Trading with Moving Averages

At its root, a moving average is simply the last X period’s price divided by the number of periods. This gives us the ‘average’ price over the last x periods. And this will be expressed on the chart, much like price itself.

Looking at price movements expressed as an average can present quite a few clear benefits; primary of which is that the wide variations from candlestick to candlestick are modulated by looking at the average price of the last X periods.
Traders often have the question of whether or not price is too high, or too low – but by simply looking at the average price for this candlestick (in consideration of the prices over the last X periods), the trader gets the benefit of automatically seeing the bigger picture.
Many traders will take the indicator’s usage much further; hypothesizing that when price intersects with a moving average, some thing or the other might happen. Or perhaps traders will imagine that if two moving averages crossover, some special event may take place. We’ll discuss this below, but for now – just know that the most basic usage of a moving average is to modulate price; attempting to eradicate questions that may pop up from the erratic price swings that can take place from candle to candle.
Commonly Used Moving Averages
There are quite a few different flavors and flairs of moving averages. Some came about out of trader necessity; others came about from traders simply trying to ‘build a better wheel.’
The most basic moving average is the Simple Moving Average, which we explained the calculation of above. Traders will use quite a few different input periods for moving average for a number of different reasons.
The most common moving average is the 200 period MA, and many traders like to apply this to the daily chart. It is of the belief that most trading institutions; banks, hedge funds, Forex dealers, etc. watch this indicator. Whether it is true or not can, unfortunately, not be substantiated as most of these institutions keep their trading systems and practices proprietary.
But one look at this indicator on any of the major currency pairings can seemingly prove its worth. The chart below will highlight some of the interesting price action that can take place with the 200 period moving average applied to a daily chart:
Many traders also like to watch the 50 period’s moving average. This is thought to be a faster moving average since fewer input periods are used, and the primary effect is that this moving average will be more responsive to more near term price movements. The picture below will show how the 50 periods moving average stacks up to the 200: Here I suggest follow another TECNICAL INDICATOR RSI

Other commonly used input periods are 10, 20, and 100 settings.
Some traderscommonly use numbers from the Fibonacci sequence as moving average inputs, as shown in my scalping strategy in the article Short Term Momentum Scalping in the Forex Market.

Exponential Moving Averages, Can Also follow TECHNICAL INDICATOR ZIGZAG
Out of trader necessity to more closely follow near term price movements, as many traders feel recent price changes to be more relevant than older price variations, the Exponential Moving Average will place higher importance on price values registered more recently.
Since more recent prices are weighed more heavily than older price swings, the indicator becomes more adaptive to the current price environment. In the picture below, we’ll compare the 200 period moving averages as Simple and Exponential MA’s.

Identifying Trends with Moving Averages
Since moving averages provide the luxury of showing us price in consideration of the last X periods, we have the luxury of being able to observe tendencies which we may be able to take advantage of.
Nowhere is this more prevalent than when using this indicator to define trends, which is often the most common application of the moving average.
If price action is consistently residing above its moving average, with the moving average inevitably pulling higher to reflect these increasing prices – traders can consider the chart to be showing an uptrend.

And the exact opposite is true for downtrends. 

Moving Averages as Support and Resistance
As we were able to see in the above picture of the 200 period moving average, peculiar events can take place when price interacts with one of these lines. As such, many traders will look to moving average intersections as opportunities to buy up-trends cheaply, or to sell down-trends when price is thought to be expensive. The thought being that while an uptrend takes a break by moving lower, down to its average, traders can jump in while price is relatively low. The picture below illustrates further:
Moving Average Crossovers
Some traders will take the utility of the moving average a step further, hypothesizing that when two of these lines cross, something may happen. The ‘Golden Crossover,’ often referred to in the financial press is simply the 50 periods moving average crossing the 200 period MA. When this happens, some believe that price will continue moving in the direction of the crossover. Can also follow populer TECHNICAL INDICATOR MACD

     
Some traders feel moving average crossovers can be ineffective as they can often produce considerable lag to a traders’ analysis, compelling traders to buy after an uptrend is well entrenched, or to sell when a downtrend may be nearing its end.

Populer post here

Populer post here

01. The Fibonacci

02.  Trading tips for a Daily Chart  

03.  How To Place A Stop Loss and Profit Target sort of a skilled

04.  How To Day Trade 

05. Basic Ways to Exit Your Forex Trades
 

 

Trading in ingulfing pattern

An engulfing pattern occurs when a candlestick with a large body literally engulfs the body of the preceding candlestick. Ideally the engulfing candlestick will be a different colour to the preceding one, signalling a change in trend. A Bullish engulfing will signal the reversal of a down trend and follow a negative candlestick. A Bearish engulfing is simply the opposite of this. It should follow to another indicator  MACD

The theory behind the formation is that after a trend in one direction, the second large candlestick begins to form when residual pressure causes the security to open above or below the previous open/close. Can Follow DAILY CHART However, the new market direction is revealed as buyers/ sellers step in after this opening gap and begin to drive prices up/ down. Towards the end of the period, this change in direction is so intense that prices move to engulf the previous open/close as well. Good volume is an indication of the strength of the push the engulfing pattern will give to a new trend. The pattern is also strongest when the engulfing occurs after a marked trend in one direction. In the example above note the ‘V’ that is formed by the immediate reversal of the previous trend. Finally ensure you wait until the candle has closed before identifying it as an engulfing pattern. Next Important Indicator Is HAMER CANDLE

Populer post here

01. The Fibonacci

02.  Trading tips for a Daily Chart  


03.  How To Place A Stop Loss and Profit Target sort of a skilled

04.  How To Day Trade 


05. Basic Ways to Exit Your Forex Trades

The Pin Bar: one among the foremost Powerful value Patterns in Forex mercantilism

Are you uninterested in attempting to be a plunger and frequently obtaining scalped by the market? maybe the fast action of the 1-Minute and 5-Minute charts may be a bit an excessive amount of.  In fact, mercantilism those lower timeframes will be terribly troublesome, even for the foremost seasoned skilled traders. one among the simplest things several new traders will do to extend their winning share and profits is to easily step back and start mercantilism on higher timeframes like the Daily, 4 Hour, and one Hour Charts.  By stepping back and mercantilism off these higher timeframes, new traders can notice a way less disagreeable sort of mercantilism as there's no have to be compelled to sit before of the pc and watch tick by tick as value moves against you a couple of pips, and so for you, and so against you another time. (The Best strategy The Fibonacci )

The transition from mercantilism lower timeframes to higher timeframes will be to a small degree troublesome initially for newer traders. initial of all, higher timeframes would require additional patience. value pattern set-ups won't occur as oft, and once they do, profits might not return as quick.  Generally, mercantilism off of upper timeframes might not be as “exciting” as mercantilism tick-by-tick on the lower timeframes.  However, common technical analysis tells America that signals off higher timeframes tend to be additional reliable than signals off lower timeframes as a result of the upper timeframe signals square measure created by a bigger set of information. during this article, we have a tendency to square measure attending to discuss one among the best likelihood mercantilism methods within the FX Market-the Pin Bar.

Pin Bar History & Definition

In his book Pring on value Patterns, Martin Pring mentioned a candle holder formation he coined the “Pinnochio Bar.”  The Pinnochio Bar, or pin bar, tends to supply terribly reliable reversal signals once known and listed properly.  Before we have a tendency to maintain, here may be a image of a pin bar: ( Another populer article Trade with Parabolic SAR )

Pring used the first term “Pinnochio Bar” as a result of this candle is like Pinnochio’s nose.  Let’s assume the image on top of may be a one Hour candle holder.  As value emotional up throughout the one Hour amount, it appeared that bulls were in complete management of the market, on the other hand at some purpose throughout this one Hour amount, sellers were ready to are available with nice fury and not solely hold the consumers far from pushing value higher, however they really came in and took complete management of the mercantilism amount.  By the tip of the one Hour session, sellers had utterly erased all of the gains that consumers had created, and that they were even ready to push value below the amount open so the candle closed red, that proves that sellers square measure currently utterly up to speed of the market.

The psychological science behind the candle is that value “lied” to America.  It tried to convert America it absolutely was moving higher, however truly, value emotional abundant lower by the tip of the session; therefore, the name “Pinnochio,” or pin bar.  These pin bars square measure a robust reversal signal once they kind within the correct manner and site. ( Best Strategy Trading tips for a Daily Chart )

Not All Pin Bars square measure Created Equal

The best pin bars can shut below the open if the wick is to the upper side, or on top of the open if the wick is to the draw back. within the image on top of, you'll be able to see that the candle holder closed the one Hour mercantilism session below the open; therefore, it closed as a red candle. that's what you would like to envision.  If there has been a pleasant move up in value and also the pin bar forms at the highest of the move with a giant wick to the upper side, you would like the candle to shut red, as within the image on top of.  However, if value has created a pleasant downmove and a pin bar forms at the low of the move, with a giant wick to the draw back, then the body ought to shut inexperienced.( How To Place A Stop Loss and Profit Target sort of a skilled )

If a pin bar doesn't quite try this, it will still be okay, however be assured that the highest ones can march on the style simply delineated .  And continually keep in mind, mercantilism solely the most effective pin bars can give you the best likelihood of mercantilism success. ( How To Day Trade )

The body of a pin bar should be no quite two hundredth of the measuring of the body to the tip of the wick.  Therefore, if the body is eight pips and body to finish of wick is twenty five pips, the candle holder wouldn't be classified as an ideal pin bar.  If the wick to body is one hundred pips, then the body ought to be no quite two hundredth of one hundred pips, or 20 pips.  If it's a couple of pips additional, it will be okay, however is ought to be terribly near twenty pips or less.

The nose shouldn't be terribly long the least bit.  If the nose is to long, the candle holder can kind what's referred to as a doji, that may be a candle holder with a little body and equal length wicks on both sides. an ideal pin bar can have a awfully long wick on one aspect and a awfully little wick, or perhaps no wick, on the opposite aspect. ( Need to read it also Trade with Parabolic SAR )

Location is of utmost importance.  Pin bars shouldn't be listed within the middle of consolidation or a sideways market. often in consolidation, pin bars can kind, however these signals square measure abundant less reliable.  Ideally, there ought to be no candles to the immediate left of a pin bar wick.  Instead, there ought to solely be open house.  Let’s examine a couple of photos.

DON’T TAKE THESE!

The on top of pic is Associate in Nursing example of an ideal pin bar forming within the middle of consolidation. albeit the pin bar’s kind is ideal, because the one within the on top of pic is, it's to create within the correct location!!  This one doesn't, thus you must not trade it. you need to notice pin bars that kind at the highest and bottom of moves.

In the on top of image, you'll be able to see that the pin bar forms at rock bottom of Associate in Nursing extended move. this can be wherever you would like a pin bar to create.

The next vital facet of the pin bar is ensuring it forms at a key space of support/resistance.  You don’t wish to trade them in random value locations. they must be forming on key areas of support/resistance as known through common technical analysis. they must be confirming a value reversal. Now go here 

Basic Ways to Exit Your Forex Trades

Trade with Parabolic SAR

New traders often learn a valuable lesson very early in their trading career. And that is that any trade idea is often – at best – a hypothesis. 

Any trade that is placed can be a potential loss, and the management of risk is important regardless of the market, currency pair, or asset class being traded; so that if that loss occurs – the trader is able to mitigate the damage.

Traders can attempt to ‘cap,’ or mitigate losses with the usage of stop-loss order. A Stop-Loss is a protective order added to a trade; a order that will close the position if price moves against the trader.

There are not as many indicators designed for risk management, or stop placement as there are for other facets of trading, such as entering trades – but there is one indicator that traders can look to for suggested risk management that is known as Parabolic SAR. (The Best strategy The Fibonacci )

Parabolic SAR (which stands for STOP and REVERSE) is an indicator designed by J. Welles Wilder with the goal of denoting market trends.

Below is a chart with Parablic SAR applied (using the default inputs of .02 step and .2 limit). Please notice the area encompassed by the box outlined in blue.

In the blue box, the market began trending up. Also, please notice the purple dot added towards the bottom of the blue box, sloping higher as price continued to trend in an upward direction. As the currency pair continued its trajectory higher, Parabolic SAR was plotted below price. Trading tips for a Daily Chart  )

Towards the top of this up-trend, price began to come down. As price fell further, price eventually intersected with where Parabolic SAR was plotted. A closer view is added below:

In the Yellow circle, we can see the intersection of price with the Parabolic SAR plot. The candle immediately following the intersection, then plots ABOVE price, indicating bearishness. Now as price continues to move lower, Parabolic SAR is plotted above price until another intersection takes place. ( How To Place A Stop Loss and Profit Target sort of a skilled )  Let’s look at the first picture again to see both a Bullish and Bearish Parabolic SAR reading.

The Green box in the picture above will show us the bearish downtrend that followed the intersection of price and Parabolic SAR that we had looked at previously (highlighted by the yellow circle). 

Once again, as the trend continues, so does Parabolic SAR – continuing to denote the bearish downtrend with plots ABOVE price. ( How To Day Trade )

Towards the end of the Green box, we, once again, see an intersection of price with the Parabolic SAR plot ABOVE price. The indicator will then switch sides with which it is plotted, and begin printing underneath price in a BULLISH fashion. 

As you may have noticed, Parabolic SAR is always plotted on the chart. Values are dictated solely by price movements relative to previous price movements, and Parabolic SAR will always be either bullish or bearish. 

One of the more popular mechanisms of utilizing Parabolic SAR is for risk management, or the setting of stops. Traders looking to trade with long-term trends can look to place their stops at the area in which Parabolic SAR is plotted. If the trend continues, the trader can continually adjust the stop higher per the reading of the indicator. As the indicator continues to print higher, this gives the trader the potential to move their stop beyond break-even, locking up gains as the position moves in the traders’ favor. ( Basic Ways to Exit Your Forex Trades )

Eventually, when price retraces and crosses the Parabolic SAR plot, the trader can look to close out their trade (hopefully at a hearty gain) in anticipation of a potential trend change against the trader’s initial position.

 

 

Top ten Forex commercialism Rules

To be a no-hit Forex bargainer you would like to grasp the importance rules that have radio-controlled all kinds of traders. every Forex commercialism rule alone is vital, however after they work along it'll generate immense profits. commercialism with these rules will decrease the possibility of losing and causes you to a no-hit forex bargainer however when reading this Top ten Forex commercialism Rules.

1.      Always Use a commercialism arrange

Here Is some Important tips

     1.  The Fibonacci

    2.   Trade with Parabolic SAR

    3.   Trading tips for a Daily Chart

A commercialism arrange may be a written set of rules that needs a trader’s entry, exit, and cash management criteria. employing a commercialism arrange permits traders to try and do this, though it's a long try. simply try and follow the quote “Fail to arrange and you intend to fail” whereas commercialism in Forex business.

2.      Treat commercialism sort of a Business

To become no-hit, do the commercialism as a full or part-time business – not as a hobby or employment. As a hobby, it are often costlier. As a Job, it are often frustrating. commercialism may be a business and incurs expenses, losses, taxes, uncertainty, stress and risk.

3.      Use Technology to Your Advantage

Trading may be a competitive business, Charting platforms permits the infinite form of strategies for viewing and analyzing the markets. Backtesting a concept will save a commercialism account. obtaining market updates with smartphones and high-speed web connections will greatly increase commercialism performance.

4.      defend Your commercialism Capital

A commercialism account will take an extended time and far effort to saving cash. protective your commercialism capital, it’s not just like having no losing trades. protective capital entails not taking any gratuitous risks and doing everything you'll be able to to preserve your commercialism business.

5.      Become a Student of the Markets

Think of it as continued education – traders got to stay targeted on learning additional daily. laborious analysis permits traders to be told the facts. Focus and observation enable traders to realize instinct and learn the nuances.

6.      Risk solely What you'll be able to Afford to Lose

Do not use real money for commercialism rather than that keep all cash within the commercialism account. the cash in an exceedingly commercialism account mustn't be allotted for the kid’s school tuition or pay the mortgage. One should be ready to lose all the cash allotted to a commercialism account.

7.      Develop a commercialism Methodology supported Facts

Invest some time to develop a sound commercialism methodology is well worth the effort. ought to} be very easy to create cash by victimization methodology however the facts no emotions or hope should be the inspiration behind developing a commercialism arrange.

8.      Always Use a Stop Loss

Using a stop loss will take a number of the feeling out of commercialism since we all know that we are going to solely lose X quantity on any given trade. The stop loss are often either a greenback quantity or proportion.

9.      Know once to prevent commercialism

There area unit 2 reasons to prevent commercialism: Associate in Nursing ineffective trading arrange, Associate in Nursingd an ineffective bargainer. Associate in Nursing ineffective commercialism arrange shows a lot of bigger losses than Associate in Nursingticipated in historical testing and an ineffective bargainer is one United Nations agency is unable to follow his or her commercialism arrange.

10.  Keep commercialism in Perspective

Focused on the commercialism strategy, analyze the info, mind that losing is additionally a part of a business. Setting realistic goals is an important a part of keeping commercialism in perspective. For more knowledge 

How To Place A Stop Loss and Profit Target sort of a skilled

Explanation of Forex Leverage

We know that Leverage is the ability to use something small to control something big. Specific to forex trading, it means you can have a small amount of capital in your account controlling a larger amount in the market.Stock traders will call this trading on margin. In forex trading, there is no interest charged on the margin used, and it doesn't matter what kind of trader you are or what kind of credit you have.If you have an account and the broker offers margin, you can trade on it.The obvious advantage of using leverage is that you can make a considerable amount of money with only a limited amount of capital. The problem is that you can also lose a considerable amount of money trading with leverage. It all depends on how wisely you use it and how conservative your risk management. 
And overlook trading indicator Trade with Parabolic SAR

Basically You Have More Control Than You Think 

Leverage makes a rather boring market incredibly exciting. Unfortunately, when your money is on the line exciting is not always good, but that is what leverage has brought to FX. Without leverage, traders would be surprised to see a 10% move in their account in one year. However, a trader using too much leverage can easily see 10% move in their accounts and one day. While typical amounts of leverage tend to be too high, I trade with five times leverage; it is important for you to know that much of the volatility you experience when trading is due more to the leverage on your trade than the move in the underlying asset. The Fibonacci

What’s Leverage Amounts Can We take 

Basically Leverage is usually given in a fixed amount that can vary with different brokers. Each broker gives out leverage based on their rules and regulations. The amounts are typically 50:1, 100:1, 200:1 and 400:1. 

Explanation about 50:1 Leverage 

Fifty to one leverage means that for every $1 you have in your account you can place a trade worth $50. As an example, if you deposited $500, you would be able to trade amounts up to $25,000 on the market using 50:1 leverage. It's not that you should be trading the full $25,000, but you would have the ability to trade up to that amount. 

Explanation about 100:1 Leverage 

According to above One hundred to one leverage means that for every $1 you have in your account, you can place a trade worth $100. This is a typical amount of leverage offered on a standard lot account. The typical $2000 minimum deposit for a standard account would give you the ability to control $200,000. 

Explanation about 200:1 Leverage 

According to Two hundred to one leverage means that for every $1 you have in your account, you can place a trade worth $200. This is a typical amount of leverage offered on a mini lot account. The typical minimum deposit on such an account is around $300. With $300 you would be able to open up trades up to the amount of $60,000. 

Explanation about 400:1 Leverage 

According to Four hundred to one leverage means that for every $1 you have in your account, you can place a trade worth $400. Some brokers offer 400:1 on mini lot accounts. I would personally be wary of any broker that offers this type of leverage for a small account. Anyone making a $300 deposit into a forex account and trying to trade with 400:1 leverage could be totally wiped out in a matter of minutes. Also overlook

Trading in ingulfing pattern

So, It's not as if the brokers force the trader only to deposit $300, but if they make it possible, I suspect that there are also other ways that they will not act in your best interest. 

About Professional Traders and Leverage 

It is the most part for Forex Trafders, professional traders trade with very low leverage. Keeping your leverage lower protects your capital when you make trading mistakes and keeps your returns more consistent. Many professionals will use leverage amounts like 10:1 or 20:1. It's possible to trade with that type of leverage regardless of what the broker offers you. You just have to deposit more money and make fewer trades.No matter what your style, always remember, just because the leverage is there does not mean you have to use it. In general, the less leverage you use, the better. It takes the experience to know really when to use leverage and when not to. Also overlook

Trading with Moving Averages

What's E-commerce?

E-commerce is anything and everything having to do with buying and selling products using electronic tools — computers, PDAs, cell phones, or whatever else. More commonly, E-commerce refers to business-to-consumer (B to C) Web sites that allow customers to place orders online. This still includes a broad range of sites including major retail chains, small local stores, Web-only stores, and individuals selling on aggregate sites such as eBay. E-commerce is powered by Web-based programs commonly called E-commerce Software or Shopping Cart Software. For most small and medium sized businesses, it's much more cost effective to create a store using an existing shopping cart software solution such as Shop Site, rather than trying to create the entire E-commerce solution from scratch. How does a E-Commerce Work
When you consider what's involved, it's helpful to look at the two different ways people deal with E-commerce. First is the customer's viewpoint. For a customer, E-commerce is all about finding and ordering the right products. Potential customers are thinking about only a few things:
1. Where Can I Find What I Want to Buy?
2. Is This What I'm Looking For?
3. How Much Does It Cost?
4. How Do I Order It?

5. Am I Actually Going To Get What I Ordered?
And, the merchant's viewpoint. For the merchant, it's a lot more complex. There are several things you have to consider, and third-parties such as shipping carriers and payment processors you have to work with. Here are just a few of the things you'll need to think about:
A. Creating and Managing a Product Catalog
B.Drawing Potential Customers to Your Store

C. Taking Orders from Customers
D. Being Notified when Customers Place Orders
E. Accepting and Processing Customer Payments
F. Charging Appropriate Tax on Orders
G. Shipping Ordered Products
H. Calculating and Charging Shipping Rates
I. Protecting Your Store from Hackers

And there are several different components involved in any E-commerce software. If you've worked in a brick-and-mortar store, you probably already know about displaying your products, managing your inventory, and accepting payments when customers buy your products. You may also already know about the variety of advertising, pricing, and incentives you need to draw customers to your store. A Web-based store has all of those components to it, along with taking orders and shipping the products. Fortunately, good shopping cart software includes tools to help you with all of these jobs.

How Do I Create A Product Catalog

How to get obviate over-activity in forex trading?

One of the foremost common mistakes in any market is active. upset will result in important losses, particularly if associate unclear state of affairs within the market.However, there's no “correct” the degree of trade, that may well be over in a very single day, week or month. It depends on the individual merchant, and also the methodology used. however one issue is for sure: if you're perpetually losing cash, then this is often owing to the following:1. you are doing not have an entire and well thought-out strategy. This includes the utilization of risk management and capital of the stop-loss and take-profit.2. you're active. You trade additional often than they must.3. you are doing not use the opportunities that the market offers you. You trade less often than they must.

Here we'll concentrate on the last 2 points.Hyperactivity. You active once you open additional trades than they must. Traders create this error within the case once they ar too confident (that is, folks assume that they're higher than their system). they are doing not trust their methodology and need a fast profit growth.

Sometimes traders concentrate on the potential gains and don't take under consideration the risks related to a specific dealings. which results in additional open positions than they must. On the opposite hand, skilled traders follow their strategy, as a result of they grasp that once the system provides the signal, the probabilities of come back on their facet.

In alternative cases, particularly for beginners, as traders don't trade, they assume that they're doing nothing. in order that they simply take and open position, to feel that they're doing one thing, although the threat to their industrial capital.

Consider the subsequent 2 scenarios:A. ar you able to trade, however your system doesn't emit any signal. you have got determined to enter. The market goes against you.B. ar you able to trade, however your system doesn't emit any signal. You be the sidelines.In situation A, you have got lost cash, and B per the situation – preserved. therefore – keep out of the market – additionally a commerce call.

How to get obviate over-activity within the trade?

Non-participation in trade once the conditions ar clear. If you have got a system, and you are doing not trade once they ought to, the primary issue you'll accept you – you're petrified of losses. you want to bear in mind that once you ar developing a system that took under consideration the risks and limit losses. Therefore, you have got solely to use its own system. Losses happen typically. And skilled traders grasp this. they're awake to the impossibility of continuously shut all trades with a profit. and people traders that ar winning within the trade, have a really low magnitude relation of risk to reward.Do not be afraid to lose. the foremost winning and profitable traders grasp that regarding eightieth of the profits accounted for half-hour of transactions.

Below we tend to offer you some tips to assist you get obviate these errors once and for all (of course, if you may follow these tips):1. Development of a system and follow it.2. Analysis of the market at the start of your commerce day.3. Maintain commerce Journal

Basic Ways to Exit Your Forex Trades

Talking Points:

• Getting great exits is crucial for a successful trading strategy
• Understanding money management
• Learning how to setup exits in 3 different ways: traditional stop/limit, moving average trailing stop, and volatility based stop/limit.

Through emails, phone calls, and tweets many traders I work with on a daily basis are quick to point out why they are entering a trade and are able to describe each setup in great detail. But something I see much less of are traders talking about their exit plans.

Most prudent traders will setup a stop and a limit to go along with their trade, but I’d venture to guess most traders are spending a lion’s share of their time on worrying about getting good entries. This would mean they setup their exit strategy as an afterthought which as a trading instructor, concerns me.

Our exits should be just as well thought out as our entries and we need to have clear reasons on where we exit our trades and under what conditions. Without an exit strategy, we are taking on a lot more risk than we should be.

Interested In Our Analyst's Best Views On Major Markets? Check Out Our Free Trading Guides Here

Exit Strategy #1 – Traditional Stop/Limit (Using Support & Resistance)

The traditional stop/limit method is one that I use constantly during my simple trading strategy webinars. I like it because it is both versatile and effective. The goal is setting our stop and limit so that they have a positive risk to reward ratio and are set around support and resistance levels. Let's take a look at an example of a short Euro trade against the USD that occurred a couple weeks back on a daily RSI chart.

Learn Forex: Traditional Stop/Limit Based on Support & Resistance

When selling a pair, we want to look back at the previous bars and look for an obvious swing high. That swing high could potentially act as a resistance level in the future, so we would like to set our stop loss several pips above that level. This way, the only way we are taken out of the trade is if the pair has enough strength to make a new high. This is fine because if a pair is showing that much strength, it's not a pair that we want to be selling anymore anyway.

Next, the limit order we place will be 100% dependent on our stop loss’ distance. Using the ruler tool on our chart, we should figure out how far our stop loss is set in pips. In this example, our stop is 100 pips from our entry price. We should set our limit twice as far as our stop. That is 200 pips in this example. This is will give us a 1:2 risk to reward ratio.

The next exit strategy is an interesting one for many, because it includes trading automation.

Exit Strategy #2 – Moving Average Trailing Stop

It has long been known that a moving average can be an effective tool to filter what direction a currency pair has trended. The basic idea is that we only look for buying opportunities when the price is above a moving average and we only look for selling opportunities when the price is below a moving average. But some traders have found that it can be effective to use a moving average as a stop loss.

The idea is that if a MA is crossed from one side to the other, then the trend is shifting. If we were trend traders, we would want to close out our positions once this shift has occurred. So this is why setting your stop loss based on a moving average could be effective.

In the example below, we are looking at a M15 chart of the USDJPY which is currently in an uptrend based on the 100 period exponential moving average. At the time when I opened this long position, I placed our stop loss directly at the 100 EMA level. This put our stop loss about 80 pips away. Wanting to stay true to our 1:2 risk to reward ratio rule, I set my limit at 160 pips.

Learn Forex: Stop Loss Based on 100-Period Moving Average

As the trade develops, the exponential moving average is going to change with each new candle that is created every 15 minutes. As the EMA moves, we will update our stop loss to match the 100 EMA. You can see that from the time I opened the trade until now, the 100 EMA has risen 30 pips, raising our stop loss 30 pips alongside it. This means almost 40% of the risk we were taking on our trade originally is now gone. But you will notice, our limit stays fixed at the amount of pips it was originally set to. This means our risk to reward ratio improves throughout the life of the trade. 

Obviously I know many of the Forex traders reading this do not have the time to manually change their stop loss every time their chart prints a new candle, so I am including free download links to automated strategies that will automatically adjust your stop loss in real time to match the MA of your choosing. As long as your platform remains open and connected to trade servers, your stop will continue to move until the trade is closed. 

Exit Strategy #3 – Volatility Based Stop & Limit

I’ve saved the easiest exit strategy for last. This final technique uses the ATR (Average True Range). The ATR is designed to measure market volatility. By taking the average range between High-Low prices for the last 14 candles, it tells you how erratic the market is behaving and this can be used to set your stop and your limit for each trade. 

The greater the ATR is on a given pair, the wider your stop should be. This makes sense because a tight stop on a volatile pair could get stopped out too early. Also, if we set our stop too wide for a slow moving pair, we might be taking on a larger risk than we really ought to. 

In the chart below we used an ATR Pips indicator. 

I recommend setting your stop loss at least 100% of ATR. In the example below, we set our stop loss at 43 pips. Following our 1:2 risk to reward ratio, we set our limit twice as far, 86 pips. 

Learn Forex: Stop Loss & Limit Based on Volatility (ATR)

The ATR Pips indicator will adapt to any time frame you throw at it, so it is completely universal. Simply set your stop at 100% ATR, and set your limit twice that amount. Once the stop and limit is set, it will stay at those levels throughout the life of the trade. You are not required to move your stop and limit as ATR changes. 

Ending With a Bang

Remember that forex trading is more than just getting good entries; your exits should be just as important. You should always have a game plan before you open any position and I hope the 3 exit strategies in this article will help you develop a winning system or help improve upon an existing system. 

 
 

Fundamental forex factor

When it comes to forecasting forex rates, the science of fundamental analysis involves taking into account a variety of relevant economic and political factors for one currency relative to the other currency in each currency pair considered. A fundamental analyst will review as many of these items as possible on a regular basis for each currency and then compare the two to obtain a forecast. Generally, such forecasts are not specific objective numbers for the exchange rate, but instead an overall directional outlook on the currency pair. For example, their outlook might be positive, negative or neutral after the analysis. This would mean that the analyst expects the exchange rate for the currency pair to rise, fall or stay roughly constant respectively. Furthermore, when some new fundamental information enters the forex market in a sudden way, it can prompt significant market moves and volatility as traders react to the new information. At such times, one of the most basic assumptions of technical analysis - the idea that "price discounts all" - breaks down until the new information has been duly assimilated. If you have a trading system based on purely technical indicators this is really important, as a number of key fundamental factors can and often do influence market moves, which may produce unexpected results when trading using systems based on technical analysis. As a result, it really pays to know what the likely effects of such key fundamental information could be so that a quick assessment of probably future direction can be made. Primary Fundamental Information Types The types of fundamental data items which will most impact a country's currency along with a brief description of its likely effect include the following: Growth:
Changes in the country's Gross Domestic Product or GDP that gives a useful measure of growth. A growing economy tends to strengthen a currency. Rates: The level of short term interest rates, such as the Fed Funds rate, in the currency's country of origin affect forex rates because higher rates provide an investment incentive that should strengthen the currency. Trade: The country's trade and current account balance can have an impact on forex rates since persistent trade or current account deficits will tend to depreciate that country's currency. Economy: The general economic outlook for one country in relation to that of the other country can affect forex rates. The forex market tends to value currencies of peaceful countries with growing economies and stable politics over the currencies of less stable countries that are at war or having their national security threatened in some other way. Key Economic Factors Many forex traders perform a daily review of economic calendars for the currency pairs they maintain positions in. They do so since the release of such key information can often result in considerable short term volatility in the currency market, as well as prompt shifts in market sentiment. A list of key economic factors that are routinely covered in the current news and which can move the market when they are released includes the following: Interest Rates: a key element in evaluating one currency against another. If interest rates are increased, the currency of the country becomes more attractive against other currencies offering lower interest rates. Inflation: If the country is in an inflationary economic cycle indicated by the Consumer and Producer Price Indexes, CPI and PPI, this would make it more likely that the central bank of that country would tighten interest rates in order to stem the increase in inflation. An increase in rates would tend to make the currency appreciate. Trade or Currency Account Balance: A trade or current account surplus or deficit will either favor the currency rate for the country with a surplus or weaken the rate for the country with a trade deficit. Credit: Another economic factor that will influence exchange rates directly. If a country has borrowed excessively large sums of money from other nations or from the IMF, its currency will surely reflect the serious level of debt the country is in. Gross Domestic Product (GDP): Represents the total of goods and services a country produces and reflects the level of growth in the economy. Commodity Prices: Can affect exchange rates when the country is a producer and net exporter of commodities and if the country imports commodities. Employment Data: If a country has an increasing percentage of its citizens employed that will tend to strengthen its currency. This key data typically comes in the form of jobless claims, payrolls statistics or the unemployment rate for a country.
Industrial Production: A strong industrial base will tend to strengthen a nation's currency. Retail Sales: A strong retail sales figure is generally favorable for a currency and the country's overall economy. Consumer Price Index (CPI): A measure of inflation. Rising inflation in a country indicates that interest rates may soon be tightened by the national central bank and so will tend to make its currency appreciate. Other factors Supply and Demand Effects: Substantial flows of capital into one currency and out of another currency, perhaps as a result of large corporate transactions or managed portfolio shifts, can shift the exchange rate for the currency pair to favor whichever currency sees the higher demand. Monetary Policy: Because of the effect of monetary policy on interest rates, this makes up an important element in the valuation of a currency. Tighter monetary policy implying higher interest rates, while dovish or looser monetary policy indicating lower interest rates. Political Influences: Countries with stable governments tend to have their currencies favored over those of countries with less favorable political situations. Greater fiscal responsibility also tends to support a country's currency, while excessive government spending will tend to depreciate its currency. Commodity Price: The prices of key commodities like gold and oil tend to affect the valuation of the currencies of their primary exporters and importers. For example, higher oil prices help the British Pound and the Canadian Dollar, while they hurt the U.S. Dollar and the Japanese Yen, whose countries net import oil. Furthermore,
higher gold prices tend to favorably impact the Australian Dollar, and by close association the New Zealand Dollar, since Australia exports that precious metal and so its currency will benefit from a rise in gold's value. Fundamental Information and Technical Trading Combining fundamental news analysis along with technical analysis offers the trader the best of both worlds and will minimize surprises while trading. Some traders purposefully avoid trading on days with economic releases because the market may become temporarily volatile only to settle back towards the original trend. Also, technical forex traders might avoid known risk events like major economic data releases since one of the key assumptions of technical analysis: "Price Discounts All" tends to break down during the period immediately after the announcement as the new information is assimilated into the price.