Forex Tips | GFT Forex

What Makes Prices Move?

Wed, 10 Mar 2010 09:49:43 -0500

Today I will go over what I think drives price movement in the markets, why I hold these beliefs, and why I think it is important to understand the forces in price movement. Keep in mind the following theories are my opinions, not absolute fact. I believe

What Makes Prices Move?

People often ask "did fundamentals trump technicals on that trade?" or something along those lines. No offense to anyone out there, but that is a ridiculous question. There are not two boxers names "fundamental analysis" and "technical analysis" slugging it out for trading supremacy. Sometimes a major news announcement will shoot the price past a strong technical level, but that's why I don't enter trades right before a major news announcement. How do we measure "fundamentals" though? Does that mean an announcement today, the overall economic scope of a country over the past century, or something in between?

The reality is that the only force that moves prices in any market is the buying and selling of the financial instrument. For our purposes, we will use currency trading as an example, but this is true in all liquid, openly traded markets. Currency prices don't fluctuate on their own. They only move up when traders are willing to buy at a price higher than the current price, and the only move down when traders are willing to sell at a lower price. That sounds incredibly simple, but this is a very important fact to establish.

Full Story - FX360

Warning Signs- Long Bars Review

Tue, 09 Mar 2010 09:52:03 -0500

I warn of long bars near the completion of a pattern in nearly every trade I put on fx360.com. The reason for this is that they are the number one signal that a pattern is likely to fail. Of course, some patterns are going to fail and some patterns are go

Warning Signs- Long Bars Review

I warn of long bars near the completion of a pattern in nearly every trade I put on fx360.com. The reason for this is that they are the number one signal that a pattern is likely to fail. Of course, some patterns are going to fail and some patterns are going to win. There is nothing anyone can do about that, and no one wins them all. However, long bars are the number one red flag that indicates we should not take a trade when utilizing our geometric pattern recognition that we use on fx360.com

Geometric pattern recognition is a methodology that attempts to find points of significant support or resistance. In other words, we are looking for a reversal in price action. If the price is falling, we are looking for it to begin to rise at the point we suggesting going long. If the price is rising, we are looking for it it to fall at the point we suggesting going short.

Since we are looking for reversals, we want to enter our trades with as little momentum as possible. The more momentum a currency pair has, the more force it requires to reverse. Long bars are simply an indication that there is a lot of momentum or force that will have to be reversed at the entry point. In turn, long bars near the entry of the trade decrease the probability that the trade will reverse as the pattern suggests.

Full Story - FX360

Creating a Trading Plan

Mon, 08 Mar 2010 10:28:49 -0500

A trading plan is a must. I would be will to bet that virtually all successful traders have one. However, most new traders have no plan. In fact, I bet most new traders barely even have actual reasons for entering a trade.

Creating a Trading Plan

Creating a trading plan is actually relatively easy. There are several core requirements that make up the plan. In my opinion, the main components of a trading plan are:

Trading objective (goals).

What and when to trade.

Money management.

The edge (trading strategy that puts the probabilities in your favor or a long sequence of trades).

Documentation and analysis of the results.

First, we have to define our trading objectives. Why are you trading? What is your end goal? Most new traders have completely unrealistic goals. For instance, a new trader might wan their $10,000 investment turn into $100,000 in their first year. While this is possible, it is highly improbable. These unrealistic expectations kill off a lot of traders before they ever had a chance. I think breaking even in the first year is an admirable goal; many traders do not do that. If a trader makes 20-30% on their initial investment in their first year, that is outstanding.

Full Story - Fx360

Trading Psychology- Accepting the Risk

Wed, 24 Feb 2010 10:08:45 -0500

Trading psychology is the most important aspect of a trader's success.

Trading Psychology- Accepting the Risk

Accepting the risk of each trade is not easy, especially for inexperienced traders. Of course, there are some steps we can take to make it easier to accept the risk. First, it is very important to plan out each trade. This means we should know where we will enter the trade, place our stop, and place our take profit level(s). That way there are no decisions that need to be made once the position is entered. The human brain will view information differently once that position is entered and it thinks much more clearly before the position is entered. Additionally, if we know the distance between the entry and the stop, we know exactly how much capital we are risking. This is important because it is impossible to accept a risk when we do not know how large the risk is. After entering the pre-planned trade, emotion is inevitable, but at least it won't impact the result of the trade.

Full Story Fx360.com

The Reality about Leverage

Tue, 23 Feb 2010 09:50:04 -0500

Leverage is the amount of currency one can control relative to the amount of capital one has.

The Reality about Leverage

Leverage has become a scapegoat for poor risk management in trading. I feel as if leverage is being blamed more and more without anyone taking a moment to think what the real problem is. First, let's take a step back for those of you who don't know what I am talking about. For the purposes of this article, we will assume "leverage" refers to trading, specifically forex trading.

Leverage is the amount of currency one can control relative to the amount of capital one has. That's it. In forex, most traders have 100:1 leverage. That means for every one dollar of capital a trader has, they can control one hundred dollars.

Full Story FX360.com

Live Account vs. Demo Account

Mon, 22 Feb 2010 10:59:26 -0500

why your results in your demo account will probably contrast sharply with the results in your live account.

Live Account vs. Demo Account

Today we will discuss why your results in your demo account will probably contrast sharply with the results in your live account. When most people start trading, they believe their results trading with fake money will be the same as their results trading with real money. Of course, that is almost never the case. The reason for this is that a person's emotions greatly impact their decision making ability when real money is on the line. We will go over why this is, and we will go over some tips for blurring the line between demo accounts and live accounts.

Full Article at FX360.com