Trading divergences

There is another great way to use my favorite stochastic oscillator. There are 4 types of divergences to trade using stochastic.

First 2 types are called regular divergences and they assume trend reversal.
In bullish way the chart should make new lower lows and oscillator should make higher lows.
In bearish wat the chart should make new higher highs and oscilllator should make lower highs.



This is an example of bearish regular divergence on Gbp/Usd. Using orange line I'm showing the divergence and with circle I've marked the possible profit.

Second 2 types of divergences are a little different. They are called "hidden divergences" and they confirm the trend continuation.

Hidden bullish divergence assumes that the rate makes higher lows and the oscillator makes lower lows.

Hidden bearish divergence assumes that the rate makes lower highs and the oscillator makes higher highs.



In this hidden bullish divergence I've marked with circles the possible entry and exit to make a profit trade.

Multiple time frames

Most of the indicators on forex can give you a signal to buy or to sell, however if you use only one indicator, probably you'll get a loss. There is a way out of this situation: using two or even three time frames on one chart would give you much less signals but they will be much more precised.

Why is it more profitable? Simply because we have only one rate on any currency chart. Let's take a stochastic indicator for example. It can give you a signal that market is overbought on a day chart and on an hour chart. Better would be to use day chart but what if market would react only on an hour chart? I would wait till market become overbought on both time frames and the rate would definitely bounce back.

We can't be sure what time frame is currently being watched by most of the traders. I like the idea of many time frames because it makes sense. There would work only one indicator at a time or multiple indicators at once.

Recently I've read that you can use multiple time frames for Fibonacci retracement levels. If there are 2 swings on 2 time frames you can draw the Fibonacci levels to find out the rate when the correction would probably stop. It is necessary to have both desirable rates on 2 time frames to be approximately in one place.

Don't forget about other indicators like MAs and Fractals. I would recommend to use 2 time frames: H1 and Daily for this strategy. If there are a low amount of signals then open other currency pairs, that way you can have much more signals.

Investments In Forex

There are a few options for entrusted administration of your funds.

I'm going to tell you about PAMM and ZuluTrade, although there are many more similar systems.

PAMM allows you to entrust administration of your funds to some trader who will take a fixed percent of the profit he can make with your money. This trader also have his own money in the account, so if he lose your money then he lose his money too. The reward percent could be around 20%. You, as an investor, can invest money in different traders to diversify your risks.

ZuluTrade is another system that is a lot easier to use, however this system takes in reward your pips with openning of new orders. This system would take your money even if the system makes losses. That way your broker and the trading expert only cares to open new trades and they aren't concerned that you can lose your money.

If you haven't had success with trading on forex yourself then you should check this kind of systems. Forex is a very interesting market and it can be traded in any market state. On the contrary, stock markets are very profitable on growing market. Currently, in our global economy state, I wouldn't recommend to invest your money in commodities or capital issues.

However, there is an opinion that every forex trader sooner or later lose his deposit. It can be that every equity chart you see on these systems are always in down trend and currently their profit could only be a correction. That's why you have to select only those traders who has good history of trades with at least 3 months of profitable trading.

If you choose to invest in forex, you should always keep an eye on traders who use your money. I would recommend to withdraw your profit frequently to avoid undesirable surprises.

How to define market trend?

In this article I'll describe 3 ways of defining the trend.

1. The simplest way to detect the trend is to use Moving Average indicator or 2 MAs with different smoothing property. The trend can be bullish if: MA is growing, current rate is over the MA or fast MA crossed slow MA. The opposite is true for bearish market.

2. The trend can be detected by using the breakout of current strong support/resistance levels. If the rate for a while was in closed corridor of prices then these prices appears to be the support/resistance levels. If the rate broke out the resistance level then we are in bull market and if it broke out support level then we are in bear market.

3. There is one more interesting way to define current trend. Look at your chart and locate impulse wave followed by a correction wave. If you don't know the meaning of these waves please read my post "Elliott Wave Theory". Look at the size of the correction wave. If it's smaller than impulse wave then we are in the impulse wave direction market. If the correction wave seems the same as impulse way then it's possible there is going be flat market or market reverse. Eventually, If you see that correction wave is larger than impulse wave (however, it is impossible in the regular elliott wave theory) then market can develop in this opposite direction.

And remember, the trend should be defined on Day chart.

Scalping strategy

Many traders prefer scalping strategy because of its simplicity. The strategy concept is in taking a small amount of pips (1-10) per trade, whether it's profit or loss. It is necessary to catch a micro wave and trade on it.

This strategy is also based on intuition and needs a lot of practice. When you could feel what will be the next step of the market then you're ready to trade this way.

However, there are a few problems with scalping you can face and they all depend on your broker.

First of all you need a good broker which can open you trades in less than a second. There should be no requotes and spread should be very low. It is better to have fixed spread because if you trade on news spread can be more than 10 pips and this is definitely is not what you need.

In the end, you need to have fast and stable internet connection.

You need to test your skills in scalping on demo account on silent market and during release of major news. If you could make stable profit then open a real account and test your broker once more. There is a possibility that on real account you would face new problems because brokers don't like scalpers. If your trading would go smoothly you can higher your lots. If not, try another broker, there is a plenty of them.

MetaTrader 5 and MQL5

Yesterday I tried new trading platform that is now in active testing mode. It was completely rewritten but at first sight looked the same. However, it is much more advanced now. I waited for its release because I had very good thoughts for multi-currency expert advisor. MetaTrader 4 do not provide strategy tester for that kind of experts which is essential for developers.

It took me 2 hours to rewrite that simple program, that I told about in my previous post "Your first EA" . The programming language MQL5 is completely different from MQL4. It's like to compare "C" and "C++" languages.

All the indicators and expert advisors have to be completely modified for MetaTrader 5. Moreover, its not like to change the names of the functions or the syntax of the language. MT5 do not support orders in the way almost all trading platforms does! Orders are replaced with positions and there can be only one position on each currency pair. This means all old expert advisors should change their logic and it'll take hours to modify its source code.

In MT4 to reverse your order you had to close Buy order and open Sell order. Now, you would have to open Sell order with doubled lot to do exactly the same thing.

Strategy tester in MT5 still needs some improvements. I haven't found a Results bookmark where I could see all done orders. But wait a minute, there are no orders in MT5. Actually, in the experts' output strategy tester shows some kind of orders, but it's done for testing purposes only. It is really a pain now to debug expert advisors in MT5.

Anyway, I made a simple multi-currency expert advisor and it worked nice. I would suggest to use it, if you have a good idea for that kind of an expert.

MT5 strategy tester worked slower for me, but developers says it should be faster than MT4. Maybe my advisor wasn't optimized but I doubt it.

We have to adapt for new technologies so it's time to learn this new platform. It has a really big potential because of its possibilities to trade on almost any market in the world.

Safe-haven currency

What if the second wave of recession seen on forex was made artificially? There was a big fall of Euro from the beginning of the year. I don't remember any big problem in Europe except of Greece crisis that could make such a big drop. And what was before this rally? There was big Usd growth.

I remember many analytics began to consider entering global safe-haven currency called SDR. Many people thought that USD will lose its safe-haven currency status because of its big fall.

After that, magically, USD began to rise. It happend as-if american goverment decided to rise it once more to convince people that USD is stable and there can't be any other global currency.

However, US can't live happily with expensive dollar because they have very big debts and it's much easier to pay them using cheap dollar. As for the economy, it is a well known fact, that cheap currency makes a positive influence on exporters. Europe countries that highly depends on export, such as Germany, made good profit during Euro crisis.

As I already told, I think USD now is going to fall, until there will appear new statements about its denial from high authorities.

Correlation and Hedging

Risk management in forex is one of the most important things. With good risks policy you'll never lose all your money. Hedging will help you with this not-so-simple task.

Let's open 2 charts - Eur/usd and Gbp/usd. They have strong correlation and if you want to trade on both of these charts you should keep in mind that openning orders in the same direction on both charts would almost twice increase your chances to lose your money. Of course with the chance to lose thse orders you could also win them.

Now let's try to open buy on Eur/Usd and sell on Gbp/Usd. That way you open hedging orders and highly lower your risks. This technique may be useful if you have separate trading systems for each currency pair. If one trading system tells you to buy Eur/usd and the other one to sell Gbp/usd you'll be protected and on the contrary opening both orders in one direction can worth a lot to your deposit. Try to avoid trading in one direction on strong correlative currency pairs.

Cross currency pairs

Today I want to reveal you some information that might seem interesting to you.

Let's look intently at Eur/Gbp. You'll be mistaken if you think there is no USD between them, however when you'll trade this pair USD won't make any influence on it.

Actually all pairs on forex are using USD. When you buy Eur/Gbp your broker just buys Eur/Usd and at the same time sells Gbp/Usd. The Eur/Gbp chart also shows us the difference between these 2 direct pairs. Just divide current price of Eur/Usd on Gbp/Usd and you'll get Eur/Gbp price. Do the math and see for yourself.

The main problem is that two spreads are also put together. This makes trading expensive and you should know that.

There is also an advantage for some people who trade cross pairs. I would recommend using cross pairs for trading on news and for those who follow both economics of the chosen countries.

Trading that uses technical analysis would probably fail here. First of all because there are very low number of players that disable all psychology factors. Secondly there are low amount of trades so triggered stops/limits of other traders won't make a big influence on its rate.

Stocks and forex

Although forex is working 24 hours a day, we divide it on 4 trading sessions. We also know that market higher its volumes with openning of major stock exchanges, like NYSE, and that volumes falls with the stock closure.

Why is it happening? How it can be useful?

I like to watch on DJIA index because its movement highly correlate with USD index. It is often seen that with falling of DJIA the USD begins to grow and vice-versa. If we look from the sidelines it seems a little weird: national currency falls when stocks are growing.

This is happening because people invest all their USD into stocks. Everybody wants to get rid of dollars making its rate fall. That way companies do not automatically become a lot wealthier. It's just a cash flow. The price of a company is calculated based on what company is actually doing. That means that globally price of a company remains approximately the same if we convert it to any other currency for comparison.

We can use this fact for USD rate forecast on forex. Make a technical analysis of DJIA and see if it's going to hit any support/resistance line. If it is the case then you should consider a reflection on forex market. The correlation between Eur/Usd and DJIA also might help you in trading.

Several charts for rate forecast

Take a look at these charts.



I draw a moving average (100 days) on both charts Eur/Usd and Gbp/Usd. When the price crossed MA on Gbp/Usd it was a signal to buy currency not only on Gbp/Usd but also on Eur/Usd.

All charts on forex have some correlation between them. That means that all charts fluctuate together. First of all it is because all direct currency pairs use USD. For example, when Gbp meets some kind of support/resistance then it's probably touches Eur/Usd as well.

You can calculate how strong currently correlation is by using Microsoft Excel and CORREL() function. You need to get historical prices for both currency pairs and do the math.

Correlation varies from -1.0 to 1.0. The correlation is strong near 1.0 (or -1.0) and it's low around 0.

If you do the math then you'll see that all currency pairs affect each other.

That way if you trade on Eur/Usd then you can use Gbp/Usd as an additional indicator to your trading system. It is also necessary to know current correlation because if it's low then it's worth nothing. With Gbp/Usd and Eur/Usd it's seen by sight that correlation is strong enough.

Artificial neural networks

There is one very interesting type of expert advisors that uses neural networks. Let me explain it to you. It sounds as something very complicated and incomprehensible. Although, I never had experience with such software, I think the whole idea is rather simple.

Developers claim that they invent artificial intelligence but it is only half-truth. This kind of software reads all the chart and tries to find the repetitive patterns. Moreover, it should consider time and that scales of patterns could be different.

It's like japanese candlestick analysis, except it is much more advanced. For good results the program should count all possibilities and it takes much time even for fast computers.

Above all, the program should give more priority to new patterns and current market situation, but also not to forget what happened years ago. That's why the program should first learn what happened before, and only after that, trade on real market.

The idea of such expert advisor actually is very good. It is compared to peoples mind because we will do most likely the same to predict the rate in future.

What is the best analysis?

I believe that every chart deserves its own analysis. Moreover, I think stock charts highly differs from forex charts.

How to find out what technical analysis will be the best for your chart?

I think it's a matter of practice. Open your chart and begin checking all your theories on historical prices. That's what big guys do. The more time you spend looking at the chart, the more money you could make out of it. Maybe you should print some daily graphs, lay on your sofa and read them thoroughly.

Pay attention to people who mostly trade on your chart. I suppose that japanese more often use candlestick analysis and englishmen prefer regular technical analysis. It could affect Usd/Jpy charts and Gbp/Usd charts accordingly.

Imagine that all japanese are looking at the specific chart and see precise reversal candlestick pattern. Then assume that they all believe that it's the most important indicator that means the reverse of the current trend. Will anybody try to trade against the pattern? I don't think so and rate most likely reverse. With this example I'm trying to say, that you need to know people with whom you are trading with.

Candlestick analysis

This analysis were used by japanese when they first developed candlestick charts. It was used for rice prices forecast on japanese stocks hundreds years ago. It gave good results to analytics of that time. This method is simple enough because it doesn't take much time to find candlestick patterns and make conclusions.

There are 2 types of candlestick patterns, first one called reversal pattern, and second one called continuation pattern. These patterns are used to forecast the rate behaviour whether it's going to reverse or to continue the current trend.

I would recommend to read a book "Japanese candlestick charting techniques" by Steve Nison. This book covers all possible candlestick patterns.

These days, I don't think this method is working as well as before. I would recommend to use it only as an additional indicator to your trading system. Check your chart to see if these patterns were working on historical prices of your trading chart.

Forex reversal patterns

Lets discuss the most popular forex reversal patterns.

There are 2 main patterns called head-and-shoulders and double-top (M). There is also a variation of double-top called triple-top. All patterns have its inverse variants called "inversed head-and-shoulders" and "double-bottom" (W).

There is also a V pattern just like double-bottom except it has only one bottom. It occurs rarely, so we won't discuss it here.

Head-and-shoulders pattern means that price tried to make 3 attempts of growth but on the last one it failed and rate reversed. It is like a triple-top pattern except that first and third attempts were weaker than middle one.



When you see this pattern you should sell when price goes lower than the neckline.

Now let's look at the double-bottom example.



It's just like the previous one, except it doesn't have a head. When you see this pattern you should buy just above the neckline.

These patterns are really simple and you should easily identify them. However, I would recommend to look after them on a day chart because smaller time frames won't give you such reliable results.

Fibonacci numbers

He was an italian mathematician and considered as "the most talented western mathematician of the Middle Ages".

In the Fibonacci sequence of numbers, each number is the sum of the previous two numbers, starting with 0 and 1. That way the sequence starts with 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 etc.

The higher up in the sequence, the closer two consecutive fibonacci numbers of the sequence divided by each other will approach the golden ratio which is approx 1 : 1.618.

The golden ratio rule is widely spread in almost everything in our world and represent harmony and beauty. Even egyptian pyramids were built using this, sometimes called "Divine proportion". Some people claims that even human body and face consist of it. Although, the golden ratio have its supporters and detractors.

In forex these ratio represented by 23.6%, 38.2%, 50%, 61.8% and 100%, 161.8, 261.8%. You should find Fibonacci indicator in your forex software. It can be used for calculating the following impulsive or corrective wave size. The sizes 23.6-100% are used to calculate the corrective wave and 100-261.8% the impulsive wave. These waves always take turns and also the size of next wave always differs. There can't be 2 continuous 23.6% corrective waves or 161.8% impulsive ones.

For example in spring 2010 we could see a correction of impulsive wave on ~ 61.8% . The most important levels are 61.8 % and 38.2% and the other ones are additional.

As we can see 61.8% level made a strong resistance to the rate. You should consider fibonacci levels as additional support/resistance level in trading on forex.

Elliott wave theory

I've read all the info I could find on technical analysis but I was hungry for even more. To my attention came Elliott wave theory because many experienced traders mentioned it either in good or bad sense. I had to check it out and opened a whole new world. Wave analysis is very complicated one and it don't give you straight answers on how to trade.

The simple rule states that each wave consist of 5 impulsive waves (12345) and 3 corrective waves (ABC). Moreover all waves are made of smaller waves with the same structure.


All the work you have to do with this theory is to mark all waves on the chart. If you mark all the waves the right way then you'll know what will be the next market's move.

This theory is completely based on psychology and golden ratio rule. The biggest problem of this theory is that it is completely subjective. I saw people on forums who tries to use this theory on practice, and on the same charts they have completely different markings. Because of that, there are no good EAs based on this theory (at least I didn't hear of any) and that's why it's hard to check if its working or not. This method was developed for trading on stocks which adds more doubts in its potential on forex.

Anyway I'm happy that I've read some books on this theory because there were many clues that helped me to understand many mysteries on forex. All the standard technical analysis is written in details in wave theory and all the market possibilities are uncovered there.

Day limits

If you trade on forex already then you probably heard of Dow Jones Newswires. These news are built-in my MetaTrader so I follow them. Often they inform that highest/lowest limit of the day has been reached. This information could help you to trade on the following correction.

For example you think that highest rate of the day already been hit and you sell with a small limit order. In this case stop order should be set just above your current highest rate of the day.

How to recognize that day's highest or lowest price already been hit? News can help you, but it's more interesting to try to find out them yourself. I would try to calculate the average move of the day based on history of the chart. It can be done simply by sum of the pips of previous 50 days divided by 50. That way you'll know that the price already moved at least the average number of pips. Next step is to look at the watches. Leave at least 2-3 hours till the end of the day to trade on reverse.

More than 90% of day candles have its shadows. You need to focus to enter the market when its on its boundaries. Lastly, make sure that there will be no major news for the current day. It is very important because the market can be waiting for them to make its move.

This method, however, is very risky. Try to combine it with other signals coming from other indicators.

Pivot points on forex

There is another proven to work technique for discovering support/resistance levels.
Considering previous day's candle you can calculate a so-called pivot line and its additional pivot support/resistance levels. This method works only on day charts.

The whole point is that the rate should bounce off of a pivot line. With this technique you can predict the trend of the current day. If the rate is higher than pivot line then probably it won't go lower it and vice-versa.

There is also some additional support/resistance levels. They are called S1, S2, S3 for support and R1, R2, R3 for resistance. Between them lies pivot point level (P).

Let's see the formulas for classic pivot line calculation:

P=(dh+dl+dc)/3
R1=2*P-dl
S1=2*P-dh
R2=P+(dh-dl)
S2=P-(dh-dl)
R3=P+2*(dh-dl)
S3=P-2*(dh-dl)

dl means Lowest price of previous day
dh means Highest price of previous day
dc means Close price of previous day

This is pretty simple. Actually I found this pivot points useful in my EA. When I tried to use this formulas with my chart I didn't manage them to work. But I never give up so I began to reflect what could be wrong. The trick was to match the correct Time Zone for pivot point calculation. In different countries the day closes at different times so we can get 24 pivot point lines across the globe and they all will be right.

Calculate your pivot points and try to find which one will be best for you. I believe the Time Zone should be chosen individually for every currency pair.

Channels on charts

Trading by channels can give you a strong additional support/resistance level.

Take a look at the recent GBP/USD chart.



Based on red points we could build channel borders. It is necessary to have atleast 3 points to build a channel, however here we used 4 points to be sure that channel borders lies under the same angle. Beginning with the first yellow point you can make a sell or buy order accordingly. Channels do not last long so you have to be very vigilance. Use these channels together with other indicators and do not assume the rate will bounce off the channel more than 6-8 times.

Channels can be narrow, widen or equiangular. They also can be called as triangles. If you look at the charts you could find a lot of triangles, however it is very difficult to find one when it is developing.

Your first EA

I wrote a simple EA that trades with the help of Stochastic indicator.
The program is written in MQL4 for MetaTrader software.

int order_buy=-1;
int order_sell=-1;

int init() { return(0); }
int deinit() { return(0); }

int start()
{
double stochastic=iStochastic(Symbol(), PERIOD_H1, 5, 3, 3, MODE_SMA, 0, MODE_MAIN, 0);

if(order_buy==-1 && stochastic<20)
{
order_buy=OrderSend(Symbol(), OP_BUY, 0.1, NormalizeDouble(Ask, 4), 10, 0, 0);
}

if(order_sell==-1 && stochastic>80)
{
order_sell=OrderSend(Symbol(), OP_SELL, 0.1, NormalizeDouble(Bid, 4), 10, 0, 0);
}

if(order_buy!=-1 && stochastic>80)
{
OrderClose(order_buy, 0.1, NormalizeDouble(Bid, 4), 10);
order_buy=-1;
}

if(order_sell!=-1 && stochastic<20)
{
OrderClose(order_sell, 0.1, NormalizeDouble(Ask, 4), 10);
order_sell=-1;
}

return(0);
}

The algorithm of the program uses overbought state of the market to sell and vice-versa.
When market state changes on the contrary the program closes its order.

First we create 2 variables that represent orders.
In the main function we use built-in function to calculate stochastic on H1 chart using standart parameters for Fast Stochastic.

There 2 functions OrderSend and OrderClose for openning and closing orders.
With simple "if" operator we check the state of the market.

NormalizeDouble is used because of some problems with history. There were some rates with 4 numbers after comma and then data changed on 5 numbers. OrderSend and OrderClose couldn't handle them so I had to truncate all rates to 4 numbers.

There are 3 main functions: init, deinit and start. In this program first two aren't used.
Function start usually executes with every new tick, but when I test my EAs I use method based on fully built bars so the function start is executed every 1 hour as I set in in Strategy Tester.

The lot was used 0.1 which means 1 pip ~ 1$ . The 5th parameter of OrderSend is called slippage. It only matters when program runs in real-time meaning that rate could be more or less than 10 pips otherwise this function fails.

This program is used only for testing algorithm in Strategy Tester for H1 period on Gbp/Usd. Do not try it on real account! The testing period was since 01.01.2000.

I'm not going to get deeper in this code. If you have any questions just post a comment here.

Now the interesting part. The results showed us profit factor 0.97. The program was setup on 10000 USD and we lost 3044 USD. Total profit was 113091 USD and total 116135 USD. Actually its not a big difference. Order count was 4156.

With all that result I can tell you that this algorithm actually could make profit! The problem lays only in the size of the spread... Spread for Gbp/Usd is 4 pips. With a simple math we can count that 4156 orders * 4 pips = 16624 pips and is approx. 16624 USD. If we add this sum to our loss 3044 we could get 13580 USD.

Unfortunatly it is impossible to trade without spreads, although some of the brokers provide this opportunity with a cut of your profit. I haven't had experience with such brokers so I don't know for sure how it works.

When to close your order?

There are some ways to properly close your order.

First way is to set limit and stop orders. They guarantee you that your order will be closed no matter what. That way you'll never lose much money and never catch a margin call.

There is also a variety of stop called trailing stop. I like it very much because it allows me to get as much possible profit as possible. It simply pulls your stop order in profit direction with a setup distance. For example you can set it to 20 pips. If you buy and set a trailing stop and market grows on 40 pips and then falls on 20 pips you'll get your deserved +20 pips of profit. With trailing stop you'll never lose more than a setup number of pips.

Second way is to close your order based on your trading system. I prefer using this one because my robot follows the market 24 hours a day. As long as I have conditions to enter the market , I also have conditions to exit. Sometimes these conditions are opposite and sometimes I have more exit conditions than enter ones.

For example I used stochastic indicator to enter the market when it was overbought. Further I follow it till it becomes oversold and exit my position. With limit/stop orders I couldn't do this.

There is a catch though. If you choose this method you have to be very cold-blooded. Don't let your greed or fear to overtake you. React hard as when you opened your order.

Results with different brokers

Today I tested my EA with another broker. First of all I noticed it uses different time zone, so I had to modify some of the source code. Then I've run the test on the both terminals to compare the results. Unfortunately with second broker there were only 75% of orders made by first one. Profit factor with first broker is 1.7 and with second one only 1.4.

Thats not that bad because usually all EA fails if something is wrong. The next step was to check swaps. With the second one they were even better. So this is not where the problem lays. Finally I've checked historical rates for certain periods and found out a big difference in rates. Actually I have no idea why the rates do not match. The orders on second broker opened and closed at completely different time also. I couldn't find any similarity in the results.

That all means that my EA works and it works great. I'm happy because I knew that my EA was optimized for the first broker. I've done a very big optimization after any new strategy that seemed to work. That's why I was a little apprehended that my program was written for history and not for real time trading.

Now I have come to conclusion that I need to optimize my strategies for any new broker that I would like to switch to.

Investors and Forex

There are investors who trade on stock exchanges. These people can significantly change currency rate during their work. We usually hear from media about their risk appetite.

Today is monday and we saw a small fall of Euro. There were no important news that might change the rate. When it happens, usually media says that investors made their profit-taking.

What does it mean? I'll try to answer. There are 3 states that have an impact on forex.

First state - strong risk appetite. It means that we have investors buying metals, oil, capital issues etc... USA dollar is not only a safe haven currency, it is also a currency used in all transactions on stock exchanges all around the world. That means when somebody buys oil through the internet with an aim to earn some money the rate of USD lowers. In that optimistic market state everyone tries to get rid of their USD and purchase some goods.

Second state - profit-taking. When everyone sees the rise of prices on goods, people who became their owners, tries to sell them with higher price. Frequently this rise happens because of the same people who recently bought them. In that moment prices on goods falls and rate of USD rises.

That way investors do the following. They buy goods when USD is strong and prices on goods are cheap. For example, they do it on monday. Then during the week rate of USD falls and goods becomes more expensive. In that moment investors don't have a big profit because of cheap USD. Then on friday they sell their goods making USD stronger. This is called profit-taking. That way most of investors makes their money.

Third state - weak risk appetite. When it happens USD become strong. Investors keep their money and do not invest in anything. They may be scared because of economy. Bad news and reports keep them away from trading. It could last a while, but anyway they have to work to make a living. So they are hoping on any good news to trade again. The longer they waited for good news, the higher impact on stocks and USD will be.

Forex during the crisis

Everybody states that markets now are very unstable. Trading on forex became very dangerous.

And what do we see now on media? So many ads about becoming a successful trader. There are courses to learn how to profitably trade on forex. People are losing their jobs and businesses because of reduction of consumer behaviour. It is really hard to find a new job now, so people took their last money and try a fortune on forex.

To learn how to profitably trade on forex you need so much time and knowledge in economy. You need to learn it all your life. If it was easy then everyone would be rich, but its not the case. Actually I think 9/10 people losses their money and other 1/10 part takes them.

It is happening because there are so many newbies thinking they are so smart that they can beat the market. I personally think that most of broker companies do not place your money on forex. If you were a broker company why do you need to pay the fees if you know that client in 90% of cases would lose his money? Even if you win, they can pay you, because of their huge income. Its like a lottery for them.

Prepare yourself for a battle. Take a bull or bear position and hold your ground.

Manual Vs Automated Trading

It is completely up to you whether to trade manually or with a robot. Both approaches have its own prons and cons. Some people manages to use both of them. For example you can set a trend in a program and it will try to catch the best moments for only buying or selling.

Manual trading, in theory, can make you much more money than a robot. If you look at forex as a full time job then this choice will probably be better for you. It is necessary to follow media if you trade by hand. If you try to concentrate only on technical analysis then robot will beat you anyway. With trading by hand you can feel the market. Agencies like Moody, S&P and Fitch together with high-ranking officials can easily move the market. Keep an eye on economic calendar all the time. Almost every new published economic indicator have its influence. You have to be prepared for any news and react accordingly.

Automated trading is very simple if you have a proven to work expert advisor. But where to get one? Actually I think they are very expensive and you won't be able to buy one on the net for 10-100$ . There are a plenty of offers on the net, but I won't believe to any of them. It's all because of demand and supply. If someone would have a profitable advisor he would be a millionaire. If some people provide a profitable chart it doesn't mean a thing! I personally know a MQL4 shortage making it possible to create a chart without a single loss.

Take your time to write a profitable robot or order one from a programmer on a site like http://www.odesk.com/ , but I strongly recommend you to learn MQL4 and do it your way. Before I made my profitable EA i've tried hundreds of different algorithms that came up to my head every 5 minutes. It is really fast and easy to write an EA and test your theory on history by robot.

After all you need a hosted server or you'll have to keep one of your computers 24 hours enabled with MetaTrader software running.

Carry trade strategy

Usually trader pays for swap when decides to leave his position for one more day. Now imagine that you can earn swap money instead of spending. It becomes possible if there are a big difference between interest rates of 2 countries. You can borrow one currency with low interest rate and buy another currency with high interest rate. Thanks to difference of interest rates you can make positive swaps day by day.

Currently popular pair for these strategy would be AUD/JPY.

Let's take a look at the chart.



As far as I remember interest rates from february of 2009 till now were not changed for both AUD and JPY.

Than means if you made a buy on this pair at 1st february 2009 you could make a lot of pips plus everyday swaps.

Of course, there is a catch. Although, this chart shows us a bull market, it still could be bear and you would catch a margin call very fast. This is a risky technique yet there are some positive moments. Just think about it for a sec. Many banks, hedge funds and individual traders would try to make money on this opportunity. The rate would go higher and higher because of new players getting it. This is like a pyramid and while there are positive area in interest rates of both currencies then its more likely the rate will go in the direction you need.

PS. If you need to find out what swap you'll get then go to MetaTrader and try to locate where all currency pairs are listed (usually on the left side). There you can right click and select "Symbols". In the opened window choose a pair and click to see it properties.

My forecast on Eur/Usd and Gbp/Usd

Let's take a look at the charts.



Well, what have we here? I see a stable uptrend from the beginning of 2000 on both charts.
Then we got a collapse in august 2008. All stock exchanges were hit by the crisis and USD became a safe haven currency.

After a big fall we see fast recovery till december of 2009. Then again a big fall because of problems in Europe including Greece. Currently we once again have a small recovery.

What will be next? Unfortunately forex is a new market and thats why we can't be sure what should happen next according to history. But we all know that history always repeats itself.

I've made some research on some other crises that happened on Wall Street. Recessions could be of 2 shapes - V-shape and W-shape. Now its more likely that we are in W-shape type of recession. So I assume there won't be any surprises and world economy should become stronger with every new day.

What we also know is that US have really big debts now, counting in trillions of dollars, and it needs to pay them back. How it can be done? Simple, by printing more money. Usually that means depreciation of national currency. America took a scenario of living in debt since the collapse of Soviet Union and it can't last forever. SU was a real threat to US and citizens of america worked hard to be a great competitor. Now we see that Russia paid all its debts of SU and more likely is going to take a leadership from US. Once again China made a real break through in world's economy.

I really believe this could be the next scenario but US always could think of something extraordinary. It is proven to be the strongest economy in several tens of years. There is no need to underestimate its potential.

Bollinger bands indicator

Although I'm not using this wonderful indicator, I still find it very informative. You definitely need to try it in trading. Bollinger bands unite 2 most important indicators in forex: Moving Average and Stochastic. It is also very visual indicator that shows in what condition the market is in.

Trading Bollinger bands is much the same as with stochastic as described in previous post. The only difference is in the levels which happens to be dynamic.

There is one more thing you need to know to trade on Bollinger bands. It is their feature of changing its size. When they have close limits you need to prepare for break through. The longer their bounds remains narrow the bigger break through will be. Frequently this happens because of market's waiting for important economic news.

Stochastic as a leading indicator

Whether its RSI, Momentum or CCI they all are leading indicators that do one thing. I prefer to use fast stochastic for 5 periods. The parameters are 5, 3, 3. It shows the representation of where the market has closed for each period in relation to the trading range for the specified number of periods used in the indicator. This line is called %K. There is also %D line which is simply a MA of %K.

Generally people use strategies based on crossing of these 2 lines, but i think it can only make sense for slow stochastics where parameters are 14, 3, 3.

My favorite one is fast stochastic. I'm not going to use %D line at all because it slows down the fact of overbought / oversell market.

Then we have 2 lines with 80 and 20 levels. When stochastic is crossing level 80 bottom-up we have overbought market and of course crossing level 20 top-down means oversell. To be completely sure we have such cases we can higher levels to 90 and 10 accordingly.

Generally you can simply wait while stochastic goes oversell and buy then wait till it goes overbought and close position. This technique works 50/50. So by doing these trades you aren't risking too much.

There is another a little more complicated technique. You need to buy when stochastic crosses its level 80 bottom-up and close position when it crosses the same level top-down. This method works well on important news, publishing of economic indicators and openning of major stock exchanges.

Thereby we have 2 completely different trade methods using a single stochastic indicator. You have to find out when it is necessary to use first one and when second one. It is also useful to merge signals of different trading methods together for better results.

Is it hard to write your own EA?

If you are already familiar with programming then you are all set. First of all you need to get a broker with MetaTrader software. Then you need to decide what strategy you want to automate. Writing program in MetaTrader is as easy as ABC. The language is called MQL.

First of all you need to understand how OrderSend and OrderClose works. These functions open and closes positions. Then look at the core of a program. There are 3 main functions: init, deinit and start.

init - is automatically called when program first started.
deinit - is called when EA has been stopped.
start - is called every time the currency rate has changed.

In fact start() is the main function here. If during execution of start() new tick occurs then it will be ignored. Keep that in mind. If you need to catch all currency rate changes you have to make this function to execute as fast as possible.

It is worth to mention that MQL4 has built-in most of the indicators available in MetaTrader. Surely this would help you to write your own EA's and its also keeps your code clean from unnecessary stuff.

The language syntax is similar to "C" language but it's more like its lite version. Even a "Basic" programmer can deal with MQL.

Use of fractals

When I started to write expert advisors my attention was attracted by support and resistance levels. It is obvious that psychology of traders are much the same all around the world. When everyone sees rate near big support/resistance level there always happens a battle between bulls and bears. It is a very good point to buy or sell currency. The rate will either bounce off or break through.

Now lets talk about how to find these levels. I found a very good way using fractals. I'm using a simple method as always, but there is a more complicated version by Bill Williams. If you are interested you can find info about it on Google.

Open up a day chart.

Try to find a nearest row of 3 candles from your current rate where a middle one would have highest rate of 2 nearby candles. This highest rate you can consider as a resistance level. On the contrary a row of 3 candles where a middle one would have a lowest rate between 2 other candles would tell us a current support level.

If there are no such rows on active bull/bear market that means there is no strong resistance or support level. At least one level there should by anyway.

Using these levels, its not hard to build your own trading system. I recommend to use it on Eur/Usd only. I don't see these levels working on other markets because of relatively low liquidity and number of market traders.

I have made a profitable expert advisor on this method but I wasn't pleased with its efficiency. I'm pretty sure it is possible to make it better. Maybe I'll get back to it any time soon.

Handling of Moving Averages

There are 2 ways to describe current trend using MA's.

1) If rate rises bottom-up the MA then it can be considered as beginning of bull market. And on the contrary if rate lowers top-down the MA then it is beginning a bear market.

2) Look at your MA and make out its ending. If the indicator has risen comparing to a previous day then we are still on bull market. You have to wait till the indicator changes its direction. That way the rate can be higher than MA but the trend can be still considered as bear market and vice versa.

I prefer using second method. It gives me better results, but keep in mind that using it, you have to use a higher smoothing parameter. Good numbers would be 21/50 days to the first method and 100 days for the second one.

For the first method I would consider MA as a resistance/support level. The rate frequently bounce off this line. Check the history of your currency pair and trial and error the best value for your smoothing parameter.

My favorite book on trading

Actually I would recommend to read two books. First one called "Interviews with Top Traders" by Jack D. Schwager and second one called "Reminiscences Of a Stock Opearator" by Edwin Lefevre.

These books are not going to tell you how to trade on forex, but they will give you strong motivation to continue learning. I couldn't tear myself away from these books. It is so excited to read real stories of successful traders.

I failed to find good books on forex that could grab my attention. After all I suggest you to read these 2 books that are now considered a classic.

If you know some really good books on forex, please leave a comment here. Thanks!

Result of my trading on demo account

Now lets take a look at what happened on demo account.

My computer works 24 hours a day to make this chart possible.



Testing period from 4th january till now. As you can see there was a high deposit downfall at the very beginning. I was very disappointed with that. Then I got myself together, checked the program and began to wait. Currently I'm very happy with the result. I have 772$ on my account and its about 50% of my demo deposit in half a year.

I haven't made anything in program since the beginning and I've never interfered with its work.

Writing this program took me about half a year. I was very curious to know, could I make a profitable expert advisor or not. I'm still not sure whether its working or not and that's why I'm going to test it a little more.

My profit statement based on history

This statement shows the potential of my expert advisor.






Here is the result of my program on history from 2000 1st january till today on Gbp/Usd. I have used 15min time frame. Deposit was set to 500$. Maximum deposit slump was 302$. Total profit estimate 9003$. Number of profitable trades equals to 58.51%.

This program works with permanent trading volumes thereby making risks lower with each trade. Although there is a possibility to make much more using progression if I would calculate trade volume from the size of my current deposit. In that case the risks to get margin call would be the same as from the start of trading.

My strategy on forex

Currently I have 6 strategies on forex.

Four of them are trading by trend. Two strategies do not use trend at all.
I had to develop all these strategies because every single one had too low number of signals.
Almost everyday I have a trade open. Sometimes even 2-3 at once. It is really pleasently to look how program works in real time.

I have to use strategies that sometimes trade against the trend because 100 days MA can have weeks of wrong signals. I have to wait 100 days and not to lose much money while trend reverses. It is necessary measure because I don't know any other way to correctly define a trend.

I like my test results. When trend reverses my program neither takes profit nor loss. I'm pretty sure that not losing money is a victory on forex. When trend finally reverses my strategies begins to work on full power.

I've been testing my program for 6 months and it results in 50% of profit of my demo deposit. It is pretty similar to testing on history for the last 10 years. So I'm having in average about 8% of profit from deposit. Although its sounds very nice, my program can make a big deposit slump. It can be a whopping 75%. Not sure that many out there would go on such big risks.

However testing on history haven't made a single margin call. I doubt there are many traders who never lost their deposit.

Later on I post some screenshots with my results. Stay tuned!

Trading by or against the trend

Market could be in two states.

1 State. The chart is going by trend day by day. Sometimes it stops but then continues. If you look at day chart you'll see that exchange rate could rise of fall for a week or even two weeks.

2 State. After any big movement there is a correction state. In that period of time the chart usually reverses for some time. It can go down for 1/3 or 1/2 of previous active wave.

Lets call this movements as waves. After every active wave, there is a passive one. It is called correction. There were written a several books on this theory. It called Elliott wave theory. The size of correction is calculated using Fibonacci levels. It uses golden ratio thus making a correction on 61.8%, 50% or 38.2% of previous active wave. As theory says the size of correction do not repeat twice. That means after 61.8% correction, next one will be 50% or 38.2%.

I know it is a little hard to understand. Sometimes the size of correction is really one of these numbers. Maybe it is because many traders around the world are looking at these levels thus making them like resistance or support levels.

The problem is that its all very subjective. I just recommend not to trade against the trend if currency rate fell under 38.2% of previous wave.

Most of the time you have to trade by trend. This isn't that dangerous. Draw a moving average for 100 days. If the chart is above the MA then you can buy. If it gets near to MA you have to increase your vigilance. Handle it like any other support level.

Now lets talk about trading against the trend.

Generally chart is going together with MA in some distance. You can try trading against the trend if chart has gone very long way from MA. Almost every time it would bounce back a little to MA. Don't wait till it comes back to MA, because it is not the case. Combine this technique together with stochastic and follow all the news out there. If nothing serious had happened then you are free to go into trade. Try to catch a moment when the bounce is developing. Frequently stochastic can give you a signal but the market can be overbought for some time. You should go short after stochastic goes back to <> 80 level during bull market. This protects you from unwillingness surprises.

When you trade by trend you can hold your position very long period of time. If you catch a good moment to make a trade, you can leave till the global trend decides to reverse. On the contrary, trading against the trend, and trying to trade the correction, your trades should be very quick.

Introduction of technical analysis

I spent many hours on testing different technical indicators. Now I'm going to tell you the most important ones from my point of view.

1) Moving Average (MA). I love it because it tells me what trend currently prevail on chart. I'm using simple moving average although there are some more advanced varieties. I'm not in a hurry for complicated solutions. My methods are straightforward. There is only one parameter that needs to be chosen carefully. It is MA period that is responsible for time frame. This paremeter is simply a number of days that are taken into account.

I prefer 100 day simple moving average. Why 100? Because if you follow chart for the last several years, you'll see that trend is changing very rare. Of course there are some very big corrections, but they usually bounce and reverse after some point. You need to select moving average that would mistake rarely.

Danger occur when side trend is developing. It gives us no information and we better keep out of that market. We can't know for sure where the chart would go next. You could recognize side trend by seeing how much currency rate crosses MA.

2) Stochastic. There are 2 stochastics which can be used on day chart - slow and quick one. I suggest using quick one. It gives you motivation to open a trade when the market is oversold or overbought. You simply can wait till market gets overbought and make a sell.

I would recommend to make these decisions based on 2 stochastics at once. First stochastic you can set on a day chart and second one on an hour chart. When both stochastics becomes overbought (their index would be > 80) you can sell.

3) Resistance and support levels. Although there is no simle indicator showing you these levels you could find them yourself. Also you can read about DeMark method.

These levels are strong ones where market can either reverse or make a break through. Most of the time chart is trading between this two levels and sometimes it gets near to its borders. Generally before a break through there are some reverses. You can trade both ways. You have to be very careful, because market is going wild, when it is in these levels zone.

And thats it. I couldn't manage to work other complicated indicators. I combine those 3 in my strategies, together with current time on stock exchanges.

Importance of economic indicators

Lets talk about trading on news. There is an economic calendar stating when certain economic indicator will be published together with its prognosis. The market is watching on these numbers. If economic indicator states an increase in economic activity then most likely its currency would rise. The market takes these numbers into account almost instantly after every publishment. Even a prognosis can start a new trend on forex. Most interesting fact is that big movements appears only if prognosis differ from actual data.

You should be very careful when it happens. For example there should be announced some economic indicators. After first one the market falls and after a minute executive tells us some positive news and market reverses. If you wanted to catch a big movement after first signs of a new developing trend then you may lose your money. Some forex brokers won't even allow you to open or close trades in that moments because of a big overload.

This trading technique is rather simple. If you learn how to use it then you may try to earn some money on forex only on certains minutes during a whole month. Because some economic indicators are published once in a month at certain time, you should be in front of your computer, only at that moment, and you must react quickly.

There is one more thing. If market was quiet in 1-2 days before publishing of important indicators then most likely there is going to be a really big movement. On the contrary if trading was going actively then news should not affect chart too much.

Forex chart types

Currently the most popular chart type is a candlestick chart. It is very informative yet a little tricky.

Every candle shows four values:
1) Open price
2) Close price
3) Highest price
4) Lowest price

If candle is filled or green that means that during specified time frame currency rate raised.
If candle is empty or red that means that during specified time frame currency rate lowered.

Every candle represents specified time frame. It could be any, from 1 minute to 1 month.

It is very important what time frame you choose for trading. Basic rule read as follows, the higher time frame you choose for your candlestick chart, the better your technical analysis would be. Chart types like day ones clears up all the noise from the chart. For example if one big bank would buy a lot of currency just because of its needs then it doesn't mean that something serious happened on forex. Maybe it needs to pay some syndicated bank credit and thats all. With day charts you won't need to focus on such useless movements.

Technical vs Fundamental analysis

To start a trade you have to follow your trading system. Trading system is a set of rules set by you that lean on technical and / or fundamental analysis that is made by yourself.

Technical analysis is simpler. It covers chart patterns and indicators inside your broker software. When you see a reverse pattern such as double-top (w-top) or v-top you can go short. Short position refers to selling and long position refers to buying. There are many information on the net about different pattern types. There is also candle analysis which was developed by japanese. They used candle chart hundred years ago to trade rice. We'll discuss technical analysis later in this blog because it is the only analysis I use in my trading system, because it is fully computerized.

Fundamental analysis means reading all the major news, statements of economists with good reputation and following the official statistics of certain countries. This information induces you to buy or to sell. You have to be very careful with this type of analysis. Misunderstanding may cost you a lot of money. Even the intonation of a politic can reverse a trend. Moreover some bad news can make its currency stronger. It wasn't the case with the US dollar until the beginning of global financial crisis. When it happened, US dollar was growing by leaps and bounds, and every bad news within the US made it stronger against Euro. That made us to believe that US dollar is a shelter currency. Investors took their money back and that made exchange rate growing. So, that's the paradox.

You better take the best from both worlds. Try to foresee exchange rate using one or another analysis. Then see what gives you better results.

As you can see now trading isn't that attractive. You must take into account so much information to be competitive.

When to trade?

Although you can trade from monday to friday 24 hours a day there are specific trade sessions when market falls asleep or experience its rush hours.

There are 4 main sessions:
1) Pacific ocean session - Market sleeps for about 3 hours. Really slow movement.
2) Asia/Australia session - Aud, Nzd and Jpy wakes up here.
3) Europe session - Eur, Gbp and Chf currencies begin to fluctuate.
4) American session - Most aggresive and liquid market which affect all currencies.

You need to keep an eye on openning of major stock exchanges of countries which currencies you plan to trade. London and Frankfurt stock exchanges are openning at the same time. Despite the difference of time zones in Germany and UK they agreed to open at once thus not giving english traders to sleep one extra hour.

The biggest movements takes place when New York stock exchange (NYSE) begin its operation. After approx. one hour European markets are closing, nevertheless Gbp and Eur are still under pressure till NYSE closes.

There is a strong connection between stock exchanges and currency rates. You could follow it for yourself. You can even predict currency rate relying on prices and trends of commodities and capital issues.

Big bounce of rate could appear exactly at the time of openning or closing of major stock exchange. Don't try to trade during this moments. All technical analysis could let you down because new trend could appear.

Forex as a full time job

You have to pass a long way till you become a successful currency trader.

It is possible that you lose some deposits until you finally understand how to trade the right way. This job is very nervous. If its hard to you to suffer from the stress then better make trading a hobby than a job.

Trading on internet is very attracting offer. You could work from home, you can travel and be very independent. Moreover you can earn indefinite amount of money. But don't forget about your health. As I already told it is a tough job. It is very painful to look how your deposit goes down and admit that you have made a wrong decision.

Start trading with small orders. While time passes you can higher your stakes. Try to lower your risks as well. Gradually you can switch all your time on forex if you could feel yourself comfortable on this unstable market.

What could help to trade in terminal ?

There are several type of trade orders. Besides simple buy, sell and close position actions there are some auxiliary orders. They called limit order and stop order. Some brokers provides instead of them OCO ( one cancels the other ) orders. Classic limit and stop orders are better. Because my broker do not have OCO I won't explain them here.

Limit orders allows you to buy at a certain price and stop orders do the same for selling.

In addition to any opened position you can set Take Profit and Stop Loss levels. When market hits any of the above, position would close accordingly.

If you trade by hand than you should at least use Stop Loss. When openning a position make certain goals for desirable profit and certain amount that you can afford to lose. It is necessary to set higher profit than loss. You could have Take Profit level in 2 or 3 times higher than Stop Loss level.

Risk management in forex

There are some rules that you must know. I'm not saying you have to follow everything you read. There are no gold rule.

As most of experienced traders says you should allow to risk no more than 1-2% of your deposit on each trade.

It seems very logical but you won't make much profit that way at least in the beginning. To earn some money for living you had to invest several thousands of dollars.

There is always a temptation to make one big trade to make your account grow in several times even if you invest 1000$ . Try to resist this temptation. When you open such trade there will be 2 devils in your head.

First one called fear... Fear to lose money if your position goes negative. You will sit and watch hoping that trend reverse. Maybe it will reverse and this feeling would leave you or you could catch "margin call" meaning losing all your money at once.

Second devil called greed. When your position grow and you see lets say +100$ you won't close it and wait till it become bigger. You think you forecasted the trend and then it reverses and you still holding position, seeing how your profit goes back to zero. In that case you have to close your position with no exceptions.

I just want to say that emotions prevail your mind and you simply would take wrong decisions.
Some people think that this feelings helps them to trade. Personally I'm not that kind of person.

Smaller trades won't make you so nervous. My trading system gives me only 60% of profitable trades. Some experienced traders affirm that they can predict 70-80% of trades. I think this is possible. Especially with some kind of inside information. Even being on stock exchange you could see panic or euphoria in traders eyes. Unfortunately we all can't be there and feel that atmosphere.

What strategy to choose?

There are so many strategies on the net. There are websites and forums dedicated to them. But don't think you could pick any strategy and start making money. Most of them don't even state what type of chart to use (day, hour, minutes) and for which currency pair that strategy for.

I'm as a programmer, looking for money making opportunities, tested many free strategies. I have written many expert advisors for Meta Trader platform and checked them on history. Even on history the results were negative. Some strategies may work for 1-2 months but then lose all deposit anyway.

Don't forget that, if everybody would use profitable strategy then it stops working. That as simple as that. No one would make profitable strategy open for everyone. Maybe it worked for some time and then stopped and developer decided to share it with traders community. He can even prove that its working based on history of profitable trades. But in future it would lose.

But I believe there are many profitable strategies. Moreover I think simpler is the better.

I'm using several simple strategies at once. It gives me good results. When one strategy goes negative and another goes positive they compensate themselves. Thats how I trade. I can have several open positions at once with different trade amounts. My expert advisor monitors positions 24 hours a day. It could open and close positions all the time while the market is open.

How to trade on forex?

First of all you need an account from forex broker. I won't tell the names you could find them yourself with ease. Keep in mind that many brokers offer bonuses to new clients. Don't deny in their assistance.

Start with demo account. You need to learn many things before you can start trading real money on forex. About 90% of newbies losses their first deposit.

After successful practice I'd recommend to start with mini account (or maybe even micro account).

Standart account means that approx. 1 point = 10$
Mini account: 1 point = 1$
Micro account: 1 point = 0.1$

Next thing to do you have to decide which pair to trade. And last thing is to buy or to sell?

On my blog I would make examples for Gbp/Usd because I trade it.

I would always suggest to trade by trend. That is to buy on bull market and to sell on bear market. Main thing is to define what market is currently prevail. Look at the daily chart. What do you see? Chart is going down? That means you have to sell. When? Well there are many entrance points. We will discuss about it later. Generally I would sell when the market seems overbought intraday. Especially when market hits resistance level and go down.

The more conditions you keep the less entrance points you get but your trade usually will have more chances to become profitable.

What currency pair to trade?

Lets talk about what is the best pair to trade on forex. There are 7 main currencies: usd, gpd, cad, chf, jpy, aud and nzd. Actually I think any pair could be profitable. All you need to do is follow news of the appropriate countries. You should keep in mind that every currency has its specifics.

Aud and Nzd are very simillar because they are close to each other, have similar laws and they provide world with valuable such as gold.

Cad stands for oil and is depend on the US as well.

Jpy has very advanced industry and its also depend on US market because it has the biggest consumption in the world (approx. 20%).

Chf has very reliable banking area. But its currency is under big pressure lately. National bank of Switzerland goes on a very big interventions. You have to follow economic factors to foresee what will be the next step of their bank. Otherwise you can get into trouble.

Last two currencies Eur and Gbp are the most liquid on forex. They show how real people could move the exchange rate in euphoria during bull market or in panic during bear market.

Eur/Usd is to most liquid pair in forex. It is very good for speculators. You could feel safe trading this currency. All the world is following on this pair. If there will be any movement right away you could read the news explaining why it happened. It is very important to understand every move. After several months or years you could react accordingly on any economic news involving euro-zone or usa.

But my favorite currency pair is Gbp/Usd. I believe its the most technical pair. After a few months of testing my strategies I found out that it gives me more profit in front of Euro. While I was reading about english pound I learned that englishmen are the biggest speculators in the world together with americans. While euro rate is very important to the whole europe economy and industry, pound isn't affected so hard. Euro should keep the rate that will be reliable for all EU countries. So politics is much involved in the Eur/Usd rate. On the contrary UK could live on its own account. It is simillar how weak or strong USD doesn't affect US citizen lifes. The inflation inside USA is about 2% only and their income doesn't change because of currency rates.

Sorry for my poor english. I will try hard to make it more readable :)

Welcome Everyone!

Hello!

Today I decided to start my blog here. I'm interested in forex for some time now and I have much thoughts to share with you. I would be happy to go into discussion of my strategy. I'll try to focus on technical analysis, programming, automated forex trading and some key economic news. My ideas are based on people's psychology, current time, technical indicators and opening/closing of major stock exchanges.

Also I've written an successful expert advisor that i'm testing right now. It showed very good results on past 10 years history. After I started this program in real time on demo account its showing positive numbers as well. Its not easy money as you may thought but I believe everyone can find his own profitable strategy as long as it stays private. Anyway I will tell you some of mine clues so you can try to build your own trading system.

Check my site often to keep me posting here. I would be glad to see regular readers and you guys could keep me motivated to update my blog constantly.