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Tips on Forex Market Analysis

Forex market analysis relies on chart patterns, chart indicators. But also on off-chart oscillators and indicators, and fundamentals analysis. Forex charts are confusing because all these different indicators tend to disagree with one another. And also a single indicator can give conflicting signals even on two correlated currency pairs. Wise traders assign an order of importance on their indicators. And through the years, they have figured out that chart patterns tend to override all other chart-derived indicators. It’s only the fundamentals, and more specifically the medium term (quarterly fundamentals) that can override anything else. In all other cases, chart patterns provide the basic road map for trading a market. Off-chart indicators are helpful in that they often provide leading signals, often not seen on the charts and their patterns. But these indicators suffer from poor timing, and they fail to predict the exact day where the signal in question will likely be triggered. Chart patterns, especially on the daily chart, help to improve the use of these off-chart indicators. So for example, the CCI indicator may provide a divergence signal, which warns of a possible reversal or correction. But no exact day can be detected on the CCI graph. This is where swing point analysis and several patterns on the daily market chart may provide sufficient clues. Forex market analysis can be greatly improved through the use of these concepts. The hardest part which will always remain a puzzle to traders, is dealing with medium term fundamentals. Fundamentals in general are very hard to make sense of. Because they are not as simply as buy or sell. Many times, they act more like complex signals which impact the markets in more ways than one. And each component of the impact acts at a different moment in time. Fundamentals are so complicated that no economics model can beat them. And even top investment banks always have conflicting opinions on quarterly and annual market outlook. Sometimes one analyst is right, and sometimes some other analyst, using a different approach, is proven right. The bottom line is that one cannot trade the forex market based on the recommendations and opinions of even the top investment banks.

What is Forex Market Analysis — Investment banks are large and well financed. They also trade a great deal through futures contracts (whose pricing is non linear and can diverge from market price). This divergence often reflects an increase in the risk premium, similar to how car insurance premiums can go up if a driver is seen as too risky. This and other kinds of divergences between spot market price and futures prices, allow wise CFD traders to figure out the intentions of the investment banks. And these methods work well when the market is about to reverse. CFD traders are smaller by comparison but they trade and act much more wisely. Futures traders themselves are clueless, and if they are not investment bankers, they will have a hard time figuring out the next market move.

Improving Forex Market Analysis

In order for traders to improve their forex market analysis methods, they would have to better define their objectives and time frames of interest. The daily chart carries a lot of weight, much more than other time frames. And it is also more useful for short term trading, than the weekly chart is. The first success in online trading can be achieved through analysis on the daily chart first. Traders can also use the 30 minute or 60 minute charts as a secondary time frame for fine tuning their analysis. But it is always the daily chart which seems to contain more information than any other chart. Because of the swing points that are formed daily, the high and the low, and the different active trading hours. The daily chart is also much more immune to market noise and intimidating trading action. It does produce false signals, but wise traders have learned how to figure them out. Wise traders use CFDs to trade or just hedge various commodities and currencies, including of course important commodity currency pairs. Online CFD analyses used by these traders range from chart patterns, to more sophisticated methods. One of them is watching for divergences between the spot market and the Futures market. Or even divergences between two Futures contracts having different delivery dates. Futures contracts do sometimes provide leading clues through these divergences, because they have no linear pricing. And the Futures themselves act as an indicator. Sometimes these divergences can be quite dramatic. Wise CFD traders use Futures and their divergence patterns as indicators, and they trade the actual market through the highly linear CFD contracts.

Best Automated Forex Trading Systems

Automated forex trading systems are not what will make a trader millions, based on multi-fold capital gains. But they still do have a place as a routine trading solution. Even the best forex trading strategy can be enhanced through some added automation on the side. This automation can deal with routine tasks, as part of a strategy which for example captures linear trends in the market. Or even small tiny trades overnight, such as in a scalping strategy. Anyone with experience studying forex charts will have observed that automated trading can capture some of the trading action, and make profits. But just to use automated trading, in any way, also requires extensive knowledge and understanding of market volatility and risk management. Knowledge which beginners do not have. So automated trading is not actually a substitute for trading experience, and neither should it be regarded as such. Ambitious beginner traders need to realize that automated trading especially that provided through cheap forex robots and Expert Advisors will not make them any money in the long run. This kind of automation is average to bad. And even if such a product is good, the new trader lacks the experience to change the parameters as needed, month after month. Automated trading can only enhance the trading of experienced traders, and those who understand volatility well. Specifically, it is parameters such as volatility, derivatives of volatility, stop loss size, and the impact of the news, which are totally ignored by new traders. Vendors on the other hand have to keep things simple, and keep these issues out of the presentation. Because consumers will not buy anything that will realistically present risk. Most of these cheap automated forex trading products use Martingale principles in one way or another, thereby risking to blow your account. The same Martingale principles in the hands of an experienced trader who pays attention to volatility and news, will not blow the trading account. So, in that regard, only experienced traders can profit from automated forex trading systems. No matter how good the product is. And if the product is really good, it will ultimately require manual adjustments from month to month, something which only experienced traders well versed in volatile markets can do.

Automated Forex Trading Systems Tips — Automated trading systems rely on algorithms executed by neural networks, and attempt to control a situation where the objectives are well defined. The problem is they are still too primitive and manual adjustments are required. As of today, market volatility ends up fooling all such systems in existence, and parameters have to be updated manually to maintain profitability.

Automated Forex Trading Systems Put to the Test

Many automated forex trading systems are put to tough trading tests, and are evaluated by wise veteran traders. The results for some of these systems are very positive. The bad news is that they can only be used by a small number of veteran traders. This is too small of a niche market for any developer to target. And yet these good systems could sell for many $1000s each, to the right client. Such a system can trade even a $5,000 forex account, relatively safely, with manual adjustments, and make good money. With perhaps as much as 10% per month profit, experienced traders would gladly buy it. But someone who has just started to learn forex trading will not be able to handle the parameters, and will end up messing up and blowing their account, and then would blame the developer for their failures. This is why vendors have to focus on training their clients, and provide their products at much higher prices. And they should also provide a secondary software tool just for assessing volatility metrics and key parameters.

How to Assess and Trade Forex News

To trade forex news data, the trader has to pay great attention to volatility, and less attention to market direction. Forex news creates the illusion that the market moves because of the effects that this or that news story has caused. But this isn’t so. The market trend as seen on the daily charts, can never change and reverse, in a single day. Not for any reason! And because news is released into the market on a daily, intra-day basis, it cannot change the established daily trend. All it can do it cause a deviation, at most. Day trading forex live is all about watching volatility, momentum, and little clues on price direction. But volatility is easier to figure out through the news release times. Because all markets tend to trade quietly, or in a mean-reverting way just prior to news release. And after the actual release, all hell breaks loose as volatility skyrockets. During this increased volatility traders know that there will be false breakouts, false breaches of pivots, and all kinds of misleading trading action. So instead of being worried of missing out on the action, they focus on the daily chart. If the fast moving market is moving in the direction of the daily trend, it may or may not be a good idea to jump in. If it is moving against, it is a superb idea to look to jump in, in the direction of the daily trend. Hence actually minimizing the impact of the news. That’s how wise traders trade forex news, and simply don’t care what this or that news number means. These news numbers are impossible to make sense of anyway. Only amateur traders attempt to predict market direction based on the news. And they end up being wrong and losing money about 80% of the time. Because the logic involved is flawed. They see news as a binary event, which can only have 2 possible outcomes. But in reality, news items are not binary events, and they can produce 8 or more outcomes. Market price tends to sweep across all 8 or more possible market price levels, hence the wild volatility. The only binary outcome here is the progress of probability, as the number of possible outcomes doubles for every additional risk factor. If one more binary unknown is involved, the possible outcomes increase from 8 to 16, and so on.

Read Trade Forex News — In most cases, there are 3 binary events to every market news story. And these 3 are independent from one another. The net probability of predicting market direction correctly based on the news, for day trading purposes, is 1/8 or 12.5%. And not 50%! These 3 binary events are the 3 possibilities, what if the news is better or worse than the last one, what if the news is better or worse than analysts expect, and what if the news has or has not been priced in by the market already. And 12.5% is the best case scenario, if one more binary event is introduced, the probability halfs to 6.25% and so on.

How to Trade Forex News on Probability

To trade forex news directly on direction, is impossible. Nonetheless one can get around that using the properties of the daily chart discussed above. Though this requires extending day trading into a more relaxed, and longer term strategy from time to time. Though Forex trading live can be very profitable on these principles alone, what traders need is boldness and experience. A cool forex trading business opportunity appears almost every other day in the markets, based on volatility. Knowing how news creates this volatility, helps time it much better. Beyond that, it’s good to know that the supposed probability analysis mentioned above is based on the assumption that news is binary, perceived as either bad or good by the market. But if each news is perceived as a 3-outcome event, which is even more accurate, then things become much more complicated, and volatility becomes much more relevant. In reality, the binary assumption is most of the time correct, it works just like the 3-outcome event in most cases. Except in the few cases where a news number, is exactly identical as the last time it was reported. For example the CPI inflation number, is a piece of news which is possible to remain unchanged over two consecutive reporting times, but it’s very rare.

Successful Forex Trading Strategies Used by Top Traders

Learn Successful Forex Trading Strategies

Successful forex trading strategies are the dream of every trader trading forex, they are what matters most. More than the actual financial success itself! And all these successful forex trading strategies do to some extent complement one another, as no single strategy is perfect. As one looks at the various forex charts, it is easy to see why this is the case. Profitable forex trading strategies catch market movements here and there, and each one does so in a different way. All of them combined, from the very basic ones, to the more advanced forex trading strategies end up capturing every pip of potential profit. Basically, all strategies tend to overlap one another slightly. And some may share basic principles. But because of the uniqueness each trader brings to the table, the strategies they develop tend to differ. So no two traders trade exactly alike, but may think along the same lines. Both simple and advanced forex trading strategies can work very well in the hands of seasoned traders. Traders who understand them well. Regardless of the level of sophistication involved in each one individually. If seasoned traders use them, it means that they are all profitable forex trading strategies which aim at making money in today’s currency markets. To a dedicated trader, being able to understand the markets and figure out the next move, is a great feeling because the financial markets are undoubtedly a great mystery to most people. And in fact most people treat them with suspicion, fear and cynicism. But the markets are not controlled by anyone. They are moving freely and are fair and realistic. And to the traders, they also are the world’s most equal opportunity employer. Because they don’t discriminate against race, age or personal background. Anyone with a strong will can be successful in the forex market, regardless of who they are. And while there is nothing wrong being a little greedy. Many new forex traders tend to be more greedy than knowledgeable. As a result, their greed gets the best of them, leading them to unrealistic trading goals, big losing trades and into blowing their accounts. Greed has to be kept under control, and allow the market, through the strategies used, to bring whatever profits are possible to the trader. By setting huge goals on financial gain, from day one, things become unrealistic. And with unrealistic goals profitable strategies are actually more dangerous, because they can create an illusion of invincibility. Good profitable strategies are just that, profitable, but only in the hands of wise veterans who know how to use them properly.

Successful Forex Trading Strategies For you — Success is a nice feeling. Veteran traders having succeeded in trading, are also successful in pursuing one more exceptionally difficult goal in their lives.

All Advanced Forex Trading Strategies are Exceptionally Successful Forex Trading Strategies

All sophisticated and advanced forex trading strategies go to great lengths in dealing with subtle market risk, because they have been developed slowly, over many years, and by traders who learned the hard way. These traders could no longer afford to lose money trading the forex market. With so much experience gained through all this forex trading info and the enormous number of data, it couldn’t have been otherwise. These trading veterans couldn’t have developed anything less than these advanced forex trading strategies, which are not simply successful forex trading strategies, but also a vindication of their long term determination, just like a Nobel prize is to a hard working devoted scientist. Life is not all about money, Nobel prize winners know this very well. And veteran traders too, learn to look beyond just financial success. It’s the pleasure of cracking the riddle, that drives them to develop further these already profitable forex trading strategies. The obsession of the human mind is so great with riddles, that solving a tough riddle such as the ones presented by financial trading, is a phenomenal success. In fact, many veteran traders see their success in solving such riddles. And they regard profits as merely a small vindication, through financial gain, for their work and all that time devoted. But the feeling of success is so much greater than money, and often beyond any price. Profitable forex trading strategies bring more and more confidence and vindication with every new winning trade they offer. And the amazing power of thought and will of those successful trading veterans goes a long way, and beyond just trading. Many of them have one more goal in life, which has nothing to do with the markets, and which they also achieve. Again through unbelievable perseverance and obsession, they succeed. These goals may be for example to travel around the world, to date some Hollywood movie star, or to make a big difference in the lives of people living in impoverished countries. It may seem obvious that all goals in life can be achieved simply by spending tons of money, but this isn’t so. Goal achievement requires much more than just money, and very few can plan right. Because just like trading, there are subtle risks along the way, which can ruin the plan. Only through realistic assessment, and meticulous planning, where risk is embraced, can these goals be achieved. And this is why many super rich people fail to do much good on the planet today, because they falsely believe that money can buy everything, including all the know-how needed. But this isn’t so, most problem solving needed around the world today, requires a lot of specific, priceless know-how, and much less money than politicians think. Veteran traders know how to develop know-how, because they had to invent their strategies from scratch. It’s not as if they could just buy those strategies on the open market, because nobody puts them up for sale.

Creating a Simple Forex Trading System

A good, yet simple forex trading system can be based on indicators such as LSS pivots, price momentum, moving averages or active trading hours. All of these provide insights from time to time, as to where the next opportunity will appear. Online trading can be simplified through such a system, so that the trader will cut losses short when wrong, and will not dig much deeper in chasing losses. In the case of CFD trading, which covers perfectly the needs of commodity and currency trading, much more than Futures do. The trader can practice in an online CFD simulator trading platform, and put things to the test. An effective, yet simple forex trading system is all about clarity and efficiency at low overall risk, as long as the system generates enough trades to make the trader’s efforts and time worth devoting. Curious traders will find it difficult to stick to such simple trading system for too long. They always want to dig deeper and look further, as they have a desire to explore more. So then comes the question whether such a simple trading system will keep the trader busy and active enough, so as to maintain an active interest. A simple trading system doesn’t stop the trader from doing their fundamental analysis. This field of research alone is so huge that it can keep the trader fully active, in a creative way, while the trading system will stay as is. If the fundamental analysis over the week or month in focus suggests that the market will go up, then they can simply refrain from taking short trades, even if the system generates such signals. Fundamental analysis is very motivational, and allows for enormous freedom of choice. So there is no excuse for a trader not to be busy, since they could be studying these fundamentals in great depth. Fundamentals cannot easily be quantified and put into equations and charts, or have probability analysis run on them. But they provide an underlying logic, which helps avoid many false signals on the technical side. And a simple trading system is always a technical one. There is no need for these two different concepts to be in conflict.

Improving a Simple Forex Trading System

Improving a simple forex trading system further, is perfectly possible. Again, through the insights the trader finds in fundamental analysis, they can change technical parameters so as to make the signals more accurate. Traders know that a technical system relaying on LSS and moving averages will be wrong at least 40% of the time. This is expected. The improvement is about identifying big losers early, and cutting them short early. This can be done through fundamental analysis and by watching the trade in question for some amount of time. All stable profitable systems do have losing trades, and that’s why they can stand the test of time. Systems that promise very low percentage of losing trades are probably unstable and will suddenly stabilize, out of the blue, by producing too many losers all at once. It’s a law of physics, as things to tend to move towards greater stability. Trading systems that claim to defy this law are not in touch with reality. The trader can be profitable even if their system only produces 30% winning trades. Again, through fundamental analysis, they are able to identify winners and losers as they happen, and handle them accordingly. Whether or not an open trade is profitable is not about the open Profit/Loss figure. But rather it is about whether or not it is in line with short term fundamentals. So is trading online made easy through simple technical trading, filtered through fundamental analysis? The Answer is Yes! And a system of this kind is bound to be stable too.

Trading on Live Forex Signals

Even though all wise traders keep an open mind on their strategies, and break or bend all the rules, trading on live forex signals puts a lot of pressure on the trader. So limitations have to be imposed, through the use of rigid rules and discipline. Day trading forex live, or just having to act there and then, as soon as the signal appears, does require extremely sharp focus. What discipline offers to these fast-acting traders, is exactly the ability to stay focused. This is why all martial arts rely so much on discipline. Because there’s little time to think and react. Traders acting on live forex signals are still allowed to break rules relating to their strategy, but only in advance, before the trading session starts. During the actual trading session staying focused is their one and only priority, because there is no time to think. More experienced traders have developed methods for dealing with extreme volatility and fast moving markets, and specifically for assessing their day-trades, once they have been placed. If the time available to them is anything form a few minutes to half-an-hour, that is long enough to let the trade prove itself, and then apply their assessment methods. Some day traders apply time limits on their trades. So that if the trade is taking too long, and more than 30 minutes to become somewhat profitable, it is seen as a doomed trade, bound to become a loser. So such trades are closed past the 30 minute limit, regardless of profitability. Other day traders go further, and devise methods for actually reversing trades that they believe they are bound to become losers. And these methods can help traders be better prepared, no matter what happens next. The basic idea is that probability of success in day trading can be estimated in a matter of 30 minutes, as long as the trade entry criteria are valid.

Learn Live Forex Signals — If probability theory specialists were to develop a martial art, it would be just like the disciplined traditional martial arts found in Asian countries. It’s all about optimal movements of defense and offense, under the constraint of time, where the user doesn’t have time to think, — it’s all second nature to them. Successful day trading is based on probability too, and because of time restrictions, discipline is necessary, in order to make things work so that probability is on the traders’ side.

Live Forex Signals and Volatility

Volatility can produce false live forex signals, or just ruin signals that would otherwise have been good. Forex trading signals are often misleading or lack conviction. Because day traders don’t pay attention to momentum and volatility. Momentum can be identified through various indicators and LSS pivots. Volatility can be estimated based on the expectation of news release days. Typically, a currency pair will trade with limited volatility on the days and hours leading up to an economic report release time. And volatility will increase dramatically right after the release time. By paying attention to all these indications, traders can customize their strategies. A volatility-specific day trading strategy will work much better than a primitive strategy. Where all days are considered to have the same amount of volatility. All this forex trading info should be taken into account by traders, and this could allow them to handle their trading signals much better. It is worth mentioning that seemingly minor factors, such as volatility or LSS pivots, can have a huge impact. When all these different pieces of information are combined in a balanced way, trading can be enhanced dramatically. This is all because trading works on probability, and in probability theory even a seemingly minor factor can change the net result by as much as 30%. This is evident in games of thought, such as poker, where the player gains a seemingly small advantage, say 1.5% if they play some hands in a specific way. 1.5% may sound too small, but together with good money management it can have a huge positive impact on the player’s goals. In trading too, probability is in control, and traders can achieve order out of chaos. Small increases in probability of success result in huge increase in end profitability. Probability is also the basis for all sophisticated stock valuation models. And for assessing risk. Probability is carefully measured by all successful investment banks, and no number is too small or irrelevant to their analysis.