Monday, April 28, 2008

My chart forex signal Reviews

Pivot Points in Forex: Mapping your Time Frame

It is useful to have a map and be able to see where the price is relative to previous market action. This way we can see how is the sentiment of traders and investors at any given moment, it also gives us a general idea of where the market is heading during the day. This information can help us decide which way to trade.

Pivot points, a technique developed by floor traders, help us see where the price is relative to previous market action.

As a definition, a pivot point is a turning point or condition. The same applies to the Forex market, the pivot point is a level in which the sentiment of the market changes from "bull" to "bear" or vice versa. If the market breaks this level up, then the sentiment is said to be a bull market and it is likely to continue its way up, on the other hand, if the market breaks this level down, then the sentiment is bear, and it is expected to continue its way down. Also at this level, the market is expected to have some kind of support/resistance, and if price can't break the pivot point, a possible bounce from it is plausible.

Pivot points work best on highly liquid markets, like the spot currency market, but they can also be used in other markets as well.

Pivot Points

In a few words, pivot point is a level in which the sentiment of traders and investors changes from bull to bear or vice versa.

Why PP work?
They work simply because many individual traders and investors use and trust them, as well as bank and institutional traders. It is known to every trader that the pivot point is an important measure of strength and weakness of any market.

Calculating pivot points
There are several ways to arrive to the Pivot point. The method we found to have the most accurate results is calculated by taking the average of the high, low and close of a previous period (or session).

Pivot point (PP) = (High + Low + Close) / 3

Take for instance the following EUR/USD information from the previous session:

Open: 1.2386
High: 1.2474
Low: 1.2376
Close: 1.2458

The PP would be,
PP = (1.2474 + 1.2376 + 1.2458) / 3 = 1.2439

What does this number tell us?
It simply tells us that if the market is trading above 1.2439, Bulls are winning the battle pushing the prices higher. And if the market is trading below this 1.2439 the bears are winning the battle pulling prices lower. On both cases this condition is likely to sustain until the next session.

Since the Forex market is a 24hr market (no close or open from day to day) there is a eternal battle on deciding at white time we should take the open, close, high and low from each session. From our point of view, the times that produce more accurate predictions is taking the open at 00:00 GMT and the close at 23:59 GMT.

Besides the calculation of the PP, there are other support and resistance levels that are calculated taking the PP as a reference.

Support 1 (S1) = (PP * 2) - H
Resistance 1 (R1) = (PP * 2) - L
Support 2 (S2) = PP - (R1 - S1)
Resistance 2 (R2) = PP + (R1 - S1)

Where , H is the High of the previous period and L is the low of the previous period

Continuing with the example above, PP = 1.2439

S1 = (1.2439 * 2) - 1.2474 = 1.2404
R1 = (1.2439 * 2) - 1.2376 = 1.2502
R2 = 1.2439 + (1.2636 - 1.2537) = 1.2537
S2 = 1.2439 - (1.2636 - 1.2537) = 1.2537

These levels are supposed to mark support and resistance levels for the current session.

On the example above, the PP was calculated using information of the previous session (previous day.) This way we could see possible intraday resistance and support levels. But it can also be calculated using the previous weekly or monthly data to determine such levels. By doing so we are able to see the sentiment over longer periods of time. Also we can see possible levels that might offer support and resistance throughout the week or month. Calculating the Pivot point in a weekly or monthly basis is mostly used by long term traders, but it can also be used by short time traders, it gives us a good idea about the longer term trend.

S1, S2, R1 AND R2...? An Objective Alternative

As already stated, the pivot point zone is a well-known technique and it works simply because many traders and investors use and trust it. But what about the other support and resistance zones (S1, S2, R1 and R2,) to forecast a support or resistance level with some mathematical formula is somehow subjective. It is hard to rely on them blindly just because the formula popped out that level. For this reason, we have created an alternative way to map our time frame, simpler but more objective and effective.

We calculate the pivot point as showed before. But our support and resistance levels are drawn in a different way. We take the previous session high and low, and draw those levels on today's chart. The same is done with the session before the previous session. So, we will have our PP and four more important levels drawn in our chart.

LOPS1, low of the previous session.
HOPS1, high of the previous session.
LOPS2, low of the session before the previous session.
HOPS2, high of the session before the previous session.
PP, pivot point.

These levels will tell us the strength of the market at any given moment. If the market is trading above the PP, then the market is considered in a possible uptrend. If the market is trading above HOPS1 or HOPS2, then the market is in an uptrend, and we only take long positions. If the market is trading below the PP then the market is considered in a possible downtrend. If the market is trading below LOPS1 or LOPS2, then the market is in a downtrend, and we should only consider short trades.

The psychology behind this approach is simple. We know that for some reason the market stopped there from going higher/lower the previous session, or the session before that. We don't know the reason, and we don't need to know it. We only know the fact: the market reversed at that level. We also know that traders and investors have memories, they do remember that the price stopped there before, and the odds are that the market reverses from there again (maybe because the same reason, and maybe not) or at least find some support or resistance at these levels.

What is important about his approach is that support and resistance levels are measured objectively; they aren't just a level derived from a mathematical formula, the price reversed there before so these levels have a higher probability of being effective.

Our mapping method works on both market conditions, when trending and on sideways conditions. In a trending market, it helps us determine the strength of the trend and trade off important levels. On sideways markets it shows us possible reversal levels.

How we use our mapping method?
We at StraightForex ( use the mapping method in three different ways: as a trend identification (measure of the strength of the trend), a trading system using important levels with price behavior as a trading signal and to set the risk reward ratio (RR) of any given trade based on where the is the market relative to the previous session.

About the Author

Raul Lopez is the founder of A site dedicated to provide high quality training for Forex traders.

Three Reasons Why Forex Trading Is Great.

As a Forex trader you will always be attempting to make more profits than losses from the fluctuations of exchange rates between currencies in the forex market; in short, this is what is called forex trading. The good news is that nobody is going to ask you for a diploma, or somehow verify the amount of hours you've spent studying the foreign exchange market (FOREX). All you need is the proper training and the tools that will help you become a profitable trader. But this is not the only advantage you get when trading forex, compared to other ways of investment and speculation as stocks. You have a other great advantages that will make you decide for forex and forget about stocks and commodities.

1): There will Never be a Bear Market in FOREX.

You can have access to a mutually-inclusive (two-way) exchange of world currencies. In other words; currencies trade in "pairs"(for example, US dollar vs. yen or US dollar vs. Euro), one side of every currency pair is constantly moving (up or down) in relation to the other one. Thus, when you buy a particular currency, you are actually simultaneously selling the other currency in that particular pair. As the market moves, one of the currencies will increase in value while the other will decrease proportionally. It is up to you to choose the correct currency to be long or short. Since currency trading always involves buying one currency and selling another, it all means that you have equal potential for profits in both a rising or falling market.

2): Trade with High Leverage - up to 200:1 Leverage.

Every trader participating in the forex market is allowed to trade foreign currencies on a high leverage basis - up to 200 times your investment with some brokers. This is primarily attributed to the higher levels of liquidity within the currency markets. Standard 100,000-unit currency lots can be traded with as little as 1% margin, or $1,000, which is a pretty nice feature of forex. Mini Forex accounts are permitted to trade with just 0.5% margin -- in other words, just $50 allows you to control a 10,000-unit currency position. Futures traders, who are asked for margin requirements generally equal to 5%-8% of the total contract value, will immediately appreciate that the FOREX market provides much greater leverage; and stock traders, who must post at least 50% margin, may think they are dreaming.

3): Most Price Movements Are Highly Predictable.

Many times currency prices in the forex market may be volatile, but they have the great advantage that generally repeat themselves in relatively predictable cycles, creating trends. The strong trends that foreign currencies develop are a significant advantage for traders who use the "technical" methods and strategies.

Unlike stocks that sometimes seem to simple lay down in narrow price alleys, currencies rarely spend much time in tight trading ranges and have the tendency to develop strong trends. It is known that over 80% of the trading volume in forex is speculative in nature and, as a result, the market frequently overshoots and then corrects itself. As a technically-trained trader, you can easily identify new trends and breakouts, which provide for multiple opportunities to enter and exit trading positions.

About the Author

Adrian Pablo is a freelance writer with articles published in a number of places. Get a free report onFibonacci Tradingand learn more about the world of trading , visit the website:

Forex Trading: Margin Usage and Introduction to Hedging

A good rule of thumb for either a mini-account or standard forex account, is to limit your margin usage for each trade to 5% - 10% of your usable margin.

As an example, if your usable margin is $5000, to trade safely, limit your margin usage for each trade to a maximum of $250. This means trading only 1 full lot for each trade. This is assuming that you are trading in a CMS Universal account with 400:1 margin. Your use of margin is increased with a smaller ratio, as most other brokerages only offer a smaller ratio, normally 200:1 or even 100:1.

As your account grows and your usable margin grows, you can increase your margin usage and trade bigger mini or full lot sizes. If you lose money and your account shrinks, drop your margin usage back down to smaller sizes. You need to learn to keep your eye on your usable margin, especially if you've suffered some losses.

Protect your usable Margin by not having more than 2 open hedged or unhedged position at any one time. Your usable margin & equity will get eaten up by un-hedged open positions that go bad in the wrong direction...this is a really good reason why you want to use stops, and if
you hedge, hedge tightly.

IMPORTANT: Don't just keep putting on positions because you think it's a good opportunity. First sell a position and book some usable margin before you put on another position.

NOTE: Hedging does not use up more margin! Use it to protect your equity & usable margin, esp. in an emergency situation!

If you break the hedging rules, and your positions go against you and you aren't properly hedged with stop losses, you'll quickly see your usable margin degrade.
If it degrades enough so that your usable margin goes into the negative, you'll get a margin call. This means that the operators will automatically start selling some of your lots in your oldest losing positions in order to beef up your usable margin. This makes your unrealized loss become a realized loss...and the money is gone from your account.

If you lose too much useable margin, they won't even let you trade in your account, the message they'll give you when you try to put on a new trade is, 'Account in Untradeable Condition'.

If this happens, you might have an open position that needs to be hedged immediately or you might need to sell an old position. Or you might need to deposit more money into your account. Then you can start trading smaller lots to win back some usable margin.

You can lose your entire account balance if you're not careful. One other good thing about forex trading is that you will never lose more money than is in your account, you won't have to sell your house if you get a margin call! Stick to the rules above and this won't happen to you. You'll make more money than you thought possible and without the stress of loss.

About the Author

Cynthia Macy is co-author of 'The Day Trade Forex System: The Ultimate Step-By-Step Guide To Online Currency Trading'.

FOREX Trading Strategies

FOREX Trading Strategies

To be a successful FOREX trader you need to develop and adhere to a trading strategy. There are many different strategy's available and no particular one is good for all traders; rather, each trader needs to develop his or her individual approach to the FOREX. We each have special skills that separate us from others and the FOREX trader needs to find what works best for him/her. Some traders rely solely on technical analysis while others prefer fundamental analysis, but many successful FOREX traders use a combination of both to get a broad overview of the market and for plotting entry and exit points.

Technical analysis, or charting, relies on one key concept: Prices move by trends. The common saying in FOREX and stock trading is 'The trend is your friend.' If prices are moving in one direction, the strength of the move can be observed by looking at the chart. Market movements have identifiable patterns that have been studied for many years and a thorough understanding of these trends and how to use the trends to make FOREX trading decisions form the basis of a good trading strategy.

There are many analytical tools available to study market movements. FOREX traders can use computer software or even pen and paper to perform their own analysis. Books abound describing many of these strategies. The beginner FOREX trader should study each one well and acquire a working knowledge of the concepts. Study each method until it is mastered, then use itthe strategy to fully learn it. Once mastered, move on to the next strategy and repeat. It is a simple practice to "trade" FOREX simply on paper, without entering any actual trades. In fact, this method is highly recommended until the beginning FOREX trader builds some confidence.

Support and resistance levels are used in many FOREX trading strategies. 'Support' refers to the price level that is repeatedly seen as the bottom - when the price reaches this level it tends to rise. Prices will seldom fall below the "support" line. At the opposite spectrum is the Resistance levels. Resistance appears to be the peak that a price will reach when buyers and sellers seem to agree. At this apex prices will move up no further. The space in between "resistance" and "support" is known as the "trading range". Prices can move back and forth within this range for some time. The longer the time frame spent in this range, the more important the signal triggered when prices move outside of the range.

When currency prices break through either support or resistance levels, the prices are expected to continue in that same direction. As mentioned, the longer prices stayed in a trading range, the more significant the "breakout", if prices move above "resistance" or "breakdown", if prices fall below "support" For example, if the price rises above the previous resistance level, it is seen as bullish - the price should continue to rise. This signify's that more buyers have entered the market and this increased "buy" pressure will move prices higher. Conversely, when sellers are too many and buyers few, a "breakdown" could signify prices moving lower again until buyers and sellers once again reach equqlibrium.

To find support and resistance levels, price charts need to be analyzed for unbroken support and resistance levels. Charts can be analyzed in any time frame; short term traders will study daily or even hourly charts while the long term trader will use weekly or monthly charts to easily see the long term trend. Traders can use support/resistance levels to determine when to enter or exit a transaction.

Moving averages are another common tool in FOREX trading strategies. If a trader only uses the closing price of a currency at the end of the day as a guide, it is hard to establish the true direction of the move. Moving averages "smooth" out the large moves and give us a much clearer look at the currency price. One average used is the simple moving average (SMA) shows the average price in a given period of time over a specified period of time. A 10 day SMA simply takes the past 10 day closing price of a currency and averages out the 10 day data. Another popular moving average is a weighted moving average. While similiar to the SMA, the WMA puts more emphasis on the last several days trading. So while still showing a 10 day average, more weight is added to the last couple of trading days to better reflect the true trend. When prices are above the MA, they will tend to stay above the MA line. When the MA is below the line, price decline can be expected as well.

These are examples of trading strategies that can be used individually or in combination. In practice, the FOREX trader should have a repertoire of trading tools to examine market conditions and to support the findings of one trading method or another. Experienced traders will rely on several, rather than one, key indicators to base their trading decisions on.

Similarly, fundamental analysis can be used to reinforce technical findings, or vice versa. The FOREX trader will study currency valuations, inflation rates, and other key financial indicators to decide whether a currency is "cheap" or "expensive" Ideally, the FOREX trader will use several indicators into account when plotting a trading strategy.

Every trading strategy should provide clear guidelines about when to enter a trade, what to expect in terms of market movement, when to exit a trade, and how much loss can be accepted in case the deal moves against the trader. Following these simple guidelines and learning about technical analysis can help you become a successful FOREX trader.

About the Author

Read more of this informative series designed for the beginning FOREX trader at


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