PIPS AND LOTS

Forex  traders quote the value of a currency pair, and trade sizes, in pips and lots. A pip is usually the smallest amount by which the value of a currency pair can change, although these days some brokers offer fractional pip quotes too. In example, when the value of the GBP/USD pair goes up by one tick (i.e. pip) the quote will move from 1.3845, to 1.3846, and the size of the movement is just one pip. The beginning trader make success or loss in an account by pips instead of the actual dollar value. A one pip gain in a $10 account, is equal, in terms of the trader’s skill, to a 1 pip gain in a $1,000 account, although the actual dollar amount is very different. professional traders is called it a lot. For USD-based pairs, the lot size is 100,000. In other words, when you enter a trade with your margin account, the smallest amount that you can buy or sell is 100K.

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Japanese Candlestick Patterns In Forex Trading

A Brief History of Japanese Candlestick Charting Patterns.

Candlestick charts originated in Japan during the 18th century. Since no defined currency standard existed in Japan during this time rice represented a medium of exchange. Various feudal lords deposited rice in warehouses in Osaka and would then sell or trade the coupon receipts, thus rice become the first futures market. In the 1700s legendary Japanese rice trader Homma Munehisa studied all aspects of rice trading from the fundamentals to market psychology.

Homma subsequently dominated the Japanese rice markets and built a huge fortune. His trading techniques and principles eventually evolved into the candlestick methodology which was then used by Japanese technical analysts when the Japanese stock market began in the 1870s. The method was picked up by famed market technician Charles Dow ( DOW THEORY HERE ) around 1900 and remains arguably the most popular form of technical analysis chart in use by today’s traders of financial instruments.

• Why use Candlestick Charts?

Candlestick charts show the same information as bar charts but in a graphical format that provides a more detailed and accurate representation of price action.

Candlestick charts visually display the supply and demand situation by showing who is winning the battle between the bulls and the bears. ( Trading the Bullish Hammer Candle )

Candlestick charts reveal another dimension of the given period’s price action by pictorially displaying the force (or lack of force) behind each price bar’s movement.

Candlestick formations make all single bar and multi-bar patterns significantly easier to spot in real time, thus increasing your chances of catching high probability trade setups. In addition, because candlestick charts use the same data as bar charts (open, high, low, and close), all Western technical signals used on a bar chart can easily be applied to a candlestick chart.

Candlestick charts offer everything bar charts do and more, using them is a win-win situation because you can use all the trading signals normally used on bar charts with the added clarity and additional signals generated by candlesticks. Candlesticks charts are more fun to look at.

• The Anatomy of a Candle

Candlesticks have a central portion that displays the price distance between the open and the close. This area is known as the real body or simply the body.

The price distance between the open and the high for the period being analyzed is called the upper shadow, sometimes referred to as an “upper wick” as well. The highest price paid for a particular period is the marked by the high of the upper shadow.

The price distance between the close and the low for the period being analyzed is called the lower shadow, sometimes referred to as a “lower wick”.

The real body displays the opening and closing price of the security being traded. Closing prices have added significance because they determine the conviction of the bulls or bears. If the security closed higher than it opened, the real body is white or unfilled, with the opening price at the bottom of the real body and the closing price at the top. If the security closed lower than it opened, the real body is black, with the opening price at the top and the closing price ( PRICE ACTION TIPS ) at the bottom. Depending on the price action for the period being analyzed a candlestick might not have a body or a wick.

To better highlight or visualize price movements, modern candlestick charts (especially those displayed digitally) often replace the black or white of the candlestick real body with colors such as red (for a lower closing) and blue or green (for a higher closing).

Core Candlestick Patterns There are multiple forms of candlestick patterns; here is a brief overview of the most popular and widely used single and multi-bar patterns commonly used today.
Bullish Candle
Signals uptrend movement, they occur in different lengths; the longer the body, the more significant the price increase

Bearish Candle
Signals downtrend movement, they occur in different lengths; the longer the body, the more significant the price decrease.

Long Lower Shadow
These candles provide a bullish signal, the lower shadow must be at least the size of the real body; the longer the lower shadow the more reliable the signal.

Long upper shadow
These candles provide a bearish signal, the upper shadow must be at least the size of the real body; the longer the upper shadow the more reliable the signal.

Hammer
The hammer is a bullish signal that occurs during a downtrend. The lower shadow should be at least twice the length of the real-body. Hammers have little or no upper shadow. When a hammer occurs during an uptrend it is known as a “hanging man” and is a bearish signal. Because of the bullish long lower shadow however, this pattern needs bearish confirmation by a close under the hanging man’s real body.

Shooting Star
This candle has a long upper shadow with little, ( Trading the Shooting Star  ) or no lower shadow, and a small real body near the lows of the session that develops during or after and uptrend.

Harami
The Harami is a two-candlestick pattern in which a small real body forms within the prior session’s larger real body.

Doji
The Doji is a candlestick in which the session’s open and close are the same, or almost the same. There are a few different varieties of Dojis, depending on where the opening and closing are in relation to the bar’s range.

Dragonfly doji
The Dragonfly Doji has a long lower shadow, the open, high, and close are at or very near the session’s high. This pattern often signals reversal of downtrend.

Gravestone doji

The Gravestone Doji has a long upper shadow, the open, low, and close are at or very near the session’s low. This pattern often signals reversal of an uptrend.

High wave candle / long-legged doji
This candle has a very long upper or lower shadow and a small real body. If the opening and closing price are the same the candle has no real body and is then called a Long-Legged Doji. The first picture is a high wave candle the second is a Long-Legged Doji.

Engulfing candles
The bullish engulfing pattern consists of large white real body that engulfs a small black real body in a downtrend. The bearish ENGULFING PATERN occurs when the bears overwhelm the bulls and is reflected by a long black real body engulfing a small white real body in an uptrend.

Spinning tops
Spinning tops are simply candles with small real bodies.

Metatrader Bollinger Band Settings - A Simple Bands Trading System

This is the third article in our Bollinger Bands series. If you haven’t already, we suggest that you check out the first article about the Bollinger Bands Indicator. In the previous two articles, we have covered the background, the calculations involved, and how to use and read the Bollinger Bands indicator. John Bollinger designed his bands in order to measure if prices were high or low on a comparative basis with relative volatility. Traders use the bands to anticipate increases and decreases in volatility that signal imminent trend changes are on the way. Traders focus on the key points of reference for the Bollinger Bands, which are band bounces and squeeze reactions. The “Bollinger Bands Accordion” reflects how volatility varies with price behavior. When the candlesticks “hug” one boundary limit, they tend to “bounce” back to the centerline. When the bands “squeeze”, they also tend to expand quickly thereafter as a price breakout follows a consolidation. The following trading system is for educational purposes only. Technical analysis takes previous pricing behavior and attempts to forecast future prices, but, as we have all heard before, past results are no guarantee of future performance. With that disclaimer in mind, the “green” circles on the above chart illustrate optimal entry and exit points , both conservative and aggressive, that can be discerned from using Bollinger Bands analysis. Using the Bollinger Bands in combination with another technical indicator is also always recommended.
A simple trading system would then be: Determine your entry point after a “squeeze” of consolidation occurs and when the candlesticks begin to pierce the upper limit; Execute a “Buy” order for no more than 2% to 3% of your account; Place a stop-loss order at 20 “ pips ” below your entry point; Determine your exit point when two topping candlesticks form above the upper limit signaling a strong move back to the centerline. Steps “2” and “3” represent prudent risk and money management principles that should be employed. This simple trading system would have yielded a profitable trades of 40 “pips”, but do remember that the past is no guarantee for the future. However, consistency is your objective, and hopefully, over time, Bollinger Band Technical Analysis will provide you with an “edge”. That concludes our series on the Bollinger Bands Indicator. For further reading visit our Forex indicators section. Previous << An example strategy using the Bollinger Bands indicator << Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.

Buying and commercialism / Bid and Ask

In the previous articles we've got been talking regarding Forex costs as one quote. In reality, there square measure 2 quotes for every worth: the damage and therefore the raise price.

A {bid worth|price|terms|damage} associate degreed an raise price square measure typical for any money product, from stocks and different commodities, to Forex quotes further. The bid and raise costs square measure continuously quoted in regard to the bottom currency. Brokers guarantee that the traders get the particular worth for his or her transactions by having bid and raise costs quoted in real time.

The Bid is that the absolute best worth at that the merchandiser should purchase the instrument that he's commercialism at that moment. once commercialism the bottom currency the {bid worth|price|terms|damage} is that the price the dealer is willing to pay to shop for the bottom currency from you.

The raise is that the absolute best worth at that the merchandiser will sell the instrument being listed at the present time. once shopping for the bottom currency, the raise worth is that the worth at that the dealer is willing to sell you the bottom currency in exchange for the quote currency.

The {bid worth|price|terms|damage} can continuously be smaller than the raise price, and you'll see that within the example higher than.

Whichever currency is quoted 1st, it's continuously the one within which the dealing is being conducted. You either obtain or sell the bottom currency.

If you think that the EUR/USD can rise, you'd click obtain and therefore the trade are triggered at the worth of one.2981. this is often what traders talk to once oral communication they're long. a protracted position is after you have opened a trade and acquired one thing, thinking of it as mounting.

If you think that the EUR/USD can fall, you'd click Sell, and therefore the trade are triggered at the worth of one.2983. What you've got now's known as a brief sell position. you've got really sold  one thing you are doing not own, to shop for it back at a smaller worth and benefit from the worth distinction. thus if you short sell a currency combine and therefore the worth goes down, you create money; if it goes up, you lose cash. Follow it price action

Pip (Point), price of the Pip and the way it's Calculated

There ar 2 widespread acronyms for the term PIP. One is proportion in purpose, and also the alternative is value Interest purpose. Basically, a pip is that the unit of mensuration to specific the modification in worth between 2 currencies .

For example, the AUD/USD quote going from zero.8611 to 0.8610, we might decision that a value decline of zero.0001, or 1 pip. If the present value of USD/JPY is 118.13 and it goes to 118.14, this is often a value rise of zero.01, or 1 pip. One pip is so the littlest modification in worth for a quote that permits 2 or four decimal places.

However, a lot of and a lot of brokers transcend the quality four and 2 decimal places, giving quotes with 5 and 3 decimal places. This third or fifth decimal is often called pipet. A broker might quote NZD/USD as zero.78586. If that goes to zero.78587, the movement is termed as a one pipet rise.

However, a lot of and a lot of brokers transcend the quality four and 2 decimal places, giving quotes with 5 and 3 decimal places. This third or fifth decimal is often called pipet. ( How does a E-Commerce Work? ) broker might quote NZD/USD as zero.78586. If that goes to zero.78587, the movement is termed as a one pipet rise.

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Price Action tips

Over the past few months, we’ve published multiple articles on the topic of Price Action, which is the study of one of the most pure indicators available to traders: Price.
With knowledge of price action, traders can perform a wide range of technical analysis functions without the necessity of any indicators. Perhaps more importantly, price action can assist traders with the management of risk; whether that management is setting up good risk-reward ratios on potential setups, or effectively managing positions after the trade is opened.

How To Day Trade

This article is a capstone of all of price action studies that we’ve published thus far; teaching traders to analyze and grade trends, enter trades in 6 different ways with various setups, and manage risk while looking at support and/or resistance.

Before we get into the individual elements of price action, there are a few important points to establish.
Trend Analysis  Can get extra knowledge Trade with Parabolic SAR
The first area of analysis that traders will often want to focus on is diagnosing the trend (or lack thereof), to see where any perceivable biases may exist or how sentiment is playing out at the time.

In Price Action Introduction we looked at how traders can notice higher-highs and higher-lows in currency pairs to denote up-trends; or lower-lows, and lower-highs to qualify down-trends. The chart below will illustrate in more detail:

Entering Trades
After the trend has been analyzed, and the Price Action trader has an idea for sentiment on the chart, and trend in the currency pair – it’s time to look for trades.
There are quite a few different ways of doing so, and we’ve published quite a few resources on the

Basic Ways to Exit Your Forex Trades

topic.
In Price Action Pin Bars, we examined one of the more popular candlestick setups available, which traders will commonly call a ‘Pin Bar.’ The Pin Bar is highlighted by the elongated wick that ‘sticks out’ from price action. The picture below will show a pin bar in greater detail:

We took this a step further in How to Trade Fake Pin Bars, as we looked at how traders can trade candles that show long wicks that don’t quite ‘stick out’ from price action. This is where trend analysis can greatly assist in the setting of initial risk (stops and limits). The following picture will show how a trader might want to play a ‘Fake Pin Bar.’

  Periods of congestion or consolidation can also be used by traders utilizing price action. In Trading Double-Spikes, we looked at the ‘double bottom’ or ‘double top’ formation that is popular across markets. We looked at two different ways of playing Double-Spikes, both of which we’ve outlined in the following 2 charts.
We looked at the Double-Spike breakout for instances in which traders are anticipating that the support (or resistance) that has twice rebuked price may get broken with strength. The Double-Spike breakout is plotted below:

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  And for situations in which traders are anticipating support or resistance continuing to be respected, the Double-Spike Fade may be more accommodating:

On the topic of congestion, another very popular setup that we discussed was Trading Price Action Triangles.
While there are different types of triangles, most traders look to trade these periods by anticipating a breakout. Below is the ‘Descending Triangle,’ in which price has respected a horizontal support level while offering a down-ward sloping trend-line. Related is the ascending triangle that is highlighted with an upward sloping trend-line. In both instances, traders are often looking to play breakouts of the horizontal support or resistance level (this horizontal line is support for descending triangles, and resistance for ascending triangles).

If no horizontal support or resistance exists, traders may be looking at a ‘symmetrical triangle,’ which adds an element of complication since there are no horizontal levels with which to look to play  ( which currency pairs are best to trade ) breakouts. The following illustration shows a symmetrical triangle setup, along with how a trader may look to trade it:

And for periods in which the market is ranging the article How to Analyze and Trade Ranges with Price Action went over the topic in detail. 

Risk Management
In Price Action Swings we identified ‘swing-highs’ and ‘swing-lows’ with which traders could use to identify comfortable areas of setting stops or limits.

And of course, in an up-trend: 

We took this a step further in the article How to Identify Positive Risk-Reward Ratios with Price Action, so that traders can analyze the relevant swings to decide whether or not the potential trade (given its management parameters) would be warranted.

And of course, once we are in the trade, managing profits is a topic of key consideration. We looked at exactly that in Trading Trends by Trailing Stops with Price Swings. The following picture will illustrate this concept further:

  




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