Forex trading how to create a trading strategy. The Forex Fundamental Analysis, Technical Analysis, Risk Management, Rules Successful Forex Traders Follow and Reasons Why Forex Traders Fail.
3. The Country's Economy
Unemployment Rate
Political Events
GDP
Interest Rate
Inflation
Consumer Price Index
Balance of Trade
Purchase Price Index
Natural Disasters
The Major Economic Indicators Include:
An Introduction to Fundamental Analysis
Fundamental Analysis refers to a method of analyzing the Forex Market based on the economic, social and political
factors. It mainly focuses on the overall state of the economy and includes other factors like the Interest Rate,
Employment, GDP, International Trade, etc and the impact it has on the value of a particular nation's currency. The key
aspect of Fundamental Analysis is to discover the real value of a currency and to compare it with the current price
and to discover a trading opportunity.
4. Economic Calendar
The economic calendar shows the upcoming events
across the world.
Provides useful information on upcoming macroeconomic
events by means of pre-scheduled news announcements and
government reports on economic indicators that influence the
financial markets.
It helps a trader find out which event could shift or shake the value
of a particular country's currency.
The events are ranked in order of importance in terms of low;medium
and high or in terms of bulls or colours.
By following indicators like GDP, Inflation and Employment Strength,
a trader can anticipate market volatility and gain potential trading
opportunities in good time.
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5. Interest Rates
The biggest factor that drives the foreign-exchange market
is the interest rate changes made by any of the global
central banks.
The changes are an indirect response to other economic
indicators and they possess the power to move the market
immediately and with full force.
As the interest rate changes often, it makes the biggest
impact on the market.
Inflation is one of the major aspect that influences the
Central Bank's interest rate decision.
Understanding how to predict and react to these volatile
moves can lead to quicker responses and higher profit
levels.
Higher interest rate increases the value of a country's currency
and attracts foreign investment, increasing the demand and
value of the home country's currency and in case of lower
interest rates it is vice versa.
INTEREST
RATES %
6. Monetary Policy
It refers to the macroeconomic policy laid down by the Central
Banks. It involves management of money supply and interest
rate and is used by the government of a country to achieve its
macroeconomic objectives like Inflation, Consumption, Growth
and Liquidity.
The goal of monetary policy is to stabilize GDP in order to
achieve and maintain low unemployment rate and maintain
predictable exchange rates with other currencies.
Central Banks use monetary policy to control:
- Inflation
- Money Supply
- Lending's to Commercial Banks
- Interest Rates
- The portion of Depositors Balance Commercial Banks
should have on hand as Cash.
Objectives
Price Stability
Economic Growth
Full Employment and Maximum Output
Exchange Stability
Interest Rates
7. Political Events
Political events affect the market more than the economic data.
When an investor puts his money in a stable country with a
strong economy and a stable political system. Any political
uncertainty might pull down the domestic currency. As a
result, the investor withdraws his assets and invests them in
stronger currencies. Hence, all these lead to the suffering of
the economy and a greater depreciation of the currency.
ELECTIONS
SOCIAL INSTABLITY
CROSS COUNTRY DISPUTES
INTERNATIONAL SUMMITS
AND MEETINGS
SPEECHES AND COMMENTS
OF POLITICAL OFFICIALS
The Value of
Currency
8. To Know More :
To know more on Forex News, Courses and Forum
Discussions visit:
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Fx Factory
10. Technical Analysis
Predicting the Future Price action based on the Historical performance
Evaluating assets based on the Analysis and Statistics of Past Market
Action, such as past prices and past volume
Analyzing the market using Technical Charts, Indicators and Tools.
11. Forex Charts
Used by traders to Analyze the Movement of Currency Prices and determine the moment to Buy and Sell
Three primary chart types which include Line chart, Bar chart and Candlestick chart
12. Line Chart
Bar Chart
Draws a line from one Closing Price to the Next Closing
Price. When strung together with a line, we can see the
general price movement of a currency pair over a period of
time.
It shows the Opening and Closing prices, as well as the
Highs and Lows. The Bottom of the vertical bar indicates
the Lowest traded price for that time period, while the
Top of the bar indicates the Highest price paid.
13. Candlestick Chart
Candlestick charts show the same price information as a bar
chart, but in a Graphic Format. In candlestick charting, the larger
block (or body) in the middle indicates the range between the
opening and closing prices. If the block in the middle is filled or
colored in, then the currency pair closed lower than it opened.
14. Types of Candlesticks
A bullish candle is formed when there is a
significant increase in price with a longer body.
The body of the candle can stretch as much as
it can, which says that there is a growth in the
market.
A bullish candle means there is currently more
buying pressure in the market. As long as
buyers maintain enough buying pressure the
candles will be bullish. If buying pressure eases
and selling pressure increases bullish candles
will become smaller, representing decreased
bull strength.
Bullish Candle:
15. Bearish Candle
A bearish candle is formed when there is a
decrease in the market. Longer the body the
more chances of a price decrease.
A Bearish Candle means there is currently
more selling pressure in the market. As long
as sellers maintain enough selling pressure
the candles will be bearish. If selling pressure
eases and buying pressure increases, bearish
candles will become smaller, representing
decreased bear strength.
16. Spinning Tops
It is a neutral pattern that occurs when the distance between the
high and low, and the distance between the open and close, are
relatively small.
Spinning tops are the patterns where small real bodies are
formed. These patterns have much longer shadows than the
bodies. It points both bullish and bearish trend.
17. Doji is a pattern, in which the market opens and closes at the same
time. There are different types of Doji patterns depending upon the
opening and closing of the market.
Long-Legged Doji: This long-legged Doji comprises of long upper
and long down shadow, and the price in the middle.
Dragonfly Doji: The dragonfly pattern signifies downtrend; it has
long lower shadow and has no upper shadow.
Gravestone Doji: The gravestone Doji signifies uptrend; it has long
upper shadow and have no down shadow.
Four Price Doji: This form of pattern indicates a very quiet market. It
shows just a line which indicates indecision. In this pattern, the open,
close, highs and the lows are all the same for the trader.
The Doji patterns include:
Doji - Trend Reversal Signal
18. Hammer & Hanging Man
Hammer, is a bullish signal. In this candle, the down shadow
must be twice the length of the real body. These hammers
have little shadow up or no shadow at all.
It appears after a significant downtrend. If the line occurs after a
significant uptrend, it is called a Hanging Man. A small body and a
long wick identify the Hammer. The body can be empty or filled in.
19. Inverted Hammer &
Shooting Star
An inverted hammer is a bullish reversal candlestick. A shooting
star is a bearish reversal candlestick. Both candlesticks have little
bodies (filled or hollow), long upper shadows, and small or absent
lower shadows.
The inverted hammer occurs when price has been falling
suggesting the possibility of a reversal. Its long upper shadow
shows that buyers tried to bid the price higher.
The shooting star occurs when price has been rising. Its shape
indicates that buyers attempted to push the price up, but sellers
came in and overpowered them.
20. Engulfing candlestick patterns takes two candlesticks to be identified:
Engulfing Candle
- Similarly a bearish engulfing pattern is characterized by a
bearish candle whose body engulfs the previous candle’s body.
- A bullish engulfing pattern is characterized by a bullish
candle whose body, the open and close engulfs the previous
candle’s body.
This candlestick patterns exhibits extreme market sentiment.
A bullish engulfing pattern tells us that the buyers have overcome
the sellers in the market, thus indicating an increase in the price
and vice versa.
21. Three White Soldiers
Uptrend Indicated
It is a Bullish candlestick pattern that is used to predict the
uptrend in a pricing chart.
It consists of three consecutive long-bodied candlesticks
that open within the previous candle's real body and a
close that exceeds the previous candle's high.
The size of the candles and the length of the shadow is
used to judge whether there is a risk of retracement.
It suggests a strong change in market sentiment. The
pattern is mostly preceded by other candlestick patterns
suggestive of a reversal, such as a Doji.
22. Three Black Crows
Downtrend Indicated
It is a bearish candlestick pattern that is used to predict
the reversal of the current uptrend.
It consists of three consecutive long-bodied candlesticks
that have opened within the real body of the previous
candle and closed lower than the previous candle.
The pattern occurs when bears overtake the bulls during
three consecutive trading sessions and shows up on the
pricing charts as three bearish long-bodied candlesticks
with short shadows.
23. The three easy indicators one has to be familiar with include:
Technical Indicators
Moving Average
MTF Analysis
Heat Map
Technical indicators help to interpret price data and generate buy
and sell signals.
They help in identifying the trending environment and find
high probability entry and exit points.
24. What is Moving Average?
Price can be set at open, close, high, or low.
Moving Average
“Simple Moving Average”, or “SMA”, indicator is one of the
oldest and most common indicators used.
It was designed to smooth out the effects of price volatility
and create a clearer picture of changing price trends.
It has two variables involved in its computation “period”
and “price”.
The period can be chosen, but values over “20” are normal-
ly better when dealing with longer trend lines.
25. There four basic MA types:
Moving Average (MA) is a trend indicator, which is essentially a curve calculated
based on the price changes. It assists traders by confirming the trend.
Simple MA– Its values are simple arithmetic means of the price changes.
Exponential MA– Here more weight is given to the latest data.The weight is
calculated in arithmetic series.
Linearly weighted MA-More weight is given to the latest data, however, the
weight is calculated exponentially.
Smoothed MA– More weight is given to the latest data, it takes into account the price
values beyond the time period (their influence is not significant).
26. How to add the Moving
Average Indicator?
Select “Indicators”–”Trend”–”Moving Average” in the “Insert” tab
of the upper menu or just by clicking on the relevant icon on the toolbar.
To set the indicator right click on the indicator and select MA(32)
properties. You will see a window, where you can set the
following parameters:
- Period
- Shift
- МА method ( МА type, like Simple, Smoothed, Exponential
and Linear Weighted)
- Apply to (calculate based on the opening/closing price, etc.)
- МА style (color, thickness)
You can also choose the timeframes from the visualization window.
27. It is the most basic trading approach as only one indicator is
needed for the analysis
Trading with the Moving
Average Indicator
Trading with One MA
Trading with Two MA
The chart has two Moving Averages with different parameters and
the signal is the intersecton of two Moving Averages.
In this case if the fast Moving Average crosses the slow one
upwards, then a long position opens.
In this case the position should be open when the price crosses the
Moving Average. If the price crosses the Moving Average Upwards a
Long Position opens and vice versa.
28. MTF - Analysis Multiple Time Frame
It refers to monitoring the same currency pair across various frequencies.
Helps a trader zoom in to find out better entry and exit points.
Offers the opportunity for traders to understand the market structure in a much deeper and profound way
than any single time frame analysis
29. BlueMax Multiple Time Frames
We offer 9 degrees of time frames.The time frames we provide are :
1 minute, 5 minutes, 15 minutes, 30 minutes, 1 hour, 4 hours, 1 day, 1 week and 1 month
30. The Best Time Frame Combinations
Spotting Support & Resistance - Support & Resistance is key for the higher time frames. Reviewing
the weekly chart, for instance, is useful if you are a swing trader.
Identifying the trend and patterns - The middle time frames are the best for viewing trends, momentum, corrections,
and patterns in general. For swing traders this would be a daily chart, whereas for intra-day or intra-week traders,
a 1-hour or 4-hour chart would be appropriate.
Searching for entries - The lowest time frames are the best trigger chart, and are useful for trading
purposes. It is the best for finding the entry, and also for taking a trade setup.
There is nothing wrong with single time frame analysis, but traders can see clearer benefits performing multiple
time frame analysis, specifically when using three charts with three different roles.
31. Heat Map
It also identifies the risk of entry on each and every potential trade.
It is a real time visual map of the entire forex market for spotting
strength and weakness in individual currencies.
It also verifies and validates any trade entry. It monitors 28 currency
pairs in real time.
Heat Map tells when the market or individual currency groups have
mixed signals and tells when NOT to enter a trade.
32. Forex Strategy
1.Trendline
Trend Pattern
Up Trend: The Buying strategy is preferable when the market goes Up
Down Trend: The Selling strategy would be right when the
market goes Down
When the market moves Sideways the third option – to Stay Aside
will be the Wisest Decision
Forex Trend is the Direction in which the Market Moves. It is
comprised of a series of Highs and Lows, and depending on the
movement of those peaks and troughs one can understand the trend
in the market.
33. 2. Support and Resistance Strategy
The Support and Resistance are the terms for Price Lows and Highs
respectively
Support level indicates the area on the chart where the Buying
Interest is significantly Strong and surpasses the selling pressure
Resistance level represents an area on the chart where Selling
vInterest overcome buying pressure
For an Uptrend to go on, each Successive Support Level should be Higher
than the previous one, and each Successive Resistance Level should be
Higher than the one preceding it
When the Price Falls to the Support Level, Traders decide to Buy creating
demand and driving the price up
When the Price Rises to a Resistance Level, Traders decide to Sell, creating
a downward pressure and driving the price down
34. The key concepts to survive as a Forex Trader:
Risk Management-
Keeping Risk Under Control
Proper use of Leverage
Maintaining the Risk-Reward ratio
Using Stop Loss and Take Profit
Selecting the apt lot size
Controlling your Emotions (Greed; Fear and Over Trading)
Following the Trading Strategy
Risk
Management
Leverage
Risk-Reward
Ratio
Stop
Loss
andTakeProfit
Lot Size
Trading
Strategy
35. Golden Rules Successful
Traders Follow
They maintain the Basic Infrastructure i.e they keep the
computer in a good state with a proper and fast internet
connection.
They do not Gamble. They take Forex as a business and
consider it as pure trading.
They are 100% Disciplined.
They follow their Trading Strategy.
They follow all the Risk Management Rules.
Trade keeping their Emotions Aside.
They Maintain History for each and every Trade they place
and learn from their Mistakes.
They Keep Learning.
Maintain Basic Infrastructure
Do Not Gamble
100% Discipline
Follow Trading Strategy
Follow Risk Management Rules
Keep Emotions Aside
Maintain Trading History
Keep Learning
SUCCESS
36. Why do Traders Fail?
No Trading Plan or Strategy
No Risk Management i.e using High Leverage or no proper use of Lot Size, Stop Loss,etc
Undermining Money Management
Not Fixing the Stop Loss and Take Profit
Letting Losses Compound
Setting the Wrong Goals
Overtrading i.e. trading too many positions at a time
Being Unaware of the News and Data Events.
No Trading
Plan
Setting the
Wrong Goals
Undermining
Money
Management
Letting Losses
Compound
Unaware of the
News and
Data Events
Giveup and
Leave
the Market
37. The Key to Successful Trading!!
Happy Trading !!!
“Follow Trading Rules Keeping Emotions Apart”
“Trade with Discipline and the Market will Reward You”
Thank You
