There is a variety of Forex strategy for trading. There are however some fundamentals of studying a price chart you must master before proceeding to studying any strategy in depth. Let's look at the fundamental foundations of trading on the Forex market using an analysis of technical aspects:
* Levels of Support and Resistance - How do you identify and chart them
Support levels are created when the market moves upwards. Therefore, if a market is trending lower, for instance but then shifts direction and moves upwards, it's either created a level of stability or bounced off an established level of support.
Levels of resistance are created when the market moves downwards. Therefore, if an asset is going up, by way of example, and then it changes direction and began to move lower or higher, it has either established a level of resistance or bounced off an established level of resistance:
Finding and drawing levels of support and resistance is not exactly a science. Instead, it involves the application of the human eye and a more brain power...don't worry it's not too difficult to get proficient and proficient in creating the levels of resistance and support in your chart.
Below we can observe how the market is performing on a daily GBPUSD chart, which includes all relevant levels of support and resistance included:
The most important thing that you need to be aware of about resistance and support levels is that they're not real. Many traders believe that the levels of resistance and support are definite and that they should not enter into a trade when there is a resistance or support nearby, which could result in them suffering from analytical paralysis and not trading. While it's valid to consider the most important resistance and support levels that are in place, it is also important be aware of the general market conditions. In the market that is trending these levels are often breached by the momentum of the trend Don't be scared of levels of resistance or support since they often be broken. Instead, look at these levels for signals from traders. If an Forex trading signal such as an action-based setup appears at a crucial support or resistance level it's highly likely even worth noticing.
The market that is trending offers us the greatest opportunity to earn money, because the market clearly moves in one general direction. We could use the information we have to gain, by trying at entering the market in line with the trend.
A trend that is upbeat is defined by a sequence of highs that are higher and lower lows, and a downward trend is characterized by a string of lows, highs and lows. Be aware that trends end and, as you can see from the current EURUSD chart below. The downtrend is coming to an end last week when patterns of higher highs and lows was broken...
I like trading on the trend of the day in the near term by searching for price action with high probability strategies that are forming inside an overall structure that is a part of the trend. What I am referring to is to look for setups of price action that form close to support when a market moves lower in an uptrend and close to resistance when the market moves higher in an downtrend. Markets flow and ebb and if you make the most of the trending market, you'll have a great chance to become a successful Forex trader.
* Trading in counter-trends
Because trends come to an come to an end, we should benefit from this data. But, trading against the trend is more risky and complicated than trading with the trend, therefore it should only be considered once you've fully learned to trade in the direction of the trend. One of the most important things to look out for in a signal that is a good counter-trend is an action pattern, or setup that is forming in a clear and crucial resistance or support in the daily chart See here:
If a market is in the trading range, it indicates that the price is consolidating levels of resistance and support. The situation of a market moving between resistance and support for our benefit. When the market is near the boundary of resistance or support within the trade range, then we can benefit from an entry point with a high probability as risk is clearly established just above or beneath the support or resistance of the range. When you trade price action within trading ranges, look out for clear price action setups that are near the boundary of the range. You can see here:
* Candlestick charts for Forex and patterns
We talked about Forex charting in the 7th part but since they are crucial in the way I teach and trade the concept of price action, I decided to give them more time. I've published a great guide to Forex candlestick charts which you can find at: Forex candlestick charts
It's crucial to comprehend that candlestick patterns are a distinct terms that you need to learn before you try to master a trading strategy , such as price action.
I've got a fantastic tutorial for candlesticks free which you can find on this page: Forex Japanese Candlestick Patterns
Here's a great video about trading using Forex candlesticks. Forex Candlestick Reversal Bar Trading Strategy
"'The Myth of Automated Forex Trading Systems
As we discuss different methods of trading on within the Forex market, I would like to address the commonly believed "myth" concerning automated robots and indicator-based trading strategies...
You will likely encounter a variety of Forex websites selling Forex software which they claim can completely automatize trading which means that all you need only click the mouse when the program tells you to, and then you can rake in the cash. It is important to keep your mind on the old saying "If it seems too good to be true, it's probably true ..." while you are learning how to trade Forex. In the same way it is likely that you will to stumble across lots of these sites that are automated in case you aren't already. The best option is staying clear of them all.
It is likely that you will see tracks that claim to as "indisputable" proof of robot's performance on the markets...what they do not say is that this track record is just the display of the "perfect" dataset the software was tested back on. The issue is that trading software can't be trusted for long-term performance since the market is always evolving and, as such, it requires the discernment that the brain has to successfully trade in the market over the long run. I'm not saying that computers have no use in trading, however, it should not be the sole factor you trust and is not a good idea to use it in an efforts to fully automate trading. The ability to understand the price action in the market and then adapt and grow in accordance with the constantly changing conditions that the marketplace is the way I trade myself and what I teach my students to trade.