To enter a successful forex deal it is likely that a trader will have gone through the following processes to arrive at the strategy to be applied to the particular deal:-

They will have developed a trading strategy that evaluates the trading environment, has a method of scanning the market for potential transactions, has trigger and signal required to enter a transaction, has decided how the transaction will be managed, has a predetermined way of exiting the transaction and a record keeping process.

Before this they will have developed their dealing station skills (entering orders, stops, targets etc) and Charting skills. They will have determined the timespan they trade in and risk they are prepared to adopt on every trade. They will have backtaded, demo trades and tested a number of strategies to reach the one that they are comfortable.

They will be aware of most of the technical analysis tools and indicators and a number of trading setups. they will know the difference between a signal and a trigger. They will know what kind of target to go for on their trades.

The diagram below summarises this process and creates a framework for the notes that will be available through the Forex Trade of the Day process and Expert-4x notes.

The Expert-4x subscription service has produced exceptional results recently!! 836 pips in 14 days!. The question is how much money can one make for a good run like that. Money management is one of the most neglected trading skills of Forex Trading. The trick is to match your money management approach with your personal Trading and risk profile. One has to strike a balance between capital preservation and trading risk.

If you have found a trading technique that is reasonably consistent and profitable (an average of 400 pips per month per annum will do) we would suggest that you consider the following Money Management techniques:

Always risk the same percentage on each trade.

For example:- a trader (John) has $30 000 in his trading account to trade and has decided to risk 2% on each trade. He has his money in a mini account ($1=1Pip) for reasons you will see soon. This means that if John considers a trade with a target of 100 pips and a stop of 40 pips (the risk) he would calculate the number of lots he can trade in the following way. 2% of $30 000 is $600. He can therefore risk $600 on his trade. He calculates the number of lots by taking the $600 divided by the 40 pip = 15 lots. Thus if the deals is successful John will earn 15 lots x 100pips = $1500. If the deal is unsuccessful he will lose $600 which is the 2% that was prepared to risk.

If the risk was 45 pips he would calculate the number of lots;- $600 / 45pips = 13.33 or 13 lots. Always round downwards, even if the answer is .9. This also shows the importance of trading mini accounts (1 pip = $1) rather than the main accounts (1 pip = $10). If John was using a main account he would be trading 1 lot for a long time.

Risking the same % on each trade builds in an interesting dynamic. When the trading results a good you automatically increase your number of lots and when trading result are poor you would end up decreasing your lots. A good trading approach in general.
Use the risk approach that matches your personal trading a risk profile.

If you are a conservative investor and the capital you use to trade the forex market is not completely risk capital then you could consider risking 1% (or less)of your capital per trade. This means that over time you would only loose your capital once you have more than a net of 100 negative trades. In general these traders sleep quite well during the evenings. They could still double their account in 8 to 10 months.

If you are a less conservative investor and the capital you use to trade the forex market can be exposed to more risk, then you could consider risking 2% of your capital per trade. This means that over time you would only loose your capital once you have more than a net of 50 negative trades. In general these traders are reasonable secure if they have found a technique that generates an average of 300 per month. They could double their account every 6 to 9 months.

Some more aggressive traders risk 4% of their capital per trade. The risk is higher and therefore they have to have a fairly consistent trading technique. These traders double their trading account a number of times a year. They can effectively, on average, get it wrong 25 times before they loose their capital. After doubling their money, they would often bank their original capital and then use their gains as their risk capital. A nice position to be in because your original capital is secure.

CONTENT

Module 1 : Introduction
Module 2: Basic Concepts
Module 3: The Hedged Grid trading rule
Module 4: How you make money
Module 5: Grid Trading success factors: simultaneous transactions
Module 6: Grid trading success factors: Volatility of currency
Module 7: Grid Trading Success factors: Interest Charges
Module 8: Automating the transactions
Module 9: How to Manage trending markets
Module 10: Grid Trading Strategies
Module 11: Capital Required
Module 12: Real live trading examples
Module 13: Conclusion
Module 14: Question and Answers

The course can be accessed at GRID COURSE

Currency traders have always realized that in the Forex trading market currencies have specific bear channels (angles) that currency prices follow and certain bull channels (angles) that they follow. Using this trading strategy one can quickly bring order into what seems a random moving market. It also dispels the Chaos theory.

Below are a few currency trading charts that show this concept in action. It also challenges the trading concept that most support and resistance levels are horizontal. The forex trading charts clearly show that there is a very strong support and resistance relationship using dominant angles than the traditional horizontal support and resistance areas determined by Fibonacci ratios and pivot points.

These dominant angles are great for determining bounce and breakout points at the start of a new currency price trend. It is used very well with the candle spike and long candle trading approach.

Expert4x recently interviewed a private Forex Trader who had produced a phenomenal 2600 pips (on a 1 lot basis) in a 3 week trading period. Barry Thornton is a private Forex Trader who has learnt forex trading the hard way – by trial and error. He further enhanced his development by presenting international Forex workshops to selected groups of traders and thereby getting involved in mentorship, training and subscription services. He has become independently wealthy from trading his own capital and specialises purely on the Forex market.

Expert4x has been given access to the trading records, pretrading analysis charts, result charts of Barry’s trading that produced the 2600 pips. Barry Thornton has further given his personal comments on each trade as well as giving Expert4x an opportunity to ask as many questions as it wants to understand the trading techniques used during these trades.Your are now given an opportunity to access the interview and the detailed trades over this period (if you wish). Further more Barry has agreed to answer any further questions that members of Expert4x and visitors to the various sites may have. He has agreed to provide personal mentorship feedback which maybe of benefit to any Forex Traders.

By obtaining a password to the website pages on which this information available you are not only getting valuable trading information on Barry Thornton the Forex trader but it will entitle you to ask any questions you like regarding any Forex Trading challenges you maybe encountering or the material presented.The cost of the password is $19.95 and once you have the password you may share it with as many Forex Trading associates as you wish. They will however not be entitled to the question and answer part of this service. Please allow up to 48 hours for your Barry Thornton password.

Click here to get a password > PASSWORD

Although not a spectacular gain, the EURGBP provided a great example a technical analysis principles working together to provide a good technical trade.

The EURGBP was trading in an upward sloping channel. A double top formation (reversal price pattern) was formed. At the same time sell divergences were made on the MACD momentum indicator which gave a forewarning of a possible sell transaction. Further more the MACD crossed over the 50 line a went into the sell zone. The 4 and 6 moving averages based on the price highs gave a crossover sell signal. The final sell signal came when the price violated the lower channel line / trendline. Normally this would trigger the sell transaction. However we missed it.

In general it is not a good idea to chase a missed entry. When there is a trendline violation the price often returns to the trendline for a 2nd time before it resumes the trend. We made use of this principle to place a sell order behind the price near the violated trendline. In this case the price did retest the trendline (Support become resistance) triggering the sell entry and then heading south as all the signals indicated. We exited before the last low which represents a support level.

This raises the point that traders need to establish which technical analysis indicators are SIGNALS and which ones are TRIGGERS. Signals warn about a possible transaction but the TRIGGER is the activity that creates the entry. In this case the double top, the moving average crossovers, the momentum divergences, the MACD moving into the sell zone were all SIGNALS. The trendline violation would normally have been the TRIGGER for the transaction but we missed it so the retesting of the violated trendline became our TRIGGER.

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The market had another below average volatility day yesterday. The “Looney” however created some movement which gave us a trade to talk about.

Very often a trade is entered into and we need to set a target for the trade. One of the guidelines one can use is the height of the formation (what ever the formation is) which preceded the price movement. Yesterday the CAD was trading in a triangle and a breakout was imminent.   If you are not sure which way it is going to break create both a sell and buy entry order and let the market decide. This is what we did and the price broke through the bottom support trendline of the triangle activating our sell entry order. Our stop was at the latest high in the middle of the triangle. Now where to put the target.

As can be seen we measured the height in the triangle at its highest point and then copied that below the triangle breakout point. This gives the expectation of the breakout and a guide to where the target should be. The trade worked out almost 100% perfectly in this respect and we banked 100pips.

Please remember to add your spread to any buy transactions. The exit in this case was a buy and therefore we could not place the target at the exact expectation level as the price would have to move past that point to activate the buy. Remember you are looking at the SELL price on most charts

www.Expert-4x.com is a sponsor of this free educational blog and uses many of the concepts high lighted in these postings for its daily alert services.

The JPY was again one of the most volatile currencies yesterday. We traded the GBPJPY as the JPY’s volatility is sometimes increased in this GBPJPY cross. Yesterdays range for the JPY was 112 pips, the EURJPY 111 pips and the GBPJPY 266 pips (Enough said).

Today’s topic is leading indictors. Most indicators are lagging indicators as they tell you what has happen in the past (eg moving averages). There are many indicators that give an indication of what is going to happen in the future. These are leading indicators.

One of the most powerful leading indicators is a straight support or resistance line. This line need not be horizontal. All that it has to do in join the tops of bottoms of turning points in the price movement and extend into the future. This extension represents possible support or resistance in to the future – therefore turning it into a leading indicator. It is also referred to as a trendline.  In fact 90% of our trades use a trendline violation (Crossover) or bounce at the entry trigger.

Yesterday the GBPJPY was trending downwards quite strongly. We drew a resistance trendline over the tops of turning points on the candles to establish our resistance trendline. As the price started turning back slowly it came closer and closer to the trendline. On the strength of the buy signal on the momentum indicator (Also leading in this case) we anticipated a violation of the upper resistance line and placed an entry order just above this line and a stop at the last low. The price broke through the trendline (resistance line) and started trending upwards quite nicely. We had no target in mind for this trade so followed the price movement with a following stop that was moved to the last low every time the candle closed. We were stopped out when the price retraced giving back over 60 pips to the market. In hind sight closing the deal at +150 would not be a bad days trading.

The momentum indicator again showed good measurement of the 2 wave nature of the Forex market as discussed earlier this week.

www.Expert-4x.com is a sponsor of this free educational blog and uses many of the concepts high lighted in these postings for its daily alert services.

Yesterday was a particularly lacklustre day with the JPY showing with only signs of life.

Momentum indicators can give reasonable signals in a sideways market. There are however a few principles to bear in mind when putting on a trade based on momentum signals. Here are a few:
1. NEVER trade momentum signals in a trending market (When the price is making new highs or new lows), NEVER.
2. Although not commonly known momentum tends to measure trading waves and we have found that there tends to be 2 major down waves and the 2 major up waves and so on (Sorry about that Mr Elliott). The waves must move through the momentum Buy/Sell line to be valid. 2 waves in the either the sell or the buy zone don’t count.
3. Trendline violations after the 2 wave are reasonably good trading signals.

Yesterday a momentum trading opportunity presented itself on the JPY (Also on the EURJPY and GBPJPY). The price was between a recent high and a recent low (confirmation of a sideways market), there was a trendline violation on the momentum indicator after 2 fair sized waves.

This was further supported by some other signals which we will discuss in future daily trade reviews. We put on a sell on confirmation of the signal (You have to wait for the candle to close), a stop at the last high and our initial target was the last major low at 122.80. As the deal progressed we exited on the next momentum buy signal (a trendline violation after 2 waves with the price still being between a recent high and low).

Gain 38pips $30,  Risk 12pips $ 10 Return on risk +300% (Time Taken 7 hours)

www.Expert-4x.com is a sponsor of this free educational blog and uses many of the concepts high lighted in these postings for its daily alert services.

Often in the Asian Forex market does not have the volumes to dramatically move the forex prices. During these quite trading sessions the price tends to consolidate. A group of moving averages based on different time spans gives a good visual confirmation of this (See the chart). What is essentially happening is that short term and long term traders are  agreeing on the current price levels and that is way the moving averages consolidate. This does however also mean that the slightest bit of news or a big buyer or seller entering the forex market could disturb this balance and often a strong breakout occurs.

This is what happened with the EURJPY yesterday and the moving averages started to consolidate on the 15 min chart. The price was trading in an upward sloping channel but made a failed swing (The price did not go to the opposite side of the channel) indicating a break downwards. An entry order sell was placed just below the lower channel support and a stop at the last high (20 Pips). As the eastern Europe volumes started moving into the market the break was given momentum and the price slowly broke downwards during the European session.

The question then was when to exit? Moving average crossovers are great for exits (but not always good for entries as you will experience many whipsaws). The exit was manually done on the close of the bar which confirmed the moving average cross overs of the fastest moving averages. The disadvantage of this is that you need to watch the deal to manually exit.

The moving averages for the chart are 5, 8, 31, 21, 34, 44 and  55.

The Head and shoulder formation is not always pretty and horizontal as can be seen from the trade below. We noticed that the GBPJPY again started forming a Head and Shoulder reversal formation and was battling to break through the breakout neckline. There where 3 blue candels next to 4 red channels where the price tried to break through. We placed a sell order below the the neckline and a target at 400 pips lower which was the expectation established by the approximate height of the channel in which the Head and shoulders formation formed. The price broke out and reached the target very quickly!! (only 2 x 4hour candles). The GBPJPY is the most volatile currency and these big moves are not uncommon.

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This trade was taken from directly our subscription service this week (180 pips in one transaction). We noticed that the GBPJPY had started forming a Head and Shoulder reversal formation and was battling to break through the breakout neckline. There where no less than 5 spikes where the price tried to break through. We recommended a sell just below the neckline and a target at 180pips lower which was the expectation established by the approximate height of the channel in which the Head and shoulders formation formed. The price broke out and reached the target very quickly. The GBPJPY is the most volatile currency and these big moves are not uncommon.

Although momentum indicators tend to give unreliable signals when the currency is trending there was a particularly strong sell divergence supporting the breakout.

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When in doubt about where strong support or resistance is it is often a good idea to look for candle spikes. These spikes normally show areas where the price slipped into but where very quickly sent back from where it came. This shows strong support or resistance. The chart below shows how they could have acted as good trading support signals. Remember that long blue candle next to a red candle (or the other way round) is often also a disgusted spike because if you add them together they become a spike.

A stronger reversal formation is candle tweezers where 2 spikes occur directly next to each other (not shown in the chart).

#  YOU get the direction wrong

#  The market whipsaws and takes out YOUR stop and then reaches your target.

#  YOU get your stop wrong. Too small when they should be big and too big when they should be small.

#  YOU cash in at the wrong time only to see the market run another 200 pips in the direction you where in.

Because of the ongoing market dynamics these problems occur with mechanical and manual trading systems

Imagine a trading system where you:-

* YOU can cash in a positive deal no matter which direction the market moves.
* YOU don’t need stops because deals are hedged by other transactions / options.
* The system is so mechanical that it can be traded without charts.

To good to be true?

Not so. Using the INVESTMENT GRID system we simply setup a series of hedges (Self financed transactions) which effectively allow you to cash in on EVERY move of the market (up or down). No need for stops.

Background to the Investment GRID System.

Many financial organisations use hedge and forex option principles to setup low risk trading processes. The magic system sets up its own network of hedges which allow you to cash in on EVERY move of the market.

This INVESTMENT GRID system has been marketed for thousands of $’s with a money back guarantee if any purchaser can prove that the system did not work using any currency over the last 15 years. No refunds have ever been made. Over the years we have made some changes to refine the system. We are now offering the INVESTMENT GRID system to be traded on a subscription basis.

What makes this system so unique:-

We believe that the average trader is so focused on trading one transaction at a time that they loose sight of what they are try to achieve (Make lots of money from trading). They can’t see the wood for the trees.

The INVESTMENT GRID System is based on the philosophy that says:  Why not invest in hedges placed above (say 1000 pips) and below (say 1000 pips) the market which allow you to cash in on every buy and sell move in the market. As the market tend to trade sideways and retrace, much more than it trends, with careful currency selection your hedges way never be hit for years and years and in the meantime you are cashing in on every move of the market. The money generated can exceed the cost of the hedge very quickly a thereby eliminate the risk very quickly.

The INVESTMENT GRID system is therefore not a true trading system but more related to an Investment on which continuous returns are being generated (ROI). It has been developed by financial and actuarial people rather than traders and is therefore a different approach to maximising income from the natural movement of the market. See the examples below: Sometimes the investment can last 1 hour and sometimes the investment takes days or weeks to mature profitably.

Conventional trading

We recently mentored a competent trader who had generated 700 pips during June making over $ 6 000 in the process. Not bad for a month of skilful trading. He did 160 trades with an average stop of 40 pips. During this period the trader had invested an amazing $ 60 000 in having stop losses (160 transactions x 40pips x $9.50per pip). Some were hit and other not. Using a fraction of $ 60 000 the trader could rather have invested in a hedging system which would have allowed a much freer way of trading and would have eliminated many of the stop out encountered. The INVESTMENT GRID system can easily be adapted for further optimisation by competent traders.

Why not add up (calculate) all the negative (stopped out) transactions you have had in the last month as well as the risk you took on the positive transactions and you will be amazed at how much you risked (In $ and in pips) for the return that you made. If you do this you will start seeing the benefits of using hedging to finance stops rather than being stopped out.

The INVESTMENT GRID system investments using hedges.

Very Simple examples of the concept:

The market goes up by 100 pips and then down by 100 pips. Cashed in $200 (you benefit from all moves and no concerns about stops being hit.) less the cost of the hedge $ 100 = Profit of $100. No more risk. Start a new investment.

The market goes up by 200 pips and then down by 100 pips. Cashed in $300 (you benefit from all moves and no concerns about stops being hit) less the cost of the hedges $200 = Profit of $ 100. No more risk. Start a new investment.

You may not need any of your own capital after a number of transactions.

What are the key success factors impacting your trading returns when using the Magic system.

? You need to use currencies that have a low spreads.
? You need to use currencies that have a low over night interest charge as some currencies may not move over say 100 pips every day.
? The size of your “cash in move” should be 100 pips or more depending on the volatility of the market.
? The market must move – doesn’t matter in which direction.
How do I start trading the INVESTMENT GRID system:

The system is easy to trade as all the entry orders are preset to cover a 1000 pip movement in the market. The system only requires you to replace cashed in transactions on the GRID as soon as possible so that you can cash them in again in the future.

The system is published regularly on our website and a new investment group is started every Monday. Every Monday a small change is made to the investment criteria. You are free to move from one group to the next.

For the 1st month we strongly suggest that you demo trade the system. Mainly because the psychologically this is not a trading system but an investment process and it takes a while for traders to get comfortable with the new concept. They for instance keep on looking at the charts and trying to manage the process.

You need either 2 trading mini accounts to facilitate buy transactions and sell transactions in the same currency at the same time, or alternatively a broker mini account that allows the above. The hedges will be created in these accounts.

To trade live you will need $ 5 000 available to invest. Depending on the market conditions when you start, you may only end up risking as little as $1 000 to setup the hedges. The balance is of the capital may not be needed at all!  $ 5000 in capital can hedge a move of 3000 pips so you have plenty.

What returns has the system generated.

The returns of this system are proportionate to the size of the cash in (50pips, 100pips and 150pips and 200 pips), the currencies used, the interest rates charges by brokers on overnight deals, the market phases, time started etc. Each user of the system applies these variables according to the size hedges they can afford. Adding more than 1 hedge results in exponential increase in returns rather than just doubling returns.

This is the 1st time that the investment GRID is being offered on a subscription service. We will be using a set of variable best suited for the subscription service and wherefore there is no track record. We would rather be conservative and not give an indication of the returns enjoyed.

We would strongly suggest that you demo trade your 1st month subscription to access the profitability of version of the system that will be traded for the subscription service.

The Grid system is traded as a subscription trading service. You can enroll for this service by subscribing for $24.95 a month on the following link - http://www.forextradersupportservices.com/subscribe.html
Alternatively I see that information regarding a similar hedged trading methodology is available at www.fxcm.com/hedging.jsp 

This is not a completely mechanical system and choosing the appropriate currency to trade, the grid size and what to do in a trending market takes trading experience and that is why it is presented as a subscription service.

One of the first things a forex student has to do is obtain free charts, a demo trading account and a knowledge of how to operate both the dealing and charting software. There are a number of brokers who offer demo accounts, trading charts, basic training and support.

When visiting these sites please review all the information on the sites. It is good to read 3 or 4 sites to obtain different perspectives of the same topics. Below are some suggested brokers to get started with:-

FXCM:

www.fxcm.com. FXCM supplies al the tools a new trader would need to get started so spend some time getting to know the company and the services offered. They are particularly good at offering live support on any questions you may have on virtually every page of their websites. There is further support given on their site www.dailyfx.com.

Demo account registration:  http://www.fxcm.com/open-free-100k.jsp
Charts:    http://www.fxcm.com/charting-options-exchange.jsp
METATRADER:

www.metaqoutes.net  MetaTrader supplies numerous brokers with there integrated charting and dealing software. The charting system is particularly good in that it supplies considerable history.

MetaTrader 4   http://www.metaquotes.net/downloads/
Technical analysis courses http://www.metaquotes.net/techanalysis/

www.Expert-4x.com is a sponsor of this free educational blog and uses many of the concepts high lighted in these postings for its daily alert services.

One of the most important trading skills a trader can develop is to be able to tell whether the currency in a trending market or a trading market. In general momentum indicators are highly unreliable in a trending market and trending indicators like moving average based techniques perform very badly in sideways trading markets. It has been estimated that markets trade sideways between 80% to 90% of the time and trade only 20% to 10% of the time.

A trending market is generally when the market is making higher highs and higher lows relative to the time span being traded. (A down trend makes lower highs and lower lows). Other indication of a trending market is when trendlines and / or moving averages point in a definite upwards or downwards direction. In general one should always trade in the direction of the trend when the market is trending until reversal signals are encountered. A trend must be assumed to continue until the weight of the evidence confirms a new trend relative to the time span being traded.

A non trending market is where new highs or new lows are not being made relative to the time span being traded and the price trades between a recent high and recent low. The trendlines and moving averages tend to be horizontal. One can trade in any direction in a sideways trading market.

Events that typically result in trend changes are Economic announcements or meetings, Political or important news or events, Market openings, Historic support and resistance areas and the ongoing battle between the bulls and the bears

Some Indicators that signal a trend change are A trendline violation, A moving average crossover, Momentum indicators signaling changes in momentum, reversal price formations, channel lines violations, bounces off a support or resistance areas, multiple moving average crossovers and candle formations.

Trend changing signals provide excellent signals to ENTER transactions as well as excellent signals to EXIT transactions, either as a stop loss or as a profit.

Most mechanical systems are programmed to be successful in one type of market and very seldom in both.

www.Expert-4x.com is a sponsor of this free educational blog and uses many of the concepts high lighted in these postings for its daily alert services.

Below are charts showing the range in which various currencies traded over the last 10 months. Clearly the GBPJPY has made some big moves ranging almost 5000 pips. It is not unusual for this currency to move 200 to 300 pips a day so it has high volatility.

On the other hand the EURGBP has only ranged 500 pips over this period which means that this currency pair is not good to trade if you are looking for big runs. 

www.Expert-4x.com is a sponsor of this free educational blog and uses many of the concepts high lighted in these postings for its daily alert services.

The following is a way trading these announcements:-

* Establish the exact time of the important announcement.
Confirmation of the importance of the announcement will be a narrow rangebound price movement (30 pips) with a bear or bull trap(false break) before the announcement.
* 2 minutes before the announcement input entry orders to straddle the current price (buy +15 to 20 pips / sell –10 to 15 pips).
* Wait for the break and cancel the unactivated leg of the straddle (or use it as a stop).
* Alternatively buy and sell market  orders could be activated 2 minutes before the time and stops moved within 15 to 20 pips from the price just before the announcement.

Many brokers systems can not cope with the fast movement of the price so make sure that your broker is comfortable with these tipe of trades.

More notes on straddle trades
* They are subject to whipsaws so research prior announcement results and the conditions in the market thoroughly before planning an announcement straddle or hedge.
* Announcements are generally regarded as risk events and careful consideration should be given to the trade.
* The Payroll announcement on the 1st Friday of every month has given the most volatile and dependable results.

www.Expert-4x.com is a sponsor of this free educational blog and uses many of the concepts high lighted in these postings for its daily alert services.

Most of the currencies have either broken through major trendline resistance / support or started making new highs / lows. This is a period when the bulls and bears have their biggest fights. The monthly and weekly charts below shows the status of all currencies. The analysis of the relative strength of currencies available on the blog shows how weak the US$ and JPY is compared to the EUR and GBP. We will therefore be favouring buying the EUR / GBP as they are strong and selling the USD / JPY as they a weak in the next few weeks. We will also be increasing the size of our stops and targets.

Please click on the charts below to enlarge them.

www.Expert-4x.com is a sponsor of this free educational blog and uses many of the concepts high lighted in these postings for its daily alert services.

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Traders fall into two schools when it comes to ways to analyze the market and find trading opportunities. There are trades that use mainly fundamental analysis (news and events and reltive strength of currencies) and those who use technical analysis(Charts reflecting the historic movements of currencies). The fundamental analyst concentrates on the underlying causes of price movements, while the technical analyst studies the price movements as reflected on the chart.

Technical Analysis
• Technical analysis focuses on the study of price movements. Historical currency data is used to forecast the direction of future prices. The premise of technical analysis is that all current market information is already reflected in the price of that currency; therefore, studying price action is all that is required to make informed trading decisions.
• The primary tools of the technical analyst are charts. Charts are used to identify trends and patterns in order to find profit opportunities.
• The most basic concept of technical analysis is that markets have a tendency to trend. Being able to identify trends in their earliest stage of development is the key to technical analysis.

Fundamental Analysis
• Fundamental analysis focuses on the economic, social and political forces that drive supply and demand. Fundamental analysts look at various macroeconomic indicators such as economic growth rates, interest rates, inflation, and unemployment.
• However, there is no single set of beliefs that guide fundamental analysis. There are several theories as to how currencies should be valued.

Technical Analysis or Fundamental Analysis?
• Most traders abide by technical analysis because it does not require hours of study. Technical analysts can follow many currencies at one time. Fundamental analysts, however, tend to specialize due to the overwhelming amount of data in the market.
• Technical analysis works well because the currency market tends to develop strong trends. Once technical analysis is mastered, it can be applied with equal ease to any time frame or currency traded.
• Technical analyst traders can not however ignore the fundamental aspects of trading as they must know the times of important economic announcements as these times represent higher risk conditions.
• Fundamental analyst need technical analysis to get an optimum entry into the market.
• On the whole traders should be able to trade in both ways as fundamental information generally creates the reason for a trend and technical analysis provided the way to best benefit from these trades.

For more information on fundamental and technical trading please go to:-

http://www.financepoint.net/intro-forex.asp

http://www.easy-forex.com/en/Forex.forecast.aspx

http://forex.easy-forex.com.au/learn_fx_trading/technical_analysis/

http://www.internettradebureau.com/article/forex-trading-an-a249.html

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Momentum divergences refers to situations that develop in where the trends (as determined by trendlines joining pivot points  (Turning points) on the price charts and on the momentum charts) on the price charts differ from those on the momentum indicators.

These are very strong signals but are not triggers to trade (refer to triggers and signals on this site).

These signals should not be used in trending markets.

Dr Alexander Elder in his book “trading for a living refer to these signals as the strongest trading signals in trading.

www.Expert-4x.com is a sponsor of this free educational blog and uses many of the concepts high lighted in these postings for its daily alert services.

The market sometimes shows signs of a possible high energy breakout, but it is not always clear which way the price will break.

Therefore instead of trying to 2nd guess the market direction one can place a buy and a sell entry order on either side of the price (straddle the price).

Whichever way the market moves it will activate one of the orders and you will be in the direction of the break.

When To Straddle Trade
*Before an announcement
*Price formation breakouts
*Periods of uncertainty
*Market openings (public holidays or weekends)
*Break of important support or resistance.

The first step is to identify a potential transaction. Below is an example of a triangle developing which sometimes provides breakout opportunities.

The next step is to determine the potential expectation on the transaction. With triangles this is normally the height of the triangle at the start of its formation.

The next step is to determine  your risk (where your stop should go) so that we can determine whether the risk / return ratio and capital risk acceptable?

Buy:
Expectation   110
Risk               40
Risk / return  2.7 / 1
Sell
Expectation       110
Risk               40
Risk / return  2.7 / 1

The next step is to place sell and buy entry orders (supported by targets and stops) at the breakout points. Now the market will determine the breakout direction.

1.     You DON’T need to know the direction the price is going to go to trade the Forex market.

This surprises many new Forex traders but straddle trading techniques will help you to have successful trades even when you are unsure of the direction the price will move.
 

2   The probability of a transaction being successful is dependent on the potential volatility behind the transaction. The amount of PUSH behind the move

Most traders spend 90% of their energy trying to find the direction on a move and only 10% on volatility. What’s the use of getting the direction 100% right when the move only goes for 15 pips.

3.    Trade ahead of the market. Anticipate the transaction before it happens.

High probability trades with appropriate entry points can normally be anticipated well in advance and programmed trades using entry orders (waiting orders) with targets and stops can be used.

4.    Knowing the rhythm and nature of the market allows you to trade appropriately.

Learn how to read the trading conditions of the FOREX market and how to take advantage of natural movement (Waves and channels) of the market. Also know when not to trade.  Most Traders ignore this and try to impose a technical analysis technique on inappropriate market conditions. This is probably the biggest cause of beginner  trader frustrations.

5.    Have a simple trigger that will get you into the market.

Firstly know which are trading signals and what is a trading trigger.

In the end the simpler you can make your trading techniques the better. Having hundreds of indicators makes trading complicated and confusing. Having simple but effective signals makes easy to make trading decisions (Pull the Trigger)
 

6    Use leading indicators to warn you about a potential transaction well in advance. Most indicators are lagging and give late signals.

The Forex market is faster than other markets and you need as much advanced warning about potential moves as what you can get.  Learn about leading indicators that give signals well in advance of the more traditional indicators.

7   Keep Emotions out of the trade as much as possible.

There are many ways of automating all the elements of a trade so that you don’t have to watch the screen all day long and become emotional about the outcome of the transaction (using entry orders etc.)

8    Before you trade live thoroughly back test and demo trade your technique.

Properly test and improve your strategies before going live. 90% of new traders start trading a technique that they have not personally tested. They go on the trust of what they have been told.

Testing a technique ensures that you can apply it under any conditions and that you understand it. It also gives you an opportunity to add improvements.

9    Keep your safety stops out of the traffic.

In appropriate placement of stops is a mjor cause of trading failure. In many cases an unsuccessful technique can become successful by just increasing the stop levels. Spend time finding your personal comfort level in this area. There are a number of techniques to not use stops at all.
 

10    Successful traders find the exit of a successful transaction is the most difficult part of trading.

Exiting transactions optimally takes experience.  many ways are discussed on this glog.

11     Assume that the market will trend in the direction that it is currently going until you see conclusive proof of a possible reversal

The objective of trading is to enter a new trend and stick with it until it is over.

12     Money and risk management is essential to a long term relationship with the Forex Market

Many methods used by successful traders are presented for your consideration. I don’t make recommendations or give advice in this area but knowing the alternatives enable you consider am appropriate one your way of trading

13     Technical Analysis techniques have strengths and weaknesses. Know both. Know then to use Technical Analysis and when not.

Certain indicators only work in trending markets and others in trading markets. Some trades can be done without charts. learn as much as you can about trading.

14    A trading strategy contains the time frame traded, warning signals, trigger signals, ways of managing the transaction, way of exiting the transaction, money management approach and risk management. It is not only about the entry

Find a personal trading strategy that takes your personal circumstance into account.

15  The trading process consists of doing an environmental scan, identifying possible future transactions, entering the transaction, managing the transaction, exiting the transaction, doing a post mortem and reviewing your trading strategy.

Build competency in all these areas.

16     In general the longer term charts (Daily, 4 Hr and 1 Hr) give more reliable signals than the shorter term ones (30min, 15 min, 5 min and 1 min) which are subject to noise.

Be aware of the many scalping (short term) and position trading (longer term) strategies available to trad the Forex market.  Knowing the alternatives will help you develop a personal strategy

Currencies tend to trade in channels quite consistently. Much more than many traders realise. This is also supported by the Dominant Angle theory that the price channels downward and upwards between sets of trendlines that repeat the same angle. This is discussed under another topic.

There are many ways of establishing channels but drawing straight trendlines is the simplest and most efficient. One only need 3 reference points to draw a channel as illustrated on the accompanying chart. Once 2 strong pivot points (turning points 1 and 3) have been established an extended trendline is drawn joining the 2 pivot points. This establishes one of the channel lines. The next channel line is simply drawn by drawing a line parallel to the already established trendline that touches the turning point 2. You then have a channel. The great thing about this is that this technique can be used in trending and sideways trading markets.

Way to trade this is then to find an entry point that will allow you to trade from 3 pivot point to the project 4 pivot points. Once the 4 pivot point is reached you can then trade the 4 to 5 leg and so on until there is a strong breakout from the channel which normally means a trend change or the formation of a new channel. Nice simple and effective way of trading.

As can be seen on the chart a good channel was establish for the CHF which was trading in a stepping down fashion within a channel. We missed hooking the number 3 bounce off the upper trendline (which became a channel line) so we were looking for a reason to sell the CHF. The best we could find was a trendline joining the recent lows. We placed a trendline violation sell order just below this line which was activated.

As we were trading the 3 to 4 point channel move the target became to projected bounce at point 4. We placed an automatic limit order just short of this so that our transaction would be automatically closed when the price reached this level. Fortunately it did and 100 pips were banked on this deal.

Because this was an automated deal it was also an alert on our UK alert service. For more information on the Expert-4x US and UK alert services please go to www.expert-4x.com.

www.Expert-4x.com is a sponsor of this free educational blog and uses many of the concepts high lighted in these postings for its daily alert services.

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Yesterday was not a great trading day and the market seemed to consolidate and trade with very little volatility. This would be a good time to review the importance of knowing the relative strength of the currencies compared to each other.  Knowing this you can establish the trend of currencies compared to other currencies.

At Expert-4x we have devised a very simple technique to do this. We use the monthly, weekly, daily and 4 hour charts to get a view of how currency crosses are performing against each other. In this table we have used the USD, GBP, EUR, JPY, CHF. This can be extended to the AUD and CAD or any other currency you wish. We determine the trend of the crosses by using simple indicators such as the direction that the 3 moving average is pointing, or the direction that the quick MACD signal line is pointing, candle formations and trendline directions. On the table below we then simply record the trend as UP, DOWN or FLAT. The table then gives an overall reading on how currencies compare with each other by showing how a currency compares against all the other currencies in a particular timespan. The 1st reading on the monthly part of the table shows that the USD is down against all currencies except the JPY.

By doing this for all the currencies for all the timespans and accumulating the readings we very quickly can tell that the USD has been the weakest currency and the JPY not far behind.  The GBP has been the strongest currency with the EUR the second strongest.

So how do we use this information? You should always try to trade crosses that are trading the strongest currency against the weakest currency. For example we should look for buy opportunities in crosses such as GBP/ USD or GBP / JPY to trade in the direction of the major trend.

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Currently the JPY is one of the weakest currencies depreciating against all other major currencies (except the US$). The GBP and EUR are currently the strongest major currencies appreciating against all other currencies. This information is obtained by comparing the trends of all the major currencies compared with all the other major currencies on a monthly, weekly, daily and 4 hourly basis. A future trade of the day will feature this analysis.

We were therefore looking for any excuse to use the JPY’s weakness and the EUR or GBP’s strength to trade motivate a trade. We noticed that a strong non horizontal upward sloping trendline was giving the EURJYP strong support as it trended upwards on the 1 Hour chart. We therefore followed this trendline with a buy entry order place in a position that would anticipate an upwards bounce off this trendline. This occurred at 166.85 when the price went to retest the support line. The trade soon went positive and the next concern was that the price was trading in a triangle and that the upper triangle resistance line would bounce the price back. The stop was moved to breakeven when the price reached the 167.25 area but it soon broke through and headed north.   Our target was the top of the upper channel but we decided to close the deal at the close of the weekend market as we were +120 pips at that stage, which is what we did. Sometimes a bird in the hand is worth 2 in the bush.

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The Head and Shoulders formation is one of the most wellknown reversal formations known by Technical Analysts. As is shown in the chart below the Head and shoulder formation consists of a Main Head with 2 shoulders on each side. A neckline can be drawn joining the bouncing points. It is not uncommon for the price to break through the neckline  and then retest it before continuing in the reversal direction.  The head and shoulders can also be viewed as a change of channel formation.

The Head and Shoulders is traded by trading the breakout of the neckline and placing a stop at the top of the breakout shoulder. The target is the height of the head and shoulders.

We trade the Head and Shoulders even when the neckline is non horizontal.

In online Forex trading it is important to always review all time spans of all the currencies traded to establish the long term dominant trend as well as important support and resistance levels. Looking at the GBP monthly chart gave us some idea of which short term trading strategies to employ. The GBP was clearly in a upward trend for a number of years. It is however at a 15 year previous high at 2.0110 . Any previous high is a psychological barrier because one of the definitions of a upward trending market is when the price is making new highs and new lows. When it comes to a 15 year new high this is even of more importance.

There are a number of ways the market can react to this new high. The bears can try to put up a very strong fight to try to keep the price below the previous high or what often happens is that the breakout is a high volatility breakout with the price moving upwards very quickly.

From the price action after the 15 year high violation it looks like we are in for a fight with the Bears putting up strong resistance. Sometimes it is a good time to not trade on a technical basis because of this fight.

Yesterday a double resistance opportunity presented itself for a possible trade. A support trendline that been violated (and now becomes resistance at 2.0185) and the upper resistance horizontal area (at 2.0195) formed a double resistance area for a downward trade. This was a risky trade because it was against the trend but often when there is a breakout the price goes back to retest the previous resistance. This is what happened and our sell activated at 2.0180 and the price went down to retest the previous support at 2.0110. The stop was put above the previous high.

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Annual Rhythm is about times when not to trade such as Xmas / New year period,
Easter Week end and public holidays. It is also about knowing the impact of Daylight savings on the major markets.

Quarterly Rhythm is mostly about trading volumes and movements when Forex Options expire.
The Monthly rhythm is knowing the Announcement schedule and important events impacting the Forex market.

Weekly rhythm is about having open deals over weekends and which days are the most volatile.

The Daily rhythem is about knowing the charactristics of the various markets Tokoyo: Quiet,  European: Volume increases, UK Open: Good trends, US Open: High volume and high volatility.

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Online Forex traders must always be aware of how events in the world can impact the exchange rates of the various currencies. Major events impacting currency movements are events like elections, interest rate changes and economic announcements. There are also events that have a calming impact on the market. These are public holidays in some or all of the trading markets. Essentially the market represents the views of human beings. When these human beings go on holiday there is very little interest in the Forex market. Yesterday was Independence Day in the USA (the 4th of July). The chart above reflects the EURUSD chart with the EUR only showing a range of 23 pips for the day.

On the whole major public holidays are good days for online Forex Traders to get out and also have a holiday. Even if the price moves a bit, so what, the market will still be there tomorrow. It is always important to not try to squeeze movement out of the market that just is not there. We did very well to breakeven yesterday. Sometimes the best trade you can make is not to trade.

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Results from channel trading are particularly good in sideways trading market although channel trading can be applied just as profitably in trending markets. The application of channel trading in trending markets will be discussed in another trade of the day. There are many ways of identifying trading channels eg. Using trendlines, moving average channels, etc.

Moving average envelopes are normally found under the indicator options of most trading packages. These indicators are based on envelopes around a moving average. At Expert-4x we like using fast moving averages of between 3 and 5 but traders must experiment to find the moving averages that meet their trading needs. There is no fixed setting for the width of these moving average envelopes. Traders must use their own judgement to try to capture 90% to 95% of the price movement within the envelopes. By definition only exceptional price movements will poke out of the channel occasionally making this a great retracement trading system.

Yesterday this system was used very effectively to make 110 pips on the GBPJPY. See the trading chart. The 4 hour chart and using envelops that capture 95% of the price movement was used. To make sure that we were in a sideways trading market we made sure that there was a high higher than the existing price levels and a low lower than the existing price levels. We place a sell entry order at the level of the upper envelop and a buy entry order at the level of the lower envelop thereby straddling the price. The price went up and activated the sell entry order before returning back into the envelope and heading south were the lower buy order acted as a great target.

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