As we learned in the last section, the best trading opportunities present themselves just after a breakthrough in price consolidation.

Not every consolidation pattern; however, is tradable. There are additional patterns, which significantly increase the odds of the trade following through in the desired direction.

The tools, which we present, are:

1. support/resistance
2. trends
3. moving averages.

Support and Resistance

Support and resistance are general price areas that have halted the movement of stock in the past.

Support lines are horizontal lines that correspond with an area where stock previously bounced.

Resistance lines are horizontal lines corresponding with an area where stock resisted moving through.

Support and resistance lines are used to help access how much the stock price will remove before it is halted.

There are two main types of support and resistance;

1. Major price support/resistance
2. Minor price support/resistance

Major Price Support/Resistance

Major Price Support is an artificial horizontal line representing an area where a stocks downward movement was halted to give way to a new upward movement (Figure 16).

Figure 16

Therefore, the price level is supporting the price of the stock.

Similarly, Major Price Resistance is an artificial horizontal line representing an area where a stocks u ward movement was halted to give way to a new downward movement.

Therefore, the price level is resisting the price of the stock.

When considering a stock as a trading opportunity it is important to note the location of the nearest support and resistance levels.

Stocks near areas of support make for better buy opportunities and stocks near areas of resistance make for better short opportunities.

In the same way, the trader should be more cautious about shorting stock above areas of support, and buying stock near areas of resistance.

Minor Price Support/Resistance

Minor Price Support is an artificial horizontal line representing an area, which previously served as price resistance, but has now transformed to price support ( Figure 17).

Likewise, Minor Price Resistance is an artificial horizontal line representing an area, which previously served as price support, and has now transformed to price resistance (Figure 18).

Figure 17

Figure 18

When considering a stock as a trading opportunity it is important to note the location of the nearest support and resistance levels.

Stocks near areas of support make for better buy opportunities and stocks near areas of resistance make for better short opportunities.

In the same way, the trader should be more cautious about shorting stock above areas of support, and buying stock near areas of resistance.

Trends

Figure 20

Every stock is in one of three states (Figure 20):

1. Up Trend
2. Down Trend
3. Sideways Trend

An Up Trend is defined by a series of higher highs and higher lows.

A Down Trend is defined by a series of lower highs followed by lower lows.

A Sideways Trend is defined by a series of relatively equal highs and lows.

Even the strongest stocks will need a period of rest through a pullback in price or a period of marking time with little to no price movement.

A strong stock will often pull back in price as short to medium term traders take their profits off the table, and in the process, increase selling pressure, which will temporarily push the stock lower.

A strong stock, after rest will often resume its rally after these slight pullbacks.

The trader has better odds in his favor by playing the stock in the direction of the trend.

For example, stocks in and up trend can be bought, and stocks in a downtrend can be shorted (Figures 21 & 22).

Figure 21

Figure 22

A stock in a sideways pattern can be either bought our shorted if the stock ison strong price support or resistance.

In otherwise, the trader should enter long positions only on up trending stocks that have pulled back for rest ready to resume the rally.

Likewise, the trader should enter short positions on down trending stocks that have pulled back for rest ready to resume the decline.

Moving Averages

The most basic form of moving average, and the one we recommend to all our traders is called the simple moving average.

The simple moving average is the average of closing prices for all price points used.

For example, the simple 10 moving average would be defined as follows:

10MA = (P1 + P2 + P3 + P4 + P5 + P6 + P7 + P8 + P9 + P10) / 10

Where P1 = most recent price, P2 = second most recent price and so on

The term "moving" is used because, as the newest data point is added to the moving average, the oldest data point is dropped.

As a result, the average is always moving as the newest data is added. Moving averages can be used as support and resistance levels.

Stocks tend to rebound off of moving averages much in the same way that they rebound off major and minor support and resistance lines.

A moving average can be plotted using any period; however, the periods that seem to provide the strongest support and resistance for short term trading are the 10MA, 20MA, 50 MA, 100MA and 200MA.

Figure 23

Figure 24

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Throw a baseball straight up into air. As the ball approaches the top of its projectile path it will decelerate to a speed of zero, and then reverse downward picking up speed as it approaches the ground.

Now imagine yourself drilling into a piece of wood. You suddenly hit a hard spot in the wood at which time bear down with all of your might to overcome the temporary resistance created by the knot in the wood.

When you penetrate the knot you surge forward and quickly poke through to the other side. These are two analogies to help explain the patterns of stocks as they transition between one move and the next move.

When a stock is completing a move, it experiences a period of deceleration, which is referred to by chartist as price consolidation.

Consolidation is one of the most important signals that a stock is about to begin a new move.

The move can be a continuation in the same direction, or it can be a reversal in the opposite direction.

The area of consolidation represents a battle zone where the bears are at war with the bulls.

The outcome of the battle often defines the direction of the next move.

As short-term traders, it is important to identify these areas of consolidation and enter a trade just as the new move is beginning.

During the consolidation period or 'battle zone', traders, both long and short are patiently waiting on the sidelines watching to learn the outcome of the battle.

As these winners emerge, there is often a scramble of traders jumping in with the winning team.

The candlestick patterns gives the trader excellent clues on when this move is about to take place, and helps the trader time his entry so that he can get in at the very beginning.

There are four different consolidation patterns experienced by stocks, they are:

1. Bearish Continuation
2. Bullish Continuation
3. Bearish Reversal
4. Bullish Reversal.

The Bearish Continuation Consolidation Pattern

Several strong bearish candlesticks precede the Bearish Continuation pattern where the bears are clearly in control (Figure 12).

Figure 12

The bears and bulls then begin to battle by pushing the stock up and down in price in a tightly formed consolidation zone.

The narrowing size of the candlesticks toward a line of support indicates that the bears are winning the battle. The bulls finally weaken and allow the bears to penetrate the line of support, at which time the bears quickly conquer new territory by taking the stock to lower prices.

By recognizing the consolidation pattern the trader is able to short the stock just after the stock breaks the line of support, and profit from the sharp move downward.

The cause of the sharp sell off is fueled by the emotions of the traders watching for the outcome of the battle. Traders who bought the stock in the area of consolidation in hope of a rally off of support, are now scrambling to exit their losing positions.

Traders who are short from the period before the area of consolidation are realizing that their original entries were correct and are adding to their winning positions.

The Bullish Reversal Consolidation Pattern

Several strong bearish candlesticks precede the Bullish Reversal Continuation pattern where the bears are clearly in control (Figure 13).

Figure 13

The bears and bulls then begin to battle by pushing the stock up and down in price in a tightly formed consolidation zone.

The narrowing size of the candlesticks toward a line against upward resistance indicating that the bulls are winning territory from the bears.

The bears finally weaken and allow the bulls to penetrate the line of resistance, at which time the bulls quickly conquer new territory by taking the stock to higher prices.

By recognizing the consolidation pattern the trader is able to buy the stock just after the stock breaks the line of resistance, and profit from the sharp move upward.

The cause of the rally is fueled by the emotions of the traders watching for the outcome of the battle.

Additional traders who jump in to buy the stock now that its strength has been confirmed fuel the sharp upward move.

Traders who are currently short the stock in the area of consolidation waiting in hope of a breakdown, are now scrambling to cover their short positions.

This buying action also fuels the fire pushing the stock to higher prices.

The Bearish Reversal Consolidation Pattern

Several strong bullish candlesticks precede the Bearish Reversal Continuation pattern where the bulls are clearly in control (Figure 14).

Figure 14

The bears and bulls then begin to battle by pushing the stock up and down in price in a tightly formed consolidation zone.

The narrowing size of the candlesticks toward a line of support indicates that the bears are winning the battle.

The bulls finally weaken and allow the bears to penetrate through the line of support, at which time the bears quickly conquer new territory by taking the stock to lower prices.

By recognizing the consolidation pattern the trader is able to sell short the stock just after the stock breaks the line of support, and profit from the sharp spike downward.

Additional traders who jump in to short the stock now that its weakness has been confirmed fuel the sharp sell off.

Traders, who are currently long the stock in the area of consolidation waiting in hope of a breakdown, are now scrambling to sell their long positions.

This selling action also fuels the fire pushing the stock to lower prices.

The Bullish Continuation Consolidation Pattern

Several strong bullish candlesticks precede the Bullish Continuation Consolidation Pattern where the bulls are clearly in control (Figure 15).

Figure 15

The bears and bulls then begin to battle by pushing the stock up and down in price in a tightly formed consolidation zone.

The narrowing size of the candlesticks toward a line of resistance indicates that the bulls are winning the battle.

The bears finally weaken and allow the bulls to penetrate the line of resistance, at which time the bulls quickly conquer new territory by taking the stock to higher prices.

By recognizing the consolidation pattern the trader is able to buy the stock just after the stock breaks the line of resistance, and profit from the sharp move upward.

The cause of the sharp sell off is fueled by the emotions of the traders watching for the outcome of the battle.

Traders, who shorted the stock in the area of consolidation in hope of a sell off in the area of consolidation, are now scrambling to exit their losing positions.

Traders who are long from the period before the area of consolidation are realizing that their original entries were correct and are adding to their winning positions.

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From the previous section, we determined that price movements result from massive emotions of fear and greed regarding trader's position in the market with a given stock.

Recognizing the footprints of greed and fear is not difficult. Recognizing the signs that the rally or decline before it happens is the difficult part of trading. How many times has this situation happened to you: You enter a trade based on a bullish reversal signal, but then exit on a slight pull back only too see the stock rally to a new high after you exit.

Or how often have you held on to a stock that experiences a bearish pull back in hopes that it will turn around, only to see the stock plummet to new lows before you finally concede to defeat and exit.

Unfortunately, there is no system that can predict with 100% accuracy exactly where a greed rally or fear sell off begins. There are; however, techniques based on candlestick patterns that help us locate probable areas for these turning points. The rest of this section will explore the techniques in identifying those probable areas that properly managed will result in profits for the trader in the long run.

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There are only two forces behind the supply and demand forces that drive a stock's price higher or lower.

Those forces are the emotional forces of fear and greed. To illustrate this point we refer to Figure 11.

Figure 11

Suppose you are a trader observing the bullish rally of Stock XYZ at the beginning of the 3rd bullish green candlestick, and considering an entry.

You have witnessed the stock rally huge for two days and know that each trader who entered on the first two days is now a big winner.

Based on the emotion of greed you decide to enter at that beginning of the 3 day, and mentally count your profits as the price rallies to a new high.

After the stock closes, you brag to your friends at the golf course regarding the great trade that you made that day.

You go home from the golf course and celebrate the victory with your spouse and maybe even discuss how you will use the extra money that you have earned through the trade.

Now keep in mind that the profit is only on paper and not one penny has been earned yet.

The next morning you check the price of your position, with expectations that your bullish stock will rocket to the moon! Now imagine the emotion that goes through your mind when your position not only fails to go higher, but also opens below your entry price.

What is the emotion that flows through your body as you not only see your profits erode before your eyes, but now rob your account of precious capital?

The emotion that you will experience is undoubtedly fear and will prompt you to scramble to liquidate your position as soon as possible to minimize your losses.

Now consider that there were also 2 or 3 thousand additional traders who entered the same stock at around the same price with the hopes of the gaining the same profit.

All of these traders will be tripping over themselves trying to get out of the stock.

As was illustrated in the previous section, this increase in fear results in an increase in supply of the stock relative to the increase in demand, and triggers the sharp decline in the price.

The deeper the red candlestick cuts into the bullish green candlesticks, the more traders are thrown into loosing positions, and thus the further the price decline.

Perhaps you are beginning to realize the power of emotions in price movements of a stock.

The technical analyst through candlestick reading is trained to read this greed and fear emotions in the market and capitalize on them.

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Figure 7

A stock's price will adjust to higher or lower prices based strictly on supply and demand principles.

In Figure 7 is shown a diagram of a green candlestick. The green color of the candlestick indicates that the closing price of the stock at the end of the day is higher than the opening price at the beginning of the day.

As you will see, the candlestick's color and size provide very important clues regarding the TRADER'S SENTIMENT toward a given stock's future price.

Notice that 'trader's sentiment' is the key phrase here. In short term trading, it is critical for the trader to have a clear understanding of what other traders are thinking. As you will see, the most direct way to get that understanding is through proper interpretation of the candlestick.

Let's look at an example. In Figure 8 is shown a candlestick of XYZ Company, which opened at 25 and closed at 25 3/8.



Figure 8

The candlestick is green in color, which gives us a quick visual signal that the stock price has rallied higher during this period.

How can we use this information to help us understand what other traders are thinking? To answer this question, we will follow the candlestick's changes step by step to understand the mechanism which is driving the stock price to move higher.

In Figure 8, we see the stock opens at 25, and then quickly rallies to 25 1/8. The reason the price moves to 25 1/8 is because there is a high demand to buy the stock at 25 1/8, and a short supply of sellers offering stock at 25 1/8.

Once all of the stock available at 25 1/8 is snatched up, the next group of sellers steps up to offer their stock at 25 1/4. All of the 25 1/4 stock is quickly snatched up because there are still a larger number of traders willing to buy at 25 1/4 than sellers willing to sell stock at 25 1/4.

Once the 25 1/4 stock is gone, the next group of sellers steps up to offer their stock at 25 3/8. The 25 3/8 stock is quickly snatched up too.

This process will repeat itself until the buyers loose interest in buying the stock resulting in a reduction of demand.

The result of combining these steps is a green candlestick with an opening price of 25, rallying to a closing price of 25 3/8.

During the rally period; however, the astute candlestick reader will be able to observe the long green color of the candlestick, and deduce that buyer demand is high.

Figure 9

Now there is only one reason why traders would increase demand by stepping up to buy the stock, and that is because they think that the stock will go up in the near future. So by observing the candlestick color and size, the astute candlestick reader is able to deduce exactly what other traders are thinking, and that is that they think the stock price will go higher in the future.

In Figures 9 & 10 we show an example of how the same principle in reverse applies to the analyses of a red candlestick.

The red color of the candlestick indicates that the closing price of the stock at the end of the day is lower than the opening price at the beginning of the day.

In Figure 10, we see the stock opens at 25 3/8, and then quickly drops to 25 1/4.



Figure 10

The reason the price moves to 25 1/4 is because there are many sellers looking to unload there stock at 25 1/4, and a low number of buyers willing to buy at 25 1/4.

Once all of the buyers have bought the stock at 25 1/4, the next group of buyers steps up to bid for stock at the lower price of 25 1/8.

The desperate sellers quickly sell all of the stock at 25 1/8, and then the next set of buyers step up at the price of 25.

This process will repeat itself until all of the sellers have unloaded all of the stock that they want to sell, resulting in a reduction of supply.

The result is a red candlestick with an opening price of 25 3/8, falling to a closing price of 25. During the stock's price fall; however, the astute candlestick reader will be able to observe the long red color of the candlestick, and deduce that demand for the stock is low.

Now there is only one reason why traders would increase the supply of stock to sell, and that is because they think that the stock will go down in the near future.

So by observing the candlestick color and size, the astute candlestick reader is able to deduce exactly what other traders are thinking, and that is that they think the stock price will go lower in the future.

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One of the greatest values of the candlestick chart is the ability to read market sentiment regarding a stock. To illustrate consider the following example of a stock traded from the eyes of a Western chart trader and then from the eyes of a candlestick chart trader.

Western Chart Trader

At the close of the day's session you observe that the stock closed well above your entry price (2), which leaves you very content with your trade.

After the close of day 2, you open the financial section of the paper and check the closing price of the stock and observe that not only is your stock well above your entry price, but also has gained slightly (it is worth mentioning that most western papers only publish closing prices while Japanese papers publish both opening and closing prices).

On day 3 you open and the newspaper to check the close and notice a slight dip in your stocks price but you do not panic, because you are still well in the money.

You convince yourself that the stock has only dipped slightly relative to the entry day close (day 1), and should resume its up trend on the next day.

On day 4, you check the close and notice that the stock has fallen significantly relative to the prior days close.

You are now concerned about protecting the profits that you had previously bragged about just days before.

On the beginning of day 6, you call your broker (or logon to your online trading account) and place a market order to sell at the first opportunity.

At the day 5 markets open, the stock opens sharply lower and continues to fall.

Your order is executed at a price several points below where you entered.

You then shrug off the trade as an unpredictable misfortune, and move on to the next trade.



Figure 5

Candlestick Chart Trader

Now suppose you are a candlestick chart trader trading the same stock using a candlestick chart (Figure 6).

At the beginning of Day 1 you enter the stock based on a candlestick pattern entry signal (we will discuss proper entries in detail latter in this unit).

At the close of the day's session you observe that the stock closed well above your entry price (2) which leaves you very content with your trade, but also moves you into a state of caution for signs of a change in trend or reversal.

After the close of day 2, you observe the candlestick formed for the day and notice that the real body is small indicating that there was a tug of war between the bears and the bulls.

You also observe that the real body is read in color indicating that the stock closed lower than the open indicating that the bulls actually lost the tug of war to the bears.

Based on these observations you conclude that the bullish rally in the stock has ceased, and the bullish sentiment of the market regarding the stock is changing.

You decided to sell your position at the days close, or at the market open on the next day to lock in your profit.

If this were a stock in the midst of an overall downtrend, you may decide to short the stock under the low of the day 2 bearish candlestick.

As you can see the candlestick chart trader has the advantage over the western chart trader in that he can use the signals generated in each candlestick to help foretell the changing sentiments of the market regarding a stock.

The open to close relationship revealed in the candlestick is more effective than the close-to-close relationship commonly used by western traders.



Figure 6

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The Western bar chart is made up of four parts components, open, high, low, and close. The vertical bar depicts the high and low of the session, while the left horizontal line represents the open and the right horizontal line represents the close.




Figure 1

The Japanese Candlestick Line (Figure 2) uses the same data (open, high, low, and close) to create a much more visual graphic to depict what is going on with the stock. The thick part of the candlestick line is called the real body. It represents the range between the session’s opening and closing prices. If the real body is red, it means that the close of the session was lower than the open. If the real body is green, it means that the close was higher than the open. The lines above and below the body are the shadows. The shadows represent the session’s price extremes. The shadow above the real body is called the upper shadow and the shadow below the real body is called the lower shadow. The top of the upper shadow is the high of the day, and the bottom of the lower shadow is the low of the day.




Figure 2

One of the main differences between the Western Line and the Japanese Candlestick line is the relationship between open and closing prices. The Westerner places the greatest importance on the closing price of a stock in relation to the prior periods close. The Japanese place the highest importance on the close as it relates to the open of the same day. You can see why the Candlestick Line and its highly graphical representation of the open to close relationship is such an indispensable tool for the Japanese trader. To illustrate the difference, compare the daily chart plotted with Western Lines (Figure 3) with the exact same chart plotted with Japanese Candlestick lines (Figure 4). In the Western bar chart as with the Japanese Candlestick chart, it is easy to interpret the overall trend of the stock, but note how much easier it is to interpret change in sentiment on a day to day basis by viewing the change in real body color in the Japanese Candlestick chart.




Figure 3

Figure 4

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There are two types of ways to analysis the price of a stock, fundamental analysis, and technical analysis. Fundamental analysis is used to gauge the price of a stock based on the fundamental attributes of the stock, such as price/earnings ratio, Return on invest, and associated economic statistics.

Technical analysis deals more with the psychological component of trading a stock, and is influenced for the most part on emotionalism.

The technical analyst is seeking to answer the question "how are other traders viewing this stock, and how will that effect the price in the immediate future".

As you will see, the candlestick chart is the most effective way to gauge the sentiments of other traders.

The Japanese were the first to use technical analysis to trade one of the world's first rice futures markets in the 1600s. A Japanese man by the name of Homma who traded the futures markets in the 1700s discovered that although there was link between supply and demand of the rice, the markets were also strongly influenced by the emotions of the traders.

Homma realized that he could benefit from understanding the emotions to help predict the future prices. He understood that there could be a vast difference between value and price of rice.

This difference between value and price is as valid today with stocks, as it was with rice in Japan centuries ago.

The principles established by Homma in measuring market emotions in a stock are the basis for the Candlestick Chart analysis, which we will present in this seminar.

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In the 1930s, Ralph Nelson Elliott, a corporate accountant by profession, studied price movements in the financial markets and observed that certain patterns repeat themselves. He offered proof of his discovery by making astonishingly accurate stock market forecasts. What appears random and unrelated, Elliott said, will actually trace out a recognizable pattern once you learn what to look for. Elliott called his discovery "The Elliott Wave Principle," and its implications were huge. He had identified the common link that drives the trends in human affairs, from financial markets to fashion, from politics to popular culture.

Robert Prechter, Jr., president of Elliott Wave International, resurrected the Wave Principle from near obscurity in 1976 when he discovered the complete body of R.N. Elliott's work in the New York Library. Robert Prechter, Jr. and A.J. Frost published Elliott Wave Principle in 1978. The book received enthusiastic reviews and became a Wall Street bestseller. In Elliott Wave Principle, Prechter and Frost's forecast called for a roaring bull market in the 1980s, to be followed by a record bear market. Needless to say, knowledge of the Wave Principle among private and professional investors grew dramatically in the 1980s.

When investors and traders first discover the Elliott Wave Principle, there are several reactions:

• Disbelief – that markets are patterned and largely predictable by technical analysis alone
• Joyous "irrational exuberance" – at having found a "crystal ball" to foretell the future
• And finally the correct, and useful response – "Wow, here is a valuable new tool I should learn to use."

Just like any system or structure found in nature, the closer you look at wave patterns, the more structured complexity you see. It is structured, because nature’s patterns build on themselves, creating similar forms at progressively larger sizes. You can see these fractal patterns in botany, geography, physiology, and the things humans create, like roads, residential subdivisions… and – as recent discoveries have confirmed – in market prices.

Natural systems, including Elliott wave patterns in market charts, "grow" through time, and their forms are defined by interruptions to that growth.

Here's what is meant by that. When your hands formed in the womb, they first looked like round paddles growing equally in all directions. Then, in the places between your fingers, cells ceased growing or died, and growth was directed to the five digits. This structured progress and regress is essential to all forms of growth. That this "punctuated growth" appears in market data is only natural – as Robert Prechter, Jr., the world's foremost Elliott wave expert and president of Elliott Wave International, says, "Everything that thrives must have setbacks."

The first step in Elliott wave analysis is identifying patterns in market prices. At their core, wave patterns are simple; there are only two of them: "impulse waves" and "corrective waves."

Impulse waves are composed of five sub-waves and move in the same direction as the trend of the next larger size (labeled as 1, 2, 3, 4, 5). Impulse waves are called so because they powerfully impel the market.

A corrective wave follows, composed of three sub-waves, and it moves against the trend of the next larger size (labeled as a, b, c). Corrective waves accomplish only a partial retracement, or "correction," of the progress achieved by any preceding impulse wave.

As the figure to the right shows, one complete Elliott wave consists of eight waves and two phases: five-wave impulse phase, whose sub-waves are denoted by numbers, and the three-wave corrective phase, whose sub-waves are denoted by letters.

What R.N. Elliott set out to describe using the Elliott Wave Principle was how the market actually behaves. There are a number of specific variations on the underlying theme, which Elliott meticulously described and illustrated. He also noted the important fact that each pattern has identifiable requirements as well as tendencies. From these observations, he was able to formulate numerous rules and guidelines for proper wave identification. A thorough knowledge of such details is necessary to understand what the markets can do, and at least as important, what it does not do.

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It has become imperative for every forex trader to learn how to predict the price trend and which method or software is the best.

When you do forex trading, it is very important to understand the difference between fundamental analysis and technical analysis. A quick explanation of the difference among the two types of analysis is: fundamental analysis focuses on money policy, government policy and economic indicators such as GDP, exports, imports etc within a business cycle framework while technical analysis focuses on price action and market behavior, especially on chart and technical indicators.

Needless to say both schools are equally disparaging about the other, and both believe their techniques are infinitely superior. But the reality is that it has become increasingly difficult to be a purist of either persuasion. Fundamentalists need to keep an eye on the various signals derived from the price action on charts, while few technicians can afford to completely ignore impending economic data, critical political decisions or the myriad of societal issues that influence prices.

Generally speaking, fundamental analysis can only judge which direction the market will move, and technical analysis can supply both direction and rough currency rate.

Keeping in mind that the financial underpinnings of any country, trading bloc or multinational industry takes into account many factors, including social, political and economic influences, staying on top of an extremely fluid fundamental picture can be challenging. Meanwhile, forecasting models are as numerous and varied as the traders and market buffs that create them. Different people can look at the exact same data and come up with two completely different conclusions about how the market will be influenced by it. At the end, some may make huge profit and some lose their money. You can not say fundamental analysis is easy.

Remember, fundamental analysis is a very effective way to forecast economic conditions, but not necessarily exact market prices. For example, when analyzing an economist's forecast of the upcoming GDP or employment report, you begin to get a fairly clear picture of the general health of the economy and the forces at work behind it. However, you'll need to come up with a precise method as to how best to translate this information into entry and exit points for a particular trading strategy.

Tip: If you are new to do forex trading and do not trade frequently, you can mainly use fundamental analysis for your trading.

Don't disturb yourself by information overload. Sometimes traders fall into this trap and are unable to pull the trigger on a trade. Normally, your first feel is the answer for you to do forex trading. At that time, you are sure which currency is strong and which country's economy is good. The more simple, the more useful.

However, trading a particular market without knowing a great deal about the exact nature of its underlying elements is unbelievable. You might get lucky and snare a few on occasion but it's not the best approach over the long haul.

For forex traders, the fundamentals are everything that makes a country tick. From interest rates and central bank policy to natural disasters, the fundamentals are a dynamic mix of distinct plans, erratic behaviors and unforeseen events. Therefore, it is very important to understand fundamental analysis and use them on forex trading.

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The trendline. A trendline is a main initial element for the price chart analysis. While the market moves in any direction not along a straight line but along a zigzag, the mutual placement of upper and bottom points of those zigzags permits to plot a line connecting the significant highs (peaks) or the significant lows (troughs) of an appropriate zigzag using technical tools of the computer program.

To draw a trendline only two points are necessary and the third one is the contact point confirmation. On a bullish trend chart it should be drawn using troughs, on a bearish using peaks. The trendline and a line which is about parallel to it and drawn on the opposite side (through peaks on a bullish trend and through troughs on a bearish) form the trade channel. Both lines are then channel's borders.

Lines of support and resistance. The upper and the bottom borders of trade channels are called accordingly support and resistance lines. The peaks represent the price levels at which the selling pressure exceeds the buying pressure. They are known as resistance levels. The troughs, on the other hand, represent the levels at which the selling pressure succumbs to the buying pressure. They are called support levels. In an uptrend, the consecutive support and resistance levels must exceed each other respectively. The reverse is true in a downtrend. Although minor exceptions are acceptable, these failures should be considered as warning signals for trend changing.

The significance of trends is a function of time and volume. The longer the prices bounce off the support and resistance levels, the more significant the trend becomes. Trading volume is also very important, especially at the critical support and resistance levels. When the currency bounces off these levels under heavy volume, the significance of the trend increases.

The importance of support and resistance levels goes beyond their original functions. If these levels are convincingly penetrated, they tend to turn into just the opposite. A firm support level, once it is penetrated on heavy volume, will likely turn into a strong resistance level. Conversely, a strong resistance turns into a firm support after being penetrated. In general, to evaluate the reliability (that is the possibility of a break) of the trade channel borders taking a decision to close or to save an existing position one should govern himself with following rules:

1. A channel is the more reliable the longer it exists. Hence, the solidity of very old channels (e.g. existing more than 1 year) decreased sharply.
2. A channel is the more reliable the more is his width.
3. The resistance may be broken if it is bounced on the background of a growing volume.
4. A steep channel is less reliable in compare to a gentle one.
5. The support may be broken independent on the volume.

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It is through the Forex market wherein one could get enough information about currency market. If you will study the Forex market, you will be aware about the price change, economic indices, tracking information and swaps and pip. Others will think that it is a must to have software or maybe a trading system; yes this could be right however what is really important is for you to have call outs.

The key factor of real time forex quotes is the price which is the crucial part in the whole trade currency. The price is the most important factor in the market. If you get to check on the price, you need to remember the following: ensure that you are in the right market track, bear in mind that the price of the currency would always increase.

If we are going to talk about real time forex quotes, the price rates are categorized into sections. Real time forex quotes will inform you about the important dices that one must know in order to gain knowledge about real time CFP quotes from all over the world. You need to get the quotes which are based on the region specific currency pair that you're trading in but this would just depend on the service that you were able to sign up for.

Also, always ensure that you know how to respond the real time forex quotes in order for you to be successful in the market. You could also make your own fundamental and technical analysis as this would be also helpful especially if you don't have the time to have your own trade signals. That is where quotes get into the picture to fill in the void.

To conclude, real time forex quotes are very helpful but it would depend as to how you are going to use them and how they are able to give you benefits. When you check online, you will be amazed with the fact that there are a lot of companies who offer such service. To sign in would mean you will have another piece of information that you could use to have money off the market but still it would take experience and the right skill in order to use them properly.

Just follow the information written above and you will be able to get idea in dealing with real time forex quotes. Knowing this is only the first step to earning money, of course, you must have a complete knowledge of the trading market in order to succeed.

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The buying and selling of the major global currencies in the Foreign exchange market or the Forex trading business has seen a new high in the last couple of years. Being recognized as the worlds largest cash flow market where the trading volume has multiplied tremendously, this business has acquired rapid pace in the recent years. The result has unfolded in terms of trillions of dollar exchange each day throughout the world.

Trading Forex is not as simple as it seems! To tread the path successfully you need to resort to superior Forex trading strategies. The problem lies in finding some of the best strategy to help accomplish the trade. A trader must remember that while formulating a Forex trading strategy one needs to emphasize on the formula of buying low and selling high in a particular market situation at a particular moment.

The internet is flooded with plenty of Forex trading strategies, most of which are just trash. To be precise, its only a handful which can deliver satisfactory results to the clients. However, one thing is sure, that is if you want to achieve success in Forex business, along with your own skill and dedication you must take the help of some Forex trading strategy. Else, you have to bear a lot of luck and Gods grace to reap profits.

Strategy developing packages along with good literature found in the internet can surely help the new traders a great deal to devise their own strategies. But depending blindly on a strategy without putting your own inputs may never yield good results. Developing your own Forex trading strategy needs lot of devoted research and effective trading.

Categories of Forex trading strategy

A simple and easy way is to classify the Forex trading strategies into three main categories. They are:

• Simple strategies- Simple Forex trading strategies must have a disciplined attitude towards risk minimizing. There methodologies needs to be simple and easy and simultaneously should have the ability to get the best out of any favorable market moves.
• Complex strategies- Similarly complex strategies are about taking a steady approach taking the help of several Forex trading tools and platforms, such as indicators and moving averages. Traders might take some time to adjust to them.
• Advanced strategies- The advanced Forex trading strategies have a more theoretical as well as a logical base and are generally used by veteran traders who have mastered the expertise of the Forex trading business. These Forex trading strategies which they use take into consideration various combinations of indicators and moving averages.

Another practical Forex trading strategy is using support and know-how through technical analysis. This can be very well used to get the much desired basis for the trade along with a resistance development. In formulating this kind of Forex trading strategy one must have a positive mindset about markets being trading over their support and beneath their resistance levels. If this level is broken at any point of trade then the traders can assume that markets are likely to follow that trend from that particular moment.

Every trader has their individual functioning style. Therefore it is not mandatory that the same Forex trading strategy which works for one will also work the same for others. Eventually each trader wants to gain profits but in this endeavor their Forex trading strategies will have to differ. It is upon the individual trader to play the game in their unique style making use of some good Forex trading strategy to move in the direction of returns.

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