How To Seriously achieve 90% accuracy in professional chart reading.
Trading Forex like a professional is easier than one would expect. The professionals take their time, use their patience and skills to make money. They do their research and make educated trades based upon the long term expectancies of the Foreign Exchange Market. They focus on what could be lost rather than what can be gained and avoid the high risk moves that could go either way very quickly.
The professional traders operate in direct contrast to how many of the novice traders operate. Most novice traders use short term charts and graphs that make it difficult to determine the actual market trends. In addition, most novice traders are focused upon the potential profit, rather than the potential loss. This spurs them onto making riskier trades and potentially losing a lot of money.
The novice trader often does not have the patience to develop and follow through with the strategies that the professional traders have. This lack of patience causes the novice trader to enter into and pull out of trades faster than the professional trader. The novice trader may also find that they are doing more trades than the professional trader. This is not an indication that they are doing better than the professional, but simply an indication that they are working harder than the professional.
A great way to learn to trade like to professionals is to learn and study like the professionals. Take your time and read the different articles about trading. Take your time and practice with the different demo programs that enable you to see the long term effects of trading without risking your money. These demos are often free to use and are offered by many of the larger trading firms.
Another way to learn to trade like the professionals is to take courses in trading. There are many different websites that offer trading courses and seminars. These seminars and courses are designed to help not only the professional but the novice trader learn how to be a better trader. These seminars help you to understand how the market works, the different factors that affect the market and the how to predict what the market will do.
HIGH-PROBABLE ENTRY CONDITIONS
The following checklist summarizes important criteria for identifying high-probable entry conditions. Of course, it is not exclusive, but the questions illustrate the need to integrate multiple methods of confirming trades while applying price break,point and figure charting. A useful exercise is to answer these questions whenever scanning and considering a trade opportunity.
A. Trend Conditions
- 1. Is the price above or below the day trend line in the intended direction of the trade?
- 2. Is the price above or below the fifty-day moving average?
- 3. Is the fifty-day moving average in agreement with the trend direction?
- 4. Is the twenty-one–day moving average crossed above or below the fifty-day moving average
B. Reversal Conditions
- 1. Is the price at a day support or resistance?
- 2. Is the price at a four-hour support or resistance?
- 3. Is the price at a fifteen-minute support or resistance?
- 4. Is the price moving above or below a Bollinger band and then returning to its previous direction?
- 5. Is the price probing the Bollinger band and seeming to slide down on it, or hug it, if it is going up?
- 6. Do you spot a Doji candle at a support line or at a resistance line?
- 7. Is the price near a projected cycle turning point?
C. Fibonacci Retracement Lines
- 1. If price is at the key 61.8 percent Fibonacci retracement line, is it at a trend changing point?
- 2. Has the price penetrated the 61.8 percent Fibonacci retracement line?
- 3. Has the price penetrated the 61.8 percent Fibonacci retracement line and returned back?
D. Momentum Conditions
- 1. Has an inner trend line been generated?
- 2. Has the stochastic crossover occurred?
E. Risk Management Conditions for Entry
- 1. Is the stop loss less than 2 percent of the total cash in account?
- 2. Is the stop loss risk calibrated with the win/loss ratio?
REVERSAL DISTANCES: A KEY METRIC
When a price break chart reversal occurs, except for isolated instances of fl ip-fl ops, a new sequence of black or white boxes is set in motion. This happens, of course, because the countersentiment was usually strong enough to generate a reversal condition. Let’s consider some important questions that arise in relationship to the reversal event:
- ➤ How strong is the reversal?
- ➤ Can the trader know?
- ➤ Does it matter?
These are important questions because if a trader knows how to derive some reliable answers, he will have the potential to generate very effective trading tactics.
Here is how to do your own reversal distance analysis for price break charts:
- 1. Generate the time series of the prices.
- 2. Locate the fi rst reversal block (in either direction).
- 3. Measure the low and the high of that block.
- 4. Count the number of consecutive blocks (black or white) that appeared when a reversal occurred.
- 5. Repeat the process for every sequence of lows and highs.
Trading in the Direction of the Trend after a Counterreversal Block
This strategy entails the following five steps:
- 1. Select prevailing trend.
- 2. Select entry time interval.
- 3. Detect counterreversal.
- 4. Place a buy stop order or a sell stop order.
- 5. Identify an entry location.
- 6. Let’s look at these steps in order.
FACTORS CAUSED FOREIGN EXCHANGE VOLUME GROWTH ( EQUALLY IMPORTANT )
Foreign exchange trading is generally conducted in a decentralized manner, with the exceptions of currency futures and options. Foreign exchange has experienced spectacular growth in volume ever since currencies were allowed to float freely against each other. While the daily turnover in 1977 was U.S. $5 billion, it increased to U.S. $600 billion in 1987, reached the U.S. $1 trillion mark in September 1992, and stabilized at around $1,5 trillion by the year 2000. Main factors influence on this spectacular growth in volume are indicated below.
For foreign exchange, currency volatility is a prime factor in the growth of volume. In fact, volatility is a sine qua non condition for trading. The only instruments that may be profitable under conditions of low volatility are currency options.
Interest Rate Volatility
Economic internationalization generated a significant impact on interest rates as well. Economics became much more interrelated and that exacerbated the need to change interest rates faster. Interest rates are generally changed in order to adjust the growth in the economy, and interest rate differentials have a substantial impact on exchange rates.
Business Internationalization
In recent decades the business world the competition has intensified, triggering a worldwide hunt for more markets and cheaper raw materials and labor. The pace of economic internationalization picked up even more in the 1990s, due to the fall of Communism in Europe and to up-and-down economic
and financial development in both Southeast Asia and South America. These changes have been positive toward foreign exchange, since more transactional layers were added.
Increasing of Corporate Interest
A successful performance of a product or service overseas may be pulled down from the profit point of view by adverse foreign exchange conditions and vice versa. An accurate handling of the foreign exchange may enhance the overall international performance of a product or service. Proper handling of foreign exchange generally adds substantially to the rate of return. Therefore, interest in foreign exchange has increased in the past decade. Many corporations are using currencies not only for hedging, but also for capitalizing on opportunities that exist solely in the currency markets.
Increasing of Traders Sophistication
Advances in technology, computer software, and telecommunications and increased experience have increased the level of traders' sophistication. This FOREX. On-line Manual For Successful Trading enhanced traders' confidence in their ability to both generate profits and properly handle the exchange risks. Therefore, trading sophistication led toward volume increase.
Developments in Telecommunications
The introduction of automated dealing systems in the 1980s, of matching systems in the early 1990s, and of Internet trading in the late 1990s completely altered the way foreign exchange was conducted. The dealing systems are online computer systems that link banks on a one-to-one basis, while matching systems are electronic brokers. They are reliable and much faster, allowing traders to conduct more simultaneous trades. They are also safer, as traders are able to see the deals that they execute. The dealing systems had a major role in expanding the foreign exchange business due to their reliability, speed, and safety.
Computer and Programming development
Computers play a significant role at many stages of conducting foreign exchange. In addition to the dealing systems, matching systems simultaneously connect all traders around the world, electronically duplicating the brokers' market. The new office systems provide full accounting coverage, ticket writing, back office processing, and risk management implementation at a fraction of their previous cost. Advanced software makes it possible to generate all types of charts, augment them with sophisticated technical studies, and put them at traders' fingertips on a continuous basis at a rather limited cost.
Foreign exchange trading is generally conducted in a decentralized manner, with the exceptions of currency futures and options. Foreign exchange has experienced spectacular growth in volume ever since currencies were allowed to float freely against each other. While the daily turnover in 1977 was U.S. $5 billion, it increased to U.S. $600 billion in 1987, reached the U.S. $1 trillion mark in September 1992, and stabilized at around $1,5 trillion by the year 2000. Main factors influence on this spectacular growth in volume are indicated below.
Interest Rate Volatility
Economic internationalization generated a significant impact on interest rates as well. Economics became much more interrelated and that exacerbated the need to change interest rates faster. Interest rates are generally changed in order to adjust the growth in the economy, and interest rate differentials have a substantial impact on exchange rates.
Business Internationalization
In recent decades the business world the competition has intensified, triggering a worldwide hunt for more markets and cheaper raw materials and labor. The pace of economic internationalization picked up even more in the 1990s, due to the fall of Communism in Europe and to up-and-down economic
and financial development in both Southeast Asia and South America. These changes have been positive toward foreign exchange, since more transactional layers were added.
Increasing of Corporate Interest
A successful performance of a product or service overseas may be pulled down from the profit point of view by adverse foreign exchange conditions and vice versa. An accurate handling of the foreign exchange may enhance the overall international performance of a product or service. Proper handling of foreign exchange generally adds substantially to the rate of return. Therefore, interest in foreign exchange has increased in the past decade. Many corporations are using currencies not only for hedging, but also for capitalizing on opportunities that exist solely in the currency markets.
Increasing of Traders Sophistication
Advances in technology, computer software, and telecommunications and increased experience have increased the level of traders' sophistication. This FOREX. On-line Manual For Successful Trading enhanced traders' confidence in their ability to both generate profits and properly handle the exchange risks. Therefore, trading sophistication led toward volume increase.
Developments in Telecommunications
The introduction of automated dealing systems in the 1980s, of matching systems in the early 1990s, and of Internet trading in the late 1990s completely altered the way foreign exchange was conducted. The dealing systems are online computer systems that link banks on a one-to-one basis, while matching systems are electronic brokers. They are reliable and much faster, allowing traders to conduct more simultaneous trades. They are also safer, as traders are able to see the deals that they execute. The dealing systems had a major role in expanding the foreign exchange business due to their reliability, speed, and safety.
Computer and Programming development
Computers play a significant role at many stages of conducting foreign exchange. In addition to the dealing systems, matching systems simultaneously connect all traders around the world, electronically duplicating the brokers' market. The new office systems provide full accounting coverage, ticket writing, back office processing, and risk management implementation at a fraction of their previous cost. Advanced software makes it possible to generate all types of charts, augment them with sophisticated technical studies, and put them at traders' fingertips on a continuous basis at a rather limited cost.
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