Think of the price action as a snarling pit bull tied to a stake. It charges for you, but you know the exact length of its chain and you are standing confidently just an inch beyond that. It leaps for your face and just before it makes contact with your throat the length of chain reaches its end and yanks the dog back, throwing it violently to the ground.

Welcome to Forex Scalping!

What is scalping? It is when you take a small amount of pips (5-10 pips) from an anticipated reaction (movement) of price action. Scalping is done using a small time frame like the 5-minute chart but it is critical to reference the higher time frame so that you know at what price point to enter your trade. You have to know beforehand where there is strong support and resistance.

Scalping is a totally different technique then the trend based trading that you would normal do throughout the day or week. These scalping techniques are in fact, counter-trend. It is not for the weak of heart and it does carry a higher degree of risk but if you know the techniques and can apply them consistently then scalping will become a viable method of trading for you.

Couldn’t you use forex scalping strategies to trade with the trend? My answer to that is why would you want to? If you find a setup that allows you to trade with the trend then why are you going to settle for a measly 5-10 pips? The whole idea of trend trading is to get in at a pullback and let the trend carry you to higher ground. Scalping is reactionary. We know where price is going to bounce due to profit-taking and we bet against the trend and snag a few pips. The key to this forex scalping system is in identifying these price points and your execution.

Get your price points (levels of support and resistance) off of the daily chart. Use the 5 minute chart as you approach them. Don’t wait for price action to react at that point, it will be too late. You want to be in on the trade the moment before price action bounces. Remember, we are trading against the current direction in anticipation of a reaction when price action hits our price point. This will run against the grain of your accustomed trading.

This means that you will put in a buy order when that long bearish candle hits your price point. You can’t chase price, you trade against it before the bounce. It is scary at first but once you get it you will understand why that is the most sensible way to go about scalping.

Which currencies to scalp?

The spread needs to be low. If you scalp currency pairs with large spreads then you are at too much of a disadvantage for scalping. That means that GBP/JPY is off the table! Stick with GBP/USD or the EUR/USD. The spreads are better and price action is not as volatile. If you keep getting whipsawed when you scalp then you are trading the wrong currency pair.

Scalping is risky because the amount of pips you hope to gain isn’t a whole lot more then the spread cost and the stop-loss. At best you have a 1:1 risk to reward ratio. You improve that ratio by identifying the price points of strong support and resistance and you further improve it by not chasing price. You stand there waiting for it.

The first step is to identify potential price points where price action will bounce. In order to show you that we need to go over a little lesson. As you know, this market is composed of traders. It is the traders who drive the market. But not all traders are equal. There are institutional traders with billions at their discretion. When you and I place a trade in the market, it won’t even cause a tick but when these whales place an order it can make a big splash.

That is why when it comes to scalping, you want to pay close attention to the daily chart. You are not going to scalp off of the daily chart but you are going to use it to look for strong prices points of support and resistance.

Institutional traders don’t waste their time with intraday charts. They look to the daily and when they see their signals, they trade. That is why price action respects levels on the daily chart. The biggest fish in the market are looking at the daily indicators so that means you should too.

So what are the forex scalping indicators? What? There are none! Indicators are used for trend trading. This is counter-trend! We are only looking at these indicators on the daily chart because price action will react when it touches them.

So on the daily chart, map out all of these lines and indicators:

Pivot Points

The daily pivot levels S4 – R4 including the mid-levels (these pivots need to be calculated off of the GMT timezone because there is an actual world beyond the Eastern Time zone and they don’t care about what time it is in New York.)

Moving Averages

10 day EMA
10 day SMA
50 day SMA
100 day SMA
200 day SMA

These are the most common moving averages and the institutional types will be using them. Again, this has nothing to do with spotting trends. When price action hits one of these daily moving averages it will bounce. Note: Don’t put these moving averages on your 5-minute chart because it won’t be the daily. Moving averages are calculated off of the period of your chart i.e. 5 minutes. So if you want the 10 day SMA to show up correctly on your 5-minute chart then you would need a 2880 period SMA. It’s not so crazy; I do it all the time.

Old High and Lows

Draw the horizontal lines out for these high and low points. They cause a reaction.

Who is our favorite Italian? Fibonacci!

Map out the Fibonacci retracements and extensions for the major price movements. Don’t make this difficult. Just try to think of what would be most sensible. How would the market movers draw them out?

Psychological Numbers

Levels like 1.2500 or 1.5000 should be drawn out on your chart in bright neon pink because when price action hits these levels it’s like Christmas all over again. You’ll be gifted with an easy 10 pips no fail.

Trendlines

Once again, keep it simple. Draw out the most logical trendlines on the daily chart.

—–

That’s it! That’s how to scalp forex. It’s pretty simple, ballsy, but simple. The scalping technique is just three steps:

1. Identifying the price points
2. Executing your order against price direction
3. Taking out 5-10 pips (not being greedy)

Discipline is everything and if you need some then I highly recommend Peter Bain’s course. If you want to know the market then this is the man who can teach it to you. Follow it, apply it and be a success. Cheers!

Forex Scalping Video

Now more than ever people are looking for ways to supplement their incomes, maybe even replace their day jobs. Many people realize that just being an employee is risky and to safeguard against the unpredictable they need learn how to forex trade. The only fx trading course that I recommend wholeheartedly is Peter Bain’s course. It does a thorough job of nailing down the initial concepts that are hard to explain to someone who has no investing experience.

In addition to understand the theory, you need to understand something else… yourself. Your discipline will ultimately determine your success as a trader. These are the rule you need to follow in order to develop that strict discipline and become a success.

The 10 Forex Coaching Rules

1. Always have a trading plan

Don’t ever put in a buy order without having clear objectives for the session. You need to plan when you will take profit and when you will cut bait if the market moves against you. Have as policy, the highest amount of capital you will ever risk during a trade. Don’t casually enter trades and fly by the seat of your pants. Sloppy trading results in little to no profits. Write your trading plan down on a piece of paper and follow it.

2. Filter your trades

You need to have a method that allows you to be selective of your trades. It should be based on trend and price momentum. Don’t guess and don’t be hopefully. Listen to what the chart is telling you and trade with the trend. Bear in mind the time frame you are trading and know your tolerance of risk. Don’t be desperate for a trade. The market will be there tomorrow but you won’t if you don’t screen your trades.

3. Review your charts

Never buy on news alone. Always do a top-down analysis of your charts starting with the daily down to the 15-minute. Use your tools to determine the trend and time your entry. Remember that current price anticipates the news and reacts when the results are something other than what was expected. Fundamentals give you clues, your charts give you signals.

4. Trade with the trend

When you first learn how to currency trading, you will have a higher degree of success if you trade with the trend. The market does move in cycles and getting in at a market bottom or top can be very rewarding but it is much more difficult for a new investor to do so than it is to trade with the trend. That is how to invest in forex with long-term success.

5. Have a money management system

When your trading account rapidly diminishes, it is call “drawing down”. It is like a water well that begins to run dry. The only way to prevent this is too have a strict money management system. You need to live to trade another day. For that reason, don’t ever let a losing trade take a large portion of your account. This means that you limit your trades, hedge and use leverage judiciously. Don’t ever have more than 5% of your account in the market at any given time.

6. Have confidence in your trades

If you are not sure about a particular trade, then don’t take it. Review your charts and only enter a trade when you see a convergence of buy or sell signals. Don’t try to talk yourself into the trade. You can pass it up because there will be plenty more trades down the road.

7. Only trade liquid markets and liquid sessions

Don’t trade anything where price action is stagnant. In order to make a profit you need volatility. Consolidations don’t offer enough opportunity to do that. You need to trade with a trend not with a pool of standing water. These are fx trading basics that you need to take to heart otherwise you’ll get frustrated and quit when nothing happens.

9. Always trade with a stop-loss

Nothing can decimate an account faster then unbridled price action going in the wrong direction. Consider the stop-loss as the first rule in your manual of table saw safety. As a carpenter you keep your fingers clear of the saw blade and as a trader you always put in your stop-loss. Avoid a painful lesson because the market is waiting to teach you one.

10. Learn from your success and your failures

Did a trade go as expected? Then you better make note of what signals you saw that led you to your decision. Did you get stopped out? Review and see there were clues to the adverse price action that you didn’t see before you put in your trade. Do this and you’ll refine your skills into the sharpness of a razor blade.

These are the rules. To what degree you succeed will largely be determined by how well you apply them. If you haven’t done any forex training courses then buy this one right now. Trust me, it will be money well spent. Study, practice and practice some more and you will find success in the forex market.

Forex Training Video

The heart and soul of your currency trading education is how to buy at the bottom of a trend and sell at the top. Currency trading for beginners can be quite daunting. Not only is there much to learn about forex, but a trader also has to learn a lot about himself. Self-discipline is a vital ingredient for every successful trader. It does no good to win big and lose even bigger. The winners in this game know that the secret ingredient to long-term gains is consistency.

Peter Bain’s Advanced Forex Course

In order to get into the right state of mind and control your emotions while you trade, you must write down a trading plan that you can look over regularly and be able to remain focused on your current trading objectives. By jotting down your trading plan, you automatically place yourself in the top 3% of people who have written down their plans and goals, which gives you an edge over the vast majority of traders. Look these questions over and answer each one in order to develop your own trading plan.

1. What is your strategy for entering a trade? The goal here is to find an entry where the risk is low but the reward is high. Write down specifically what level of risk to reward you are willing to take before entering a trade.

2. What is your strategy for exiting the trade? Don’t ever enter a trade without having a clear exit strategy. You should set yourself a target as to when you will exit the majority of your position. Be sure to always take some profit and leave a little to ride if you think the trend is heading to the stratosphere. Just like you learned in your forex trading tutorials, always, always, always have a stop loss in place in case the market moves against you.

3. Which type of order will you use to exit or enter a trade? Limit orders allow you the to define your reward to risk by delimiting exactly when you will be take into the trade while market orders allow for a quick exit. Figure this out beforehand.

4. How big does your account need to be in order to successfully trade? The larger yours is the better, but is your account big enough to meet the trading objectives you have set for yourself. The spreads that you pay your broker can add up quickly. Did you factor that in?

5. What percentage of your account are you willing to risk with each order? 2% to 10% is the norm. Anything greater than that and you are at risk of drawing down your account rather quickly. Also, that percentage is how much you’ll have in play at a given time. Don’t get caught in the moment and risk more than you reasonably should.

6. How many open positions will you have at any given time? More than two and you are at risk at having your attention dispersed. You don’t need to obsess over your trades but you do want to be able to stay on top of them. Set your trade limit and stick to it.

7. How much leverage will you be using? This is vitally important. High leverage can kill your account. Forex offers some the highest leverage out there. Set your limits and don’t exceed them. Leverage cuts deep when it moves against you.

8. Is your trade journal planned out? What information is vital for you to keep a running log of? What information do you need to know at a glance? Are you keeping enough information so that you can do a post-trade analysis? You fx trading course will give you a good idea of what you need to keep track of.

9. What are your quality controls functions? Just like a production assembly, you to need to perform the duties of quality control. Is your trading shining a bright light on weak points? Be sure to give yourself homework so that you can turn those weak points into strong points whether it be chart patterns or identifying lines of support and resistance. This is how you truly learn fx trading.

10. What preparatory steps do you need to do before you start your trading session? Don’t be scrambling during a trade looking for your reference books or your cup of water. Create a “pre-game” checklist that will ensure you have everything you need before you need it.

That is your free forex education on how to currency trade with a session plan. This put you in a strong to position to being able to control the emotional rollercoaster that we go through when trade. Review your trading notes often and develop the discipline skills you need to become a long-term success. Keep getting currency trading courses under your belt and you’ll be making consistent wins in no time.

Forex Trading Education Video

The absolute best training for you when you’re new to forex is a course on technical analysis (Peter’s course is the best.) And the heart and soul of technical analysis is the price action charts. Price charts give you insight into the collective mind of other currencies traders. They graphical represent trends and flows that would otherwise not be seen if you were merely keeping tabs on a data feed. It doesn’t matter if you trade options, stocks, commodities or currencies, if you are not trading with charts you are trading at a disadvantage.

Unfortunately, most people attempt to interpret stock charts without getting the vital training that they need. That is why a forex training course that goes over technical analysis in detail is so important. Even if you have already read the forex tutorials for beginners, you still need to go through a complete course on technical analysis so that you have a vital foundation on which to build your trading career. Even advanced traders need to keep abreast of the latest tools as mastering technical analysis is a life-long ambition.

The first thing that you need to know is that technical analysis isn’t a crystal ball that predicts the future. Instead, it is a collection of tools that traders use to immediately size up current trading conditions and help an investor decide when to enter a trade, when to exit a trade or when to not trade at all.

Specifically, here is what technical analysis can tell you:

1. When to sell or buy, depending on your tolerance of risk and style of trading.

2. What is a good price (value) for a particular currency pair.

3. Which currency pairs are forming favorable conditions for your trading method.

4. What is the best place for your stop loss relative to the price action.

5. Whether or not current volatility of price movement is sustainable, for how long that particular trend will continue, and if a reversal of trend is near.

6. When to close out your trade based on your trading strategy and financial objectives.

7. Which type of trader is currently dominating the market, the bears or the bulls.

8. When you are approaching significant lines of support or resistance.

9. When an economic event bucks the current trend.

10. When a major price trend has come to an end.

Forex will be less of a gamble if you understand the components of a price chart. A price chart consists of nothing more than time and price. A stock chart is a little different because it has a third component, volume. Forex charts do not because currencies are traded globally as opposed to a central stock exchange. The most significant chart out of all the time frames is the daily chart. Because it is so widely traded, you should pay heed when price action approaches daily indicators.

For the best technical analysis setup you will need a set of dissimilar indicators that should include:

1. Trend strength or weakness indicators, trend directional indicators and overall trend.

2. Oscillators that will show oversold or overbought conditions which track along moments of consolidation and give early breakout signals.

3. Indicators that illustrate Accumulation and Distribution cycles which give insight as to how the market movers are leading the current trend.

4. Indicators that give Divergence and Convergence signals so you can anticipate a reversal of trend direction.

5. Tools that show expansion or compression of price patterns in a cyclical fashion.

Whether or not you have assets in the financial markets, technical analysis is a vital skill now more than ever. Technical charts give us an illustration of what has happened before and what is currently taking place. All of this information in a graphical format helps investors and traders anticipate what is to come.

When you begin your forex course trading should only occur after you have finished it. A currency trading tutorial is not enough. As your skill with charts and analysis becomes more proficient you will be able to develop a trading style and risk management system that will allow you to achieve your trading objectives. No longer will you have to pester someone for a stock tip.

By studying the historical data and the current data you will be able to spot reoccurring trends and consistent buy signals that you were blind to before. With technical analysis you’ll be able to improve your market timing and either go with the flow of the trend or get in at the bottom or sell at the top. That is how to make money with forex.

Get Peter Bain’s course if you want master technical analysis.

Forex Course Video

Once somebody gets sold on the profits they can make in currency trading, then next natural inclination is to get their feet wet and open an fx trading demo account with a broker. There is nothing wrong with that but these people are certainly not going to be able to learn anything useful if they are not able to trade during market sessions.

Forex Tester – The Forex Simulation Software

Most people who are studying forex, do so when time permits. They have day jobs and other commitments. They do not have an open schedule in which they can make themselves available for the periods of market volatility where they can learn the most.

More likely, they have three hours in the evening for forex demo trading. In the US that is the worst time to trade because there is nothing going on. In order to make money in this fx trading game you need volatility! You need action! You need prices soaring and dropping, traveling sideways for a spell and taking off again. If you are demo forex trading in the dead of the session where price action is slow and flat, then you will begin to take ill-advised trades out of sheer boredom. You’ll never really get how price action moves. What you have learned won’t apply and you will begin to develop bad habits. Or even worse, you will decide that you’re not cut out for currency trading.

That is why you should not waste your time with a demo forex account. If you really want to practice currency trading then you need to do it with a forex simulator.

Simulated forex trading is by far the better method. Using historical forex data you can recreate any time period or session and trade it! You can quickly scan forward through days and weeks to find setups that correlate to whatever aspect of forex trading you are currently studying. By backtesting trading strategies you can quickly find out for yourself what works and what doesn’t.

Winning The Forex Game

How many times have you been so focused on the bleeding edge of price action that you failed to realize that an upsidedown heads and shoulders pattern was forming? Even the best traders are at times blind to the obvious. With forex backtesting software you can scan over an entire year of a major currency pair and drill spotting the patterns until you get it down cold. A confident trader is one who can trade with certainty. The way that you develop certainty is by breaking down currency trading into its constituent parts and drill them until you know them like the back of your hand.

Can you do all of that with a forex demo trading account? No. You are limited to whatever price action is currently in play. How many people have a schedule where they can stay up in the dead of night to trade the London session? Not many. But with forex paper trading software, you can actively trade whatever time period you load up. You set the timer and it will actively run price action as if it were a live account.

My favorite forex backtest is to get an old forex calendar with a schedule of economic reports and cue up the time frame just before they are released. This way I can see just how much news affects the currency pair that I am trading. There is no better way to learn forex trading free, other then working at the dealer’s desk yourself.

My Forex Tester Review

Buy it already. My opinion is in accord with all of the other Forex Tester reviews… it is the best on the market. If you are serious about learning forex then Forex Tester is your biggest bang for the buck. I have been able to test countless strategies and was able to quickly develop my own personal system that is effective for my style of trading and tolerance of risk. You are not going to be able to do this efficently with dead price action. Forex Tester has all of the standard indicators that you would expect from professional charting software.

One of the indicators that is difficult to master is Fibonacci extensions. They can be misleading to downright confusing at times. With Forex Tester I was able to put that tool to the through the wringer and really learn how Fibonacci sequences mirror price action. Such knowledge is valuable to the extreme. I can honestly say that my trading has reached a new level thanks to this handy piece of software. You too can clear the obstacles that prevent you from becoming a full-time trader. Download it and give it a forex test spin. You will not be disappointed. And don’t be surprised when you begin learning faster then you ever thought possible.

Forex Practice Account Video

Ignorance is expensive. What you do not know can cost you money. The majority of people are under the delusion that if they do not participate in the stock market then they are not at a financial risk. What they fail to realize is that by being a participant in a national economy they are in fact, at risk.

Peter Bain’s Advanced Technical Analysis Course

100 years ago, a dollar was worth a dollar and one could confidently expected it to retain its purchasing power for the next 10 years. That same confidence currently exists, but with a darker perspective. People are convinced that their dollar today will be worth even less 10 years from now. Haven’t you noticed that the price of everything has gone up except the slave wages? Why is there inflation for everything else yet salaries remain an anachronism?

People are realizing that day jobs just aren’t cutting it anymore. The most common solution to this problem is to have less. But cutting your budget back to nothing is not the road to prosperity. You need to bring in more money. There are economic forces at work that you know nothing about, that take your purchasing power. It is your duty as a breadwinner to cease remaining ignorant. Currencies fluctuate to your detriment. The best way to combat this is to learn to trade the forex market.

How to Learn Forex Trading

Once you know how to trade the forex market, no longer will you be the defenseless victim of the economy. The corporate malfeasance of Wall Street rewards the criminals and punishes the working class. They set up the mark (unwitting victim) with promises of high returns and yank the rug from under him. If these victims took charge of their own nest eggs and knew how to read a chart then they could also read the writing on the wall. No matter how bad off you are financially; learning forex trading is a skill that will be remunerative until the end of your days. The best way to do this is to learn forex currency trading online.

What Needs to be Covered in Forex Trading Courses

There is a superabundance of mediocre forex courses on the web. The majority of them are rehashes of common material. At the end of the article I will give my recommendation for the best forex course. Here is a list of subject that need to be covered in order to get you started:

Overview of the Forex Market

The majority of courses seek to explain forex in relation to the stock market. The parallels that they draw would require some knowledge of stocks and bonds. If you know nothing about the stock market then you are at a disadvantage. We ascribe worth as a dollar value, what makes forex difficult is the fact that the dollar is valued against other currencies. The first part of a course needs to explain this in detail. It needs to describe the size and scope of the market and why it exists in the first place. It needs to go over how currencies are quoted and what are the major currency pairs. The profits made from the differences in currencies are called pips and an explanation of how they are gained also needs to be gone over in detail.

Technical Analysis

The skill of being able to read a forex chart is known as technical analysis. There are many mathematical indicators used that are plotted along the price action of the chart to help the trader gain insight as to where price is going. This involves certain chart patterns, trends and barriers known as levels of support and resistance. More advanced technical analysis seeks to identify major price highs and lows. These are known as cycles and being able to trade with them is known as market timing.

Fundamental Analysis

Economic news drives a lot of the trends that can be seen on a forex chart. Geopolitical news in the form of economic reports create much speculation amongst traders. Such things as unemployment data, interest rates and disasters can instantly send markets soaring or dropping. The course needs to go over the key events on the forex calendar so that you can anticipate moments of high volatility and see firsthand how news can drive the market.

The Best Course to Learn Forex Basics

For someone new who wants to learn forex trading online, I recommend this forex course. It is not too expensive and does a very good job of laying the foundation on which you can build your forex education. Making money with forex isn’t a pipe dream, but it does take some dedication and the willingness to learn a new skill set. Once you get it, you will never go hungry. Fluctuations in currency are always taking place and you can profit from the consistently, but you have to know forex inside and out. Financial liberation is yours to take if you take that first step and learn.

Learn to Trade Forex Video

When it comes to forex platform trading, there are two overall strategies that traders align with. The first is to trade with the trend. This involves the identification of the trend moving in a channel. The second strategy is to be able to identify market exhaustion and buy at the bottom and sell at the top of the trend.

Peter Bain’s Forex Strategy Course

Some traders make the mistake of only focusing on one or the other. If the “trend is your friend” then the reversal is your natural enemy. Likewise, if you only attempt to get in at the exhaustion point you may find yourself carried away by the power of the trend. So, in such a case, the best strategy would be to incorporate into your forex online platform trading both of the above methodologies.

What are forex day trading systems?

Forex mechanical system trading involves sets of rules that delineate the conditions and provide the signals for entering and exiting a trade. Such systems can range from simple to arcanely complex. The ideal system should incorporate trading with the trend and a means to anticipate and identify a market bottom or top.

In reality, every investor uses some kind of system. But all of the systems are somewhere along the scale of purely discretionary to totally mechanical. For any trading system that is discretionary, it means that a trader interprets what he sees on the chart. Give two traders the same discretionary rules and charts and you’ll most likely get diametrically opposed trading advice. There are too many variables.

On the other extreme we have the completely mechanical day forex system trading. This is defined minutely by rules that are based on price action. With such a system it seeks to entirely remove the human variable known as “judgment”. If it were possible for such a system to exist, then the markets would have long since been conquered.

Therefore, the ideal system would incorporate both discretionary and mechanical aspects. Because not everyone has the same forex investment plans there is no universal trading system. The levels of risk that traders will tolerate also vary. That is why it is up to every individual trader to develop their own system according to their needs and incorporate the forex strategies that work for them.

Why should you use a forex trading system?

The main reason for using a trading system is to rely less on gut feeling and to trade with a statistical edge. Simply put, a system is used to identify high probability trades. This means over time that a certain percentage of trades will yield favorable results. The further that you develop your trading system the lower the statistical quantity of loss will become. This is called the probability of ruin, or managed risk. Just reading some of the forex managed accounts reviews will tell you some of the horror stories of the risk to reward ratios that professionals employ. Don’t be one of the casualties.

These are the six rules for developing your trading system:

1. The trading system must signal high probability trades, consistently.

A trading system that hits it big only three times out of 10 trades will quickly draw down your account. The goal of the system is to manage risk while identifying profitable trading opportunities. If your system isn’t working consistently then it needs to be refined or dropped altogether.

2. The trading system must be relatively simple, not elaborately complex.

When analyzing charts you can quickly get data overload. Any system that has more than 10 rules or indicators on the screen can become difficult to keep track of. All your attention will be on the minutia and not on the glaringly obvious. Don’t overload your charts with similar indicators. Evaluate each of your rules and indicators according to levels of importance. Keep what is most important and trim back the rest.

3. The trading system needs to be scalable.

What this means is that it needs to work consistently on different time frames and in different markets. Such a system that can do that would be considered robust. If what you are doing is only successful in a certain market or a certain time frame then you need to identify what is workable about the strategy, then dissect it and refine it so that it does work in other time frames or markets.

4. The system must incorporate money management and risk control.

Capital preservation is your primary goal as a trader. Profits are a secondary goal. It does no good to win small and lose big. Your trading system needs to have a failsafe that will prevent margin call. Bear this in mind next time you are asked to try a free forex trading strategy.

5. The trading system needs to be a harmonious blend of mechanics and discretion.

In other words you are guided by signals and convinced through your judgment. Someone who’s completely discretionary in their trading most likely doesn’t understand technical analysis and someone who wishes for completely mechanical trading doesn’t trust their own judgment. There needs to be a blend between the two. A trader needs to be able to read the charts and allow his trading system to produce the mechanical signals. Discretion is further used to filter the trades.

6. You need to believe in your trading system.

You have to believe that the trading system you are using works for you. The only way to achieve that is to practice, practice, practice. You need to analyze lots of charts and get a feel for when the signals work and when they don’t. There is no sure thing when placing a trade but it is possible to develop a level of confidence that the trade you are making has a high probability of success.

After learning what is involved with a trading strategy, would you want to leave the risks and gains to a money manager? You need to learn technical analysis inside and out if you want to safeguard your capital and build on it.

Forex Trading Strategy Video

When somebody is new to technical analysis, one of the first things they learn is how to draw trend lines and with good reason for they are used by virtually every trader in all markets. The difficulties with trendlines is that identifying and drawing the trend can become a largely subjective.

Peter Bain’s Advanced Technical Analysis Course

Give two traders identical charts and ask them to draw in trendlines and you will get different results, two separate interpretations. Ultimately, there is only one correct trendline and price action will confirm it. Considering that most traders place orders based on trends, trend analysis becomes the foundation of successful traders.

Price action occurs due to the fluctuation of supply and demand. Traders make decisions based on current price and the prices of the past. The bulls, recognizing the value, drive up price and the bears satisfy the orders, causing the price to go down. Now more buyers see the potential for profits and drive up the price again. With more demand than supply, prices go even further until more sellers are pulled into the market to drive down the price. These collective buying and selling decisions create a market psychology and is in fact the trend, the support and the resistance.

A trendline is essentially a graphical representation of market psychology. It simultaneously provides support, resistance and projection of price action.

Thomas DeMark, author of “The New Science of Technical Analysis” developed Tom DeMark Trendlines in an effort to bypass the subjectivity of traditional trend analysis and to provide a mechanical method for objectively plotting the trend.

The classic method of drawing a downtrend involves identifying the most recent major highs and intersecting them with a line. The opposite is used to draw the uptrend. With this method, one would more or less have to gauge the best angle for the trend line. This introduces a variable where exactitude is desired with technical analysis chart patterns.

Tom DeMark trendlines are drawn by intersecting the two most recent swings. The swings require a little bit of explaining. Now imagine that we have a pendulum that defies physics. It swings left to right even if we place it on its side. In this scenario the pendulum is now swinging up and down. Now, if we pushed this pendulum along a table, the up-down movements would approximate the price action we see on the chart. These are the swings.

An upswing point (candle) is identified as such when it is higher than the candle to its immediate left and its immediate right. That swing point is drawn back (to the left) to the next immediate higher swing point. With these two points connected, the line is further extended (left to right) with a dotted line to show the potential trend. This is how you draw TD supply line (downtrend). The exact opposite is used to draw the TD command line (uptrend).

With this method there is no subjectivity as to where exactly the line should be drawn. It is completely mechanical and eliminates the variables that are introduced with the traditional method. With every swing of the pendulum a new trendline can be drawn. Price action will either validate a trendline or break it. It is important to note that no matter which way price action is ultimately trending, both trendlines should be drawn as they provide insight into price action.

Another famous DeMark indicator is the Tom DeMark Sequential. Early on, Tom DeMark recognized that most investors traded with the trend. If the trend is your friend then reversal in your enemy and not wanting to be caught off guard, he needed a way to anticipate them. Frustrated with the conventional methodologies used to identify market tops and bottoms, Tom DeMark set to work in developing an indicator that would identify market exhaustion. Despite being described as such, The Sequential is by no means, simple. It is, in fact, quite lengthy and tedious, but the reward is a method that is surprisingly accurate in identifying a market top or bottom.

The Sequential is termed as such because there is sequence of phases that must occur in order to generate a buy or sell signal. The first phase is known as The Setup and it involves the counting of nine closes that are all either above or below the close four days prior to the first. Only after The Setup occurs can the next phase take place. That is known as The Countdown. Depending on whether it is a buy setup or a sell setup, a countdown of 13 closes that either above or below the close two days prior are required. There are also conditional rules that can reset both The Setup phase and The Countdown phase. Once The Countdown phase completes, there are techniques for entering the trade.

Looking over all that is required, you can tell that it is something that doesn’t occur too frequently. In fact, it could take months for the TD Sequential to complete on a daily chart, but results of 70% to 90% accuracy have been reported. With such recommendations, every trader should at least give The Sequential a “once over” twice.

For indepth training on DeMark Indicators I highly recommend this technical analysis course.

DeMark Indicators Video

Just like Japanese Candlesticks, the Bollinger Bands indicator is available as a standard feature in technical analysis software. Its popularity in no small measure is due to the fact that they help signal to the investor whether prices are high or low.

Peter Bain’s Bollinger Band Training Course

What Are Bollinger Bands?

In ways that are similar to the Parabolic Stop and Reverse Indicator, the bands are plotted around the price action of the chart and help define relative lows and highs. Prices along the top band are considered the high prices (overbought) and the price action along the lower band are the lows (oversold). The bands are calculated off of a simple moving average, the goal of which is to gauge the current trend. This moving average is plotted as the middle band and has as its base, 20 periods.

The measurement of volatility is hard-coded into indicator and it is represented as the width between the upper and lower bands. The upper and lower bands are drawn at a distance of two standard deviations from the middle band. As volatility increases, the bands begin to widen and during less active periods such as consolidations, the bands will contract.

The Bollinger Bands Formula

Two standard deviations plus the middle band equals the upper band.

A twenty-period moving average equals the middle band.

Two standard deviations minus the middle band equals the lower band.

In order to know how to use Bollinger Bands, an investor must have a basic understanding of technical analysis. The underpinnings of that knowledge is that no single indicator should be used as a buy or sell signal. Moreover, a convergence of indicators should be used when making trade decisions and Bollinger Band signals could be one of those indicators used in such calculations.

How to Read Bollinger Bands

1. Price action becomes overbought as it approaches the upper band, and as the market becomes increasingly oversold as it reaches the lower band.

2. Price action is known to travel along the upper band for a spell and along the bottom as well.

3. The highs and the lows that are shown by the Bollinger Bands are relative. The relativity provides comparison of price action that assists in coming to a Bollinger Bands trading decision.

4. Indicators are indicative of abstracts such as sentiment and investor interest, but they are also based on tangibles such as volume and momentum.

5. Bollinger Bands are not used for price action confirmation as trend and volatility are incorporated into the indicator.

6. Avoid the simultaneous use of indicators that are based off of the same datasets as an investor may erroneously conclude a convergence of signals where there truly was only one.

7. Use Bollinger Bands for clarification of charts patterns, such as 1-2-3 tops and 1-2-3 bottoms, reversals, continuations patterns, etc.

8. Pay attention to a close beyond the Bollinger Band (tags), as it is a continuation signal when confirmed by other indicators. It is not a reversal signal. Note: (Further clarification) When other indicators show a continuation of a trend and you hit a tag, consider it a confirmation of a continuation of the trend, the tag isn’t a reversal signal.

9. 20 periods is the default parameter on which the deviations of the Bollinger Bands are calculated. This may or may not work for a particular market or session. Experiment, backtest and fine-tune on recent data feeds until you find a period setting that “reads”.

10. Bear in mind that Bollinger Bands plot the intermediate trend based on a simple moving average and the signals it generates should be confirmed with other dissimilar indicators.

The Bollinger Band Squeeze

Volatility drives the Bollinger Bands, and nothing reflects that volatility more than The Squeeze. As a trending market consolidates the bands will restrict and narrow into a horizontal channel. As with any consolidation, price action will vacillate in a very narrow range. It is the low volatility that produces the pronounced squeeze.

The strategy here is to be on the look out for the sudden expansion of the bands. This widening is the Bollinger Band breakout and it occurs at the cusp of a period of high volatility. This event is often heralded by a head-fake. Price action will tag one of the bands and suddenly breakout in the other direction. The breakout can be further anticipated as a pennant chart pattern often forms concurrently with the squeeze.

Just wait for the bull or bear trap to be set and confirmed with a tag and further confirm that price point with previous lows or highs, then ride the breakout when it reverses.

Strategies based on indicators such as Bollinger Bands can make you lots of money, but the question is, “Do you know how to use them?”

In order to profit consistently, you need to know technical analysis like the back of your hand. There is no other course that can help you develop the fearless certainty of a confident trader than Peter Bain’s technical analysis course.

Bollinger Bands Explained Video

Bollinger Bands Strategy Video

Just as it is with stocks and options, there are many different techniques and strategies you can use to trade in the currencies market.  Some of these strategies are very complicated and difficult to master while others are very easy to understand.  One Forex strategy that is very easy to learn and implement is a strategy known as trend following.  In trend following, an investor finds a currency that is starting a new trend (usually a reverse of its previous course) and then simply follows it.

You can identify a currency that is starting a new trend by looking for those currencies that are trading within a range.  This simply means that the currency consistently trades between two price points.  In stock trading, this type of situation is usually called a rolling stock, because the stock appears to be casually rolling between two price points when viewed on a chart.

Examining the angle of a currency’s moving average is another way to identify a currency that is starting a new trend.  If you see the moving average angled sharply in an upward direction, it is indicating a trend that is rising.  If you see the moving average declining sharply, it is indicating a declining trend.

You can also use a MACD histogram to determine if a currency is trading within a range and is starting to trend in a new direction.  Using a MACD histogram for this purpose is very easy to do.  You simply add a new level above zero on your currency chart and below it as well.  After you have done this you should have no trouble identifying a currency that is trading within a range since you will not see any trading activity above or below the new histogram lines.

After you have spotted a currency that is starting to trend in a new direction, regardless of the direction it is now trading, you can either enter a trade position on that currency or pass on it for a better trade.  If you do enter a trade position with a currency, definitely keep a close watch on your position to make sure it doesn’t suddenly move against you.

There are many great Forex trading strategies.  Trend following is just one of many.  Since it is simple and easy to understand, it makes for an excellent strategy for investors who are new to Forex trading.