Forex Gold Trader Forex Peace Army Relative Strength

Hombros de Giants 2 el mejor comerciante mundial Jarratt Davis, famoso forex educador Andrew Mitchem, el banquero profesional europeo Sive Morten publicar sus mercados exclusivos atntalytics. Pruebas de desempeño Buscando comprar EA, señales o unirse a la cuenta administrada Mantenemos pruebas reales de Real Money para asesores expertos de metatrader disponibles en el mercado, señales de divisas y cuentas administradas por divisas. Forex Traders Court Si usted se convierte en la víctima de la estafa forex, Forex Peace Army hará todo lo que esté a su alcance para ayudarle a recuperar su dinero. Es gratis y ayuda a exponer las estafas, por lo que otros comerciantes no caen en sus trampas. Los servicios del ejército de la paz de la divisa son LIBRES Ganamos el dinero exhibiendo los anuncios, pero no endosamos ningún producto o servicio anunciado. Por favor, asegúrese de leer nuestras opiniones antes de dar su dinero a cualquier empresa. Forex avanzada Patrones de reversión Candlestick La mayoría de los comerciantes de divisas que utilizan el análisis técnico como base para sus posiciones pasan mucho tiempo viendo cartas de velas. Este tipo de gráfico es útil en un número de frentes diferentes, y uno de los mejores ejemplos de esto se puede encontrar en las formas de cartas de velas puede hacer más fácil detectar reversiones. Cuando hablamos de reversiones, la idea principal es que cualquier tendencia dominante ha comenzado a llegar a su punto de agotamiento y que los precios están listos para comenzar a moverse en la dirección contraria. En el momento, puede parecer muy difícil saber que todo el impulso direccional anterior ha funcionado realmente su curso. Pero cuando usamos formaciones de candelabro como una herramienta de identificación, hay algunas señales específicas que se envían sobre una base regular. Aquí, vamos a mirar varias formaciones del doji, así como los patrones engullir alcista y bajista. Doji patrón El patrón candelabro doji es una fuerte señal de inversión que muestra el momento de mercado se está acabando. Dado que la mayoría de la actividad de compra o venta ya ha tenido lugar, cualquier indicación de que el número de participantes mayoritarios está disminuyendo se puede utilizar como una oportunidad para comenzar a tomar posiciones de divisas en la otra dirección. El patrón doji puede ser alcista o bajista en la naturaleza, todo dependiendo de la dirección de la tendencia anterior. Gráfico Fuente: Forexmachines Las formaciones de candelero que se muestran arriba podrían parecer diferentes en forma, pero todas esencialmente cuentan la misma historia. El patrón común del doji se compone de un cuerpo muy pequeño de la vela con una mecha superior e inferior. El doji de piernas largas también tiene un cuerpo de vela muy pequeño que está aproximadamente en el centro de la formación. En este caso, sin embargo, las mechas superior e inferior son más largas, lo que en última instancia sugiere que hubo más volatilidad durante ese intervalo de tiempo. El doji de lápida es una de las versiones más bajistas del patrón. En este caso, el patrón muestra un cuerpo muy pequeño de la vela en la parte inferior, con una mecha larga a la parte superior. Este patrón muestra que los mercados subieron rápidamente a niveles que eran insostenibles. Los vendedores entonces asumieron el control y el intervalo de tiempo terminó. Si esta formación es seguida por una vela bajista de cuerpo entero, la confirmación está en su lugar y se pueden tomar posiciones cortas. El doji de la libélula es una de las versiones más alcistas del modelo. En este caso, el patrón muestra un cuerpo de vela muy pequeña en la parte superior, con una mecha larga en la parte inferior. Este patrón muestra que los mercados cayeron a niveles que eran insostenibles. Los compradores entonces asumieron el control y el intervalo de tiempo terminó. Si esta formación es seguida por una vela bullish de cuerpo entero, la confirmación está en el lugar y las posiciones largas se pueden tomar. Gráfico Fuente: Metatrader En el gráfico anterior, podemos ver que la actividad de precios fue fuertemente alcista en el AUD / USD. Sin embargo, ninguna tendencia puede durar para siempre, y el impulso del mercado comienza a disminuir a medida que el proceso se eleva por encima del área de 0,9300. Aquí, un patrón bajista del doji forma 8212 que sugiere que la tendencia anterior del toro está lista para invertir. Después de que se vea el doji, se forma una vela fuertemente bajista, confirmando el patrón de inversión. Posiciones cortas podrían haber sido tomadas en esta etapa, y los comerciantes de divisas podrían haber capitalizado en todo el movimiento descendente que siguió. En términos de formaciones de candelero, el patrón doji es relativamente extremo y requiere definiciones estrictas de lo que se puede ver en el cuerpo para ser válido. Pero hay otra forma de patrón que es menos rígida pero tan poderosa en las formas en que puede predecir las reversiones de las tendencias. A continuación, nos fijamos en el patrón engullir alcista y bajista, que es otro indicador de candelero que se puede utilizar en el establecimiento de posiciones de divisas. A continuación se muestra la estructura del patrón de engrosamiento alcista: En el patrón engullente alcista, se observa una tendencia a la baja que llega a su fin. Las tendencias de bajada están dominadas por velas bajistas, y una pequeña vela bajista es lo que se necesita para comenzar el patrón engullente alcista. Esta pequeña vela bajista es seguida por una vela alcista más grande que abruma, o engulfe lo que se vio anteriormente. En el gráfico anterior, podemos ver que el primer cuerpo de la vela es aproximadamente la mitad del tamaño del cuerpo alcista de la vela que sigue. Los mercados empujan inicialmente los precios más bajos, y esta brecha hacia abajo crea una mecha inferior que se extiende por debajo de la vela inicial bajista. El momento del mercado se invierte, extendiéndose a un nuevo máximo alto y un fuerte cierre positivo que es más alto en el Día 2. A continuación se muestra la estructura del patrón engorroso bajista: En el patrón bajista engullente, se observa una tendencia alcista que llega a su fin. Las tendencias ascendentes están dominadas por velas alcistas, y una pequeña vela alcista es lo que se necesita para comenzar el patrón engorroso bajista. Esta pequeña vela alcista es seguida por una mayor vela bajista que abruma, o engulfe lo que se vio anteriormente. En el gráfico de arriba, podemos ver que el primer cuerpo de la vela es aproximadamente la mitad del tamaño del cuerpo bajista de la vela que sigue. Los mercados inicialmente empujan los precios más altos, y esta brecha hacia arriba crea una mecha más alta que se extiende por debajo de la vela alcista inicial. El impulso del mercado luego se invierte, extendiéndose a un nuevo mínimo inferior y un fuerte cierre negativo que es más bajo en el día 2. Gráfico Fuente: Metatrader ¿Qué tipo de patrón de engullir está presente aquí? Dado que la tendencia inicial es hacia abajo y luego veremos una reversión alcista. El tipo de estructura aquí es el patrón engullir alcista. Aquí, podemos ver que los precios caen a aproximadamente 115 8212 y la serie de pequeñas velas rojas se termina con una fuerte vela verde que sugiere una inversión es inminente. Los operadores de Forex podrían haber tomado posiciones largas aquí. Y capitalizó en las ganancias que siguieron. Carry Trades El mercado de divisas se asocia a algunas estrategias de negociación que no se pueden encontrar en otras clases de activos. Un ejemplo se puede ver en el carry trade, que se beneficia de las diferencias en las tasas de interés que se pueden encontrar al unir las monedas en conjunto. Todas las posiciones de divisas implican la compra y venta simultánea de dos monedas diferentes. Cuando los comerciantes compran una moneda con una tasa de interés alta a cambio de una moneda con una tasa de interés más baja, el diferencial de la tasa de interés se acumula diariamente. Con el tiempo, estas posiciones pueden llegar a ser bastante rentables ya que el valor de carry de estas operaciones se garantiza esencialmente (siempre y cuando el diferencial de tasa de interés permanezca intacto). Por estas razones, hay muchos comerciantes que optan por centrarse exclusivamente en este tipo de estrategias. Aquí, vamos a ver algunos ejemplos de hipotética carry trades con el fin de ver cómo los beneficios pueden ser capturados con el tiempo. Monedas y tasas de interés Todas las monedas están asociadas a una tasa de interés específica. Estas tasas son determinadas por el banco central de cada nación. Esta es la razón por las reuniones de política monetaria en los bancos centrales son vistos con un alto nivel de importancia por los comerciantes de divisas. Cuando compra una divisa, obtiene la tasa de interés mientras mantenga la posición. Por ejemplo, si el Banco Central Europeo ha fijado su tipo de interés de referencia en 2.5, obtendrá 2.5 en su posición por cada año en que tenga esa moneda. Si usted vendiera la divisa (es decir, en una posición corta en el EUR / USD), su cuenta de la divisa se debitaría -2.5 para cada año que usted sostiene la posición. En todos los casos, estos créditos y débitos se acumularán diariamente una vez que la posición se mantenga durante el período de rollover a las 5pm. Ejemplos de comercio Vamos a considerar algunos ejemplos hipotéticos de comercio utilizando la lógica de carry trade. Históricamente, el dólar australiano (AUD) se ha asociado con altas tasas de interés, mientras que el yen japonés (JPY) se ha asociado con bajas tasas de interés. Por esta razón, el AUD / JPY es una de las opciones más populares para carry trades. Hipotéticamente, supongamos que el Banco de Australia ha establecido su tipo de interés base en 5. También se supone que el Banco de Japón ha establecido su tasa de interés base en 0,5. El diferencial de tasas de interés para estas dos monedas sería entonces de 4,5, por lo que si usted comprara el AUD / JPY y mantenga la posición durante un año, obtendría una garantía de 4,5 en su posición. Esto sería independiente de cualquier cambio observado en el tipo de cambio subyacente entre estas dos monedas. Carga negativa Como un punto de ilustración, también debe entenderse que el valor de transporte también puede trabajar en la dirección opuesta. Vamos a suponer que la Reserva Federal ha fijado la tasa de interés para el dólar de EE. UU. en 3,5. Al mismo tiempo, el Banco de Canadá ha establecido la tasa de interés del Dólar Canadiense en 2. ¿Qué ocurriría si eligiera tomar una posición corta en el USD / CAD? Una posición corta en el USD / CAD significaría que usted está Vendiendo el USD y comprando el CAD. Puesto que usted estaría comprando la moneda con la tasa de interés más baja, su posición estaría expuesta a carry 8212 negativo que en este caso significa que su cuenta de negociación se debitaría un valor igual a -1,5 de su posición para cada año se mantiene la posición . Esto se debe a que la diferencia de tasas de interés entre USD y CAD es 1,5 (3,5 y 2). Debido a esto, las posiciones a largo plazo que están asociadas con carry negativo están expuestas a un mayor riesgo porque las pérdidas están garantizadas. Cualquier beneficio que pudiera ser generado por cambios potenciales en el tipo de cambio subyacente todavía tendría que contabilizar los costos de carry en que incurrió durante la vida del cargo. Posicionamiento a largo plazo Los comerciantes de Forex que emplean estrategias de carry trade tienden a ser los comerciantes que poseen una perspectiva a largo plazo. Esto se debe a que normalmente toma una gran cantidad de tiempo con el fin de generar suficientes beneficios para justificar la posición. Los valores de la tasa de interés que son cotizados por su corredor de la divisa se dan sobre una base anual. Esto no significa que usted tendrá que mantener sus posiciones durante un año completo con el fin de capturar los beneficios del carry trade. Todas las posiciones son prorrateadas, y sus ganancias y pérdidas finales serán determinadas por la duración exacta del tiempo que ocupó cada posición. Mercados correlacionados La mayoría de los comerciantes de divisas en las etapas avanzadas de su carrera tienden a colocar la mayoría de su foco en el mercado de divisas. Hay una buena razón para esto, ya que permite una mayor familiaridad dentro de una clase de activos específicos. Pero un problema con este enfoque es el hecho de que se hace muy fácil olvidar que todos los mercados están interconectados y se influyen mucho entre sí. Forex no es ciertamente diferente, y por lo que tiene sentido tener una comprensión de las formas en que las áreas como las acciones y las materias primas trabajan con (y contra) los mercados de divisas. Aquí, vamos a ver algunos de los factores que impulsan las correlaciones entre divisas y las otras clases de activos importantes. Existencias individuales tienen poca o ninguna influencia en los mercados de divisas, pero esto no es el caso cuando miramos los índices de referencia en su conjunto. Instrumentos muy observados como el SampP 500 o el FTSE 100 pueden tener una influencia significativa en las monedas 8212 especialmente las monedas que están más estrechamente asociadas con esas regiones geográficas. Los días fuertemente alcistas en el alemán DAX y francés CAC 40 tienden a apoyar pares de divisas como el EUR / USD y EUR / JPY. La actividad positiva en el Nikkei 225 tiende a crear presión de venta en los pares de divisas denominados en el Yen japonés (como el JPY es la moneda de contrapartida en estos pares). Los cambios de precios en el GBP / USD a menudo estarán influenciados por el FTSE 100. Y muchos comerciantes de la divisa esperarán para ver las tendencias imperantes en cada uno de estos puntos de referencia antes de establecer posiciones a corto plazo. En el caso del dólar estadounidense. Las cosas tienden a funcionar a la inversa. Dado que el USD es generalmente considerado como un activo refugio seguro. A menudo cambiará en la dirección opuesta con respecto a los puntos de referencia centrales en los EE. UU. 8212 el SampP 500 y el Dow Jones Industrials. Esto significa que en días de acciones negativas, los comerciantes tienden a sacar su dinero de las existencias y almacenar en efectivo. Esto beneficia al USD y muestra que existe una relación de correlación negativa entre la moneda y sus índices de referencia más estrechamente asociados. Así que los días que son fuertemente alcistas para el SampP 500 y el Dow Jones generalmente creará una perspectiva más negativa para el USD. Mercados de productos básicos Los mercados afectarán los precios de la divisa de diferentes maneras. Los países que son conocidos por la producción de metales tienden a beneficiarse cuando el precio de esos activos está aumentando. Por ejemplo, hay una gran cantidad de producción de cobre en Australia. En los días en que los precios del cobre están subiendo, pares de divisas como el AUD / USD tienden a beneficiarse. De la misma manera, los altos niveles de producción de oro en Canadá crean una correlación positiva entre el precio del oro y el CAD. En los días en que los precios del oro están subiendo, pares de divisas como el CAD / JPY tienden a subir (y viceversa). Al mismo tiempo, el USD tiende a trabajar en la dirección opuesta. Esto se debe a que los commodities tienen un precio en dólares estadounidenses, por lo que los comerciantes generalmente necesitan vender dólares para comprar oro o petróleo. Si usted ve un día de negociación donde el petróleo se está reuniendo, va a haber al menos alguna presión bajista sobre el dólar como el flujo de órdenes más amplio que se ve en el mercado se requieren ventas adicionales del dólar. Conclusión: Mantenga el conocimiento de las tendencias en los mercados alternativos Por todas estas razones, tiene sentido mantenerse al tanto de las tendencias en otras clases de activos 8212, incluso si parece que no hay una conexión directa entre su comercio de divisas y los últimos movimientos de precios en acciones o Productos básicos. En su mayor parte, lo que debe buscar son las correlaciones negativas y positivas, y luego ver lo que está sucediendo en los mercados alternativos antes de colocar cualquier nueva posición de divisas. Estas correlaciones por sí solas podrían no ser suficientes como base única para nuevas posiciones. Pero estos son factores que deben ser considerados, ya que hay claras influencias que pueden medirse. Tener una comprensión firme de la interconexión más amplia entre estos mercados puede ayudarle a convertir sus probabilidades de éxito a su favor a largo plazo. Diversificación de una cartera de Forex La mayoría con la experiencia de comercio en los mercados financieros entender que las diversificaciones es generalmente una buena cosa. Cuando pensamos en la diversificación, suele estar asociada a inversiones en acciones que se extienden por varios sectores industriales. Pero es posible la diversidad de su cartera de divisas, también. Esto puede hacerse separando las monedas en diferentes categorías y asegurándose de que no se dobla en ningún activo. Aquí, vamos a ver algunos de los factores que entran en la diversificación de una cartera de divisas. Evitar la duplicación En primer lugar, debe entenderse que tener múltiples posiciones en una sola moneda puede ser especialmente problemático. Por ejemplo, supongamos que un comerciante de divisas compra un lote en el EUR / USD y un lote en el EUR / GBP. Podría parecer como si el comerciante está tomando dos posiciones totalmente diferentes, pero nada podría estar más lejos de la verdad. En un escenario como este, el comerciante de divisas sería esencialmente tomar una posición doble en el EUR 8212, a pesar de que se está haciendo frente a dos monedas diferentes. Aquí, el comerciante sería esencialmente la colocación de todos los huevos en una cesta y sería especialmente vulnerable si se observa alguna debilidad en el euro. En un caso como este, sería mucho más sabio para un operador a tomar una mitad de posición en ambos pares de divisas, ya que esto limitaría la exposición excesiva en la moneda del euro. Tomar la exposición excesiva en cualquier moneda única puede ser muy peligroso, y romper muchas de las reglas básicas de divisas que requieren una gestión comercial adecuada. No hay nada malo en separar su postura en más de un par de divisas. Pero las reglas apropiadas de la gerencia del comercio dictan que ninguna posición de la divisa debe exponer el balance de su cuenta a las pérdidas de más de 2-3. Así que si usted está buscando para expresar sus puntos de vista del mercado con más de un par de divisas, es importante evitar tomar posiciones de tamaño completo que comprar o vender una moneda única. Esto no es muy diferente de tomar dos posiciones en un par, ya que cualquier actividad a la baja en la moneda que está comprando con eficacia generará dos veces las pérdidas. Ver Correlaciones de Divisas Otro factor a considerar es la correlación de divisas. Muchas monedas tienden a caer en la misma categoría, y si usted está buscando para lograr la diversificación en su cartera de divisas, tendrá que crear la exposición a más de un tipo de activo. Por ejemplo, el dólar estadounidense (USD) y el franco suizo (CHF) ambos caen en la categoría de refugio seguro que se beneficia de la incertidumbre económica y de los mercados bursátiles en declive. El yen japonés (JPY) es otra moneda que se beneficia de estos tipos de escenarios como los comerciantes de divisas a menudo se miran a cerrar las posiciones comerciales. Otros ejemplos incluyen monedas tradicionalmente de alto rendimiento como el dólar australiano (AUD) y el dólar neozelandés (NZD). Al mismo tiempo, el Euro y la Libra Esterlina (GBP) tienden a moverse en direcciones similares, dado el carácter interconectado de ambas economías. Lograr la diversificación Con todo esto en mente, los inversionistas de divisas con una perspectiva a largo plazo deben mirar para extender su cartera a través de más de un tipo de moneda, evitando duplicar en cualquier posición. Por ejemplo, los inversionistas de forex podrían buscar crear cierta exposición a divisas de alto rendimiento mientras siguen manteniendo posiciones largas en una moneda de refugio seguro para protegerse contra los shocks inesperados en el mercado. De esta manera, la teoría de la cartera moderna puede aplicarse a mercados distintos de las acciones y puede utilizarse para suavizar la volatilidad en sus posiciones colectivas. Los operadores de Forex deben mirar sus carteras como una colección de posiciones, en lugar de un vehículo para comprar una moneda única en pares múltiples. Cuando juegas a las fortalezas de los múltiples tipos de divisas, se vuelve mucho más fácil aprovechar los positivos que se ven cada clase de moneda. Por lo menos, debe recordarse que una verdadera diversificación no puede lograrse utilizando más de una posición completa en una sola moneda. Es posible, sin embargo, tomar una posición mayoritaria en una moneda mientras que usa tamaños reducidos de la posición. En el ejemplo inicial presentado aquí, un comerciante sería mucho más seguro y protegido del riesgo si las posiciones EUR se redujeron. Esto podría significar la reducción de posiciones entre parejas como EUR / USD, EUR / GBP y EUR / AUD. Forex algoritmo y comercio cuantitativo Hemos visto muchas nuevas tendencias en el comercio financiero durante la última década. Uno de ellos es el hecho de que el comercio de divisas se hizo popular como el Internet se hizo más generalizada. Pero junto con esto ha sido una tendencia creciente en el comercio basado en computadora que permite la implementación de estrategias automatizadas. En su mayor parte, estos oficios se basan en estrategias de análisis técnico predeterminado que han sido probados con éxito a lo largo del tiempo. Dicho esto, el comercio automatizado implica cierto nivel de riesgo y hay muchos paquetes de caja negra que prometen rendimientos significativos en un corto período de tiempo. Cualquier promesa extrema como esta debe ser satisfecha con al menos cierto nivel de escepticismo. Pero el hecho es que el comercio algorítmico y cuantitativo es una parte válida del mercado de divisas 8212 y esto no va a cambiar en el corto plazo. Aquí, miramos algunos de los factores que deben ser considerados antes de colocar operaciones algorítmicas que se basan en estrategias cuantitativas. Algorítmica / estrategias cuantitativas definidas En primer lugar, los comerciantes deben entender lo que se entiende por algorítmica y cuantitativa de comercio. Específicamente, estos términos se refieren a los casos en que los comerciantes de divisas iniciar posiciones que se definen por fórmulas matemáticas predeterminadas. Por ejemplo, las operaciones pueden ser activadas cuando los precios suben por encima o por debajo de una determinada media móvil. Factores como el momentum de los precios, la desviación estándar, los promedios históricos y la tendencia de la fuerza tienden a ser utilizados como base para la mayoría de estas estrategias. Una vez que un conjunto específico de criterios se cumplen, las operaciones se colocan 8212 y esto puede incluso incluir elementos adicionales como la colocación de órdenes de stop loss y las pérdidas de ganancias. Asesores expertos Para activar estas operaciones de forma automática, los comerciantes de divisas generalmente utilizan un asesor experto. O EA. Esto se puede hacer utilizando una plataforma de comercio de divisas que permite el comercio automatizado. Algunas de las opciones más comunes aquí incluyen TradeStation y Metatrader. Que son la plataforma altamente personalizable que permiten el comercio algorítmico y cuantitativo. Así que si usted está interesado en utilizar realmente este tipo de estrategia, usted querrá asegurarse de que utiliza un corredor de divisas que ofrece plataformas como estas o algo similar. Cuando se buscan los propios EA, las opciones son mucho más amplias. Para obtener alguna perspectiva, su plataforma de comercio de divisas se puede considerar como su dispositivo de computación y los EA que utiliza puede ser pensado como una aplicación. Estas aplicaciones darán lugar a intercambios automáticamente 8212 siempre y cuando se cumplan sus criterios de mercado predeterminados y su estación comercial está abierta y funcionando. EAs se puede encontrar a través de una simple búsqueda en la web, pero algunas fuentes para estos son sin duda más reputadas que otras. A menudo es mejor utilizar EAs que se pueden encontrar a través de las comunidades de comercio de divisas, ya que estos pueden ser objetivamente probado y revisado. Sin esta seguridad añadida, a veces es difícil saber si la EA ha sido o no correctamente probada y es realmente capaz de producir sus resultados. Dos fuentes populares para EAs se pueden encontrar en Forex Peace Army y Forex Factory. Muchos de los EAs listados en estos sitios son gratuitos. Pros y contras Como dijimos antes, el comercio de divisas automatizado se asocia con su propio conjunto de beneficios y desventajas. En el lado positivo, las estrategias algorítmicas y cuantitativas permiten a los comerciantes de divisas vigilar eficazmente todos los aspectos del mercado de divisas 8212 incluso cuando no están supervisando activamente su estación comercial. Piense en ello de esta manera, usted puede ser que tenga una estrategia muy acertada pero sería imposible mirar cada par de la divisa para los casos donde sus criterios predeterminados se satisfacen. Las estrategias basadas en la computadora tienen esa capacidad y esto puede permitirle capitalizar en comercios de la divisa que usted pudo haber faltado de otra manera. En el lado negativo, casi con certeza verá casos en los que su EA ha abierto un comercio que podría haberse evitado. Desafortunadamente, los algoritmos de computadora son modelos digitales que están destinados a entender un mundo analógico 8212 y habrá casos en los que su modelo de EA abrirá las posiciones de manera más agresiva de lo que podría tener por su cuenta. Por estas razones, es generalmente una buena idea mantener los tamaños de posición de la divisa más pequeños de lo que podría cuando se negocia manualmente. En general, lo mejor es mirar sus tasas de éxito en el tiempo y luego permanecer con una EA dado si produce resultados positivos que son consistentes. El comercio algorítmico y cuantitativo no es algo que debe llevarse a cabo de manera fortuita, ya que podría abrir su cuenta de operaciones a posibles pérdidas. Pero si estas estrategias se investigan correctamente (y con precisión de nuevo probado), las estrategias automatizadas pueden ser una herramienta poderosa para agregar a su arsenal de comercio de divisas. Forex Momentum Oscillators Con el fin de ganar dinero en el mercado de divisas, tendrá que tener alguna manera de predecir donde los precios son propensos a la cabeza en el futuro. Una de las mejores maneras de hacer esto es hacer una evaluación de dónde está la mayoría es el impulso de los mercados se coloca. Hay muchas maneras de hacer esto, pero los analistas técnicos tienden a tener una ventaja en estas áreas con la ayuda de algunas herramientas de gráficos probados. Dos de las opciones más populares se pueden encontrar en el Oscilador Momentum y el Índice de Fuerza Relativa (también conocido como el RSI). Aquí, vamos a ver algunas de las formas en que los comerciantes de divisas utilizan estas herramientas y, a continuación, proporcionar algunos ejemplos visuales en gráficos de moneda activa. El Momentum Oscillator Al mirar para evaluar el impulso dominante visto en el mercado de divisas, un buen lugar para mirar es el Momentum Oscillator. Esta herramienta de gráficos permite a los comerciantes de divisas para medir la tasa de cambio que se observa en los precios de cierre de cada intervalo de tiempo. Disminuir el impulso puede ser una indicación excelente de que una tendencia del mercado está lista para revertir. Cuando los puntos de reversión se señalan con precisión, los comerciantes de divisas son capaces de comprar bajo y vender alto antes de que el resto del mercado ha hecho la transición. En resumen, los comerciantes deben lado con la tendencia dominante cuando el oscilador Momentum indica fortalecer. Los comerciantes deben apostar contra la tendencia cuando el Momentum Oscillator se ralentiza y sugiere que el mercado está llegando a un punto de agotamiento. Vamos a echar un vistazo a un ejemplo de gráfico en tiempo real utilizando el GBP / JPY: Gráfico Fuente: Metatrader Aquí, el Oscilador Momentum se representa debajo de la actividad de precios y se muestra en azul. Una línea ascendente sugiere que el impulso del mercado está creciendo. Cuando la línea de impulso cae al fondo de la medición, el impulso está saliendo del mercado. En este ejemplo, podemos ver que los precios caen a sus mínimos cerca de 119.20. Los precios comienzan entonces a subir y esto va acompañado de una fuerte señal de tendencia enviada por el Momentum Oscillator (mostrado en la primera flecha). Esto estaría en la indicación para el comerciante de la divisa al lado con la dirección del último movimiento 8212 del precio que, en este caso, es alcista. El GBP / JPY luego experimenta un masivo rally por encima de la marca de 160. En este caso, un operador de divisas podría haber visto las primeras señales enviadas por el Momentum Oscillator e inició una posición larga en el GBP / JPY. Si esto se hizo, las ganancias significativas se podría haber realizado con poco o ningún retiro. El Índice de Fuerza Relativa (RSI) Otra opción para medir el impulso en los mercados de divisas es usar el Índice de Fuerza Relativa. O RSI. Esta herramienta de gráficos compara ganancias y pérdidas recientes para determinar si los toros o osos están realmente en control del mercado. A continuación, veremos un ejemplo de RSI cartografiado utilizando el USD / JPY: Gráfico Fuente: Metatrader El RSI oscila entre 0 y 100. Las lecturas de indicadores por encima de la marca de 70 se consideran sobrecompra. Mientras que las lecturas por debajo de la marca 30 se consideran sobreventas. Las señales de compra se generan cuando el indicador cae por debajo de la marca de 30 y luego retroceden por encima de ese umbral. Las señales de venta se generan cuando el indicador se eleva por encima de la marca de 70 y luego retrocede por debajo de ese umbral. En el ejemplo de USD / JPY anterior, podemos ver que los requisitos para la postura bajista se cumplen cuando el indicador golpea el territorio de sobrecompra antes de que la lectura del RSI empiece a disminuir. Como esto ocurre, el USD / JPY cotiza en 85.80. En última instancia, el par cae a 80,90 antes de volverse hacia arriba, lo que significa que cualquier comerciante que actúe sobre la señal de impulso generado por la señal de venta RSI podría haber capturado casi 500 pips de ganancia con muy poca reducción. De esta manera, el RSI puede ser una herramienta muy eficaz es evaluar si el impulso del mercado es probable que sea alcista o bajista en las horas, días y semanas por delante. Los comerciantes de Forex que buscan establecer posiciones basadas en el impulso subyacente presente en el mercado pueden beneficiarse enormemente después de consultar al RSI, ya que es una manera rápida y fácil de evaluar si los precios de mercado se han sobrecomprado o sobrevendido. Noticias de Forex Trading Los operadores de Forex que buscan basar sus posiciones desde la perspectiva del análisis fundamental casi siempre utilizarán nuevas versiones en la formación de una postura del mercado. Estos comunicados de prensa pueden tomar una variedad de formas diferentes, pero el más común (y relevante) para los comerciantes de divisas es el comunicado de prensa económica. Estos informes se programan con bastante antelación y generalmente se asocian con las expectativas del mercado que se derivan de las encuestas de analistas. Los calendarios de datos económicos se pueden encontrar fácilmente en una búsqueda en la web, un buen ejemplo se puede encontrar aquí. En algunos casos, estas expectativas son exactas. En otros casos, no lo son. Por lo tanto, es importante para los comerciantes de divisas para monitorear los desarrollos en estas áreas, ya que hay muchas oportunidades de comercio que se pueden encontrar una vez que los lanzamientos de noticias importantes se hacen públicos. Una de las mejores maneras de abordar esta estrategia es buscar diferencias significativas entre las expectativas iniciales y los resultados finales. Cuando el mercado está reaccionando a la nueva información, los picos de volatilidad se ven y los grandes cambios en los precios pueden ser muy rentables si se captura en las primeras etapas. Evaluación de la importancia de los datos Por supuesto, no todos los lanzamientos económicos están asociados con el mismo nivel de importancia. Informes como el PIB trimestral, la inflación, el desempleo y la manufactura tienden a subir hacia la parte superior de la lista. Pero habrá casos en los que otros informes económicos más pequeños son más relevantes para un escenario específico. Por esta razón, es importante evitar caer en una rutina rígida al evaluar qué informes de datos son probablemente importantes y cuáles no. Una de las mejores maneras de evaluar si un informe dado o no significativo mover el mercado es simplemente ver qué próximos informes están recibiendo la mayor atención en los medios financieros. Estos informes tienden a generar titulares una vez que los resultados finalmente se hacen públicos, y titulares de noticias financieras a menudo dictan qué tendencia es dominante en cualquier día de negociación. Ejemplo de gráfico en tiempo real Echemos un vistazo a un ejemplo de gráfico en tiempo real en el USD / JPY. En este caso, los mercados esperaban ansiosamente las cifras trimestrales del PIB fuera de los Estados Unidos. Los analistas de Forex esperaban una caída de -0,5 para el período. Y esta expectativa negativa envió el USD bajo a través del tablero. Estas tendencias obligaron al USD / JPY a mínimos cerca de 92,70 justo antes de la publicación de los datos. Gráfico Fuente: Metatrader Sin embargo, el informe se hizo público, rápidamente se hizo claro que la estimación de consenso era incorrecta 8212 y el PIB trimestral de los EE. UU. subió a una tasa de 1. En el gráfico anterior, podemos ver que la reacción del mercado fue bastante pronunciada y abiertamente alcista para el USD. Los precios finalmente se recuperaron por encima de los 99,50, impulsados ​​en gran parte por las expectativas cambiantes del mercado para la perspectiva general en el USD. Cualquier comerciante que estaba viendo activamente los newswires durante este lanzamiento podría haber saltado en este rally en las primeras etapas y capturado beneficios masivos con poco o ningún drawdown. Escenarios como este ocurren todo el tiempo. La realidad es que es bastante difícil para los analistas de divisas para predecir con precisión los resultados de la economía de datos en todos los casos. Los datos macroeconómicos están influenciados por un sinnúmero de factores (tanto nacionales como globales), por lo que es esencialmente imposible para los pronosticadores construir modelos matemáticos que puedan hacer pronósticos precisos cada vez. Pero es importante recordar que estas diferencias entre la expectativa y la realidad son las instancias que crean la mayor oportunidad en los mercados de divisas. En esencia, grandes sorpresas crean grandes movimientos de precios. Y estos movimientos de precios se pueden traducir en grandes ganancias si se capturan en las primeras etapas. Minimizing Risk A final point to note is that news driven market events tend to create extreme volatility in forex prices. This increase potential reward also carries with it the increased potential for risk, so it is absolutely essential for forex traders to make sure that any established position is placed using a protective stop loss. In most cases, news data tends to force prices on one direction with very little to be seen in corrective retracements. But this will only work for positions that are taken in the direction of the data (ie. bullish positions for positive data, bearish positions for negative data). It can be difficult to place news positions quickly in some cases, so all orders must be placed to a good deal of care and attention. News trading can be quite profitable when done correctly 8212 but a certain level of caution is warranted, as well. Forex Technical Indicators Technical analysis is a popular method used in the forex markets, as it allows traders to view price activity in objective ways. This is helpful because it allows traders to spot not positioning opportunities before big price moves start to take shape. It can be argued that technical analysis is even more popular in forex than it is in areas like stocks or commodities. So, for those looking to tackle the currency markets and achieve long-term profitability, it makes sense to have a solid understanding of the terms and strategies that are commonly used. Since chart analysis has such an important impact on forex trading, it is not surprising that we see some technical indicators used that are less commonly known in other markets. Indicators like the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) have their place in forex trading just as they do in stocks, commodities, and futures. But alternative indicators like Stochastics and Bollinger Bands are two examples of charting tools that might be less commonly known in the other financial markets. Here, we will look at ways trades can be placed when using these technical indicators. Bollinger Bands Bollinger Bands were developed by a famous chart technician named John Bollinger. They are designed to literally envelope price action and give traders an idea of how far valuations might move if market volatility starts to increase. Lets take a look at a real-time example using the AUD/USD: Chart Source: Metatrader In the example above, we can see that Bollinger Bands are composed of three different lines that move in tandem with price activity. The upper band can be thought of as a resistance line . the lower band can be thought of as a support line . These two lines are then plotted along with a 21-period moving average . which is generally near the middle of the underlying price action. The upper and lower bands are placed two standard deviations away from price activity. These bands will tighten as market volatility declines, and then widen as market volatility increases. In terms of buying and selling signals, there are a few different points to note. First is that Bollinger Bands can be great in predicting future volatility. Again, we look at price activity in the AUD/USD : Chart Source: Metatrader In the chart above we can see that the Bollinger Bands constrict. This indicates a period of indecision in the market as fewer traders are activity buying and selling. But conditions like this can only last for so long. It might be that the majority of the market is waiting for an important economic release, and once that data is made public volatility should start to increase in a relatively predictable direction. Essentially, tight Bollinger Band readings suggest that the market is getting ready to make a big move (although the direction of that move is not yet apparent). Wide Bollinger Bands suggest the reverse, as excessive volatility will probably start to settle. Next, we look at ways the Bollinger Band indicator sends buy and sell signals to the market. Again, we look at the AUD/USD: Chart Source: Metatrader In this chart example, we can see the various says that Bollinger Bands send buy and sell signals to the market. Since the upper and lower bands should be thought of as dynamic support and resistance levels . the currency should be bought when prices fall to the lower band and sold when prices rise to the upper band . This is true because any time prices have reached the outer band, it shows that prices have now moved two standard deviations away from their historical average. Prices can only exist in these areas 5 of the time, so when prices are seen in these areas a reversal should be expected. For this reason, the currency pair should be sold when it rises to the upper band, and bought when it falls to the lower band. Stochastics Another technical indicator that is largely unique to common use in the forex market is the Stochastics indicator. This technical tool is useful in determining when prices have become cheap relative to the historical averages (oversold) or too expensive relative to the historical averages (oversold). Where Bollinger BAnds are plotted with price activity, the Stochastics indicator is plotted separate from the price action (below). Lets take a look at a chart example using the GBP/USD: Chart Source: Metatrader As you can see, the Stochastics indicator is plotted on a graph from 0 to 100. Readings above the 80 mark qualify as overbought, while readings below the 20 mark suggest the currency pair is oversold . Overbought readings suggest that traders should consider selling the currency pair, oversold readings indicate traders should consider buying the currency pair. Next, lets look at some sell signals that were sent in this chart: Chart Source: Metatrader In this chart, we can see a clear downtrend. But if we look at the activity in the Stochastics readings, sell signals were sent early on. When we look at the oversold readings that start near the halfway point, we can see slowing momentum in the levels that were hit by the indicator. This weakening momentum (ie. the indicator is no longer able to reach the same highs) should have signals that forex traders could start to sell the currency pair, prior to the massive downtrend that followed. Trade Management and Trailing Stop Losses One of the biggest mistakes made by new traders comes from the belief that once you initiate a trade, the process and your work as a trader is over. Unfortunately, nothing could be further from the truth. And if you fail to actively manage your trades once they are placed, you will almost certainly encounter unnecessary losses. The forex market is always moving and evolving, and in many cases the environment can change significantly after your trade is placed. For these reasons, there will be instances where traders will need to adjust their stop loss levels and profit targets. Here, we look at some methods to manage your trades from a protective standpoint in adjusting your stop losses after the initial trade is executed. Active Stop Management On the positive side, if you are ready to adjust your stop loss it probably means that your position is gaining (in the money). If the market was moving against you, your stop loss likely would have been hit on its own. Many traders will look at trade management from a pip standpoint. For example, a trader might start to adjust the stop once the trade is positive by 50 pips. One strategy in a situation like this is to take profits on half the position . and then moving the stop loss to the break even point (the price level at which the trade was opened). This method effectively allows traders to capture some profits while removing any potential for further risk. If the stop loss is hit later, no losses will be seen. There are other methods that follow the same general logic but do not rely on pip values. For example, a trader might instead look at percentages as a way of determining when a stop loss should be moved. If the trade has made gains of 1-2 it would generally be a good idea to start taking risk off of the table and moving your stop losses to the break even point. In any case, there is nothing wrong with taking profits on at least some portion of your trade. As the old forex markets maxim goes, nobody ever went broke taking trading gains. Parabolic Stop and Reverse (SAR) An alternative approach require more aptitude in technical analysis. Here, we will introduce a less commonly used chart indicator called the Parabolic Stop and Reverse, or Parabolic SAR. The Parabolic SAR indicator is much easier to understand through visuals, so lets take look at the indicator at work using the EUR/USD: Chart Source: Metatrader Visually, the Parabolic SAR looks like no other indicator and it might even be a bit difficult to see on the chart. But here we can see purple dots that follow price action and send buying and selling signals in the process. Specifically, buy signals are sent when prices are above the plotted indicator reading. Sell signals are sent when prices are below the indicator reading. But these signals can also be used in positions that have already been established. For example, forex traders that are in active long positions might want to consider exiting those positions when sell signals are sent. Conversely, those in active short positions might want to consider reversing that stance if the indicator issues a buy signal. This is why the indicator is named the stop and reverse. Lets look at this chart again with the buy and sell signals identified: Chart Source: Metatrader Here, we can see how it looks when the Parabolic SAR sends its buy and sell signals. Lets pay special attention to the first two signals. The first downward arrow signals an opportunity to sell the EUR/USD currency pair. Assume that this short position was taken and held until a buy signal was sent at the second upward arrow. Here, a forex trader could have capitalized on a price move of roughly 600 pips before there was any indication that the position should be closed. If we look at the differences between the second and third signals (a buy signal and a sell signal, respectively), an even larger move is seen. With this in mind, it should be understood that the Parabolic SAR is a very powerful tool in terms of the ways it can allow traders to actively manage their positions once established. Forex Breakouts A large percentage of forex traders focus on technical analysis and use it as a basis for establishing new positions. To some extent, this makes a good deal of sense because analyzing the currency markets is a much broader task than analyzing the earnings outlook for a single company. Many more factors influence the economic prospects for an entire nation, so one solution for dealing with this is to pay more attention to price charts and using that information to establish forex trades. There are many sub-strategies that forex traders use when attacking these markets, but one of the most common is the breakout strategy . In this case, forex traders look for chart signals which suggest that currency prices are on the verge of a big move (in either the upward or downward direction). Here, we will look at some of the elements that go into spotting breakouts as well as some of the trade management rules that are typically associated with this type of trading. The End of a Sideways Market In order for a breakout to occur, we must first have a sideways, or consolidating, trading environment. Those familiar with some of the basics of technical analysis will understand the trading range 8212 which is where prices bounce back and forth between support and resistance levels with no dominant trend in place. Below is an example of a sideways market with range trading characteristics present: Chart Source: Metatrader The above chart shows sideways trading activity in the EUR/GBP . which is a currency pair that is often caught in trading ranges. Prices bounce back and forth from the support zone to the resistance zone and no dominant trend is present. Trading ranges cannot last forever, however, and once this trading range breaks down, there are increased for breakouts as the market adjusts to the new directional momentum. Breakouts Signal New Trend Beginning When one of these support or resistance levels is breached, forex traders start to position for the beginning of a new trend. The logic here is that market energy was building as price activity was constricting. Once these consolidative ranges break, the momentum that follows is often very forceful. When forex traders are able to spot these events in the early stages, significant profits can be captured when new positions are established in the direction of the breakout. Lets take a look at a downside breakout in the EUR/GBP: Chart Source: Metatrader In the chart above, we can see an example of a bearish breakout where prices are trading mostly sideways against a clearly defined level of support. In forex, breakout traders would be looking for an opportunity for new trades as the level of support finally breaks. This event occurs at the downside arrow, which comes in near the 0.9150 mark. Short trades could have been taken here, and roughly 350 pips could have been captured as the GBP strengthened and prices soon fell below 0.8800. Next, lets assess a bullish example using the USD/JPY : Chart Source: Metatrader In the chart above, we can see an example of a bullish breakout where prices are trading sideways against a clearly defined level of resistance. Here, breakout traders would be looking for an opportunity for long trades as the level of resistance finally breaks. This event occurs at the upside arrow, which comes in near the 81.80 mark. Long trades could have been taken here, and roughly 200 pips could have been captured as the USD strengthened and prices later rose to the 83.80 region. An added factor that can be seen in this example is the fact that prices pushed through the critical resistance zone, made a small rally 8212 and then dropped back slightly to retest the area of the breakout. Basic technical analysis rules tell us that once a level of resistance is broken, it then becomes a level of strong support. (Just as a broken level of support will then become a level of strong resistance). In this USD/JPY example, we can see that after the initial bullish breakout prices dropped to test the 81.80 breakout zone. This is shown at the red candle near the sideways arrow. The long bottom wick on this candle shows that prices bounced forcefully out of this area 8212 strong indication that the breakout is valid and that 81.80 will now be viewed as support for the uptrend that follows. Commodities Intermediate Forex AdvancedForex Advanced Candlestick Reversal Patterns Most forex traders that use technical analysis as the basis for their positions spend a lot of time watching candlestick charts. This chart type is useful on a number of different fronts, and one of the best examples of this can be found in the ways candlestick charts can make it easier to spot reversals. When we talk about reversals, the main idea is that any prevailing trend has started to reach its exhaustion point and that prices are ready to start moving in the opposing direction. In the moment, it might seem very difficult to know that all of the previous directional momentum has actually run its course. But when we use candlestick formations as an identification tool, there are some specific signals that are sent on a regular basis. Here, we will look at various formations of the doji, as well as the bullish and bearish engulfing patterns. Doji Pattern The doji candlestick pattern is a strong reversal signal that shows market momentum is running out. Since the majority of the buying or selling activity has already taken place, any indication that the number of majority participants is dwindling can be used as an opportunity to start taking forex positions in the other direction. The doji pattern can be bullish or bearish in nature, all depending on the direction of the previous trend. Chart Source: Forexmachines The candlestick formations shown above might look different in form, but they all essentially tell the same story. The common doji pattern is composed of a very small candle body with an upper and lower wick. The long legged doji also has a very small candle body that is roughly in the center of the formation. In this case, however, the upper and lower wicks are longer which ultimately suggests that there was more volatility during that time interval. The gravestone doji is one of the most bearish versions of the pattern. In this case, the pattern shows a very small candle body at the bottom, with a long wick to the topside. This pattern shows that markets rose quickly to levels that were unsustainable. Sellers then took over and the time interval ended. If this formation is followed by a full-bodied bearish candle, confirmation is in place and short positions can be taken. The dragonfly doji is one of the most bullish versions of the pattern. In this case, the pattern shows a very small candle body at the top, with a long wick at the bottom. This pattern shows that markets fell to levels that were unsustainable. Buyers then took over and the time interval ended. If this formation is followed by a full-bodied bullish candle, confirmation is in place and long positions can be taken. Chart Source: Metatrader In the chart above, we can see that price activity was strongly bullish in the AUD/USD. But no trend can last forever, and market momentum starts to slow as process rise above the 0.9300 area. Here, a bearish doji pattern forms 8212 suggesting that the previous bull trend is ready to reverse. After the doji is seen, a strong bearish candle forms, confirming the reversal pattern. Short positions could have been taken at this stage, and forex traders could have then capitalized on all of the downside movement that followed. Bullish and Bearish Engulfing Patterns In terms of candlestick formations, the doji pattern is relatively extreme and requires strict definitions for what can be seen in the body in order to be valid. But there is another pattern shape that is less rigid but just as powerful in the ways it can predict trend reversals. Next, we look at the bullish and bearish engulfing pattern, which is another candlestick indicator that can be used in establishing forex positions. The following shows the structure of the bullish engulfing pattern: In the bullish engulfing pattern, a downtrend is seen coming to an end . Downtrends are dominated by bearish candles, and a small bearish candle is what is needed to start the bullish engulfing pattern. This small bearish candle is then followed by a larger bullish candle that overwhelms, or engulfs what was seen previously. In the graphic above, we can see that the first candle body is roughly half the size of the bullish candle body that follows. Markets initially push prices lower, and this downward gap creates a lower wick that extends below the initial bearish candle. Market momentum then reverses, extending to a new higher high and a strong positive close that is higher on Day 2. The following shows the structure of the bearish engulfing pattern: In the bearish engulfing pattern, an uptrend is seen coming to an end . Uptrends are dominated by bullish candles, and a small bullish candle is what is needed to start the bearish engulfing pattern. This small bullish candle is then followed by a larger bearish candle that overwhelms, or engulfs what was seen previously. In the graphic above, we can see that the first candle body is roughly half the size of the bearish candle body that follows. Markets initially push prices higher, and this upward gap creates a higher wick that extends below the initial bullish candle. Market momentum then reverses, extending to a new lower low and a strong negative close that is lower on Day 2. Chart Source: Metatrader Which type of engulfing pattern is present here Since the initial trend is downward and then we later see a bullish reversal . the type of structure here is the bullish engulfing pattern . Here, we can see that prices fall to roughly 115 8212 and the series of small red candles is ended by a strong green candle that suggests a reversal is imminent. Forex traders could have taken long positions here . and capitalized on the gains that followed. Carry Trades The forex market is associated some a few trading strategies that cannot be found in other asset classes. One example can be seen in the carry trade, which benefits from differences in interest rates that can be found when pairing currencies together. All forex positions involve the simultaneous buying and selling of two different currencies . When traders buy a currency with a high interest rate in exchange for a currency with a lower interest rate, the interest rate differential accumulates on a daily basis . Over time, these positions can become quite profitable as the carry value of these trades is essentially guaranteed (as long as the interest rate differential remains intact). For these reasons, there are many traders that choose to focus exclusively on these types of strategies. Here, we will look at some examples of hypothetical carry trades in order to see how profits can be captured over time. Currencies and Interest Rates All currencies are associated with a specific interest rate. These rates are determined by the central bank in each nation. This is why monetary policy meetings at central banks are viewed with a high level of importance by forex traders. When you buy a currency, you gain the interest rate for as long as you hold the position. For example, if the European Central Bank has set its benchmark interest rate at 2.5, you will gain 2.5 on your position for each year you hold that currency. If you were to sell the currency (ie. in a short position in the EUR/USD), your forex account would be debited -2.5 for each year you hold the position. In all cases, these credits and debits will accumulate daily once the position is held through the rollover period at 5pm. Trading Examples Lets consider a few hypothetical trading examples using the carry trade rationale. Historically, the Australian Dollar (AUD) has been associated with high interest rates while the Japanese Yen (JPY) has been associated with low interest rates. For this reason, the AUD/JPY is one of the most popular options for carry trades. Hypothetically, lets assume that the Bank of Australia has set its base interest rate at 5. Lets also assume that the Bank of Japan has set its base interest rate at 0.5. The interest rate differential for these two currencies would then be 4.5, so if you were to buy the AUD/JPY and hold the position for one year you would earn a guaranteed 4.5 on your position. This would be independent of any changes seen in the underlying exchange rate between these two currencies. Negative Carry As a point of illustration, it should also be understood that carry value can also work in the opposite direction. Lets assume that the Federal Reserve has set the interest rate for the US Dollar at 3.5. At the same time, the Bank of Canada has set the interest rate for the Canadian Dollar at 2. What would occur if you chose to take a short position in the USD/CAD A short position in the USD/CAD would mean that you are selling the USD and buying the CAD. Since you would be buying the currency with the lower interest rate, your position would be exposed to negative carry 8212 which in this case means that your trading account would be debited a value equal to -1.5 of your position for each year the position is held. This is because the interest rate differential between the USD and CAD is 1.5 (3.5 and 2). Because of this, long-term positions that are associated with negative carry are exposed to greater risk because the losses are guaranteed . Any profits that might be generated by potential changes in the underlying exchange rate would still need to account for the carry costs incurred during the life of the position. Long-term Positioning Forex traders that employ carry trade strategies tend to be traders that possess a long-term outlook. This is because it usually takes a great deal of time in order to generate sufficient profits to justify the position. The interest rate values that are quoted by your forex broker are given on a yearly basis. This does not mean that you will be required to hold your positions for a full year in order to capture the benefits of the carry trade. All positions are pro-rated, and your final profits and losses will be determined by the exact length of time you held each position. Correlated Markets Most forex traders in the advanced stages of their career tend to place the majority of their focus on the currency market. There is good reason for this, as it allows for greater familiarity within a specific asset class. But one problem with this approach is the fact that it becomes very easy to forget that all markets are interconnected and greatly influence one another. Forex is certainly no different, and so it makes sense to have an understanding of the ways areas like stocks and commodities work with (and against) currency markets. Here, we will look at some of the factors that drive correlations between forex and the other major asset classes. Individual stocks have little to no influence on the forex markets, but this is not the case when we look at the benchmark indices as a whole. Closely watched instruments like the SampP 500 or the FTSE 100 can have a significant influence on currencies 8212 especially the currencies that are most closely associated with those geographical regions. Strongly bullish days in the German DAX and French CAC 40 tend to support forex pairs like the EUR/USD and EUR/JPY . Positive activity in the Nikkei 225 tend to create selling pressure in the forex pairs denominated in the Japanese Yen (as the JPY is the counter currency in these pairs). Prices changes in the GBP/USD will often be influenced by the FTSE 100 . and many forex traders will wait to see the prevailing trends in each of these benchmarks before establishing short-term positions. In the case of the US Dollar . things tend to work in reverse. Since the USD is generally considered to be a safe haven asset . it will often trade in the opposite direction relatively to the central benchmarks in the US 8212 the SampP 500 and the Dow Jones Industrials . This means that on negative stock days, traders tend to take their money out of stocks and store it in cash. This benefits the USD and shows that there is a negative correlation relationship between the currency and its most closely associated stock benchmarks. So days that are strongly bullish for the SampP 500 and the Dow Jones will generally create a more negative outlook for the USD. Commodities Commodities markets will impact forex prices in different ways. Countries that are known for metals production tend to benefit when the price for those assets is increasing. For example, there is a large amount of copper production in Australia. On days where copper prices are rising, currency pairs like the AUD/USD tend to benefit. In the same way, high levels of gold production in Canada create a positive correlation between the price of gold and the CAD. On days where gold prices are rising, currency pairs like the CAD/JPY tend to rise (and vice versa). At the same time, the USD tends to work in the opposite direction. This is because commodities are priced in US Dollars, so traders will generally need to sell Dollars in order to buy gold or oil. If you see a trading day where oil is rallying, there is going to be at least some downside pressure placed on the USD as the broader order flow that is seen in the market will require extra sales of the Dollar. Conclusion: Remain Cognizant of Trends in Alternative Markets For all of these reasons, it makes sense to remain cognizant of trends in other asset classes 8212 even if it seems like there is no direct connection between your forex trade and the latest price moves in stocks or commodities. For the most part, what you should be looking for are negative and positive correlations, and then watch what is happening in alternative markets before you place any new forex positions. These correlations alone might not be enough to use as a sole basis for new positions. But these are factors that should be considered, as there are clear influences that can be measured. Having a firm understanding of the broader interconnection between these markets can help you turn your probabilities for success back into your favor over the long run. Diversifying A Forex Portfolio Most with experience trading in the financial markets understand that diversifications is generally a good thing. When we think of diversification, it is usually associated with stock investments that are spread over a number of different industry sectors. But it is possible to diversity your forex portfolio, as well. This can be done by separating currencies into different categories and making sure that you are not doubled-up on any one asset. Here, we will look at some of the factors that go into diversifying a forex portfolio. Avoid Doubling-up First, it must be understood that having multiple positions in a single currency can be especially problematic. For example, lets assume a forex trader buys one lot in the EUR/USD and one lot in the EUR/GBP . It might seem as though the trader is taking two entirely different positions, but nothing could be further from the truth. In a scenario like this, the forex trader would essentially be taking a double position in the EUR 8212 even though it is being done against two different currencies. Here, the trader would essentially be placing all the eggs in one basket and would be especially vulnerable if any weakness is seen in the Euro. In a case like this, it would be much wiser for a trader to take a half-position in both of these currency pairs, as this would limit the excessive exposure in the Euro currency. Taking on excessive exposure in any single currency can be very dangerous, and break many of the basic forex rules that require proper trade management. There is nothing wrong with separating your stance across more than one currency pair. But proper trade management rules dictate that no forex position should expose your account balance to losses of more than 2-3 . So if you are looking to express your market views using more than one currency pair, it is important to avoid taking full-sized positions that buy or sell a single currency. This is not much different than taking two positions in one pair, as any downside activity in the currency you are buying will effectively generate twice the losses. Watch Currency Correlations Another factor to consider is the currency correlation. Many currencies tend to fall into the same category, and if you are looking to achieve diversification in your forex portfolio, you will need to create exposure to more than one asset type. For example, the US Dollar (USD) and Swiss Franc (CHF) both fall into the safe haven category that benefits from economic uncertainty and declining stock markets. The Japanese Yen (JPY) is another currency that benefits from these types of scenarios as forex traders will often look to close out carry trade positions. Other examples include traditionally high-yielding currencies like the Australian Dollar (AUD) and New Zealand Dollar (NZD). At the same time, the Euro and British Pound (GBP) tend to move in similar directions, given the interconnected nature of both economies. Achieving Diversification With all this in mind, forex investors with a long-term outlook should look to spread their portfolio across more than one currency type while avoiding doubling-up on any one position. For example, forex investors might look to create some exposure to high yielding currencies while still maintaining long positions in a safe haven currency in order to protect against unexpected shocks in the market. In this way, modern portfolio theory can be applied to markets other than stocks and it can be used to smooth volatility in your collective positions. Forex traders should be looking at their portfolios as a collection of positions, rather than a vehicle for buying a single currency in multiple pairs. When you play to the strengths of multiple forex types, it becomes much easier to harness the positives that are seen each currency class. At the very least, it must be remembered that true diversification cannot be achieved using more than one full position in a single currency . It is possible, however, to take a majority position in one currency while using reduced position sizes. In the initial example presented here, a trader would be much more secure and protected from risk if the EUR positions were reduced. This could mean reduced positions across pairs like EUR/USD, EUR/GBP, and EUR/AUD. Forex Algorithmic and Quantitative Trading We have seen many new trends in financial trading over the last decade. One of those is the fact that Forex trading became popular as the internet became more widespread. But along with this has been an increased trend in computer-based trading that allows for the implementation of automated strategies. For the most part, these trades are based on predetermined technical analysis strategies that have been back-tested and proven successful over time. That said, automated trading does involve some level of risk and there are many black box packages that promise significant returns over a short period of time. Any extreme promises like this should be met with at least some level of skepticism. But the fact remains that algorithmic and quantitative trading is a valid part of the forex market 8212 and this will not be changing any time soon. Here, we look at some of the factors that should be considered before placing algorithmic trades that are based on quant strategies. Algorithmic / Quantitative Strategies Defined First, traders must understand what is meant by algorithmic and quantitative trading. Specifically, these terms refer to instances where forex traders initiate positions that are defined by predetermined mathematical formulas. For example, trades might be triggered when prices rise above or below a certain moving average. Factors like price momentum, standard deviation, historical averages and trend strength tend to be used as a basis for most of these strategies. Once a specific set of criteria are met, trades are placed 8212 and this can even include added elements like the placement of stop loss orders and profit losses. Expert Advisors To trigger these trades automatically, forex traders will generally use an Expert Advisor . or EA . This can be done using a forex trading platform that allows for automated trading. Some of the most common choices here include TradeStation and Metatrader. which are both highly customizable platform that allow for algorithmic and quantitative trading. So if you are interested in actually using this type of strategy, you will want to make sure that you use a forex broker that offers platforms like these or something similar. When looking for the EAs themselves, the options are much broader. To get some perspective, your forex trading platform can be thought of as your computing device and the EAs that you use can be thought of as an app. These apps will trigger trades automatically 8212 as long as your predetermined market criteria are met and your trading station is open and working. EAs can be found through a simple web search, but some sources for these are certainly more reputable than others. It is often better to use EAs that can be found through forex trading communities, as these can be objectively tested and reviewed. Without this added security, it is sometimes difficult to know whether or not the EA has been accurately back tested and is truly capable of producing its claimed results. Two popular sources for EAs can be found at Forex Peace Army and Forex Factory. Many of the EAs listed on these sites are free of charge. Pros And Cons As we said before, automated forex trading is associated with its own set of benefits and drawbacks. On the positive side, algorithmic and quantitative strategies allow forex traders effectively monitor all aspects of the forex market 8212 even when they are not actively monitoring their trading station. Think of it this way, you might have a highly successful strategy but it would be impossible to watch every forex pair for instances where your predetermined criteria are met. Computer-based strategies have that capability and this can allow you to capitalize on forex trades that you might have missed otherwise. On the negative side, you will almost certainly see instances where your EA has opened a trade that you might have avoided yourself. Unfortunately, computer algorithms are digital models that are meant to understand an analogue world 8212 and there will be instances where your EA model will open positions more aggressively than you might have on your own. For these reasons, it is generally a good idea to keep your forex position sizes smaller than you might when you are trading manually. On the whole, it is best to look at your success rates over time and then stay with a given EA if it produces positive results that are consistent. Algorithmic and quantitative trading is not something that should be undertaken in a haphazard way, as it could open up your trading account to potential losses. But if these strategies are properly researched (and accurately back tested), automated strategies can be a powerful tool to add to your forex trading arsenal. Forex Momentum Oscillators In order to make money in the forex market, you will need to have some way of forecasting where prices are likely to head in the future. One of the best ways of doing this is to make an assessment of where the majority is the markets momentum is placed. There are many ways of doing this but technical analysts tend to have an edge in these areas with the help of some proven charting tools. Two of the most popular choices can be found in the Momentum Oscillator and the Relative Strength Index (also known as the RSI). Here, we will look at some of the ways forex traders use these tools and then provide some visual examples in active currency charts. The Momentum Oscillator When looking to assess the dominant momentum seen in the forex market, a good place to look is the Momentum Oscillator . This charting tool enables forex traders to measure the rate of change that is seen in the closing prices of each time interval. Slowing momentum can be an excellent indication that a market trend is ready to reverse. When reversal points are accurately pinpointed, forex traders are able to buy low and sell high before the rest of the market has made the transition. In short, traders should side with the dominant trend when the Momentum Oscillator indicates strengthen. Traders should bet against the trend when the Momentum Oscillator slows and suggests that the market is reaching a point of exhaustion. Lets take a look at a real-time chart example using the GBP/JPY: Chart Source: Metatrader Here, the Momentum Oscillator is plotted below the price activity and shown in blue. A rising line suggests that market momentum is building. When the momentum line falls to the bottom of the measurement, momentum is leaving the market. In this example, we can see that prices fall to their lows near 119.20. Prices then begin to rise and this is accompanied by a strong trend signal sent by the Momentum Oscillator (shown at the first arrow). This would be in indication for forex trader to side with the direction of the latest price move 8212 which, in this case, is bullish. The GBP/JPY then experiences a massive rally above the 160 mark. In this case, a forex trader could have seen the early signals sent by the Momentum Oscillator and initiated a long position in the GBP/JPY. If this was done, significant profits could have been realized with little to no drawdown. The Relative Strength Index (RSI) Another option for measuring momentum in the forex markets is to use the Relative Strength Index . or RSI. This chart tool compares recent gains and losses to determine whether bulls or bears are truly in control of the market. Next, we will look at a charted RSI example using the USD/JPY: Chart Source: Metatrader The RSI ranges from 0 to 100 . Indicator readings above the 70 mark are considered to be overbought . while readings below the 30 mark are considered to be oversold. Buy signals are generated when the indicator falls below the 30 mark and then move back above that threshold. Sell signals are generated when the indicator rises above the 70 mark and then move back below that threshold. In the USD/JPY example above, we can see that the requirements for the bearish stance are met as the indicator hits overbought territory before the RSI reading starts to turn lower. As this occurs, the USD/JPY is trading at 85.80. Ultimately, the pair falls to 80.90 before turning back upward, which means that any trader acting on the momentum signal generated by the RSI sell signal could have captured nearly 500 pips in profit with very little drawdown. In this way, the RSI can be a highly effective tool is assessing whether market momentum is likely to be bullish or bearish in the hours, days, and weeks ahead. Forex traders looking to establish positions based on the underlying momentum present in the market can benefit greatly after consulting the RSI, as it is a quick and easy way of assessing whether or not market prices have become overbought or oversold. Forex News Trading Forex traders that are looking to base their positions from the perspective of fundamental analysis will almost always use new releases in forming a market stance. These news releases can take a variety of different forms, but the most common (and relevant) for forex traders is the economic news release . These reports are scheduled well in advance and are generally associated with market expectations that are derived from analyst surveys. Economic data calendars can be found easily in a web search, one good example can be found here . In some cases, these expectations are accurate. In other cases, they are not. So it is important for forex traders to monitor developments in these areas, as there are many trading opportunities that can be found once important news releases are made public. One of the best ways to approach this strategy is to look for significant differences between the initial expectations and the final results. When the market is reacting to the new information, volatility spikes are seen and the large changes in prices can be quite profitable if caught in the early stages. Assessing Data Importance Of course, not all economic releases are associated with the same level of importance. Reports like quarterly GDP, inflation, unemployment, and manufacturing tend to come up toward the top of the list. But there will be cases where other, more minor economic reports are more relevant for a specific scenario. For this reason, it is important to avoid falling into a rigid routine when assessing which data reports are likely to be important and which are not. One of the best ways to assess whether or not a given report will significant move the market is to simply watch which upcoming reports are getting the most attention in the financial media. These reports tend to generate headlines once the results are finally made public, and financial news headlines will often dictate which trend is dominant on any trading day. Real-time Chart Example Lets take a look at a real-time chart example in the USD/JPY . In this case, markets were eagerly awaiting quarterly GDP figures out of the United States. Forex analysts were expecting a decline of -0.5 for the period . and this negative expectation sent the USD lower across the board. These trends forced the USD/JPY to lows near 92.70 just prior to the data release. Chart Source: Metatrader But onces the report was actually made public, it quickly became clear that the consensus estimate was incorrect 8212 and US quarterly GDP rose at a rate of 1 . In the chart above, we can see that the market reaction was quite pronounced and overtly bullish for the USD. Prices eventually rallied above the 99.50, driven largely by the changing market expectations for the overall outlook in the USD. Any trader that was actively watching the newswires during this release could have jumped in on this rally in the early stages and captured massive profits with little to no drawdown. Scenarios like this happen all the time. The reality is that it is quite difficult for forex analysts to accurately predict the results of economy data in all cases. Macroeconomic data is influenced by a countless number of factors (both national and global in nature), so it is essentially impossible for forecasters to build mathematical models that can make accurate forecasts every time. But it is important to remember that these differences between expectation and reality are the instances that create the greatest opportunity in forex markets. In essence, large surprises create large price moves. And these price moves can be translated to large profits if caught in the early stages. Minimizing Risk A final point to note is that news driven market events tend to create extreme volatility in forex prices. This increase potential reward also carries with it the increased potential for risk, so it is absolutely essential for forex traders to make sure that any established position is placed using a protective stop loss. In most cases, news data tends to force prices on one direction with very little to be seen in corrective retracements. But this will only work for positions that are taken in the direction of the data (ie. bullish positions for positive data, bearish positions for negative data). It can be difficult to place news positions quickly in some cases, so all orders must be placed to a good deal of care and attention. News trading can be quite profitable when done correctly 8212 but a certain level of caution is warranted, as well. Forex Technical Indicators Technical analysis is a popular method used in the forex markets, as it allows traders to view price activity in objective ways. This is helpful because it allows traders to spot not positioning opportunities before big price moves start to take shape. It can be argued that technical analysis is even more popular in forex than it is in areas like stocks or commodities. So, for those looking to tackle the currency markets and achieve long-term profitability, it makes sense to have a solid understanding of the terms and strategies that are commonly used. Since chart analysis has such an important impact on forex trading, it is not surprising that we see some technical indicators used that are less commonly known in other markets. Indicators like the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) have their place in forex trading just as they do in stocks, commodities, and futures. But alternative indicators like Stochastics and Bollinger Bands are two examples of charting tools that might be less commonly known in the other financial markets. Here, we will look at ways trades can be placed when using these technical indicators. Bollinger Bands Bollinger Bands were developed by a famous chart technician named John Bollinger. They are designed to literally envelope price action and give traders an idea of how far valuations might move if market volatility starts to increase. Lets take a look at a real-time example using the AUD/USD: Chart Source: Metatrader In the example above, we can see that Bollinger Bands are composed of three different lines that move in tandem with price activity. The upper band can be thought of as a resistance line . the lower band can be thought of as a support line . These two lines are then plotted along with a 21-period moving average . which is generally near the middle of the underlying price action. The upper and lower bands are placed two standard deviations away from price activity. These bands will tighten as market volatility declines, and then widen as market volatility increases. In terms of buying and selling signals, there are a few different points to note. First is that Bollinger Bands can be great in predicting future volatility. Again, we look at price activity in the AUD/USD : Chart Source: Metatrader In the chart above we can see that the Bollinger Bands constrict. This indicates a period of indecision in the market as fewer traders are activity buying and selling. But conditions like this can only last for so long. It might be that the majority of the market is waiting for an important economic release, and once that data is made public volatility should start to increase in a relatively predictable direction. Essentially, tight Bollinger Band readings suggest that the market is getting ready to make a big move (although the direction of that move is not yet apparent). Wide Bollinger Bands suggest the reverse, as excessive volatility will probably start to settle. Next, we look at ways the Bollinger Band indicator sends buy and sell signals to the market. Again, we look at the AUD/USD: Chart Source: Metatrader In this chart example, we can see the various says that Bollinger Bands send buy and sell signals to the market. Since the upper and lower bands should be thought of as dynamic support and resistance levels . the currency should be bought when prices fall to the lower band and sold when prices rise to the upper band . This is true because any time prices have reached the outer band, it shows that prices have now moved two standard deviations away from their historical average. Prices can only exist in these areas 5 of the time, so when prices are seen in these areas a reversal should be expected. For this reason, the currency pair should be sold when it rises to the upper band, and bought when it falls to the lower band. Stochastics Another technical indicator that is largely unique to common use in the forex market is the Stochastics indicator. This technical tool is useful in determining when prices have become cheap relative to the historical averages (oversold) or too expensive relative to the historical averages (oversold). Where Bollinger BAnds are plotted with price activity, the Stochastics indicator is plotted separate from the price action (below). Lets take a look at a chart example using the GBP/USD: Chart Source: Metatrader As you can see, the Stochastics indicator is plotted on a graph from 0 to 100. Readings above the 80 mark qualify as overbought, while readings below the 20 mark suggest the currency pair is oversold . Overbought readings suggest that traders should consider selling the currency pair, oversold readings indicate traders should consider buying the currency pair. Next, lets look at some sell signals that were sent in this chart: Chart Source: Metatrader In this chart, we can see a clear downtrend. But if we look at the activity in the Stochastics readings, sell signals were sent early on. When we look at the oversold readings that start near the halfway point, we can see slowing momentum in the levels that were hit by the indicator. This weakening momentum (ie. the indicator is no longer able to reach the same highs) should have signals that forex traders could start to sell the currency pair, prior to the massive downtrend that followed. Trade Management and Trailing Stop Losses One of the biggest mistakes made by new traders comes from the belief that once you initiate a trade, the process and your work as a trader is over. Unfortunately, nothing could be further from the truth. And if you fail to actively manage your trades once they are placed, you will almost certainly encounter unnecessary losses. The forex market is always moving and evolving, and in many cases the environment can change significantly after your trade is placed. For these reasons, there will be instances where traders will need to adjust their stop loss levels and profit targets. Here, we look at some methods to manage your trades from a protective standpoint in adjusting your stop losses after the initial trade is executed. Active Stop Management On the positive side, if you are ready to adjust your stop loss it probably means that your position is gaining (in the money). If the market was moving against you, your stop loss likely would have been hit on its own. Many traders will look at trade management from a pip standpoint. For example, a trader might start to adjust the stop once the trade is positive by 50 pips. One strategy in a situation like this is to take profits on half the position . and then moving the stop loss to the break even point (the price level at which the trade was opened). This method effectively allows traders to capture some profits while removing any potential for further risk. If the stop loss is hit later, no losses will be seen. There are other methods that follow the same general logic but do not rely on pip values. For example, a trader might instead look at percentages as a way of determining when a stop loss should be moved. If the trade has made gains of 1-2 it would generally be a good idea to start taking risk off of the table and moving your stop losses to the break even point. In any case, there is nothing wrong with taking profits on at least some portion of your trade. As the old forex markets maxim goes, nobody ever went broke taking trading gains. Parabolic Stop and Reverse (SAR) An alternative approach require more aptitude in technical analysis. Here, we will introduce a less commonly used chart indicator called the Parabolic Stop and Reverse, or Parabolic SAR. The Parabolic SAR indicator is much easier to understand through visuals, so lets take look at the indicator at work using the EUR/USD: Chart Source: Metatrader Visually, the Parabolic SAR looks like no other indicator and it might even be a bit difficult to see on the chart. But here we can see purple dots that follow price action and send buying and selling signals in the process. Specifically, buy signals are sent when prices are above the plotted indicator reading. Sell signals are sent when prices are below the indicator reading. But these signals can also be used in positions that have already been established. For example, forex traders that are in active long positions might want to consider exiting those positions when sell signals are sent. Conversely, those in active short positions might want to consider reversing that stance if the indicator issues a buy signal. This is why the indicator is named the stop and reverse. Lets look at this chart again with the buy and sell signals identified: Chart Source: Metatrader Here, we can see how it looks when the Parabolic SAR sends its buy and sell signals. Lets pay special attention to the first two signals. The first downward arrow signals an opportunity to sell the EUR/USD currency pair. Assume that this short position was taken and held until a buy signal was sent at the second upward arrow. Here, a forex trader could have capitalized on a price move of roughly 600 pips before there was any indication that the position should be closed. If we look at the differences between the second and third signals (a buy signal and a sell signal, respectively), an even larger move is seen. With this in mind, it should be understood that the Parabolic SAR is a very powerful tool in terms of the ways it can allow traders to actively manage their positions once established. Forex Breakouts A large percentage of forex traders focus on technical analysis and use it as a basis for establishing new positions. To some extent, this makes a good deal of sense because analyzing the currency markets is a much broader task than analyzing the earnings outlook for a single company. Many more factors influence the economic prospects for an entire nation, so one solution for dealing with this is to pay more attention to price charts and using that information to establish forex trades. There are many sub-strategies that forex traders use when attacking these markets, but one of the most common is the breakout strategy . In this case, forex traders look for chart signals which suggest that currency prices are on the verge of a big move (in either the upward or downward direction). Here, we will look at some of the elements that go into spotting breakouts as well as some of the trade management rules that are typically associated with this type of trading. The End of a Sideways Market In order for a breakout to occur, we must first have a sideways, or consolidating, trading environment. Those familiar with some of the basics of technical analysis will understand the trading range 8212 which is where prices bounce back and forth between support and resistance levels with no dominant trend in place. Below is an example of a sideways market with range trading characteristics present: Chart Source: Metatrader The above chart shows sideways trading activity in the EUR/GBP . which is a currency pair that is often caught in trading ranges. Prices bounce back and forth from the support zone to the resistance zone and no dominant trend is present. Trading ranges cannot last forever, however, and once this trading range breaks down, there are increased for breakouts as the market adjusts to the new directional momentum. Breakouts Signal New Trend Beginning When one of these support or resistance levels is breached, forex traders start to position for the beginning of a new trend. The logic here is that market energy was building as price activity was constricting. Once these consolidative ranges break, the momentum that follows is often very forceful. When forex traders are able to spot these events in the early stages, significant profits can be captured when new positions are established in the direction of the breakout. Lets take a look at a downside breakout in the EUR/GBP: Chart Source: Metatrader In the chart above, we can see an example of a bearish breakout where prices are trading mostly sideways against a clearly defined level of support. In forex, breakout traders would be looking for an opportunity for new trades as the level of support finally breaks. This event occurs at the downside arrow, which comes in near the 0.9150 mark. Short trades could have been taken here, and roughly 350 pips could have been captured as the GBP strengthened and prices soon fell below 0.8800. Next, lets assess a bullish example using the USD/JPY : Chart Source: Metatrader In the chart above, we can see an example of a bullish breakout where prices are trading sideways against a clearly defined level of resistance. Here, breakout traders would be looking for an opportunity for long trades as the level of resistance finally breaks. This event occurs at the upside arrow, which comes in near the 81.80 mark. Long trades could have been taken here, and roughly 200 pips could have been captured as the USD strengthened and prices later rose to the 83.80 region. An added factor that can be seen in this example is the fact that prices pushed through the critical resistance zone, made a small rally 8212 and then dropped back slightly to retest the area of the breakout. Basic technical analysis rules tell us that once a level of resistance is broken, it then becomes a level of strong support. (Just as a broken level of support will then become a level of strong resistance). In this USD/JPY example, we can see that after the initial bullish breakout prices dropped to test the 81.80 breakout zone. This is shown at the red candle near the sideways arrow. The long bottom wick on this candle shows that prices bounced forcefully out of this area 8212 strong indication that the breakout is valid and that 81.80 will now be viewed as support for the uptrend that follows. Commodities Intermediate Forex Advanced