blog30

Stochastic: What’s it Really Showing You?

by with No Comment Forex

Ever heard the expression “getting ahead of the curve?” In trading, this cliche perfectly reflects what every trader wishes they could consistently do. In addition to fundamental analysis, you might turn to charts to forecast price moves. A big part of using charts to make sense of the markets are indicators, but are they really any good? Many traders turn to the Stochastic indicator to check overbought or oversold levels, so just what insights does Stochastic analysis really offer, and how can you use these insights to determine when to open a position?

 

Here’s an overview of this popular indicator, why you might be struggling to use it, and some top tips that will help you avoid misinterpreting market moves.

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Overbought and oversold

The terms overbought and oversold describe a period where there has been significant movement in price without much pullback or reversion. Simply put, a rise or fall that doesn’t deviate far from the trend line.

What goes up…! You know the saying. Price trends can’t last forever. They eventually reverse, and trading close to that point of reversal is one way you can maximize your profits. In traditional technical analysis, traders expect overbought or oversold currency pairs to reverse, but that’s not always the case and it can be quite an expensive realization. To constantly set your trades based on the Stochastic indicator will yield mixed and likely disappointing results.

How to read the Stochastic

If you’ve already signed up with Exness, then you have access to a trading platform and a risk-free demo account. This is the perfect way to get familiar with any of the free and paid indicators available. Open up your platform and go to the Navigator pane on the left. Scroll down and then drag the Stochastic folder to the chart. A section will appear below the price chart with two lines tracing along, above, and below a central range.

The concept is fairly simple. The lower horizontal line represents a value of 20. The upper horizontal line is 80. Whenever the tracing line breaches 80, it indicates a possible overbought status, and traders expect a price correction. Likewise, if the lines cross below the 20-mark, it signals a possible oversold status, and a reversal might be imminent.

In the above EURUSD example, a downtrend started on May 19 and crossed the 20-line on May 22 [yellow]. Traders using the Stochastic indicator would normally take this as a sign of overbought, and they would set a buy order with the expectations of a reversal. They would consequently be very pleased with the rise that followed. Just five days later, Stochastic indicated another oversold status [blue], but traders clicking the buy buttonprobably lost whatever profits they’d achieved the previous week. So, what’s going on?

Indicators are not fortune-tellers

FX News does not recommend using the Stochastic indicator as a stand-alone forecasting strategy. Indicators are best used to confirm theories, not to create them. Having said that, Stochastic is one of the best indicators a trader can use, but you might consider adding a little common sense to the mix. In the yellow example above, you can see that the price line and the Stochastic lines match rather well in the days preceding the oversold signal—and continue to do so after the fact. The perfect example of how a Stochastic indicator can forecast a reversal!

The blue example a few days later shows a clear divergence. The Stochastic line falls dramatically in a complete reversal from overbought to oversold, but the price line barely moves in comparison. Consider that a warning sign! Another common indicator is that the reversal usually comes when the rise or fall happens in a short period of time. Watch out for steep peaks and valleys that accompany the overbought/oversold range.

Top trading tips for advanced traders

Although we’ve used a price line to better illustrate the price moves in the chart image, FX News suggests using candlesticks when performing chart analysis. Moreover, Stochastic’s default %K period and slowing is set at 5,3,3, but cautious traders usually use higher numbers. On the top menu, go to Insert > Indicators > Oscillators > Stochastic Oscillator and set to 15,5,5. You can run both settings at the same time to see the differences. Certain settings may work better for certain pairs, so play around with the levels before committing to one.

 

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blog28

Do Forex Signals Really Work?

by with No Comment Forex

So, you’ve funded your trading account, and you’re ready to make some trades. Now it’s time to analyze the market and find some attractive trading options. Researching currency pairs can take a big chunk out of your free time, and it’s not uncommon to end your market investigation as lost as when you started. If that’s you, don’t despair. You’re not alone, which is why professional market analysts and A.I. programmers got together to create forex signals. But are those signals any good?

Why do traders use forex signals?

Technical indicators, news reports, fundamental analysis, who has time to analyze the dozens of trading instruments available on your trading platform? If your life is like mine, it’s hard to find time to properly research the market. But what if somebody or something could do all the research for us and then send a report with statistics and clear conclusions?

It’s so convenient. Forecasts that normally take hours to perform just appear in your inbox or MetaTrader message board in the form of a signals report, all thanks to a team of professional forex analysts working in concert with A.I. technology.

Traders of all levels and experience use signal provider services and their associated apps. While some forex signals services are free, others have a fee; there are hundreds, so choosing which one to go with takes time and investigation. Moreover, some work better than others.

 

Which forex signals providers can you trust?

This question is difficult to answer. Forex signals get constant updates and performance changes with each update. Signal performance and accuracy also varies from brand to brand. From as low as 60% up to an unconfirmed 92% win/loss ratio. One forex signal provider’s performance might be strong during the time of writing this article, but things can change in a matter of days. Keeping current with the top signal providers can take up as much time as keeping current with the forex market. Fortunately, there is a solution.

The easy way to choose a signal provider

To make sure you’re getting the latest forex signals, just stick to the more established and popular services. There’s a reason they are so popular! One signal provider worth considering in 2019 is the award-winning Trading Central. For almost 20 years, Trading Central has been supporting investment decisions for forex traders, and it is a consistent leader in the industry. Professional analysts monitor Trading Central’s tried and tested algorithms, and their performance and reputation is solid, which is why Exness gives free access to Trading Central signals directly on your trading platform.

Top tip: Some signal providers have had better performance percentages than Trading Central, but their consistency is lacking and not really worth mentioning. Try comparing multiple signal providers. Keep a diary of the signal forecasts then go back and check to see which ones gave better signals. If the majority of signal providers are saying the same, then you might be onto a sure thing.

As always, FX News recommends that you understand every order you make, and not blindly follow forex signals or forecasts. Find time to conduct your own market research and learn and grow as you go.

Try signals trading and see if it’s right for you!

 

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blog19

Bars, Lines, or Candlesticks? Reading Forex Charts Like a Pro

by with No Comment Forex

Are you struggling to find trading opportunities when you use fundamental analysis? News reports and eco releases can be strong influencers of market price, but sometimes they don’t give a clear enough indication of what to trade, and more investigation is called for. Time to check the forex charts!

Some traders use indicators to make sense of price history, while others prefer to “eyeball” the situation and make their own conclusions. Either way, it comes down to technical analysis and recognizing patterns in the price history, which brings us to the topic of this article. Which forex chart type reveals more? Should you use lines, bars, or candles? Here’s a simple breakdown of those options so you can start using the one that best suits your trading style.

Line charts

Right-click on an open forex chart and you’ll see three viewing options: lines, bars, and candlesticks. Lines display a currency pair’s price history in a much cleaner way. Lines track a simple straight line between the opening price and the closing price. Anything that happens between those two points will not be visible on a line chart. Since line charts don’t show the daily highs and lows, it makes them better suited to long-term analysis offering a wider simplistic overview. If you are planning to keep an order open for more than a week, then lines give a much cleaner picture from which to base forecasts. For short-term orders that present a risk of volatility, a bar chart is much more informative.

 

Bar charts

Like lines, bars also show the opening and closing prices, but bars display price highs and lows. The lowest and highest levels on each bar represent the lows and highs for the selected period. To the left of the bar is the opening price, to the right is the closing price

Most traders find bars harder to read than price lines, but there are certain advantages to using bars when performing technical analysis. When setting ‘Stop Loss’ (SL) and ‘Take Profit’ (TP), it can be useful to indicate just how extreme the lows and highs are compared to the closing prices. If the bars are long, but the opening and closing prices are crammed closer to the middle, it can mean that the selected period is experiencing price volatility. Extreme highs and lows tend to prematurely trigger a tight ‘SL’ or ‘TP’ order. If you’re opening a trade for the day, check the previous candlesticks to see if the wicks were far from the open and close? Set your ‘SL’ or ‘TP’ accordingly.

 

Candlestick charts

Candlesticks are probably the most popular way to view forex charts. This type of chart shows the same trading information as bars, but many traders prefer the style and insist that they are easier to read.

CSimilar to bars, the candlestick body shows the opening and closing prices, and the wicks that are sticking out of the top and/ or bottom represent the highs and lows of the selected period. The direction of the price for the period is shown by the color used. The most popular contrasts being green for a rise and red for a fall, but this is a completely customizable feature.

Just remember that the highs and lows never change, but the opening price on a candlestick switches place whenever the price direction changes. A rising trend opens on the bottom. A declining trend opens on the top. Candlesticks take a little getting used to, but when you do, there are dozens of patterns to watch out for that have a history of indicating rally moves or crashes.

 

So which forex chart is better for forecasting?

 

Take a look at the three forex chart screenshots in this article. Which one seems the easiest to read or analyze? It’s really down to your own personal preference. Lines are great for a quick and easy overview, but they show much less when you’re looking at a one-minute timeframe. Consider using lines for long-term trading analysis or quick checks on how a fundamental release is affecting market prices. If you tend to open and close orders in the same day, candlesticks might be a better choice.

 

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blog16

Want To Trade Forex Like An Expert? Control Your Environment

by with No Comment Forex

Why  Building A Supportive Forex Trading Environment Is Important

What do I mean by supportive trading environment? I mean that no one exists in a vacuum. Many things outside the actual forex market itself — from the physical environment you trade in to your personal circumstances at the time you are trading — can impact your trading performance. Maybe you have skeptical family members that are giving you a bad case of performance anxiety. Maybe you don’t have enough funds in reserve, which causes adverse anxiety and pressure that impacts your performance. Whatever the reason may be, the outside world impacts your performance just as much as market conditions.

Top Tip: The Outside World Matters

Knowing what outside factors impact your trading performance — and setting up your environment to support your best performance — can be a good way to improve your trading.

 

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Tags:

AUD, Brexit, Brexit, Banks, CAD, CHF, CNH. currency hedging, CZK, Donald Trump, EU EUR, forex trading, GBP, Global, Growth, Fears, Gold Prices, Government Shutdown, HKD, Is forex trading profitable, JPY Leverage, Mean Reversion, MXN, NOK, NZD, Passive income, popular strategies, Risk Management, RUB, Safe, haven currencies, second referendum, SEK SGD, Silver, Price, technical indicators, trading account, Trading Basics, trading psychology, Trailing Stop, trump wall, TRY USD, USD Price, Chart, XAG, XAU, ZAR,

 

 

blog14

Want To Trade Forex Like An Expert? Control Your Risk

by with No Comment Forex

Want to step above the crowd? Knowing when to cut your losses and being consistent and disciplined about doing so can help you truly elevate your trading game.

Why Controlling Risk Is Key To Developing As A Trader

At first glance, this sounds rather obvious, doesn’t it? It may surprise you, but far too many traders lose more money than they can afford by sticking with bad trades in the hope that things will turn around for them. In reality, this rarely happens.

Smart traders, in contrast, set firm stopping points with their broker before ever opening their trades. If their losses drop below the level set, they understand that the best thing they can do is to walk away.  While this sounds easy enough to do, actually doing it consistently in real life can be quite hard. It’s basic human psychology to try to hold on to what we perceive as ours and to recoup losses. Fighting through that urge and learning to walk away will put you head and shoulders above many traders, however.

Top Tip: Planning Is Key

Have a plan about how and when to cut your losses and be disciplined and consistent about sticking to it. For example, determine what percentage of your equity can you afford to lose before making a trade and set a stop-loss order to ensure you don’t go beyond it.

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