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This is a discussion on Forex Articles within the General Discussion forums, part of the Trading Forum category; By: DailyForex.com Nearly every trader has heard of the MetaTrader4 trading platform, one of the most respected and popular trading ...

          
   
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    Forex Articles

    By: DailyForex.com
    Nearly every trader has heard of the MetaTrader4 trading platform, one of the most respected and popular trading platforms available, and one that is offered by over 450 Forex brokers worldwide. But MetaTrader4 isn’t the only accomplishment of the famed MetaQuotes Software Corp. – in fact, the company is constantly developing new trading technologies and services that enhance and improve the way trading takes place – and a notable one is the MQL5 Market, which provides the trader with an opportunity to buy a variety of trading tools such as indicators, robots, scripts, and other trading assistants for trading terminal MetaTrader 5. The service is free to anyone subscribing to MetaTrader5 platform.
    A Bit About the MetaTrader5 Platform

    MetaTrader5 was released in June 2010 and is the latest version of MetaQuotes Software Corp.’s trading platform. This is a built-in platform which expands the number of products that are available for trading to include*stocks*and*commodities. Upon the launch of the MetaTrader5, the MQL5, a new version of the programming language, was also launched.
    As a trading platform, the MetaTrader5 client trading terminal differs in a number of ways from its predecessor, and the MQL5 Market*widens these differences considerably. First of all, the marketplace is very easy to use. The applications are divided into specific sectors with clearly delineated free and paid applications. A manual sorting option makes it possible to select the correct products according to their price, familiarity and several other criteria. And there is a wide range of software products including Tick Price indicators, Multi Timeframe Mapping and Freak Junior systems, so that there truly is something for every trader.
    Traders can choose the best applications both by reading descriptions of the product and by viewing screenshots of the service, so that they can know with near certainty that their choice will be useful. A potential buyer can use a free demonstration to test any indicator or trading robot. This gives them the opportunity to evaluate each product’s performance before making a selection.
    Marketplace Security
    Purchasing a product from the MQL5 Market is entirely straightforward. The MQL5 Market has its own payment system which allows conducts all transactions directly through it. MetaQuotes developers clearly worried about security (as they are with every product they develop) and each transaction uses a secure connection to SSL-protocol and the mandatory payment confirmation via SMS. In fact, all operations are strictly governed by the rules of service. Vendors of software products must be registered for a real-time check of their contact information, and they must provide testing of proposed applications.
    In order to place an order, the buyer has to register on the mql5.com site and deposit funds in any of a number of different manners. Any product that has been ordered and paid for is available immediately in the terminal trader. Each program has its own unique security code for installation so that the product will work only the buyer’s platform. It will, however, work on three computers at once.
    There’s no question that choosing a platform based on speed of execution and the comfort of its design is critical – and that MetaTrader5 offers many positive attributes in these regards. But with the launch of the MQL5 Marketplace, the MetaTrader5 platform blows its competitors (including the MetaTrader4) out of the water, and opens the world to a revolutionary way to trade Forex with the tools and indicators each trader needs to succeed.*
    Registration for the MQL5 Marketplace can be done here.


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    Price Action Setups to Not Be Sucked Into

    By: Johnathon Fox
    A lot of traders understand that price action trading is the art of looking at raw chart of a Forex pair, stock or instrument and using only the raw price data to decipher order flow from which they can spot high probability patterns that repeat themselves time again in the markets.
    By learning these patterns and order flow clues traders can position themselves in the correct way to profit from the next move in price.
    Whilst many people cover the best setups and patterns to look for, what can at times be even more helpful is knowing what patterns to avoid or when the order flow signals given through the price action are sucking the trader in! A common term to explain traders being sucked into trading is “the false break”. Whilst trading the false break can be a super high probability trade for the price action trader that is doing the sucking in, the trader being sucked in can be in for pain.
    In this article we are going to look at two really common sucker trades that traders need to avoid. These apply to not only price action trading but many other types of technical analysis trading.
    The False Break

    The false break is a pattern that can be very profitable for the trader who is patient, but for the trader who jumps the gun or doesn’t wait for confirmation it can be a sucker trade. The false break is easy to spot and is basically noted by price moving through a level before snapping back the other way.
    The false break moves often happen at key levels of support or resistance. The traders who enter when price is breaking out can be sucked in and then stopped out as price whips back the other way. For the trader who is patient they can watch price snapping back and use it to trade in the opposite direction to the break out.
    Below I have attached two charts. The first chart shows price starting to break out higher through resistance. Upon noticing this, the break out traders would start to take long trades.


    The second chart shows price snapping back lower which would stop the break out trader. This is also when the trader who has been patient could use this false break signal to take a short trade and use the false break in their favour, rather than being sucked in like the break out trader.


    Entering From Extreme Highs and Lows

    When traders come to Forex they have a strong urge to trade from the extreme highs and lows. The main reason for this is these new traders hear the saying “The trend is your friend” and they try to implement it into their trading. Because they normally lack a solid education, the new trader does not understand how to enter high probability trades with the trend.
    The risk of entering trades after the market has made a large move is that the people who have made money from the large move will begin to take profit. This can lead to the market turning back the other way. As the new trader starts entering the market at the extreme high or low, the professionals are taking profit and leaving the market which will cause price to change directions against the new trader’s positions.
    The chart below highlights how this pattern works and how it leads many traders to being sucked in. On the chart you can see price has made a large move higher. From this move higher a lot of traders would have made solid profits. The high of this market is where a lot of traders will enter trying to trade with the trend. As we said above the worry is that the traders who are holding profit can take profit at this high which will cause price to move lower and stop the new trader out.


    The best way to enter high probability trades with the trend is to wait for price to rotate off the extreme high or low back into a value area. Tutorials on how to trade these price action signals with and against the trend can be found in my earlier articles.


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    Success With the Pin Bar Setup

    By: DailyForex.com
    The Pin Bar is an easy to spot, objective setup that is consistent and produces a high-win rate. It’s a pure Price Action method: that means there’s no use of indicators beyond the Price Chart. And it is timeless.
    Definition of a Pin Bar: the body of the Pin Bar is within the top third or bottom third of the entire candle range. (It doesn’t matter if the open is higher than the close for either a bullish or bearish Pin Bar.)

    Let’s take a recent trade setup that we called live:


    Wednesday (19 Dec, 2012) produced a Pin Bar on the Daily GBP/USD chart. This Pin Bar very plainly lined up with previous resistance coincidentally made by another Pin Bar back in September. That marked a key resistance level: prior to that level, the price had run up over 800 pips and then retraced 480 pips. Now as it reached that previous resistance again last week, 1.6309, the new Pin Bar touched the level within 3 pips. Clearly that resistance is still important and is going to produce significant selling before being broken.
    Typically we consider two possible entries: the open of the next bar after the Pin Bar or a stop-entry order a few pips below the Pin Bar. Our stop-loss would be just above the high of the Pin Bar.
    We use the Pin Bar in our personal trading, in our Live Room and in our managed accounts. As simple as the setup is, it’s a serious tool.
    We called this trade via email as part of our Live Room service with an advance stop-entry sell order. Our trade is sitting 80 pips in profit at the time of writing.


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    How to Trade Beyond Your Comfort Zone

    By: DailyForex.com
    A reoccurring theme that we will often see is that Forex traders tend to be too one-dimensional. This is probably because of the fact that they are often sold a bill of goods when it comes to trading currencies. They would hear advertisements that suggest that Forex markets are the best market to trade, and while this is probably true, the fact is that they are not the only markets trade. There are times where it makes more sense to be involved in other markets than the Forex market, but it used in conjunction with currency trading can be quite powerful as opposed to using these markets exclusively.
    For example, you may find that you are bullish of gold. We certainly are for the long term, and as such want to be exposed to gold as often and as long as possible. However, it is difficult to hold onto a leveraged currency position in the South African rand or the Australian dollar in times of economic uncertainty. Quite often, these positions will get absolutely annihilated because of a run back to the US dollar for safety. It is certainly difficult to hang onto these positions for several years.
    Knowing this, there are some alternatives. For example, you may find that buying the GLD ETF a reasonable alternative. This exchange traded fund focuses on physical ownership of gold. In other words, the GLD owns a specific amount of gold. If you are a shareholder in this particular ETF, you actually own a specific amount of gold. The beauty of this though is that it isn't leveraged. It's traded as a simple stock essentially, and as such fluctuations in price aren't as damaging. Because of this, you can hold onto this investment for a long time and essentially have a "core position" in gold over the long term and then go in and out of the currency and futures market to add to your winnings when the markets are trending upwards.
    Another tool that traders have in their arsenal is the CFD market. CFD stands for contract for difference, which is essentially betting on whether or not a specific market will go up or down. You don't necessarily own that particular contract, but what you do is have an interest in the underlying financial instrument.
    For example, natural gas had been in a wicked bear market for some time until the middle of 2012. If you were to try and sell or go short natural gas contracts on a futures exchange, you might find that it's a bit expensive. After all, the margin required to several thousand dollars, and the markets are very volatile. However, if you are a small trader you can get into the CFD markets and place a trade for whatever size you wish to. This allows you to essentially trade for pennies per tank if you need to, and allows the smaller trader to be involved in markets that typically are out of their reach.
    Another advantage to having the ability to trade such small positions is that you can take a longer-term outlook on a particular market. Much like using the ETF above, you can simply have a small position for the long term in various markets. In fact, you can even trade stocks this way, and those particular CFDs have the advantage of operating 24 hours a day. This way, you don't have wicked spikes at the open if you are trading a stock like you can on one of the exchanges.
    As you can see, there are various ways to trade the world's markets. Locking yourself into currencies only is a huge disservice to yourself, as there are plenty of trading opportunities in various markets on any given day. You have to understand that although your heart may lie with currencies, the reality is that it all ends up in your base currency at the end of the day. It really doesn't matter what you’re trading, rather that you are trading well and are taking advantage of all the opportunities that you can.


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    What is the Fighting For?

    By: Andrea Cohen
    The elections in the US are behind us now and it seems like the balance of powers in Washington has not materially changed. The Democrats maintain control over the Senate and the Presidency of course, while the Republicans dominate the House of Representatives. This split in control means that in order to resolve the Fiscal Cliff situation, an agreement between the two parties must be reached.
    The main point of disagreement between the parties is about what to do with the tax reliefs that were put in place by the Bush administration almost a decade ago. For the US economy, the question is really about the effect of these changes rather than the identity of the ones affected by them. In other words, the political and economic questions are not identical.
    The problem with a potential across-the-board tax hike is that it reduces disposable income. A lower disposable income means less saving and less consumption. The latter is a key component in the US GDP and any change in it can have grave consequences that will trickle to other sectors as well.
    Taking a step back in order to explain the American personal taxation system is warranted here. Each year, every American files his taxes with the IRS. On one hand there is income and on the other hand there are tax-deductible expenses. On the net income, the person will pay a tax based on his/her tax bracket. Increasing tax revenue can come from either an increase to the marginal tax rate (figuratively – the tax rate applicable to the last dollar earned) or from eliminating or reducing eligible deductions.
    And this is where Democrats and Republicans disagree. Each side cites both economic and ideological arguments supporting their positions.
    Republicans are of the opinion that higher tax revenue should be achieved by lowering eligible tax deductions. That would result in a higher average tax rate but no change in the marginal tax rates. The economic sense behind this stance is that lower marginal taxes are associated with higher saving rates and more consumption. It is also important to note that Republicans are kind of anti-taxes in general. The free-market advocates opposed higher marginal tax rates on high-earning individuals; they view that as an unjust punishment inflicted on those who succeeded and did well in the open market and a deviation from Capitalism.
    Democrats, on the other hand, are pro big-government and traditionally represent more lower-income earners and advocate more Socialist views (in American terms of course, nothing like a European Socialist). Their stance is that the first order of business should be to reinstate the marginal tax rate for high-income earning individuals back to pre-Bush levels as well as eliminate other tax breaks that this population is the main beneficiary of (for example, the Alternative Minimum Tax, taxes on dividends and capital gains). The economic logic here is that while the disposable income of the wealthy will be hurt more than that of lower income earners, the effect of that on the economy will be significantly smaller. The reasoning is that for the average American, a 1% tax hike translates to immediate effect on his purchasing decisions, while for the top 10% earners, that same percentage-point tax will have a smaller effect.


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    How to Use Oil and Metals to Trade Currencies

    By: DailyForex.com
    One of the biggest mistakes the Forex traders make is that they tend to operate in a bit of a vacuum. A lot of the time, this is predicated upon the allure of Forex itself: When you start seeing commercials for various currency firms, strategies, and indicators, they all count how great the currency market is. So by extension, a lot of traders will simply focus on just Forex, and forget the fact that there are multiple factors that can move a currency pair.
    One of the most common ways to find a correlation between markets is to use metals, mainly gold, and oil to predict currency movements. It's relatively simple when you think about it, that if a producer of a particular commodity sells it to a foreign investor or corporation, they choose to be paid in their local currency. Because of this, you can use a little bit of common sense and observation to predict where a currency pair may end up over the long term.
    Let's take oil as an example: One of the world’s largest oil-producing countries is Canada. Even more important, the Canadian supply the Americans with quite a bit of their oil and the Americans are the largest consumers of that commodity. Having said this, if you can imagine a large American consumer or distribution network buying Canadian oil, what must happen? It's relatively simple; the American corporation would have to exchange US dollars for Canadian dollars in order for the Canadian oil company to get paid. Obviously, this can have an effect on money flow, and send it out of the United States into Canada.
    As demand rises for crude oil, as a general rule you will see the Canadian dollar gained strength. This is because more and more people were willing to bid up the price of oil in order to obtain it. By doing so, they have to use more and more Canadian dollars to purchase that oil. Also, there will be more customers on the whole which of course means more transactions anyways.
    There are other so-called “petro currencies” out there as well. However, the Canadian dollar is by far the most liquid currency to trade. Other currencies include the Russian ruble, Saudi Arabian real, and the Norwegian krone. However, for most traders the Canadian dollar does quite well.
    When it comes to trading metals, namely gold, there is by far one leading candidate: the Australian dollar. This is because Australia is the world's most major and largest exporter of gold. The thought process is the same as the oil markets, as traders wish to purchase more gold; they will eventually have to do business with the Australians. Australian miners wish to get paid in Australian dollars obviously, so as gold rises in value, you have the same exact situation as you do in Canada with oil, the local currency rises in value.
    What should also be noticed is the fact that both of these commodities are priced in US dollars worldwide. This means that the value of the dollar naturally can go down because it takes more of them to buy one of these commodities as they get more and more valuable. This doesn't necessarily have to be the case, but in general this is true.
    While not a 100% correlation, if you put up gold and an AUD/USD chart, you will see that over time the two tend to work together. The same can be said for the USD/CAD chart and oil markets. However, you must keep in mind that the USD/CAD pair moves inversely, as it falls when the Canadian dollar rises and vice versa.
    The next time you are trading these currencies, notice how sometimes the commodity markets will move first. If one of them breaks out, quite often you will see the other one react shortly thereafter. This can be a valuable tool for the trader that has the ability to follow several markets at the same time.



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    How to Pinpoint Market Turns Before They Occur

    By: DailyForex.com
    Predicting when a market is about to change directions is one of the most difficult things a trader can attempt to do. However, there are some telltale signs that will appear as the markets get ready to change trends. This will be the case no matter if it is a simple intermediate pullback, or an actual overall trend change.
    One of the most common things to look for is a trend line break. The biggest problem that most traders have with trying to use a trend line break is the fact that they have no idea what time frame to use. Quite often, I will see traders talk about the trend changing on an hourly chart. This isn't the trend, but rather what the market is doing in the very short-term. A trend is something that takes time to build, and something that almost everybody on the planet can see as they look at the overall markets. What happened over the last 50 pips is hardly worth getting bothered by.
    One of the best time frames that I have found over the years to draw trend lines on the weekly time frame. This doesn't necessarily mean the unique trade weekly chart, but rather is a great way to differentiate between what the trend is and isn't. Simply put, as with all things technical analysis related, the higher the time frame, the more important it is. This is because it takes more trades and therefore more emotional input to affect how price moves on a weekly chart as opposed to a chart that is based on the half an hour time frame. It just takes more volume, and then of course is what you can use to measure whether or not it's true market sentiment.
    Because of this, when you see a trend line break on the weekly charts, it should catch your attention. With this being said, there are other things that you can look at in order to predict a market turn.
    Although I am not a big fan personally of moving averages, I am always aware of where a few of them are on the charts. If you are on the daily chart, you should be aware of where the 200 day exponential moving average is currently situated. This is because a lot of former stock traders tend to get into Forex markets, and as such they pay attention to the 200 day moving average because it represents the amount of trading days during the year. (The stock market trades 200 days a year, and although Forex markets actually trade 5 1/2 days a week which of course isn't 200 is year, this large group of people seems not to care.)
    The 200 day moving average doesn't move very quickly, so that being said: price doesn't typically sliced through very often. If you see a sudden impulsive move through the 200 day moving average, you can bet your bottom Dollar that somebody else's seen it too. This is exactly the kind of move that you need to take advantage of as you need other market participants to step in and give you a hand.
    There's also something known as the "one, two, three pattern." Simply put, this means that a market may pullback from an ongoing trend, and that would be what you would consider the "one" of the pattern. The "two" of the pattern is a continuation of the overall trend that does not make it as far as the initial search does. In other words, this means that they failed to make a higher high or lower low depending on the direction. The "three" of the pattern is when they pullback from the overall trend even farther than they did the first time. In other words, if we were in an uptrend and had a pullback, the second leg wouldn't go as high as the initial search, and the third leg would go lower than the original pullback. This would show that momentum was not only waning, but the sellers were starting to take over.
    Just make sure it's obvious
    One of the biggest mistakes that Forex traders seem to get sucked into is the idea that you have to be constantly different than the herd. I cannot think of a more dangerous bit of advice as far as trading is concerned. You do not have the volume nor the capital to move the markets yourself, and as such you need the rest of the market participants to play along with you. This is why I like to use obvious clues and setups that are so blatantly obvious that the entire world is paying attention to them. I don't want to be the sneakiest trader in the room, just a profitable one.



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    Five MT4 Indicators Worth Using

    By: DailyForex.com
    One of the first things that I would say about using MetaTrader 4 indicators is that it is very easy to get inundated with hundreds of potential indicators as there is what seems to be an almost unlimited amount of them out there. The other thing that I would say first of all is that buying an indicator isn't necessary as there are so many free ones out there, that the premium ones quite frankly will do very little for you.
    Speaking of premium indicators, it should be noted that indicators will only work when other traders use them. It is because of that that I would steer you towards the most common ones as the market simply needs to believe in the same thing or at least the same direction in order to move in a way that's going to be beneficial to your position. After all, the best way to move the market is to have a large group of traders see the same thing. This is why certain things like 50% Fibonacci retracement attract so much attention, its self-fulfilling prophecy as so many traders are aware of it. Having said this, there's absolutely no reason to find some "secret" indicator as the other market participants will be completely unaware of what this indicator is telling you.
    Moving Averages

    While not necessarily the most exciting or exotic of indicators, the moving average is without a doubt one of the most common ones. Remember, we are not trying to make this any more difficult than it needs to be, rather we are trying to profit from it. There are a seemingly unlimited amount of combinations of moving averages to use, but it should be noted that there are three specific values that appear over and over. The 50 day, the 100 day, and the 200 day moving averages all tend to appear on a lot of charts. This is because of the fact that traders tend to like large round numbers, and it should also be stated that on the daily chart the 200 day moving average represents a full year's worth of trading. (There are 200 trading days in the stock markets, and although it doesn't match up perfectly with the Forex markets, this habit has been brought over from Wall Street.)
    MACD

    MACD is probably one of the more popular ones as well. This acronym stands for Moving the Average Convergence Divergence. This particular indicator is an oscillator, and it is made up of three signals. These signals are calculated from historical price data, which is normally the closing price the three signal lines are the MACD line, the signal line, and the difference.
    This indicator is used in a variety of ways, but it is essentially used to track momentum. Ironically, this is simply a type of amalgamation of moving averages. In a sense, it works very much the same way, and is a bit of a lagging indicator. Because of this, it is preferred to be used on longer time frames. There are a plethora of systems based upon this particular indicator, and as such is often cited by traders as being one of their more trusted indicators.
    RSI

    RSI, or the Relative Strength Index is an indicator that measures historical strength or weakness and as based upon closing prices of recent trading periods. This is a momentum oscillator, and as a result will measure velocity and magnitude of price movement. The RSI computes momentum as a ratio of higher closes to lower closes. RSI tends to be used on a 14 day time frame, and is measured from 0 to 100 for strength. A lot of times, you will see a dashed line at 30 and 70, which is the range for which RSI should typically hang about and. Once we get above those ranges, this shows extreme strength, or extreme weakness depending on whether we are in the higher or lower part of the indicator.
    RSI is often used in a very similar manner to MACD, and as such many of the systems that use MACD and RSI are somewhat interchangeable. Nonetheless, this is a very popular indicator, you will see it used over and over again.
    ADX

    ADX stands for Average Directional Movement Index. Much like the RSI, this indicator tends to measure strength in a series of movements over the course of time. This indicator is often used to differentiate between true momentum, and low liquidity spikes in price.
    By using the ADX, you are comparing the recent movement to average movements over the course of a longer time period. The ADX doesn't show the direction of a trend, only the strength. The trend of must be established in order to use this indicator. Strong trends that measure over 70 are often thought to be more reliable as it shows real momentum building in the currency pair.
    Bollinger Bands

    The Bollinger Bands are one of the most commons indicators out there currently. You'd be hard-pressed to find a trading platform that does not include them. Bollinger bands essentially use a moving average as the centerline, which of course is surrounded by two other lines that measure ounce standard deviations from the moving average. In other words, a standard deviation of one is the average price movement away from the moving average. Many Bollinger band traders use a deviation of two in order to see when a market is either overbought or oversold. The idea is that price will eventually come back to the moving average.
    The deviations are measured over the course of recent price action, and as such you will see the width of the bands shrink and expand depending on volatility. There are numerous ways used on your man's, and probably an unlimited amount of systems out there. Because of this, Bollinger bands can be a very useful instrument.



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    Trading the Price Action Reversal Signals

    By: Johnathon Fox
    Today’s quick article is going to cover 2 very simple price action reversal signals that any trader can learn and start spotting today. These two signals are not complicated and even the newest of traders will be able to start spotting them all over their charts.
    Pin Bar Reversal

    I have covered in previous articles exactly what goes into making a Pin Bar a valid signal. To see the previous tutorial on Pin Bar’s see here.*Basically a Pin Bar is a candle that has a small body and a large nose that is rejecting either higher or lower prices. The thinking behind the Pin bar is quite simple; Price has moved higher or lower before a wave of orders snaps price back in the other direction. See the chart below for what a Pin Bar looks like:

    Like all price action signals, not all Pin Bars are created equal. There are certain factors that go into making one Pin Bar better than another. A few of these factors are:
    The time frame the Pin Bar forms on
    Where the Pin Bar forms. Does it form in a range or in a nice trending market?
    Is there space for price to move into when price breaks the low or high of the Pin Bar?
    Is the Pin Bar rejecting a logical support or resistance area
    Learning all the factors that goes into making one signal better than the other is all part of the education process for price action traders.
    Pin Bars form regularly however as traders we only want to be taking the very best signals that form at the very best areas. A recent example of a quality Pin Bar is attached below. Notice in the example price was rejecting a logical resistance area and the Pin Bar stuck out away from all other price.

    Bullish and Bearish Engulfing Bars

    Engulfing Bars are very obvious price action signals that are momentum trades. Quite often engulfing bars will be massive in range and one of the largest candles on the chart. A lot of traders become worried about large price action signals, where instead they should be getting excited. Large engulfing bars are showing a large shift in momentum and the bigger the better.
    Engulfing bars are really easy to spot and identify. To read the previous tutorial on what makes an engulfing bar valid please read here.
    Just like the Pin Bar and other price action signals, not all engulfing bars are created equal. The same factors that go into looking for the best Pin Bars are also valid for the engulfing bar. We need to see them sticking out and screaming at us that price want to reverse. What I mean when I say “screaming at us” is many traders will get caught out trying to spot signals when they are simply not there. The best signals are always when they are really obvious, and as soon as you flick to that chart they stick out like a sore thumb! Stick to the really obvious and simple engulfing bars and avoid trying to trade something you have to search really hard to find.
    A chart of an engulfing bar is below:

    An example of a Bullish Engulfing Bar is attached below. Notice how large and obvious this candle was. Many would be afraid because of how large the candle was, but look at the move the engulfing bar set off!

    Trading On Daily Charts

    I am a massive fan of trading on the daily and 4hr charts. So many new traders get caught up with trading the smaller time frames which are prone to wild swings and whipsaws. Trading on higher time frames has a lot of benefits, but the main reason I am such a proponent of them is because the signals are much more reliable. The reason for this is simply because of the time that goes into making the signals.
    On a 5 min chart you have 5 mins of data that has gone into producing that signal. Obviously 5 mins is not much and to try and trade from these signals will bring about many whipsaws and false signals that will stop traders out even if they do pick the correct direction of the market.
    On the daily chart you have 24 hours worth of data that has gone into producing that signal. Obviously we can learn a lot more from 24 hours worth of data compared to 5 mins!
    One of the main reasons traders try to master the smaller intraday time frames is because they are under the belief that more trades equals more profit. Whilst it is true that the smaller the time frame, the more signals that will be produced, more signals does not equal more profit.
    Because the signals on the smaller time frame charts are more likely to be false signals, the chances are the trader will make more losing trades. If you are placing losing trades it doesn’t matter if you enter hundreds of them, you are still going to lose. The trader that enters only a few quality signals from the daily charts can come out well ahead of the trader that places hundreds of trades on the 5 min charts. The simple reason for this is it is not how many trades you are playing, but how much profit you are making overall!
    Recap

    I have spoken about two very simple and easy to identify price action trading signals. For traders looking to start trading price action I recommend opening a demo account and taking all the indicators and rubbish of your charts. Switch your charts from the small time frames over to the daily charts. Start looking for the obvious reversal price action signals that form at good areas and start learning how price moves and repeats itself.
    Safe trading!


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  10. #10
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    Top Tech Strategies for Today's Markets

    By: DailyForex.com

    While the technical strategy that you choose to use trading Forex will depend heavily upon your personality, there are some general systems that you can use in order to try and deal with the extreme bouts of volatility that we have seen in the marketplace recently.
    With the debt crisis in Europe, many of the currency pairs around the world have simply bounced back and forth between a "risk on, risk off" type of attitude. Because of this, you simply must understand whether or not the markets are in a good or bad mood. It seems somewhat simplistic, but the truth is that risk appetite is everything in the marketplace now, especially since we seem to have very short-term goals these days.
    The London Breakout

    As the Asian session wraps up, the liquidity starts to dry up in the Forex markets. The Asian session is by far the most illiquid marketplace, and as such we begin to see serious trading begin shortly before the London session starts. This is probably the most quiet time of the 24-hour cycle in the currency markets, and as such when the larger trading firms get back into the marketplace we can tell how the attitude of the traders will be for the day.
    Essentially, what you are looking for is the beginning of volatility. By keeping track of the highs from the Asian session as well as the lows, you begin to see the "range" of the quiet market. You are essentially waiting to find out what the Europeans are going to do for the day. Once you have a significant break out either above or below the range, this typically will lead you in the right direction for a currency pair during the European trading session.
    Granted, this is a 100% accurate but it does give you a heads up when it comes to what the larger chunks of money are going to be doing in the marketplace during the day. Because of this, this gives you a better chance to come out ahead than not. As the money starts to flow back into the marketplace, eventually we begin to see where the larger amounts of money head towards and this of course is where we want to be sending our money to.
    One caveat of course is on a night when the Asian markets have been extremely volatile. If that's the case, then this wouldn't be a smart strategy to use as the volatility would be much higher, and therefore have most trading firms on their guard. This doesn't give a "clean" indication of where they want to be, rather how they are reacting. This is two different things if you think about it.
    The Hourly Giant

    Another strategy that you can try to use in this choppy trading environment is one that I like to call "The Hourly Giant" system. It's a basic system that essentially looks at the size of the candles on the hourly chart. The idea is fairly straightforward, and just about anybody can use this particular strategy. In fact, this is probably the least "technical" of the strategies that I use, but it is one of the more effective ones.
    As usual, I will plot out major support resistance levels. But what's more important in this system is looking for a longer hourly candle that really stands out from the rest. This is because we have had choppy trading so much that a large candle tends to be a bit of an anomaly. In other words, if we get a candle that is twice the height of every other candle over the last 48 hours, you have to pay attention to it and assume that the move meant something. Because of this, you simply go long or short depending on the color of the candle, and leave your stop behind the opposite end.
    You are looking for candles that her least twice the size of the average one during that time period. You aren't necessarily using a strict technical system at this point, but rather using simple observation. You would be surprised how few traders use observation, and simply use what they consider to be magic, which of course is simply a mathematical system.
    The Round Number Bounce

    If you ever wanted to know how to scalp the daylights out of the Forex markets, I will let you in on a secret: If you are willing to trade only occasionally, simply playing for the bounce off of the large round numbers actually works. In other words, if you are coming towards a large round number in a currency pair, you simply buy the pair if you are following towards a large round number, or sell if you are gaining towards a large round number.
    An example would be if you were to trade the USD/CAD pair. Let's pretend that the pair is currently trading at 1.0028 during a fairly liquid time of the day. The reason I chose this particular pair is that it has a fairly tight spread. For most of you out there, this pair should be about 3 pips wide as far as the spread is concerned. As we are playing for very small gains, this matters.
    The idea is to put in a buy order at the 1.0000 level, thinking that we will bounce when we hit this level. This makes sense, as a lot of large firms base their entries and exits on these large numbers. A lot of traders will take their profits at these levels as well, which means the sellers would be buying at that point in time. This makes the pair bounce, and as such be a smaller trader you can take advantage of this. In this particular trade, you may choose to take profits at 1.0010 or so. It doesn't sound like that big of a deal, but the 7 pips you just made are basically free ones.
    Obviously, you are better off using this particular technique when approaching a large round number, and not just some random handle out there. Areas like parity, 1.50, and 1.10 all suggests that a lot of orders will typically be at these places. You obviously cannot try this in an ill liquid pair either, as the spread may be 50 pips.
    This is not a system that you would use all of the time, but just a way to simply pack your account a little bit from time to time as you notice these particular opportunities. In a volatile trading environment like we've been in lately, this trick is actually worked quite well lately.


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