Forex Glossary (1)

In this section I'm going to post some terms related to forex trading in oreder to enhance your trading skills.

A

Aggregate Demand:

Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and firms in other countries for good and services.

Aggregate risk:

Size of exposure of a single customer to a market related movement.

Aggregate Supply:

Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.

Aggressor:

A trader dealing on an existing price in the market.

Appreciation:

The increase in the value of an asset.

Arbitrage:

Profiting from differences in the price of a single currency pair that is traded on more than one market.

Ask:

The price at which a currency pair or security is offered for sale; the quoted price at which an investor can buy a currency pair. This is also known as the 'offer', 'ask price', and 'ask rate'.

Asset:

An item having commercial or exchange value.

B

Back Office:

The office location, or department, where the processing of financial transactions takes place.

Base Currency:

In terms of foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. The base currency is the currency against which exchange rates are generally quoted in a given country. Examples: USD/JPY, the US Dollar is the base currency; EUR/USD, the EURO is the base currency.

Bear Market:

An extended period of general price decline in an individual security, an asset, or a market.

Bid:

The price at which an investor can place an order to buy a currency pair; the quoted price where an investor can sell a currency pair. This is also known as the 'bid price' and 'bid rate'.

Bid/Ask Spread:

The point difference between the bid and offer (ask) price.

Big Figure:

The first two or three digits of a foreign exchange price or rate. Examples: USD/JPY rate of 108.05/10 the big figure is 108. EUR/USD price of .8325/28 the big figure is .83

Bull Market:

A market which is on a consistent upward trend.

Buy Limit Order:

An order to execute a transaction at a specified price (the limit) or lower.

Buy On Margin:

The process of buying a currency pair where a client pays cash for part of the overall value of the position. The word margin refers to the portion the investor puts up rather than the portion that is borrowed.

C

Cable:

The British pound/US Dollar exchange rate GBP/USD.

Candlestick Chart:

A chart that displays the daily trading price range (open, high, low and close).

Carry (Interest-Rate Carry):

The income or cost associated with keeping a foreign exchange position overnight. This is derived when the currency pairs in the position have different interest rates for the same period of time.

Central Bank:

A bank, administered by a national government, which regulates the behavior of financial institutions within its borders and carries out monetary policy.

Chartist:

A person who attempts to predict prices by analyzing past price movements as recorded on a chart.

Closing a Position:

The process of selling or buying a foreign exchange position resulting in the liquidation (squaring up) of the position.

Closing Market Rate:

The rate at which a position can be closed based on the market price at end of the day.

Commission:

The fee levied by an institution to undertake a trade on behalf of a customer.

Confirmation:

Written acknowledgment of a trade, listing important details such as the date, the size of the transaction, the price, the commission, and the amount of money involved.

Counterpart:

A participant in a financial transaction.

Cross-Rate:

The exchange rate between 2 currencies where neither of the currencies are USD.

Currency:

Money issued by a government.

Currency Pair:

The two currencies that make up a foreign exchange rate. IE: USD/YEN.

Currency Risk:

The possibility of an unfavorable change in exchange rates.

D

Day Order:

A buy or sell order that will expire automatically at the end of the trading day on which it is entered.

Day Trade:

A trade opened and closed on the same trading day.

Day Trader:

A trader who buys and sells on the basis of small short-term price movements.

Day Trading:

Refers to a style or type of trading where trade positions are opened and closed during the same day.

Dealer:

An individual or firm that buys and sells assets from their portfolio, acting as a principal or counterpart to a transaction.

Depreciation:

A fall in the value of a currency due to market forces.

Devaluation:

The act by a government to reduce the external value of its currency.

Discretionary Account:

An account in which the customer permits a trading institution to act on the customer's behalf in buying and selling currency pairs. The institution has discretion as to the choice of currency pairs, prices, and timing-subject to any limitations specified in the agreement.

E

Euro:

The common currency adopted by eleven European nations(Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal) on January 1, 1999.

European Central Bank (ECB):

The Central Bank for the new European Monetary Union.

Execution:

The Process of completing an order or deal.

F

Federal Deposit Insurance Corporation (FDIC):

The regulatory agency responsible for administering bank depository insurance in the United States.

Federal Reserve (Fed):

The Central Bank of the United States.

Fill:

The process of completing a customer's order to buy or sell a currency pair.

Fill Price:

The price at which a buy or sell order was executed.

Financial Risk:

The risk that a firm will be unable to meet its financial obligations.

Flat:

Term describing a trading book with no market exposure.

Forward:

A transaction that settles at a future date.

Forward Points:

The points that are added to or subtracted from the spot rate to calculate the forward rates for a forward foreign exchange transaction. These points are based on the differential between the interest rates of the two currency pairs.

Forward Price: (See forward rates).

Forward Rates: The net price resulting from calculating the forward points and subtracting them from the existing spot rate. This is the rate at which a currency can be purchased or sold for delivery in the future.

G

Good Till Cancelled Order (GTC):

A buy or sell order which remains open until it is filled or canceled.

H

Hedge: A transaction that reduces the risk on an existing investment position.

I

Initial Margin:

The deposit a customer needs to make before being allocated a trading limit.

Initial Margin Requirement:

The minimum portion of a new security purchase that an investor must pay for in cash.

J

Jobber:

A trader who trades for small, short-term profits during the course of a trading session, rarely carrying a position overnight.

L

Limit Order:

An order to execute a transaction at a specified price (the limit) or better. A limit order to buy would be at the limit or lower, and a limit order to sell would be at the limit or higher.

Liquidity:

Refers to the relationship between transaction size and price movements. For example, a market is "liquid" if large transactions can occur with only minimal price changes.

Long Position:

In foreign exchange, when a currency pair is bought, it is understood that the primary currency in the pair is 'long', and the secondary currency is 'short'.

M

Maintenance:

A set minimum margin that a customer must maintain in his margin account

Margin:

The amount of money needed to maintain a position.

Margin Account:

An account that allows leverage buying on credit and borrowing on currencies already in the account. Buying on credit and borrowing are subject to standards established by the firm carrying the account. Interest is charged on any borrowed funds and only for the period of time that the loan is outstanding.

Margin Call:

A call for additional funds in a margin account either because the value of equity in the account has fallen below a required minimum (also termed a maintenance call) or because additional currencies have been purchased (or sold short).

Mark-to-Market:

The theoretical value of an open position at the current market price.

Market Close:

This refers to the time of day that a market closes. In the 24 hour-a-day foreign exchange market, there is no official market close. 5:00 PM EST is often referred to and understood as the market close because value dates for spot transactions change to the next new value date at that time.

Market-Maker:

person or firm that provides liquidity making two-sided prices (bids and offers) in the market.

Market Order:

A customer order for immediate execution at the best price available when the order reaches the marketplace.

Market Rate:

The current quote of a currency pair.

Market Risk:

The risks that occur when general market pressures cause the value of an investment to fluctuate.

Maturity:

The date on which payment of a financial obligation is due.

Momentum:

The tendency of a currency pair to continue movement in a single direction.

O

OCO-One Cancels the Other Order:

A combination of two orders in which the execution of either one automatically cancels the other.

Offer:

The price at which a currency pair or security is for sale; the quoted price at which an investor can buy a currency pair. This is also known as the 'ask', 'ask price', and 'ask rate'.

Open Order:

Buy or sell order that remains in force until executed or cancelled by the customer.

Open Position:

Any position (long or short) that is subject to market fluctuations and has not been closed out by a corresponding opposite transaction.

Order:

A customer's instructions to buy or sell currencies.

Overnight Position:

Trader's long or short position in a currency at the end of a trading day.

P

Pip:

The smallest increment of change in a foreign currency price, either up or down.

Price:

The price at which the underlying currency can be bought or sold.

Price Transparency:

The ability of all market participants to "see" or deal at the same price.

Principal Value:

The original amount invested by the client.

Forex Glossary (1)

a

Top Ten Myths About Forex Trading

Forex is a market where exchange of one currency with another currency takes place. It’s the market which provides accessibility and liquidity to the traders to buy and sell one foreign currency in exchange of another.

Forex traders seek profit in buying currencies low and selling them high. This kind of trading became more popular with the widespread of the on-line Forex brokers. There is a lot of information available about Forex on the web. However there also many myths surrounding the foreign exchange market:

Forex trading is easy: Many people that want to dive into the world of the foreign exchange market believe that the Forex trading is easy — you just read a book or two and then you will be able to earn daily profits with just 2-3 hours trading daily. Others think that they can buy a profitable strategy and it will make them rich in Forex. In reality that’s just a myth. Succeeding in Forex isn’t easier than mastering any other profession — it takes time, money and a lot of practice.

"I will make money in Forex, if I can trade stocks successfully" Success in stock market doesn’t imply that you will get success in Forex market — there are many differences between trading stocks and the spot currencies. First of all, Forex market requires a lot of hard work and dedication as this market is open for 24 hours a day. You cannot just sit in front of your computer for the whole day and night, so the best way is that you should find the most suitable time periods for trading. Second, “buy&hold„ strategy simply won’t work in Forex market. Third, you don’t have that much information about currencies as you can get from the companies’ reports and statistics.

"I can make profit whenever I want if Forex market is open 24 hours a day" Once again, you won’t be sitting in front of your PC for the whole day to be able to trade 24 hours. You’ll have to develop automated trading software to get the advantage of 24 hours a day working schedule.

"I can be a successful Forex trader just following someone else’s signals" Many beginning traders get burned by the blind signal-following. That’s like putting away the whole responsibility for your actions to someone else. That may sound cool, but in reality you end up with the huge losses. Learn to rely on your own knowledge and skills. Remember that there were no great signal-followers in any financial market.

No commission is to be paid in Forex market: You only have to pay the spread, but you don’t have to pay the commission. And what’s spread? It is the difference between the buy and sell price of the currency pair at the same moment. You may end up with the major part of your profits in the broker’s hands if you plan to rely on the short-term trading.

Forex is a scam: Some skeptics and disappointed traders think that Forex is just some new fad to scam people for their hard earned money. Although there are many scams that are hiding behind the "brand" of Forex, that doesn’t mean that the Forex itself is a scam. There are many institutional Forex brokers, regulated Forex account managers and other solid companies in the market to whom you can trust.

"I need to exactly predict the market outcome to be profitable in Forex" There is no scientific method to know something in advance in the market with a 100% certainty. There would be no Forex market if you could know the exact currency rates beforehand. Trading is not the game of certainties; it’s a game of odds. One of the first things that new traders learn is to think in the terms of probabilities and risk-to-reward ratios.

"I need to use a very complex strategy to be successful in Forex" It’s a popular myth, in which many on-line sellers would want you to believe. The main requirement to be successful in Forex is a self-discipline and money management. There are many traders that make consistent profits with rather simple and old strategies.

"I need to have a lot of starting capital to get profit in Forex" Big capital investment won’t help you in Forex. You don’t need a lot of money to diversify in currencies and you can’t move the currency rates with your trading orders (you’d need billions of dollars to do that). Actually you can trade with a very a little capital, because Forex trading is almost always leveraged with the broker’s money.

Forex is gambling because it’s completely random: Although there is no certainty in Forex (as in any financial market) it doesn’t mean that it’s completely random. And it’s certainly not a gambling, since your success in this market depends mostly on your skills and experience, not on your luck.

Forex Automated The Key To Trading Flexibility.

Forex Automated The Key To Trading Flexibility Expert Traders often use the automated trading methodology to execute market orders when they are not able to be in front of their computer. The Forex market, like its counterparts (Stock and Bonds) does not have a central exchange. All trades are conducted online through a trading software 24 hours a day and 5 days a week.

It maybe 3 in the morning, but a trader using the automated technology will not miss a trade. All he has to do is input the currency pair and targeted amount that he wants to buy or sell. To execute the trade, he has to set a deadline, which if hit, executes the trade.

One can limit automated trading sessions according to their needs. It can be a 24 hour period or even longer if required. It depends upon the opportunity and the trading strategy. As a follow up, a trader can setup multiple set of trades, all on automation.

Automated trading kills trading indecisions

In trading, indecision is a common element. A trader may see an opportunity, but maybe weary of executing it, regardless of how good it maybe. Using the right software, the trader can avoid the volatility of the mind. The trader can set the right rules and can also edit any of the trades he manually set. Automated trading at times offers peace of mind.

Online trading is virtual. There is nothing tangible bought or sold. Since a country’s economy can change due to extreme external influences like natural disasters, Geo-political wars, etc, it is not recommended to take part, unless experienced in the market behavior. The initial account opened should be a test account to understand and test automated trading.

Automated trading, while offering peace of mind and emotionless trading, can be disastrous in certain conditions. Since it cannot sense and judge external events, it can, many of the times, lead to heavy capital losses.

Lastly, it is all about experience. Once you have gained enough understanding as well as confidence in your automated strategy, you can take the risk of trading while you sleep, or even if you are out of town celebrating your big wins.

Some Ways To Safe Yourself From Forex Scams.

Do not let your hard-earned money go to individuals who do not deserve any part of it. If you are into Forex trading or any other marketing ventures or trade schemes, be very careful. Of course, this must be applied in every aspect of your life. But when it involves money and your future, study your way through all the paths of the venture to avoid mishaps along the way.

Scams Everywhere

Did you know that fraudulent acts in Forex trades are becoming more and more common? This is because this kind of trading is also becoming more prominent. So as the number of individual traders increases, so does the group who commits fraud to such people who want to increase their savings.

Be vigilant, if you do not want to end up having nothing left in your accounts. You can find some help through reading and asking around. But the trick will all depend on you. If you don't succumb easily to acts that seem to be good to be true, then you are on the right track to becoming a successful trader.

The Preventive Measures

The most useful tip that you may be getting from the traders themselves is to educate yourself further before you become too involved in the trading system. But the scammers are also improving as time passes. The technology is evolving so fast that they are also benefiting from it.

Your only hope as the trader is that the Forex trade also comes up with high-tech solutions to prevent such bad acts. But while they are still thinking of such, you can opt for some measures to protect your claims and stocks.

The CTFC

There are warnings and additional explanations that can be read through the Commodity Futures Trading Commission (CTFC) Forex Fraud. Read those carefully and apply what's applicable when entering into any negotiation.

The NFA

The National Futures Association (NFA) can also be your ally on this task. Before trading with a group, check with the NFA to see if they are a member of this organization. This way, you can be assured of the companies, groups and individuals that you're dealing with before you are fooled into any scams.

The Better Business Bureau

In Forex Trading, you can also check the group or company that you'll be dealing with at the Better Business Bureau. This way, you can investigate on them first, research about their background and decide on your own if they are worthy to be trusted.

How To Turn Off Investment Swindlers?

After discussing about who are investment swindlers and the techniques they use to cheat the investors, lets talk about some techniques that one can use to turn off these swindlers and save himself/herself from the upcoming fraud. Ive been reading this article about 'Questions That Can Turn Off An Swindler', the article was so good so i am posting some of the major points of that article.

The first line of defense against investment fraud is your inalienable right to ask questions and--until you get the right answers--to say "No." And mean no. Not surprisingly, this is usually an investment swindler's first point of attack. To keep you from asking questions, he asks them! Invariably, the questions have "yes" answers, such as "You would at least be interested in hearing about such a fantastic investment opportunity, wouldn't you?" or "You would like to make a large amount of money in a short period of time with little or no risk, right?"

1. Where did you get my name?

If the response is that you were chosen from a "select list of intelligent and prudent investors," that select list may be the telephone directory, or a purchased list of persons who've bought certain types of books, subscribed to particular magazines, or responded to newspaper ads. If you have made ill-advised investments in the past, you can be pretty sure your name is on someone's alumni list. It's the list swindlers prize most: Easy preys who are eager to recoup (but are doomed to repeat) their earlier losses.

2. Can you send me a written explanation of your investment so I can consider it at my leisure?

For someone peddling fraudulent investments, that can be a double turnoff. For one thing, most crooks are reluctant to put anything in writing that might cause them to run afoul of postal authorities or provide material that, at some point, might become evidence in a fraud trial. Secondly, swindlers don't want you to do anything at your leisure. They want your money now.

3. Would you mind explaining your investment proposal to some third party, such as my attorney, accountant, investment advisor or banker?

If the answer goes something along the lines of "normally, I'd be glad to, but there isn't time for that," or if the salesman snaps back by asking "can't you make your own investment decisions?" these are virtually certain clues that your final answer should be an emphatic "No."

4. Can you give me the names of your firm's principals and officers?

Although some persons who establish and operate dishonest firms change their own names as often as they change their firms' names, even the hint that you are the kind of investor who checks into things like that can be a fast turn-off for a swindler.

5. Can you provide references?

Not just another list of other investors who supposedly became fabulously wealthy (the names you get may be the salesman's boss or someone sitting at the next phone), but reputable and reliable recommendations such as a bank or well-known brokerage firm that you can easily contact.

6. Are the investments you are offering traded on a regulated exchange, such as a securities or futures exchange?

Some bona fide investments are and some aren't, but fraudulent investments never are. Exchanges have strict rules designed to assure fair dealing and competitive price determination. There are also in-place mechanisms to provide for rule enforcement and to impose severe sanctions against those who fail to observe the rules.

7. How long has your company been in business?

In any kind of business activity, there can be advantages to dealing with a known, established company. This isn't to say that new businesses aren't starting up all the time or that the vast majorities aren’t perfectly reputable. But if you find yourself talking with someone who doesn't seem to have a past, it can be worthwhile to find out why. Many swindlers have been running scams for years but understandably aren't anxious to talk about it.

8. What has your track record been?

Before you accept a salesman's assurance that he can make money for you, you have the right to know what his performance has been in making money for others. And ask to have the information (if there is any) in writing. Boasting over the phone is one thing; putting it down on paper is quite another. In any case, even if you are able to obtain a documented performance record, don't lose sight of the fact that past performance in itself provides no assurance of future performance.

9. When and where can I meet with you or with another representative of your firm?

Chances are a crooked operator--particularly if he is operating out of a telephone boiler-room--isn't going to take
the time to visit with you and even more certainly doesn't want you to see his place of business.

10. Where, exactly, will my money be? And what type of regular accounting statements do you provide?

In many investment areas, such as futures trading, firms are required to maintain their customers' funds in segregated accounts at all times. Any mingling of investors' funds with those of the firm or its principals is prohibited. You might also want to find out what, if any, routine outside audits the firm's account records are subject to.

Some Techniques Swindlers Use.

Their techniques are as varied as their methods of establishing contact. If there is a common denominator, however, it is their ability to be convincing. The skills that make them successful are essentially the same skills that enable any good salesperson to be successful.

But swindlers have a decided advantage: They don't have to make good on their promises. In the absence of this responsibility, they have no reluctance to promise whatever it takes to persuade you to part with your money.

The first line of defense against investment fraud is your inalienable right to ask questions and--until you get the right answers--to say "No." And mean no. Not surprisingly, this is usually an investment swindler's first point of attack. To keep you from asking questions, he asks them! Invariably, the questions have "yes" answers, such as "You would at least be interested in hearing about such a fantastic investment opportunity, wouldn't you?" or "You would like to make a large amount of money in a short period of time with little or no risk, right?"

Investment Swindlers( Who they are, what they do?).

They are a faceless voice on a telephone. Or a flashy web site on the Internet. Or a friend of a friend. hey may have no apparent connection to the investment business or they may have an alphabet-soup of impressive letters following their names. They may be glib or fast-talking or so seemingly shy and soft-Forex Scamspoken that you feel almost compelled to force your money on them. The first rule of protecting yourself from an investment swindle is thus to rid yourself of any notions you might have as to what an investment swindler looks like or sounds like. Indeed, some swindlers don’t start out to be swindlers. There are case histories in which individuals who held positions of trust and esteem—accountants, attorneys, bona fide investment brokers and even doctors—have sacrificed their ethics for the fast buck of running an investment scam. In still other cases, investment programs that began with legitimate intentions went sour through happenstance or poor management, leading the promoter to mishandle or abscond with investors’ capital. Whether an investment is planned as a scam or simply becomes one, the result is the same. This is why protecting your savings against fraud involves at least three steps. Carefully check out the person and firm you would be dealing with. Take a close and cautious look at the investment offer itself. And continue to monitor any investment that you decide to make. No one of these precautions alone maybe sufficient.

Who are the Victims of Investment Fraud?

If you are absolutely certain it could never be you, the investment swindler starts with a
big advantage. Investment fraud generally happens to people who think it couldn’t happen to them. Just as there is no typical profile for swindlers, neither is there one for their victims.
While some scams target persons who are known or thought to have deep pockets, most swindlers take the attitude that everyone’s money spends the same. It simply takes more small investors to fund a large fraud. In fact, some swindlers deliberately seek out families that may have limited means or financial difficulties, figuring such persons may be particularly receptive to a proposal that offers fast and large profits. A favorite pitch is that small investors can become rich only if they learn and employ the investment strategies used by wealthy persons. Naturally, the swindler will teach them! Although victims of investment fraud can differ from one another in many ways, they do, unfortunately, have one trait in common: Greed that exceeds their caution. They also possess a willingness to believe what they want to believe. Movie actors and athletes, professional persons and successful business executives, political leaders and internationally famous economists have all fallen victim to investment fraud. So have hundreds of thousands of others, including widows, retirees and working people—people who made their money the hard way and lost it the fast way.

Forex Scams.

Despite many brokers claims to the contrary, trading foreign exchange successfully is not an easy thing to do. FX trading is at best a risky business and at worst, a scammer’s dream come true. The Commodities Futures Trading Commission (CTFC) has seen a marked increase in the amount of foreign exchange scams over the last few years as FX trading has become more and more popular. Here is a quick list of some popular general forex scams:

Signal Sellers

It seems like a new company springs up every day that has the signal service to beat all signal services. They profess to be able to sell you information on which trades you should make. These signal sellers usually charge a daily/weekly/monthly fee for their service and usually do not offer anything that will help improve your trading. There is no such thing as having a magic key to the market and if there was, why would you sell it?

Phony Investment Funds

In the past few years, funds called HYIP(High Yield Investment Program) have popped up all over the place. Most of these(if not all) are scams. They promise you a high level of return for temporary use of your money in their forex fund. It is a type of Ponzi scheme where the investors of yesterday get paid back by the investors of tomorrow. Once the fund runs out of prospects, they usually close down and take whatever money they had with them.

Miracle Software

There is no software that will figure out the forex market for you. However, a quick google search will turn up plenty of software sellers that say otherwise. Some companies out there are selling their special “packages” for upwards of $5,000 and many times it turns out to be something that you can find on the internet for free. It is generally not advisable to buy any type of forex software that will tell you which trades to make.

Most Traded Currencies.

When people hear of currencies changing, they are often confused. When they hear of the dollar gaining or losing on other types of currency, that do not realize that the currency is actually being bought, sold, and traded. The forex market, also known as the foreign exchange market, is a way for companies, banks, and individuals to trade currencies to try to gain on their initial investments. The forex market is different and unique; the three markets (US, Europe, Asia) have at least one running at all times during the weekdays; this makes this a 24 hour a week-day market, working constantly on the week days to make sure currencies can be traded. All currencies have the opportunity to be traded, but there are obviously major players that are traded the most on the forex market.

In general, the eight most traded currencies (in no specific order) are the U.S. dollar (USD), the Canadian dollar (CAD), the euro (EUR), the British pound (GBP), the Swiss franc (CHF), the New Zealand dollar (NZD), the Australian dollar (AUD) and the Japanese yen (JPY).

A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible. Some Of the common pairs are:

EUR/USD Euro / US Dollar "Euro"

USD/JPY US Dollar / Japanese Yen "Dollar Yen"

GBP/USD British Pound / US Dollar "Cable"

USD/CAD US Dollar / Canadian Dollar "Dollar Canada"

AUD/USD Australian Dollar/US Dollar "Aussie Dollar"

USD/CHF US Dollar / Swiss Franc "Swissy"

EUR/JPY Euro / Japanese Yen "Euro Yen"

How To Trade Using Pivot Points.

Breakout Trades:

The pivot point should be the first place you look at to enter a trade, since it is the primary support/resistance level. The biggest price movements usually occur at the price of the pivot point.

Only when price reaches the pivot point will you be able to determine whether to go long or short, and set your profit targets and stops. Generally, if prices are above the pivot it’s considered bullish, and if they are below it’s considered bearish.

Let’s say the price is hovering around the pivot point and closes below it so you decide to go short. Your stop loss would be above PP and your initial profit target would be at S1.

However, if you see prices continue to fall below S1, instead of cashing out at S1, you can move your existing stop-loss order just above S1 and watch carefully. Typically, S2 will be the expected lowest point of the trading day and should be your ultimate profit objective.

The converse applies during an uptrend. If price closed above PP, you would enter a long position, set a stop loss below PP and use the R1 and R2 levels as your profit objectives.













The Pullback Trade:

This is one of my favorite set ups. The market passes through S1 and then pulls back. An entry order is placed below support, which in this case was the most recent low before the pullback. A stop is then placed above the pullback (the most recent high - peak) and a target set for S2. The problem again, on this day was that the target of S2 was to close, and the market never took out the previous support, which tells us that, the market sentiment is beginning to change.














Breakout of Resistance:

As the day progressed, the market started heading back up to S1 and formed a channel (congestion area). This is another good set up for a trade. An entry order is placed just above the upper channel line, with a stop just below the lower channel line and the first target would be the pivot line. If you where trading more than one position, then you would close out half your position as the market approaches the pivot line, tighten your stop and then watch market action at that level. As it happened, the market never stopped and your second target then became R1. This was also easily achieved and I would have closed out the rest of the position at that level.

Understanding Pivot Points Using Charts.

Generally speaking, the pivot point is seen as the primary support or resistance level. The following chart is a 5 minute chart, where:

The green line is the pivot point (P).

The red lines are resistance levels (R1, R2, R3).

The blue lines are support levels (S1, S2, S3).

Using Pivot Points In Trading.

You are going to love this lesson. Using pivot points as a trading strategy has been around for a long time and was originally used by floor traders. This was a nice simple way for floor traders to have some idea of where the market was heading during the course of the day with only a few simple calculations.

The pivot point is the level at which the market direction changes for the day. Using some simple arithmetic and the previous days high, low and close, a series of points are derived. These points can be critical support and resistance levels. The pivot level, support and resistance levels calculated from that are collectively known as pivot levels.

Every day the market you are following has an open, high, low and a close for the day (some markets like forex are 24 hours but generally use 5pm EST as the open and close). This information basically contains all the data you need to use pivot points.

Daily pivot points give a structure to each new trading day in the currency market. With these values you can use traditional support and resistance techniques to enter and exit trades. But before I get to the strategy, I'll show you how to calculate pivot values.

Pivot Point (PP) = (High + Low + Close) / 3
Resistance 1 (R1) = (2 x Pivot Point) - Low
Support 1 (S1) = (2 x Pivot Point) - High
Resistance 2 (R2) = Pivot Point + (Resistance 1 - Support 1)
Support 2 (S2) = Pivot Point - (Resistance 1 - Support 1)

(Pivot values for several different currency pairs are posted on the TradingMarkets web site every day.)

The pivot values are plotted as horizontal levels which, in turn, serve as support and resistance. The pivot point itself can be thought of as the day's mid-point, or fulcrum. It's where the buyers and sellers meet to determine the day's trend in a currency pair. The support and resistance levels that are plotted around the pivot point are just that: potential support and resistance.

A daily pivot point (in green), S2, S1, R1, and R2 values are plotted on the chart below of the EUR/USD FX future. The chart is a 5-minute interval. Notice how the Euro broke above the pivot point early in the day, and then proceeded to trade up to R1, where it met resistance and gyrated for the rest of the day. There are many sites providing facilities to calculate pivot points, like the following site:

http://www.earnforex.com/pivot_points_calculator.php

How To Place A Forex Order.

Whether you are trading in a demo account or a live "real money" account, when you are ready to make a trade, you will need to place an order with your Forex broker. You will place an order to start a new trade or to end a trade. So now, we'll talk about the types of orders that apply to the Foreign Exchange Market.

Market Order – It is an order where you can buy or sell a currency pair at the market price the second that the order is processed. Customers utilizing ACM's online currency trading platform click on the buy or sell button after having specified their deal size. The execution of the order is instant; this means that the price assured at the exact time of the click will be given to the customer. Setting a market order by phone is quite similar but normally takes a few seconds more time.

Entry order – It is an order where you can buy or sell a currency pair when it attains a certain price target. In theory, this can be any price. You can set an entry order for the low price of a time period or the high price of a time period. The entry order is also studied by university students under forex trading education.

Limit Orders - A limit order is an order placed to buy or sell at a certain price. The order essentially contains two variables, price and duration. The trader specifies the price at which he wishes to buy/sell a certain currency pair and also specifies the duration that the order should remain active.

GTC (Good till cancelled): A GTC order remains active in the market until the trader decides to cancel it. The dealer will not cancel the order at any time therefore it is the customer's responsibility to remember that he possesses the order.

GFD (Good for the day): A GFD order remains active in the market until the end of the trading day. Since foreign exchange is an ongoing market the end of day must be a set hour.
For ACM the end of the trading day occurs at exactly 23:00 CET.

Stop orders - A stop order is also an order placed to buy or sell at a certain price. The order contains the same two variables, price and duration. The main difference between a limit order and a stop order is that stop orders are usually used to limit loss potential on a transaction whilst limit orders are used to enter the market, add to a pre-existing position and profit taking. The same variations are used to specify duration as in limit orders (GTC and GFD). Let's take the following example:

Example: Trader x Buys EUR/USD 100'000 @ 0.9340, he's expecting a 60 to 70 pip move in the market but he wants to protect himself in case he has overestimated the potential strength of the Euro. He knows that 0.9310 is a b support level so he places a stop loss order to sell at that level. Trader x has limited his risk on this particular trade to 30 pips or USD 300.

Another usage of a stop order is when a trader is expecting a price breakout to occur and wishes to grasp the opportunity to 'ride' the breakout. In this case a trade will place an order to buy or sell 'on stop'. To illustrate the logic behind this let's review the following scenario:

Example: Trader x sees EUR/USD breaking through the 0.9390 resistance level. He believes that if this happens, the price of EUR/USD could be headed to 0.9450 or over. At this point the market is at 0.9350 so trader x places an order to initiate a buying position of 500'000 at 0.9392 'on stop'.

OCO - An OCO (order cancels other) order is a mixture of 2 limit and/or stop orders. 2 orders with price and duration variables are placed above and below the current price. When one of the orders is executed the other order is cancelled. To illustrate how an OCO order works let's take the following example:

Example: The price of EUR/USD is 0.9340. Trader x wants to either buy 500'000 at 0.9395 over the resistance level in anticipation of a breakout or initiate a selling position if the price falls to 0.9300. The understanding is that if 0.9395 is reached, he will buy 500'000 and the 0.9300 order will be automatically cancelled.

Some Forex Quotations.

Now i'm going to post some famous forex quotes, this might sound off-topic but m going to post it anyways, :D

1.“If you get in on Jones’ tip; get out on Jones’ tip”. If you are riding another person’s idea, ride it all the way.

2. Run early or not at all. Don't be an eleven o'clock bull or a five o'clock bear.

3. Woodrow Wilson said, "a governments first priority is to organize the common interest against special interests". Successful traders seek out market opportunities capitalizing on the reality that government's first priority is rarely achieved.

4. People who buy headlines eventually end up selling newspapers.

5. If you do not know who you are, the market is an expensive place to find out.

6. Never give advice-the smart don't need it and the stupid don't heed it.

7. Disregard all prognostications. In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word-nobody! Thus the successful trader bases no moves on what supposedly will happen but reacts instead to what does happen.

8. Worry is not a sickness but a sign of health. If you are not worried, you are not risking enough.

9. Except in unusual circumstances, get in the habit of taking your profit too soon. Don't torment yourself if a trade continues winning without you. Chances are it won't continue long. If it does console yourself by thinking of all the times when liquidating early preserved gains you would otherwise have lost.

10. When the ship starts to sink, don't pray-jump!

11. Life never happens in a straight line. Any adult knows this. But we can too easily be hypnotized into forgetting it when contemplating a chart. Beware of the chartist's illusion.

12. Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.

13. Whatever you do, whether you bet with the herd or against, think it through independently first.

14. Repeatedly reevaluate your open positions. Keep asking yourself: would I put my money into this if it were presented to me for the first time today? Is this trade progressing toward the ending position I envisioned?

15. It is a safe bet that the money lost by (short term) speculation is small compared with the gigantic sums lost by those who let their investments "ride". Long term investors are the biggest gamblers as after they make a trade they often times stay with it and end up losing it all. The intelligent trader will . By acting promptly-hold losses to a minimum.

16. As a rule of thumb good trend lines should touch at least three previous highs or lows. The more points the line catches, the better the line.

17. Volume and open interest are as important to the technician as price.

18. The clearest and easiest way to determine a trend is from previous highs and lows. Higher highs and higher lows mark an uptrend, lower highs and lower lows mark a downtrend.

19. Don't sell a quiet market after a fall because a low volume sell-off is actually a very bullish situation.

20. Prices are made in the minds of men, not in the soybean field: fear and greed can temporarily drive prices far beyond their so called real value.

21. When the market breaks through a weekly or monthly high, it is a buy signal. When it breaks through the previous weekly or monthly low, it is a sell signal.

22. Every sunken ship has a chart.

How To Trade Trend Lines?

Only one of two things can happen when a price approaches support or resistance: the price can break through it, or it can bounce off and reverse direction. The same is of course true for trend lines.

Trading on a Pullback

If a chart is trending in a clear direction, and a trend line can be drawn connecting a series of relative highs or relative lows, trading opportunities exist when the price approaches the trend line. If the price bounces off the trend line and resumes the trend in the original direction, this can be an excellent opportunity to enter the market in the direction of the dominant trend. This is often referred to as buying on a pullback in an up trend or selling into strength in a downtrend.

Buying on a bounce off such a support line can be done through a limit order just above the support.

Trading a Break of the Trend

The second possible trade is the break of the trend line, which can be traded just as any other broken support or resistance line. If a candle closes through a trend line to the downside, as in the example below, the proper entry point would be to sell once the price moves below the low of the breakthrough candle.

This ensures that the short term force is in the direction of the break lower. The opposite would be true for a break above a resistance line.

Understanding Trend Lines.

Trend Lines are the most powerful technical analysis tools. They allow you to gauge the trends direction, identify potential reversal levels and enter trades with low risk and high reward. In this article, you will learn how to use trend lines indicators in FOREX trading

An uptrend creates a series of trends that have higher lows and highs. A trend line drawn between the rising lows can often be fairly accurate in determining where the market can find greater support during the next low trend and indicate fairly good buying levels. In the Up Trend, Forex trend line that connects at least two lowest low (Low open/Close) will create a trend line. In the uptrend a trend line acts as Support.





















Many Forex traders will choose an area below the trend line at which stop orders are are placed resulting in a sharp sell off. New sellers are generally attracted by breaks below the uptrend line. It's quite normal to see a series of lower lows and lower highs during a downward trend in the market.In this case, the trend line is drawn in alignment with the descending highs and will mirror the analysis as described above. In the Down Trend Forex trend line that connects at least two highest highs (High Open/Close) will create a trend line. In the downtrend a trend line acts as Resistance.

Leading And Lagging Indicators.

The term “indicator” refers to a metric whose main task is to point towards a certain situation/aspect etc - in short: to “indicate” something. For example the metric “cost-per-click” indicates how much one has to pay for one click at a certain time on a certain link.

Leading Technical Indicators are the indicators that help to predict possible future trend. Many trading systems use these types of indicators to generate trend reversal signals. However, there is no guarantee that the analyzed security, index or market will reverse its trend after a signal is generated. The common problem with this type of technical studies is that in some cases a trade could be opened too early and the signal could be ignored (no reversal). Examples of such indicators could be volume based technical indicators. Examples of these would be:

1. number of booked impressions for a certain ad position for the coming quarter (e.g. 100000 ad impressions for REC booked for Q2 2007)
2. budget for specific keyword groups for the next quarter (e.g. 100.000 USD for keyword-group “fitness” booked for Q2 2007)
3. number of leads referred by affiliate partner campaigns to a certain product (e.g. 500.000 leads monthly referred by campaign “X” to product “Y”)

Lagging Technical Indicators are the technical indicators that would rather follow a trend then predict its reversal. These studies are more reliable than the leading technical indicators. However they have other problem: in many cases a trade could be opened and closed when it is too late and the trend already in reversal movement. Example of these studies could be MACD, Moving Averages, etc. Examples

1. number of page impressions for a specific product within the past month (e.g. 1 million page impressions for product “X” in August 2006)
2. number of unique users for a specific site (e.g. 100.000 unique users for the sports special “FIFA WM” in June 2006)
3. amount of revenue generated with a specific product

Leading indicators mostly refer to the beginning of the value chain and reflect the drivers and/or causes of value whereas lagging indicators mostly refer to the end of the value chain and reflect the effect certain measures, decisions, actions had.

Forex Trading In India: Legal Or Not?

Still i can see debates going on this topic that whether forex trading is legal in india or not? People are still in doubt. Those who are against the trading in india say that forex trading is illegal in india is that Only corporates are allowed to trade in forex - subject to the condition that they can use only their free dollar reserves. i.e. they cant purchase dollars by converting rupees into dollar, they can use only the existing dollars they have earned in normal business. Also another condition is that they cannot use leaverage of more than 10 times. Forex trading for indivisual is strictly not allowed for indians, forex trding is explicitly banned in FEMA and is non-bailable offence.

Well lets talk about what i feel that if you are intersted in forex trading Open an online share trading or forex trading or currency trading account whose registered Regulatory office is based anywhere out side Indian Jurisdcition. Then open an International Personal Banking Account in the same country bank where you hold trading account and I would like to say that it is allowed as per the LRS scheme FAQ point number 36 mentioned on http://www.rbi.org.in/scripts/FAQView.aspx?Id=53

Once you open a trading account AND also an international personal banking account in jurisdiction which falls outside India, then you can first of all send the money to you international personal banking account using the LRS scheme. And once it's remitted the powers of Indian jurisdiction is over. Then from that bank account simply transfer to your trading account which is also in the same country and does not falls in Indian Jurisdiction. This is the way and legal way to do forex trading using the LRS scheme and within legal limits.

In simple words select a broker online first then you just need to deposit funds in your online account with your credit card, or Paypal and do trading. You can also withdraw your funds through Paypal. Your bank won't even care where you spent your money, or from where you even got it.

HAPPY TRADING!

Candelstick Reversal Patterns.

Candlestick patterns can consist of just one candlestick or couple of them, usually not more than six, some reversal patterns are described below:

Hammer And Hanging Man Patterns

This is a one candlestick pattern with small body and long lower shadow (and no upper shadow). The hammer occurs in a downtrend and hanging man in the uptrend. The smaller the body is and the longer the long lower shadow is, the better is the actual signal. Also, hanging man with a black body is more bearish and hammer with white body more bullish.













Engulfing Pattern

It consists of two bodies ( two candlesticks ) of which one is filled and one is empty. The second day’s body should be engulfing the first day’s body like you can see on the picture. Shadows are not important. This pattern predicts end to the previous trend. The first day’s color should reflect the trend (filled for downtrend and empty for uptrend).Note that in order to make any conclusions from this pattern, there must be a previous trend. The bigger the second day’s engulfing is, the more likely signal it is.

Bullish: when a white, real body totally covers, "engulfs" the prior day's real body. The market should be in a definable trend, not chopping around sideways. The shadows of the prior candlestick do not need to be engulfed.













Bearish: when a black, real body totally covers, "engulfs" the prior day's real body. The market should be in a definable trend, not chopping around sideways. The shadows of the prior candlestick do not need to be engulfed.













Stars make up part of four separate reversal patterns:

Morning Star: This is a bullish reversal pattern that consists of long filled body which is followed by small body (and a gap between them), followed by a long empty body. It’s good if there’s a gap both after and before the middle body. Like with most reversal candlestick patterns, the first body should be according to the previous trend. Note that in case of the second body it is not important whether it is filled or empty.













Evening Star: A bearish top reversal pattern and counterpart to the Morning Star. Three candlesticks compose the evening star, the first being long and white. The second forms a star, followed by the third, which has a black real body that moves sharply into the first white candlestick.













Doji Stars

When a doji gaps above a real body in an uptrend, or gaps under a real body in a falling market, that particular doji is called a doji star. Two popular doji stars are the evening star and the morning star.

Evening Doji Star: A doji star in an uptrend followed by a long, black real body that closed well into the prior white real body. If the candlestick after the doji star is white and gapped higher, the bearishness of the doji is invalidated.













Morning Doji Star: A doji star in a downtrend followed by a long, white real body that closes well into the prior black real body. If the candlestick after the doji star is black and gapped lower, the bullishness of the doji is invalidated.