Born in Dublin, Ireland, in 1856, George Bernard Shaw grew to become one of Great Britain’s greatest and most controversial playwrights. Shaw’s father, a corn merchant, was an alcoholic and therefore there was very little money to spend on George’s education. George went to local schools but never went to university and was largely self-taught. He was Read More

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After a decade of sustained and rapid growth, the retail foreign exchange (Forex) market is seemingly entering the phase of consolidation. Japan, which used to have the top place globally with estimated USD 65B per day turnover is estimated to have come down to USD 35B/day. The decline of Japan market does not represent the global trend but is an indication of consolidation. Over the past few years Forex trading has been getting very popular among small retail investors and the retail forex trading volumes have been growing exponentially. Some of the factors which have been fueling this exponential growth was the heavy advertizing by Forex firms to lure new investors or traders, the spread of a feeling that this could be a fast way to riches because of very high leverages and hence very less capital requirements and also that anyone can do it with practically no experience and minimum of studies or knowledge. Even though many of these points could be taken as true but on the other side most of these points are the slow poisons for both the traders and the Forex brokers.

Many people say that the heavy regulations being imposed by some of the major markets are killing the retail trading. For example the highest allowed leverage cut by Japan to 1:25 and by the US to 1:50 but on the other side these regulations are going to be the cause of the matured and long-term growth of the market. No market can grow when more people are losing money but a market will always grow when more people make sensible amounts of money.

Some other factors which are making the traders more knowledgeable and hence pave the way for a matured growth is better education avenues and better communities like various Forex forum, mirror trading platform, other forex trading communities and forex portals like CountingPips (http://www.countingpips.com).

Any matured market always depend on the awareness of both, the buyers and the sellers about the market dynamics and it needs better sources of information, better knowledge sharing and better knowledge management. Every new market goes through it’s own cycles of growth and consolidations and foreign currency exchange market, with its continued growth is no exception.

Article by forexabode.com

How to set up your charts for price action trading on MT4 –

Being one of the most commonly used charting platforms for spot FX trading we’ll focus on Meta Trader 4 for this tutorial. Being such a versatile platform, MT4 allows traders a variety of options in the way they can lay their charts out. The easiest and most logical way to set up your charts for price action trading is to use a different profile for each currency pair you actively trade. Using a separate profile for each pair allows you as a trader to solely focus on a specific pair without running the risk of having your judgment influenced or clouded by other crosses.

After opening up our MT4 platform, the first thing we want to do is click on the default tab in the status bar as shown below. MT4 will then bring up a list of all profiles we have saved. We then want to click on the first in the list which is Default. This will open a default profile which we will later customize to our price action trading format.

The next step we have to take is opening 4 of the same chart for our default profile. We simply click on the new chat tab (or file -> new chart). This will bring up a list of the pairs our broker will allow us to trade. We then open 4 charts for the same pair. We can confirm we’ve opened 4 charts by looking just above the status bar at the bottom of the screen as seen below.

The third step we have to take is arranging our 4 charts so that they are all visible on the screen at the same time. To do this we click on the ‘window’ tab on the top tool bar and then select either: Tile horizontally or Tile vertically. Our charts are then displayed as seen below, with each one taking a quarter of the screen.

In our fourth step we have to change the Timeframe for each chart on our screen. To do this we simply have to click on each chart separately and then change the timeframe using the tabs at the top of the screen as seen below. We can also click (Charts -> periodically) from the main tool bar which will allow us to change the timeframe. The timeframes we use for price action trading are: 1hr, 4hr, Daily & Weekly. Setting our charts up in this way allows us to see the price for each pair on one screen using different timeframes allowing for better analysis.

We now have our first profile set up. The next thing we need to do is save it as a new profile. To do this we click the default tab in the status bar at the bottom of the screen. We then click on ‘Save profile as…’

We then save the profile using a name we can associate with the pair we’re saving. In the eur/usd example we’ve used we will save our new profile as ‘EUR/USD. We then click OK.

We now have our 1^st profile saved. Every time we open MT4 we can simply click the profiles tab on the status bar at the bottom of our screen to open a list of our saved profiles

We have to repeat the process for each pair we want to trade or analyze remembering to save a new profile for each one. Once we set up our charts for each pair we simply click the profiles tab on the status bar allowing us to easily change between charts.

The method for chart layouts we’ve explained in this tutorial is an easier way to analyze each currency pair we trade without over complicating our analysis with numerous different pairs on the same screen. This layout also allows for clearer chart viewing and easy switching between pairs.

Article by vantage-fx.com

]]> http://www.forexsignals.info/set-up-your-charts-for-price-action-trading-in-mt4.html/feed 0 http://www.forexsignals.info/forex-%e2%80%93-macd-trading-strategies.html http://www.forexsignals.info/forex-%e2%80%93-macd-trading-strategies.html#comments Mon, 16 Jan 2012 03:10:15 +0000 admin http://www.forexsignals.info/forex-%e2%80%93-macd-trading-strategies.html
No indicator can give all correct signals all the time and hence continuous refinement in the strategies to use an indicator is a must to avoid as many false signals as possible. Getting a few signals which are good is always better than getting a lot of signals of poor quality. Moving average convergence divergence or [...]]]>

No indicator can give all correct signals all the time and hence continuous refinement in the strategies to use an indicator is a must to avoid as many false signals as possible. Getting a few signals which are good is always better than getting a lot of signals of poor quality.

Moving average convergence divergence or MACD in short is used very commonly in technical analysis for trading. MACD is a lagging indicator and that means that any signals by the crossover of MACD and its signal line are generated with some lag in time. The signals are generated after a confirmation of the move in a particular direction this comes with a time lag. When the trend is weaker, this lagging would tend to cause more false signals.

Why more false signals during weak trends or when the market is ranging or running sideways?:

1) Entry signal: By the time the entry signal is generated, the price may be reaching the reversal point because during the time lag the trend becomes further weaker and market is on the verge of reversal.
2) Exit Signals: By the time the reversal crossover takes place and signals that we should close our position to take profit, the price already reverses so much that the realized profits levels are much less than the realization levels if would have closed the trade sooner.

Though the most important factor in trading are the skills, knowledge and trading discipline but there are always possibilities of improving our indicators also. The improvement can be either by the change in the logic by adding new conditions or by experimenting with different period settings. What we wish to always achieve is to have lesser and lesser percentage of false signals. Albin, Gunter and Kain came up with some refinements in the original MACD for reducing the percentage of false signals which may otherwise be generated. The first refined version is known as MACD R1 and the second is MACD R2 as the subsequent one.

Let’s check what MACD-R1 and MACD-R2 are. Our trading platform most probably will not have these refined versions but considering the logics of these, we may think about improving our MACD trading strategies.

MACD-R1:

a) One more condition was added and that was to wait for three periods (days on daily chart) after the MACD line crosses the signal line upwards or downwards before we take a position. This wait was to ensure that the signal was not false and an immediate reversal does not take place as soon as we take a position. If during this 3 periods another crossover takes place then we forget the first crossover and wait for another 3 periods to ensure this reversal.

b) To avoid the exit problem as mentioned in point number 2 above, MACD R1 has the profit taking levels as pre-decided percentages. In a nut and shell it says that don’t be greedy and come out of a trade with certain pre-decided percent of profits. These suggested profit taking percentages were 3% or 5%. So MACD R1 says that close the trade after 3% or 5% gain after the entry. In case a reversal crossover takes place before this pre-decided target of 3% or 5% then also we should close the trade.

MACD-R1 – weaknesses:

1) Even with these additional conditions there still is higher number of false signals.

2) Loss in the profits: Let’s assume that it is a strong uptrend and after taking a buy position the prices move up by 8%. And what we did was, we closed the position after 3% or 5% profit and hence the opportunity of making higher gains was lost. basically we may end up in making a big loss in the profit and that goes against the mantra that let your profits run and cut your losses short.

MACD-R2:

To overcome the above mentioned issue of still higher number of false signals by MACD R1 an additional condition was added in terms of further refinement. The new refined version is known as MACD-R2.

Let’s think why MACD-R1 still offers possibilities of reducing the false signals:

Scenario: We wait for 3 periods to have the confirmation of the trend continuation by seeing that no reversal crossover takes place during this waiting period. And after this 3 periods we enter the market. As soon as we enter the market, a reversal takes place and we end up with losses.

Now let’s see why the above mentioned scenario is possible and what did we miss to avoid it:

This can happen because we waited for the confirmation but ignored another warning signal i.e. what did not happen may happen soon now.

This may happen because though by the end of the 3 periods after the original crossover, another reversal crossover does not take place but the MACD line comes dangerously close to the signal line to indicate a reversal. The difference between the MACD and signal line reduces drastically. We are not keeping track of this development and ignore this reducing difference between MACD line the signal line even though it indicates the possibilities of a reversal crossover.

What additional changes/conditions are there in MACD-R2:

Now when we know what we missed, we have to add that condition so that we do not lose the track of the reducing difference indicating a reversal.

An additional condition was added apart from the original concepts of MACD-R1 to design MACD R2. This condition is to ensure that we keep a track of the difference between the MACD line and the signal line and do not ignore a warning signal of a possible reversal. This condition ensures that a pre-decided difference maintains between MACD and MACD signal line even after waiting for 3 periods and then only we enter the market. If the difference between MACD line and the signal line goes lesser than the pre-decided level then we do not enter the market. [Please find more details about MACD and moving averages for technical analysis in Forex trading at FA (ForexAbode)]

Suppose we decide that the minimum difference between MACD and signal line should be at least 1.2% at the end of 3 periods. What it means is if the difference between these two lines is less than 1.2% then should not take trade position. We decide this difference percentage based on the experience that a difference less than this may indicate a possible reversal.

For the explanation of this third condition please see the following example:

Let’s consider that we are talking about daily trading chart which means that 1 period means 1 day.

1) Suppose MACD and MACD signal line crossover takes place on July 1st.
2) We wait for 3 days and see that no further crossover has taken place during this time i.e. till July 4th.
3) We check the price. Let’s say it is 150.00
4) We check MACD (12 day EMA – 26 days EMA). let’s say it is 5.
5) We check the signal line (previous 9 days EMA of MACD). let’s say it is 3.
6) We use the formula (MACD-Signal line after 3 periods)*100/(price)
i.e. (5-3)*100/150 = 1.33%
now as 1.33% difference is bigger than the pre-decided minimum difference i.e. 1.2%. This indicates that we can enter a trade as a reversal crossover may not be taking place soon.

In the case that the difference between MACD and its signal line was less than 1.2% then we would not have entered the market as suggested by the MACD signal 3 periods back.

Article by ForexAbode

USDJPY stays in a trading range between 76.60 and 77.32. Lengthier consolidation in the range would likely be seen in a couple of days. Key resistance is at 77.32, a break above this level will confirm that the fall from 78.21 had completed at 76.60 already, then further rise to test 78.27 resistance could be seen. Support is at 76.60, only break below this level could trigger another fall to 76.00 zone.

Daily Forex Forecast

Before developing a trading strategy, traders should be familiar with event risks that heavily impact the Forex trading market. During normal market conditions, shifts in government policy along with economic developments tend to drive market action, and being able to identify the key event risks can help avoid being on the wrong side of the market.

Have a Plan

There are a few strategies that you should think of us when trading news events. There is a caveat, finding the style that fits one’s trading personality and then tailoring it to meet different needs can help curb the risk for loss and at the same help to possibly profit from market volatility. Some strategies involve setting up entry orders ahead of the event risk, while others are based on mathematical calculations. All require prudence and flexibility given the inconsistency in market reaction. One must recognize that at times, the best move can be to stand aside when traders show a muted reaction to the news or when the market turns choppy.

Trading News Events

Trading major US news events has been in 2011. This has been given due to the strong correlation between the US dollar and risk, but these dynamics may break down in the following year as the fundamental outlook for the world’s largest economy improves. Indeed, the Fed’s zero interest rate policy has been one of the culprits behind the risk driven market this year. We expect to see fundamentals playing an increased role next year as the central bank eases its dovish tone for monetary policy. As the economy speeds it recover up, this limits the Fed’s scope for another large scale asset purchase program. This means we should see the FOMC carry out ‘Operation Twist’ in 2012, and the central bank may end its easing cycle in the following year as economic activity gradually strengthens. As the risk of seeing QE3 wanes, fundamental developments might have a greater impact on the dollar’s exchange rate. The market reaction should be even more straight forward in the following year as the Fed begins to put an end to the speculation for additional monetary support.

The economic docket for the week of 2012 is expected to include the all important US Non-Farm Payrolls. We are expecting this to be increasing another 150K in December. The ongoing improvement in the labor market should support the Buck. However, if the FOMC minutes due on Tuesday might shake up the currency market. These minutes could cause investors to weigh the prospects for monetary policy. We might see the Fed raise its fundamental assessment for the region and the central bank may endorse a wait and see attitude throughout the first-half of 2012 as the sovereign debt crisis dampens the outlook for the world economy. This could mean that Bernanke may preserve a cautious outlook for the US, but we may see him curb expectations for another round of QE as the economy revolves around a double-dip recession.

for more information on stock trading you can visit Avafx.com – for information on forex broker you can visit zforex.co.uk

you can also learn forex trading or use exchange rate calculator

DISCLOSURE & DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER.  FOR MORE INFORMATION AS WELL AS UP TO DATE FOREX ANALYSIS VISIT US AT FX-INSIGHTS.COM – FOREX NEWS

As forex traders, we are constantly looking for any edge we can get in the marketplace.  Using the charts is one way that traders look for predictive behavior in the price action of any currency pair.  But sometimes, there are more simplistic tactics that can provide equal results.

Case in point, today’s action on GBP/USD.  This is one of the most simplistic “plays” in the market and can sometimes provide low-risk opportunities.  Today’s market action is called “No news is good news”.  This was one of the first tactics I learned when I made the transition to forex and it can be used over and over again.

Earlier this morning, the British pound rose some 80 pips from yesterday’s low volume session.  One might think that there was some “good news” driving the Pound higher, or perhaps there was some bad news about the other currency in the pair. Since the US market hadn’t opened yet, one might naturally conclude that there was good news in the UK then.

Not only was there not good news, there was NO news at all as the UK markets are closed today.  But the forex market trades 24-hours around the clock.  Without the possibility of bad news, the market saw the opportunity as good news and therefore pushed the Pound higher.  In other words, with the threat of negativity removed, you could have had an easier move higher!

Sometimes we see this type of action with the changing of the trading sessions.  Have you ever noticed, especially lately, that the markets seem to drift higher once the European market closes?  This happens because the risk coming from Europe is great right now so if we make it through a European session without negative news, the market sees it as a positive!

Of course it is still import to use support and resistance levels, and in the Pound earlier today that support level was at 1.56 providing a low-risk, high return short-term trade.  So trade the path to least resistance and you may see moves similar to this one today!

It’s surprising to see so many novice and experienced traders paying little attention to the importance and benefits of keeping a trading journal or log. To the majority of novice traders and a handful of experienced ones, keeping a journal is probably one of the simplest ways to improve their profitability.

A trading journal allows the trader to organize their trading in an efficient and positive way. A journal in its most basic form is a record or diary of every trade a trader takes, including: Entry price, Stop loss, Targets, reasons why the trade was taken and the outcome of the trade. Most trading platforms such as MT4 offer the trader an overall review of their accounts, showing their profit and loss. However what they can’t show is a real trade journal produced by the trader themselves.

The keeping of a trade journal provides the trader with a visual record of their trading activities. A journal allows the trader to record the reasons behind their trading; this record can be used to analyze losing or winning trades and improve or eliminate trading errors. 

Below is a very basic journal. The columns listed are self explanatory; however some traders often include extra details in their journals such as a % or monetary gain per trade. A good habit to keep is adding screen shots of your charts for each trade recorded in your journal. This further enhances the visual aspect and can make analyzing much easier. It’s often a good idea to; if possible, use different colors for wins, losses and breakevens. This again enhances the visual aspect of the journal and allows for better/easier analyzing.

A trade journal is not difficult to make or keep, however like most other aspects of trading requires a disciplined mind by the trader to make sure every trade taken is recorded in their log. It’s important for the trader to explain in detail why the trade was opened and the outcome of the trade. Reviewing your journal on a monthly basis is a good way to start better understanding your trading behavior and patterns. Most traders give little regard to trading journals however once they start logging their trades they are amazed at the benefits this simple element of trading can produce.

Article by vantage-fx.com

Dec. 17, 2011 (Allthingsforex.com) – Following the Fed’s decision to keep the monetary policy status quo, the week ahead will bring a sequence of U.S. housing and economic growth data, which could instill further confidence in the resilience of the world’s largest economy and could fuel a Christmas rally (provided the headlines from the EU debt crisis do not decide to rain on the market’s parade).

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1.    EUR- Germany IFO Institute Business Climate and Expectations Index, a leading indicator of economic conditions and business expectations in the Euro-zone’s largest economy, Tues., Dec. 20, 4:00 am, ET.

In need for stronger growth to avoid a “mild recession”, the largest economy in the Euro-zone could show further weakness as the German IFO index heads lower for another month with a reading of 106.1 in December from 106.6 in November.

2.    USD- U.S. Housing Starts, a leading indicator of housing market activity measuring construction of new residential properties, Tues., Dec. 20, 10:00 am, ET.

First in the series of U.S. housing market data throughout the week, the housing starts are forecast to inch higher to 635K in November from 628K in the previous month.

3.    JPY- Bank of Japan Interest Rate Announcement, Wed., Dec. 21, around 12:00 am, ET.

With the U.S. dollar erasing a big chunk of its post-intervention gains against the yen but staying above record lows in a range between 77 and 78 yen, the Bank of Japan would not be likely to intervene at these levels. Japan’s central bank is expected to keep the benchmark interest rate in the current 0% to 0.10% target band, but could consider additional quantitative easing as a tool to weaken the yen, while at the same time, stimulating the economy.

4.    GBP- Bank of England Monetary Policy Committee Meeting Minutes, a comprehensive report of the central bank’s meeting that could provide an outlook on the economy, interest rates and future monetary policy, Wed., Dec. 21, 4:30 am, ET.

After the Bank of England’s decision to keep rates for another month at their record low 0.5% level since March 2009, the minutes could confirm that the Monetary Policy Committee is still open to the idea of additional expansion of its Asset Purchase Program into the New Year. Expectations of more quantitative easing and risk aversion will continue to be risk factors for the GBP.

5.    USD- U.S. Existing Home Sales, the main gauge of the condition of the U.S. housing market measuring the number of closed sales of previously constructed homes, condominiums and co-ops, Wed., Dec. 21, 10:00 am, ET.

Contributing to next week’s list of upbeat U.S. economic data, the sales of existing homes are expected to gain momentum with an increase of up to 5.2M in November from 4.97M in October.

6.    NZD- New Zealand GDP- Gross Domestic Product, the main measure of economic activity and growth, Wed., Dec. 21, 4:45 pm, ET.

Suffering the impact of floods and an earthquake, the New Zealand economy grew by only 0.1% q/q in Q2, but is expected to pick up the pace by 0.6% q/q in the third quarter of 2011.

7.    GBP- U.K. GDP- Gross Domestic Product, the main measure of economic activity and growth, Thurs., Dec. 22, 4:30 am, ET.

The final reading of the U.K. Q3 GDP should confirm that the U.K. economy grew faster by 0.5% q/q in the third quarter of 2011 following the 0.2% q/q increase in Q2. An upward revision could give the British pound a temporary boost, although risk aversion, weak U.K. economic data and expectations of more quantitative easing by the Bank of England would be a threat to any GBP rally.

8.    USD- U.S. GDP- Gross Domestic Product, the main measure of economic activity and growth in the world’s largest economy, Wed., Dec. 22, 8:30 am, ET.

The third and final reading of the U.S. Q3 GDP would offer an opportunity for a final comparison before the year’s end between the U.S. economic growth and that of other major economies, especially the slowing Euro-zone. The consensus forecasts point to the same 2.0% q/a pace of U.S. growth, as listed in the downwardly-revised previous estimate.

9.    USD- U.S. Consumer Sentiment, the University of Michigan’s monthly survey of 500 households on their financial conditions and outlook of the economy, Thurs., Dec. 22, 9:55 am, ET.

Trending higher in recent months, the U.S. consumer sentiment index is forecast to end the year on a high note with a reading of 68.0 in December compared with the preliminary estimate of 67.7 and up from 64.1 in November.

10.    USD- U.S. Personal Income and Outlays, a measure of the income received and purchases made by consumers, released along with the Personal Consumption and Expenditures Price Index- a leading indicator of inflation preferred by the Federal Reserve, and U.S. Durable Goods Orders, a leading indicator of economic activity measuring durable goods orders placed with domestic manufacturers, Fri., Dec. 23, 8:30 am, ET.

The PCE and durable goods reports will wrap up what looks like another week of cautiously optimistic U.S. economic data. Consumer spending in the U.S. is forecast to register a larger increase by 0.3% m/m in November from 0.1% m/m in the previous month, while the Fed’s preferred inflation gauge, the core PCE Index, is expected to show inflationary pressures remaining flat at 0.1% m/m in November, same as the 0.1% m/m reading in October.

The orders for durable goods are forecast to gain momentum with an increase of up to 3.2% m/m in November, recovering from the 0.5% m/m drop in the previous month.