There are numerous forex strategies available to investors and forex traders should explore each one to find out which they prefer. In today’s article we take a brief look at three strategies that are used by traders in the forex market.
Stochastics – Stochastics is a technical indicator used by many traders due to the accuracy of its findings. It is a technical momentum indicator that compares the security’s closing price to the price range over a specific time frame. It is especially helpful in determining good entry and exit points based on the holdings, and it is often used in conjunction with the moving average. The theory behind stochastics is that in an upward trending market the prices tend to close hear their high and conversely in a downward trending market, the prices tend to close near their low.
Elliot Wave Theory – The Elliot Wave Theory is one of many forex strategies and it is named after Ralph Nelson Elliott. Elliot suggests that the market moves up and down in a series of waves. He concluded that the market moves up in a series of five waves and that is moves down in a series of three waves. Basically, his theory suggests that the movements of the stock market (and other markets) can be predicted through observing and identifying a repetitive pattern of waves. The waves are based on rhythms found in nature, and there is no time requirement for a cycle to complete. Furthermore, these ‘waves’ represent the upward and downward movements of the psychology of the masses. (see the psychology of investing)
Moving Average – The moving average is another technical analysis indicator used by the forex investor, and it tells the investor the price at any point in time over a defined set of intervals. There are three types of moving averages including the SMA, or the Simple Moving Average, the EMA, or the Exponential Moving Average, and the WMA, or the Weighted Moving Average. Additionally, traders utilize the MACD, or the Moving Average Convergence Divergence as one of their forex strategies. The MACD used a trigger line to plot the difference between specific exponential moving averages (EMAs).
These forex trading concepts can seem quite complex when you first begin your forex trading education, however, they are very useful tools once understood. Continue to learn about the forex markets and find forex trading strategies that make sense to you.
Market Direction: What should be done when the markets are bobbing at support or resistance levels? That quandary is usually better answered with the use of strong candlestick buy or sell signals on individual stock prices. As seen in the trading of the Dow today, it sold off severely in the morning, breaching the recent support level. This creates a dilemma. The market is already oversold. Do you short new positions when the support level is breached? This usually means shorting in oversold conditions. There is a strategy that allows for an investor to offset some of the risk when new criteria is being established.
When the markets are in oversold condition and appears to be heading lower, is it plausible to be buying long positions? It is if the buy signals demonstrate strong buying. This can be illustrated in our recent recommendation of LNCR. The Belt Hold signal has very strong bullish implications. An investor can offset the risk of being in the market when the directional conditions are in an unknown status. Note how the Belt Hold signal was created on a day when the Dow lost almost 400 points. This clearly illustrates a strong buying force had come into this stock price. The next two days of the Dow trading did not show any significant bullish tendencies, but LNCR demonstrated the bullish result expected from a Belt Hold signal.
There will be times when the market indexes make it fairly clear which direction the market will be moving. Obviously, bullish positions should be added to a portfolio would candlestick analysis evaluates the markets moving in an uptrend. Short positions should be added when the markets are in a downtrend. The difficult areas to make money is when the market is in a condition where it could move in either direction, or continues to move in a sideways direction. That is when utilizing strong candlestick buy signals becomes a very important investment tool.
Analyzing the direction of the market is important. Knowing what to do with that analysis is more important. Fortunately, candlestick signals and patterns provide insights into which stocks are going to move in a direction in spite of what the general market is doing. This creates a huge advantage. The Belt Hold signal is just one of a half a dozen very powerful candlestick patterns. Utilizing the information built into each signals/pattern allows for an extremely high degree of profitability when the markets are not providing a clear direction.
Candlestick Forum Boot Camp - Candlestick analysis allows for simple if/then trading programs. The common sense is built into candlestick signals and patterns can be easily assessed. For the trader that wants to improve their profitability, the Candlestick Forum Boot Camp demonstrates how the use each of the elements of candlestick analysis in minute detail. Once you have learned how to evaluate and apply the information built into the candlestick signals and patterns, the remaining aspects of successful investing falls into place. Entry and exit strategies become fine tuned. Stoploss procedures can be put into place with a high probability/commonsense application. Simple money management procedures take the emotional aspects out of your investing. Do not miss this opportunity to learn the small nuances that make the difference between being a good investor and an extremely successful investor. This training is not going to reveal investing "secrets", it is going to reveal investment disciplines that are an inherent part of candlestick analysis. Please check our homepage for more details on the Candlestick Forum Boot Camp.
There will not be a chat session tonight due to travel conflict. The members chat session will be Tuesday night February 17.
The Candlestick Forum Team
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