What is Online Forex Trading?

Online Forex Trading is the arena where a nation's currency is exchanged for that of another currency of another nation. The foreign exchange market is the largest financial market expression within the world and is the equivalent of over 1.5 trillion USD changing hands daily, which is more than three times the collective amount of the US Equity and Treasury markets combined.

Unlike other financial markets, the Forex Trading market lacks physical location and has no central exchange. Thus it operates all the way through a global network of banks, corporations and individuals that trade one currency for another.

The need of a physical exchange enables the Online Forex Trading market to operate on a 24 hours a day and 7 days a week basis, spanning from one zone to another in all the major financial centers in the world.

By resting on the Forex Trading market a person can easily trade main and exotic currency pairs and crosses quickly and easily, from his or her home or the office too. Many companies offer both individual and institutional customers instant "click and deal" trades on live deal-able quotes during the Online Forex Trading.

The Online Trading is very much influenced on a margin that allows a person to open positions as large as 200 times the opening amount. A person can easily earn interest on a strong currency position even if the market is not moving enough.

Dealing in Online Forex Trading

Companies dealing with Online Trading try to be as practical as possible to their customers which is why the companies are constantly improving and enriching their services.

In such a stage the customers can execute directly from streaming prices through a platform, which is fast, reliable, stable, easy to use, secure and also contains powerful functions. They even highlight within the most demanding trading environments of the Online Forex Trading.

The orders are executed and finalized within seconds. Real-time tables and real-time interactive charting are both flexible and customizable. They include a precision feature that allows the customers to work with other applications and yet are able to monitor their trading activities.

The platform that is used is proprietary software that has been created in-house by Online Forex Trading stock's information technology department. They enjoy a distinctive ability to repeatedly develop the same and to meet the evolving needs of their customers.

All the trading activity is tracked onscreen in real time, including the current open positions, real-time profit and loss, margin availability, account balances, and all the historical transaction details too.

The responsive and well-informed staff is available 24 hours a day and 7 days a week to assist the customers with any question that comes to their mind. While dealing with the Online Forex Trading customers can trade currency via our online dealing room and also by the telephone in English, 24 hours during the working days and can also easily chat with the dealers round the clock.

To deal with Forex Trading there are many online Forex trading platforms available with proprietary softwares that are based on the superb qualifications of professional currency traders. They are effective, efficient and reliable to use too.

Placed direct orders in Forex Trading are executed on streaming currency prices and can never be re-quoted. The market orders that have not been filled instantly are confirmed within seconds at prices accepted by the client during Online Forex Trading.

As soon as a live trading account is opened, the customers are provided with the Charting package. Multiple Online Forex Trading forex charts can be opened in virtually any time to view the currencies that matter most to the customers.

The transparency feature helps the customers to work with multiple windows as it supports the multiple screens and yet keep a bull's eye on each and every single one of them.

Eliminating all commissions and fees enhances the trading performance. In addition, various companies offer complete transparency of where the Forex market is Online Forex Trading and where it can be bought or sold.

Through the unique map function that some companies offer, the customers can easily place the open platform's windows outside the visible area of the screen and easily move them back in. Thus facilitating in the process of trading.

The Online Forex Trading platform has user-friendly, customizable windows, through which you can easily track the current Forex holdings in your account, the quantity of your position their average price and the current market price too. Read More..

What is Foreign Currency Trading?

Foreign Currency Trading is a complete manual on effectively taking advantage of trading, both as a source of profit and income, and also as a sophisticated enclose in an investment selection. Foreign Exchange is the name given to the "direct access" trading of foreign currencies. Hence the word as Foreign Currency Trading.

Currency Trading is different from investing, since it is more speculative in nature. Currency Trading offers high potential returns because of the fact that you can control your money.

Lets try understanding the concept of Foreign Currency Trading with the help of an example. Leveraging your account balance by 100 to 1 means you can capture the change in value of $100,000 worth of a currency with only $1,000 in your forex margin account.

Some Currency Trading accounts may also offer 200 to 1 leverage. In contrast, a homeowner that puts 5 percent down on a home purchase only has 20 to 1 leverage. Thus, understanding the fact that a currency move can force liquidation of open positions if adequate margin isn't maintained in the account.

Knowing Foreign Currency Trading Better

With an average daily volume of $1.4 trillion, Currency Trading is understood to be 46 times larger than all the future markets combined and, for such similar reasons, is the world's most liquid market till date. In the past, Foreign Currency Trading was limited largely to enormous money center banks and other institutional traders.

But in just the recent few years, technological innovations and the development of online trading platforms, such as that used by the FX, allow mostly many small traders to take advantage of the significant benefits of Currency Trading with foreign Exchange.

Primarily, in the beginning of the era of Foreign Currency Trading, only very large enterprises had access to the foreign exchange, trading countenance within the inter-bank business, the largest and most liquid financial market countenance within the world.

In this market, currencies valued around USD2, 000 billion are bought and sold by thousands of worldwide participants every repeated day and 24 hours per day.

Recently, within the past few years this highly attractive market has become more and more accessible to the private clients too.

The market participants in Currency Trading, who are linked worldwide by the readily available modern communication systems, control the rates, because this market follows the law of supply and demand. As a result continuous changes in rates are registered.

The Foreign Currency Trading involves purchasing and selling of different currencies. It consists of making profitable use of these changes and the market fluctuations on the magnificent basis of well-tried Currency Trading models.

The special advantage of this investment as compared to the well-established investments like the fixed interest shares is that profits can also be made. For instance, the USD is falling instead of rising compared to, say for an example, the Euro.

In Foreign Currency Trading, a deal is always finalized between two different currencies, with one currency theoretically representing the loan currency that is the debit, and the other one the investment currency which is the credit. Results are restricted with limitations to the amount of the difference between the entry and exit prices.

Also an added advantage of Currency Trading is that it is possible to trade currency with up to 100 times or more of your own capital. This is called as leverage or say gearing. A relatively small market movement can almost have a proportionately larger impact then on the magnificent funds you have deposited or may think to deposit.

This can both options available as either it may work against you or it may work in favor for you.

In the Foreign Currency Trading market, currencies are always priced and traded in pairs. You simultaneously can buy one currency and sell another, but you can determine which pair of currencies you wish to trade.

As an example, if you believe the value of the Eurodollar is going to increase in comparison to the U.S. dollar, then you would buy the euro in the euro/U.S. dollar pair.

The objective of Currency Trading is to exchange one currency for another in the expectation that the market rate or price will change so that the currency you bought has increased its value relative to the one you sold.

If you have bought a currency during Foreign Currency Trading and the price increases in value, then you must sell the currency back in order to lock in the profit. An open trade or position is one in which a trader has either bought/sold one currency pair and has not sold/bought back the equivalent amount to effectively close the position.

As with most traded financial products, Currency Trading quotes include a "bid" and "ask." The ask is the price at which a market maker will sell (and you can buy) the base currency in exchange for the counter currency.

Now, the bid is the price at which a market maker is willing to buy (and you can sell) the base currency in exchange for the counter currency. The difference between the bid and the ask price is referred to as the spread.

An advice that can be helpful is that if you posses a small amount and have no knowledge at trading currencies, then always start practicing with a Free Demo Account.

Familiarize yourself with the trading platform and develop one or more trading strategies. Foreign Currency Trading has become one of the primary most lucrative businesses resource within the world. Read More..

Why 90-95% of Forex Traders Fail to Comprehend Risk

I can recall many moons ago reading an article regarding the success rate of forex traders. I don't know how factual the figures where, or where the person who wrote the article obtained the figures from, but I do remember the figures presented. Initially it came as a surprise, but considering my own track record when I begun trading the forex market I didn't doubt the facts bites you back and its not long (around 3-6 months) that you find yourself glaring at an account balance below the amount available to buy one contract.

Just recently I decided to write up a quick article on what I thought was the number one determining factor personally. In this particular article it stated that about 90-95% of forex traders lose their capital within the first 3-6 months.

Now, everybody who opens up a forex account believes they will be the 5-10% of traders who super-naturally just happen to make money with the small amount of experience they have. I know I did! But this mild sense of arrogance of why 90-95% of forex traders lose their shirt within their first 3-6 months? After looking at my own starting performance and reading around the forums and talking with forex friends I think I have found the number 1 reason.

And here it is...

FOREX TRADERS FAIL TO TRULY UNDERSTAND THEIR RISK

I know I know, you've heard it before right? And you've been to all the special risk management classes and read all the money management books, visited all the risk courses on the internet, etc etc, but please read on.

See, I thought I knew all there was to know about risk, and I thought the skills that I had acquired from the stock market were easily transferable to the forex market. I mean, how complicated can understanding risk be? Isn't it just what we can lose from our trade? Well, lets make sure we are all on the same page with the definition of risk...

While we might all have our own different interpretations on what risk means, I personally define it as being the amount that can be lost if our stop were hit once our trade is transacted.

As an example: If I were to buy 10 EURUSD contracts at 1.2401 and were to place a 20 pip stop I would lose 10 x $10 x 20 = $2,000. The equation variables are: quantity of contracts x value per pip per contract x distance of stop price from opening price. Therefore, we were willing to risk $2,000 on that trade.

So our risk is defined as the initial amount we are willing to lose when we place our trade. With this understanding let us know see why so many budding forex traders fail to truly comprehend it.

Forex Trading Risk Questionnaire:

Answer these questions about your forex trading experience to gauge your understanding of risk in the forex market:

Do you use stops? Yes/No
Do you know how much you are likely to lose in a trade if it happened to go wrong immediately after the trade was transacted? Yes/No
Do you know how much you are risking as a percentage of capital per trade? Yes/No
Do you place similar orders in the same direction on different currencies? Yes/No

If you answered "NO" to the very first question, I would hate to think of the excuses you use to justify not using stops. Here are some reasons that I have come across from people who do not attach stops to their orders:

My broker is out to get me (SOLUTION: Either change broker, or place a stop that is ridiculously way outside where you would get out, then hit close trade when it hits your stop point)

I use entry stop reversal orders instead (be very careful with this method as FXCM has certain restrictions on this)

I use mental stops (I would hate to be around your place when the computer, electricity, internet or certain body organs need emptying... place a ridiculously far stop anyway, then hit close trade when it hits your stop point) I'm a man... I don't need stops (I can't help you here... maybe surgery?!)

If you do not employ stops in your trading then you have very lax risk management principles, and if you happen to wipe out within 3-6 months representing another statistic then I would strongly recommend that you re-think your stop loss part of your trading plan.

If you answered "NO" to the second question, then either you do not use stops (see the two paragraphs above), or, you do not know how to calculate your risk. If you would like to know how much you are risking then use this simple formula:

Quantity of Contracts x Value per Pip x Loss in Pips

As a quick example: If you bought 7 EURUSD standard contracts and had a 16 pip stop loss, then your risk would be 7 x $10 x 16 = $1,120. A standard contract is where each contract uses $1,000 in margin per contract. If you use a mini contract you will notice that each contract requires you to have $100 in margin per contract (the "Value per Pip per Contract" variable would be worth $1 in the above example and your risk would only be 7 x $1 x 16 = $112).

If you answered "NO" to the third question I would assume that you either thought it was of little importance, or did not know how to do it. If you do not know how to calculate it just use the formula above (Qty x Value per Pip x Loss) and divide that result by the amount of capital you have.

So why is risk as a percentage of capital important? I have read many times before that the optimal risk percentage is about 2% per trade. If you find yourself wiping out often it could be due to the fact that you risk far too much per trade. Knowing your risk percentage can also show you what amount of consecutive losses you can take before you wipe out. The calculation is below...

To find out how many consecutive losses will wipe you out divide 100 by your risk percentage. As an example, if I were risking 4.5% per trade it would only take 100 / 4.5 = 22 consecutive losses until I was wiped out. If you are backtesting a system you might want to check the number of consecutive losses your system has had in the past and then make sure that the systems string of losses is less than the calculated figure above.

The Hidden Risk

The last question brings it all home. Even if you think you have mastered risk by successfully answering all the above questions, you may still find yourself wiping out. The reason for this is due to the correlation between the currencies you trade.

It should come as no surprise to you that the EURUSD and GBPUSD currencies move in similar fashion, likewise the EURUSD and USDCHF in a mirrored fashion (when one moves up the other moves down). This relationship is known as a correlation and can be measured statistically. If the correlation between two currency pairs is above 0.90 then they are said to have a "strong correlation". Conversely if the correlation between two currency pairs is below -0.90 then they are said to have a "strong negative correlation" (when one moves up it is more than likely the other will move down).

This high correlation between currencies can blow your risk by at least twofold and as much as threefold if you trade the EURUSD, GBPUSD and USDCHF in a similar direction.

I once analyzed the correlation that existed between the currencies and found some amazingly high correlations (even between currencies I really didn't think had much of a correlation). As you can see from clicking the link below the chart highlights some of these strong correlations.

Daily Forex Correlations

The warning I would like to make is that if you find you are placing similar trades on two different currency pairs you are doubling your risk! Instead of risking the initial 2% per trade, you are now actually risking 4% per trade! Instead of 50 consecutive losses wiping you out, you only now have 25! I hope you can see the importance of this.

What to do? First of all recognize the problem and do one of two things: Decrease the quantity of contracts for each trade that has a high correlation (if you are trading the EURUSD & the USDCHF halve the quantity between both), or Only trade one currency. Reducing your risk can be as simple as that.

I hope this lesson has impressed on you the importance of risk in the forex market. It's not just a case of knowing what your risk is, but knowing that there exists a high correlation between currencies and that by doing similar trades you can be doubling or even tripling your risk. Don't forget the first rule in trading: Protect your capital at all costs. Managing your risk safely will help you achieve this.

by currencysecrets.com

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FOREX vs. FUTURES TRADING

This article tries to highlight why FOREX is considered a better option for investors when compared to Futures Trading.

You pay ZERO commissions and exchange fees!

In the futures market, you must pay commissions and exchange fees. In the FOREX market, you pay NONE of that. No commissions. No exchange fees. Not one red cent. How can FOREX do that? Simple. Because you deal directly with the market maker via a purely electronic online exchange, you eliminate both ticket costs and middleman brokerage fees. There is still a cost to initiating any trade, but that cost is reflected in the bid/ask spread that is also present in futures trading. And, because the FOREX trading platform offers instant execution off firm two-way prices, you never have to worry about price "slippage" or bad fills which happen all too often in other financial products. To see for yourself how these benefits work, open a free demo account.

You get more leverage than futures

The sheer size of the currency market (46 times greater than all futures markets combined) and the greater price stability allow you to trade with a much higher degree of leverage than is typical with futures contracts. Plus, you are able to select the degree of leverage that you wish to employ in trading. Unless you specify otherwise, FOREX sets your leverage level at FOREX's most lenient requirement. The actual margin requirements for leverage vary with account size.

For example, if your account has $30,000 in it, then the margin requirement is $1,000 for every position (approximately equal to $100,000 worth of currencies). Thus, the margin requirement is just 1% of the total value of the currencies traded - a 100:1 ratio. Click here for a demo.

Your risk is strictly limited

With FOREX, you can NEVER have a debit balance! In the event that funds in your account fall below margin requirements, the FOREX Dealing Desk will simply close all open positions. That means that, even if you are dead wrong and there is a catastrophic market move against you, you can never lose more than the amount of money you have in your account. In addition, by using stop loss orders that are guaranteed by FOREX, your risk can be further limited and defined. That provides you with tremendous peace of mind. See for yourself by making a few risk-free virtual trades in your FOREX demo account.

You get instantaneous execution and firm prices

The futures market does not offer instant execution or price certainty. Even with electronic trading and limited guarantees of execution speed, the price for fills on market orders is far from certain. In the futures market, the prices represent the LAST trade, not necessarily the price for which the contract will be filled. With FOREX currency trading, in contrast, you get instantaneous execution and price certainty. On the FX trading, you trade directly off real-time streaming prices. Your trades are filled instantly. There is no discrepancy between the displayed price and the execution price. This holds true even during volatile times and fast moving markets. Experience the benefits of instant fills and guaranteed prices by opening a free demo account.

You get maximum liquidity

Due to its enormous size (46 times bigger than all futures markets combined), the currency market is the most liquid market in the world. The spot currency market is a $1.4 trillion daily market, making it the largest and most liquid market in the world. This market can absorb trading volume and transaction sizes that dwarf the capacity of any other market. If you compare this to the $30 billion per dayfutures market, it becomes clear that the futures market provide only limited liquidity. The currency market, in contrast, is very liquid, meaning positions can be liquidated and stop orders executed without slippage. In just a few minutes, you can open a demo account and see how this works.

You can easily trade 24 hours a day

Unlike most futures exchanges, the currency market is a seamless, 24-hour market. At 5 p.m.Sunday, New York time, trading begins as markets open in Sydney and Singapore. At 7 p.m. the Tokyo market opens, followed by London at 2 a.m., and finally New York at 8 a.m. As a trader, this allows you to react to favorable or unfavorable news by trading immediately. It also gives you the added flexibility of determining your trading day. By comparison, the currency markets in the United States, such as the Chicago Mercantile Exchange and Philadelphia Exchange, have regulated hours. The CME, for instance, opens at 8:20 a.m. New York time and closes promptly at 2 p.m. Therefore, if important data comes in from England or Japan while the U.S.futures market is closed, the next day's opening could be a wild ride. (Overnight markets in futures currency contracts exist, but they can be thinly traded, not very liquid and difficult for the average investor to access.) Open a free demo account and get the ability to trade whenever you want.

by 2work-online.com

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Trading Tips for the New Forex Market Trader

For those of you who are new to the Forex market, or those of you who are considering becoming a Forex market trader will find this article on trading tips to be most helpful. You’ll learn what Forex is and what it does. You’ll also learn six trading tips that will help you in your transactions.

First, for those of you who are new you’ll need to know what Forex is. The FOREX or Foreign Exchange market is the largest financial market in the world, with an volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another. The Forex market got its start back in the early 1970's when floating currencies and free exchange rates were first introduced. At this time, the Forex market traders were the only players on the market to decide upon the value of one type of currency against another, all solely based upon a particular currency’s supply and demand

The Forex market is unique for a number of reasons. First of all, it is one of the few markets that requires very little trading qualifications, is free from any external control and cannot be manipulated in any way. As the largest financial market, with trades reaching up to 1.5 trillion U.S. dollars, or USD, the money moves so fast, it’s impossible for a single investor to substantially affect the price of any major foreign currency. In addition, unlike any stock that is rarely traded, Forex traders are able to open and close any positions within seconds, because there are always a number of willing buyers and sellers.

1. All you have to do to open a Forex account is fill out an application and provide the necessary identification. The application includes a margin agreement and will state if the broker will be allowed to intervene with any trade when it appears too risky. This agreement is made to protect the interests of the broker because most trades are done using the broker’s money. However, once you have established an account, you can fund it and begin trading in the Forex market.

2. In order to become a successful trader, you will need to adapt your own trading strategy. There is no one strategy that will work for all traders. Individual traders will need to develop their own approach to the market. While some traders may rely solely on technical analysis, others may prefer a more fundamental approach, while the more successful traders use a combination of both. Each individual trader will need to learn the best approach for his or herself in order to gain a comprehensive overview of the Forex market.

3. Before you take any position, look over the top five currencies to make sure you’re not missing something. The top five foreign currencies in Forex are: USD/Yen, Swiss franc/USD, Euro/Yen, Euro/USD and Pound/USD.

4. Prices move by trends. There are certain movements that have been studied over many years in order to identify a pattern in the trend. These trends need to be understood in order to understand a good trading strategy. For small accounts that are $25,000 and under, trading with a trend may help improve your odds when compared to bi-directional trading. Most new traders will look to trade in any direction, when they should be trading with a trend.


5. For new traders it is safest to have two accounts to learn as you play the trading game. Keep one real account that you will use to actually trade real money. Have a second demo account that you can use to test alternative moves in the trading game. You can easily use your demo account to shadow the trades in your real account so you can see if you are being too conservative or not conservative enough.

6. Always examine the one hour, four hour and daily charts that concern your trades. You can trade at 15 and 30 minute time intervals but doing so requires a bit of juggling. Read More..

The Prime Time for Daily Forex Trading

Investors and traders can trade currencies worldwide, in any trading zone, 24 hours a day, in today’s foreign exchange market. London, Japan and New York top the top three currency traders among the currency dealers. These currencies are being traded 24 hours a day. The only time that currencies stop trading is on Friday when the Japanese market shuts its doors. There is a one day window after Japan closes before Europe steps in on Monday morning to open for business.

The majority of trading comes from banks, brokerages and investment companies. Companies that sell and buy foreign currencies as part of their business, like independent brokers and currency dealers, make up only a small part of the foreign exchange currency trading. The Forex market will continue to develop and grow at a steady pace as more currency traders become aware of the foreign exchange markets potential for earning and raising capital. The Forex market reaches an average daily turnover 30 times higher than any other U.S. market.

Added to the drive for supply and demand, the Forex market presses on as the enormous scope for profit potential among the currency dealers is steadily rising. The Forex market also uses the free floating system that is considered more practical for today’s foreign exchange market which can experience a change in the currency rates at an estimated 4.8 seconds. The Forex market is taking on a prodigious role in the country’s economy, after developing from connective financial centers to one unified market. Having expanded worldwide, the Forex market is reflecting the constant growth of all international trades and their countries. When you consider the size of the foreign exchange market, it would be important to understand that any transactions that are made with a future trading broker or an independent broker, can lead to more transactions. This can be due to the brokerage businesses as they work to readjust their positions.

Understanding your overall portfolio and its sensitivity to market unpredictability is necessary in order to be an effective day trader. This is especially important when trading foreign exchange currencies, because these currencies are priced in pairs and no single pair will trade completely independently of the others. Gaining an understanding of these correlations and how they can change will help you use them to your advantage to control your portfolio’s exposure.

Correlations Defined

There is a reason for the interdependence of foreign currency pairs. For instance, if you were trading the British pound (GBP) against the Japanese yen (JPY) or GBP/JPY pair, then you’re trading a type of derivative of the USD/JPY and GBP/USD pairs. Therefore, the GBP/JPY must be slightly correlated to one or both of the other currency pairs. Even so, the interdependence amongst these currencies will stem from more than the fact that they are in pairs. While there are some currencies that will move one right behind the other, the other currency pairs can move in different directions often resulting in a more complex force. In the financial world, correlation is the statistical measure of a relationship between two securities.

Then there is the correlation coefficient that ranges between -1 and +1. The correlation of +1 indicates that two currency pairs can move in the same direction nearly 100% of the time. While the correlations of -1 indicates that two currency pairs are likely to move in the opposite direction 100% of the time. If the correlation is zero, this indicates that the relationships between the currency pairs will be completely at random.

Correlations are not always stable. Correlations change, just as the global economic system and other various factors can change on a daily basis, making the ability to follow the shift in correlations very important. The correlations of today may not be in line with the long-term correlations between any two-currency pairs. This is why it’s suggested to take a look at the past six months trailing correlation to provide a more clear perspective on the average relationship between the two currency pairs. This change is the result of a variety of reasons - the most common reasons being a currency pair’s predisposition to commodity prices, the diverging monetary policies and unique political and economic circumstances. Read More..

Japanese candlesticks

Candlestick Charts identical to a bar chart in the information conveyed, but presented in an entirely different visual context. The candlestick encapsulates the open, high, low and close of the trading period in a single candle.

Candlestick charts are on record as being the oldest type of charts used for price prediction. They date back to the 1700's, when they were used for predicting rice prices. In fact, during this era in Japan, Munehisa Homma become a legendary rice trader and gained a huge fortune using candlestick analysis. He is said to have executed over 100 consecutive winning trades!

The candlesticks themselves and the formations they shape were give colorful names by the Japanese traders. Due in part to the military environment of the Japanese feudal system during this era, candlestick formations developed names such as "counter attack lines" and the "advancing three soldiers". Just as skill, strategy, and psychology are important in battle, so too are they important elements when in the midst of trading battle.

Candlestick charts are much more visually appealing than a standard two-dimensional bar chart. As in a standard bar chart, there are four elements necessary to construct a candlestick chart, the OPEN, HIGH, LOW and CLOSING price for a given time period. Below are examples of candlesticks and a definition for each candlestick component:

The body of the candlestick is called the real body, and represents the range between the open and closing prices.

This kind of chart displays each time period in a "candlestick" format. As in the bar chart, the candlestick shows the open, high, low and close of a specific time period. A candlestick can either be solid or transparent. Its appearance depends on the relationship between the opening and the closing price. If the close is higher than the open, the candlestick is transparent or empty.

If the close is lower than the open, the candle is solid or filled. When two thin lines extend vertically above and/or below the body of the candle, this means that they represent the highs and lows respectively, but not the closing price. These lines represent the high and the low for the period and referred to as shadows. The high for the period is the upper shadow and the low is known as the lower shadow.

A black or filled-in body represents that the close during that time period was lower than the open, (normally considered bearish) and when the body is open or white, that means the close was higher than the open (normally bullish).

The thin vertical line above and/or below the real body is called the upper/lower shadow, representing the high/low price extremes for the period.

Candlestick charts have three major advantages when compared to bar charts.

Candlestick charts are much more "visually immediate" than bar charts. Once you get accustomed to the candle chart, it is much easier to see what has happened for a specific period - be it a day, a week an hour or one minute.

With a bar chart you need to mentally fill in the price action. You need to say to yourself, "The left tick says that's where it opened, the right tick where it closed. Now I see. It was an up day." With a candlestick chart, this is all done for you. You can spend your energy on analysis - not on figuring out what happened with the price.

With candles you can spot trends more quickly by looking for whether the candles are clear or colored. Within a trend, you can easily tell what a stock did in a specific period.

Most importantly, candles are vital for spotting reversals. These reversals are usually short term - precisely the kind the swing trader is looking for. When traditional technical analysis talks about reversals, usually it is referring to formations that occur over long periods of time. Typical reversal patterns are the "double top" and the "head and shoulders." By definition, these involve smart money distributing their shares to naive traders and normally occur over weeks or even months.

Candlesticks, however, are able to accurately pick up on the changes in trend that occur at the end of each market swing. If you pay meticulous attention to them, then they often warn you of impending changes.

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Bar chart, the chart of interval histograms

Technical analysis is simply the study of prices as reflected on price charts. Technical analysis assumes that current prices should represent all known information about the markets. Prices not only reflect intrinsic facts, they also represent human emotion and the pervasive mass psychology and mood of the moment. Prices are, in the end, a function of supply and demand. However, on a moment to moment basis, human emotions also dramatically effect prices. Markets may move based upon people's expectations, not necessarily facts.

Standard bar charts are commonly used to convey price activity into an easily readable chart. Usually four elements make up a bar chart, the Open, High, Low, and Close for the trading session/time period. A price bar can represent any time frame the user wishes, from 1 minute to 1 month. The total vertical length/height of the bar represents the entire trading range for the period.

The top of the bar represents the highest price of the period, and the bottom of the bar represents the lowest price of the period. The Open is represented by a small dash to the left of the bar, and the Close for the session is a small dash to the right of the bar. Below is a standard bar chart example.

Each period, for example hour, looks as follows:

On a daily bar chart each bar represents one day's activity. The vertical bar is drawn from the day's highest price to the day's lowest price. Closing price and opening price are represented by ticks on the bar.

Bar chart is graphic representation of price action using a vertical bar to connect the highest price to the lowest price during a period. The opening price is displayed as a horizontal line on the left side of the bar. The closing price is displayed as a horizontal line on the right side of the bar. Bar Charts can be constructed for any time period in which prices are available. Traditionally, the most popular time interval for bar chart is hourly chart. However, since the wide availability of the real time prices, it is common to use smaller time interval such as 30 minutes, 15 minutes, 5 minutes, 1 minute.

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Line Chart

All charts are plotted with time on the x-axis and the currency pair on the y-axis. Each time period on our real time charts can range from a tick by tick to a weekly interval (the tick refers to each individual pip movement). This gives traders the flexibility to view currencies with closer examination while also allowing them to spot the trends most suitable for their time-sensitive trading strategy.

A line chart's strength comes from its simple design; it provides an uncluttered, easy to understand view of a currency's price. Line charts display the currency's closing price.

A line chart is simply a graph of the value of a currency taken at regular time intervals based on current prices.

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Tick chart

Tick chart has the finest scale - 1 tick (individual quoting of bid and ask prices by market-maker). It is the chart of Bid and Ask quotations which look as columns on the chart of the prices.

The maximum of each separate column is Ask, the minimum of each concrete column is Bid.

As a rule tick chart is not used for the analysis of the market as its scale is so small that does not approach for the technical analysis. However tick charts are effectively used for exact definition of support and resistance levels and also to raise efficiency of purchases and sales, making it on local minima and maxima.

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Types of charts

There is one very important factor that you should consider with great care if you are willing to become a successful, profitable Forex trader. This ever important factor that must be always present in the trader's portfolio, is the ability to read the charts.

The beauty of FOREX charts, as opposed to charts used for, say, daytrading stocks, is that they are pretty easy to interpret and use. They're a reflection of a slower-moving, stable economy (the one of a country) compared to the future and daily drama of company reports, Wall street analysts and shareholder demands.

And, unlike stocks, currency charts rarely spend much time in tight trading ranges and have the tendency to develop strong trends (even though the FX market may be volatile, it's more predictable). And, rather than tens of thousands of stocks to analyze, you only have a few mayor currencies to trade.

There exist three kinds of famous charts:

Line Chart : The line chart is a graphical depiction of the exchange rate history of a currency pair over time. The line is constructed by connecting daily closing prices.

Bar Chart : The bar chart is a depiction of the price performance of a currency pair, made up of vertical bars at set intraday time intervals (e.g. every 30 minutes). Each bar has 4 'hooks', representing the opening, closing, high and low (OCHL) exchange rates for the time interval.

Candlestick Chart : The candlestick chart is a variant of the bar chart, except that the candlestick chart depicts OCHL prices as 'candlesticks' with a wick at each end. When the opening rate is higher than the closing rate the candlestick is 'solid'. When the closing rate exceeds the opening rate, the candlestick is 'hollow'.

There are also such types of charts as:

• Volumetric Japanese candles (Candlevolume)
• Equivolume charts
• Point and Figure, as named XO, or crosses-zero
• Three-Line Break
• Renko charts
• Kagi charts

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FOREX : TECHNICALS and CHARTING

Why day trade once you get a good seat and the market is going your way. It is always more profitable to ride even the short wave for 2-10 days by adding up. In general, you must day trade only when you are losing. To find a buy entry seat for short-term trades, you can study the "accumulation and distribution patterns and 20 MA" in 8, 4 hourlies or 30 min "Line Charts" (or Candle Charts), together with MACD "overbought and oversold indicators" with its Patterns. If you study them for awhile you will understand when it the best entry point. The remainder is for money management and discipline and of course, experience. Good trades�

On technical side of the trading, the first thing to do is to find out the trend in one�s trading time frame and the proper trading strategy for that trend. Some ride positions for months, while some ride positions for less than an hour or a day and their views of the trend obviously differ. For a trader who is running a position for months, a daily fluctuation may be just a meaningless noise while for a daytrader or an hour trader, a daily fluctuation could be a monstrous tsunami. Having a precise definition and a technique of identifying a trend and the turn of a trend in a trader�s time frame, and adopting the right strategies for that trend is the first elementary step in a hard school of trading. Imho.

I keep my technical side on any pair as simple as possible largely relying on other�s moves to see how I can take advantage of the situation. So for me the strategy is to "range trade". Please always give stop order per your risk profile when you open any new position. Medium-term reversals can be confirmed only in monthly, weekly and daily charts. Chart reading is not to predict the tops or bottoms of any move, but to confirm the change of trend as soon as they are made and adopt right strategies in that new trend. Good trades.

Each cycle is different from the last one and that is the beauty of the market. It is extremely important to look at the big picture from the distance rather than studying the minute and hourly charts with a microscope. And repeat the whole show again and again �til it shows the sign of turning in daily or weekly chart. And flip. Good trades to you.

I use very primitive charting methods. Please read 8 hour charts of EUR/GBP with 20 and 40 MA, and read round figures and breakout (from consolidations, then you will realize the method cannot be more primitive than that, but still deadly effective). Buy on dips towards the support and add up on breakout of that consolidation treating the two as one trade with same stop loss and "keep them" as long as the market moves in your way. Good trades.

As a rule of thumb, 20 MAs in 8 hour, day, week and month are useful for its directional tendency and as a resistance and support point. Not sure how much it is useful in daytrading though.

Please have a look at Eur/Usd and Usd/Jpy weekly 10 RSI and Aud/Usd monthly 10 RSI "patterns", not levels. Then you will find out primitive things work better when coupled with even simpler MAs. And RSI is useful "only in these weekly and monthly time scale" as far as I can see. You can ignore RSI in short-term scales as the inventor of RSI, Wilder, told us long ago.

Good afternoon. Agree with your observation. Once Soros of Quantum Fund hit the nail on the head with his theory of reflexivity in the market and that is exactly how these players work in the market. That rather romantic tool of daily candlestick chart is useful because whenever some players start positioning to start or stop short-term moves in Yen market, say several hundred pips, for whatever reasons, it reveals their intention to the market, more often than not. It sounds so weird to say tens of yards are spent relying on indicators so primitive like hand-drawn candlestick charts, but that is the truth in Yen market. Same as millions of soldiers risking their lives depending on how their generals draw up the battle plan with their cheap red and blue pencils in their operation room desk. Crazy world, I would say, but that is the fact. And as you say, battle is a battle and those ones who make their first move with their candlestick may not always win either. I happen to believe if a child can learn to trade with some simple signals he will do better than most traders, most of the time, making a good living. But then again, movin market is more than just following the signals. Good trades to you.

I guess if you are a daytrader, 30 minute and 15 minute candle charts and line charts in combination with MACD and MA could be more useful than hourly charts or even daily charts. Especially watch out for the down-sign and up-sign with long tails in candle charts and confirmation of the change of short-term trend in line charts breaking accumulation area in these charts. If you are a nimble trader, even a candle-sign is enough to start moving in with stops above or below the long tail end. For dollar/yen trade, read swiss/yen, pound/yen and euro/yen together to confirm the top or bottom. For Eurodollar or dollar/swiss trade, read pound/swiss and euro/pound together to confirm the same. If you are a daytrader, what matters is the flow of that particular day, not the bull or bear bias, so, 30 Min and 15 Min Candle Charts and Line charts are not bad tools to follow these flows. Good trades.

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Forex Trading - Advantages and Disadvantages

Forex, or Foreign Exchange, is the simultaneous exchange of one country’s currency for that of another. This market of exchange has more daily volume, both buyers and sellers, than any other in the world. Taking place in the major financial institutions across the globe, the forex market is open 24-hours a day.

Currencies are quoted in pairs. The first listed currency is known as the base currency, while the second is called the counter or quote currency. In the wholesale market, currencies are quoted using five significant numbers, with the last placeholder called a point or a pip.

The forex market is one of the most popular markets for speculation due to its enormous size, liquidity, and tendency for currencies to move in strong trends. An enticing aspect of trading currencies is the high degree of leverage available.

Advantages of Forex trading

Leverage. Huge leverage is available in Forex trading, often up to 100:1 meaning that large profits can be generated from small margin deposits.

Liquidity. The enormous size and global trading of the forex markets means that the markets in the major currency pairs are very liquid making trade executions almost instant with little slippage.

Ability to go short. Since currency trading always involves buying one currency and selling another, there is no structural bias to the market. This means a trader has equal potential to profit in a rising or falling market.

Trends. Fundamentally, the value of a country's currency is determined by interest rates and the strength of the economy in relation to other countries. Currencies, therefore, have a greater tendency to trend until the fundamentals change.

Disadvantages of Forex trading

Leverage. With huge leverage available to forex traders the danger is that positions which carry too much risk for the account size can be taken on, leading to margin calls. Effective money management rules must be adhered to.

Brokers. Retail traders must use a broker rather than dealing directly in the interbank market. The broker will be the counterparty in all transactions and is, effectively, making the market. They can, therefore, widen spreads or even refuse to trade during volatile trading conditions. To avoid dealing with brokers an alternative to forex is to use futures. See online futures trading for more details.

Spreads. As the retail trader must use a broker to trade, they cannot deal at the interbank rates. A broker will generally quote a fixed spread of 3-20 pips depending on the currency pair. The underlying interbank rate might be as little as 1 pip.

Forex is a very large market but for most retail traders dealing with brokers the odds are shifted against them.

Online futures trading provides a much more level playing field for most traders who want to take part in forex trading Read More..

Forex Trading Platform

As the name says, the Forex trading platform is a place where you can sell and buy the forex. This can also be called the forex-trading station. All forex trading financial companies, banks, traders and brokers will provide their own trading hub. These currency trading or forex trading hubs use sophisticated software's, which have, can perform various kinds of analysis such as technical and fundamental analysis. They also generate data, which is both numeric, and well as statistical base such as graphs, pies, regression data etc.

In most cases the trading stations or the platforms have real time streaming ticker line. This ticker line is being constantly updated and gives the buy / sell currency rate of major currencies in pairs. Forex dealers or traders also maintain fixed spreads on major currencies across the world, which are constant irrespective of the changing financial markets. Most of the trading stations will provide the following

Real time streaming of the major currencies in pairs.
Pricing which is competitive
Fixed spreads in 3-5 pips
Certainty of price for the currencies in buy and sell position

Another factor in the forex trade is that the more creditworthiness an institution or a forex trader is, the better access they have to market information and competitive pricing. This is then reflected also in the trading sessions that the subscribers and the investors utilize. They would have better access to interbank prices and therefore the cost of the execution for the trade in currencies would be better. The currency trade software's provide the following in most cases

Real time streaming currency pair rates. One can click the suitable boxes provided to confirm the sale or the purchase of the desired currencies.
They allow the linkage to currency margin account, which means that you can have more purchasing power with less of investment.
Immediate confirmation of the sale / purchase of the currencies. Of course the cost would be debited to your account. This is done almost simultaneously and in real time.
These currency trade software will also show you the real time profit / losses that you have made in the currency transactions.

Investors must make sure that when they subscribe to these currency trade software's, they read the terms and conditions as many trades may be subject to regulations and the agreement that may be drawn between the client and the websites / currency trade companies.

There are options provided whereby one can also limit or stop the open orders. These can also be cancelled or modified at a later stage in these forex trades. Reports on all forex and currency transactions can also be generated. These reports can be in the form of monthly / weekly reports. One can print these records or download them for later. There are many combinations and permutations, which are possible. Depending upon forex trading packages that each forex trader or financial company may provide, the forex trading stations may differ in features provided. Read More..