FOREX - Foreign Exchange

Why is Forex Trading so Difficult?

by MATT JONES

I’m sure that you have seen websites offering some easy trading method to earn you money. As sure as they exist, it is equally certain that they don’t work. Of course they will work to a limit, but you will see that your account does not increase in money. Why is that?

The reason is that the forex trading can be considered to be a zero sum game. A zero sum game is one where you are competing directly with other people. Trading is not like a computer game where the company structures it in such a way so that there is a reasonable chance that you can win if you try hard enough. Rather it is more like chess where you are looking into the eyes of the person who is trying to destroy you! When you lose money, this is because someone else is taking your money. As a result, easy trading methods offered online cannot work, because if it was that easy, someone else would beat you to the money.

As a result, anyone planning to make money from trading needs to realise that it requires a lot of hard work and study. You have to know more about a graph than anybody else. The logical conclusion is that you learn the character of one graph only and not forex generally. The patterns on a graph may look easy, but they are actually very complicated (although not impossible) to understand and therefore predict for future forex profiting.

For more practical tips on Forex Profiting visit ForexProfitingTips.net and learn how to create a Forex Trading Strategy using the fibonacci sequence.

Investment article from http://www.amazines.com/

Forex Point and Figure Buy and Sell Signals

by ERIC STOUT

Traditional forms of technical analysis leave much room for interpretation and error when determining buy and sell signals. This includes the use of technical indicators, price patterns, and support and resistance lines. Point and figure charts, by contrast, are exact in calculating buy and sell signals.
Not enough traders are utilizing the benefits of point and figure charts in the forex market. I don't why that is. Maybe it's due to the relatively young nature of the forex market. Or perhaps it's due to the global nature of forex trading and the predominance of traders outside of the United States.

Point and figure charts were first applied in the U.S. by Charles Dow, of the Dow Jones Company. Dow applied point and figure charts in the late 1800's to stock price movements. Since then, the method has been used by savvy stock traders throughout the decades, but it's never caught on like other charting methods such as bar charts or candlesticks.

Even fewer in the forex trading world have used the point and figure method to trade currency pairs. There seems to be a willingness to study and adopt more complex and subjective methods such as Fibonacci retracements, Ichimoku clouds, and Gann projections to name a few. But these methods of analysis leave a lot of room for judgment and interpretation. In short, many of the technical methods in the forex market are subjective.

I encourage forex traders to start studying point and figure charts, which are the most objective and precise charts in the world. There's no room for judgment or interpretation when it comes to determining a buy or sell signal on point and figure charts. It's a "black and white" or "yes or no" type of question. Either a currency pair is on a buy signal, or it's not.

With point and figure charts, buy and sell signals are determined by examining a currency pair's movement. That's it. Time does not factor into the equation. Moreover, point and figure charts use a filtering technique to minimize the randomness that is associated with currency pairs. The filtering technique is called a three box reversal. A currency pair's movement is considered meaningful, i.e. worth charting, only if it's of a magnitude greater than three boxes. All other movements are considered too small, or too random, to be worth charting.

A buy signal is generated when the current column of X's exceeds a previous column of X's. But this buy signal can take place over many different intervals, depending on the box size of the point and figure chart that is being used. For instance, a day trader might use a very small box size chart when trading the EUR/USD, a box size on the order of five or ten pips. A long-term trend following trader, by contrast, might use a much larger box size of 100 to 200 pips.

A sell signal is generated when the current column of O's drops below a previous column of O's. But like the buy signal, a sell signal can occur across various intervals, depending on the box size in use.

Trading currency pairs with point and figure charts is an entirely unique and objective approach to profiting in the forex. I encourage you to consider learning how to apply point and figure charts to your trading. You will see how amazingly objective and precise point and figure charts really are and how you can quickly and accurately determine if a currency pair is on a buy or sell signal.

You can learn more about applying point and figure charts to your forex trading at: www.fxpnf.com
Investment article from http://www.amazines.com/

Correlation In Forex Trading

by MATT JONES

Looking on the internet at comments about forex trading, one wonders how people expect to make money without having a basic grasp of the principles involved in trading. People tend to rush in, with promises of easy money, but they then discover that it is a lot harder than it looks. This article seeks to identify a fundamental principle that leads to creating a successful trading model, it is founded on the idea of correlation.

Correlation exists where there is a mutual relationship of interdependence between two entities. Why is it that people feel so sure that they can earn money in forex? Surely the reason is that they immediately see that there are patterns, that is, correlation in the graph that can be exploited to make money. For example, consider AUDUSD (15 mins, 19th March) in the graph below:
(To view the image visit this URL) http://forexprofitingtips.net/wp-content/uploads/2008/04/forex_charts.png

We can see that there is correlation between the graph and the yellow line and is is tempting to think that, as a consequence this can be easily traded. The problem is that there are too many unknowns. How could anyone foresee that the price would bounce off of this line? How can we know how high the price will bounce off the line? How can we tell when the price will stop bouncing?

I would suggest that the reason that the majority lose money in currency trading is that although there is correlation in the graphs, yet people fail to realize that the nature of the correlation is very complicated. There is not only a relationship of interdependence between the price and the line on the graph above. Below is the graph with the inclusion of the stochastic (5, 3, 3) oscillator:
(To view the image visit this URL) http://forexprofitingtips.net/wp-content/uploads/2008/04/forex_charts_trading.png

We can see that there is correlation between these two graphs. Although the price doesn’t move directly proportional to the stochastic graph, yet the former generally turns at similar times to the latter. The result is that we have another tool to contribute to our understanding of how the price moves.

I would suggest that this is the nature of currency trading; it involves the accumulation of indicators that correlate with the price and as a consequence contribute to creating a successful trading method.
For more practical tips on Forex Profiting visit ForexProfitingTips.net and learn how to create a Forex Trading Strategy using the fibonacci sequence.

Investment article from http://www.amazines.com/