Search Forex Factory's forums, news, and network of traders from around the Can someone please post a link to sign up for ChartStation form Netdania. Chart example with most traded live streaming currency exchange charts. Beside charts from the forex market the application can be used for displaying any. many years ago when I first started sniffing around this magical world of trading I stumbled on an “exquisite” Forex broker who didn't even have. DESCARGAR CURSO DOMINANDO FOREXWORLD Web Browser client the Ease of provides a default configuration optimized for. This file contains Panda Free Antivirus on the repo Splashtop Business which tracing the devices. You'll then want CPU and memory around a while so you can are very good, that forum crap that is called.
A few hours later, the price moves to 1. Since you're closing your trade and you initially bought to enter the trade, you now sell in order to close the trade so you must take the 1. The price traders are prepared to buy at. The difference between 1. Using our formula from before, we now have. So when you buy a currency, you pay the spread as you enter the trade but not as you exit. And when you sell a currency you don't pay the spread when you enter but only when you exit. What the heck is Leverage?
You are probably wondering how a small investor like yourself can trade such large amounts of money. Sounds too good to be true? Well this is how forex trading using leverage works. The amount of leverage you use will depend on your broker and what you feel comfortable with. Typically the broker will require a minimum account size, also known as account margin or initial margin.
Once you have deposited your money you will then be able to trade. The broker will also specify how much they require per position lot traded. The minimum security margin for each lot will vary from broker to broker. In the example above, the broker required a one percent margin. What the heck is a Margin Call? In the event that money in your account falls below margin requirements usable margin , your broker will close some or all open positions.
This prevents your account from falling into a negative balance, even in a highly volatile, fast moving market. Usable Margin is the money available to open new positions or sustain trading losses. Remember, usable margin is the money you have available to open new positions or sustain trading losses.
Make sure you know the difference between usable margin and used margin. If the equity the value of your account falls below your usable margin due to trading losses, you will either have to deposit more money or your broker will close your position to limit your risk and his risk. You should also know that most brokers require a higher margin during the weekends.
The topic of margin is a touchy subject and some argue that too much margin is dangerous. It all depends on the individual. Some brokers describe their leveraging in terms of a leverage ratio and other in terms of a margin percentage. Print and run! The term "order" refers to how you will enter or exit a trade. Here we discuss the different types of orders that can be placed into the foreign exchange market.
Be sure that you know which types of orders your broker accepts. Different brokers accept different types of orders. Order Types Basic Order Types There are some basic order types that all brokers provide and some others that sound weird. The basic ones are: Market order A market order is an order to buy or sell at the current market price. If you wanted to buy at this exact price, you would click buy and your trading platform would instantly execute a buy order at that exact price.
If you ever shop on Amazon. You like the current price, you click once and it's yours! The only difference is you are buying or selling one currency against another currency instead of buying Britney Spears CDs. Limit order A limit order is an order placed to buy or sell at a certain price. The order essentially contains two variables, price and duration. You want to go long if the price reaches 1. You can either sit in front of your monitor and wait for it to hit 1.
If the price goes up to 1. Stop-loss order A stop-loss order is a limit order linked to an open trade for the purpose of preventing additional losses if price goes against you. A stop-loss order remains in effect until the position is liquidated or you cancel the stop-loss order.
To limit your maximum loss, you set a stop-loss order at 1. Stop-losses are extremely useful if you don't want to sit in front of your monitor all day worried that you will lose all your money. You can simply set a stop-loss order on any open positions so you won't miss your basket weaving class.
Your broker will not cancel the order at any time. Therefore it's your responsibility to remember that you have the order scheduled. Because foreign exchange is a hour market, this usually means 5pm EST since that that's U. Two orders with price and duration variables are placed above and below the current price. When one of the orders is executed the other order is canceled. You want to either buy at 1.
The understanding is that if 1. Always check with your broker for specific order information and to see if any rollover fees will be applied if a position is held longer than one day. Keeping your ordering rules simple is the best strategy. Summary The basic order types market, stop loss, and limit are usually all that most traders ever need. DO NOT make a trade with real money until you have an extremely high comfort level with the trading platform and order entry system.
Before trading Forex you need to set up an account with a Forex broker. So what exactly is a broker? In simplest terms, a broker is an individual or a company that buys and sells orders according to the trader's decisions.
Brokers earn money by charging a commission or a fee for their services. You may feel overwhelmed by the number of brokers who offer their services online. Deciding on a broker requires a little bit of research on your part, but the time spent will give you insight into the services that are available and fees charged by various brokers. Is the Forex broker regulated?
When selecting a prospective Forex broker, find out with which regulatory agencies it is registered with. Among the registered firms, look for those with clean regulatory records and solid financials. Stay away from non-regulated firms! The NFA is stepping up their efforts in educating investors about retail forex trading. The NFA recommends you read it before taking the forex plunge. Both the brochure and the online learning program are available at no charge to the public.
Customer Service Forex is a hour market, so hour support is a must! Can you contact the firm by phone, email, chat, etc.? Do the reps seem knowledgeable? The quality of support can vary drastically from broker to broker, so be sure to check them out before opening an account. Seeing how quickly they respond to your questions can be key in gauging how they will respond to your needs. If you don't get a speedy reply and a satisfactory answer to your question, you certainly wouldn't want to trust them with your business.
Just be aware that as in other types of businesses, pre-sales service might be better than post-sales service. Online Trading Platform Most, if not all, Forex brokers allow you to trade over the Internet relatively easy. The backbone of any trading platform is their ordering system. So trading software is very important. Get a feel for the options that are available by trying out a demo account at a few online brokers.
It should include: the ability to view real-time currency exchange rate quotes, an account summary showing your current account balance with realized and unrealized profit and loss, margin available, and any margin locked in open positions. A client-based software program, or one that you download and install, will only allow you to trade on your own computer unless you install the program on every computer you use.
Usually, the "download and install" program runs faster, but most programs are operating system specific. For example, most brokers only offer their trading platform application to run on Microsoft Windows. If heaven forbid you are a Mac user!
These two the Web or Java-based will run on any computer since they run through your internet browser. Java-based software programs are preferred by most brokers, who think they are more safe and reliable. Java-based software tends to be less vulnerable to attack from viruses and hackers during transmissions than "download and install" software. But always be sure to open a demo account and test out the broker's platform before opening a real account!
Make sure you have a high speed Internet connection. Dial-up will absolutely not work for Forex! Bells and Whistles Any Forex broker worth his salt should offer you real-time quotes and allow you to quickly enter and exit the market. These are minimal requirements of any trading software. Upgraded software packages are usually offered as an extra monthly fee by brokers. Most brokers now offer integrated charting and technical analysis packages with their trading platforms.
The level of integration with the trading platforms varies and is worth understanding carefully. These little cute accounts are a great way to get started and test your trading skills and gain experience. Broker Policies Before selecting an online Forex broker, you should closely examine their features and policies.
Transaction Costs Transaction costs are calculated in pips. The lower the number of pips required per trade by the broker, the greater the profit that the trader makes. Comparing pip spreads of half dozen brokers will reveal different transaction costs. Margin Requirement The lower the margin requirement meaning the higher the leverage , the greater the potential for higher profits and losses.
Margin percentages vary from. Low margin requirements are great when your trades are good, but not so great when you are wrong. Be realistic about margins and remember that they swing both ways. Some brokers even offer fractional unit sizes called odd lots which allow you create your own unit size. Rollover Charges Rollover charges are determined by the difference between the interest rate of the country of the base currency and the interest rates of the other country.
The greater the interest rate differential between the two currencies in the currency pair, the greater the rollover charge will be. On the other hand, if the Swiss Franc were to have the smallest interest differential to the U. The interest rates normally fluctuate with the prevailing national rates.
If you decide to take an extended break from trading, the money in your margin account will be accruing interest. Finding the right broker is a critical part of the process. Keep looking and trying different demo accounts. Low Spreads. Lower spreads save you money. Low minimum account openings. Instant automatic execution of your orders. This is very important when choosing a Forex broker. This is very important when trading for small profits.
This means you want instant execution of your orders and the price you see and "click" is the price that you should get Free charting and technical analysis Choose a broker that gives you access to the best charting and technical analysis available to active traders. Look for a broker that provides free professional charting services and allows traders to trade directly on the charts.
Leverage Leverage can either make you super rich or super broke. Most likely, it will be the latter. As an inexperienced trader, you don't want too much leverage. A good rule of thumb is to not use more than leverage for Standard k accounts and for Mini 10k accounts. Live as if you'll die today.
Opening a new online trading account with a Forex broker can be done in three simple steps: 1. Selecting an account type 2. Registration 3. Activating your account Before trading a dime of your hard earned money, you may want to think about opening demo account. Actually, open up two or three demos - why not? Try out several different brokers to get a feel for the right one for you.
Account Types When you're ready to open a live account, you have the choice of opening a Forex trading account under your personal name or a business name. Also, you will have to decide whether or not you want to open a "standard" account or a "mini" account or "micro" account if available. Inexperienced traders or traders with a small amount of capital to trade should always open a mini account.
Only experienced traders with lots of money should open a standard account. Always read the fine print. Registration You will have to submit paperwork in order to open an account and the forms will vary from broker to broker. Account Activation Once the broker has received all the necessary paperwork, you should receive an email with instructions on completing your account activation. After these steps have been completed, you will receive a final email with your username, password, and instructions on how to fund your account.
Pretty easy huh? You will still probably lose money Go through our entire School of Pipsology and you'll understand what we mean. With the ability to trade during the U. Commission Free Trading Most Forex brokers charge no commission or additional transactions fees to trade currencies online or over the phone. Combined with the tight, consistent, and fully transparent spread, Forex trading costs are lower than those of any other market.
Instantaneous Execution of Market Orders Your trades are instantly executed under normal market conditions. You also have price certainty on every market order under normal market conditions. What you click is the price you get. There's no discrepancy between the displayed price shown on the platform and the execution price to enter your trade.
Keep in mind that most brokers only guarantee stop, limit, and entry orders are only guaranteed under normal market conditions. Fills are instantaneous most of the time, but under extraordinarily volatile market conditions order execution may experience delays. Short-Selling without an Uptick Unlike the equity market, there is no restriction on short selling in the currency market.
Trading opportunities exist in the currency market regardless of whether a trader is long or short, or which way the market is moving. Since currency trading always involves buying one currency and selling another, there is no structural bias to the market.
So you always have equal access to trade in a rising or falling market. Look at Mr. He's so confident and sexy. Stocks has no chance! No Middlemen Centralized exchanges provide many advantages to the trader.
However, one of the problems with any centralized exchange is the involvement of middlemen. Any party located in between the trader and the buyer or seller of the security or instrument traded will cost them money. The cost can be either in time or in fees. Forex traders get quicker access and cheaper costs. Rumor had it that the funds were taking profits because of the end of the financial year or because today is "triple witching day", all as an explanation of why this stock is up or the market in general is down or positive on the session.
The stock market is very susceptible to large fund buying and selling. In spot trading, the liquidity of the Forex market makes the likelihood of any one fund or bank to control a particular currency very slim. Banks, hedge funds, governments, retail currency conversion houses and large net-worth individuals are just some of the participants in the spot currency markets where the liquidity is unprecedented. Analysts and brokerage firms are less likely to influence the market Have you watched TV lately?
Heard about a certain Internet stock and an analyst of a prestigious brokerage firm accused of keeping its recommendations, such as "buy" when the stock was rapidly declining? It is the nature of these relationships. No matter what the government does to step in and discourage this type of activity, we have not heard the last of it. IPO's are big business for both the companies going public and the brokerage houses. Relationships are mutually beneficial and analysts work for the brokerage houses that need the companies as clients.
That catch will never disappear. Foreign exchange, as the prime market, generates billions in revenue for the world's banks and is a necessity of the global markets. Analysts in foreign exchange don't drive the deal flow, they just analyze the forex market. Which one will you trade?
Got the time to stay on top of so many companies? In spot currency trading, there are dozens of currencies traded, but the majority of the market trades the 4 major pairs. Futures, don't our short shorts look cool? This market can absorb trading volume and transaction sizes that dwarf the capacity of any other market. Thirty billion?!! The futures markets can't compete with its limited liquidity. The Forex market is always liquid, meaning positions can be liquidated and stop orders executed without slippage except in extremely volatile market conditions.
EST the Tokyo market opens, followed by London at 2 a. And finally, New York opens at 8 a. EST and closes at 5 p. As a trader, this allows you to react to favorable or unfavorable news by trading immediately. If important data comes in from England or Japan while the U. Overnight markets in futures currency contracts exist, but they are thinly traded, not very liquid, and are difficult for the average investor to access. You pay NO commissions! Because you deal directly with the market maker via a purely electronic online exchange, you eliminate both ticket costs and middleman brokerage fees.
Brokers are compensated for their services through the bid-ask spread instead of via commissions. Price Certainty When trading Forex, you get rapid execution and price certainty under normal market conditions. In contrast, the futures and equities markets do not offer price certainty or instant trade execution. Even with the advent of electronic trading and limited guarantees of execution speed, the prices for fills for futures and equities on market orders are far from certain.
Guaranteed Limited Risk Traders must have position limits for the purpose of risk management. Risk is minimized in the spot FX market because the online capabilities of the trading platform will automatically generate a margin call if the required margin amount exceeds the available trading capital in your account. All open positions will be closed immediately, regardless of the size or the nature of positions held within the account.
In the futures market, your position may be liquidated at a loss, and you will be liable for any resulting deficit in the account. That sucks. Willing is not enough, we must do. As in any new skill that you learn, you need to learn the lingo You, the newbie, must know certain terms like the back of your hand before making your first trade. Some of these terms you've already learned, but it never hurts to have a little review. All other currencies are referred to as minor currencies.
Do not worry about the minor currencies, they are for professionals only. These pairs are the most liquid and the most sexy. Base Currency The base currency is the first currency in any currency pair. It shows how much the base currency is worth as measured against the second currency. In the Forex markets, the U. The primary exceptions to this rule are the British pound, the Euro, and the Australian and New Zealand dollar. Quote Currency The quote currency is the second currency in any currency pair.
This is frequently called the pip currency and any unrealized profit or loss is expressed in this currency. Pip A pip is the smallest unit of price for any currency. In this instance, a single pip equals the smallest change in the fourth decimal place - that is, 0. Bid Price The bid is the price at which the market is prepared to buy a specific currency pair in the Forex market.
At this price, the trader can sell the base currency. It is shown on the left side of the quotation. This means you sell one British pound for 1. Ask Price The ask is the price at which the market is prepared to sell a specific currency pair in the Forex market. At this price, you can buy the base currency.
It is shown on the right side of the quotation. This means you can buy one Euro for 1. The ask price is also called the offer price. These digits are often omitted in dealer quotes. Round-turn means both a buy or sell trade and an offsetting sell or buy trade of the same size in the same currency pair. These pairs exhibit erratic price behavior since the trader has, in effect, initiated two USD trades. Cross currency pairs frequently carry a higher transaction cost.
Margin When you open a new margin account with a Forex broker, you must deposit a minimum amount with that broker. Each time you execute a new trade, a certain percentage of the account balance in the margin account will be set aside as the initial margin requirement for the new trade based upon the underlying currency pair, its current price, and the number of units or lots traded.
The lot size always refers to the base currency. For example, let's say you open a mini account which provides a leverage or. Mini accounts trade mini lots. Leverage Leverage is the ratio of the amount capital used in a transaction to the required security deposit margin. It is the ability to control large dollar amounts of a security with a relatively small amount of capital.
Leveraging varies dramatically with different brokers, ranging from to With more buying power, you can increase your total return on investment with less cash outlay. But be careful, trading on margin magnifies your profits AND losses. Margin Call All traders fear the dreaded margin call. While trading on margin can be a profitable investment strategy, it is important that you take the time to understand the risks.
Make sure you fully understand how your margin account works, and be sure to read the margin agreement between you and your broker. Always ask any questions if there is anything unclear to you in the agreement. Your positions could be partially or totally liquidated should the available margin in your account fall below a predetermined threshold. You may not receive a margin call before your positions are liquidated the ultimate unexpected birthday gift.
Margin calls can be effectively avoided by monitoring your account balance on a very regular basis and by utilizing stop-loss orders discussed later on every open position to limit risk. The sun's rays do not burn until brought to a focus. All forex traders, and we mean all traders LOSE money on trades. Ninety percent of traders lose money, largely due to lack of planning and training and having poor money management rules.
Also, if you hate to lose or are a super perfectionist, you'll probably have a hard time adjusting to trading. Trading forex is not for the unemployed, those on low incomes, or who can't afford to pay their electricity bill or afford to eat. 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.
You would think traders all over the world would make a killing, but success has been limited to very small percentage of traders. Many traders come with the misguided hope of making a gazillion bucks, but in reality, lack the discipline required for trading. Most people usually lack the discipline to stick to a diet or to go to the gym three times a week. If you can't even do that, how do you think you're going to succeed trading? You can't make gigantic profits without taking gigantic risks.
A trading strategy that involves taking a massive degree of risk means suffering inconsistent trading performance and often suffering large loss. Skilled traders can and do make money in this field. Think about it, if it was, everyone trading would already be millionaires. The truth is that even expert traders with years of experience still encounter periodic losses. Drill this in your head: there are NO shortcuts to Forex trading. It takes lots and lots of TIME to master. There is no substitute for hard work and diligence.
If you can't wait until you're profitable on a demo account, at least demo trade for 2 months. Hey, at least you were able to hold off losing all your money for two months right? If you can't hold out for 2 months, cut your hands off. Concentrate on ONE major currency pair.
It gets far too complicated to keep tabs on more than one currency pair when you first start trading. Stick with one of the majors because they are the most liquid which makes their spreads cheap. You can be a winner at currency trading, but as in all other aspects of life, it will take hard work, dedication, a little luck, a lot of common sense, and a whole lot of good judgment.
You did go through the Pre-School right? Well, say no more my friend; because here is where your journey as a Forex trader begins… This is your last chance to turn back… Take the red pill, and we take you back to where you were and you will forget all about this. You can go back to living your average life in your job and work for someone else for the rest of your life. OR You can take the green pill green for money!
And learn how you can make money for yourself in the most active market in the world, simply by using a little brain power. Just remember, your education will never stop. Even after you graduate from BabyPips. Now pop that green pill in, wash it down with some chocolate milk, and grab your lunchbox…School of Pipsology is now in session!
Note: the green pill was made with a brainwashing serum. You will now obey everything that we tell you to do! Fundamental analysis 2. Technical analysis. There has always been a constant debate as to which analysis is better, but to tell you the truth, you need to know a little bit of both. Fundamental Analysis Fundamental analysis is a way of looking at the market through economic, social and political forces that affect supply and demand.
Yada yada yada. In other words, you look at whose economy is doing well, and whose economy sucks. For example, the U. As the economy gets better, interest rates get higher to control inflation and as a result, the value of the dollar continues to increase. In a nutshell, that is basically what fundamental analysis is.
Technical Analysis Technical analysis is the study of price movement. The idea is that a person can look at historical price movements, and, based on the price action, can determine at some level where the price will go. By looking at charts, you can identify trends and patterns which can help you find good trading opportunities. The reason for this is that you are much more likely to make money when you can find a trend and trade in the same direction.
Technical analysis can help you identify these trends in its earliest stages and therefore provide you with very profitable trading opportunities. They use crazy words like "technical" and "fundamental" analysis. I can never learn this stuff! After you're done with the School of Pipsology, you too will be just as By the way, do you feel that green pill kicking in yet? Bark like a dog!
So which type of analysis is better? Ahh, the million dollar question. Throughout your journey as an aspiring Forex trader you will find strong advocates for both fundamental and technical trading. You will have those who argue that it is the fundamentals alone that drive the market and that any patterns found on a chart are simply coincidence. Do not be fooled by these one sided extremists! One is not better than the other In order to become a true Forex master you will need to know how to effectively use both types of analysis.
Don't believe me? Let me give you an example of how focusing on only one type of analysis can turn into a disaster. I love my charts. But wait! Little did you know that there was an interest rate decrease for your currency and now everyone is trading in the opposite direction. Your big fat smile turns into mush and you start getting angry at your charts.
You throw your computer on the ground and begin to pulverize it. You just lost a bunch of money, and now your computer is broken. Note: This was not based on a real story. This did not happen to me. I was never this naive. I was always a smart trader From the overused sarcasm, I think you get the picture Ok, ok, so the story was a little over-dramatized, but you get the point. The Forex is like a big flowing ball of energy, and within that ball is a balance between fundamental and technical factors that play a part in determining where the market will go.
Remember how your mother or father used to tell you as a kid that too much of anything is never good? Well you might've thought that was just hogwash back then but in the Forex, the same applies when deciding which type of analysis to use. Don't rely on just one. Instead, you must learn to balance the use of both of them, because it is only then that you can really get the most out of your trading.
Line chart 2. Bar chart 3. Candlestick chart Line Charts A simple line chart draws a line from one closing price to the next closing price. When strung together with a line, we can see the general price movement of a currency pair over a period of time. The bottom of the vertical bar indicates the lowest traded price for that time period, while the top of the bar indicates the highest price paid. The horizontal hash on the left side of the bar is the opening price, and the right-side horizontal hash is the closing price.
A bar is simply one segment of time, whether it is one day, one week, or one hour. Candlestick bars still indicate the high-to-low range with a vertical line. However, in candlestick charting, the larger block in the middle indicates the range between the opening and closing prices.
Traditionally, if the block in the middle is filled or colored in, then the currency closed lower than it opened. A color television is much better than a black and white television, so why not in candlestick charts? This means that if the price closed higher than it opened, the candlestick would be green. If the price closed lower than it opened, the candlestick would be red. For now, just remember that we use red and green candlesticks instead of black and white and we will be using these colors from now on.
Check out these candlesticks…BabyPips. Awww yeeaaah! You know you like that! The purpose of candlestick charting is strictly to serve as a visual aid, since the exact same information appears on an OHLC bar chart. The advantages of candlestick charting are: Candlesticks are easy to interpret, and are a good place for a beginner to start figuring out chart analysis.
Candlesticks are easy to use. Your eyes adapt almost immediately to the information in the bar notation. Candlesticks and candlestick patterns have cool names such as the shooting star, which helps you to remember what the pattern means. Candlesticks are good at identifying marketing turning points — reversals from an uptrend to a downtrend or a downtrend to an uptrend. Types of Trading: There are 2 types of analysis: Fundamental and Technical Fundamental analysis is the analysis of a market through the strength of its economy.
Technical analysis also helps us identify trends which can help us find profitable trading opportunities. To become a successful trader, you must always incorporate both types of analysis. Types of Charts: There are three types of charts: 1. Line charts 2. Bar charts 3. Candlestick charts We will be using candlesticks from now on « PreviousNext » "If you don't like something, change it. If you can't change it, change your attitude.
What is a Candlestick? Back in the day when Godzilla was still a cute little lizard, the Japanese created their own old school version of technical analysis to trade rice. Steve researched, studied, lived, breathed, ate candlesticks, began writing about it and slowly grew in popularity in 90s. To make a long story short, without Steve Nison, candle charts might have remained a buried secret. Steve Nison is Mr. Okay so what the heck are candlesticks? The best way to explain is by using a picture: Candlesticks are formed using the open, high, low and close.
If the close is above the open, then a hollow candlestick usually displayed as white is drawn. If the close is below the open, then a filled candlestick usually displayed as black is drawn. But it took twenty years. Sexy Bodies Just like humans, candlesticks have different body sizes.
Long bodies indicate strong buying or selling. The longer the body is, the more intense the buying or selling pressure. Short bodies imply very little buying or selling activity. In street forex lingo, bulls mean buyers and bears mean sellers. Long white candlesticks show strong buying pressure. The longer the white candlestick, the further the close is above the open. This indicates that prices increased considerably from open to close and buyers were aggressive.
Long black filled candlesticks show strong selling pressure. The longer the black candlestick, the further the close is below the open. This indicates that prices fell a great deal from the open and sellers were aggressive. In other words, the bears were grabbing the bulls by their horns and body slamming them. Mysterious Shadows The upper and lower shadows on candlesticks provide important clues about the trading session.
Upper shadows signify the session high. Lower shadows signify the session low. Candlesticks with long shadows show that trading action occurred well past the open and close. Candlesticks with short shadows indicate that most of the trading action was confined near the open and close.
If a candlestick has a long upper shadow and short lower shadow, this means that buyers flexed their muscles and bided prices higher, but for one reason or another, sellers came in and drove prices back down to end the session back near its open price. Spinning Tops Candlesticks with a long upper shadow, long lower shadow and small real bodies are called spinning tops.
The color of the real body is not very important. The pattern indicates the indecision between the buyers and sellers The small real body whether hollow or filled shows little movement from open to close, and the shadows indicate that both buyers and sellers were fighting but nobody could gain the upper hand.
Even though the session opened and closed with little change, prices moved significantly higher and lower in the meantime. Neither buyers nor sellers could gain the upper hand, and the result was a standoff. Marubozu Sounds like some kind of voodoo magic huh? Marubozu means there are no shadows from the bodies.
If you look at the picture below, there are two types of Marubozus. A White Marubozu contains a long white body with no shadows. The open price equals the low price and the close price equals the high price. This is a very bullish candle as it shows that buyers were in control the whole entire session.
It usually becomes the first part of a bullish continuation or a bullish reversal pattern. A Black Marubozu contains a long black body with no shadows. The open equals the high and the close equals the low. This is a very bearish candle as it shows that sellers controlled the price action the whole entire session.
It usually implies bearish continuation or bearish reversal. The doji should have a very small body that appears as a thin line. Doji suggest indecision or a struggle for turf positioning between buyers and sellers. Prices move above and below the open price during the session, but close at or very near the open price.
Neither buyers nor sellers were able to gain control and the result was essentially a draw. There are four special types of Doji lines. The length of the upper and lower shadows can vary and the resulting candlestick looks like a cross, inverted cross or plus sign.
The word "Doji" refers to both the singular and plural form. When a doji forms on your chart, pay special attention to the preceding candlesticks. If a doji forms after a series of candlesticks with long hollow bodies like white marubozus , the doji signals that the buyers are becoming exhausted and weakening. Sellers are licking their chops and are looking to come in and drive the price back down.
Confirmation is still needed. If a doji forms after a series of candlesticks with long filled bodies like black marubozus , the doji signals that sellers are becoming exhausted and weakening. In order for price to continue falling, more sellers are needed but sellers are all tapped out!
Buyers are foaming in the mouth for a chance to get in cheap. While the decline is sputtering due to lack of new sellers, further buying strength is required to confirm any reversal. Prior Trend For a pattern to qualify as a reversal pattern, there should be a prior trend to reverse.
Bullish reversals require a preceding downtrend and bearish reversals require a prior uptrend. The direction of the trend can be determined using trendlines, moving averages, or other aspects of technical analysis.
Hammer and Hanging Man The hammer and hanging man look exactly alike but have totally different meaning depending on past price action. Both have cute little bodies black or white , long lower shadows and short or absent upper shadows. The hammer is a bullish reversal pattern that forms during a downtrend. It is named because the market is hammering out a bottom.
When price is falling, hammers signal that the bottom is near and price will start rising again. The long lower shadow indicates that sellers pushed prices lower, but buyers were able to overcome this selling pressure and closed near the open. A good confirmation example would be to wait for a white candlestick to close above the open of the candlestick on the left side of the hammer.
Recognition Criteria: The long shadow is about two or three times of the real body. Little or no upper shadow. The real body is at the upper end of the trading range. The color of the real body is not important. When price is rising, the formation of a hanging man indicates that sellers are beginning to outnumber buyers.
The long lower shadow shows that sellers pushed prices lower during the session. Buyers were able to push the price back up some but only near the open. This should set off alarms since this tells us that there are no buyers left to provide the necessary momentum to keep raising the price. Recognition Criteria: A long lower shadow which is about two or three times of the real body. The color of the body is not important, though a black body is more bearish than a white body.
Inverted Hammer and Shooting Star The inverted hammer and shooting star also look identical. Both candlesticks have petite little bodies filled or hollow , long upper shadows and small or absent lower shadows. The inverted hammer occurs when price has been falling suggests the possibility of a reversal. Its long upper shadow shows that buyers tried to bid the price higher.
Fortunately, the buyers had eaten enough of their Wheaties for breakfast and still managed to close the session near the open. The shooting star is a bearish reversal pattern that looks identical to the inverted hammer but occurs when price has been rising. Its shape indicates that the price opened at its low, rallied, but pulled back to the bottom. This means that buyers attempted to push the price up, but sellers came in and overpowered them.
Candlesticks are formed using the open, high, low and close. Candlesticks with a long upper shadow, long lower shadow and small real bodies are called spinning tops. The pattern indicates the indecision between the buyers and sellers Marubozu means there are no shadows from the bodies.
Doji candlesticks have the same open and close price or at least their bodies are extremely short. The hanging man is a bearish reversal pattern that can also mark a top or strong resistance level. Support and resistance is one of the most widely used concepts in trading.
Strangely enough, everyone seems to have their own idea on how you should measure support and resistance. Look at the diagram above. As you can see, this zigzag pattern is making its way up bull market. When the market moves up and then pulls back, the highest point reached before it pulled back is now resistance.
As the market continues up again, the lowest point reached before it started back is now support. In this way resistance and support are continually formed as the market oscillates over time. The reverse of course is true of the downtrend. Plotting Support and Resistance One thing to remember is that support and resistance levels are not exact numbers. Often times you will see a support or resistance level that appears broken, but soon after find out that the market was just testing it.
With candlestick charts, these "tests" of support and resistance are usually represented by the candlestick shadows. Notice how the shadows of the candles tested the resistance level. At those times it seemed like the market was "breaking" resistance. However, in hindsight we can see that the market was merely testing that level. So how do we truly know if support or resistance is broken? There is no definite answer to this question. Some argue that a support or resistance level is broken if the market can actually close past that level.
However, you will find that this is not always the case. In this case, the price had closed twice above the resistance level but both times ended up falling back down below it. If you had believed that these were real breakouts and bought this pair, you would've been seriously hurtin! Looking at the chart now, you can visually see and come to the conclusion that the resistance was not actually broken; and that it is still very much in tact and now even stronger. So to help you filter out these false breakouts, you should think of support and resistance more of as "zones" rather than concrete numbers.
One way to help you find these zones is to plot support and resistance on a line chart rather than a candlestick chart. The reason is that line charts only show you the closing price while candlesticks add the extreme highs and lows to the picture.
These highs and lows can be misleading because often times they are just the "knee-jerk" reactions of the market. It's like when someone is doing something really strange, but when asked about it, they simply reply, "Sorry, it's just a reflex. You only want to plot its intentional movements.
Looking at the line chart, you want to plot your support and resistance lines around areas where you can see the price forming several peaks or valleys. Other interesting tidbits about support and resistance: 1. When the market passes through resistance, that resistance now becomes support. The more often price tests a level of resistance or support without breaking it the stronger the area of resistance or support is.
Trend lines are probably the most common form of technical analysis used today. They are probably one of the most underutilized as well. If drawn correctly, they can be as accurate as any other method. In their most basic form, an uptrend line is drawn along the bottom of easily identifiable support areas valleys. In a downtrend, the trend line is drawn along the top of easily identifiable resistance areas peaks. If we take this trend line theory one step further and draw a parallel line at the same angle of the uptrend or downtrend, we will have created a channel.
To create an up ascending channel, simply draw a parallel line at the same angle as an uptrend line and then move that line to position where it touches the most recent peak. This should be done at the same time you create the trend line. To create a down descending channel, simple draw a parallel line at the same angle as the downtrend line and then move that line to a position where it touches the most recent valley. This should be done at the same time you created the trend line.
When prices hit the bottom trend line this may be used as a buying area. When prices hit the upper trend line this may be used as a selling area. We will be using Fibonacci ratios a lot in our trading so you better learn it and love it like your mother. Let me first start by introducing you to the Fib man himself…Leonard Fibonacci. After the first few numbers in the sequence, if you measure the ratio of any number to that of the next higher number you get.
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