Learn Forex Courses
Forex is the largest financial market in the world where $7.2 trillion is traded every day. Traders invest in the market popularly known as Forex for speculation purposes. Traders are attracted to forex because of the following reasons:
Leverage - leverage means that traders can make more money in forex by investing little of their own capital. This is because traders can borrow money to trade with from their forex broker using leverage.
Liquidity - The fact that forex is the largest financial market in the world means that there are very many traders trading the market at any time of the day or night during the market week. The fact that there are many traders investing in this market make the market a very liquid market meaning trader can open and close trade in a matter of seconds.
Low Transaction Cost - Because in forex there are many traders trading at any one given time means that trade costs are lower because of this big volume of trades taking place in the trading market. The only transaction cost paid by the trader is the spreads; no other cost is paid by the traders. The spread is also only when a trader opens a trade: therefore if a trader does not trade then they don't pay any cost.
This tutorial presents the various forex education courses that technical traders or traders who want to learn analysis can learn from. After traders have learnt the basics of forex trading it is then time to learn more about technical analysis topics that they can use to trade with.
The forex analysis lessons can guide beginners on how to study the various analysis concepts.
Basics of Technical Analysis
Candle Charts
For technical traders the basic analysis tool that they use is the chart. There are 3 types of charts: line charts, bar charts and candle charts. The type of chart most commonly used by traders is the candlestick chart. This is because the candle chart has a visually appealing format that clearly represents the movement of prices, by displaying different colors for different movements; that blue color when prices close higher than they opened or red color that represents when prices close lower than they open. In addition these candles show the distance between the open & close price and this forms the body of the candlestick. This body of the candlestick is looks similar to the wax part of a real candle. The highest point of the price will be plotted with what as known as a shadow, the shadow is a thin poking line that is drawn above the candlestick & it looks similar to the wick of a real candle. There is also another shadow drawn below the candlesticks & this one represents the lowest point of the price.
The information plotted by the candlesticks is known as OHCL - which represents Opening price, High, Low and Closing price.
Japanese candlesticks were developed in Japan by a traditional rice trader that used to trade futures, his name was Homma Munehisa, he later moved to trading the Tokyo exchange market that was in 18th Century and he made a fortune trading the Tokyo exchange market using these candlesticks: He is said to have made over 100 consecutive winning trades.
In addition to showing the graphical representations of price traders also use candlestick patterns to gauge & determine the strength of the price movement. Traders also study these candlestick patterns so as to learn how to interpret and trade signals from the various candlestick patterns. Traders wanting to about the various candlesticks patterns can learn from our forex section under the analysis topics, the various candlestick patterns used to trade Forex are:
1.Long & short Candles
2.Spinning Tops and Doji Candles
3.Hammer Candle-stick Setup and Hanging Man Candlestick Pattern Candlesticks
4.Inverted Hammer Candle-stick Setup and Shooting Star Candle-stick Setup Candles
5.Piercing Line Candle Setup and Dark Cloud Cover Candle-stick Setup Candles
6.Morning Star Candlesticks, Evening Star Candles and Engulfing Candlesticks Patterns
Support & Resistance Areas
Some traders also refer to these levels as support and resistance lines. The concepts of support & resistance levels refers to price zones where it's difficult for the price break through & move beyond these levels.
At these levels traders are likely to perceive the price of the currency pair as being cheap or as being expensive.
Support
Support prevents the price of an asset from getting pushed downward. Support areas are therefore regarded as the floor because these price levels prevent the market from moving prices downwards past a certain point.
Resistance
Resistance prevents the price of an asset from getting pushed upward. Resistance levels are hence regarded as a ceiling because these price levels prevent the market from moving prices up-ward.
Therefore, these levels might be used by trader to determine where to open trades at the points where there is a high risk: reward ratio. For example a trader may open a buy trade at a support level and place a stop loss a few pips below that level. The trader buys at this point because they perceive the price to be cheap. A trader may open a sell trade at a resistance level and place a stop loss a few pips above the resistance level. The trader sells at this point because they perceive that at that point the price is very expensive and therefore there will be less people willing to buy that currency because the price is very expensive and therefore the price is likely to start moving down soon rather than continue to move upwards.
FX Trend-Lines
Trend Lines are used to determine the general direction of the market.
Sometimes support & resistances are formed diagonally in a similar way like a staircase. This forms a trend, a trend is a sustained movement in one direction either upwards or downward.
A trend-line depicts these points of support & resistance for price.
Trendline is an aspect of technical analysis that uses line studies to try & predict where price will move next.
A trend-line is a straight diagonal line that connects two or more price points and then extends into the future to act as line of support or resistance.
Trend Lines are based upon the idea that markets move in trends. Trendlines are used to show 3 things.
- The general direction of price movement up or down.
- The strength of prevailing price movement and
- Where future support and resistance of the current price movement are likely to be located at.
If a trend line forms in a certain direction then price usually move in that direction for a period of time until a time when the trend line breaks-out.
Upwards trend line - If price of a currency is moving up then a line is formed that is also moving up. This line is called an upward trend line.
Down-wards trend line - If price of a currency is moving down then a line is formed that also moves down. This line is called a downward trend line.
MAs Indicator
Moving averages are also used in forex to determine the general direction of the market. Moving Averages is a trend following indicators that is used to show the direction of the market.
Most common method of determine direction of the trend is by using two moving averages to form the MA cross over system. The MA cross over system is covered in our forex strategies section. The MA cross over system is made up of two moving averages one with a lower period & the other with a higher period, for example a trader might use the 5 period Moving Average and the 7 period MA, when price of a currency is moving up the two moving averages will also be moving up & when the prices are moving down the two MAs will also be moving down. Traders also can identify when a trend changes its direction because the two moving averages will cross over each other once there is a change in direction of the currency movement. This cross-over signal is used by traders to determine when to open a new trade after the cross-over signal has been generated & the two MA start to move in the same direction. This cross-over signal is also used to determine when to close a trade & take profit after there a cross-over in opposite direction.
Bollinger Band Indicator
Bollinger Band is a very popular forex indicator, it is also a trend following indicator and it's used to show the general trend of the market. The Bollinger band is made up of 3 lines, these are:
·Middle band - this is a moving average of 20 price periods
·Upper Band -shows upper limit of price
·Lower Band - shows lower limit of price
Middle band will show the general direction of the market trend whether up or down.
The upper band is where a trader will open a sell trade if the market trend is down or close their buy trade & take profit at this level if the market is trending upwards.
The lower band is where a trader will open a buy trade if the market trend is up or close their sell trade & take profit at this level if the market is trending downwards.
FX Fib Retracement Levels
Fibonacci retracement levels are popularly used to determine the levels where price retracements are likely to go up to. Traders use these retracement levels to determine where to open trades after a price pullback.
Fibonacci retracement levels are covered in the learn forex lessons section of this web site under the analysis topics. Trader can learn how to use the Fibonacci retracement levels, which levels are commonly used to open trades and how to plot these retracement levels using Fibonacci retracement indicator.
All these analysis techniques are also covered on the strategies section of this learn forex tutorial website & trader can learn more about these concepts and get examples of these concepts are used in trading from this forex strategies section that has numerous screenshots illustrations of these technical tools and how they are drawn on forex charts along with explanation of they are used to generate forex signals.
