FOREX TRADING BASICS...
1. What is FOREX ?
FOREX = Foreign Exchange (Exchange of Currencies)
2. What is TRADING ?
TRADING = Buying and Selling of anything (Any Goods or Products)
3. What is FOREX TRADING ?
FOREX TRADING = Buying and Selling of Currencies | Buying One currency and Selling another currency at a same time (simultaneously) .For Example : Consider that, I have USD in my hand, If I want to Buy EURO, then I need to spend (SELL) my USD Currency to get (BUY) EURO Currency.
4. What is FOREX MARKET?
MARKET = Place for Buying and Selling anything.
FOREX MARKET = Place for Buying and Selling Currencies.
Forex Market is the World’s No.1 Financial Market with daily turnover of 8 Trillion USD. The world’s largest NewYork Stock exchange has a daily turnover of over 180 Billion USD.
5. What is the main difference between Physical Trading and Online Trading with 1:100 Leverage ?
PHYSICAL Trading | ONLINE Trading |
|---|---|
| 1. You need to pay full 100% money to buy your product. | 1. You just need to pay only 1% or lesser money to buy your product. No need to pay anymore forever.  |
| 2. After buying, Your product will be in your hand. | 2. After buying, Your product will be on hold in your trading account. |
3. You can make only Small profits in Small Money. Example : You buy a 100$ worth gold by paying full(100%) money Physically, After 2 month, if your gold becomes 110$, then your profit will be 10$ for your 100$ investment. | 3. You can Make Big profits in Small Money using Leverage Option. Example : You buy a 100$ worth gold by paying only 1$ or lesser money by online trading, After 2 month if your gold becomes 110$, then your profit will be 10$ for your 1$ investment. This is how you make Big profit in small money. |
| 4. It takes some time to buy your product. | 4. You can Buy your product instantly within 1 second(s). |
| 5. If price of your product falls down, you will loss more. | 5. If price of your product falls down, you will loss maximum 1% only. Because, you invested only 1% of your money. |
7. How FOREX Market moves ?
Forex Market moves due to the transactions done by the following firms.
- Major Banks
- Big Interbank Networks (EBS) & Reuters.
- Small and Medium sized banks.
- Hedge Funds, Retail Market Makers, Retail ECNs, Commercial companies.
- Retail Traders (Individual traders)
8. Why Forex Market is possible to make profit in both Up and Down movements?
Forex market has 2 currencies combined together, called as Currency Pair.
Example : EUR/USD, USD/JPY, USD/INR
Why Forex has 2 currencies combined together?
Forex Trading = Buying and selling of currencies (Exchanging currencies)
While doing One Exchange Transaction, we are Selling One currency (USD) and Buying another currency (EUR) at the same time.
Here totally 2 Currencies are involved in One Exchange Transaction.( Example : Selling USD and Buying EUR = 2 currencies involved for one transaction)
This is the reason, Forex market has 2 currencies combined together.
9. Technical name of Currency pair :
Example 1 : EUR/USD
EUR = First Currency = Base Currency.
USD = Second Currency = Counter Currency or Quote Currency.
Example 2 : USD/INR
USD = First Currency = Base Currency.
INR = Second currency = Counter Currency or Quote Currency.
10. How Forex Market Moves UP and DOWN ?
Let’s consider one example : If there are More people buying one product (example : GOLD),
More Buyers for GOLD => More Demand => Price will Increase Higher (Gold Market moves up)
Forex Market has 2 currencies combined together. Example : EUR/USD
If First Currency (EUR) becomes strong (More Buyers), then EUR/USD Market will Move UP.
If Second Currency (USD) becomes strong ( More buyers), then EUR/USD market will Move DOWN.
11. Placing New Trade order : BUY ORDER & SELL ORDER
Buy Order =Buying First Currency
Sell Order = Buying Second Currency
12. How is it possible to Make Profit in Forex trading at anytime under any situations ?
If First Currency Strong => Market Moves UP =>Place Buy Order =>Make Profit
Second Currency Strong => Market Moves DOWN => Place Sell Order =>Make Profit
13. Types of Pending Orders in forex trading :
Pending order = placing the new buy or sell order in advance (or) Pre Booking price.
There are 4 types of Pending orders.
- Buy limit = placing “pending buy order” below the current market price.
- sell limit = placing “pending Sell order” above the current market price.
- buy stop = placing “pending buy order” above the current market price.
- sell stop = placing “pending sell order” below the current market price.
14. Stop Loss and Take Profit in forex :
Stop Loss = If you want your trade order to close with limited loss automatically, then you need to use Stop Loss (SL)
Take Profit = If you want your trade order to close with limited profit automatically, then you need to use Take Profit (TP)
15. Technical terms in Forex :
Bid Price = Selling price
Ask Price = Buying Price
SPREAD = Difference between Buying and Selling Price (or) Difference between Bid and Ask Price
LEVERAGE = It is the option used for buying More Valuable things (or) products with very small money.
Example : If you have leverage of 1 : 100 = You can buy 100$ valuable product with just 1$.
The above details are just the basics in forex trading.
If you are interested to become a Successful Forex trader, you should have to learn more about the market. You can check our Next Level Forex Trading
We are ready to help you always ! Thank you !
FOREX CHART PATTERNS-For profitable trading
In Forex Market, the chart pattern plays a big role to predict the future movement of the market in an easy way.
One of the main parts of Technical analysis is Chart Patterns. It is an easy trading skill if you practice more with different market charts. Become Professional trader using the below technical chart patterns.
♦ Head and Shoulders pattern
♦ Triangle patterns
♦ Pennants
♦ Flag
♦ Rectangle
♦ Wedge
♦ Double Top & Double Bottoms
♦ Triple Top and Triple Bottoms
♦ Disadvantages of Trading Chart Patterns
What are Chart Patterns?
The set of shapes like Triangle shape, Rectangle shape, Dual top, Dual Bottom, and many other shapes formed in the price charts is known as chart patterns.
A Chart Pattern shapes are printed on all the market charts at any time. Traders keep watching the price chart to find the patterns. Once the trader found a pattern, then it will give the signal on where the price is going to move next?
The complexity of trading necessitates a keen eye and a sharp mind, but one thing that can make it easier for both seasoned professionals and beginners is having a trading patterns chart sheet.
Identifying the pattern shapes in the chart is very easy by using simple tools such as horizontal lines, trend lines, Equidistant Channel lines, etc. Let’s see different types of chart patterns.
Different Types of Forex Chart Patterns
Forex Trading patterns are divided into 3 types depending on the market trend such as uptrend, downtrend, Neutral trend (Ranging/consolidation).
1) Continuation Chart Patterns
2) Reversal Chart Patterns
3) Neutral Chart Patterns
Continuation Chart Patterns
Continuation chart pattern appears when the market is moving in an Uptrend or Downtrend. You can spot this pattern during the price correction or retracement happening in a trending market.
For example: If the market is moving in an Uptrend, then it stops at some price and starts to move down which is against the trend. During this time, you can identify the continuation chart patterns.
Most popular continuation pattern charts are Pennants, Rectangles and Corrective Wedges.
Pennants
Pennants shape formed in the chart during the strong trend. The market takes a small break during the trend and it forms a pennant pattern in the chart.
Pennant looks like the shape of the symmetrical triangle, as both triangle and pennant are bound by trendline support and resistance lines. The difference is that pennant appears during the trend, but triangles can be formed during both trends and general consolidation periods.
Pennants could be bearish or bullish depending on the trend direction. When a pennant occurs during a trend, it has the potential to push the price in the direction of the overall trend.
How to trade pennants?
Wait for a breakout of the Pennant pattern to enter into the trade.
If the pennant is formed, the minimum take profit target should be the number of pips moved in the first wave of the pennant as shown in the chart picture.
After a breakout, the distance of the first wave inside the pennant should be your minimum take profit target.
Flag Pattern
Flag pattern is similar to pennant pattern. Whatever rules applied in pennant chart pattern applies to flag pattern too.
Flag charting patterns can be formed during the retracement of the trend.
The only difference between flag and pennant is, Flag looks like a small channel (parallel lines) in a trend.
Rectangle Chart Pattern
Rectangle shape can be formed in the chart when the market is moving up and down between horizontal support and resistance levels. The market takes a long break from the trend move and it keeps moving up and down between the certain price level.
During a trend, when the price starts moving sideways forming a rectangle, another trending move is likely to occur once price eventually breaks out of the rectangle formation. This move is likely to be at least as big as the size of the rectangle. Rectangles could be bearish or bullish depending on the trend direction.
How to trade Rectangle?
You can take short term trades in the Rectangle pattern. If the market reaches the bottom support of the rectangle, you can place buy trade. If the market reaches the Top of the resistance, you can place a sell trade.
Note: Always keep placing the trade depend on the trend. Example: If the market moving in an Uptrend, place only sell trade after breakout confirmed at the Bottom Support of the Rectangle.
After a breakout, the distance of the first wave inside the rectangle should be your minimum take profit target.
Wedge Chart Pattern
When the market forms higher highs and higher lows in a narrow path, it is known as a rising wedge. A rising wedge will form either in uptrend or downtrend.
When the Market forms Lower highs and Lower Lows in a narrow path, it is known as a falling wedge. A falling wedge will form either in uptrend or downtrend.
Wedge Pattern forms during both trend continuation and at the Trend Reversal.
Trend Continuation Wedge is called Corrective Wedge Pattern.
Trend Reversal Wedge is called Reversal Wedge Pattern.
How to identify Corrective or Reversal Wedge?
Corrective Wedge pattern is a correction that happened during the trend which forms a Wedge Shape in the Chart.
Reversal Wedge pattern is similar to Corrective Wedge, the only difference is Market will start to reverse after forming the wedge. Whereas In Corrective Wedge, the market starts to continue the trend.
We may not know whether the wedge is corrective or reversal until it breakout from that wedge Pattern.
If the breakout happened in the trend direction, Then we can confirm it as Corrective Wedge.
If the breakout happened against the trend, it means market starts to reverse. Then we can confirm it as a Reversal Wedge.
How to trade Wedges?
You can take short term trades inside the Wedge pattern at highs and lows of the Wedge. If the market reaches the bottom of the Wedge, you can place buy trade. If the market reaches the top of the wedge, you can place a sell trade.
Wait for a breakout of the Wedge pattern to enter into the Long term trade. Stop-loss should be placed near to highs and lows.
Bonus: Wedge Pattern will breakout mostly at the 4th Touch of the Higher High or Higher Low. Let’s look out this falling wedge Chart.
We hope you are very clear now on how to trade the wedge pattern. If you have any questions, please let us know.
Reversal Chart Patterns
Double Top Pattern
It is a reversal pattern in an Uptrend, where market creates exactly two tops on the same price level.
There are 2 types of Double top
1) Traditional Double Top
If each top gap is within 9 months, then it is called “Traditional Double Top”.
2) Cyclic Double Top
If each top gap is more than 9 months (or) If the time taken to form each top is more than 9 months, then it is called as “Cyclic Double Top”.
Double Bottom Pattern
It is a reversal pattern in a Downtrend, where market creates exactly two bottoms on the same price level.
There are 2 types of Double bottom
1) Traditional Double Bottom
If each bottom gap is within 9 months, then it is called “Traditional Double Bottom”.
2) Cyclic Double Bottom
If each bottom gap is more than 9 months (or) If the time taken to form each bottom is more than 9 months, then it is called as “Cyclic Double Bottom”.
How to Trade Double Top?
If you saw a double top in the chart, wait for the confirmation of breakout at the recent low level.
After breakout confirms at the recent low level, You can enter into the trade.
The Minimum Double Top Target should be the same as the distance of the previous high to low as shown in the image
How to Trade Double Bottom?
If you saw a double bottom in the chart, wait for the confirmation of breakout at the recent high level.
After breakout confirms at the recent high level, You can enter into the trade.
The Minimum Double Bottom Target should be the same as the distance(size) of the previous Low to high as shown in the image.
Triple Top and Triple Bottom Patterns
Triple Tops and Triple Bottoms are same as Double tops and Double Bottoms. The only difference is additionally extra one top or bottom formed in the chart.
1) Traditional Triple Top
If each Tops gap is within 9 months, then it is called “Traditional Triple Top”.
2) Cyclic Triple Top
If each Top gap is more than 9 months, then it is called as “Cyclic Triple Top”.
How to Trade Triple Top?
If you saw a Triple top in the chart, wait for the confirmation of breakout at the recent low level.
After breakout confirms at the recent low level, You can enter into the trade.
The Minimum Triple Top Target should be the same as the distance of the previous high to low as shown in the image
How to Trade Triple Bottom?
If you saw a Triple bottom in the chart, wait for the confirmation of breakout at the recent high level.
After breakout confirms at the recent high level, You can enter into the trade.
The Minimum Triple Bottom Target should be the same as the distance(size) of the previous Low to high, as shown in the image.
Head and Shoulders Pattern
Head and Shoulders Pattern is one of the Top Reliable chart patterns for technical analyst. It is a strong reversal pattern. If these patterns formed in the chart, Market definitely needs to reverse.
If you look out the image, you can see the Middle Top looks like a Head and each side tops look like shoulders. It’s like a Human right?
This is the reason we call this Pattern as Head and Shoulder.
This head and Shoulder pattern is a Reversal Pattern in an Uptrend.
But how about the reversal of downtrend?
It is just opposite of the ordinary head and shoulder pattern.
If the Head and Shoulders formed in the chart in an Inverted shape, it is known as “Inverted Head and Shoulder”.
It looks like a person doing Headstand.
If you found this inverted head and shoulders shape in the chart, it confirms the Reversal pattern in a Downtrend.
How to Trade Head and Shoulders Pattern?
If you saw a Head and Shoulders in the chart, wait for the confirmation of breakout at the recent low level (Neck level breakout).
