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How To Make Money From Forex Trends

Identifying and profiting from forex trends and patterns is the way that most forex traders make money. Your main aim when you are trading the foreign exchange market will be to identify a trend as it is forming and jump in so that you can profit from it.

Trends are very simple to see in hindsight when we look at a chart. A candlestick chart shows them most clearly but you can see them on any type of chart.

If you draw a line above the low points of the candlestick shadows while prices are generally rising you will see the slope of the uptrend. Similarly if you draw a line above the high points of the shadows while prices are generally falling, you will see the slope of the downtrend.

There are also sideways trends when the prices are fluctuating up and down between two points but not breaking beyond them. In this case the lines drawn above and below the shadows will be just about horizontal.

Where you have a horizontal line, you could expect a breakout going in one direction or the other eventually. Some traders will set up orders to enter the market when the price goes to a certain point either above or below the line.

Other traders will use sideways forex trends to indicate a change in the main movement of the prices. For example if the sideways pattern follows a pretty much regular upward movement, it may indicate resistance to the price moving any further. You could surmise that the upper line is a resistance line and a downturn will follow to bring the prices back within the band that is supported by the market.

Before using any of these methods to create a system, however, you should do extensive testing. Backtests will help you decide whether the system is worth investigating further. Then always run real time tests using a demo account before you back your system with real money. Remember that forex is very risky and even the best of systems have their failures or what may be called losing runs.

If trend lines are drawn correctly they can be just as accurate a way of predicting breakouts or major changes in the direction of price movements as any other method. However you have to be careful to be objective, especially when dealing with the real time market.

When we are waiting for certain conditions to be fulfilled so that we can place an order, it is tempting to jump the gun and assume that a pattern is forming when really it is too early to be sure. So watch out. When drawing lines for forex trends it is deceptively easy to draw what you want to have happen, instead of what is happening.

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Friday, June 19th, 2009 Strategy No Comments

FX Trading Software – Does it make a difference?

FX trading software programs include the automated systems or robots that help you to trade online from the comfort of your own home. They are very popular but are they necessary? What do they really do?

Many people are unwilling to trust their trading decisions to a computer program, especially at first. It is true that it is wise to be cautious in the beginning, because there is always the chance that you will misunderstand something. But you can almost always use the software in demo mode until you are familiar with all of its settings and features.

The main point to remember is that you are controlling the program, not the other way around. You tell it what to do by setting it up in a way that follows your preferred system.

An automated forex trading system can do many things that you cannot. For example, it can trade 24 hours a day. As the currency markets are international and operate in almost every time zone, they are never closed for business from Monday morning in Australia to Friday afternoon in New York. FX trading software can exploit these very long hours and watch the markets all day and all night, never missing a possible trade.

If you join a retail forex trading company online, you will almost certainly be offered software so that you can operate your account from your own computer. This takes the pressure off the company’s website. You can use this type of software to check the currency values and operate your account. This is different than a robot, because you are making the trading decisions and simply using the software to put them into effect.

Automated forex robots, by contrast, are not linked in to one particular broker or company. They run on a trading platform and offer historical market analysis and trend data as well as real time currency values. This data can be extremely valuable for identifying patterns. You can look back to see how currency values fluctuated around the time of certain major events such as an epidemic or an election. Even something like an international sports event can affect national confidence and so cause a change in currency values.

As you become more skilled in interpreting the market trends, you will use all of this data to help improve the success of your trades. Of course there is no guarantee that the currency markets will always behave as they did in the past but any expert will tell you that you cannot ignore the historical data. To put it simply, getting information like this from your FX trading software can help you to make more money from your forex trading.

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Sunday, May 17th, 2009 fx trading software No Comments