Check out that those sell signals from the Bollinger bands and the Stochastic. EUR/USD climbed until the top of the band, which usually acts as a resistance level. At the same time, the Stochastic reached the overbought area, suggesting that the price could drop down soon. And what happened next? EUR/USD fell by around 300 pips and you would’ve made a hefty profit if you took that short trade.

Later on, the price made contact with the bottom of the band, which usually serves as a support level. This means that the pair could bounce up from there. With the Stochastic in the oversold area, it means we should go long. If you took that trade, you would have gotten around 400 pips! Not bad!

Here’s another example, with the RSI and the MACD this time.

When the RSI reached the overbought area and gave a sell signal, the MACD soon followed with a downward crossover, which is also a sell signal. And, as you can see, the price did move downhill from there. Later on, the RSI dipped to the oversold region and gave a buy signal. A few hours after, the MACD made an upward crossover, which is also a buy signal. From there, the price made a steady climb. More pips for us.

You probably noticed in this example that the RSI gives signals ahead of the MACD. Because of the various properties and magic formulas for the technical indicators, some really do give early signals while others are a bit delayed.

As you continue your journey as a trader, you will discover which indicators work best for you. We can tell you that we like using MACD, the Stochastic, and RSI, but you might have a different preference. Every trader out there has tried to find the “magic combination” of indicators that will give them the right signals all the time, but the truth is that there is no such thing.

We urge you to study each indicator on its own until you know the tendencies of how it behaves relative to price movement, and then come up with your own combination that you understand and that fits your trading style.

What is the Best Technical Indicator in Forex?

Now on to the good stuff: Just how profitable is each technical indicator on its own? After all, forex traders don’t include these technical indicators just to make their charts look nicer. T

Traders are in the business of making money! If these indicators generate signals that don’t translate into a profitable bottom line over time, then they’re simply not the way to go for your needs! In order to give y’all a comparison of the effectiveness of each technical indicator, we’ve decided to backtest each of the indicators on their own.

Backtesting involves retroactively testing the parameters of the indicators against historical price action.

@OP THANKS FOR THIS TIP

Ok

Where to Find Forex News and Market Data

Market news and data are available through a multitude of sources.

The internet is the obvious winner in our book, as it provides a wealth of options, at the speed of light, directly to your screen, with access from almost anywhere in the world. But don’t forget about print media and the good old tube sitting in your living room or kitchen.

Individual forex traders will be amazed at the sheer number of currency-specific websites, services, and TV programming available to them. Most of them are free of charge, while you may have to pay for some of the others. Let’s go over our favorites to help you get started.

Traditional Financial News Sources

While there are tons of financial news resources out there, we advise you to stick with the big names.

These guys provide around-the-clock coverage of the markets, with daily updates on the big news that you need to be aware of, such as central bank announcements, economic report releases and analysis, etc. Many of these big players also have institutional contacts that provide explanations about the current events of the day to the viewing public.
 Reuters
 The Wall Street Journal
 Bloomberg
 MarketWatch.com

Real-time Feeds

Financial TV networks exist 24 hours a day, seven days a week to provide you up-to-the-minute action on all of the world’s financial markets. In the U.S., the top dogs are (in random order), Bloomberg TV, Fox Business, CNBC, MSNBC, and even CNN. You could even throw a little BBC in there.

Another option for real-time data comes from your forex trading platform. Many forex brokers include live newsfeeds directly in their software to give you easy and immediate access to events and news of the currency market. Check your broker for availability of such features not all brokers features are created equally.

Economic Calendars

Wouldn’t it be great if you could look at the current month and know exactly when the Fed is making an interest rate announcement, what rate is forecasted, what rate actually occurs , and what type of impact this change has on the currency market? It’s all possible with an economic calendar.

The good ones let you look at different months and years, let you sort by currency, and let you assign your local time zone. 3:00 pm where you’re sitting isn’t necessarily 3:00 pm where we’re sitting, so make use of the time zone feature so that you’re ready for the next calendar event!

Yes, economic events and data reports take place more frequently than most people can keep up with. This data has the potential to move markets in the short term and accelerate the movement of currency pairs you might be watching.
Lucky for you, most economic news that’s important to forex traders is scheduled several months in advance.


Market Information Tips

Keep in mind the timeliness of the reports you read. A lot of this stuff has already occurred and the market has already adjusted prices to take the report into account.

If the market has already made its move, you might have to adjust your thinking and current strategy. Keep tabs on just how old this news is or you’ll find yourself “yesterday’s news.” You also have to be able to determine whether the news you’re dealing with is fact or fiction, rumor or opinion.

Economic data rumors do exist, and they can occur minutes to several hours before a scheduled release of data. The rumors help to produce some short-term trader action, and they can sometimes also have a lasting effect on market sentiment.

Institutional traders are also often rumored to be behind large moves, but it’s hard to know the truth with a decentralized market like spot forex. There’s never a simple way of verifying the truth. Your job as a forextrader is to create a good trading plan and quickly react to such news about rumors, after they’ve been proven true or false. Having a well-rounded risk management plan in this case could save you!

And the final tip: Know who is reporting the news.

Are we talking analysts or economists, economist or the owner of the newest forex blog on the block? Maybe a central bank analyst?The more reading and watching you do of forex news and media, the more finance and currency professionals you’ll be exposed to.

Are they offering merely an opinion or a stated fact based on recently released data? The more you know about the “Who”, the better off you will be in understanding how accurate the news is. Those who report the news often have their own agenda and have their own strengths and weaknesses.

Get to know the people that “know”, so YOU can “know”.

morgan2p:



Weldone sir for the updates. My question is how do we combine technical and fundamental analysis to trade fx and also kindly advise the best method or analysis to use when trading

Technical analysis is the application of charts to know the condition of the market and in determining trade set ups while Fundamental analysis is the application of Economic,Social and Political news to take your decisions also. When a very strong fundamental news is in air ,it tends to out-play the technicals for the period but the technicals will serve as guidelines for IMPORTANT PRICE LEVELS. Whenever fundamentals is not in air,technicals rule the market.

I will still drop for us a table showing the most important fundamentals to consider trading .

To your 2nd question,there is no best method or analysis to trade the forex market ,everyone comes up with their individual trading plan and they trade the plan.

abbeyforex:


Technical analysis is the application of charts to know the condition of the market and in determining trade set ups while Fundamental analysis is the application of Economic,Social and Political news to take your decisions also. When a very strong fundamental news is in air ,it tends to out-play the technicals for the period but the technicals will serve as guidelines for IMPORTANT PRICE LEVELS. Whenever fundamentals is not in air,technicals rule the market.

I will still drop for us a table showing the most important fundamentals to consider trading .

To your 2nd question,there is no best method or analysis to trade the forex market ,everyone comes up with their individual trading plan and they trade the plan.

Thanks for the reply sir but I noticed u left the whatsapp group

Market Expectations to News and Their Impact on Currencies

There’s no one “All in” or “Bet the Farm” formula for success when it comes to predicting how the market will react to data reports or market events or even why it reacts the way it does.

You can draw on the fact that there’s usually an initial response, which is usually short-lived, but full of action. Later on comes the second reaction, where forex traders have had some time to reflect on the implications of the news or report on the current market.

It’s at this point when the market decides if the news release went along with or against the existing expectation, and if it reacted accordingly.
Was the outcome of the report expected or not? And what does the initial response of the market tell us about the bigger picture?

Answering those questions gives us place to start interpreting the ensuing price action.

Consensus Market Expectations

A consensus expectation, or just consensus, is the relative agreement on upcoming economic or news forecasts. Economic forecasts are made by various leading economists from banks, financial institutions and other securities related entities.

All the forecasts get pooled together and averaged out, and it’s these averages that appear on charts and calendars designating the level of expectation for that report or event.

The consensus becomes ground zero; the incoming, or actual data is compared against this baseline number. Incoming data normally gets identified in the following manner:

 “As expected” – the reported data was close to or at the consensus forecast.
 “Better-than-expected”- the reported data was better than the consensus forecast.
 “Worse-than-expected” – the reported data was worse than the consensus forecast.

Whether or not incoming data meets consensus is an important evaluation for determining price action. Just as important is the determination of how much better or worse the actual data is to the consensus forecast. Larger degrees of inaccuracy increase the chance and extent to which the price may change once the report is out.

However, let’s remember that forex traders are smart, and can be ahead of the curve. Well the good ones, anyway.

Many forex traders have already “priced in” consensus expectations into their trading and into the market well before the report is scheduled, let alone released.

As the name implies, pricing in refers to traders having a view on the outcome of an event and placing bets on it before the news comes out. The more likely a report is to shift the price, the sooner traders will price in consensus expectations. How can you tell if this is the case with the current market?

You can’t always tell, so you have to take it upon yourself to stay on top of what the market commentary is saying and what price action is doing before a report gets released. This will give you an idea as to how much the market has priced in.

A lot can happen before a report is released, so keep your eyes and ears peeled. Market sentiment can improve or get worse just before a release, so be aware that price can react with or against the trend.

There is always the possibility that a data report totally misses expectations, so don’t bet the farm away on the expectations of others. When the miss occurs, you’ll be sure to see price movement occur.

What the Heck? They Revised the Data? Now what?

Too many questions in that title.But that’s right, economic data can and will get revised. That’s just how economic reports roll!

Let’s take the monthly Non-Farm Payroll employment numbers (NFP) as an example. As stated, this report comes out monthly, usually included with it are revisions of the previous month’s numbers.

We’ll assume that the U.S. economy is in a slump and January’s NFP figure decreases by 50,000, which is the number of jobs lost. It’s now February, and NFP is expected to decrease by another 35,000.
But the incoming NFP actually decreases by only 12,000, which is totally unexpected. Also, January’s revised data, which appears in the February report, was revised upwards to show only a 20,000 decrease.

As a trader you have to be aware of situations like this when data is revised. Not having known that January data was revised, you might have a negative reaction to an additional 12,000 jobs lost in February. That’s still two months of decreases in employment, which ain’t good.

However, taking into account the upwardly revised NFP figure for January and the better than expected February NFP reading, the market might see the start of a turning point. The state of employment now looks totally different when you look at incoming data AND last month’s revised data.

Be sure not only to determine if revised data exists, but also note the scale of the revision. Bigger revisions carry more weight when analyzing the current data releases. Revisions can help to affirm a possibly trend change or no change at all, so be aware of what’s been released.

You can’t always tell, so you have to take it upon yourself to stay on top of what the market commentary is saying and what price action is doing before a report gets released. This will give you an idea as to how much the market has priced in.

A lot can happen before a report is released, so keep your eyes and ears peeled. Market sentiment can improve or get worse just before a release, so be aware that price can react with or against the trend. There is always the possibility that a data report totally misses expectations, so don’t bet the farm away on the expectations of others. When the miss occurs, you’ll be sure to see price movement occur.

Still reading. From what I gathered news from fundamentals analysis can form a new trend at anytime therefore it is advice able for a newbie to be current with the latest news. Hope am right sir

morgan2p:
Still reading. From what I gathered news from fundamentals analysis can form a new trend at anytime therefore it is advice able for a newbie to be current with the latest news. Hope am right sir

Not newbies only but every trader.

Good work abbeyforex.

abbeyforex:



Not newbies only but every trader.

Thank you sir

I almost forgot this thread exists,am sorry . Loads of work is the cause.

What is a Trading Plan?

Be your own trader.
In other words: Don’t follow someone else’s trading advice blindly! Just because someone may be doing well with their method, it doesn’t mean it will work for you.
We’re all in different situations in life, and we all have different market views, thought processes, risk tolerance levels, and market experience. Have your own personalized forex trading plan and update it as you learn from the market.

With rock solid discipline, your trading could look like this.
Developing a Trading Plan and sticking to it are the two main ingredients of trading discipline. But trading discipline isn’t enough. Even solid trading discipline isn’t enough. It has to be rock solid discipline.

We repeat: rock solid. We want to be successful traders!

And having rock solid trading discipline is the most important characteristic of successful traders.

A trading plan defines what is supposed to be done, why, when, and how. It covers your trader personality, personal expectations, risk management rules, and trading system(s).

When followed thoroughly, a trading plan will help limit trading mistakes and minimize your losses. After all, “If you fail to plan, then you’ve already planned to fail.”

A trading plan removes any bad decision making in the heat of the moment. Your emotions can consume you when money is on the line, causing you to make irrational decisions. You don’t want that to happen.

The best way to prevent it from happening is to minimize (notice we did not say eliminate) thinking by having a plan for every potential market action. With the right forex trading plan, every action is spelled out, so that in the heat of the moment you don’t have to make any rash decisions. You just simply stick to your trading plan.

The Difference Between a Trading Plan and a Trading System

Before we continue, we have to quickly distinguish the difference between a trading plan and a trading system.
A trading system describes how you will enter and exit trades.A trading system is part of your trading plan but is just one of several important parts, i.e., analysis, executions, risk management, etc.
Since market conditions are always changing, a good trader will usually have two or more trading systems in his or her trading plan.

Got that

How then can one make money out of the financial mkt without being a trader?

How then can one make money out of the market without being a trader

Most people are just eager to make money from forex without being a trader. As for me I want to know the basis very very well before jumping.

Types of Traders

Scalper
Scalping is like those high action thriller movies that keep you on the edge of your seat. It’s fast paced, exciting, and mind-rattling all at once. These types of trades are usually only held onto for a few seconds to a few minutes at the most! The main objective for forex scalpers is to grab very small amounts of pips as many times as they can throughout the busiest times of the day. Because scalpers basically have to be glued to the charts, it is best suited for those who can spend several hours of undivided attention to their trading.

It requires intense focus and quick thinking to be successful. It is not for those looking to make big wins all the time, but rather for those who like raking in small profits over the long run to make an overall profit.

You might be a forex scalper if:
 You like fast trading and excitement
 You don’t mind being focused on your charts for several hours at a time
 You are an impatient person who doesn’t like to wait for long trades
 You can think fast and change bias, or direction, quickly
 You have fast fingers.

You might NOT be a forex scalper if:
 You easily get stressed in fast moving environments
 You can’t commit several hours of undivided attention to your charts
 You’d rather make fewer trades with higher profit gains
 You like taking your time to analyze the overall picture of the market

Some things to consider if you decide to scalp:

Trade only the most liquid pairs

Pairs such as the EUR/USD, GBP/USD, USD/CHF, and USD/JPY offer the tightest spreads because they tend to have the highest trading volume. You want your spreads to be as tight as possible since you will be entering the market frequently.
Trade only during the busiest times of the day
The most liquid times of the day are during the session overlaps. This is from 2:00 am to 4:00 am and from 8:00 am to 12:00 noon Eastern Time (EST). Let me say between 9am and 5pm Nigerian Time

Be sure to account for the spread
Because you enter the market frequently, spreads will be a big factor in your overall profit. Be sure your targets are at least double your spread so that you can account for the times the market moves against you.

Try focusing on one pair first
Scalping is very intense and if you can put all your energy in one pair, you’ll have a better chance at being successful. If you start to get accustomed to the pace of things, then you can start by adding on another pair and see how it works for you.

Make sure you follow good money management
This goes for any type of trading, but since you are making so many trades within a day it is especially important that you are sticking to risk management practices.

Nice one @abbeyforex

Nice one @abbeyforex. I didnt know one can take trades around 2am to 4pm. Most times people will say the market is sleeping.

amyliajane:
Nice one @abbeyforex. I didnt know one can take trades around 2am to 4pm. Most times people will say the market is sleeping.

The 2am to 4 am is EASTERN TIME and not GMT, you can just add 5 hours to it to the time in Nigeria.

Basically ,it is between 7am to 5pm most cases.
Also the market is a 24 hour market,it only sleep between 10pm to 11pm on FRIDAYS through 10pm to 11pm on SUNDAYS depending on brokers and Day Light Savings.

OK sir

@abbeyforex. For someone who works from 9 -5 and gets back say 8. What time will be adviceable to trade. Especially if u cant do it in d office cause of work

amyliajane:
@abbeyforex. For someone who works from 9 -5 and gets back say 8. What time will be adviceable to trade. Especially if u cant do it in d office cause of work

You can trade any time sparing between 5 to 10 minutes. There is possibility of setting Entry and Exit point,when price move to your point,your trade gets executed and when it gets to your exit point ,your trade will be closed automatically even while your pc is switched off .

Day Trading

Day trading is another short term trading style, but unlike scalping, you are typically only taking one trade a day and closing it out when the day is over. These traders like picking a side at the beginning of the day, acting on their bias, and then finishing the day with either a profit or a loss. They DON’T like holding their trades overnight.

Day trading are suited for forex traders that have enough time throughout the day to analyze, execute and monitor a trade. If you think scalping is too fast but swing trading is a bit slow for your taste, then day trading might be for you.

You might be a forex day trader if:
 You like beginning and ending a trade within one day.
 You have time to analyze the markets at the beginning of the day and can monitor it throughout the day.
 You like to know whether or not you win or lose at the end of the day.

You might NOT be a forex day trader if:
 You like longer or shorter term trading.
 You don’t have time to analyze the markets and monitor it throughout the day.
 You have a day job.

Some things to consider if you decide to day trade: Stay informed on the latest fundamentals events to help you choose a direction

You will want to keep yourself up-to-date on the latest economic news so that you can make your trading decisions at the beginning of the day.

Do you have time to monitor your trade?
If you have a full time job, consider how you will manage your time between your work and trading. Basically….don’t get fired from your job because you are always looking at your charts!
Types of Day Trading

Trend trading
Trend trading is when you look at a longer time frame chart and determine an overall trend. Once the overall trend is established, you move to a smaller time frame chart and look for trading opportunities in the direction of that trend. Using indicators on the shorter time frame chart will give you an idea of when to time your entries. First determine what the overall trend is by looking at a longer time frame. You can use indicators to help you confirm the trend.Once you determine the overall trend, you can then move to a smaller timeframe and look for entries in the same direction. Remember this, It’s called Multi-time Frame Analysis!

Countertrend trading
Counter trend day trading is similar to trend trading except that once you determine your overall trend, you look for trades in the opposite direction. The idea here is to find the end of a trend and get in early when the trend reverses. This is a little more risky but can have huge payoffs. Since our thinking is “counter-trend”, we would look for trades in the opposite direction of the overall trend on a smaller timeframe such as a 15 minute chart. Remember that going opposite of the trend is very risky, but if timed correctly, can have huge rewards!

Breakout trading
Breakout day trading is when you look at the range a pair has made during certain hours of the day and then placing trades on either side, hoping to catch a breakout in either direction. This is particularly effective when a pair has been in a tight range because it is usually an indication that the pair is about to make a big move.

Your goal here is to set yourself up so that when the move takes place you are ready to catch the wave! In breakout trading, you determine a range where support and resistance have been holding strongly. Once you do, you can set entry points above and below your breakout levels. As a rule of thumb you want to target the same amount of pips that makes up your determined range.

Swing Trading
Swing trading is a longer term trading style that requires patience to hold your trades for several days at a time.It is ideal for those who can’t monitor their charts throughout the day but can dedicate a couple of hours analyzing the market every night. This is probably best suited for those who have full-time jobs or school, but have enough free time to stay up-to-date with what is going on in the global economies.

Forex swing trading attempts to identify medium term trends and enter only when there seems to be a high probability of winning. Because trades last much longer than one day, larger stop losses are required to weather volatility, and a forex trader must adapt that to their money management plan.

You will most likely see trades go against you during the holding time since there can be many fluctuations of the price during the shorter time frames. It is important that you are able to remain calm during these times and trust in your analysis. Since trades usually have larger targets, spreads won’t have as much of an impact to your overall profits. As a result, trading pairs with larger spreads and lower liquidity is acceptable.

You might want to be a forex swing trader if:
 You don’t mind holding your trades for several days.
 You are willing to take fewer trades, but more careful to make sure your trades are very good setups.
 You don’t mind having large stop losses.
 You are patient.
 You are able to remain calm when trades move against you.

You might NOT want to be a forex swing trader if:
 You like fast paced, action-packed trading.
 You are impatient and like to know whether you are right or wrong immediately.
 You get sweaty and anxious when trades go against you.
 You can’t spend a couple of hours every day to analyze the markets.
If you have a full time job but enjoy trading on the side, then swing trading might be more your style!

Position Trading
Position trading is the longest term trading and can have trades that last for several months to several years! This kind of forex trading is reserved for the ultra-patient traders, and requires a good understanding of the fundamentals. Because position trading is held for so long, fundamental themes will be the predominant focus when analyzing the markets.
Fundamentals dictate the long term trends of currency pairs and it is important that you understand how economic data affects your countries and its future outlook.

Because of the lengthy holding time of your trades, your stop losses will be very large.

You must make sure you are well capitalized or you will most likely get margin call.

Forex position trading also requires thick skin because it is almost guaranteed that your trades will go against you at one point or another. These won’t just be little retracements either. You may experience huge swings and you must be ready and have absolute trust in your analysis in order to remain calm during these times.

You might be a forex position trader if:
 You are an independent thinker. You have to be able to ignore popular opinion and make your own educated guesses as to where the market is going.
 You have a great understanding of fundamentals and have good foresight into how they affect your currency pair in the long run.
 You have thick skin and can weather any retracements you face.
 You have enough capital to withstand several hundred pips if the market goes against you
 You don’t mind waiting for your grand reward. Long term forex trading can net you several hundred to several thousands of pips. If you get excited being up 50 pips and already want to exit your trade, consider moving to a shorter term trading style.
 You are extremely patient and calm.

You might NOT be a forex position trader if:
 You easily get swayed by popular opinions on the markets.
 You don’t have a good understanding of how fundamentals affect the markets in the long run.
 You aren’t patient. Even if you are somewhat patient, this still might not be the trading style for you.
 You don’t have enough starting capital.
 You don’t like it when the market goes against you.
 You like seeing your results fast. You may not mind waiting a few days, but several months or even years is just too long for you to wait.

Any Question?

The GOLDEN RULE: Never Risk More Than 2% Per Trade

How much should you risk per trade? Great question. Try to limit your risk to 2% per trade. But that might even be a little high. Especially if you’re newbie forex trader.

Here is an important illustration that will show you the difference between risking a small percentage of your capital per trade compared to risking a higher percentage.
Trader Risks 2% vs. 10% Per Trade