening schedule. The Fed raised the target for overnight borrowing in September by 25bp to 3.75%, the 11th such hike since June of 2004. Another rate hike is expected in October and at least one additional 25bp bump is all but assured in November or December.

Rising U.S. interest rates and an expanding U.S. economy have been the driving forces behind overseas flows into U.S treasuries and the stock market respectively. These flows translate into demand for the U.S. dollar, which has kept the greenback generally well bid in September and October. While we would contend that the equities market is vulnerable at this stage, the interest rate differential picture should continue to favor the dollar through year end.

High energy prices and inflation fears are not exclusive to the U.S. Central bankers and finance ministers from the Group of 20 industrial and developing nations are meeting in Beijing this month. A statement released on October 16th said, high oil prices "could increase inflationary pressures, slow down growth and cause instability in the global economy.'' This should benefit the dollar as well because in times of global economic uncertainty, the dollar is still considered a "safe haven" currency. While we may see other countries begin to tighten their monetary policies, U.S. interest rates will remain significantly higher.

The definitive move above USD-JPY 115.00 bodes well for additional dollar gains against the yen into the 118/120 zone. On the other hand, the July lows in EURUSD at 1.1868 must be convincingly negated to trigger further dollar gains against the European currency. Such a move would shift focus to the 2004 lows at 1.1759/78 initially, but potential would be for a drop below 1.1500.

In times of inflationary pressures, the U.S. dollar tends to lose ground against the commodity currencies. Commodity currencies are the currencies of countries that derive the bulk of their export revenues from the sale of commodities. Prime examples of liquid commodity currencies are the Canadian dollar, Australian dollar and New Zealand dollar.

The dollar hit a new 17 year low late in September against the Canadian dollar on the back of sharply higher oil and metals prices. While the dollar recovered from those lows, gains are considered corrective in nature and we look for the longer-term downtrend in USD-CAD to continue. Similarly, AUS-USD and NZD-USD are consolidating below important resistances with scope seen for additional short to medium term gains.

At some point, domestic inflation and the rise in the U.S. dollar will return focus to the U.S. trade deficit and balance of payments. As U.S. goods and services become more expensive, both domestic and overseas consumers will look elsewhere. That's the point where the U.S. stock market truly becomes vulnerable. Downside risk in the stock market will result in a negative impact on flows into the U.S. and consequently the long-term downtrend in the dollar would likely start to re-exert itself.

Conventional wisdom in the financial services industry suggests that placing 5-10% of one's portfolio in alternative investments, such as those offered by CFS Capital, is desirable to achieve the diversification necessary to protect against adverse moves in the more traditional asset classes.

Introduction To Fundamental Analysis: Forex

Forex traders almost always rely on analysis to make plan their trading strategies. There are two basic types of Forex analysis — technical and fundamental. This article will look at fundamental analysis and how it used in Forex trading.

Fundamental analysis refers to political and economic conditions that may affect currency prices. Forex traders using fundamental analysis rely on news reports to gather information about unemployment rates, economic policies, inflation, and growth rates.

Fundamental analysis is often used to get an overview of currency movements and to provide a broad picture of economic conditions affecting a specific currency. Most traders rely on technical analysis for plotting entry and exit points into the market and supplement their findings with fundamental analysis.

Currency prices on the Forex are affected by the forces of supply and demand, which in turn are affected by economic conditions. The two most important economic factors affecting supply and demand are interest rates and the strength of the economy. The strength of the economy is affected by the Gross Domestic Product (GDP), foreign investment and trade balance.

Indicators

Various indicators are released by government and academic sources. They are reliable measures of economic health and are followed by all sectors of the investment market. Indicators are usually released on a monthly basis but some are released weekly.

Two of the most important fundamental indicators are interest rates and international trade. Other indicators include the Consumer Price Index (CPI), Durable Goods Orders, Producer Price Index (PPI), Purchasing Manager's Index (PMI), and retail sales.

Interest Rates — can have either a strengthening or weakening effect on a particular currency. On the one hand, high interest rates attract foreign investment which will strengthen the local currency. On the other hand, stock market investors often react to interest rate increases by selling off their holdings in the belief that higher borrowing costs will adversely affect many companies. Stock investors may sell off their holdings causing a downturn in the stock market and the national economy.

Determining which of these two effects will predominate depends on many complex factors, but there is usually a consensus amongst economic observers of how particular interest rate changes will affect the economy and the price of a currency.

International Trade — Trade balance which shows a deficit (more imports than exports) is usually an unfavourable indicator. Deficit trade balances means that money is flowing out of the country to purchase foreign-made goods and this may have a devaluing effect on the currency. Usually, however, market expectations dictate whether a deficit trade balance is unfavourable or not. If a county habitually operates with a deficit trade balance this has already been factored into the price of its currency. Trade deficits will only affect currency prices when they are more than market expectations.

Other indicators include the CPI — a measurement of the cost of living, and the PPI — a measurement of the cost of producing goods. The GDP measures the value of all goods and services within a country, while the M2 Money Supply measures the total amount of all currency.

There are 28 major indicators used in the United States. Indicators have strong effects on financial markets so Forex traders should be aware of them when preparing strategies. Up-to-date information is available on many websites and many Forex brokers supply this information as part of their trading service.

Average True Range (ATR)

Average True Range is a technical analysis indicator that measures the price change volatility. It was developed by J. Welles Wilder Jr. for commodity market analysis. The indicator says nothing about trend strength or direction; instead it just shows the volatility level.

Calculation

True Range

Before proceeding to average true range calculation, it is necessary to calculate true range. True range is calculated using the following formula:

TR = max(High_t − Low_t, abs(High_t − Close_t − 1), abs(Low_t − Close_t − 1))

Where TR — true range for the period t,
High_t — price High for the period t,
Low_t — price Low for the period t,
Close_t − 1 — price Close for the period (t − 1),
max() — maximum value selection function,
abs() — absolute value calculation function.

The formula is translated into:

TR = max(High_t, Close_t − 1) −  min(Low_t, Close_t − 1).

Where min() — minimum value selection function.

Average value

Average true range for a given number of periods can be calculated after calculating the true range values for all those periods. The popular number of periods for ATR is 7 (proposed by the indicator's author in his book New Concepts in Technical Trading Systems) and 14 (used, for example, in MetaTrader default settings).

The principle of exponential moving average calculation is applied:

ATRt	=	ATRt − 1 × (n − 1) + TRt
		n

Where ATR_t — average true range for the period t,
ATR_t − 1 — average true range for the previous period (t − 1),
TR_t — true range for the period t,
n — number of periods for averaging.

The first average true range value is calculated using this formula:

ATRn	=	n  ∑ i = 1 TRi
		n

Where ATR_n — average true range for the period n — the first period, for which all the n true range values are present,
TR_i — true range for the period i.

Examples

7 periods

The first example shows a complete calculation process for the 7-day average true range on the EUR/USD currency pair. 8 price quotes is enough to calculate 2 ATR values. The price Close values are used with the negative shift of 1 period because only shifted values are used in the TR formula:

i	Close	High	Low
0	1.2919	-	-
1	1.2884	1.2942	1.2842
2	1.2881	1.2929	1.2846
3	1.2836	1.2889	1.2796
4	1.2881	1.2900	1.2819
5	1.2905	1.2933	1.2840
6	1.2857	1.2997	1.2833
7	1.2932	1.2956	1.2821
8	-	1.2993	1.2904

True range calculation:

TR₁ = max(1.2942, 1.2919) − min(1.2842, 1.2919) = 1.2942 − 1.2842 = 0.0100;

TR₂ = 1.2929 − 1.2846 = 0.0083;

TR₃ = 0.0093;

TR₄ = 0.0081;

TR₅ = 0.0093;

TR₆ = 0.0164;

TR₇ = 0.0135;

TR₈ = 0.0089.

The first average true range is calculated using simple arithmetic average formula:

ATR7	=	0.0100 + 0.0083 + 0.0093 + 0.0081 + 0.0093 + 0.0164 + 0.0135	=	0.0107
		7

The next average true range should be calculated using moving average formula:

ATR8	=	ATR7 × 6 + TR8	=	0.0107 × 6 + 0.0089	=	0.0104
		7		7

14 periods

The second example shows calculation process for the 14-day average true range of the EUR/USD currency pair's quotes. 2 ATR values will be calculated, so a total of 15 Close/High/Low quotes are required. Close prices are taken with a negative shift of one period as the TR formula uses them with t − 1 index:

i	Close	High	Low
0	1.3111	-	-
1	1.3075	1.3140	1.3053
2	1.3078	1.3131	1.3067
3	1.3151	1.3194	1.3071
4	1.3041	1.3176	1.3009
5	1.2935	1.3050	1.2935
6	1.2974	1.2999	1.2941
7	1.2919	1.3029	1.2912
8	1.2884	1.2942	1.2842
9	1.2881	1.2929	1.2846
10	1.2836	1.2889	1.2796
11	1.2881	1.2900	1.2819
12	1.2905	1.2933	1.2840
13	1.2857	1.2997	1.2833
14	1.2932	1.2956	1.2821
15	-	1.2993	1.2904

True range calculation:

TR₁ = max(1.3140, 1.3111) − min(1.3053, 1.3111) = 1.3140 − 1.3053 = 0.0087;

TR₂ = 1.3131 − 1.3067 = 0.0064;

TR₃ = 0.0123;

TR₄ = 0.0167;

TR₅ = 0.0115;

TR₆ = 0.0064;

TR₇ = 0.0117;

TR₈ = 0.0100;

TR₉ = 0.0083;

TR₁₀ = 0.0093;

TR₁₁ = 0.0081;

TR₁₂ = 0.0093;

TR₁₃ = 0.0164;

TR₁₄ = 0.0135;

TR₁₅ = 0.0089.

The first average true range is calculated using simple arithmetic average formula:

ATR14	=	0,1484	=	0.0106
		14

The next average true range should be calculated using moving average formula:

ATR15	=	ATR14 × 13 + TR15	=	0.0106 × 13 + 0.0089	=	0.0105
		14		14

Chart

The following chart displays the average true range (cyan line below) for the EUR/USD price (shown above). Standard Average True Range indicator from the MetaTrader 5 trading platform with period set to 14 is used for calculation.

Application

As the indicator's mathematical formula suggests, average true range cannot be used for trading signals on its own. ATR is showing neither trend's strength nor its direction. A trader can apply it as a price volatility gauge and then use this information in trading:

• Some trading strategies require high (scalping, grid) or low (trend trading) volatility. Average true range can help measuring it, both in automatic and in manual modes. It is important to remember that indicator's values are relative but absolute and thus should be compared to the values derived from the same trading instrument and not to some specific fixed threshold.
• ATR can be used as a stop-loss value because price deviation for a number of pips greater than time period's average range is definitely a significant change in price's behavior. For example, such a stop-loss can be used for intraday trading, while ATR is calculated on daily chart. ATR Trailer expert advisor is based on ATR as its trailing stop-loss.
• ATR can also be used as a potential stop-loss in trading systems. It is applied in position sizing for strategies that do not set stop-loss order. In this case, the potential loss size is limited by the current market volatility.

Indicator of Forex Market Economy

All the investors in the forex market often base their decisions in trading upon economic and political news around the world. Forex and stock market depend on the countries economy. Using of industrial production index is the best way to predict the market trends in the future. All the traders are using this market indicator specially the traders who want to trader for a long time because if a country's economy is improving definitely its currency rate goes up and if the economy is decreasing, currency rate will automatically goes down.

What is Indicator?

Forex indicators are the primary and most essential tools used to determine the trend of foreign exchange and their future prospects. These tools sometimes become so important for the users to anticipate future ups and downs of the Forex market according to which, they could invest and deal their finances with foreign exchange.

There are a variety of Forex indicators available to the users of foreign exchange, which are highly advanced and avail an enhanced platform to the Forex dealers and users to deal the challenges with foreign exchange efficiently. These indicators are useful not only to the novice Forex trader, but also an experience Forex dealer as well. The two most significant indicators of them are as follows.

Moving Averages: Simple, Exponential and Weighted

Most Forex traders use Moving Average Indicators to calculate the trends in foreign exchange. This procedure can be set and interpret easily. Using this indicator, we can easily measure the average movement of the price within a particular time period. Through this indicator, the price data get smoothen with which, we can easily observe the market trend and tendencies.

Stochastic indicator

Stochastic indicator is another significant tool used as a Forex indicator by the Forex experts and dealers to estimate market trends and tendencies. The main idea suggested by this indicator is that the rising price always lies closer to its previous highs and the falling price always lies to its previous lows.

Gann Angles — A Unique Powerful Tool For Trading Profits

W D Gann developed technical trading systems that made him a fortune of in excess of 50 million dollars.

Gann was a trading legend and his stature is reflected in the life size portrait people see when they enter the New York Stock Exchange.

Gann Angles were one of his most effective tools so let's look at them. What do they do?

Gann angles allow you to pinpoint your entry and exit levels for bigger profit potential. Let's look at why Gann angles work.

Gann based his investment strategy on the fact that by studying the Past we can see patterns that will be reflected in the future which is true of any technical systems, but his view was unique on how these patterns occurred

Gann based his methods on the following:

1. Price, time, and range are the only three factors relevant to market movement.

2. Markets are cyclical in nature.

3. Financial price movements are geometric in design and function.

Gann believed that market movements were a reflection of human nature which is constant over time and by studying the past we can predict the future.

Gann's use of angles

Gann's used three patterns to predict market behavior in the future

1. Price study- This uses support and resistance lines, pivot points and angles.

2. Time study — This looks at historically reoccurring dates derived from natural order that Gann believed governed market movement.

3. Pattern study — This studies trends using trend lines and reversal patterns.

Using Gann angles requires practice and experience and below we have outlined tha basics that anyone using Gann angles should keep in mind.

Firstly, determine time units.

The way to determine a time unit is to study charts and look at the distances in which significant price movements occur.

Put the angles to the test and see how they perform.

The intermediate time period ( 1 — 3 months) tends to produce the highest number of accurate patterns and is the time frame to trade.

Secondly, a trader needs to determine the high or low from which to draw the Gann lines

Here you can use Fibonacci levels or pivot points to help you get an accurate picture . Gann then looked for "vibrations" or "price swings."

Finally, you need to know which pattern to use:

The most common patterns are the 1x1, the 1x2, and the 2x and are purely differences in the slope of the line.

The 1x2 is half the slope of the 1x1.

The numbers simply indicate the number of units and the slope of the line.

Traders need to look for patterns to trade.

The direction of the slope will be either down and to the right from a high point or up and to the right, if it's a low point.

Always look for repeat patterns on the charts.

Gann' theories are based upon the cyclical in nature of market movement, so the easier the patterns are to spot the more likely they will be tradable for profit.

Using Gann Angles for Trading Profits

Gann angles are a fantastic tool for predicting support and resistance levels.

Of course, many other trading methods use support and resistance lines however Gann angles add a new dimension, simply because they are diagonal.

The best Gann Formation

Will indicate a balance between time and price.

This will occur when prices move in synch with time.

This is present when the Gann angle being studied is at exactly 45 degrees.

In total there are nine different Gann angles that can be applied.

When one line is broken, the following angle will then give the next area of support or resistance.

Gann angles are just one of the tools He used to amass a fortune trading other include, the Golden ratio, Fibonacci numbers — when combined you have a powerful proven trading method.

As markets are cyclical and human nature never changes Gann's methods still apply today and are used by many savvy traders.

Gann made millions from Gann angles and the tools above study his methods further and see what they can do for your trading and you may be glad you did.

Moving Averages Basics And How They Help FOREX Traders

With Forex trading becoming a more extended and desired occupation for lots of people around the world, living with the desire of working at home and still having the ability to gain a full time income, the need for accurate trading systems and techniques has become a major necessity for all these new forex traders.

Among one of the important concepts a new forex trader should know is what a Moving Average means, how it's calculated and what its use as a trading indicator is.

Moving Average is defined as a technical indicator that shows the average value of a particular currency pair over a previously determined amount of time. This means, for example, that prices are averaged over 20 or 50 days, or 10 and 50 min depending on the time frame you are using at the moment of your trading activity.

As an averaged quantity, MA's can bee seen as a smoothed representation of the current market activity and an indicator of the major trend influencing the market behavior.

This smoothing effect of the Moving Average is very helpful when the trader is looking for getting rid of the "noise" in the price fluctuations of the currency pair he is trading at the moment and a more precise emphasis in the trend direction is required.

The basic mechanics of how Moving Averages can tell you where the forex market is moving (up or down), at the moment of your analysis is by considering two different time frame Moving Averages and plotting them on the forex chart. It is very important that one of these MA is over a shorter time period than the other one; let's say one will be over a 15 days period and the other over a 50 days period. Most trading station software available by a number of brokers will let you do this plotting and much more.

Once you have plotted the two Moving Averages, you will notice points of crossover where the shorter time period MA will cross above the longer time period MA indicating an upward trend in the market, or if the crossing is below the longer period MA that will be an indication of a down trend in the forex market.

So from this simple concept you can commence to understand the basics of confirming trends when checking your forex charts during your trading hours.

Forex Traders Need To Know About Crossing Currency

Why did the currency cross the road? No this has nothing to do with the term crossing currency

Crossing currency on the Forex is one of the most profitable ways to earn money for many investors. The Forex is unlike any other type of market in the world. The foreign exchange market is extremely liquid and involves over two trillion dollars everyday. The top three currencies that are most traded on the Forex are the US dollar, the Japanese yen and the Euro. All of these currencies are traded the most out of all other forms of currency.

With the foreign exchange currency being so large, it is very liquid. Crossing currency using the Forex allows a large amount of flexibility for the trader and investor. The Forex gives the trade the ability to buy and sell currency quickly so that they are never stuck in any investment. When investors use online trading as their form of crossing currency, the trading platform can be pre-set to the preferences of the trader. If the trade is not going as expected, the platform can be set to stop the trade, allowing the trader to lose less money while using the Forex.

Learning to trade on the foreign exchange, also called the Forex, market can be both exciting and profitable. In order to trade successfully on the Forex it is essential to understand the way the market works, the terminology and the trends. Brokers and financial institutions are often the best way for traders to learn how to use the Forex for profit.

When an investor or individual wants to trade one type of currency for another, it is called exchanging currency, or crossing currency. Currency crossing is the main goal of trading on the Forex. For example, if a business or investor has US dollars and needs to trade those into Japanese yens, a broker would do this on the Forex. Many investors trade currency to make a profit. When a certain type of currency is bought at a low exchange rate, the currency can be sold once the rate increases to turn a profit.

Learning to cross currency in the Forex can be complicated. The biggest factor in trading on the Forex is having knowledge about the Forex and how it works. In addition, there are many benefits of using the Forex for trading. Crossing currency gives traders the leverage to make large profits while keeping the risk of losing capital to a minimum. In ideal conditions, an investor that puts in $500 could potentially make over $100,000.

Crossing currency also allows traders and investors to profit in rising and falling markets. This is another difference between the stock market and the foreign exchange market. With the stock market, an investor can only make money when the shares are on the rise. When there is a falling "bear" market or the stocks decline, investors cannot make money on the stock market. When crossing currency in the Forex, this is not true. This is one appealing factor of trading on the Forex. Investors can make large amounts of profits when a currency pair is either up or down. Crossing currency in the right direction can always make profits.

Another benefit of using the Forex for currency crossing, or trading is that the Forex is always open. When investing the in the stock market, the trading is limited to when the market is open. It has a definite closing time during the business week. This is not true of the foreign exchange currency. The Forex is open all the time and does not close. Traders benefit from the ability to trade twenty-four hours a day using the Internet.

Learning to trade on the Forex can be easy when new investors go through an experienced broker or financial institution. Also, there are many ways to learn how to trade on the Forex using free demo accounts available on the Internet. These websites offer valuable resources and free ways for the new investor to practice using the Forex. This is very important for those who want to learn the ins and outs of crossing currency before opening an actual account. Mini Forex accounts are also a good way for the new investor to trade currency without having the risk of a regular account. A mini account allows traders to use a smaller amount of money as their initial investment.

Trading Trend And Ranges In Today's Forex

When you choose to start trading in the Forex market, which is often called the foreign exchange market, you will need to know a little trading vocabulary. Learning specific terms and what they mean are essential before you even think about using real money to trade. You would never get into a pilot's seat and try to fly a plane without ever having taken flying lessons. The same goes for foreign exchange market trading. You need to be fully aware of what you are doing. This is a market that is not quickly learned, so you should never assume that once you jump into it, you will learn as you go. While some people opt to do that, they typically end up losing an adequate sum of money because they were not as prepared as they should have been. Knowing the importance of trading trends and ranges in Forex trading is very important. If you are thinking of trading in the Forex market, be sure you know what these terms mean and their implications.

Trading Trend

When price moves consistently in one direction in the Forex, a trend occurs. When the direction is higher, the trend is often called bullish. When the direction of the price is moving lower, the trend is often called bearish. These terms are relative of course. When you define a trend, you should always remember that price peaks and troughs are in the same direction. When you are dealing with a bearish trend, remember that price highs and lows are moving lower. Likewise when you are dealing with a bullish trend, they are moving higher.

Often when trends occur, it is possible to draw support lines under one that is moving higher (an uptrend). You can also often draw resistant lines above one that is moving lower (a downtrend). Once you see these lines break, it can be assumed that the trend is complete. At this point there is a possibility that the trend will begin to reverse. When it does reverse, you will need to know the pattern of what that entails.

Trend Reversal

When you hear of a trend reversal, it simply means that the direction of market prices is changing. Often you will see trend reversals following a four step pattern. Usually, this includes the market making a new high, the trend line being broken, the market making an intermediate low, and a new rally that does not match the first high. Many times you will see prices break the previous low however. You may come across terms such as Double, Triple Tops, and Bottoms, which are all trend reversal patterns. Head and shoulders patterns are also popular reversal patterns.

Trading Range

The trading range is actually a sideways chart pattern. It is often used to represent a resting period before the original trend is resumed. You may see these when you are charting trends and should know what they imply.

Often trends are very important to investors. Those who engage in trend-following are people who look at major trends and make decisions in the direction of the trend. This can be a good strategy, but you must know a great deal about trends and the market in general in order to use this technique successfully. Beginners are not usually very good at tracking trends and using trend-following techniques. One thing that you should also note is that some price movements are trendless. This means that they have no clear direction, which makes trend-following nearly impossible.

Remember, that in order to fully understand trends, you must be educated in the ways of the market and foreign exchange in general. Beginners should not rely heavily on foreign exchange market trend tracking. Once you get more experience you can begin looking into tracking more and more. However, be aware that different things affect and influence the Forex. These influences can change what people expect trends to be. Therefore, you should be a seasoned trader in order to rely on the trends and ranges alone. Educate yourself on these terms and learn to recognize them in the actual market. After all, learning the terms is one thing and being able to see them in reality is different.

Pivot Points in Forex: Mapping your Time Frame

It is useful to have a map and be able to see where the price is relative to previous market action. This way we can see how is the sentiment of traders and investors at any given moment, it also gives us a general idea of where the market is heading during the day. This information can help us decide which way to trade.

Pivot points, a technique developed by floor traders, help us see where the price is relative to previous market action.

As a definition, a pivot point is a turning point or condition. The same applies to the Forex market, the pivot point is a level in which the sentiment of the market changes from "bull" to "bear" or vice versa. If the market breaks this level up, then the sentiment is said to be a bull market and it is likely to continue its way up, on the other hand, if the market breaks this level down, then the sentiment is bear, and it is expected to continue its way down. Also at this level, the market is expected to have some kind of support/resistance, and if price can't break the pivot point, a possible bounce from it is plausible.

Pivot points work best on highly liquid markets, like the spot currency market, but they can also be used in other markets as well.

Pivot Points

In a few words, pivot point is a level in which the sentiment of traders and investors changes from bull to bear or vice versa.

Why PP work?

They work simply because many individual traders and investors use and trust them, as well as bank and institutional traders. It is known to every trader that the pivot point is an important measure of strength and weakness of any market.

Calculating pivot points

There are several ways to arrive to the Pivot point. The method we found to have the most accurate results is calculated by taking the average of the high, low and close of a previous period (or session).

Pivot point (PP) = (High + Low + Close) / 3

Take for instance the following EUR/USD information from the previous session:

Open: 1.2386 
High: 1.2474 
Low: 1.2376 
Close: 1.2458

The PP would be, 
PP = (1.2474 + 1.2376 + 1.2458) / 3 = 1.2439

What does this number tell us?

It simply tells us that if the market is trading above 1.2439, Bulls are winning the battle pushing the prices higher. And if the market is trading below this 1.2439 the bears are winning the battle pulling prices lower. On both cases this condition is likely to sustain until the next session.

Since the Forex market is a 24hr market (no close or open from day to day) there is a eternal battle on deciding at white time we should take the open, close, high and low from each session. From our point of view, the times that produce more accurate predictions is taking the open at 00:00 GMT and the close at 23:59 GMT.

Besides the calculation of the PP, there are other support and resistance levels that are calculated taking the PP as a reference.

Support 1 (S1) = (PP * 2) — H 
Resistance 1 (R1) = (PP * 2) — L 
Support 2 (S2) = PP — (R1 — S1) 
Resistance 2 (R2) = PP + (R1 — S1)

Where, H is the High of the previous period and L is the low of the previous period

Continuing with the example above, PP = 1.2439

S1 = (1.2439 * 2) — 1.2474 = 1.2404 
R1 = (1.2439 * 2) — 1.2376 = 1.2502 
R2 = 1.2439 + (1.2636 — 1.2537) = 1.2537 
S2 = 1.2439 — (1.2636 — 1.2537) = 1.2537

These levels are supposed to mark support and resistance levels for the current session.

On the example above, the PP was calculated using information of the previous session (previous day.) This way we could see possible intraday resistance and support levels. But it can also be calculated using the previous weekly or monthly data to determine such levels. By doing so we are able to see the sentiment over longer periods of time. Also we can see possible levels that might offer support and resistance throughout the week or month. Calculating the Pivot point in a weekly or monthly basis is mostly used by long term traders, but it can also be used by short time traders, it gives us a good idea about the longer term trend.

S1, S2, R1 AND R2...? An Objective Alternative

As already stated, the pivot point zone is a well-known technique and it works simply because many traders and investors use and trust it. But what about the other support and resistance zones (S1, S2, R1 and R2,) to forecast a support or resistance level with some mathematical formula is somehow subjective. It is hard to rely on them blindly just because the formula popped out that level. For this reason, we have created an alternative way to map our time frame, simpler but more objective and effective.

We calculate the pivot point as showed before. But our support and resistance levels are drawn in a different way. We take the previous session high and low, and draw those levels on today's chart. The same is done with the session before the previous session. So, we will have our PP and four more important levels drawn in our chart.

LOPS1, low of the previous session. 
HOPS1, high of the previous session. 
LOPS2, low of the session before the previous session. 
HOPS2, high of the session before the previous session. 
PP, pivot point.

These levels will tell us the strength of the market at any given moment. If the market is trading above the PP, then the market is considered in a possible uptrend. If the market is trading above HOPS1 or HOPS2, then the market is in an uptrend, and we only take long positions. If the market is trading below the PP then the market is considered in a possible downtrend. If the market is trading below LOPS1 or LOPS2, then the market is in a downtrend, and we should only consider short trades.

The psychology behind this approach is simple. We know that for some reason the market stopped there from going higher/lower the previous session, or the session before that. We don't know the reason, and we don't need to know it. We only know the fact: the market reversed at that level. We also know that traders and investors have memories, they do remember that the price stopped there before, and the odds are that the market reverses from there again (maybe because the same reason, and maybe not) or at least find some support or resistance at these levels.

What is important about his approach is that support and resistance levels are measured objectively; they aren't just a level derived from a mathematical formula, the price reversed there before so these levels have a higher probability of being effective.

Our mapping method works on both market conditions, when trending and on sideways conditions. In a trending market, it helps us determine the strength of the trend and trade off important levels. On sideways markets it shows us possible reversal levels.

How we use our mapping method?

We at StraightForex (www.straightforex.com) use the mapping method in three different ways: as a trend identification (measure of the strength of the trend), a trading system using important levels with price behavior as a trading signal and to set the risk reward ratio (RR) of any given trade based on where the is the market relative to the previous session.