Forex for a trader
When to sell or buy forex

When to sell or buy forexThe Basics of How Money is Made Trading Forex. Your Forecast Is Headed to Your Inbox. But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk. Your demo is preloaded with ?10,000 virtual funds , which you can use to trade over 10,000 live global markets. We'll email you login details shortly. You are subscribed to Richard Krivo. You can manage you subscriptions by following the link in the footer of each email you will receive. An error occurred submitting your form. Please try again later. Article Summary : Trading currency in the Forex market centers around the basic concepts of buying and selling. Let's take the idea of buying first. What if you bought something (it could literally be almost anything.

a house, a piece of jewelry or a stock) and it went up in value. If you sold it at that point, you would have made a profit. the difference between what you paid originally and the greater value that the item is worth now. Currency trading is the same way. Let's say you want to buy the AUDUSD currency pair . If the AUD goes up in value relative to the USD and then you sell it, you will have made a profit. A trader in this example would be buying the AUD and selling the USD at the same time. For example if the AUDUSD pair was bought at 0.74975 and the pair moved up to 0.76466 at the time that the trade was closedexited, the profit on the trade would have been 149 pips . (See the chart below…) The Idea Behind Forex Trading. Created using IG’s web trading platform. Had the pair moved down to 0.74805 before the trade was closed, the loss on the trade would have been 17 pips. Also, it makes no difference which currency pair you are trading. If the price of the currency you are buying goes up from the time you bought it, you will have made a profit.

Here is another example using the AUD. In this case we still want to buy the AUD but let’s do this with the EURAUD currency pair. In this instance we would sell the pair. We would be selling the EUR and buying the AUD simultaneously. Should the AUD go up relative to the EUR we would profit as we bought the AUD. In this example if we sold the EURAUD pair at 1.2320 and the price moved down to 1.2250 when we closed the position, we would have made a profit of 70 pips. Had the pair moved up instead and we closed out the position at 1.2360 we would have had a loss of 40 pips on the trade. Remember, we are always buying or selling the currency on the left side of the pair. If we buy the currency on the left side, which is called the base currency, we are selling the one on the right side which is called the cross or counter currency. The opposite would be true if we were selling the currency on the left side. Now let's take a look at how a trader can make a profit by selling a currency pair.

This concept is a little trickier to understand than buying. It is based on the idea of selling something that you borrowed as opposed to selling something that you own. In the case of currency trading, when taking a sell position you would borrow the currency in the pair that you were selling from your broker (this all takes place seamlessly within the trading station when the trade is executed) and if the price went down, you would then sell it back to the broker at the lower price. The difference between the price at which you borrowed it (the higher price) and the price at which you sold it back to them (the lower price) would be your profit. For example, let’s say a trader believes that the USD will go down relative to the JPY. In this case the trader would want to sell the USDJPY pair. They would be selling the USD and buying the JPY at the same time. The trader would be borrowing the USD from their broker when they execute the trade. If the trade moved in their favor the JPY would increase in value and the USD would decrease. At the point where they closed out the trade, their profits from the JPY increasing in value would be used to pay back the broker for the borrowed USD at the now lower price. After paying back the broker, the remainder would be their profit on the trade. For example, let’s say the trader shorted the USDJPY pair at 122.761. If the pair did in fact move down and the trader closedexited the position at 121.401, the profit on the trade would be 136 pips. Shorting a Currency Pair Like USDJPY. Created using IG’s web trading platform. On the other hand, if the pair was shorted at 122.761 and the pair did not move down but rather it moved up to 122.951 when the position was closed, there would be a loss on the trade of 19 pips.

In a nutshell, this how you can make a profit from selling something that you do not own. In wrapping up, if you buy a currency pair and it moves up, that trade would show a profit. If you sell a currency pair and it moves down, that trade would show a profit. Catch the DailyFX Team during office hours to ask any questions about the market or trading. Register at one or all of the links below (times are based in North America): Currency markets revolve around the buying and selling of different currencies. To learn more checkout our New to Forex trading guide which helps teach about the exciting forex landscape. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. 2.1 Level 1 Forex Intro 2.2 Level 2 Markets 2.3 Level 3 Trading. 5.1 Short Term 5.2 Medium Term 5.3 Long Term. What are you really selling or buying in the currency market? You are buying and selling money, or more specifically, a nation’s currency.

Generally, in the forex market, it helps to think of money as a commodity. When you buy a currency you hope that its value will strengthen compared to the currency that you are selling. If you are selling, you are betting that the currency you are selling will weaken compared to the currency you look to buy. Like any other commodity, currencies are displayed in quotes based on the current rate in the market, known as the spot rate, and traded in currency pairs; like the U. S. dollar against the Canadian dollar (USDCAD) or the US dollar and Japanese yen (USDJPY). Also, although you are buying another country's currency, you are not buying anything ‘physical', and thus no physical exchange of money ever takes place. This can be confusing, but think of it like buying shares of a publicly traded company where everything is done electronically inside your trading account. But unlike the stock market, the forex market doesn't have a central exchange like the New York Stock Exchange for instance. Instead the forex market is an interbank market, which means it's all connected together in a network of banks and institutions. You can also think of buying currencies as buying shares in a country, you are betting on the performance of a particular country's economy. You'll learn more about reading a currency quote and the economics that move currency rates in the upcoming Introduction to forex section. How to buysell in Forex? How to buysell in Forex? How to set stop loss and set take profit when buying selling in Forex? From the technical point of view, it depends on the trading platform you use. Every Forex broker will gladly give you the Forex trading Platform manual or will be able to guide you through the steps of setting buysell orders, profit targets and exits per you request.

As an example, let's review the basic order setting steps at the one the most popular trading platforms - METATRADER4. On the price chart - mouse Right Click. Go to 'Trading', 'New order'. You will have a new window with order specifications. Symbol - the currency you'll be trading Volume - how many lots you'll be buying Stop loss - you need to put the price you want to be stopped at in case a trade goes against you. Take profit - your profit goal. Comment - leave it blank. Type - leave it as Instant execution. Then you have two buttons: Buy and Sell. Press one of them. Ok. You have a new trade open. You will be able to see it on your chart and also you can check menu 'Trade', located below your chart. If you now try to Right click on this trade, you will have an option to 'Modify or Delete order', where you'll be able to change your trading preferences.

1. WHAT IF A TRADER STARTS TRADING BY BUYING AT THE LOWEST, LETS SAY, EXCHANGE RATE AND STOPS WITH THIS POSITION AT THE END OF THE DAY? IS HE CONSIDERED TO BE SUCCESSFUL OR NOT AT THE END OF THE DAY? WHAT I MEAN IS, HAS THIS POSITION TO BE FOLLOWEDCLOSED BY ANOTHER ONE IN ORDER TO REALISE A PROFIT (I. E. TO SELL AT A HIGHER LEVER RATE) OR IS THIS A "COMPLETE" ACTION BY ITS OWN? WHAT IF HE MAKES ANOTHER POSITION ANOTHER DAY (SAY, NEXT DAY)SO AS TO "COMPLETE" HIS PREVIOUS DAY'S POSITION BY SELLING AT A HIGHER EXCHANGE RATE? THANX IN ADVANCE (SORRY IF MY QUESTION IS STUPID, I HAVE NOT YET STARTED PLAYING) The best thing, of course, to get a Forex demo account and see how orders work. But, since you ave a question, let's answer it. When you buy at some price, you put so called "Buy order". This means that you now hold a currency that you bought, for example EURO. During the day the value of the currency will rise or fall. In order to realise the profits you've earned, you'd need to Close your "Buy order". On the trading platform it will simply be shown as "Close an order" or "Close a trade" etc. What actually happens, you sell a currency you bought earlier, capitalising on the changes it produced while you were holding it. It can be a day, a few hours, a few minutes, a week, a month and so on. I have asked this question before but i believe the construction of the question made me not to be understood. Please once again i want to know how i can set: stop loss, Take profit, Type(buy limit or buy stop), and At price. All these are what to fill in for a pending order to trade fundamental analysis. Please help me resolve this proplem of gap in knowledge.

Just yesterday i placed a trade where i got up to 80 pips but because of difficulties of no being able to exit the trade, i lost the pips and even took some losses. Trading without TP and SL is like a car without break. Please help. Lionel D. L (Nigeria) The exact steps of setting a stop loss, take profit etc will depend on the trading platform you use. Typically you have an option to set stop loss and take profit orders during the moment when you request to open a trade, either a market order or a limit order. In the new order window you should be able to see fields for stops and profit inputs. If you opt not to set stops and profit targets during the time when you were placing a new order, you always have an option to edit your existing order. Usually by doing Right mouse click on an existing trade line on your account you can see a menu option inviting to edit the order. Finally, you always have the third option to close the trade here and now any time. This is also done by either clicking on the open trade on the chart(if platform supports trading form the charts) or in your trade displayaccount window. Note: in most cases you won't be able to close your trades using market order (e. g. manually here and now) if you come to do it on the weekend, to be precise: from 5 pm Friday to 5 pm Sunday. 4-th option in to call you broker by phone and ask to close a trade. Also your Forex broker can always give you step-by-step explanation of how to use their trading platform and set upclose orders. i dont know when is right to place a buy or a sell pls help. Currency trading is a speculative market. You want to buy when the currency is cheap and then sell it when it becomes more expensive.

For example, buying EURUSD pair (when you buy EUR for US dollars), traders expect EUR to rise in value, because if it does, they can sell it back and receive more US dollars in return. Regarding the topic of where to find good buying and Selling opportunities, first open any free live charts of any currency pair. Take a simple look and try to anticipate the next possible move. If this makes you exited and you want to learn what evaluation methods stand behind market forecasts, you've got an exiting world of Forex which is all about how and when to buy and sell. Read just about everything you can find. Start from: forex-charts-book. com What are the best indicators one can use. Is it go to us more dan two indicators in a trade. kumba nigeria. It is impossible to name best indicators, every trader has different view of how the chart analysis should be done. The best indicator is the price itself with Support and Resistance levels. So, if you want to take a serious step towards success in trading, learn about the role of support and resistance in technical analysis. Another tool to get a good grip on is a trend line. Learning how and when to place a trade is very essential in FX trading. However, ther are various indicators. Candlesticks, Parabolic SAR, Moving Average and RSI. Please how is it possible that the Parabolic SAR will be saying BUY while the Candlesticks are saying SELL.

WHich one is more reliable. I am some how confuse about the issue of buying and selling, when you want to buy say US dollars as against Euro-EURUSD, do you click on buy or sell? Thanks. Ayegba, Nigeria. exlent! from anand India. Why do market go agaist me each time i place trade? Is it that i got it wrong or the platform owner uses some kind of soft ware agaist me? Ahmed. what is the meaning of buysell in currency pair GBPUSD can we sell currency before we buy it. by gulabsingh INDIA. How do i determine the amount of pips to allocate to my stoploss and the trailing stop control inorder to lock in profits? Paul Adenowo, Lagos Nigeria. most of the forex indicators are just deceiving, the best thing is for you to develope your own trading strategy.

Adepoju Sunday Nigeria. I honestly don't understand why people would take a loss when they can wait for the currency to rise again. Believe it or not, I had bought EURSEK and lost 167 pips. The very next day, I gained back and even made a profit of 30 pips! How do you calculate for stop loss and take profit. Yomi, Nigeria. when should we buy. i virtualy dont know anything but i wish to learn about forex trading. hassan from lagos. Hello, I am new to Forex market so naturaly I have a mass of questions but ofcourse I will set only a few :). 1. Should I always use stop and limit ?

Is it more safe that way ? 2. How long should I wait to close the position ? 3. If I start with a 100EUR deposit how big my margin should be ? 4. Is it ok to close the postion if it's +4.01 to take the pf ? 5. If my trade goes against me when is the best time to stop it ? Should I give it a chance to get back on its feet and start to rise again ? Is that so huge risk ? 6. What is PIPS ? 7. Candlesticks, should I study them very well ? 8. Are there any profitable strategies or is it based only acording our own anticipation and spectulative capabilities ? Thank You very much in advance . Ivan. ive just lost 20 dollars in forex. but i will be back for revenge. hmmmm. My brother, the good news is that i have become an authority in forex trading over the years after loosing three thousand five hundred dollars. To answer the smallest question first. If you are buying the dollar and the currency pair is eurusd, you will sell this pair.

If the currency pair arrangement is usdcad and you want to buy the dollar, them you will buy the pair. It all depends on which currency comes first in the arrangement. On when to buy or sell, i must tell you that all the indicators are meant to deceive you. No broker wants you to ever make a penny in forex no matter your losses. Even the trading systems you buy is only a deal to put money in the pocket of the seller. No one will ever tell you how to trade and make a profit, except me. No one ever told me. My paid trainers never did. So i learnt through the hard way and of course, God's guidance. The only system that tells you when to buy or sell is YOU. Now dont be disappointed with my answer as i will tell you what to do. The right decision is the simplest. Now look at the chart. Is it trending upward or downward? If upward, buy ; and vice versa.

Then check whether the trend started recently or will soon get to resistance level. This will guide you in taking your decision. Also check whether the chart is not trending; that is, a ranging market. Now buy and sell between the resistance levels. Always confirm the change of direction before you do. This is the best guide you can get and it is for free. God bless us. Tolu Bamisile. 08185585307. Nigeria. I am using MT4 platform but it seems it is programmed to give me an automatic stop loss of around 100 pips. The modifydelete button never lights up if I try to type in my own stop loss figures. Sometimes the same is true of take profit. MT4 tends to force me to take its own figures.

What is the explanation. I am on a demo account. Peter - Uganda. How long does a market trade last? Say I sell EuroUSD today at , how long will that order stand; days, weeks, forever? Currently I'm trading on CNBC demo account and periodically my positions disappear, as if expiring, yet I cannot find out what the term is? Also, if I sold EuroUSD and it expires in some way, is this effectively a close that realizes my gainloss? How do I calculate stop loss and take profit when trading currencies? You assistance will be highly appreciated. How to buy and sell of the forex trades in nigeria. how do we determine profitable news?

and when do we place buy and sell? do news have anything to do with current exchange rate? pls help me out. Hello I need clarity on the issue of Value of a Position. My position was opened with 25USD and at 00:01 when the position was rolled over the email said the "value of my position was 6,364USD". Does this mean if I closed my position then I would have received that amountvalue into my account? My pips were around 10USD during the rolling over. Hello I need clarity on the issue of Value of a Position. My position was opened with 25USD and at 00:01 when the position was rolled over the email said the "value of my position was 6,364USD". Does this mean if I closed my position then I would have received that amountvalue into my account? My pips were around 10USD during the rolling over. Know When to Buy or Sell a Currency Pair.

In the following examples, we are going to use fundamental analysis to help us decide whether to buy or sell a specific currency pair. If you always fell asleep during your economics class or just flat out skipped economics class, don’t worry! We will cover fundamental analysis in a later lesson. But right now, try to pretend you know what’s going on… In this example, the euro is the base currency and thus the “basis” for the buysell. By doing so, you have bought euros in the expectation that they will rise versus the U. S. dollar. If you believe that the U. S. economy is strong and the euro will weaken against the U. S. dollar, you would execute a SELL EURUSD order. By doing so, you have sold euros in the expectation that they will fall versus the US dollar. In this example, the U. S. dollar is the base currency and thus the “basis” for the buysell. If you think that the Japanese government is going to weaken the yen in order to help its export industry, you would execute a BUY USDJPY order. If you believe that Japanese investors are pulling money out of U. S. financial markets and converting all their U. S. dollars back to yen, and this will hurt the U. S. dollar, you would execute a SELL USDJPY order. By doing so you have sold U. S dollars in the expectation that they will depreciate against the Japanese yen. In this example, the pound is the base currency and thus the “basis” for the buysell. By doing so you have bought pounds in the expectation that they will rise versus the U. S. dollar. If you believe the British’s economy is slowing while the United States’ economy remains strong like Chuck Norris, you would execute a SELL GBPUSD order.

By doing so you have sold pounds in the expectation that they will depreciate against the U. S. dollar. In this example, the U. S. dollar is the base currency and thus the “basis” for the buysell. If you think the Swiss franc is overvalued, you would execute a BUY USDCHF order. By doing so you have bought U. S. dollars in the expectation that they will appreciate versus the Swiss Franc. If you believe that the U. S. housing market weakness will hurt future economic growth, which will weaken the dollar, you would execute a SELL USDCHF order. By doing so you have sold U. S. dollars in the expectation that they will depreciate against the Swiss franc. When you go to the grocery store and want to buy an egg, you can’t just buy a single egg; they come in dozens or “lots” of 12. In forex, it would be just as foolish to buy or sell 1 euro, so they usually come in “lots” of 1,000 units of currency (Micro), 10,000 units (Mini), or 100,000 units (Standard) depending on your broker and the type of account you have (more on “lots” later). “But I don’t have enough money to buy 10,000 euros! Can I still trade?” You can with margin trading! This is how you’re able to open $1,250 or $50,000 positions with as little as $25 or $1,000. You can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. You can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. Listen carefully because this is very important! Buy the Higher Low and Sell the Lower High.

by Tyler Yell, CMT , Forex Trading Instructor. Position Trading based on technical set ups, Risk Management & Trader Psychology. Your Forecast Is Headed to Your Inbox. But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk. Your demo is preloaded with ?10,000 virtual funds , which you can use to trade over 10,000 live global markets. We'll email you login details shortly. You are subscribed to Tyler Yell. You can manage you subscriptions by following the link in the footer of each email you will receive. An error occurred submitting your form. Please try again later.

Article Summary: Trading in the direction of the trend and buying low while selling high are mutually exclusive. Because we recommend you locate the direction of the trend and find a good entry, DailyFX has a new concept for you to consider. Buy the higher low and sell the lower high. This article will provide you with methods to do just that to prevent you from catching a falling knife. If you’ve ever heard a trader say that price can’t possibly go any lower, chances are they haven’t been trading for long. That’s not meant to be harsh but simply to say, no trader knows the future . What traders can do is recognize that patterns tend to play out and repeat over and over again which can lead to higher probability entries. Learn Forex: Buy Low & Sell High Is Cute But Ineffective. Chart Created by Tyler Yell, CMT. One of the principles of every trader who enters an order, whether long or short is that they believe they’ve entered at a good price in relation to where they expect the market to go. One trader will be right and the other will be wrong if they entered at the same price with similar stops and limits. While there is no guarantee which trader will be profitable and which won’t, there are some things we can do to put the odds in our favor. Learn Forex: Buy the Higher Low with Bullish Trend Lines or Rising Channels. Chart Created by Tyler Yell, CMT. Learn Forex: Sell the Lower High with Bearish Trend Lines or Falling Channels.

Chart Created by Tyler Yell, CMT. Methods to Help Prevent Buying a Low Before It Goes Lower. As stated at the beginning of the article, there is no crystal ball or Holy Grail. However, there are methods that you can use to stay on the likely right side of the big moves . The three methods we’re going to look at are pivot lines to identify support and resistance , RSI to understand directional strength, and trendlines or directional channels. The purpose of these three methods is to help you avoid buying something that’s falling. On the other hand, selling something just because it’s rising can become a fool’s game as well. That’s why studying price action can give a big leg over investors or traders who feel pr ice “can’t go any lower”, which has been the rallying cry of many losing trades. Pivot Lines for Support & Resistance. Pivot Lines are a leading indicator of sort. In short, Pivot Lines are a famous indicator to help you forecast likely future points of resistance and support to limit risk and find profit targets. Rising Pivot levels overtime can help you find a significant higher low to enter a buy trade or lower high to enter a sell trade on. Learn Forex: Pivots Clearly Paint Dynamic Levels of Rising Support for Entries Zones.

Chart Created by Tyler Yell, CMT. Knowing that the Holy Grail doesn’t exist, Pivots are a helpful way to get a feel for the directional bias. Combining pivots lines with candlestick analysis is a preferred method of many traders to find strong entries with the trend. A short cut for new traders looking at price action is to fade long wicks (highlighted above) against the trend as they likely are a rejection of a price test and often end up carrying back price in the direction of the trend. Relative Strength Index (RSI) for Directional Strength. The Relative Strength Index is the utility knife of many traders. When the RSI crosses an extreme level and is making directional moves higher or lower, traders can look for strong entries that favor the RSI bias. One simple way to find a directional bias on RSI is to add a moving average or trendline to the RSI and find bounces off support or breakouts of the RSI for a high probability entry. Learn Forex: RSI with Moving Average Added For Directional Bias. Chart Created by Trading Central.

Rising or Falling Trendlines or Channels. Trendlines and channels are nice and simple. The value of a trendline or channel is increased every time it is tested. When markets are moving higher a trendline is a form of support that can be used to identify buying opportunities. When markets are moving lower, a trendline is a form of resistance that can be used to identify selling opportunities. The purpose of this article is to help you understand that buying low and selling high is not a given trading system. You may be buying something that’s about to go a lot lower or selling something before it skyrockets. Because price is the ultimate indicator, trendlines or channels can help you pinpoint a higher probability entry as opposed to a cheap entry which could end up costing you a lot if it continues to move against you. Learn Forex: There Is No Guarantee you’ll get the Lower High You Want. Chart Created by Tyler Yell, CMT. Finding a directional bias through the methods above can help you pinpoint entries . There is nothing wrong with buying a low or selling a high as long as it’s in the direction of the prevailing trend. Trading against the prevailing trend is often more trouble than it’s worth so we recommend identifying the trend and then entering on opportunities with the trend. ---Written by Tyler Yell, CMT. Trading Instructor Currency Analyst.

Market highs and lows can be difficult to navigate and require a plan such as the one described in the article. To understand what makes traders succeed with their strategies, check out the Top Trading Lessons guide that puts together some of the key lessons our analysts have learned over the years in the markets. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. What am I buying and selling in the forex market? The forex market is the largest market in the world. According to the Triennial Central Bank Survey conducted by the Bank for International Settlements, the average daily trading volume reached $1.9 trillion in 2004. This huge trading volume provides the forex market with excellent liquidity, which benefits the large number of traders that invest there. The growth of the forex market has been spurred by the development of electronic trading networks and the increase in globalization. Specifically, the forex market focuses on the trade of currencies by both large investment banks and individuals around the world. All trading is done over-the-counter, which adds to the market's liquidity, allowing trades to be made 24 hours a day. Trading can be done in nearly all currencies, however, a small group known as the 'majors' is used in most trades. These currencies are the U. S. dollar, the euro, the British pound, the Japanese yen, the Swiss franc, the Canadian dollar and the Australian dollar. All currencies are quoted in currency pairs. When a trade is made in forex, it has two sides - someone is buying one currency in the pair, while another individual is selling the other.

Although the positions traded in forex are often in excess of 100,000 currency units, only a fraction of the total position comes from the investor. The remainder is provided by a broker, which offers the leverage needed to make the trade. Traders look to make a profit by betting that a currency's value will either appreciate or depreciate against another currency. For example, assume that you purchase US$100,000 by selling 80,000 euros. In this case, you are betting that the value of the dollar will increase against the euro. If your bet is correct and the value of the dollar increases, you will make a profit. In order to collect this profit, you will have to close your position. To do this, you must sell the US$100,000, in which case you will receive more than 80,000 euros in return. Traders are not required to settle their positions on the delivery date, which usually arises two business days after the position is opened. Traders can roll over their positions to the next available delivery date.

However, if a trader takes this route, he or she is left open to incurring a charge that can arise depending on his or her position and the difference between the interest rates on the two currencies in the pair. Deciding When to Buy or Sell. Deciding when to buy or sell a currency is probably the most important question in forex trading. Making this decision right or wrong will determine your success in becoming a profitable trader in the long run. In the following lines, let’s give a few examples to show you how the market should be analyzed to make a sound decision whether to buy or sell a currency pair. Nothing moves the currency market more than the labour reports. This a leading indicator of the economy, as companies will be reluctant to add new payrolls if they think there will be no increase in demand for their goods or services in the future. Similarly, companies will hire new workforce if they assume the demand will pick-up in the near future. On the employee side, nothing deteriorates personal consumption more than becoming unemployed – and personal consumption also has the biggest share in a country’s GDP. Simply said, a falling unemployment rate gives solid indication that the economy is doing well and that future GDP may increase. The U. S. non-farm payroll report, published on the first Friday each month, is a major report that every trader should watch. If you believe the U. S. will add more payrolls than expected, this will be bullish for the U. S. dollar.

In this case, you would consider buying the USD pairs where the USD is the base currency, or selling pairs where USD is the counter currency. Both would be sound trading decisions. Central banks often hike interest rates when the economy is doing well, and to dampen inflationary pressures. A key thing to consider is whether such interest rate hikes are already anticipated by investors, and thus already priced into the market. There are many signs that hint interest rate hikes: a falling unemployment rate, a rising inflation rate above the central bank’s target, rising retail sales, growing GDP quarter over quarter, and countless others. All these signs are bullish for the domestic currency. On top of that, an interest rate hike would attract foreign capital inside the country, which additionally spurs demand for that currency making it appreciate. If you believe the European economy is doing well, and an interest rate hike is around the corner, you would buy currency pairs where EUR is the base currency (like EURUSD), in the expectation that EUR will rise against the U. S. dollar. A Rising Price in Commodities.

Major commodity producers tend to experience their currencies rising or falling with changes in the commodity prices. Think of the Canadian dollar, which is closely related to oil prices, or the Australian and New Zealand dollars which are linked to gold. Canada is a major exporter of oil, exporting around 2 million barrels per day to the United States. A rising oil price will be beneficial to the Canadian economy, making the CAD appreciate. You would like to sell currency pairs where CAD is not the base currency, like USDCAD to take advantage of the rising oil prices. Australia and New Zealand are both large exporters of gold, and rising gold prices tend to have positive impact on their currencies. You could buy currency pairs like AUDUSD or NZDUSD in this case. While the Australian and New Zealand dollars are rising, the US dollar usually falls with rising gold prices as investors sell dollars to buy the precious metal. A margin is a part of your trading account, which is used as collateral to open much larger positions than your trading account would otherwise allow. Many traders new to the markets think about margin as a “transaction cost”, but this is far from true.

A margin is just a part of your trading account which is “locked” until your position is open. The margin still belongs to you. This table shows the required margin as part of your trading account to open positions on different leverage ratios. The higher the leverage you use, the smaller the required margin is, but keep in mind that higher leverage increases both your risk, as well as profit potential. Rollover Interest Rates. Rollover interest rates offered by brokers are interest rates paid or earned for holding a position overnight. The current interest rates for the major currencies are presented in the following table: The Basics of How Money is Made Trading Forex. Your Forecast Is Headed to Your Inbox. But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk. Your demo is preloaded with ?10,000 virtual funds , which you can use to trade over 10,000 live global markets. We'll email you login details shortly. You are subscribed to Richard Krivo. You can manage you subscriptions by following the link in the footer of each email you will receive. An error occurred submitting your form. Please try again later.

Article Summary : Trading currency in the Forex market centers around the basic concepts of buying and selling. Let's take the idea of buying first. What if you bought something (it could literally be almost anything. a house, a piece of jewelry or a stock) and it went up in value. If you sold it at that point, you would have made a profit. the difference between what you paid originally and the greater value that the item is worth now. Currency trading is the same way. Let's say you want to buy the AUDUSD currency pair . If the AUD goes up in value relative to the USD and then you sell it, you will have made a profit. A trader in this example would be buying the AUD and selling the USD at the same time. For example if the AUDUSD pair was bought at 0.74975 and the pair moved up to 0.76466 at the time that the trade was closedexited, the profit on the trade would have been 149 pips . (See the chart below…) The Idea Behind Forex Trading. Created using IG’s web trading platform. Had the pair moved down to 0.74805 before the trade was closed, the loss on the trade would have been 17 pips. Also, it makes no difference which currency pair you are trading. If the price of the currency you are buying goes up from the time you bought it, you will have made a profit.

Here is another example using the AUD. In this case we still want to buy the AUD but let’s do this with the EURAUD currency pair. In this instance we would sell the pair. We would be selling the EUR and buying the AUD simultaneously. Should the AUD go up relative to the EUR we would profit as we bought the AUD. In this example if we sold the EURAUD pair at 1.2320 and the price moved down to 1.2250 when we closed the position, we would have made a profit of 70 pips. Had the pair moved up instead and we closed out the position at 1.2360 we would have had a loss of 40 pips on the trade. Remember, we are always buying or selling the currency on the left side of the pair. If we buy the currency on the left side, which is called the base currency, we are selling the one on the right side which is called the cross or counter currency. The opposite would be true if we were selling the currency on the left side. Now let's take a look at how a trader can make a profit by selling a currency pair. This concept is a little trickier to understand than buying. It is based on the idea of selling something that you borrowed as opposed to selling something that you own. In the case of currency trading, when taking a sell position you would borrow the currency in the pair that you were selling from your broker (this all takes place seamlessly within the trading station when the trade is executed) and if the price went down, you would then sell it back to the broker at the lower price. The difference between the price at which you borrowed it (the higher price) and the price at which you sold it back to them (the lower price) would be your profit. For example, let’s say a trader believes that the USD will go down relative to the JPY. In this case the trader would want to sell the USDJPY pair. They would be selling the USD and buying the JPY at the same time. The trader would be borrowing the USD from their broker when they execute the trade.

If the trade moved in their favor the JPY would increase in value and the USD would decrease. At the point where they closed out the trade, their profits from the JPY increasing in value would be used to pay back the broker for the borrowed USD at the now lower price. After paying back the broker, the remainder would be their profit on the trade. For example, let’s say the trader shorted the USDJPY pair at 122.761. If the pair did in fact move down and the trader closedexited the position at 121.401, the profit on the trade would be 136 pips. Shorting a Currency Pair Like USDJPY. Created using IG’s web trading platform. On the other hand, if the pair was shorted at 122.761 and the pair did not move down but rather it moved up to 122.951 when the position was closed, there would be a loss on the trade of 19 pips. In a nutshell, this how you can make a profit from selling something that you do not own. In wrapping up, if you buy a currency pair and it moves up, that trade would show a profit. If you sell a currency pair and it moves down, that trade would show a profit. Catch the DailyFX Team during office hours to ask any questions about the market or trading. Register at one or all of the links below (times are based in North America): Currency markets revolve around the buying and selling of different currencies. To learn more checkout our New to Forex trading guide which helps teach about the exciting forex landscape. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. Deciding When to Buy or Sell. Deciding when to buy or sell a currency is probably the most important question in forex trading.

Making this decision right or wrong will determine your success in becoming a profitable trader in the long run. In the following lines, let’s give a few examples to show you how the market should be analyzed to make a sound decision whether to buy or sell a currency pair. Nothing moves the currency market more than the labour reports. This a leading indicator of the economy, as companies will be reluctant to add new payrolls if they think there will be no increase in demand for their goods or services in the future. Similarly, companies will hire new workforce if they assume the demand will pick-up in the near future. On the employee side, nothing deteriorates personal consumption more than becoming unemployed – and personal consumption also has the biggest share in a country’s GDP. Simply said, a falling unemployment rate gives solid indication that the economy is doing well and that future GDP may increase. The U. S. non-farm payroll report, published on the first Friday each month, is a major report that every trader should watch. If you believe the U. S. will add more payrolls than expected, this will be bullish for the U. S. dollar. In this case, you would consider buying the USD pairs where the USD is the base currency, or selling pairs where USD is the counter currency. Both would be sound trading decisions. Central banks often hike interest rates when the economy is doing well, and to dampen inflationary pressures. A key thing to consider is whether such interest rate hikes are already anticipated by investors, and thus already priced into the market. There are many signs that hint interest rate hikes: a falling unemployment rate, a rising inflation rate above the central bank’s target, rising retail sales, growing GDP quarter over quarter, and countless others. All these signs are bullish for the domestic currency. On top of that, an interest rate hike would attract foreign capital inside the country, which additionally spurs demand for that currency making it appreciate.

If you believe the European economy is doing well, and an interest rate hike is around the corner, you would buy currency pairs where EUR is the base currency (like EURUSD), in the expectation that EUR will rise against the U. S. dollar. A Rising Price in Commodities. Major commodity producers tend to experience their currencies rising or falling with changes in the commodity prices. Think of the Canadian dollar, which is closely related to oil prices, or the Australian and New Zealand dollars which are linked to gold. Canada is a major exporter of oil, exporting around 2 million barrels per day to the United States. A rising oil price will be beneficial to the Canadian economy, making the CAD appreciate. You would like to sell currency pairs where CAD is not the base currency, like USDCAD to take advantage of the rising oil prices. Australia and New Zealand are both large exporters of gold, and rising gold prices tend to have positive impact on their currencies. You could buy currency pairs like AUDUSD or NZDUSD in this case.

While the Australian and New Zealand dollars are rising, the US dollar usually falls with rising gold prices as investors sell dollars to buy the precious metal. A margin is a part of your trading account, which is used as collateral to open much larger positions than your trading account would otherwise allow. Many traders new to the markets think about margin as a “transaction cost”, but this is far from true. A margin is just a part of your trading account which is “locked” until your position is open. The margin still belongs to you. This table shows the required margin as part of your trading account to open positions on different leverage ratios. The higher the leverage you use, the smaller the required margin is, but keep in mind that higher leverage increases both your risk, as well as profit potential. Rollover Interest Rates. Rollover interest rates offered by brokers are interest rates paid or earned for holding a position overnight. The current interest rates for the major currencies are presented in the following table: What Forex Buy and Sell Signals Do I Use? This week’s question comes from Kendrick, who asks: Would you be so kind to discuss the various sell and buy signals that you frequently or commonly look out for when trading, especially after identifying support and resistance? Just about everything I do in the Forex market revolves around six buy and sell signals .

Three are candlestick patterns while the other three are chart patterns such as the head and shoulders. The question above reminded me that while I have written about these signals separately, I’ve never compiled them into a single post. So this seemed like the perfect opportunity to give you a big picture view of the signals I use. If you’ve followed me for any length of time, you know that I like to keep things simple. So while the six patterns below can be highly profitable, they are also simple to understand. In fact, some might say they are too simple. But I assure you that after using the signals in this post for more than five years, they are all you need to become consistently profitable in the Forex market . What follows is a summary of the various signals I use along with real life examples of each. Feel free to use the links throughout this post to learn more about the different patterns including entry and exit methods. With that, let’s begin. Candlestick Patterns. There are three types of candlestick patterns I look for during a trading week.

They are the pin bar, engulfing bar and inside bar . While the pin bar can be traded on the 4-hour and daily time frames, both the engulfing and inside bars are most effective on the daily time frame and higher . If you use them on any time frame lower than the daily you open yourself up to false positives. Let’s take a look at each one in greater detail. For those who have followed me for a while now, it will come as no surprise to hear that my favorite candlestick pattern is the pin bar. These candles are characterized by long upper or lower wicks and represent a rejection of support or resistance . That last sentence is paramount to the effectiveness of the pin bar pattern. Without having a key support or resistance area near the candlestick, the formation is rather meaningless. Here’s an example of a bearish pin bar on the AUDUSD daily chart: Notice how after closing below a key level, the pair formed a bearish pin bar after retesting the area as new resistance. A short entry on a 50% pullback would have yielded a tidy profit in less than 48 hours. To learn more about the pin bar including how to trade it, see this post. The engulfing bar is a reversal pattern that can often signal exhaustion from buyers or sellers . As the name implies, it’s a candle that completely engulfs the previous one. One critical rule of using this signal is only to pay attention to the engulfing patterns that develop on the daily chart and above . Any signal on the intraday charts is unreliable in the sense that it could be a false positive. Another important point is that the candlestick pattern must form at a swing high or low . Otherwise, it won’t signal the necessary exhaustion from bulls or bears that make it an effective reversal signal. Below is an example of an engulfing candle on the AUDUSD daily chart.

Note that the candle formed at a swing high and at a resistance level that had been in place for several months. See the two links below to learn more. When I began trading with price action in 2010, I started with the pin bar and inside bar candlestick patterns. I figured I would learn the two signals inside and out before considering other more advanced patterns. It was a good move. I always advocate sticking with one or two price patterns in the beginning before expanding your options . The fewer things you have to learn the easier it is to become proficient by honing in on the subject at hand. But over the years I’ve moved away from trading the inside bar, at least to some degree. I still find one here and there that catches my attention, but for the most part, I don’t trade it. That doesn’t mean it isn’t a profitable signal. It just means that it doesn’t suit my style as much as the other signals in this post. With that said, for someone searching for a good trend trading signal , the inside bar is one of the best in my opinion. The key, however, is to make sure you stick to the daily time frame . Anything lower than that and you’ll end up with too many false positives. Below are three bullish inside bars that formed on the USDJPY daily chart during an aggressive rally.

The key here is to find a pair that is trending. You should also pay close attention to the location of support and resistance before deciding to execute a trade. See this post on the inside bar trading strategy to learn more. Now that we’ve looked at the three candlestick patterns I use, let’s dive into the three chart patterns. These include the head and shoulders, channels and wedges . As the name implies, these are patterns that form over an extended period on a chart and involve multiple candlesticks. In fact, most of the technical structures I utilize take weeks, months or even years to materialize. The good news is that we don’t have to wait months or years to trade. With dozens of currency pairs at our disposal, there’s almost always something to do. Head and shoulders (and inverse) When it comes to profitability, the head and shoulders pattern is at the top of the list.

It typically forms after an extended move up and signals exhaustion from buyers . The inverse head and shoulders pattern also represents a potential reversal but does so after an extended move down and signals exhaustion from sellers . The reason I say these formations can be highly profitable is that they often provide several hundred pips of profit if traded successfully. Here’s a head and shoulders pattern that formed on the NZDJPY weekly chart over several months. This was a formation that I traded and also commented on several times on this site as things unfolded. In the case of this NZDJPY reversal, the selloff totaled more than 1,200 pips. Note that the head and shoulders also comes with what’s called a measured objective . This is a potential profit target that’s found using the height of the structure. Learn everything there is to know about the head and shoulders pattern in this detailed guide. You can learn more about how to use measured objectives in this post. Channels (ascending and descending) Channels occur more often than most traders probably realize. They are particularly plentiful after an impulsive move up or down . The channels that form in this manner are known as bull and bear flags . If you’ve followed me for a while, you’ve no doubt seen me comment on either an ascending or descending channel. In fact, I bet not a single week goes by where I don’t use a channel to outline the price action on a given chart .

They offer an excellent way to identify and outline periods of consolidation which can provide an opportunity to play the subsequent breakout. Here’s a recent example of an ascending channel on the NZDUSD daily chart: Notice how the ascending channel above began forming after an extended move lower. As such, we could also call this a bear flag, which most often represents a continuation of the prevailing trend . Check out the detailed guide on how to trade equidistant channels for more information. While usually the result of consolidation, channels can sometimes outline a broader trend or cycle . Such is the case with the ascending channel on the NZDJPY monthly chart below. Instead of using the channel above to catch a breakout (which would take decades), I would use a formation like this to form a longer-term outlook for the pair. See this post for more details on how I utilize multi-year channels such as the one above. Wedges (narrowing and broadening) Like channels, wedges usually represent consolidation. However, what sets them apart is their terminal nature. In other words, a narrowing wedge has a definitive end point whereas a channel does not . The two charts below show the difference between a narrowing wedge and a broadening wedge. First up is a narrowing wedge on the GBPJPY 4-hour chart.

As the name implies, a narrowing wedge occurs when price action gets “squeezed” by support and resistance . Because the pair has no choice but to eventually break out, we call this a terminal pattern. Now, here’s an example of a broadening wedge on the GBPJPY 4-hour chart: Notice how unlike the narrowing wedge in the first chart, the price action in a broadening formation “fans out” as time passes. The broadening wedge is not considered a terminal pattern because the pair could theoretically never break support or resistance. Of course, reality says that the formation will eventually break down as was the case in the chart above. Want to know more about the broadening wedge? Check out this post. If you’re new to price action or just looking to add an extra signal or two to your already established arsenal, the list above is a great place to start. Each one is simple yet highly profitable if you follow the lessons on this site (see links throughout this post).

My advice is to pick one or two signals, learn the characteristics, entry and exit methods, etc. before moving on. Trying to learn all six at the same time would make things harder than they have to be in my opinion. Also, the more material you try to digest at one time, the longer it will take to become proficient . By selecting just one or two patterns, you’ll be able to master them in much less time than if you took on all six at the same time. Last but certainly not least, stick to the 4-hour and daily time frames, take notes and just keep piling on the experience . Before you know it, you’ll be seeing pin bars and channels without even thinking. Your Turn: Ask Justin Anything. I’d love for this new weekly Q&A to be successful and provide an invaluable repository of answers to common Forex questions. To do that, I need your help. Here’s what you can do to get involved and have your question answered in next week’s post: Ask questions. Post them in the comments below or Tweet them to me @JustinBennettFX Help me answer questions. If I missed something or if you have something to add, don’t hesitate to leave a comment below.

been trading 2.5 yrs - not profitable - currently in a course so not a canditate now-maybe later. No worries, James. There’s a ton of free material here to digest. Just wondering what is your view on supply and demand trading? Do you ever use these zones? Any tips on it if you have any would be cool. Love your site ?? Hi Justin, thanks for the question. The support and resistance levels I use throughout this site are the byproduct of supply and demand, but I could certainly elaborate on the topic in a future Q&A. Just wanted to say this is one of the most useful articles on price action trading I have come across. Pretty much all we need to know about price action trading in one concise and informative post. Great stuff. Now to put it into practice! That’s great to hear, Dan. I appreciate the feedback.

Cheers. I started love your yr technique, now I started getting profit, Tq so much for yr help. You’re very welcome, Rosli. Thanks for sharing your experience using these strategies. Your method influences the way I trade, because it suits my trading type. Thank you Justin. You’re welcome, Agung. Glad to help. Let me know if you have any questions. Hi, Dear Justin, , This article is like a grossary store, no need to move here and there. simple but well-explained. Thanks and have a nice weekend.

I love that analogy, Mahmood. Thanks for the feedback. Much appreciated and great to have it all on one post with simple explanations! Pleased to hear that, Mimi. Cheers. Draw a chart in the Future, al you’do is Dessing some lines on what happend, my kid from 3 van do that also. What a rude and irrelevent comment. What exactly is this ‘chart’ you’d like to see? Trading price action (as explained very clearly inthis article), is about using candle stick and chart patterns in confluence with support and resistance areas, channel breakouts etc. Why are you subscribed to a website that can help you with your PA trading when all you can do is be rude the the person writing the post? This article is good (and moreover, free), education. I wish you all the best, Let me know which commentary you’d like to see, and I’ll be happy to post the links. The truth is that five of the seven signals above were discussed on this site in real time.

In other words, I’m not just going back after the fact and drawing levels. The examples above were taken directly from the Trade Setups section of this site. Justin, Thank you for the article. I learnt something totally new, sticking to the 4hr and above time frames. Is the Pin Bar good on the 1hr time frame? Regards. John. John, it can be useful on the 1-hour chart, just make sure you have a good reason for trading it. Having said that, trading the 1-hour chart before you’re profitable on the daily is like trying to run before you can walk. Gooday justin, read some of ur articles, they ar’ priceless. Money is ur issue for doing this, it is noble gesture which some people will sell jst to hve all the money of this world. Ur articles hve been concise, incisive and an eye opener. I will like to knw if a confluence is also a resistance and support? Jon, I’ll be writing about confluence in the next Q&A segment.

Thanks for the question. Hi Justin, What about indecision candlestick pattern on support and resistance level? Would you recommend using it, any comment on it from you will be appreciated.! Rahat, anything that represents indecision isn’t actionable, so I tend to ignore it. With that said, I’ll add this question to the list as I believe some could benefit from the answer. Cheers. Great to have this all together in one post. Is it possible to give us cheat sheets with a bullet point summary of the rules and maybe a chart of each? I thought I saw something like that on the site somewhere once but was not able to find it later. Francois, pleased to hear you found the content valuable. I think you’re referring to this post: dailypriceaction. comfree-forex-trading-lessonsforex-candlestick-patterns. I won’t be creating PDFs like that for the weekly Q&A posts due to time constraints. This is a very helpful post. Thanks a lot. Hi justin, thank you for all your insight into price action trading. Just one question, on the rising wedge chart, will it be incorrect to say that the price action printed before the rotation down can be viewed as a double top. thanks once again.

You’re welcome. I wouldn’t call it a double top as the two intraday swing highs are too close together, at least for my liking. Usually, there’s a decent amount of space between the two swing highs that form a double top. Good article! Thanks, Justin! You’re welcome, Dan. What do you think about the possible head and shoulders on the gbpnzd pair? thanks justin for guiding us. plz can u guide me my question is What should we do when big news is coming up while my trade is going on. i am afraid that it will hit my stop loss. sir, when market breaks the channel. wedges, double bottoms etc. sometimes it retests. sometimes it is not. so how i get in to the trade accordingly? You have to experiment with both. Personally, I wait for the retest. I’d rather secure a favorable riskreward ratio even if it means possibly missing out on the trade. Can you explain to me why no one teaches day trading? I know some people make a lot of money that way, and not everyone wants to swing or position trade. Hi Justin, I observe you arent using moving average.

Do you have an article that explains why is that so? I appreciate your response. Thanks ?? very very nice post. Hi Justin, I’ve watching Eurusd, and xauusd from Early 2017. For me, both pairs kind of creating head and shoulder. But you don’t say anything bout this on your weekly analysis. Would you like to tell me why they are not valid h& s pattern? Thanks in advance. How do you deal with economic news releases? Hola justin jenntte. fx Buenas noche Escribir programas justin. To someone who is really enthusiastic to learn free lessons brought on this site can ultimately change one’s trading.

personally I startrd to follow this site from 2016 and since then my trading improved so massively. I fell in love with channels wow ! They pay likecrazy once you master and follow the. Methodology. Thanks Justin for opening a new trading dynamic that improved my trading. Scalping or swing trading - which one pays more. Thanks i hope you want to help people especial the new coming like me. I learn many thing from you. and am still want to learn more. You are a great mentor Justine. God Bless you and more power. Knowledge is power. Thus, please continue sharing your knowledge to those interested in learning forex trading. A million thanks.

what a great piece of advice — pick one or two signals————.GREAT. Disclaimer: Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here by Daily Price Action, its employees, directors or fellow members. Futures, options, and spot currency trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This website is neither a solicitation nor an offer to BuySell futures, spot forex, cfd's, options or other financial products. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website.

The past performance of any trading system or methodology is not necessarily indicative of future results. High Risk Warning: Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results. Copyright 2018 by Daily Price Action, LLC. Please log in again. The login page will open in a new window. After logging in you can close it and return to this page.



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