Before we address how to make the most of gaps, let’s discuss what they are. If you were to look at a candlestick chart, you’d see that gaps take place because of the amount of transactions placed on the same side. The bullish ones happen when the opening price is higher than the closing one; and as you probably guessed, the bearish one develops when the opening price is lower.
In the currency market, it’s likely to see a gap develop on Sunday evenings when the Tokyo session opens. This is a unique occurrence to Forex since the markets operate on the weekends. Only the Forex dealers stop their pricing on Friday night; the banks continue to transact currencies throughout Saturday and Sunday, and that’s why you see gaps. Experts often say that those who maintain their positions throughout the weekend, even if trading export-related currencies can benefit from gaps; of course if the currency is on the side you predicted.
In the stock exchange things are different. The markets close every night; and because of such, the gaps develop overnight. The gaps in that market are the product of orders placed during what they call the “fixing.”
Therefore, we can surmise that gaps in the Forex are opening gaps and it’s possible to spot them during the day, especially during the announcement of the leading or the lagging economic indicators.
To take advantage of gaps, skilled traders watch for the corrective movements.
Tagged: currencies, currency market, forex May 7, 2012
As with any type of business, in order to amass wealth in Forex, some effort is needed. Some traders spend time studying macroeconomics to gain a clear understanding of the factors that influence currency prices. Others prefer to see the effects on charts and sidestep fundamental announcements.
And those in the latter category are fond of candlestick charts. In fact, many of these savvy traders speak highly of their strategies and of the fact that they enjoy useful candlestick patterns like hammers to increase their opportunities for accruing riches.
Hammers are figures that appear in charts and reflect the bullish movements of the currencies. More specifically, they point to trend reversals.
A hammer-like pattern often appears as a monetary unit starts to decline. When it develops completely, the trader can assume that the currency is ready to climb in price again. However, if the pattern showcases a long shadow below the body of the hammer, it means that rather than reverse, the currency continued dropping. Note though that in this case, the buyers usually take action, causing the currency to close near the opening price.
This sounds like the pattern has told us a story. And that’s certainly true. A chart formation can tell us much about what’s happening. If this sounds difficult to grasp, the pros suggest starting out with a mini, the best Forex account for novices. How the pros use hammers may elude you. However, you can trade like an expert in no time.
Tagged: currencies, forex, forex account April 23, 2012
Everyone who opens an account to trade the Forex market does so in hopes of obtaining great results. And the truth is that although not everyone achieves this goal, those who do, attribute their success to the fact that they chose to follow solid secrets from experts.
Most of them say they use Average True Range to interpret volatility in the market. Note that the ATR isn’t a signal indicator; so don’t expect it to provide you with the entry or exit signals. Instead, it can offer sufficient information for you to place your stop loss. Surely you know that a strategy passed on by floor traders can be valuable. However, as the Forex differs from the stock business, novices who excel at currency trading realize they need to follow the guidance of Spot Forex experts.
With the Average True Range you can determine whether it’s best to place the stop loss within a narrow range, or set it liberally. Most professional traders use ATR when the volatility increases, as it shows them that the optimal spot for setting the stop is at 2 to 4 times the Average True Range.
In addition, the ATR can tell you if your opportunity for making money is high or low. So if you plan to day trade Forex currencies, you may consider the different ways by which ATR can help you improve your results. The ATR may indeed be the means for obtaining above average results.
Tagged: currencies, currency trading, forex, forex market April 9, 2012
In the Forex, the more tools you have for predicting currency prices, the better off you are. And when you expand your knowledge to include fundamental analysis, you find out that interest rates offer clues on what the price of a currency will be. So how does economic growth or lack thereof help a currency trader forecast price action?
Central banks as you may know have two important mandates. One is to boost economic growth and the other is to make certain inflation remains manageable. However, the two goals are rarely accomplished at the same time. This is why a trader who follows what the central banks are concentrating on often excels at trading monetary units in the Forex on line.
When an economy is in trouble, the central banks slash the rates to fuel investments. In this scenario, more money becomes available; and if you understand supply and demand, then you realize that the increased availability of the currency implies that it will decline in price. The increase of the rates itself may not cause a drastic change in the market, especially if traders already anticipated such move.
Note though that the country’s economy may experience high inflation during times of prosperity. When this occurs, central banks look to control inflation so that it doesn’t curb economic growth. Thus, they limit the amount of money in the market and cause the currency to appreciate.
Therefore, economic growth can be used as trend indicators.
Tagged: forex, forex on line March 26, 2012
Those who trade the USD/CAD in the Forex, often wonder if the Canadian Dollar is at the mercy of the Ivey. For those who have only recently become familiar with the nuances of currency trading, the Ivey is the Purchasing Manager’s Index and a leading indicator. The Ivey survey offers the opinion of purchasing managers from a wide range of sectors in the economy.
When the reports are issued, currency traders look for hints on how the currencies will be affected.
When the economy of the U.S. is strong, the country’s imports increase. And this often represents good news for Canada. Tensions with Iran may cause the prices of crude oil to increase; and this of course would contribute to the rise of the Loonie, Canada’s monetary unit.
Using the Ivey to trade the CAD is part of a number of Forex trading strategies the pros use. Knowing certain factors can improve one’s decision-making in choosing the right time to trade. Note that when the metrics come out above expectations, the pair may dip below support. When the data is “within expectations,” the pair may fluctuate to the upside and perhaps breakout. If the metrics are “well above forecasts,” the U.S. Dollar could decline and the second support level may be pierced as a result. Signs the Ivey PMI is “below expectations” could cause the Loonie to break the resistance level. And if they come out “well below what’s expected,” the USD/CAD could pierce through resistance.
Tagged: currencies, currency trading, forex, forex trading, Forex trading strategies, USD March 12, 2012