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By : FBS Markets Inc

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JAPANESE CANDLESTICKS

JAPANESE CANDLESTICKS
By : https://fxbazooka.com
Broker : FBS Markets Inc

Candlestick chart is one the most informative types of a price chart. A trader may draw information both from individual candlesticks and candlesticks in particular combinations (candlestick patterns).

A candlestick consists of a body (the area between the open and the close) and an upper and a lower shadow (price excursions above and below the real body), which are also referred to as “wicks” and “tails”.

If the prices rose during the time period, the candle is usually painted in white or green. In this case the opening price at the bottom of the body and the closing price is at its top.

If the prices fell during the time period, the candle is usually painted in black or red. In this case the opening price at the top of the body and the closing price is at its bottom.

The top of the upper shadow is the “high” made during the time period, while the bottom of the lower shadow is the “low”. To sum up, each candlestick provides a clear picture of the price action.

JAPANESE CANDLESTICKS

The longer the body is, the more intense the buying/selling pressure is. Short candlesticks, on the contrary, indicate little price movement and represent consolidation.

A candlestick with a very small body (open and close are virtually equal) is called “Doji”. On its own doji is neutral. However, if doji forms after a series of bullish candles with long bodies, it signals that the buyers are becoming exhausted and weak and the price may reverse downwards. If doji forms after a series of bearish candles with long bodies, it means that sellers are getting tired and the prices may reverse upwards.

JAPANESE CANDLESTICKS

There are several types of doji. Long-legged doji has long upper and lower shadows that are almost equal in length and reflect a great amount of indecision in the market. Dragonfly Doji is a significant bullish reversal pattern that mainly occurs at the bottom of downtrends. Gravestone doji is a significant bearish reversal pattern that mainly occurs at the top of uptrends. Four price doji is very rare and represents complete and total uncertainty by traders concerning the market direction.

Candlesticks with short shadows indicate that most of the trading action was confined near the open and close. Candlesticks with long shadows show that prices extended well past the open and close.

JAPANESE CANDLESTICKS

Candlesticks with a long upper shadow and short lower shadow indicate that buyers dominated during the session, but by the end of the period sellers managed to pull prices down from their highs. Candlesticks with long lower shadows and short upper shadows indicate that sellers dominated during the session, but by the end of the period buyers managed to push prices higher.

Candlesticks with long both upper and lower shadows and small real body are called “Spinning tops”. Spinning tops are the sings of the market’s indecision: both bulls and bears were active, but neither manages to sustain gains. After a long advance or long bullish candlestick, a spinning top indicates weakness among the bulls and a potential change or interruption in trend. After a long decline or long bearish candlestick, a spinning top indicates weakness among the bears and a potential change or interruption in trend.

A candle without upper or lower shadows is called “Marubozu”. A bullish Marubozu forms when the open equals the low and the close equals the high and shows that buyers controlled the price action during the entire period. A bearish Marubozu forms when the open equals the high and the close equals the low and shows that the price action was controlled by sellers.

Risk Management FXmentor

Risk Management FXmentor Know Where You Live !
By :Peter R. Bain || http://forexmentor.com/risk/

Risk Management FXmentor

Operating Instructions and Pertinent Information:

The following pages of this manual contain examples of each worksheet and comments that explain the various entry fields, output results and Hot Spot actions for the “Know Where You Live” Risk Management software product. It would be beneficial for you to page through the Adobe Acrobat® PDF manual and read each comment prior to watching the videos.

Comments: 

Each spreadsheet cell that contains a small Red Triangle in the upper right corner contains a comment relating to an associated cell or range of cells.

When your mouse floats over the top of a cell with a Red Triangle the comment pop-up box will 
appear to the right of the cell.

Hot Spots: 

Whenever your mouse floats above a Hot Spot the cursor will change to indicate that you have the option of clicking on the underlying spot to perform a helpful action.

As an example by clicking on the center of the title page you will move to the first active cell on “Risk % Goals and Results” worksheet.

Redundant Comments: 

To reduce redundancy we have left out duplicate entries for related cells in a range (i.e. I have included a section of the worksheet titled “Tracker Cur A”. One comment serves to provide an explanation for the next five cells that are named “Scale Out”).

Technical analysis ALLIGATOR

The Alligator helps to identify a real trend. Its creator Bill Williams recommends following trends and staying out of trading when the price is range-bound.

Alligator Technical Indicator consists of 3 balance lines (Moving Averages, MAs):

• Blue line (Alligator’s Jaw) – 13-period smoothed MA, moved into the future by 8 bars;
• Red line (Alligator’s Teeth) – 8-period smoothed MA, moved into the future by 5 bars;
• Green line (Alligator’s Lips) – 5-period smoothed MA, moved into the future by 3 bars.

When all 3 lines are intertwined, the Alligator is asleep and the market is range-bound. Traders should follow the example of the Alligator and stay out of the market. As the Alligator sleeps, it gets hungrier and hungrier – the longer it will sleep, the hungrier it will wake up.

After waking up hungry Alligator starts to hunt the price until it has enough pray. Uptrend starts when all 3 lines, one after the other, start rising (the green line is above the red one and the red is above the blue one) – one may open a long position. The Alligator will be chasing the price, which has to be above the Alligator’s Jaw.

Downtrend starts when 3 lines, one after the other, start declining (the green line is below the red one and the red is below the blue one) – one may open a short position. The Alligator will be chasing the price, which has to be below the Alligator’s Jaw.

Having eaten enough, the Alligator starts to lose the interest to the food/price. The lines join back together and it’s the time to fix the profit.

According to the Dow theory, one may use the following strategy:

• If the Alligator shows uptrend on D1, await decline on H4 and buy on M30.
• If the Alligator shows downtrend on D1, await advance on H4 and sell on M30.

You must watch the close price of the candle. If the Alligator lines intertwined at the time of the close, this is a trading signal. If not, one better wait.

How to interpret MOMENTUM

The Momentum technical indicator measures the amount that a security’s price has changed over a given time span. It attempts to measure the momentum behind price movements for the underlying currency pair over a period of time.

How to interpret:

There are basically 2 ways to use the Momentum indicator:

• As trend-following oscillator (see the left part of the chart)
• Buy when Momentum bottoms and turns up. Sell when Momentum peaks and turns down. A short-term moving average applied to the indicator will help to determine the indicator’s turning points (violet line on the chart). If Momentum reaches extremely high or low values (relative to its historical values), the odds are that the current trend will continue. If Momentum reaches extremely high values and then turns down, assume that prices will probably keep going higher. Enter the market only after prices confirm the signal generated by the indicator – in this case wait for the prices to start falling and then sell.
• As a leading indicator (see the right part of the chart)
• Often Momentum begins to turn before price. When Momentum is diverging from the price, it may be regarded as a leading indicator pointing at potential top (when Momentum is falling while the prices are going up) or bottom (when Momentum is increasing while the prices are going down).

How to interpret MACD

MACD indicator (Moving Average Convergence/Divergence) is used to spot changes in the strength, direction and duration of a trend. MACD histogram is the difference between a 26-period and 12-period exponential moving averages (EMA). In order to show buy/sell opportunities, a so-called signal line (9-period moving average) is plotted on the MACD histogram.

How to interpret:

1. Crossovers.
   • Buy when the MACD-histogram rises above the signal line. Sell when the MACD-histogram falls below the signal line.
   • Buy when the MACD-histogram rises above 0. Sell ​​when the MACD-histogram falls below 0.
2. Convergence/divergence. Bearish convergence occurs when the price is printing lower lows, but the histogram – higher lows (buy signal). Bullish divergence occurs when the price is printing higher highs, but the histogram – lower highs (sell signal).
3. Histogram bars. Buy when histogram bars start growing after a decline. Sell when histogram bars start declining after growth.

How to interpret FORCE INDEX

Force index (FI) is used to measure the force of bears and bulls on a trending market. This indicator is based on currency price, direction and trade volumes. FI may be smoothed by a short-term (2-10 periods) or long-term (13 periods) MA (blue line on the chart).

How to interpret:

Buy signals:

• Force index is printing new highs on a rising trend (trend continuation)
• Forces become negative (fall below zero) in the period of a rising trend (buy on dips)
• Force index rises above zero on a downward trend
• Force index crosses the MA bottom up
• Divergences (price prints lower lows when FI makes higher lows)

Sell signals:

• Force index is printing new lows on a downward trend (trend continuation)
• Forces become positive (rise above zero) in the period of a downward trend (sell on pullbacks)
• Force index drops below zero on a rising trend
• Force index crosses the MA top down
• Divergences (price prints higher highs when FI makes lower highs)

How to interpret FORCE INDEX

How to interpret BULLS/BEARS POWER

Bulls/Bears Power oscillators are used to identify good entry/exit points. The indicators reflect the power of bulls and bears. It is recommended to use them together with the Exponential Moving Average indicator (EMA, the best period is 13).

How to interpret:

Buy signals:

• EMA is increasing
• Bears Power is negative, but increases diverging with the price chart.
• the last peak of the Bulls Power oscillator is higher than the previous one

It is better not to go long if the Bears Power is positive.

Sell signals:

• EMA is decreasing
•  Bulls Power is positive, but decreases diverging with the price chart.
• the last low of the Bears Power oscillator is lower than the previous one

It is better not to go short if the Bulls Power is negative.

Divergence between the Bulls/ Bears Power and prices is the best time for trading.

How to interpret STANDARD DEVIATION

Standard deviation (SD)indicator measures the price deviations from the moving average (volatility). 
This indicator is often used as a compound part of the other more sophisticated indicators (e.g. Bollinger Bands).

How to interpret

Trader needs to know that periods of market activity and calm usually alternate each other.

- High SD line means high volatility, because closing price and average closing price significantly differ.
 Extreme SD highs warn that the current activity will soon calm down (consolidation).

- Low SD line means low volatility (prices are stable). Extreme SD lows may signal the forthcoming market move.

How to interpret PARABOLIC SAR

Parabolic SAR (“Stop and Reverse”) indicator helps to determine good exit and entry points.  The indicator is very simple in use. Parabolic is placing dots, which define the trend.

How to interpret

When the dots are below the price, the trend is bullish. Parabolic signals bearish reversal when it crosses the price bottom-up and forms 3 descending dots above the candles.

When the dots are above the price, the trend is bearish. Parabolic signals bullish reversal when it crosses the price top down and forms 3 ascending dots below the candles.

Note that Parabolic is good to use on a trending market, with long rallies and declines. On a sideways market there is a high risk of getting false signals. 

How to interpret ICHIMOKU

Ichimoku Kinko Hyo Technical Indicator is a very useful tool as it provides a good overview of the market in one glance.

Timeframes to use: all.

Main elements:

• There are 2 moving averages:
  1. Tenkan-sen (red line) or conversion line – it’s a short-term MA (usually 9 periods).
  2. Kijun-sen (blue line) or the base line – it’s a longer-term MA (usually 26 periods).
• There are 2 more moving averages which are shifted forwards and shown ahead of the prices:
  1. Senkou Span A (short-term MA).
  2. Senkou Span B (longer-term MA).
     The space between these lines is painted with color and is the Cloud (or Kumo).
• There’s Chinkou Span (green line) – closing price of the current candle shifted backwards.

How to interpret:

Things to watch:

• Where are the prices against the Cloud?
  • If the price is above the Cloud, its upper line forms the first support level, and the second line forms the second support level.
  • If the price is below the Cloud, the lower line forms the first resistance level, and the upper one forms the second level.
  • If the price is inside the Cloud, we have a sideways market. The upper border of the Cloud acts as resistance, and the lower one – as support.
• Where do Tenkan-sen and Kijun-sen go?
  • Tenkan-sen is used as an indicator of the market trend. If this line increases, there’s an uptrend; if it decreases, there’s a downtrend. When it goes horizontally, it means that the market has come into the channel.
  • Kijun-sen is used as an indicator of the market movement. If the prices are higher than this line, they will probably continue to increase. When the price traverses this line, the odds are that trend will change.
• What color is the Cloud?
  • If Senkou Span A is above Senkou Span B, the Cloud is bullish (usually painted lighter) – there are more bulls at the market.
  • If Senkou Span A is below Senkou Span B, the Cloud is bearish (usually painted darker) – there are more bears at the market.
  • If Cloud is thin and horizontal – market’s most probably trendless and sideways. The market’s characterized by uncertainty and indecision.

Signals to watch:

• Tenkan-sen and Kijun-sen
• ‘Golden cross’ – bullish signal that occurs when Tenkan-sen crosses Kijun-sen to the upside. The signal can be strong (buy!) when this cross is above the Cloud; neutral when it’s inside the Cloud and weak when it’s below the Cloud.
• ‘Dead cross’ – bearish signal that occurs when Tenkan-sen crosses Kijun-sen to the downside. The signal can be strong (sell!) when this cross is below the Cloud; neutral when it’s inside the Cloud and weak when it’s above the Cloud.
• Bullish signal when the price crosses Kijun-sen from below to above. The signal can be strong(buy!) when this cross is above the Cloud; neutral when it’s inside the Cloud and weak when it’s below the Cloud.
• Bearish signal the price crosses Kijun-sen from above to below. The signal can be strong (sell!)when this cross is below the Cloud; neutral when it’s inside the Cloud and weak when it’s above the Cloud.
• Ichimoku Cloud
  • If Cloud switches from bearish to bullish state – bullish signal. The signal can be strong is if the current price is above the Cloud; neutral if the current price is inside the Cloud; weak the current price is below the Cloud.
  • If Cloud switches from bullish to bearish state – bearish signal. The signal can be strong is if the current price is below the Cloud; neutral if the current price is inside the Cloud; weak the current price is above the Cloud.
• Chinkou Span
  • If Chinkou Span traverses the price chart in the bottom-up direction – buy. At the same time, watch the current price action and the Cloud: the bullish signal is strong if the current price is abovethe Cloud; neutral if it’s inside the Cloud; weak if it’s below the Cloud.
  • If the line traverses the price chart in the top-down direction – sell. The bearish signal is strong if the current price is belowthe Cloud; neutral if it’s inside the Cloud; weak if it’s aove the Cloud.
  • Note that Chinkou Span has to come through the body of the price candle for the signal to be good.

Some Forex theorists do not recommend using Ichimoku on short-term time frames. 

However, experience shows that this indicator can be very effective on the H4, H1 and even on the minute charts. Price relation to the Cloud gives a clear picture of what the market is thinking right now. Combination of the Ichimoku with a focus of price action gives a chance for a flexible real-time trade. 

How to interpret ENVELOPES

Envelopes technical indicator consists of 2 moving averages one of which is shifted upward and another is shifted downward. Envelops can be used as bands around price action that signify overbought and oversold levels and can also be used as price targets. This indicator is same as Bollinger Band as both show the price moves to their extremes.

The period set in default is 14 in the Meta trader, whereas the deviation (shift of the MAS) set is 0.1%. The amount of deviation should be set regarding to the market volatility: the higher the latter is, the bigger it should be. In intraday one may use an hourly chart, and 10-period average and 0.3-0.5% deviation should be fine for any currency pair.

How to interpret:

Buy when the price reaches the lower margin on the band.Sell when the price reaches the upper margin of the band.

How to interpret COMMODITY CHANNEL INDE

CCI (Commodity Channel Index) indicator is widely used in order predict price reversals. It quantifies the relationship between the asset's price, a moving average (MA) of the asset's price, and normal deviations from that average.

How to interpret:

1. Overbought/oversold conditions. In a normal case CCI is fluctuating in the ±100 range. Rise above +100 means the pair is overbought and signals a downward correction. Decline below -100 means the pair is oversold and signals an upward correction.
2. Divergence/Convergence. Divergence occurs when price forms a higher high, but CCI forms a lower high.  It can be confirmed with a CCI break below zero or a support break on the price chart. Conversely, convergence occurs when the price forms a lower low, but CCI forms a higher low. It can be confirmed with a CCI break above zero or a resistance break on the price chart.

How to interpret ADX

ADX (Average Directional Movement Index) is a group of directional movement indicators is used to measure the trend direction and strength and to recognize the “buy” and “sell” signals.

The indicator automatically includes 3 lines:

• Average Directional Index (ADX) itself (yellow line)
• Plus Directional Indicator (+DI) (green line) - difference between two consecutive highs
• Minus Directional Indicator (-DI) (red line) - difference between two consecutive lows

How to interpret:

ADX (yellow line) is used to determine if the currency pair is trending or not. A strong trend is in place when ADX is above 25 and there is no trend when ADX is below 20. There appears to be a gray zone between 20 and 25. 

+ DI and -DI (green and red) define the directional movement. In general, the bulls prevail when +DI is higher than -DI, while the bears have the edge when -DI is greater. Crosses of +DI and -DI make a trading system in combination with ADX.

“Buy” signal occurs when +DI crosses above -DI (ADX must be above 25). Stop-loss is usually put at the low of the signal day. The buy signal remains in force as long as this low holds, even if +DI crosses back below - DI. 

And vice versa, “Sell” signal occurs when -DI crosses above +DI (ADX must be above 25). The high of the signal day becomes the initial stop-loss.

How to Choose a Forex Broker

How to Choose a Forex Broker

With so many different choices out there, how does a Forex "newbie" pick a broker? Chances are most new traders have no idea on where to start - and that's okay!  We're here to help!  We have put together a simple three step process to help you find a broker that YOU think will best suit YOUR needs.  You might be thinking now, "Three steps? That's it?"  Yesssiirrrr!

In the first step, you will go through some of the main questions you need ask yourself when reviewing different brokers.  Then you will take a look at different brokers and their available features. We have put together a comparison guide by taking some of the most frequently asked questions across the internet, and surveyed some of the most frequently asked about brokers out there, so that you don't have to. 

With this guide, you can narrow your choices down and take the final step of talking with different brokers and demo trading on different platforms. Simple, right? Let's begin...

Step 1: Do your research

Before comparing brokers, do you know what to look for? No? Well, here are a few of the main questions you should ask yourself:

• Is this broker registered with any regulating authorities? Check to see if your broker of choice is registered with the National Futures Association (NFA) or Commodity Futures Trading Commission (CFTC) if they're based in the US. If the broker is based in the United Kingdom, check with the Financial Service Authority (FSA). If the broker isn't registered with any of these or any other recognized regulating firm, then you may want to think twice before signing up with them.
• Dealing Desk or Non-Dealing Desk broker? Does the broker offer fixed or non-fixed spreads? How wide are the spreads? These questions are more significant to those traders who like to take quick profits on a few pips. Large and/or variable spreads can cut into the profits of this type of trading strategy.
• How much or how little leverage will a broker give you?  We highly recommend you review "Leverage the Killer"before deciding on how much leverage would be suitable for your trading style. The phrase, "Less is More," can save every newbie
• Of course, you’re not going to start trading with real money right away, right? Well, when you do having a winning strategy and you are ready to trade live; knowing how much risk capital you have to start with makes a big difference. If you have $2000 or less to start with then you probably want to start trading "micro" lots. Not every broker has this feature.
• Does this broker credit or debit daily rollover interest? Some brokers either do both, deduct interest, or neither.  This information is important to traders who hold positions overnight.
• Does this broker offer premium services such as charting, news feeds, and market commentary? How important are premium services to my trading?

Step 2: Compare brokers

Let's not beat around the bush, now you need go to Broker Comparison Guide.

Step 3: Open demo accounts and ask questions. 

Pick at least two brokers that fits most of your criteria and open up demo accounts. Trade in different market environments. Learn all the different features of each trading platform. If you have questions, don't be afraid to ask. Many brokers have excellent customer service support and would be happy to answer your questions.

Most demo trading platforms are very similar to their live counterparts, but not exactly the same. There may be a difference in speed of execution, slippage, and platform reliability (most of the time live accounts are more reliable than demo accounts). When you do have your strategy down and you are ready to move to a live account, start off small, test the waters, and see if this particular broker will suit your trading needs.