http://www.fxarticles.net/ Articles at Forex Articles en-us http://www.fxarticles.net/technical-analysis/bollinger-bands-applying-bollinger-bands.html http://www.fxarticles.net/technical-analysis/bollinger-bands-applying-bollinger-bands.html Tue, 12 Jan 2010 14:44:53 -0500
Overbought and Oversold conditions are the primary use of Bollinger Bands in the forex markets. It is normally used in forex trading but is very commonly used in the stock market. Hurst, a researcher who worked on trade envelopes in the 1970 is thought to have created the foundation for the indicator.

Bollinger created a dynamic tool unlike Hurst, who worked on a tool that was fixed. He did this by running a 20 period moving average, on an instrument price along with two deviation bands on either side. Numerous traders have been using it with a variety of indicators which include the stochastic indicator and RSI indicator. The interesting thing about bollinger bands when applied to price is the fact that they tend to act as support and resistance.

Price usually tends to fluctuate within the bands. Changes in the trend may occur should price close outside the outer bands. In trending instruments, the 20 moving average band is often seen as support. Additionally, resistance can be found in the outer bands. The above situation where trending price bounces off the middle band and the upper or lower bands is called riding the band. It signals the fact that there is a solid trend at the moment.

Bollinger bands are usually used to complement additional indicators. Candlestick patterns and price action are two tools that do well with this indicator.

It can be applied to any financial market including commodities, the stock market and the futures market. This makes bollinger bands an excellent tool that can be applied to all the markets above. ]]> http://www.fxarticles.net/technical-analysis/forex-trading-tips-profit-with-bollinger-bands.html http://www.fxarticles.net/technical-analysis/forex-trading-tips-profit-with-bollinger-bands.html Thu, 24 Dec 2009 15:59:06 -0500
A moving average, also known as a rolling average used with a sequence of best fit price points measured at successive uniform time intervals, will show you the short-term fluctuations and longer-term trends or cycles in a currency pair. You may wonder to what end or with what objective, well the moving average will chart a smoother curve based on previous price points making it easier for you as a trader to spot a change in the trend of the currency pair, and confirm support and resistance levels of the currency pair at a given time when used in conjunction with other tools and indicators. Also since moving averages are only computed at specific intervals, they are immune to price spikes that the Forex is known for, hence the smooth curve. The types of moving averages most commonly used in the Forex market by analysts is the simple moving average (SMA) and the exponential moving average (EMA).

Right, so with Bollinger bands you have your middle graph set to plot using a moving average of typically 20 or 50 closed price levels. Notice there a no units for the interval as this depends on what kind of trader you are for instance a 'scalper' or intraday trader will be interested in 20 previous price points within the hour as opposed to a long term trader who may use 20 weeks or even 20 months. In addition to the middle graph you will have 2 more graphs that trace beside the MA20 graph at 2 standard deviations, above and below it to form what is known as the 'envelope'; you should know that these are arbitrary figures and you are free to choose your own deviations and moving average to use for the bands but 20 SMA is normally recommended for beginning technical analysts.

So now that we know what they are and how they work, how can we use them in analysis? One thing to remember is that Bollinger bands like all other tools are not absolute, because they can only give you the best buy and the best sell signals of a currency pair based on relative information and indicators at a particular time with all things constant; the decision to buy or to sell would still require your better judgment in the interpretation of the information that the bands would illustrate. The lower Bollinger band often (not always) provides price level support while the upper Bollinger band provides price level resistance. As much as Bollinger himself categorically stated that if the price level of the currency pair tags or exceeds any of the deviated bands, it does not indicate a buy/sell signal, millions of traders in the Forex market do not adhere to his doctrine. Try it for yourself by placing a Bollinger band envelope of a EUR/USD chart and watch the price levels shift as they approach the lower or upper graphs, what you want to look for is the closing low/highs of the candle sticks immediately preceding the one that breaks either the upper or lower bands.

In conclusion, as a simple strategy you can monitor the price levels as they approach the upper and lower bands, and wait for them to breakout. When this happens they will usually retrace back and 'range' ; and depending on the previous candlestick when the break from the Bollinger band envelope occurred and the ranging begun (that is whether the candle stick's open and close levels are lower than the previous candle stick), you can consider that an alert that a major price shift is about to occur. It will be up to you to then decide whether to take a position. ]]> http://www.fxarticles.net/technical-analysis/simple-moving-average-overview-on-the-sma-indicator.html http://www.fxarticles.net/technical-analysis/simple-moving-average-overview-on-the-sma-indicator.html Tue, 22 Dec 2009 14:39:22 -0500
On the 11th day, we take out the first day from the data set while adding the new data point along with dividing the new value by 10. This is repeated continuously. It is an suitable indicator for long term trends as each point in the series is given equivalent weight. It is often implemented with that in mind in traders forex trading strategy.

Depending on the number of data points used, the simple moving average removes volatility by smooths out the price to help recognize long term plus short term trends. The SMA is a lagging forex indicator, much like other moving averages. It moves one step behind price movement. Generally, all moving averages do somewhat badly when the markets are ranging. Therefore, most traders keep away from implementing the SMA throughout periods when prices are very choppy.

Some basic strategies used with the simple moving average consist cross overs. In a cross over system, two SMA of different period points are utilized. The short term and long term trends are represented by both these lines. Should the long term signal remain bullish, enter a long trade when the short term signal crosses above the long term signal.

Sell if the long term line is bearish as well as the short term SMA crosses under it. One should never rely totally on just the simple moving average. They are frequently employed with a variety of other forex indicators as a means of confirmation. ]]> http://www.fxarticles.net/technical-analysis/traditional-technical-analysis-in-forex-of-course.html http://www.fxarticles.net/technical-analysis/traditional-technical-analysis-in-forex-of-course.html Tue, 22 Dec 2009 13:29:28 -0500
In today's video I'm going to share with you a wonderful way to look at the forex markets and determine which way they are headed in a matter of seconds. We'll be looking at three different cross rates and how they all correlate together in a way that I think may surprise you.

The forex markets are the biggest markets in the world and MarketClub not only covers all of them, but also covers them in real-time with pricing and charts. I hope you learn from this video and take the time to post your comments on our blog.

About Forex - Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world.

With the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined.

Unlike other financial markets, the Forex market has no physical location and no central exchange (off-exchange). It operates through a global network of banks, corporations and individuals trading one currency for another.

The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.

Traditionally, retail investors' only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes.

Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets. ]]> http://www.fxarticles.net/technical-analysis/forex-trading-tips-success-with-fibonacci.html http://www.fxarticles.net/technical-analysis/forex-trading-tips-success-with-fibonacci.html Mon, 21 Dec 2009 14:45:50 -0500
Here are a few tips on retracement, reversals and the tools used - The famous Fibonacci numbers. Ever watched LOST, the movie series by ABC? Where the characters had to drudgingly enter seemingly random numbers into a computer or endure the consequences of some cataclysmic event if they didn't? Sorry I digress I know, but if you have watched it the Fibonacci numbers are a similar sequence of numbers; I shan't bore you with its history but all you need to know is that they are a numbered recursive sequence where the next number is the sum of the previous two (example 1, 1, 2, 3, 5, 8...etc). Now I know what you are thinking, so what right? The fascinating thing about these numbers is their natural occurrence in everyday things and in nature and how amazingly applicable these numbers are in technical analysis.

Depending on the chart you use (hourly or daily chart for a particular currency pair), you can find the support, and retracement levels by drawing a linear trend line graph from the most recent high to the most recent low. A retracement level is the point where the currency pair will continue its previous trend before continuing with its current trend. Hope I didn't lose you there, but to put it even simpler if the number 5 was a retracement level and I asked you to count to 10 meaning the trend is upwards when you reach the number 5 you would 'retrace' i.e. go back to 4 maybe 3 maybe even 2 before continuing upwards again towards the number 10. Now say I didn't tell you when to retrace, but you know at some point between 1 and 10 you have to, how would you do it? That's right Fibonacci numbers.

Having got your trend line drawn, you then divide the vertical distance of the two extremities by the key Fibonacci ratios which are 23.6%, 38.2%, 50%, 61.8%. Where these points lay on the x-axis of your chart, is where your retracement levels are. I missed out the 100% ratio; this is known as the resistance level, or the level where the market does not expect the currency pair to exceed within a particular time and all things constant.

Most traders pay more attention to the 61.8% support level, but in general the reason why Fibonacci numbers are such good indicators of trend change is because millions of forex traders rely on them as pointers, thus if for whatever reason a currency pair goes against the support or breaks a resistance level, rest assured that you will see huge activity on the market at just that instant.

As a parting note, I have stared at my charts for minutes on end, watching market indecision as the market decides which way to swing after a resistance level was broken; it is at that moment that I take big positions as the opportunity to profit is tremendous. I hope these pointers have introduced you to the concepts of retracement, but you can always use one of the many free forex charts on the internet to try it out for yourself; also using a practice account you can learn just when to buy and when to sell. ]]> http://www.fxarticles.net/technical-analysis/stock-trend-analysis-introduction.html http://www.fxarticles.net/technical-analysis/stock-trend-analysis-introduction.html Sun, 20 Dec 2009 16:19:18 -0500
My own major hurdle to gaining skill was there are so many well meaning people willing to extend advice and so many resources online for technical descriptions of disparate indicators, but nothing I picked up seemed to help me understand how all these indicator definitions and macroeconomic information fit together to form a decent understanding of technical trading. I think I can save you some time and lots of frustration with this handy little getting started guide.

An overview of technical analysis.

I figure if you are interested in technical analysis sufficiency to read this far, you are already acquainted with how the stock market functions and how to purchase and trade stocks. I hope so because it is an obvious prerequisite. Keep in mind this is an conversational overview of the learning path many traders, myself included have taken to understand Technical Analysis.

Technical Analysis - Fundamental Topics. What is Technical Analysis? For the unaware, there are two major sorts of Stock Analysis.

Technical and Fundamental Analysis Although the two are not , traders tend to prefer one over the other. Fundamental Analysis looks at a company s assets, debt, earnings and cash flow. It gives the analyst a clear characterization of a company's health. When an analysis of one company is compared to its peers (groups of companies in the same business) it presents clues about potential weaknesses and strengths of the company. Its also useful in appraising a company's long term chances for growth.

Technical Analysis looks to capitalize on the collective knowledge of open market players (other traders) who are by-and-large Fundamental Analysts. Technical Analysis is basically a study of supply and demand. So, lets determine exactly how Technical Analysts use the market as their guide to trading markets.

A Simplistic Technical Analysis Example: Price Speaks Volumes Initially, recognize that Price and Volume are both technical indicators. Price being of course the cardinal indicator over any other. Each time a stock price moves up it bespeaks a vote of confidence by all participants. Sellers stood firm for a higher price than the prevailing rate and buyers stepped in and purchased at that price anyway. Sellers holding firm for more money while buyers step in to pay the difference between the market and asking price demonstrates market optimism.

Volume is the amount of shares traded over time. Technical traders look at price and volume together to estimate how optimistic or bearish buyers and sellers are and possibly are becoming. An increase in volume across a given time-frame indicates increasing involvement and hence conviction that prices will go on to travel in the ongoing direction. Whereas, when volume starts to decline it is an indicator that market participants are losing their strong belief that prices will remain in their current direction.

When volume is increasing along with prices, participants anticipate prices to proceed to climb. Technical traders speculate that prices will increase so long as volume is better than normal. If prices continue to go up while at the same time volume starts to drop, the participants are voting with less shares. This condition is a form of technical breakdown.

Typical Volume Based Price Breakdown. One more phenomenon to think about is that once price direction varies, volume may begin to increase, once again supporting the conviction of market players of the new price direction. When an indicator such as volume starts to jibe with the price direction, this is known as a kind of price confirmation.

Technical Analysis Indicators Apart from the simple indicators of price and volume, there are infinite indicators and more are produced every day. An indicator can frequently be something as simple as a moving average or far more complex involving long formulas. As you've seen already, indicators are an operative part of understanding and anticipating market action. All technical analysis indicators fit two different classes.

It is important to remark that market circumstances prescribe which form you will use, but never brush off price. Indicators are predictors, but price speaks volumes, only prices are reality.

Leading indicators are applied in sideways markets. Leading indicators react before price does. Most leading indicators seek to register shifts in the strength or force of price movement, or momentum. Leading indicators are useful to help traders anticipate price moves because they can express the strength or weakness of prices at their current level. Leading indicators do not do well as buy/sell indicators in steadily trending markets (up or down) because they indicate changes in momentum. They do well in biased markets and give traders accurate signals about when to buy or sell.

Some useful leading indicators include Momentum, Stochastic and the Relative Strength Indicator (RSI). The RSI (leading indicator flags the overbought condition).

Lagging Indicators / Trend Following Indicators Use in trending markets (moving up / moving down).

Lagging indicators follow price moves. A moving average is a simplified kind of lagging indicator. Lagging indicators are frequently employed when the markets are in a very good trend. They rapidly show traders the popular direction of a stock price. They can send phony signals in markets that are trading at parity / proceeding sideways. Their better use is in trending markets because they can distinctly show traders when to get in and how long to remain.

The most popular lagging Indicators include Moving Average, Exponential Moving Average and Moving Average Convergence Divergence (MACD) The moving average is a Trend Following Indicator.

Technical Analysis Understanding time frames. In Technical Analysis, indicators are meaningless without understanding them in the setting of time. Indicators, leading and lagging both use time and price as the very basis of any formula. It may help to think of time frames as magnification of detail. If you view a one year weekly chart and zoom into a one year daily chart, you are immediately aware that you can see price action in deeper detail. Also traveling from a one year daily chart to a three month daily chart gives even greater detail of the price activity.

More about time frames in technical analysis: Watching multiple time frames exposes greater detail.

What sort of trader are you? Do you buy into a trade and then watch impatiently at every tick in the stock price? Or are you more of a set it and forget it kind of trader who monitors the price every few days or weeks? Maybe your style is someplace in between? Why is this important and what does it have to do with time frames? read on.

The Day Trader Day Traders speedily buy and sell stocks multiple times a day to try to lock up quick profits. The Day Trader examines chart patterns and indicators which may span only a few hours or even a couple of minutes. Day trading is a high-risk job where great amounts are gained or lost in mere seconds. Day Traders pay very close attention to tick-by-tick price data as it appears on their screen in real time.

Under FINRA and NYSE rules, a trader once flagged and classified as a pattern day trader, must keep up a $25,000 account balance must obtain a margin account. For more info on day trading refer to the FINRA Notice to Members and the NYSE Information Memo.

The Active Trader - Momentum Trader Although there is no standard definition as with the Day Trader, the Active Trader looks for trends that span from a few months to as little as a few days. A typical trade for an Active Trader trader can be really brief, maybe a day or may last for many months as long as the on-going trend is intact.

Active Trader Strategy - The Swing Trader Although the strategy used by the swing trader is very similar to that of the Active Trader, the principal departure is that the swing trader looks to maximize gains by capitalizing of the regular downturns in an broad upwardly trending stock. The Swing Trader cycles in and out of the trade repeatedly until the overall trend breaks before making a last exit. Swing traders primary observe the price activity more often than the active momentum trader since the swing trade requires frequent attention. ]]> http://www.fxarticles.net/technical-analysis/rsi-review-concerning-the-relative-strength-index-indicator.html http://www.fxarticles.net/technical-analysis/rsi-review-concerning-the-relative-strength-index-indicator.html Sat, 19 Dec 2009 16:00:16 -0500
There are two bands on both sides of the center line that indicate when the markets are overbought or oversold, making it function like the Bollinger Bands forex indicator.

An exception to an oscillating indicator would be the MACD which does not have an upper as well as lower band present. As far as banded oscillators are concerned, the RSI is the probably the most extensively utilized version in technical analysis.

It can also indicate momentum of a financial market in addition to spotting overbought and oversold conditions. Momentum is determined via a comparison between the size of its losses as well as the size of its new gains.

The results are plotted as a line that fluctuates from a value ranging from zero to a hundred. Both bands are placed at 30 plus 70 respectively. Should the RSI indicator reach 70, this means situation are overbought. Conversely, should it reach 30, market conditions are oversold.

The line in the center has a value of 50. There are quite a few different ways that traders apply the RSI in their trading strategy. The easiest use is of course, identifying overbought plus oversold conditions.

When RSI levels reach 70 or 30, traders begin seeking for reversals in which they can enter a trade. Another system employed with the RSI is called RSI divergence. Should the RSI trend in a opposite direction to that of market price, it is probable that a reversal will take place soon.

The RSI can also me utilized as a cross over system. However, it must be noted that signals in the cross over system are not the most consistent. It is simple to employ. Buy if the RSI crosses over 50. If the RSI dips below 50, enter a short trade instead. When the market is ranging, steer clear of implementing the RSI cross over. ]]> http://www.fxarticles.net/technical-analysis/investing-through-technical-analysis.html http://www.fxarticles.net/technical-analysis/investing-through-technical-analysis.html Fri, 04 Dec 2009 11:52:34 -0500 stock trading, there are not many gray areas. Most traders fall into one of two camps: In the one camp you find the fundamental analysts. They believe that the only way to predict tomorrow's prices is by using fundamental analysis. In the other camp are the technical analysts who believe that technical analysis is the way to go if you want to know whether the price of a particular market instrument will rise or fall.

The latter basically involves that you study past behavior in prices and trading volumes of a market instrument and then use that information to extrapolate future movements. The underlying assumption is that the past will repeat itself in the future, given the same set of circumstances. Proponents of fundamental analysis believe that this is not possible. Market conditions will never be exactly the same, so there is no way to use the past to predict the future.

The proof of course is in the pudding. There are indeed quite a number of traders making a sizeable income by using the tools of technical analysis in their trading activities.

Charts form the main arsenal of the technical analyst. These charts are used to portray changes in a large number of so-called technical indicators. The most popular chart types used by traders are: OHLC (Open High Low Close) charts, line charts and candlestick charts.

The data that is presented graphically fall into a number of categories. Examples of these are trend indicators, momentum indicators, volatility indicators and volume indicators.

Momentum indicators, e. G the RSI, fundamentally attempt to establish when the market has reached an 'oversold' or 'overbought' situation. If this happens it is highly likely that the price of that instrument is going to rise soon (oversold) or start dropping (overbought).

A few of the most popular trend indicators are MACD and the Parabolic SAR indicator. Many indicators believe in always trading with the trend and if you are one of them, you will find this type of indicator very useful.

Volatility indicators, such as the ATR (Average True Range), depict 'normal' price ranges graphically, so that a trader can easily see when the price breaks out of this normal range - which might indicate a major price movement.

Volatility indicators, for example the ATR, portray the 'normal' ranges in which prices move graphically. That makes it easy to pick up when the price breaks out of this range - which could suggest a strong price movement.

If you are a novice trader, it is highly recommended that you become familiar with the workings of the various technical analysis tools available to a trader. ]]> http://www.fxarticles.net/technical-analysis/determining-the-primary-trend.html http://www.fxarticles.net/technical-analysis/determining-the-primary-trend.html Wed, 25 Nov 2009 20:00:02 -0500
Always remember, trend is your friend. Trading in the direction of the trend is the best trading strategy. Never try to trade against the trend. So determining the primary direction of the trend is highly importanct for you. Primary trend is the direction of the market that offers the least resistance forward making money. When you follow a primary trend in a bull market you look for strong stocks and in a bear market you look for stocks showing weaknesses. The most important thing that you should in a market is its primary trend. In order to determine the primary direction of the trend, you need to draw correct trendlines. This is an art that traders learn with experience. A wrong trendline means lost trades. You use the following tools to determine the primary trend! Knowing the primary trend and trading in its direction increases your chances of making money. So how do you find the primary trend and what tools you need to determine the primary trend?

Trendlines: To correctly draw a rising trendline on the chart, start with the lowest low on the chart and connect it to the lowest low preceding the highest high in the chart without bothering about the prices between the two points. Knowing how to draw and use trendlines gives you an excellent start on any trade. Similarly to draw the down trendline, draw a line connecting the highest high on the chart to the highest high preceding the lowest low of the chart without passing through the prices between the two prices. Key support is the area above which the prices have held for sometimes. Key resistance is the area above which the prices have not been able to rise for sometimes. A market breaking above the key resistance or below the key support is a signals a new trend.

Moving Averages: Moving averages are sues to smooth out the market's trend over a given period of time and serve as an important support and resistance levels. Support level is the price where the prices stop falling and the buyers step in overcoming the selling pressure. A break in the support level is an indication that more weakness may be ahead.

A break above the resistance level is an indication that the market is going strong. Resistance level is the price where prices stop rising and the sellers overcome the buying pressure.

Oscillators: What is more important to know is the fact that oscillators produce useful mathematical data that can help you tell whether the market is overbought or oversold and whether the momentum of the primary trend in the market is still strong or there is a potential change in the primary trend ahead? Two important oscillators that you should be familiar with are RSI and MACD. Oscillators are graphic depictions of points derived from the mathematical formulas that are plotted below the price charts. Knowing these mathematical formulas is not important as a trader.

Bollinger Bands: Bollinger bands are calculated by plotting points one or more standard deviations above and below the 20-day moving average. However, you can calculate Bollinger Bands with any moving average. Bollinger bands are also known as volatility bands or envelopes. Bollinger bands give you visual evidence when the market has travelled too far in any one direction. ]]> http://www.fxarticles.net/technical-analysis/figuring-out-candlestick-chart-patterns.html http://www.fxarticles.net/technical-analysis/figuring-out-candlestick-chart-patterns.html Fri, 20 Nov 2009 05:32:46 -0500
The open, high, low, close market price of the stock, commodity or currency over a period of time is presented in the candlestick form. The period covered is generally user selectable.

The popular time period is 5 minutes but you may favor in particular situations to take 15 minutes. Typically, longer periods are exercised for longer term trading.

The difference between open and close points are represented by the candle body. If it?s a white or blue / green on charts with color, the lower body is the open and while you were considering it, the value moved up. Should it be black or red in charts with color, the top line indicates the opening rate and during that period, the price tumbled down.

Vertical lines pointing up from top and down from the bottom are referred to as wicks. The highest stage the price ever hit is the top of the upper wick portion. The low is the bottom of the lower wick.

This approach of analysis helps the trader to know at a glance if values dipped or went up during the analysis time frame. Bearish tendencies or rise in price are represented by green or white candles while bullish trends or fall in price would be recognized by red or black candles.

Aside from this, the high and low compared to open and close prices are directly obvious. Then you may have an evidently solid candle without a wick.

It's called a Marubozu pattern. Prices never went greater or lower than the opening and closing prices in this scenario.

If the shape is black or red, the opening value was the high and the closing market price was the low. If it is white or green, the opening market price was the low and the closing rate was the high.

A long body indicates a fairly steady movement either downward or upward. A lengthy wick either top or bottom denotes a reversal.

A candlestick has to be read along with the previous ones in order to ensure accurate trending. From there relatively complicated trends can be actualized to delineate the trends in the future. ]]>