Best Indicators for Forex Trading

It is very important for you to know when the price is going to reverse or retrace as it will be able to alert you to exit your current position before the market takes it back or it can also alert you to enter a trade to trade the reversal.

Therefore in this post today, I will be sharing with you several indicators that I use to identify possible reversal or at least a retracement. As usual, these indicators will not be able to identify reversal 100% of the time as trading is a game of probability but they are pretty accurate.

1) MACD Indicator – One of the way I use the MACD indicator to identify a reversal is its histogram. When you are in an upward movement and you see the MACD histogram shortening, it is a sign that the buyers are losing strength and a possible reversal is coming.

If you are in a downward movement and you see the histogram shortening below the water line, it is sign that the sellers are losing strength while the buyers are gaining strength.

2) CCI Indicator- As for the CCI, I will usually use the 200 mark as a sign of reversal. When the price crosses above the 200 level, I will wait for it to move back down to the 100 level before I enter a reversal trade.

If it goes below the -200 mark, I will wait for it to move up to the -100 mark before I enter a trade.

Besides the above 2 indicators, I also make use of some candlestick patterns to help me in the identification of possible reversal.

1) Spinning Top – The spinning top is made up of a short body with long wick at the top and bottom. This is usually a sign of indecision among the buyers and sellers.

If it occurs at the end of a strong trend, it is usually a sign of possible reversal.
2) Railway Track – I have written a post on this railway track candlestick pattern and you can read it here. The railway track is a sign of traders getting into the wrong position and the 2 long opposite candles are formed as traders quickly exit their wrong position and enter the opposite side.
If you happen to see the indicators showing the same reversal signal together with the formation of any reversal candlestick patterns, this will greatly increase the chance of the price making a reversal.

If you have any recommendation for reversal indicators, do feel free to comment below as your input will be very useful for everyone here.

Tips from Expert regarding Forex Trading

Here is a commentary about a very important process when learning to trade currencies. When you've learnt a forex system, and it's a good one, has good profits, has quite a small drawdown, and consistent as well, plus it fits into your daily trading routine, then it's time to paper or demo trade the system. What this involves is practice to prove the system works and that you can work the system. Here's the article: 

Forex trading has changed dramatically in the last 10 years thanks to the technological advancements of the internet era. With real-time streaming technology and faster and more efficient computer systems, almost anything, from roses to FX trading, is available at the click of a button. It would be interesting to go over a few of the benefits of online FOREX trading. 

If you are new to the world of technology, internet or online FOREX trading, it would be recommendable that you considered taking an online FOREX trading class. Many traders recommend to take the course by Peter Bain if you are a beginner and want to start with solid steps towards a profitable trading career, this is a very complete and understandable course. But, of course, there are a wide variety of options out there if you are looking for a quick and easy way to improve your trading skills. 

Before you spend any money on an online FOREX trading program or subscription, ask about free trial offers or free reports. Many companies will allow potential customers to try out their software and tools before making an investment, and you won’t even need your own money to start paper trading if you want to have some practice before real money is on the line. This is a quick and easy way to begin trading immediately. There will no doubt be a learning curve, all traders have passed through this, that’s why you want to make sure that you don’t have a large investment waiting to be recovered while you are on that learning curve. If you have a friend or family member that is in the online Forex trading business, find out what program or system they use. They may be willing to walk you through a trade and give you their opinion on the program. 

Always remember that practice makes the master. One of the best ways to get a feel for the market is to paper trade. No one wants to experiment with their own money; so many brokers have come up with an innovative way to take all the risk from trying out forex trading. It’s called simulation trading or paper trading as mentioned above, and the premise is simple. The program is an exact copy of the broker or trading systems real-time trading program. The main difference is that they allow you to “play” the market just as you would if you were actually investing. You can do a simulation with a set amount of money, usually around $50,000 dollars. You can practice setting bid and ask prices, and using their various analysis tools, which are all free. 

The benefits of such a system are two-fold. First, you get a feel for the trading software itself, so that you can determine if it is right for your needs and skill level. Second, you get to practice trading in the market, under real conditions. You can practice using the various tools and research available to you to make good trading decisions. 

The amount of time needed to understand the system will vary depending on your level of experience and knowledge materials available. But the paper trading experience in Forex is always recommended, you will never regret you invested some time into this. 

Comment: Believe me, some people put on long instead of short, and, on the wrong currency when first trading forex, if they haven't used a demo before, because they're so nervous. And rightly so, if they have no practice nor confidence in the system. So go ahead and do that practice. Hope you enjoyed this article.

New Tips for New Forex Traders

Forex has always been a magnet for investors and traders, who are looking for an exciting business venture to invest in, giving them the thrill, adventure and excitement, along with an idea of a quick and easy way to make profits. But, for those who are relatively new to the Forex trading world, it is extremely important to know exactly what you are getting into. When it comes to the matter of investing a huge amount of your hard earned money into something, first time investors should always make sure what they ought to expect out of it. What should and should not be done. What steps should be taken to play safe and what to do that keeps them at away from the frauds and scams. First of all what needs to be learnt is, what is Forex and how does it work? What need’s to be known next are a few important trading tips, which will facilitate you during your transactions. Foreign Exchange or Forex or FX is one of the biggest money market in the world, and is a platform where currency is sold and bought freely between buyers and sellers. Forex, unlike any other financial markets, has no physical location or central exchange. With over $1.5 trillion USD being traded daily, the foreign exchange market has now become a market which is open to trading by an average investor as much as it is open to a high investor. Launched over three decades back, in the early seventies, Market Forex introduced free exchange rates worldwide, according to which, the price of the currencies was determined on the basis of demand and supply only.

A number of reasons are responsible for making Forex a distinctive financial market. To begin with, no external regulatory authority is allowed to set or fix currency prices or rates in this market, making Forex is market which cannot be controlled in any way. Also, it is one of those few money markets that necessitate very little trading education, training and experience. In order to know the Forex market well, the new traders should know how to start trading Forex. The few important things to be kept in mind when beginning to trade Forex are as follows:
What needs to be done firstly is, to open a Forex account. This can be done by filling up an application form, providing the required essential credentials, like personal details, financial particulars, and other details such as whether or not, a broker will be allowed to mediate with any trade if it appears to get too precarious and dicey.
Once your account has been created and recognized, you can begin to flow cash in to it and start trading Forex.

New Forex traders are always advised to create two accounts while trading, one of them being a real account, while the other being a demo one. A real account will facilitate the trader to actually trade in the market, with real money.

The demo account helps the new investor learn more about the trading business. This way the new trader can practice his moves of trading in the market, without the fear of losing all his money in case he/ she goofs up or ends up making the wrong deal.
Also, before you start trading in the market, you should have a closer look at all the top five foreign currencies and their current rates to make sure, you are aware of the current rates and are not missing anything.

The top five Forex currencies are: Pound/USD, Swiss franc/USD, Euro/Yen, USD/Yen and Euro/USD.
Always keep a check on the market. With the time intervals on hourly, daily and weekly schedules with all the currencies that are in any way related to your trade.
Being a successful trader requires to come up with individual and unique trading strategies. There is no “Golden Mantra” or “Trade Secret”, which will work for the traders.
Every investor needs to come up with their own, personal and distinctive trading approach when it comes to the market. There are different ways by which, the traders approach the market. Sometimes they may bank solely on industrial and technical analysis.
Some may like better to go in for a more elementary and basic approach for trading, while others may make use of the past records of the market, combined with both technical as well as fundamental techniques for trading.
All these strategies help the traders in studying the patterns of currency price trends and movements, making it easier for them to foresee the course of the potential developments in the Forex market.

Currency prices in Forex market mostly move in trends. They have a pattern, through which, certain movements can be studied. Some of these movements which have been studied over several years mostly help in discovering that pattern in the market trend. These trends are what should be recognized and valued properly, to facilitate the creation of an excellent trading strategy.

Any factors, financial or political, having some control over the value or the price of a currency, have already been measured by the market to be included as an important factor in creating a price trend.

When trading for the first time, it is always advisable to invest by the trends. Trading with a trend can facilitate you by advancing your chances with profit. Many new investors are enthusiastic to start trading as soon as they can, eventually ending up trading in any direction.

Trading by a trend or following a pattern and studying the market can increase your odds of being favored by the market, making your trading prospects high.

How to trade the Budget ?

It used to be presented in Westminster at noon, GMT (=17.30 IST) on the last working day of every February. After Independence, India's Finance Ministers continue to rise and clear their throats at 5.30 pm until as recently as 1998 when Yashwant Sinha pulled it back to noon IST.

All the ceremony is frankly, a waste of time and money. It would make more sense to upload the documents on government websites at dawn and let Parliament move straight into debate. However, efficiency and cost-effectiveness have never been high priorities for Bharat Sarkar

The release of the Economic Survey (ES), and the Railway Budget on the two preceding Parliamentary sessions sets some sort of direction for sentiment. The ES is often seen as an indicator of Budgetary thrust and the Railway's performance is closely linked to GDP trends.

But Budgetary provisions always differ significantly from ES recommendations. This is not a transparent "what you see is what you get" document. The fine print of annexures and departmental notifications takes weeks of micro-analysis to dissect, debate and digest. After all that analysis, it's still a toss-up if the Budget will be "good" for the economy.

The stock market however, reacts instantly to every sentence spoken by the FM and the reactions can be any which way. So there is a case to be made for staying out of the stockmarket until you can sit down with a cold towel around your head to do the micro-analysis. That's what many sensible value investors do.

But for a trader, staying out around the Budget means leaving large potential profits on the table. The Budget speech is usually sandwiched inside several sessions of high volatility and high volume that are caused by it. Prices move erratically and with greater momentum from a few sessions before, while B-day itself is often violent and sharp trends can develop.

If you control your nerves and handle that extra risk sensibly, it's like a cricketing powerplay: higher risk tied to higher reward. If you can navigate the extra turbulence, you can generate very high short-term returns.

Trading during the Budget period - for say, the five sessions before and five sessions after, requires a special approach. Broadly, it means implementing discipline to cut off losses, while trying to maximise potential gains. Here are some thoughts and suggestions that could help you trade the Budget.

1) Ideally, don't touch equity directly at all. Focus on the derivatives segment. Trade only the futures and options of the Nifty, the BankNifty and the 10 or 20 most highly traded stock futures.

You expect volatility to increase. But you don't know directional bias. You need high liquidity and breadth of coverage. You may need to reverse trades quickly. Selling equity, particularly short-selling, is cumbersome and you can't hold overnight shorts. Sticking to liquid stock futures and indices ensures you can go short or long with equal ease.

2) Don't go bargain-hunting for small caps or even medium-caps in the Budget period. The Budget is a blunt instrument. If it affects a sector, it probably affects all businesses in that sector. Budget sentiment is powerful and contagious - most stocks will move in the same direction. Certainly, stocks in the same sector will..If you get the sector right and trade the stock futures or equity of market leaders, you will get decent returns. If you get it wrong, a small stock will be tougher to exit or hedge.

3) Go with the trend, whatever its direction. Sell as happily as you buy. You may be a long-only or short-only trader by preference. But when trends develop around the Budget, they tend to be very strong, in the short-term..The trend is your friend - ride it. This is one of many reasons to prefer derivatives - they allow easy shorts.

4) Don't be a contrarian - the risks are too high. Do you think the market is responding irrationally to the speech? Well, the market can stay irrational longer than you can stay solvent. Don't anticipate a change and trade against a trend.

5) Consider "buying on rumour and selling on news". There are always rumours, credible ones, before Budget. Those rumours move prices. If the rumours are wrong, there are big corrections on B-Day. If you go long on the rumour and short as news breaks, you may gain both ways.

6) Keep stop-losses. Before you enter any trade, decide how much you are prepared to lose. Structure your position sizes around the maximum losses you are prepared to accept. High volatility and derivatives leverage is a potent combination, which can clean you out as quickly as it can make you rich. Stop losses can be noted mentally or entered as firm orders. But if a stop loss is triggered, exit. Cut your losses. (See the Box on stop-loss calculation for some ideas on handling stops.)

7) If you're comfortable with index options, use them. Nifty index options can help construct positions that are automatically hedged to limit maximum losses and capable of generating profits, whichever way the market moves.

8) Keep an eye on commodity exchanges and the forex markets. Both offer superbly-leveraged, high volume derivative markets. Budget-related trends develop there as easily as in the stockmarket. Sometimes commodity and forex trends are more obvious, persistent and rewarding.

9) Don't set "stop-profit" targets, revise stop losses. If you set a profit target and exit, you are limiting potential gains. Don't do that, move your stop loss instead. For example, suppose you take a trade, with a stop loss @1.5% away from your price and the trade gains 5%. Move the stop loss to within 1.5 % of the new price and carry on.

10) Adopt, modify or reject any of the above suggestions if you disagree with them. But consider them carefully before you decide on your Budget strategy. No trading strategy works all the time. You might find more effective ways to turn a profit without risking massive losses.