Six steps to improve your currency trading: Fourth Step

step 4: Chart Your Course with Technical Analysis

Technical Analysis uses charts to try to forecast future currency prices by studying past market movements. Using this technique, a trader has the ability to simultaneously monitor multiple currency pairs by evaluating how others are trading a particular currency. In our experience, because so many traders use technical analysis, and their reaction to market activity tends to be similar, the validity of this technique is strengthened. It becomes a self-fulfilling prophecy that feeds on itself, increasing the reliability of the signals generated from this analysis.

Support & Resistance

Perhaps the most effective and therefore the most popular form of technical analyses is the use of "support" and "resistance". Support is the "floor" or lower boundary that a currency pair has trouble breaching. Resistance, on the other hand, is simply the opposite: it is the upper boundary that a currency pair has trouble penetrating.

Support and Resistance are important in range bound markets because they indicate the boundaries where the market tends to change direction. When and if the market breaks through these boundaries, it is referred to as a "breakout" and is usually followed by increased market activity.

Using Support & Resistance

We can use these support and resistance levels in many ways. A range trader would want to buy above support and sell below resistance while breakout. Trend traders, on the other hand, would buy when the price breaks above a level of resistance and sell when it breaks below support.

The concept is still the same as we stated earlier. We want to buy a currency pair if we anticipate the market moving up and then sell it at higher price. We can also sell a currency pair if we anticipate the market moving down and then buy it at a lower price.

Be aware that trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Source: http://www.xe.com/currencytrading/improve.php

What should you know about Forex Signals ?

Six steps to improve your currency trading: First step

step 1: Strategize, Analyze and Diarize:

Successful professional traders do three things that amateurs often forget. They plan a trading strategy, they follow the markets, and they diarize, track, and analyze each of their trades.

1. Plan How You Will Trade
   You may have heard the adage, "if you fail to plan, you plan to fail." This is particularly true in Forex speculation.
   
   Successful traders start with a sound strategy and they stick to it at all times.
• Choose the currency pairs that are right for you.
  Some currency pairs are volatile and move a lot intra-day. Some currency pairs are steady and make slow moves over longer time periods. Based on your risk parameters, decide which currency pairs are best suited to your trading strategy.
• Decide how long you plan to stay in a position.
  Based on your currency pair selection, plan how long you want to hold your positions: minutes, hours, or days. Remember that depending on your account type, having open positions at 5:00pm Eastern Time may incur rollover charges.
• Set your targets for the position.
  Before you take a position you should establish your exit strategy. If the position is a winner, at what rate will you cash out? If the position is a loser, at what rate will you cut your losses? Then, place your stops and limits accordingly.
2. Follow the Forex Market
   Use Forex charts and Forex news to monitor market information and technical levels that affect your positions.
   
   
   • Use Forex Charts
     Charts are an indispensable tool to improve trading returns. You can easily recoup the money spent on a charting package from a single well-placed trade based on the analysis from professional charts. Check out XE Charts. Please keep in mind that forex trading involves a high risk of loss, and no guarantee is made that the investment on the charting applications will be recouped.
   • Follow Forex News
     XE Forex News provides breaking Forex news on economic reports and political events that influence the currency market. You can access detailed market commentary and trading strategies from experienced Forex traders.
3. Keep a Forex Diary
   Most traders fail because they make the same mistakes over and over. A diary can help by keeping track of what works for you and what doesn't. Used consistently, a well-kept diary is your best friend. When keeping your diary, make sure that it contains at least the following:
   • The date and time you took the position.
   • The rate at which you took the position.
   • The reason you took the position.
   • Your strategy for the position.
   • The date and time you exited the position.
   • The rate at which you exited the position.
   • Your profit/loss on the position.
   • Why you exited the position. Did you follow you strategy?
   Once you learn to recognize successful trading patterns, you will be able to spot them when they return.

Be aware that trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Source: http://www.xe.com/currencytrading/improve.php

What should you know about Forex Signals ?

The Benefits of Forex Trading

1. 24 Hour Market

Since the forex market is worldwide, trading is continuous as long as there is a market open somewhere in the world. Trading starts when the markets open in Australia on Sunday evening, and ends after markets close in New York on Friday.

2. High Liquidity

Liquidity is the ability of an asset to be converted into cash quickly and without any price discount. In forex this means we can move large amounts of money into and out of foreign currency with minimal price movement.

3. Low Transaction Cost

In forex, typically the cost for a transaction is built into the price. It is called the spread. The spread is the difference between the buying and selling price.

4. Leverage

Forex Brokers allow traders to trade the market using leverage. Leverage is the ability to trade more money on the market than what is actually in the trader's account. If you were to trade at 50:1 leverage, you could trade $50 on the market for every $1 that was in your account. This means you could control a trade of $50,000 using only $1000 of capital.

5. Profit Potential from Rising and Falling Prices

The forex market has no restrictions for directional trading. This means, if you think a currency pair is going to increase in value; you can buy it, or go long. Similarly, if you think it could decrease in value you can sell it, or go short.

Source: http://forextrading.about.com/od/forexbasics/tp/forex_benefits.htm

The Harvest: A Simple, Step by Step Strategy for Making $300 Per Week Trading the Foreign Exchange