Monthly Archives: November 2015

Forex Trading Secrets Every Beginner Needs to Know

Forex Trading Secrets Every Beginner Needs to Know

 

Foreign exchange trading is a highly attractive option for those looking for a convenient way to boost their income. Thanks to online brokers, it can easily be done from home, and you don’t need to put in a large investment to make a profit. However, there are a few Forex trading secrets you need to know before you jump into the world of Forex trading.

Educate Yourself
Technical terms and industry techniques come with the territory of the Forex market. If you want to start trading, become familiar with the basics of the industry before you even start looking at brokers. Make time to educate yourself, and you’ll be better at analyzing market trends and making smart decisions. You may even want to sign up for a short class on currency trading.

Practice Makes Perfect
A thorough grounding in Forex trading is only half the job, however. Before you put your real money on the line, it’s wise to practice in real time with the demo accounts offered by some online brokers. This will give you a feel for what actual trading will be like. Don’t rush through this step: take as long as you need until you’re completely comfortable with the setup.

Choose Your Broker with Care
Your choice of broker can make or break your career in currency trading. It may seem difficult to pick one of the many firms that have set up shop on the internet, but all you really need is common sense. Stay away from companies that guarantee huge profits in return for minimal effort on your part. Instead, choose an established broker that’s been around for a few years, and offers realistic projections about your earnings. Whatever choice you make, always be sure to check what sort of reputation a broker has among other traders before you sign up.

Patience Will Pay Off
You must understand that Forex trading won’t make you rich overnight. Planning, consistency, and smart money management will help you earn a tidy profit, but the results will be seen over time. It may take weeks or months before the real earnings start coming in. Patience and discipline will pay off as you weather fluctuations in the market that leave other newbies floundering.

Using Elliott Waves for Trading the Forex Market

 

elliott wave 11

The Elliot Wave Theory epitomizes the basic principle behind technical analysis, namely that patterns can be detected in past statistical data that you can use to find trading opportunities in the present. According to its creator, Ralph Nelson Elliott, the financial markets trade in a series of repetitive cycles caused by the collective emotions of investors. Specifically, they trade in a five-wave pattern, with three up separated by two down waves. In addition, this initial ‘up-pattern’ is followed by a mirror ‘down-pattern’ with three down separated by two up waves.

The biggest challenge of using the  the Elliott Wave Theory for trading is interpreting the wave count. Different analysts can interpret the current wave count differently, coming up with various ways to apply it to trading. However, if you can correctly identify the waves, you can find exact points where the price is most likely to reverse. In short, it identifies areas of support and resistance. The trick is how to identify them.

Here are some of the basics for identifying Elliott Waves.

The initial five-wave pattern is called the “impulse” wave, with three ‘up-waves’ that can be labeled as 1, 3 and 5 and two ‘down-waves’ labeled 2 and 4. This is generally followed by a three-wave pattern that is called the “corrective” pattern with the three waves labeled A, B and C.
Here are the three basic rules that you need to follow, and which can never be broken.
1. Wave 3 of the impulse wave can never be the shortest one.
2. Wave 2 can never extend beyond where Wave 1 begins.
3. Wave 4 can never move into the price area occupied by Wave 1.
The next time you look at a price chart, keep these rules in mind and with practice, you can more accurately identify Elliott Waves.

Once you’ve identified an Elliott Wave, use another indicator to confirm that a trend is occurring. Two indicators that are useful are the Commodity Channel Index (the 90-day CCI should be positive) and the relative strength index (the three day index should move to an uptrend for one day). Once you’ve identified a trend and set up a trade, make sure that you set a stop-loss order that allows you to earn a reasonable amount of profit while still moderating your risk in case the trade goes against you.