rapidforex.com

Uptrend Price Swings in Fx Trading

The fibonacci ratio is extremely useful in fx trading. Fibonacci numbers provide excellent price targets for forex trades.

In order to understand and properly use Fibonacci numbers for forex trades with fx trading, you must understand first price swings.  To understand this concept completely, you whould read my past blog post which discusses price swings, trends, and trendlines, for a thorough explanation.

The Uptrend Price Swing

An uptrend price swing, also called a rally, is a wave (swing) that starts at the low and stops at the high.  Remember that to qualify as an uptrend the market must be making higher highs and higher lows.  Following the up price swing (rally) is a reaction, also called a retracement of the up swing.

This reaction becomes a down price swing, which is also followed by a reaction (also called a retracement of the down swing). This creates a great opportunity for forex trades.

The retracement of the down swing becomes an up price swing that can either lead to a sideways movement or an extension (of the overall trend).  The retracement of the down swing often moves sideways before it makes a new high (that is, before it becomes an extension of the overall uptrend).

When analyzing uptrend price swings in your fx trading it’s very important to not lose sight of the original price swing.  The market does not make an extension (extending the overall uptrend within which the swing exists) unless it passes through the last level of resistance and makes a new high.

The market can move sideways within the original swing before breaking or continuing the uptrend. Be sure to keep this in mind when placing your forex trades.

I’ll be dicussing the specific use of fibonacci numbers in fx trading in my next few blog posts. If you want to have successful forex trades, you’ll want to follow this topic closely.

Posted in Fibonacci

Currency Trading Buy and Sell Zones

When currency trading online in the forex market it’s helpful to understand where the buy and sell zones are. Along with trading trends and trendlines, this helps you as a forex trader to identify potentially profitable forex trades.

Buy and sell zones, generally speaking, exist when a trend has been broken in currency trading.  To identify and trade buy and sell zones, then, you must be able to identify a trendline break.

The Broken Uptrend

Remember that the trend is your friend until it bends when trading forex online.  That is, if you are in the currency trading market trading a trend, then it is your friend until it bends.  Bends can also be your friend, however, if you learn to spot them and learn how to trade the trendline break (entering in the buy or sell zone).

An uptrend is considered broken if the following conditions are met:
1.The market makes a new high.
2.The market first penetrates the trendline.
3.The market then retraces to the last level of support.

When the uptrend is broken, the currency trading market enters the sell zone, which is the area below the trendline.  Remember, however, that the trend is only broken if the market has made a new high.  You will see certain cases where the market pierces the trendline but does not break it when you are trading forex online.

To be a true trendline break the forex market must bend after it has made a new high.

Watch for this broken uptrend when you are trading forex online:

Trading the Sell Zone

When currency trading the sell zone is one way to take advantage of an uptrend break.  To trade the sell zone, wait until a complete bearish candle forms below the trendline (it must completely clear the trendline, wick and body).  Notice the sell zone in the picture below:

Take care to wait until the candle has closed to call a trendline break; otherwise you may fall victim to a false spike.  When the bearish candle appears in the sell zone according to the conditions stated above, place a market order to sell at the opening of the next candle (if equity management allows).

Set your stop loss order at the last level of resistance

Techniques which can be applied to up trends, can also be applied to downtrends. Tomorrow I will share with you another example of how you can apply this strategy to currency trading online in the forex market.

Posted in Technical Analysis

The Tweezer Bottom Candlestick Pattern

By now you’ve received at least the equivalent of a $97 eBook for free (courtesy of Brian Campbell here at rapid forex), with the last 5-7 blog posts. As you can see, I’m building a foundation here and it’s going to get increasingly more exciting as we move toward actual forex trading.

The tweezer bottom formation implies a bottom (surprise!). This is the opposite of a tweezer top.

As a potential bottom, the tweezer bottom signals the end of a downtrend and the beginning of an uptrend.

A tweezer bottom formation has the following characteristics: two or more candles (dojis or spinning tops) of roughly equal height with long lower wicks (the wicks must make up at least 60% of the entire candle).  The two (or more) candles can be bullish, bearish, or a combination of both.

If you identify a tweezer bottom and decide to trade it, buy at the opening of the candle that follows the second low candle in the tweezer bottom formation.

Forex Trading Tip: Set your protective stop loss order at the last level of support (which will be the tweezer top’s low).

As with any indicator, trading on a convergence increases the probability that you will profit from your trade.  If you spot a tweezer bottom, look for the trendline break or another indicator to provide more reason to believe that the market is reversing.

Quick Recap: you’ve learned the following candlestick patterns:

1. The Morning Star
2. The Evening Star
3. The Tweezer Top
4. The Tweezer Bottom

This gives you a solid fundamental understanding of Japanese candlestick patterns. In my next post I will give you 8 rules that you can use to trade japanese candlestick patterns. After that, I’ll be posting a lot about support and resistance (some of my favorite topics!)

Posted in Japanese Candlesticks, Technical Analysis