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What is Stochastic Oscillator?

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 02:57:51 PDT

What is Stochastic Oscillator?

Stochastic Oscillator Indocator
Stochastic Oscillator is one of some indicators to identify when a trend is going to end. Stochastic Scillator is an oscillator that will calculate the boredom of selling and buying condition in the forex trading market. There are 2 curves similar to MACD indicator in which one is faster than the other.

(we will upload the picture soon)

How to use Stochastic Oscillator?
Stochastic Oscillator will recognize whether the forex trading market is bored or not. The scale of stochastic is 0 to 100. If the stochastic curve is above 70 (in the chart above is shown with red horizontal lines), it indicates the boredom in buying condition (overbought). If the stochastic is under 30 (in the chart above is shown with blue horizontal lines), it indicates the boredom in selling condition (oversold).

(we will upload the picture soon)

In the chart above, you will see that the stochastic indicator shows a quite long overbought condition. From this information, can you guess where is the next price movement going?

(we will upload the picture soon)

If your guess is the price is going down, then your answer is correct. Because the market has been experiencing overbought condition for quite long, the price will be down. It is the main function of stochastic which is to determine when the overbought and oversold condition will happen.

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What is Parabolic SAR?

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 02:58:27 PDT

What is Parabolic SAR?

What is Parabolic SAR?
If you read our previous posts, you have learnt quite a lot about technical analysis tools which can be used to recognize the beginning of trend. Although, recognizing the beginning of trend is important, there is another important thing that cannot be forgotten, which is to recognize when a trend is going to end.

A forex indicator that can help forex traders to recognize when a trend is going to end is Parabolic SAR (stop and reversal). Parabolic SAR Trading System is the form of dots which are placed along the curve to identify the possibility of trend reversal.

(we will upload the picture soon)

From the chart above, you can see Parabolic SAR dots which are placed below the price movement that is going to upward. On the other hand, the downtrend, Parabolic SAR dots are place above the price movement.

How to use Parabolic SAR?
To use Parabolic SAR is very easy. The dots below the chart is showing buying signals. On the other hand, selling signals appear when the dots are above the chart.

Parabolic SAR is very appropriate when the chart is in the trend, but it is not suggested to be used when the forex market is swinging.

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What is MACD?

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:23:17 PDT

What is MACD?

What is Moving Average Convergence Divergence (MACD)?.
Moving Average Convergence/Divergence (MACD) is used to recognize moving average that can identify bullish and bearish trends.

(we will upload the picture soon)

In the Moving Average Convergence Divergence (MACD) chart, there are 3 parameters that you have to set. Each of them representing particular function. The first parameter represents the faster moving average, the second parameter represents a slower moving average, and the third parameter represents the number that will be used to calculate the difference between the fastest and the slower moving average.

Example, MACD : 12, 26, 9 (default numbers) means:

12 represents 12 bars of the fastest moving average.
26 represents 26 bars of the fastest moving average.
9 represents 9 bars of differences between the first 2 moving average. The difference is shown with a blue vertical line chart (histogram).

The first parameter must be smaller in value than the second one. Two curves appear in MACD indicator do not represent the first and second parameters, but they are the difference between 2moving average.

In the example above, the faster curve represents the difference between 12 and 26 moving average, while the slower curve is the average plot of the previous moving average. The third parameter is the actual moving average. So, MACD : 12, 26, 9 in simple is a moving average in 9 bars period.

In other words, MACD indicator 12, 26, 9 means 9 bars moving average from the fastest curve plotted on the slower curve. Histogram chart shows the difference between a fast curve with a slower one. If you carefully notice, two curves which are getting apart from each other will make the histogram chart getting bigger, and it is called MACD ’Moving Average Convergence Divergence’.

MACD Crossover
Because of the existence of 2 different speed of moving average, the faster moving average will respond move quickly to the price movement than the slower one. When a trend is started to be formed, the faster moving average will react more quickly, and finally will touch/across the slower moving verage and it will be getting away (diverge).

(we will upload the picture soon)

From the carht above, it can be seen that the foster curve will across and will be below the slower one. It indicates the beginning of a downtrend. Please notice when 2 curves touch each other from the very first time, the histogram will disappear. It happens because the difference between 2 curves when they are touching each other is 0 (zero). When a downtrend is started to be formed, the faster curve will diverge from the slower one and a histogram chart will get bigger.

A disadvantage of MACD is this indicator is not included into lagging indicator. MACD indicator is a moving average which is formed from the historical price data.

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What is Bollinger Bands?

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:02:28 PDT

What is Bollinger Bands?

Bollinger Bands
What is Bollinger Bands?. Bollinger Bands (BB) are the common chart indicators which is used to recognize the strength/volume of volatile market. Commonly, Bollinger Bands will tell us whether a forex trading market is quite or crowded. When the market is quite, BB is narrowing. Meanwhile, when the market is crowded, BB will be widening. Meanwhile, when the forex trading market is crowded, BB will be widening.

(we will upload the picture soon)

If you want to know the history, formula, and all kinds about Bollinger Bands, you can read them in bollingerbands.com

The Classic Bollinger Bounce

(we will upload the picture soon)

One of the Bollinger Bands Technical Analysis is classic bollinger bounce. The first thing that you need to know about Bollinger Bands is that the price movement has a tendency to go back to the middle (middle of BB). From this understanding, you can take the right position to get profit. From the picture above, you can predict where the next price movement will go.

(we will upload the picture soon)

If your answer is ‘down’, then it is right. The price movement will and is going down towards the middle line of BB.

What will you just learned is called Classic Bollinger Bounce. The reason of ‘bounce’ is because Bollinger bands is like a mini support and resistance. The bigger time frame that you use, the bigger range of the BB. Bollinger Bands is often used by forex traders who take advantage of swing condition (85% of the whole time) to get profit.

Bollinger Squeeze
Another Bollinger Bands Technical Analysis is Bollinger Squeeze. The meaning of Squeeze is shrinking. If the Bollinger Bands is started to shrink, it is likely to be a breakout. In a ‘squeeze’ condition, if a candlestick is going upward and passing the upper Bollinger Bands line, a breakout will happen and going upwards.

If a candlestick started to go to downward and pass the below BB line, a breakout will happen and go downward.

In the following pictures, the BB is shrinking and the candlestick is going upwards.

(we will upload the picture soon)

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Common Chart Indicators To Learn Forex Trade

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:01:47 PDT

Common Chart Indicators
To Learn Forex Trade

When you learn forex trade, and every time you learn a new tool in technical analysis, you add another indicators. The indicators are your brain. Even tough, not every tool will be used, you must understand every indicators available. Now we will write about Common Chart Indicators For Learning Forex Trading System. They are Common Chart Indicators :

• Bollinger Bands (kasih link ke posting berikutnya)
• Moving Average Convergence Divergence (kasih link ke posting berikutnya)
• Parabolic SAR (kasih link ke posting berikutnya)
• Stockhastics (kasih link ke posting berikutnya)
• Relative Strength Index (RSI) (kasih link ke posting berikutnya)

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Which are is better between SMA and EMA?

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:01:38 PDT

Which are is better between
SMA and EMA?

Which are is better between Simple Moving Average and Exponential Moving Average?
Let’s take a look at the strength and the weakness of each of them to analysis the Simple Moving Average vs Exponential Moving Average.

Simple Moving Average Method
Strength : Display a smooth chart that can eliminate false signal.
Weakness : Slow movement that can cause a not up-to-date trend.

Exponential Moving Average Method
Strength : Moves fast and ideal to display the present price movement.
Weakness : Can give false signals.

So that, Simple Moving Average vs Exponential Moving Average, which one is better? It’s all up to you.

Some forex traders use a combination of several moving average to get profit from both sides. They use a longer period from SMA to recognize the trend’s direction and a shorter from EMA to take the right position.

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Understanding Moving Average Method

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:01:33 PDT

Understanding Moving Average Method

Moving Average Method is a forex indicator to smoothing the price movement in order to give the picture of average price movement.

(we will upload the picture soon)

Similar to other indicators, moving average method is used to predict the coming price movement. By seeing the ankle formed, you will likely to know where the price movement goes.

There are some types of moving average, each with different level of smoothness. The smoother output created by moving averages, the slower that moving average response to the price movement, and vice versa.

Simple Moving Average (SMA)

What is the simple moving average?. Simple Moving Average (SMA) is the simplest moving average method. SMA calculates the moving average by adding the data of prices during an “X” period of time, and then divided by “X” number.

Examples:
• If you want to make 5 SMA periods in 1 hour forex charts, you need to add 5 data of closing price (every hour), and divided by 5.
• If you want to make 5 SMA periods in 10 minutes forex charts, you need to add 5 data of closing prices (every 10 minutes for the next 50 minutes) and divided by 5.

The Forex Trading Charts software provided by broker will commonly give a help to various SMA automatically. All you need to do is determining the value of X and the calculation detail will be done by software.

Similar to other indicator lagging, moving average goes slower (because of the delay), so what is meant by a forecast is not knowing the coming price movement 100%, rather it is a tendency of increasing or decreasing price.

(we will upload the picture soon)

Here’s the explanation of the use of moving average method. In the chart above, you will see 3 different SMA. You will also see that the bigger SMA periods, the slower they will be compared to the actual price. 62 SMA is for left behind compared to 30 and 5 SMA. It happens because the use of bigger periods will likely to smoothen the movement. In 5 SMA, the movement is similar to the actual price movement.

Exponential Moving Average (EMA)

Even tough simple moving average method (SMA) is a very good technical analysis tool, SMA has a disadvantage. It is fragile to “spikes”, or sudden price increasement.

We will see the following example. We will use 5 SMA periods in the daily chard of EUR/USD. The closing prices during 5 days in a row are as follows:
Day 1 : 1.2345
Day 2 : 1.2350
Day 3 : 1.2360
Day 4 : 1.2365
Day 5 : 1.2370

A simple moving average method will calculate them as follows:
(1.2345 + 1.2350 + 1.2360 + 1.2365 + 1.2370)/5=1.2358

Isn’t it too simple? However, what will happen if on the second day the price moves wildly to 1.2300 so that the final result of SMA will also decrease to 1.2348.

The sudden price movement on the second day will influence the SMA calculation that will lead to the value of SMA forecast to be no longer valid.

SMA is too simple and not capable to overcome/handle a forex market with unpredicted price movement (lots of spikes). That’s why SMA is not too valid to predict the price movement. To anticipate the disadvantage of SMA, another alternative is created. It is exponential moving average method or EMA. EMA gives different emphasis on each price. As in the example above EMA will give bigger portions to the third to the fifth days, which means that the spike in the second day is not too crucial to EMA.

(we will upload the picture soon)

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Understanding Fibonacci Sequence

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:00:05 PDT

Understanding Fibonacci Sequence

Fibonacci Price Extension Levels
Fibonacci Price Extension needs 3 points to form it. In an upward trend, it needs the lowest point, the highest point, and final point.

1 hour time frame with USD/CHF

To get a Fibonacci extention level, you need to determine 3 points. In an upward trend, the lowest point 1.2447, the highest point 1.2593, and the final point 1.2541.

The levels created are 1.2597 (0.382), 1.2631 (0.618), 1.2687 (1.000), 1.2743 (1.382), 1.2760 (1.500), and 1.2777 (1.618)

(we will upload the picture soon)

You can see the next market movements:

The market goes upward to the level 0.500
The market is back to the final point.
Going back to level 0.500
Going downward a little bit
Going upward again to the level 0.618
Going back to level 0.382, where that level changes into support
Going upward to level 1.382
A little consolidation
Finally going up to level 1.500

From this example, you will see that the movement usually find the resistance. It is not always, but it happens quite often.
From the above case, the resistance is on the level 0.500

There are some problems which are likely to occur:

You will never know if a price can pass level 0.500
If you place position above level 0.500 to overcome the first problem, there will be second problem. It is when the price movement pass the level 0.500 and 0.618, but pull back to the level 0.381.

You will also see the example of Fibonacci Extension Level in a downward trend below.

1 hour time frame with EUR/USD

You draw 2 lines, started from the highest price 1.21377 to the lowest price 1.2021 and to the final price 1.2085.

Fibonacci Extension Level derived are 1.2041 (0.382), 1.027 (0.500), 1.2018 (0.618), 1.1969 (1.000), 1.1925 (1.382), 1.1911 (1.500) and 1.1897 (1.618).

(we will upload the picture soon)

What are the possibilities on the price movement?

The market will fall to level 0.382 that will be support
The market will then move within the final price and level 0.382
The price will pass level 0.382 to 0.500
Finally it passes level 1.000

(we will upload the picture soon)

As a forex trader, you are required to combine some technical analysis methods where Fibonacci is one of them. If you use Fibonacci only, you will experience many trapping false forex signals.

The key to get an effective trading system is combining some (but not too many) forex indicators.

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Fibonacci Retracement Analysis

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:00:19 PDT

Fibonacci Retracement Analysis

Fibonacci Retracement Analysis is a very popular forex trading technical analysis & tool. It used by so many forex traders generaly to calculate the targets for the possibility of the entry and exit points. It also can be used in determining the possibility of support & resistance levels. The Fibonacci retracement analysis is based on from the key of numbers which is identified by the famous mathematician, his name is Leonardo Fibonacci, found in the 13th century.

Fibonacci Retracement Levels

In an upward trend, the basic idea is to “ride” on that trend. The problem is the upward trend is not always a straight upward line, but usually it is in the form of upward zigzag lines. Therefore, a forex trader needs to take the right position )lowest point) in order to take the maximum profit.

In order to get a retracement level, you have to create an upward line started from the lowest point/price to the highest point/price on the chart. When a line is formed, the software will automatically draw some lines which represend the ration of Fibonacci retracement level.

You can learn Fibonacci Retracement Analysis you can watch the following video. Cut and paste the link below:
http://www.babypips.com/forex-school/video/fibonacci-retracement.html

Or you can use bookmark menu – F4 capital – fibol

The following is the picture of hourly chard of USD/JPY currency. We will draw a Fibonacci line from the price 110.78 (date 12/07/05) to 112.27 (date 03/07/05). Then we will get a retracement level on the price 111.92 (0.236), 111.70 (0.382), 111.52 (0.500), and 111.35 (0.618).

After we know the value of retracement level, we will place a limit order buy on those value:

(we will upload the picture soon)

And then you notice the next price movement turns into the level 0.236 and continues to level 0.382, but it does not pass the level of 0.500. Level 0.382 is the best buy position.

(we will upload the picture soon)

You will see a Fibonacci retracement in a downward trend.

The forex charts is set on 1 hour time frame with EUR/USD.
The fibo line is dragged downward from 1.3278 (date 28/02/05) to 1.3169 (date 28/02/05).

Then, we will get a retracement level on 1.3236 (0.618), 1.3224 (0.500), 1.3211 (0.382), and 1.3195 (0.236).

(we will upload the picture soon)

Let’s see what happensnext. The forex market trading is trying to pull back to the level 0.382 (after passing level 0.618 and 0.500) on the price 1.3227.

After reaching that level, the price goes downward again.

(we will upload the picture soon)

Another example is a chart with 1 hour time frame, with GBP/USD. A fibo line is dragged downward from the price 1.7438 (date 26/07/05) to the price 1.7336 (date 27/07/05). We will get a retracement level on 1.7399 (0.618), 1.7387 (0.500), 1.7375 (0.382), and 1.7360 (0.236).

A pull back happens and passing 0.500, then coming back again. This happens for several times. You will think that this position is the best to place a limit order sell on 1.7387 (0.500).

(we will upload the picture soon)

If you take that position, you will lose a transaction. Look what happens next, the price keeps moving upward.

(we will upload the picture soon)

Seeing from the above example, the market is usually experiencing a pullback, and searching for support position (in an upward trend) or a resistance position (in a downward trend).

There are some problems that you need to consider:

You cannot predict on what level the price will pullback. Is it on level 0.236 or 0.382, or even 0.618. You cannot make an exact pattern.
A forex market trading can follow a fibo rule (as in the first 2 examples), but it may also not follow the fibo rule. A forex market trading is possible to reach certain level and then pullback to the earlier trend, but a forex market trading can also act the opposite where it is experiencing a pullback and it continues. Therefore, it is very wise to use the stop loss, and determine the risk in every transaction.
Determining the fibo line since the beginning can be very subjective. If the time frame is different, the result will also be different.

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Fibonacci Sequence The Golden Ratio

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:00:32 PDT

Fibonacci Sequence The Golden Ratio

The sequence of some numbers is called as the Fibonacci Numbers or Fibonacci Sequence. Leonardo Fibonacci is an Italian mathematics' who lived in the 13th century. He analyzed a data lining with particular ratio which’s believed as a lining that will always be existing in the universe, including the currency movement.

The data lining that Fibonacci referred to was 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, …

The Fibonacci Sequence data lining is started from 1 and 2. The third lining is from the addition of the first and second lining, which will be 3.

The 4th lining will also be gotten by adding the second and third lining, which will be 5.

The first lining = 1
The second lining = 2
The third lining = the first lining + second lining = 1+2=3
The fourth lining = the second lining + third lining = 2+3=5
The fifth lining = the third lining + fourth lining = 3+5=8
The sixth lining = the fourth lining + fifth lining = 5+8=13
The seventh lining = the fifth lining + sixth lining = 8+13=21
Etc…

After certain lining, there will be the same number of division, for example 34/55 = 0.618, 34/89=0.382, etc…

0.618 is derived on n/n+1, where n is a lining number
0,0.382 is derived on n/n+2, where n is a lining number

Price Retracement Levels (Golden mean Ratio)
0.236, 0.382, 0.500, 0.618, 0.764

Price Extension Levels (Golden mean ratio)
0,0.382, 0.618, 1.000, 1.382, 1.618

As a forex trader, you do not need to be confused with all of mathematic calculation above. You only need to understand the basic of Fibonacci sequence the golden ratio.

The forex trading charts provided by Oanda (FX-Trade) has provided an additional tool to draw the required Fibonacci chart.

First ratio (price retracement levels) is used to identify support and resistance which are formed from retrace/dip/pullback.
Second ratio (price extention levels) is used to determine the target of profit taking.

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Forex Channel Indicator

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:00:44 PDT

Forex Channel Indicator

You can make forex channel indicator by using the same way in making trend lines. Upward channel is made of 2 lines with the same upward corners by connecting some supports and some resistances. It goes the same way for downward channel and sideways cannel.

With the help of forex channel indicator, it is likely for forex traders to do a more efficient and safe transaction. It is said to be efficient if the forex traders can place the channel on the right and safe position, because by doing so, traders are able to identify the price movement limitation.

(We will upload the picture soon)

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Forex Trendline Indicator

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:00:56 PDT

Forex Trendline Indicator

Trendline indicator are made to identify the tendency of price movement, whether it will be bullish, bearish or sideway/swing. Trendline indicator are the basic technical analysis that’s very helpful if it is properly placed.

In an upward trend condition, trendline indicator are made by connecting same supports/lowest prices. Meanwhile, in a downward trend, trend lines are made by connecting some resistances/highest prices.

(we will upload the picture soon)

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Forex Support and Resistance Indicator

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:02:49 PDT

Forex Support and Resistance Indicator

Support and Resistance Indicator are the main additional tools that help traders in doing transaction.

Support and resistance indicator usually based on the volatility. Look at the picture, there are zigzag patterns go upward or called bullish. When the price movement goes upward, and then downward, the highest price achieved is called resistance.

The lowest price before the price goes upward is called support.

In the pair of support and resistance, the value of resistance is always higher than support.

There are two things that are always remembered about support and resistance:

When the price movement goes upward passing the resistance, the resistance will turn into support. And when the price movement goes downward passing the support, the support will turn into resistance.
The more often the price moves upward and testing the resistance, but it is never able to pass it, the more likely a price will swing within support and resistance indicator.

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Hammer and Hanging Man Patterns

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:03:04 PDT

Hammer and Hanging Man Patterns

Hammer and Hanging Man Patterns are quite identical, but they have opposite function.

“Hammer” is a reversal pattern toward bullish, or it is called as a bullish reversal pattern than happens in a decreasing trend. It is called “Hammer” because of the form that look like a hammer from below. After selling condition continues (decreasing trend), a hammer pattern shows the presence of “awakening”. It can be seen from a huge selling pressure, but eventually the sellers push back and pull up the price. Even though “Hammer” can indicate a reversal pattern, the real truth must be supported with other indicators, such as white colored marubozu.

The main criteria of Hammer:

A long bottom tail, much longer than the body
Only has a short upper tail, even there is none at all
The body is up-side
The color of body is not giving any impact

“Hanging Man” is a reversal pattern toward bearish, or is called as a bearish reversal pattern than happens in an increasing trend. It is called as “Hanging Man” because of the form and the position that look like a hanging man. After buying condition continues, a hanging man pattern indicates a weakening. It can be seen from the reversed pressure of sellers that cause the price decreased, but eventually the buyers can pull up the price. That pattern still needs to be further proved by noticing other indicators, especially if the morabozu pattern is black.

The main criteria of Hanging Man:

A long bottom tail, much longer than the body
Only has a short upper tail, even there is none at all
The body is up-side
The color of body is not too influencing, but the black color can refer to a reversal pattern which is very likely to happen.

Inverted Hammer and Shotting Star

This pair is similar in appearance but having a different function. Both of them have small bodies, long upper tails, and short below tail, even there is none.

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Understanding Forex Pattern Recognition

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:03:18 PDT

Understanding
Forex Pattern Recognition

Now we will learn to understanding forex pattern recognition.

Basic Pettern

Marubozu

Marubozu means having only body and having no tail or shadow. The opening price is equal to the closing at the highest and lowest price.

(Picture will be uploaded soon)

Forex Pattern Recognition of Marubozu in white color is a candlestick chart without a tail showing Bullish or increasing trend. This condition is created if the opening price is equal to the lowest price and the closing price is equal to the highest price. This condition shows that buyers controlling price movement since the early transaction, or opening price to closing price. Generally, it shows the early indication of bullish or increasing trend, or reversal pattern trend.

Understanding Forex Pattern Recognition of Marubozu in black color is a candlestick chart without tail showing a bearish or decreasing trend. This condition is created if the opening price is equal to the highest price, and the closing price is equal to the lowest price. It shows that sellers controlling price movement since the beginning of transaction (opening price) to the final transaction (closing price). Commonly, it shows the indication of bearish/decreasing trend, or a reversal pattern.

Spinning Tops

Forex Pattern Recognition of Spinning Tops are candlestick charts with long tails in both sides, up and down. This condition the un-consistency between bullish and bearish condition.

(Picture will be uploaded soon)

The little body shows that the opening price is slightly different to the closing price, while the tail or shadow shows a high activity, either bullish or bearish condition. Even though the opening price and the closing price is only slightly different, there’s a big movement that can be seen from the length of the tail.

If the candlestick chart shows a spinning top pattern at the bullish trend, you need to be careful. This condition is likely to be a reversal trend, and vice versa.

Doji

Forex Pattern Recognition of Doji Patterns is a pattern where the opening price is the same to the closing Doji patterns shows the balance “fighting” between sellers and buyers. Doji Pattern becomes important if it happens within or after a candlestick chart with a long body. DOji Pattern is not too crucial if it happens between spinning tops.

There are 4 types of Doji Pattern:

Long-legged Doji
Dragonfly Doji
Gravestone Doji
Fourprice Doji

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Doji Patterns and Trend
Doji Patterns is crucial if that pattern exist after a trend happened. Exists after a trend happened. In a bullish trend, and then a doji pattern happens, it can be concluded that the buying pressure is weakening. In a bearing trend, and then a doji patterns happens, it can be concluded that the selling pressure is weakening.

Doji Patterns indicate the selling and buying pressure are getting balance, and it will likely be the end of certain trend.

Reversal Patterns
A pattern can be categorized as a reversal pattern if a certain trend has been firstly happened. Bullish reversal needs decreasing trend, while bearish reversal needs increasing trend. Trend movement can be analyzed with a help of technical analysis, such as moving average, and so on.

Long Shadow/Tail reversals
There are 2 pairs of reversal forex patterns which are made of a bar of candlestick charts. The forex patterns are in the form of 1 little body, 1 long tail, and another short tail, in which the longer tail is at least twice as long as the short tail. This forex patterns in a candlestick chart will determine the reversal direction.

The first pair is called as “Hammer” and “Hanging Man” which can be noticed from a little body with long tail at the bottom.

The second pair is called as “Shooting Star” and Inverted Hammer” which can be noticed from a little body with long tail at the upper part.

Hammer and Inverted Hammer are a reversal forex patterns from decreasing trend to the bullish situation.
Hanging Man and Shooting Star are reversal forex patterns from increasing trend to the bearish situation.

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Understanding Japanese Candlestick Patterns

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:03:31 PDT

Understanding Japanese Candlestick Patterns

What is forex trading Japanese Candlestick Patterns?
More than 200 years ago, the rice businessmen in Japan used a technical analysis in the form of candlestick chart to analyze the demand and the offer price of rice. Candlestick chart is then developed and widely used in all around the world. This candlestick chart now is called Japanese Candlestick Patterns.

Forex Trading Candlestick Charts are price movement charts consist of open high, low and close price.

If the closing price is higher than the opening, the candlestick is displayed transparent or without color.
If the closing price is lower than the opening, the candlestick is displayed in black color.
The transparent or black colored part is called body or real body.
The vertical line coming out from the body is called shadow or tail which is representing the highest and the lowest price movements.
The highest price is theup-most of tail, and the lowest price is the below of tail.

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Japanese Candlestick Patterns : Long Versus Short Bodies

The longer body is indicating a greater price movement. An active market or a market with a huge volume can be seen from the length of the body in a bar, and vice versa.

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The longer body with white color in a candlestick chart shows a greater buying pressure (the price is increasing). The longer body is showing the bigger difference between the opening and closing prices, in which the opening is much lower than the closing price. It is called as Bullish.

The longer body with black color in a candlestick chart shows a greater selling pressure. The longer body is showing the bigger difference between the opening and closing prices, in which the opening is much higher than the closing price. It is called as Bearish.

Japanese Candlestick Patterns: Long Versus Short Tails

The upper and lower shadows in candlestick charts contains important information about transaction characteristic.

A candlestick with shorter tail is showing an offering price which is around the opening and closing price.

A candlestick with longer tail is showing that the offering price is much above or below the opening and closing price.

(Picture will be upload soon)

Picture 1
Candlestick with the upper tail longer than the below tail indicates an increasing buying pressure. It can be seen from the offering price which is much higher the opening and closing prices, so that the buyers are more dominant. But eventually, the seller can pull the price to the lower position.

Picture 2
Candlestick with the below tail longer than the upper tail indicates an increasing selling pressure. It can be seen from the low offering price, so that the sellers are more dominant. But eventually, the buyer can pull up the price to a higher position.

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Learn Forex Trading Charts

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:03:46 PDT

Learn Forex Trading Charts

Types of Forex Trading Charts

In general, there are 3 types of the most popular and used Forex Trading Charts.
They are…

Line Chart

It is a simple forex trading charts based the closing price movement. We can see the forex trading online price movement in two dimensions, Y which is illustrating the currency value, and X which represents the time period.

Bar Chart

Forex Trading Bar Chart show a closing price movement as well as opening price, and also the highest and lowest price, and also the highest and lowest price.

The bottom part of Bar Chart shows the lowest price shows the lowest price, while the up-most part shows the highest price.

The Vertical line shows the price range. While the horizontal line consist of 2 types. The left one is an opening price, the right one is a closing price.

Below is the example:

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Forex Trading Bar chart is also known as OHLC chart because it shows “The Open”, “The High”, “The Low” and “The Close” price.

Example :
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Candlesticks Chart

The Forex Trading Candlestick chart show similar information to the Bar Chart, but the display is more interesting. In candlestick charts, price movements are indicated by a wider bar or stick. If the bar is colored, it shows the closing price is lower than the opening price. In the other word, the price is lowering.

The picture below will explain the difference.

The white stick shows on the opening price which is lower than the closing price. The price is increasing.
The black stick show an opening price which is higher than the closing price.

Illustration

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Candlestick charts in Forex Trading Online can also be indicated in some other colors, such as green and red.

Example:

(picture will be uploaded soon)

The purpose of using candlestick chart is to help and to make the examination of price movement, easier, compared to the Bar Chart. Therefore, forex traders can be easily able to make difference the upper and lower price movement and to determine the highest and the lowest prices.

The Advantage of using Candlestick Chart are:

Candlestick Chart is easy to use.
Candlestick Chart has unique named patterns.
Candlestick Chart is very good to identify when the trend’s changes.

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Technical analysis in Forex Trading

noreply@blogger.com (SweetJourney) — Thu, 23 Jul 2009 03:04:12 PDT

Technical Analysis in Forex Trading

Technical Point of Forex Trading Online

Now we will write how to predict the price movement in Forex Trading Online based on the historical data. The economist believe that the price movement will be reflected on the price it self.

Technical Analysis

What is technical analysis in Forex Trading online?.
Technical Analysis is an analysis on the price movement or an examination to the price movement from second to second, day to day within a certain period of time that is displayed in a chart. The main idea is to use the previous price movement data to determine where the next price movement is going. The most important thing of technical analysis in forex trading online is how the analysis is able to recognize certain trend as soon as possible.

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Fundamental Analysis: International Trader