Forex Trading Robots

www.facebook.com/diosforex It is very important for anyone getting into the Forex trading market to have a good understanding of what Forex robots are and how they work. Forex robots are like advisors; they are bits of software that actually open and close trades which are on the foreign exchange market in accordance with current conditions on the market. Robots are good because they take out the need for a person to stick to their strategy; this is an important factor when it comes to success and something many people have a hard time with. With the use of a Forex robot, a plan is executed without second thoughts or double guesses. This is something that a lot of people struggle with and that can be detrimental to their success.

 The Forex software is able to be programmed to search out trades which show a potential for winning in a selection of currency crosses. The software will also analyze minute changes and use the information in order to identify any trends affecting the pricing movements. When trends are found, the Forex software will be able to place a trade automatically through the traders account. The trade will then be constantly monitored until a profit is recognized. The software will then close out the trade with no regards as to whether the market is rising or falling. This is where the Forex robots are very helpful when it comes to taking emotions out of the equation.

Basics of Forex

Just as with any market, the idea is to buy when the market is low and sell when it is high. This is how profits are made, but knowing what and when to buy and sell can be a very technical and difficult thing for someone without enough understanding and knowledge. In Forex, the goods that are being traded on this market are actually rates of currencies from different countries. These currencies have their own prices, just as any other type of goods does. In order to settle transactions which take place between businesses that are located in different countries, banks worldwide execute currency trades on the Forex market. The market is constantly changing and this means traders need to know how to understand everything taking place in order to make good decisions. People who are new to Forex trading will have their work cut out when it comes to learning everything they should know in order to see success and make it well worth their while. It is a very bad idea for someone to jump into Forex without the knowledge necessary to have a clear understanding of everything involved. Many people think they have just found the golden key to success and jump in too soon only to walk away only to experience financial devastation.

Online Forex Basics

Just as with any market, the idea is to buy when the market is low and sell when it is high. This is how profits are made, but knowing what and when to buy and sell can be a very technical and difficult thing for someone without enough understanding and knowledge. In Forex, the goods that are being traded on this market are actually rates of currencies from different countries. These currencies have their own prices, just as any other type of goods does. In order to settle transactions which take place between businesses that are located in different countries, banks worldwide execute currency trades on the Forex market. The market is constantly changing and this means traders need to know how to understand everything taking place in order to make good decisions. People who are new to Forex trading will have their work cut out when it comes to learning everything they should know in order to see success and make it well worth their while. It is a very bad idea for someone to jump into Forex without the knowledge necessary to have a clear understanding of everything involved. Many people think they have just found the golden key to success and jump in too soon only to walk away only to experience financial devastation.

Forex Common Chart Indicators

Common chart indicators in the Forex trading system are used by Forex traders as tools to help evaluate the market and minimize trading risks. There are several common charts that are read and evaluated by Forex traders to help them make knowledgeable trading decisions in the market. The charts include Bollinger Bands, MACD, Parabolic SAR, Stochastics, and Relative Strength Index, or RSI.

Bollinger Bands are common charts that are used to measure the volatility of the market. These bands act as mini resistance and support levels. Two trading strategies that involve the Bollinger Bands are the Bollinger Bounce and the Bollinger Squeeze. The Bollinger Bounce strategy goes with the idea that the price generally always returns to the center of the Bollinger Bands. The Bollinger Squeeze is a trading strategy that is utilized to catch breakouts early in the game. Bollinger Bands are best used in markets that are ranging.

MACD

 is used to catch trends early on and can also help traders to spot trend reversals. The MACD is made up of two moving averages, one slow and one fast, and a histogram, which consists of vertical lines that measure the distance between the two averages. Because of the fact that the MACD uses so many moving averages, there is a lag involved.

Parabolic SAR

 is an indicator that spots trend reversals, and the SAR stands for Stop And Reversal. This common chart indicator is the easiest of them all to interpret, because this indicator only gives signals that are bullish or bearish. The candlestick chart is used with this indicator, and when the dots are above the candles it is a signal to sell. If the dots on the chart are below the candles, it is a signal for the trader to buy. This common chart indicator is used best in trending markets that consists of downturns and long rallies.

Stochastics

 are common chart indicators that are used to indicate oversold and overbought conditions. When the moving average lines go above seventy it is an indication to the trader to sell because the market is overbought. When the lines are below thirty, traders are looking to buy because this means the market is oversold. Relative Strength Index, or RSI, is like stochastics because it indicates conditions of overbuying and overselling on the market.

Each common chart indicator has strengths and weaknesses. Smart traders use at least three or four of these indicators to gauge which way the market is going. Common chart indicators can be a valuable tool for Forex traders if they are analyzed correctly.

Forex Trading Moving Averages

Another very useful tool that is usually found in all the Forex platforms toolbox is the moving averages options. Needless to say a moving average is a trending line that helps you gauge the market direction and the market main movements as it is being developed. As always, these tools help you make sure you are on the right track but should not be used in isolation to determine an entry in a trade unless extensively studied and well educated about these tools potentials.

 In Forex moving averages are also known as rolling averages, for the meaning of a running average. This is a sum that continues to develop as it progresses during the trading session and will change direction all the time during your trading session.

 Moving averages in Forex are usually either ‘simple’ or ‘exponential’ as the most common although other variations namely weighted moving average and cumulative are also used but a little bit less, we shall get into an overall understanding in order to help you understand a little bit more their use and application in your trading plan. When applied a Forex moving average tries to clean as much market noise as possible to help the trader identify the main market movement rather than the occasional market spike. You can use moving averages in Forex to identify reversals, trend ending or trend starting patterns. As already told, usually you do not have to learn how to draw or create the lines yourself as most modern trading platforms would have these tools made available to you as a click, where all the lines are drawn for you to maximum accuracy and perfection.

 Understand that Forex moving averages are used in conjunction to a timeframe and you need to usually use higher timeframes in order to understand strong patterns rather then just smaller market moves which might be insignificant to the trade. Smaller timeframe decisions sometimes can result into exiting early from a potential trade that would be going where your research had planned! Make good use of moving averages when trading Forex and apply them to your trading strategy, remember to always back-test in order to get familiar with the tools before entering any live trades.

Market Analysis and Fibonacci

Technical and fundamental analysis are based on the assumption that things have happened in the past will often indicate what will happen in the future. Fundamental analysis depend on the past underlying financial performance of a company or industry to make forecasts while technical analysis will look at past stock price movements for the same purpose. From that perspective you can imagine fibonacci analysis as the technical equivalent to the fundamentals of discounting cash flows or projecting financial ratios. Fibonacci analysis is a way to forecast levels of support and resistance and project price targets. It can be used to set stops as well as timing entries, however, the most valuable information is what it can tell us about risk. In this lesson we will be introducing a few of the tactical concepts and tips you will need to understand these tools and begin using them as a technical analyst. Through the subsequent sections in this lesson we will examine several case studies to understand how these ratios work in the live market and why they are considered one of the most important tools available to technical analysts. 

Fibonacci Concepts 

What are the ratios and how are they used?

I will spare you the long, historical (and mostly erroneous) explanation of where the Fibonacci ratios come from and how it appears in the natural world except to say that fibonacci analysis is based on the fibonacci number series and the Fibonacci ratios, which are then applied to price charts. While there are many Fibonacci ratios, in my experience, it is sufficient to stick with the standard levels of 23.6%, 38.2%, 50%, 61.8%, 100% and 161.8%. Slicing these levels into thinner segments results in a crowded chart and probably won't improve your analysis.

  How are fibonacci ratios calculated? 

 The ratios are based on the distance between fibonacci numbers. If we use three numbers from a simple fibonacci series (1,1,2,3,5,8,13,21,34,55...) you can see how this works in the examples below. 1. (34-21)/34 = 38.2% 2. (34-21)/55 = 23.6% 3. (34-21)/21 = 61.8%

Where do the lines go? 

 The sticky part of fundamental and technical analysis is that they are both very subjective, which means that they allow for a great deal of interpretation and individual preference. However, with Fibonacci analysis that subjectivity is easy to handle

Bodies or shadows? 

 There is always a minor debate about whether you should anchor your Fibonacci retracement to the body of a candle or the shadows. I prefer to use the shadows so that the study includes the extremes of market sentiment. Most of the time, the difference is insignificant but sometimes it can be critical. In the examples above you can see that I anchored the Fibonacci retracement to the shadows of the candles at the top and bottom of the trend.

Support and resistance lines or areas? 

 I feel that support and resistance is more often an area around the Fibonacci lines than a specific to-the-penny point in the charts. You will find that prices move around a support or resistance line, especially during a consolidation. Discounting that level because of a temporary break may lead you to ignore a valid signal in the future. In the examples I will use in this lesson I will show how to evaluate that support and resistance area and how to use it to be aware of risk as well as opportunities.

What is Support

Support level is defined as the price level at which point the demand level is strong enough to stop the trading price from declining further. When prices reach this support level it is more likely to bounce off this level, than to break through this level. The support level indicates the point at which the trading price becomes cheaper and traders become more interested in buying, giving way to a support level where sellers become less interested in selling. When prices reach the support level it is proved that the increase in demand will outweigh the supply and prices will be stopped from falling below the level of support. When prices decline below the level of support, there is an indication of new willingness to sell. This may also be the case if there is a new unwillingness to buy. Once the level of support breaks, the cycle will repeat from the start – A decrease in price will awake new interest in buying and a new level of unwillingness to sell -giving way to a new level of support This will form the new lower-level support level. Support trading can usually be found below the current price, but it is not impossible to trade at or very near support. Support levels are not always easy to identify due to various factors. Price movement is by nature volatile and prices may briefly dip through the support level, before returning upwards. Predicting the point, at which a price is considered to be breaking through the support line, comes with experience and research. Some will only consider this breakpoint if the price closes 1/8 below the current established support level.

 What is “Resistance” and “Resistance Level”?

Resistance level is defined as the level at which selling is considered strong enough to hamper the price from increasing any further. The level of resistance theory defines that as a price moves towards resistance, sellers become more willing to sell, and buyers in turn become more unwilling to buy. When the price reaches the level of resistance, supply will outweigh demand and the price will be prevented rising through the resistance level. A break above the resistance level predicts a new willingness to buy and a new lack of interest in selling. Resistance will not always be strong enough to hold and a breakout might not always be able to break. The bulls must win the bears over before a breakout can be formed. Once the current resistance level has been broken through, the process will repeat and a new higher level of resistance is establishes. We hope you have found our article on support and resistance trading interesting and that you will now be more confident about support and resistance analysis. Feel free to browse our website for more informative articles on support and resistance trading.