What is time frame?

The measurement of time in analysis. Can be in periods of minutes and hours or daily, weekly, monthly and yearly either way Time Frame must be specified. It can also be more generally referred to as Short, Medium or Long Term. In forex trading software platform you will find that the charts are divided in several set of time frames i.e. 5, 15, 30 minutes, 1 & 4 hourly, daily, weekly, and monthly. By dividing the chart it provide the flexibility of analysis for traders either they want short, medium, or long-term.

Don't be confused even though there are divided this way actually the chart is inter-connected with each other. The lower time frames i.e. 5 minutes is actually the zoomed-in version of the major time frames. And Monthly time frame is simply the general display of all the time frames. Using candlestick chart we can simply explain by taking 1 candle equal to 1 month of movement that is consist of 4 candlesticks of weekly time frame as 1 month is equivalent to 4 weeks.

Why important to understand time frame?

Perhaps one of the the ultimate achievement of every technical trader is being able to master the all time frames available. This is very important in order to success especially if you are short-term daily traders. You will be able to see the details and the bigger picture of the market directions. For example if you are 15 minutes trader you will have to look for 4 hourly or daily time frames to look for the overall positions and directions of the market. This will gives you the overall picture where will the big movements will be heading to after all small fluctuations are done.

Higher Time Frame Increase Chances of Success

Most traders do not want to get themselves involve in complicated situation especially the multiple time frames. Still they being able to have great success in trading by using only a single time frame. Yes this is possible!! By looking at the big picture of the market using the higher time frame such as daily, weekly, and monthly. This is the method used by the long-term traders who relied on trend to make decision which usually bring them healthy successful trading career.

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Simple Application of Slow Stochastic

The slow stochastic is constructed with two lines moving average just like MACD. Likewise the application is also exactly the same as MACD that is when both line is moving upwards meaning the market is going up or vice versa. The interception point of slow stochastic signal a reversal of direction just like MACD.

Despite of the exact application of the two, slow stochastic has a major advantage over MACD. It's speed of movement faster than MACD and it moves closely following the real live chart movement. Therefore it is heavily used by daily traders to take advantage of the short-term volatility movement of the chart. See the chart below as MACD moving downwards once but stochastic has already take two cycle to downwards direction. This major advantage making slow stochastic as the most popular indicator of all.

Slow stochastic is almost universal usage, and every traders who have known about its application will use it. The most effective application of this indicator is by combining with other indicators and also the in depth understanding of multiple time frame

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Simple Application of Bollinger Bands

The Bollinger Band is one the most popular used by traders to determine trend and the limit of movement (support & resistance level). It is constructed using three moving average lines designated by the upper band, middle band, and lower band. These three bands are the ideal setups or targets profit for trading or commonly known as support and resistance level. Apart from that it is also can be used to signal break-outs.

How to use Bollinger Band?

As you may notice in everyday trading, the chart/market generally moving within the limit boundary of the bollinger bands. For example it moves from bottom to top and top to bottom passing by the middle band where usually there is a break taking place. The bollinger band is simply a dynamic support & resistance level.

The band is very dynamic where sometimes it can get wider or squeeze narrower. Using this behavior technical traders use it to determine the break-out of the market. Usually when the band squeeze and getting narrower the probability of break-out is near. As the break out occur the band become wider and eventually develop narrower gap before making another break-out.

Another application of the Bollinger Band is use to determine a continuation of a trend. Using an up-trend example the candlestick chart move closely along the upper band marching upwards. There will be time that traders wants to get profit from every movement a correction will occur. As the correction occur the chart/movement will fall at the middle band instead of the bottom. This indicate that a trend is still underway. If the chart fall on the bottom it signals a trend reverse is about to begin. Read more on this go to here "Using Bollinger Band "Bands" To Gauge Trends"

In complex application bollinger bands need more than just of the applications mentioned above. And a vital success of using this tool will also depend on how far you are familiar with multiple time frames application.

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Simple Application of MACD

Moving Average Convergence/Divergence or MACD in short is one the most classic technical indicators that is still being popularly used in analyzing forex trading. It is called the lagging indicator because it always move behind the real chart movement.

How to use MACD?

In simple application MACD is very easy to use as it is only constructed with two moving average lines. The two lines is usually colored in blue and red where blue is upward direction signal and red is the opposite. When the red line moving up parallel with the blue line this signal upward direction or the opposite downward when the blue line moving down parallel with the red line. Every movement has an end and reversal which signal by the interception of the two line.

Advantage of MACD

Since the MACD is one of the most used indicators we can make assumption that most traders will have similar intention when make decision for example they will make buy or sell on the interception point. In complex application MACD is more than just that we need to include the element of emotion in our decision.

Disadvantage of MACD

Since it is a lagging indicators it takes quite sometimes to wait which can be very frustrating. Furthermore in most occasion the market always moving ahead of MACD and by that time you will miss the big hit and waste your time waiting. Many traders use multiple indicators to reduce the flaw gap of a single indicators.

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Fundamental Vs Technical

There are two types of traders in the forex market namely the technical and fundamental traders. Some traders are a little more extreme to believe that one is better than the other or vice versa. The fact is none better than the as both have its own flaws in the system.

The Fundamental Traders

They relied on the economic data such as trade balance, interest rates, non-farm payrolls, etc to predict the future directions of the forex market movement (read more on fundamental of forex fundamental). Usually their success will come only if they trade the long-term of the market direction. This is because it takes sometimes for any economic data to take effects. There are short-term effects though, but it is highly unpredictable.

Source: ForexFactory.com

The Technical Traders

Technical traders relied heavily on indicators and also the physical patterns of the market movement such as Bollinger Bands, Slow Stochastic, MACD, Trend, etc. Short-term traders are usually very keen on using it because they want precision within short time period. Although they cannot predict precisely the market movement, moving average is used to estimate the average size of the market. Thus using the average they can determine the boundary limit of movement called support and resistance level.

Source: FxStreet.com

Summary

In summary both technical and fundamental are equally reliable as well as flawed. Our objectives to study them both is to increase reliability and reduce the flawed of a system that we are using in trading. And for those extremist who claimed that one system better than the other because they are fanatic of their own system without analyzing others.

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The Nature of Forex Market

As far as forex is concern this is the most liquid and dynamic market on the planet. There are billions of money are traded every second or minutes as you can notice on the volatility of the chart movement. This volatility creates great opportunities for traders to make money as quickly within minutes of trading. The opposite also true as traders can lose their money within minutes. Our goals as traders are to minimize risks and maximize profits with the help of all the tools and experiences available to master the dynamic market.

There are no 100% precise or exact setups any traders can make in their trading activities. The reason behind this is because trading involves emotions as reflected on the candlestick chart designated by the tails of the candles. Everyone has their own analytical formula and amount of money they going to spend on the trading, thus there is no way we can predict when and how much money they are going to use for trading. As a result any trader will never have 100% setup otherwise only by chance sometimes.

Fortunately today every trading platform is equipped with many technical tools available to help traders to analyze the market physic. And most importantly using these technical tools we are able to estimate the size of the entire market volume dynamically and therefore be able to determine the ultimate limit of every movement. I shall discuss further on this in the later chapter of this blog on technical analysis tools.

An interesting historical event called “Black Wednesday” has taken place in September 1992, where George Soros a CEO of hedge fund company has ripped a profit of $1 Billion USD by shorting/selling the GBP-USD pair which a day period. And the Bank of England went panic as they loss 3.4 Billion Pound Sterling to the currency speculators and most of the money goes to Soros of course. Read more of this story from wikipedia "Black Wednesday"

This one event to remind us all no matter how good we are there are always aware of the unexpected danger that traders are facing in the forex market. Even a great financial institution like Bank of England has been through this experience.

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Chart Types

There are three different forms of common chart used to display the currency market movement which include the line chart, bar chart, and the famous candlestick chart. Despite of the same usages traders are very particular in selecting their chart to use in trading due to certain used.

The Line Chart

The line chart simply reflects the market in its general movement as shown below. It is rather more general compare to bar chart and candlestick chart. Therefore traders have less preference in using it for their trading.

The Bar Chart

The bar chart is actually the simplify version of the candlestick chart. Instead of using colored body as In the candlestick chart line the bar line is used to represent high, low, open, and close of the market movement.

The Candlestick Chart

Sometimes it is called Japanese candlestick chart, the most popular chart used by the Japanese traders. In its early days this type of chart was not very popular to the western traders until it is popularized by a book author named “Steve Nison”. Today the candlestick chart is used worldwide by any traders, and in fact it is one of the most powerful tools to aid traders in their technical analysis. In the later stage i will discuss about this powerful charting techniques used by traders to aid them in their trading activities.

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Introduction to Forex Part 2

Before Enter Live Trading!!

If you have not seen how the forex is traded before then you should have yourself get the touch of it by applying for demo account to any forex brokers available. This will provide you an experience of familiarizing yourself of the forex trading works and also getting to know the available tools to help you in trading. Usually brokers demo account will provide you some amount of practice money $10,000 or $100,000 for you to try their platforms. They are all FREE of CHARGE

Open your demo account to any of the following brokers

1. Marketiva - $10,000 Practice money + $5 Free Live Trading
2. OANDA - $50,000 Practice money
3. FXCM - $50,000 Practice money
4. InterbankFX
5. North Finance
6. DukasCopy

There are many more other brokers you can search online or choose from the following sites FxStreet & ForexTV

What do you need to start trading?

1. Internet Connection & Computers
   
2. Money
3. Brokers
   

After getting some experiences from the demo trading now that you should have the touch and familiarity of how the forex trading works. If you are interested about forex trading the first thing you need is the money of course!. Then select a suitable broker you want to trade with, register with them, and deposit some money into your trading account which you will use for live trading later on. That's it!! You are on your way to make money on forex trading.

There are pros and cons in all forex brokers usually determine by their trading platform effectiveness, spreads charge, customer support services, etc. You can read more about selecting brokers at this site Fxstreet.

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Introduction to Forex Part 1

What is Forex?

Forex is the short form for Foreign Exchange or it is most commonly known as currency market among savvy traders. It is the most liquid market on the planet with at least 1.5 trillion traded daily. And it is relatively similar to stocks trading as in the Wall street, and the only difference by the simplicity to apply for the trading. Usually stocks will require physical brokers to help the client to execute and manage their activities but forex are totally control by the client themselves. Therefore the process of trading are much simpler especially after the emerging of internet technology available today to provide live trading service on your PC.

The currency market is available for trading 24 hours five days in a week from Monday to Friday.

Anyone is eligible to join trading as long as they have the money!!

How to make money by trading forex?

Very simply!! When the market/chart go up you buy (long) you will make profits. If the market go to the opposite direction you make losses. Other wise when the market go down you sell (short) in order to make profits and if the market go to the opposite direction upside you make losses.

In simple: UP = BUY | DOWN = SELL

What cause the market to go ups and downs?

The fluctuation ups and downs of the market are the results of traders activities of buying and selling the forex. Traders make their transaction activities after analyzing the market based on fundamental and technical analysis available. Different traders will make different decisions based on their logical analysis however the results can be gaining or losing depending on which side the majority they are. If they joint the majority with the most money they will be the winning party or otherwise losing. Thus all the activities created a patterns reflected on the chart as you can see below.

Forex Terminology

Bull => The market is bullish when the trend is moving upwards direction

Bear => The market is bearish when the trend is moving downwards direction

Pips = Pip or sometimes call point is the measure of profit and loss in forex trading. It is approximately 1% of the money traded. For example if you trade $1000 and earn 1 pip that means you will make profit $10. That means if you make 100 pips you will earn $1000 which is 100% of traded amount.

Long/Buy => The term use when trader decide to make a buy position where he/she expect the market to go up.

Short/Sell => The term use when trader decide to make a sell position where he/she expect the market to go down.

Candlestick => Candlestick is one form of chart which designated by 2 colors usually black and white. Unlike line chart which is very general, candlestick can show details of traders emotions. Therefore some traders especially the Japanese use this candlestick as their analytical tool which give it a name as Japanese Candlestick charting.

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