The Truth About Fundamental Analysis and Forex Indicators

We’re focusing on technical analysis in this article with a description of some of the important indicators.

We could say, all wealthy traders use technical analysis but not all technical analysis traders are wealthy. Although technical analysis is the most precise way of trading the Forex market. It’s also useful note that fundamentals play their part in indicating whether a price will move up or down. It gives you the edge over other traders.

Technical Analysis is so powerful because of a few reasons:

1) It represents numbers. All information and its impact on the market and traders is represented in a currency’s price.
2) It helps to predict trends and the foreign exchange market is very ‘trendy’.
3) Certain chart patterns are consistent, reliable and repeat themselves. Technical Analysis helps us to see them.

Here’s one way of putting technical analysis into perspective (wish I had a dollar each time I said ‘technical analysis’). We all know that prices move in trends. Research has shown that those that trade ‘with the trend’ greatly improve their chances of making a profitable trade.

Trends help you become aware of the overall market direction and often rescue us from less then profitable entry points. I attended a 2 day course costing me over $2500 USD and the biggest thing I learned from it was the need for discipline and emotional control. The content

Keeping a cool head and focus on fundamentals is key to trading success.

was so basic that within the next 3 or 4 articles, I would have covered all of it. So learning the ‘tools of the trade’ the technical indicators and their applications will help you to diagnose what the market is doing but even then you need to expect ups and down and trade with emotional control.

Stay with the trend, follow the price.

Find the price of the currency pair. If EUR/USD is 1.4224 and moves to 1.4180 then 1.4090 then the market is in a down trend. Concern yourself only with what the market IS doing not what it might do. Listen to the markets and the indicators will backup what they are telling you.

Moving Averages
Tell you the price at a given point of time over a defined period of intervals. They are called moving because they give you the latest price while calculating the average based on the selected time measure.

They lag the market so to give you an indication of a change in trend, use a shorter average such as a 5 or 10 day moving average. By combining a shorter term and longer term M.A. you can detect a buy signal when the shorter term crosses the longer term moving average in the upward direction. Or a sell signal if it crosses in a downward direction. For example, you could use a 5 day versus a 20 day moving average or a 40 day versus a 200 day moving average.

There are simple moving averages, linearly weighted which gives more importance to the recent prices or exponentially weighted. The latter is a favorite because it considers all prices in a time period but emphasizes the importance of the most recent price changes.

MACD
Based on moving averages, a MACD plots the difference between a 26 exponential moving average and a 12 day exponential moving average, with a 9 day used as a trigger line. If a MACD turns positive when the market is still plummeting it could be a strong buy signal. The converse also works.

Bollinger Bands (sounds like an elastic band)
Prices tend to stay between the upper and lower bands. They widen and become more narrow depending on the volatility of the market at the time. A sell signal would be when the moving average is above the Bollinger bands and vice versa for a buy signal. Some traders use it in conjunction with RSI, MACD, CCI and Rate of Change.

Fibonacci Retracement

An example of Fibonacci Retracement.

Describe cycles found throughout nature and when applied to technical analysis can find shifts in the market trends. After a climb prices often retrace a large portion sometimes all of the original move. Support and resistance levels often occur near the Fibonacci retracement levels.

Relative Strength Index (RSI) 
Relative Strength Index measures the market activity to see whether it’s overbought or oversold. This is a leading indicator so helps to indicate what the market is going to do (awesome!). A higher RSI number indicates overbought (so expect a bearish shift) and a lower number indicates oversold.

Successful traders will generally use 3 or 4 signals to provide a more conclusive signal before entering a trade.

Always remember, “If in doubt, stay out!” . Technical analysis doesn’t factor in political news, a country’s economic profile or fundamental supply and demand.

Technical Analysis helps us figure out how much money to risk on a trade. How and when to enter the market and how to exit the trade for profit or to minimize loss.

For more the complete guide to making it big with Forex, check out our book The Ultimate Guide to Forex Profits – on sale now.

7 Awesome Reasons to Trade Forex

There are many money-making opportunities out there and we’ve been involved with quite a few, namely property marketing, web development, residential construction security, multi-level marketing businesses etc.

We’ve come to a few conclusions with the help of some well-known prosperity coaches.

Often people with the income they want don’t have the time to enjoy it. Those that have time don’t often have money. You don’t have to sacrifice your life-style to earn an above-average income. If you focus on the Forex for a few months you can make that dream a reality and create time and money to do what you REALLY want.

To earn a living, you get money in exchange for a product or service rendered. That product or service needs to be sold continuously otherwise your income stops abruptly (unless it’s a repeat type of product or service.)

Money is a medium of exchange. There’s no magical formula to have it, you need to exchange something of value for it.

What if, you could have access to thousands of customers who are ready, willing, and able to buy from you whenever you wanted? Wouldn’t it be great to avoid any hassles like money collection problems (just had a delayed payment from my web business), keeping difficult customers happy (we all know what that’s like), competition stealing your business without giving the same value etc.

All that is possible with Forex. You can also trade from anywhere. Take your laptop with you, find an internet connection and away you go.

Another advantage is that you don’t need experience to get started. Get a traditionally job involves accumulating specialized experience, having a well-polished resume, and having the right contacts. With the right training course, you can get started straight away.

Here’s 7 more reasons to trade Forex:

  1. It never closes. It’s open around the clock, worldwide. Trading positions open at Monday 7 am, New Zealand time and close 5 pm New York time on Friday. During this time, you can enter or exit the market whenever you like. It’s a continuous electronic currency exchange. This is great because you can trade whenever you have spare time.
  2. Leverage. Standard $100 000 currency lots can be traded with as little as $1000. This is mainly because of the ease with which you can buy and sell, some brokers will leverage up to 200 times, so with $100 you can control a 200,000 unit currency position. It’s the best use of trading capital around, even banks lending on property investments don’t come close.
  3. Accurately predict the outcomes. Currency prices generally repeat themselves in predictable cycles so you can see what the trends are. ‘Technical Analysis’ helps to see these trends and profit from them.
  4. Low Transaction Cost. In other words, you mistakes won’t cost you a fortune. Good brokers won’ charge commissions to trade or maintain an account even if you have a mini account and trade small volumes.
  5. Unlimited Earning Potential. Forex has a daily trading volume of over $5 trillion, the largest financial market in the world. It dwarfs the equities market (50 billion daily) and the futures market (30 billion).
  6. You can make money in any market conditions. Each market is one currency against another, so when you buy in one, you’re selling in another so there’s no bias towards either currency moving up or down. This means it’s up to you to choose which currency to buy or sell with. You can make money going up or down.
  7. Market transparency. This is an advantage in any business or trading environment. It means you can manage risk and execute orders within seconds. It’s highly efficient and allows you to avoid unexpected ‘surprises’.

We hope you’re now convinced that Forex is the best investment and income opportunity around.

To boost your Forex Success, join the Piptionary Club free for 14 days and get our expert trade alerts via SMS and email.

Accepting Your Losses With Grace (or How to Minimize Your Losses)

The lack of a proper trading plan which includes precise rules for entering and exiting a trade will most certainly guarantee failure over the long term. Beginners usually suffer from the same common ailments. They abandon trading plans purely on impulse because things are not going exactly as how they had envisioned. Repeatedly they use unreliable methods that do not produce a profit. Many traders hold on to losing positions telling themselves “it is going to turn” when every indicator says otherwise because they cannot bear the thought of a loss.

Why do they torture themselves? Why don’t they just find what’s going wrong and make a change? For some people recognizing that a trade or even a trading method is not working and making a change is easy, but for others it’s very difficult. They must look at their limitations admit that they have made a mistake and that’s hard because it hurts our ego. Psychologically it’s risky, it’s often easier to fool ourselves. Just keep going, living in a state of denial until your account is depleted. If you recognize any of these traits in yourself, you must stop trading at once.

Take a good look at what has been happening, try and find the problem. If you look close enough you may see a pattern. Therefore, it is vital to record every trade and as much information about it as possible. You must break out of old patterns and see things in a new light.

You will never be a successful trader if you continue to live in a state of denial. What you do to return to reality? There is a lot you can do. First off, make sure you are not trading under stress. When stressed out you can’t see clearly, you become rigid and unable to see alternative views. One of the easiest solutions is to trade smaller. The smaller the trade the less the stress, especially for the beginner. If you are experienced and in a losing streak reduce your contracts until you get your confidence returns. Some people need to take a break altogether. Get away from it all. Take your mind off the trading.

The second thing you can do is to make sure you have a life. Trading can be addictive especially when you are winning. Do not put all your emotional eggs in the trading basket. You need to have other roles that give your life meaning and purpose. By defining your identity in a variety of ways, you will not place un-natural importance on trading events. Therefore, you will be able to take losses in stride and look at your trading more objectively.

Finally, radical acceptance is a key mental strategy for coping with market uncertainty. Many traders make the mistake of thinking they can control the markets. Nobody can control the markets. We must learn to accept anything that comes our way and to trade accordingly. Adopt the attitude that trading is a journey and that all we can do is go where the markets take us.

To succeed on this journey, you cannot afford to lose too much. Manage risk and just accept what you get and enjoy the ride. This way you will trade more freely and creatively. Don’t live your life in denial. Accept your limitations, work around them, and become a winning trader. Write out your trading plan with precise entry and exit points. Most important set your stops and mentally decide you will not break them. Test your system on paper and when confident test in real time with the smallest contract size. You will have losing trades, accept them with grace and go on to the next trade.

5 Things You Must Do If You Want To Attain Financial Freedom Through Forex Trading

With the amazing growth of the Forex market, you are going to see an astounding number of traders lose all their money. Unfortunately, they haven’t followed the simple steps I have laid out for you. Go through these steps and give yourself the greatest opportunity to achieve your goals.

1. Have Faith in Yourself

To reach the level of elite Forex trader, you must trust in yourself and your Forex trading education. You must be willing to make all your trading decisions, instead of relying on someone else’s thoughts or ability (or lack of). Of course, you will prepare yourself fully before every risking any money.

2. Accept Your Learning Curve

Unless you are a veteran trader, you will lose money trading the Forex market. This is a near certainty. I don’t say this to talk you out of trading. In fact, quite the opposite. You will be trading against others that fall to this reality day in and day out. You, however, will not risk a dime until you have learned the skills you need to make money trading the Forex.

3. Decide What Type of Trader You Are

There are many ways to trade the Forex. They range from very active to very patient. You must decide which style suits you best. The best time to learn this about yourself is while you are trading a demo account. There is no need to allow your learning curve to cost you money.

4. Get Educated

Education is the shortest path to elite Forex trading. Regardless of your ultimate goals, you will reach them quicker with a great Forex trading education (Like The Ultimate Guide to Forex Profits).

Take some time to review different options before deciding on who to trust with your Forex trading education needs. A Forex seminar will help shorten your learning curve drastically.

5. Continue to Get Educated

In order to achieve and retain elite Forex trading skills, you must constantly be adding to your knowledge base. Your education should never end. In fact, one of the key points to look for in an elite Forex trading course is ongoing education. It’s nice to have an ongoing relationship with the person/people helping you to achieve your goals.

What separates an elite Forex trader from all others is their desire and ability to be independent. Many traders are willing to follow signals, systems, strategies, or anything else you may call them. By taking this approach, however, these traders are only as good as the people they follow.

An elite Forex trader will lead. Their decisions will be calculated and analyzed to near perfection. They will make decisions with no hesitation and handle the growth of their account in a predetermined, intelligent fashion. Take your trading to their level and you will never look back.

For a great start to getting educated, check out our book “The Ultimate Guide to Forex Profits“.