Wedge chart patterns - forex trading is the best business

Wedge chart patterns ~ forex trading is the best business

I want to start a series of articles on various technical chart patterns. I do believe that if you learn them and start applying in your trading you will significantly increase your chances of making stable money in financial markets. I have recently finished one series on different market conditions: calm trend, calm range, volatile trend and volatile range and I would suggest that you read those very carefully at least once. You should find a lot of useful practical tips in each article. Now, this article will cover a pretty power technical pattern: wedge. I like trading this one as we usually have a very powerful breakout out of the pattern and prices move very strongly and fast when a wedge is broken. So, let us analyze what this pattern is and how you can successfully trade it. 

What is a wedge? It is a technical pattern with a narrowing range within two converging trendlines (that slant in upward or downward direction (depending on the type of a pattern: upward or downward)) and that usually indicates an end of a trend that can be traced in the pattern itself. It means that if you have a falling wedge (prices are going down) the breakout will most probably be upwards. Price moves between the two trendlines and the narrowing range builds pressure for an upcoming breakout. If you have a rising wedge (prices are going down) the breakout will most probably be upwards. Well, maybe the explanation was kind of difficult, but when you see the examples you will clearly understand what the pattern is like. 

When you finish reading the post I recommend reading other related posts and watch a video below:

How to do technical chart analysis

Triangles

Head and shoulders

Falling wedge

Falling wedge is recognized as a bullish technical chart pattern. You can clearly see converging trendlines in the pattern that has a downward direction. The range is narrowing towards the end of the pattern and most often than not prices break upwards starting a new trend or continuing a previous one. 

The example above in usd/jpy pair clearly shows us a nice falling wedge pattern. As the price was moving down and the range of the wedge narrowing increasing pressure and finally causing the pattern to be broken upwards with an explosive move. The pair moved around 600 pips when the upper trendline of the wedge was broken. That is precisely what you are looking for. You expect the upper trendline to be broken in a wedge. If it is not, the pattern is finally distorted and loses its’ validity. 

How to trade the pattern?

You need to place a buy stop order above the closest point where the price hit the upper trendline and then retraced. If it failed to reach the lowest low (of the pattern) you place the stop loss a few pips below the retracement (from the upper trendline). In the example above you can see that the point for entry in usd/jpy was 93.68 level (a few pips above that) since that was the place where the price hit upper trendline and retraced. The price however failed to reach previous low and started rising again. The lowest point of retracement marked a level where we need to place our stop loss order. In our case that would be 92.71 level (a few pips below that). Open your chart to find out yourself entry and stop levels for the trade. You either exit your trades by moving stop loss as the price moves in the direction of the trend till the stop is hit or you exit your trade at a predefined level. In the latter case you still need to move your stop in order to protect your profits. 

Rising formation

Falling wedge is recognized as a bearish technical chart pattern. You can clearly see converging trendlines in the pattern that has an upward direction. The range is narrowing towards the end of the pattern and most often than not prices break downwards starting a new trend or continuing a previous one. 

The example above in eur/usd pair shows an excellent rising wedge pattern. As the price was moving up and the range of the wedge narrowing increasing pressure and finally causing the pattern to be broken downwards with an explosive move. The pair moved around 900 pips (with minor retracements) when the lower trendline of the wedge was broken. That is precisely what you are looking for. You expect the lower trendline to be broken in a wedge. If it is not, the pattern is finally distorted and loses its’ validity. 

How to trade it?

You need to place a sell stop order below the closest point where the price hit the lower trendline and then retraced. If it failed to reach the highest high (of the pattern) you place the stop loss a few pips above the retracement (from the lower trendline). In the example above you can see that the point for entry in eur/usd was 1.3203 level (a few pips below that) since that was the place where the price hit lower trendline and retraced. The price however failed to reach previous high and started falling again. The highest point of retracement marked a level where we need to place our stop loss order. In our case that would be 1.3243 level (a few pips above that). Again, you either exit your trades by moving stop loss as the price moves in the direction of the trend till the stop is hit or you exit your trade at a predefined level. In the latter case you still need to move your stop in order to protect your profits. As you may see your stop loss was only 45 pips and the potential profit very big (900 pips). So, when you see a wedge forming next time get ready to take a trade.

Time frames

Some say that the pattern has to be three or six months in length and I could not agree less. You will notice those patterns on various time frames. If it is a continuation pattern and a wedge is formed in a counter trend move you would usually see it on hourly chart and that may last a few days. And then you have a nice breakout in the direction of the prevailing trend. On a longer term chart (lasting months and weeks) the pattern will probably signal a reversal and a change of trend. 

Ok, I will finish now. Be sure to read related articles to learn more on technical analysis. I promise to expand on this in my future posts. 

I hope you benefited from the post. If you liked the post I would also be happy if you gave a plus on Google+, tweeted, liked it on Facebook and other social platforms. Have a nice day. 

Vytas.

If you want to see and experience what real investing in financial markets such as Forex, stocks and commodities is all about I recommend trying innovative social investment platform of Etoro. Initial deposits are as low as a few hundred bucks. The best dealer I have heard of so far!

http://www.etoro.com/A41516_TClick.aspx 

Disclaimer

Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog http://trend0.blogspot.com/ is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.

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What are commodities - forex trading robot mac

What are commodities ~ forex trading robot mac

In my post I have often mentioned the word ‘commodities’, but did not fully explain what it means. Let me do it today. A commodity is a raw material or object that is either extracted from below the surface of the earth, such as: gold, silver, oil or simply comes out of the earth: grains, coffee, soybeans. We could also treat various kinds of meat as commodities as well as products that are produced from raw material. These can be: sugar, apple juice and etc. They can be bought in the Futures market where the goods are traded in contracts or some of them, such as sugar and the above mentioned apple juice as well as cocoa (and a few more) can be bought in your local store. 



If you want to see and experience what real investing in financial markets such as Forex, stocks and commodities is all about I recommend trying innovative social investment platform of Etoro. Initial deposits are as low as a few hundred bucks. The best dealer I have heard of so far!
http://www.etoro.com/A41516_TClick.aspx 

Anybody can trade commodities

Nowadays, any trader can trade these securities via some internet broker with the help of trading platform in the same way that stocks, currencies or bonds are traded. On the one hand, in this way you do not really buy physical materials (you do not get physical delivery of commodities). On the other hand, it is much better and more secure to trade these than stocks, currencies or bonds. Why? Because, unlike the other above mentioned securities these will never go bankrupt. 

Why commodities are better than other securities?

Stocks of any company lose all value, because a company can go bankrupt. Currencies are very volatile and you have to be a pro to trade them. And bonds of a country can also lose value if a company goes bankrupt (which is very real at the moment (take Greece or Spain for example). This will never happen to commodities as they cannot go bankrupt. We will always need gold, sugar, rice and meat. So, if you want more security in your trade commodities is the place to go to. 

However, you should remember that as any other financial instrument for investment commodities have become an object of speculation. They are trade on margin with high leverage in the futures market and if you are not careful you can lose a lot of money doing the same thing that experienced speculators and investors do. 

Ok, I hope you understand the basic concept of a commodity. In my future posts I intend to go over each commodity (or maybe the most popular ones) and look at the specifics of it. In the meantime you can read more on the topic in Wikipedia.

Here is the article:

http://en.wikipedia.org/wiki/Commodity

Read also my previous post:

6 important trend trading tips

Disclaimer

Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog http://trend0.blogspot.com/ is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.

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HOW TO TRADE FOREX WITH STOCHASTIC OSCILLATOR - forex trading companies in panama

HOW TO TRADE FOREX WITH STOCHASTIC OSCILLATOR ~ forex trading companies in panama

Searching for an effective indicator that provides valid reversal signal is a common activities of novice forex  traders. I am here to help you, friends. Stochastic oscillator is such an indicator that helps to find the best price level to enter into a currency pair and exit from it.

In stochastic oscillator, two lines, one is main line and another is signal line, are illustrated. The cross overs between these two lines supply the entry and exit signals.

In the stochastic oscillators window, two horizontal lines 80 and 20 are illustrated. The area above the 80 line is the overbought area and the area below the 20 line is the overbought area.

Source:metatrader4.com

Now we should look for the crossovers. If the main line crosses the signal line from down within the oversold area, the stochastic indicator indicates that the market will go up. In the other side, if the  main line crosses the signal line from up within the overbought area, the stochastic indicator indicates that the market will go down.

Source:metatrader4.com

Using the crossovers we can both enter into the market and exit from it. For example, if we enter into the market with a buy order, we should close the order when the stochastic oscillator makes a crossover within the overbought area. In case of sell order, the order should be closed, when the crossover take place withing the oversold area. I think stochastic oscillator is not an effective tool to set stop loss and take profit levels.

You can increase the accuracy of the signals got from the stochastic oscillator by confirming them with some other indicators and chart pattern breakouts. MACD & RSI can be effective here.

Dear friends, I hope this post will enrich your knowledge of forex trading. You can share your opinion and expertise in below, dropping comments.

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HOW TO TRADE BEARISH AB CD HARMONIC CHART PATTERN - forex trading for beginners indicator

HOW TO TRADE BEARISH AB CD HARMONIC CHART PATTERN ~ forex trading for beginners indicator

Bearish AB=CD is a simple but widely found harmonic chart pattern drawn following some simple steps explained in this post.

Bearish AB=CD harmonic chart pattern suggests a short entry upon completion of the pattern. To trade the pattern, firstly traders need to find the pattern on the price chart.

How to find a bearish AB=CD harmonic chart pattern on price chart?

 

The fist step to find a Bearish AB=CD harmonic chart pattern is to find A and B points of the pattern. The A and B points are found at the bottom and top of a bullish trend respectively.

 

In the next step, we will find the C point of the bearish harmonic chart pattern. To find the B point, we will draw a fibonacci retracement tool from A to B. The B point should be at the 38.2-88.6% fibonacci retracement level of AB. Look at the following illustration.

In this step, we will draw a fibonacci retracement tool from B to C to confirm the D point of the bearish AB=CD harmonic chart pattern. The D point should be at the 113-261.8% fibonacci retracement level of BC. 

How to trade the bearish AB=CD harmonic chart pattern?

When the D point of the bearish AB=CD harmonic chart pattern is confirmed, a short entry is suggested. The stop loss for the order at point D should be placed above the upper fibonacci retracement level or other resistance level.

The profit target for the above order should be placed at the AC trend line. In some cases, AC trend line can be broken by the price then the profit target can be placed at the 50-88.6%  fibonacci retracement level of CD. Following image explains such a situation.

Dear Traders, 

This post explains the basics to trade bearish AB=CD harmonic chart pattern. If you want to join the discussion with other traders, you can drop a comment bellow. You can also subscribe yourFXguide to receive updates.

Thank You & Good Luck !!!

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Double bottom - start your own forex trading business

Double bottom ~ start your own forex trading business

Today we continue analyzing various chart patterns and double bottom technical pattern is the topic of the post. You can find this structure on various time frames and it is pretty go indication that a trend is about to change. So, this particular pattern indicates a reversal. You probably remember that we either have continuation or reversal patterns. This is a bullish reversal pattern. It means that the bears will probably lose their fight soon and bulls will start reigning in a particular security double bottom is formed. Let us look at some necessary conditions that have to be that we might state that the picture we see is a valid double bottom pattern. 

When you finish this article I also highly recommend reading other posts on chart patters:

Inverted head and shoulders

Pennants

Flags

Wedge

How to do technical chart analysis

Six key elements of technical analysis

Triangle formation

Trading head and shoulders

Key components in double bottom pattern

As it is a reversal pattern the first thing that there has to be is a previous downtrend. The security had to go down for some time in order for the pattern we are discussing to be formed. Depending on the structure the downtrend could have been from a few days (weeks, months) to a year and more. 

There has to be the first sharp fall that marks the first spot in the bottom. It is known as the lowest point in the ongoing downtrend. At this point we cannot say whether the tendency has changed or not as there still isn’t any indication of a reversal and increase in demand.

The first rally! Reaching the first bottom the price of the security rallies upwards. It indicates that smart money assumes it is good time to accumulate the security and so buying ensues. After some time (hours, days or even weeks) the first top (or important resistance) is formed. 

Back to the bottom! At some point inertia of the bears kicks in and they continue selling assuming that the downtrend is not over. So, the price of the security collapses to the first spot of support (bottom) and this time the spot becomes the second spot of a double bottom pattern. 

The second rally! After hitting the first support (bottom) the security starts rallying, which indicates that there really is serious demand for the security at current prices. In most cases the prices will reach the first spot in resistance. In most cases the price after hitting the resistance will retrace a little. 

Break of the resistance. The two points of resistance that were made as the security rallied after reaching the bottom is finally broken. That is the point where the double bottom pattern becomes a valid one. 

Support becomes resistance. That is a classical rule of technical analysis. It is not a necessity, but a security sometimes comes back to test previous resistance (that is now support) and if the break was not fake the support will hold. 

Traditional target for the exit of your long trade is the distance from the break point to the lowest point of the pattern added to the breakout point. That is the smallest distance that the price is expected to travel. It may go further, or it may fail to reach the expected target. However, if you need some guidelines where to exit this could be one of those. Additionally, you can move your stop below clusters of hourly or daily candles (depending on the strength of reversal). 

Time frames

As I said, you can find the pattern on all time frames. The longer the time frames the more valid it becomes. There have been a few of those patterns (on smaller time frames) in various currencies. Let us look an example that happened on a small time frame.

gbp/usd example

After a prolonged move upwards gbp/usd pair started collapsing on the 9^th of May (2013). The downward move continued for about two weeks till the sharp move down ended on the 23^rd of May (2013) with a strong rally upwards. The rally continued for four days and formed the first peak or resistance on the 27^th of May at 1.5156 level.  

The pair then retraced to its’ previous bottom and failed to break it. On the 29^th of May the second point in the double bottom pattern was formed. On the same day it rallied to previous resistance and formed second high (resistance) at 1.5145. It then retraced and consolidated for a few sessions before breaking the resistance and rallying to 1.5240 on the next day. One had to place a buy stop above the resistance (1.5156) with a stop loss below the bounce after second rally’s high (at 1.5098) and take profit order around 1.5300 level. 

According to our rules the exit target should be around 1.5300 level, so it has not been reached yet. The pair came to visit previous resistance (now support) and support held. The pair bounced from 1.5140 level.

This week will show whether gbp/usd will reach our target or not. Looking at technical price action we can see clear demand coming at previous resistance. So, let us be patient and wait for confirmations during European session whether we could add to our position or let the pair go down. 

Conclusion

Double bottom pattern is a bullish reversal pattern that can be found on various time frames. The pattern can be found in various securities regularly. One should wait for a break of resistance to enter market with buy orders. 

Ok, I will finish now. Be sure to read related articles to learn more on technical analysis. I promise to expand on this in my future posts. 

I hope you benefited from the post. If you liked the post I would also be happy if you gave a plus on Google+, tweeted, liked it on Facebook and other social platforms. Have a nice day. 

Vytas.

If you want to see and experience what real investing in financial markets such as Forex, stocks and commodities is all about I recommend trying innovative social investment platform of Etoro. Initial deposits are as low as a few hundred bucks. The best dealer I have heard of so far!

http://www.etoro.com/A41516_TClick.aspx 

Disclaimer

Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog http://trend0.blogspot.com/ is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.

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HOW TO STUDY THE COMMODITY MARKET TO CONDUCT THE FOREX FUNDAMENTAL ANALYSIS - forex trading for beginners part 1

HOW TO STUDY THE COMMODITY MARKET TO CONDUCT THE FOREX FUNDAMENTAL ANALYSIS ~ forex trading for beginners part 1

Commodity market analysis, in order to conduct forex fundamental analysis, is one of the most important dimensions of forex fundamental analysis. When I was introduced with the fact that the US dollar is negatively correlated with gold and oil price, I started searching on "how is forex affected with the commodity market?" 

I discovered a lot studding some books and online free resources, and would be sharing with you on this blog. With out the commodity market analysis, effective fundamental analysis of currency market is almost impossible. 

Here in this post, I will only focus on the way to conduct the commodity market analysis, later I will write on the currencies and currency pairs that are affected by the commodities.

When is a currency affected by the price of a commodity?

The answer is very simple. If an economy produces, exports or imports a commodity, the currency of the economy will be affected by the price of that commodity. But a currency will be significantly affected by the price of a commodity, if the economy of the currency is included in the list of top exporters or importers of the commodity.

How is the currency of the economy that exports a commodity affected by the price of that commodity? 

If an economy is a net exporter of a commodity, the value of the currency of that economy increases with the increase in price of the commodity, and decreases with the decrease in price of the commodity. 

For example, Canada is a net oil exporter, and it is included in the list of top ten oil exporters of the world, thats why the value of Canadian Dollar go up with the increase of oil price.  

How is the currency of the economy that imports a commodity affected by the price of that commodity? 

If an economy is a net importer of a commodity, the value of the currency of that economy increases with the decrease in price of the commodity, and decreases with the increase in price of the commodity. 

For example, United States is one of the top ten importer and consumer of oil, thats why US Dollar is negatively correlated with the oil price.

How the price of a commodity is determined in international market?

When a trader already learned the correlation between a currency and a commodity, in next step, he/she should learn "how the price of a commodity is determined in the international market". 

Simply, the price of a commodity in international market is determined by the demand and supply of the commodity. If the demand of the commodity goes up, the price of the commodity also goes up, on the other hand, if the supply of the commodity goes up, the price of the commodity goes down. 

How traders can conduct commodity market analysis?

If a trader intended to trade a currency pair that is affected by a commodity price, he/she should conduct the analysis on the commodity. Almost all major currency pairs are affected by the commodity prices.

Commodity prices primarily affected by the demand and supply news. Traders should learn the list of top exporters and importers of a commodity to conduct analysis on the commodity. Some geopolitical news can also affect the price of a commodity.

Dear Traders, this post is just a summary of the effects of commodity market in determining the value of a currency, and the importance of commodity market analysis in forex trading. You have to wait for the upcoming posts to explore the whole picture.

If you want to receive the updates right into your inbox, subscribe my blog with email address. You can also drop a comment below to join the discussion.

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The Tokyo Stock Exchange - forex trading jobs manchester

The Tokyo Stock Exchange ~ forex trading jobs manchester

The Tokyo Stock Exchange (TSE), the second largest stock exchange in the world, follows closely behind the New York Stock Exchange, based on monetary volume. It has also become a major player in the world of stock trading throughout the world.

TSE was established on May 15, 1878 and the first thing it did was to issue government bonds to former samurai. Trading stocks in bonds, gold, and silver currencies became popular in the 1920’s when Japan experienced rampant growth in their economy. Following WWII, the exchange was closed down and reopened in 1949 under the guidance of American authorities.

5 Exchanges

The Securities and Exchange Law was enacted in March of 1947 and revised in April of 1948. On April 1, 1949, three stock exchanges were established in Tokyo, Osaka and Nagoya. Trading on these exchanges began in May and in July of that same year five additional stock exchanges were established. The Kyoto exchange became the Osaka Securities Exchange in March 2001. The Kobe exchange dissolved in October 1967 and the one in Hiroshima merged into Tokyo Stock Exchange in March 2000. Fukuoka and Niigata became one with Tokyo Stock Exchange in March 2000 and the Sapporo Securities Exchange was established in April 1950. Japan now has five stock exchanges.

Standard trading hours today on the exchange are from 9:00 a.m. to 11:00 a.m. and 12:30 p.m. to 3:00 p.m.

Currently, the TSE currently lists 2,375 domestic companies and 27 foreign companies. The TSE accounts for 90.6% of all securities transactions in Japan, considerably more than its rival exchanges, the Osaka Stock Exchange (4.2%) and the Nagoya Stock Exchange (0.1%).

3 Sections

There are three sections to the TSE: There are 1,724 companies listed in the first section which consists of stocks of large companies. The second section is for mid-sized companies and has 494 companies. And the ‘Mothers Section’ representing the fastest growing, most liquid companies in the country has 157 on its list.

There are two main indices tracking the Tokyo Stock Exchange are the Nikkei 225 and the TOPIX. The Nikkei average is an index of companies selected and calculated by the Nihon Keizai Shimbun, Japan’s largest business newspaper. It is a price-weighted average and is the most watched index for Asian stocks.

The TOPIX measures all other listed companies as well as the J30 index of large industrial companies. The TOPIX is considered as the most appropriate benchmark for evaluating portfolio management Like most major exchanges throughout the world, the major functions of the exchange are to provide a responsible market place that lists and monitors securities and supervises trading participants. The management team at TSE today is headed by headed by acting Chairman and CEO Taizo Nishimuro and comprises nine directors, four auditors, and nine executive officers.according to TSE.

The last few years have seen several incidences where the TSE was forced to shut down. In November 2005, the longest interruption in the history of the exchange, 90 minutes, took place due to technical issues with a newly installed transactions system. On December 8 of the same year, a net loss of 7 million occurred J-Com shares were mistakenly sold. And on January 17, 2006, after a raid by prosecutors on the internet company Livedoor, the TSE was forced to close early as trade volume nearly exceeded the system’s capacity of 4.5 million trades per day causing the Nikkei to fall 2.8%.

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