FOREX-NATION

My Forex Experience

Moderator — Mon, 25 Apr 2011 19:22:26 +0000

Several months ago I wrote up a post on Forex-Nation promising more lessons and more info from my own forex experience to help those of you seeking to refine your own forex trading skills. Well I guess you could say I sort of didn’t quite follow through with that promise. But I would like to give an explanation for why the long silence, and no it’s not because I went broke and gave up trading.

It’s actually been one hell of a year for me both personally and financially. Thanks to the misguided hot air balloon that was the Dodd-Frank Wall Street Reform Act my trading capitol proved to be insufficient to continue trading full-time. And as I sought out further ways to boost my income, I decided that web design might offer a great opportunity to raise that capitol. Plus I don’t want another desk job where I face the daily rush hour traffic – who does?

Trading forex gave me independence; it also gave me self-discipline, self-reliance, an entrepreneurial spirit, and new friends. I loved it, and hope to continue it again. I still say it’s not for most people; it’s a niche that only the strongest, bravest, and sharpest traders will succeed at. But it’s not a scam as many will claim (who failed for legitimate reasons on their own part), it’s not a pipe dream, and if you really want to be successful at it, then I recommend you read my lessons and follow those I speak of in this blog and you will be successful.

Fast forward two months to today. I have helped create three e-commerce based websites for three separate start-up companies, with the added bonus of potential equity in those companies if successful. That’s where all my time has been spent over the last two months, but my true passion continues to be as a forex trader. No other industry exists that can offer the income potential and the freedom that being a forex trader offers. I will continue to monitor this blog and keep up with the markets in the hopes that sometime in the near future I will be in a better position to continue on with my trading as before.

For now though, I would recommend any newcomers to take a few words of wisdom that I came to realize as forex truths, and hopefully these words might help guide you along as well.

The market is always right. At the end of the day if you’re losing more than you’re winning don’t give in to the myth of “forex is just a “scam”, instead realize your system is the problem so fix it.
Seek education that’s free first before you pay for anything. Let’s face it, if you can Google it, you can probably find it for free. So ask the right questions. Yes, pay services are very beneficial, but only once you have a basic understanding and some real time trading already under you belt.
Don’t ever invest in robots. Yes big banks use them, but retail traders suck at creating them. We just don’t have the same real-time resources or capitol to build a successful automated system. Leave it to the big boys and learn the technicals they follow instead, and keep it simple.
Pay attention to the technicals more so than the fundamentals. Both do matter, but it’s my experience that technical traders make more money than fundamental traders.

If I think of more I’ll add them. Let me finish with my list of the best forex websites out there (according to me of course). These should be websites you visit frequently already, but if they’re not, I promise you will only gain more pips from seeking them out in the future for your trading needs. Good luck everyone.

And for education that works

fxknight.com

February Update – New Year Brings New Money

Moderator — Sun, 06 Feb 2011 02:59:23 +0000

What A Long Month of Trading

Well as I reported in the first week of December, the EUR/USD has been consolidating within the middle of 1.3000 to 1.4000 ranges. This means it’s not a big surprize to those that watch the fundamental data and apply it to the MT4/technical data. You need to keep big picture analysis in your everyday technical analysis. It serves as a compass towards trading decisions.

Award Nominations for fxKnight

And as if my own review of fxknight didn’t encourage you to consider their services for your forex training needs, I get to announce that fxKinght is nominated for Best Educational Content, Best Educator, and Best MetaTrader Add-on.

It’s based upon what actual traders vote, so you can follow the action, or cast your own vote at fxstreet.com for fxKnight. Either way, I would like to thank all my StumbleUpon visitors and my new subscribers! I promise to keep updating my growing-forex-blog!

Sorry for the Delay

Moderator — Mon, 10 Jan 2011 20:30:10 +0000

Just wanted to post something for those who are visiting the site looking for new content and let you know I’m not procrastinating writing new lessons as promised. I’ve got a list of lessons I’m preparing, but I also bit off more than I could chew so to speak with my other “job”. I design websites on the side and recently took on a major E-Commerce website design that’s created a whole new set of problems for me to spend time on. Until I get a good grip on this project, I’m putting my trading and this website’s content on hold. Not to say you can’t still check out all the 2010 content and gain some great insight into how

Continue reading-->Sorry for the Delay

My Advice for Trading in December? Don’t Do It!

Moderator — Mon, 20 Dec 2010 16:43:14 +0000

The first couple of weeks in December can still be navigated using the same strategy and indicators that got you through the previous 11 months of the year, but the same cannot be said for the last 2 weeks. These are extremely thin times where the big bankers and investment funds have clocked out till the New Year and small orders that would usually be easily absorbed into the market causing no visible change can actually move the market in very big ways when liquidity is lacking. That’s great when it’s in your favor, but dreadful when it’s not. My advice is to stay away. Enjoy your life outside of forex and just don’t bother thinking about the market until the New Year has arrived.

In the meantime, read up on some of the lessons and trade setups I’ve posted throughout the year. It’ll be far safer and guaranteed to increase your knowledge. Or so I’d like to believe. I’ll be on vacation until January myself enjoying family and friends and being grateful for the things in life I cherish most! That includes everyone who visits Forex-Nation. Next year will be a big year for Forex-Nation with more quality content and lessons so stay in touch everyone. Till then, Happy Holiday!

Overbought/Oversold: Using RSI, Stochastic, and Moving Average Envelopes

Moderator — Wed, 15 Dec 2010 19:41:23 +0000

Before we begin to look at what are the best indicators for determining overbought/oversold conditions and how to use them, let’s first define what overbought/oversold means.

Overbought/Oversold Defined

I define an overbought condition as a situation in which the price level of a currency pair has risen to such an extent that it is overvalued and therefore the likelihood of a pullback is very high. The opposite is true in oversold conditions where price action has fallen to such a level as to justify new buying opportunities due to its’ current undervalued state. In simpler terms, we are dealing with an extreme level in price action that as a result we should therefore see a corrective move take place.

What’s going on in the markets is that there is a very large imbalance of orders in the same direction and this increases momentum. Eventually those with winning positions will want to take some profit off the table while other investors are seeing a great opportunity to enter the market going against the momentum simply because of the extreme level of the price action. Usually this causes a pullback of around 30 to 60 pips from my experience, but it’s also a short lived pullback so don’t expect big profits here.

What Indicators Work Best at Predicting Overbought/Oversold?

This lesson will describe three separate indicators that I’ve personally used to determine when the market is overbought/oversold. The first two indicators I will introduce will be RSI and Stochastic. They fall into the class of indicators known as oscillators because they oscillate (fluctuate) between two extreme values. They are also part of a larger category of indicators known as leading indicators because they function in such a way that predicts future price action. They are the most popular and commonly used indicators for determining overbought/oversold conditions. At the end I will discuss what indicator I currently use now for determining these conditions, but let’s discuss the most popular methods first!

What is RSI?

RSI stands for Relative Strength Index. Over some period -hour, week, month, etc (depending on focus) – RSI compares the sum of gains with the sum of losses. RSI is specificly used to identify overbought and oversold conditions in the market. It is scaled from 0 to 100, and typically, readings below 30 indicate oversold, while readings over 70 indicate overbought.

Trading using the RSI

One strategy I’ve found worth exploring I got from Investopedia is known as the Ride the RSI Rollercoaster.

Rules for a Long Trade

RSI reading must be less than 30.

Wait for an up candle to form and close with an RSI reading of greater than 30.

Go long at market on the open of the next candle.

Place your stop at the swing low.

Exit half of the position at 50% of the risk and immediately move the stop on the rest to breakeven.

Exit the rest of the position when one of the following conditions is met:

Stopped at breakeven.

Trade first moves into overbought territory marked by an RSI readings of greater than 70 and then eventually drops from that zone. As soon as RSI declines below 70, sell at market on the close of that candle.

Rules for a Short Trade

RSI reading must be greater than 70.

Wait for a down candle to form and close with an RSI reading of less than 70.

Go short at market on the open of the next candle.

Place the stop at the swing high.

Exit half of the position at 50% of the risk and immediately move the stop on the rest to breakeven.

Exit the rest of the position when one of the following conditions is met:

Stopped at breakeven.

Trade first moves into oversold territory marked by RSI readings of less than 30 and then eventually rises out of that zone. As soon as RSI increases above 30, buy at market on the close of that candle.

In the past I had trouble incorporating this trading strategy with my other indicators, and to be honest I just lost interest in it, although I will say that many professional traders in all types of markets (futures, stocks, commodities) use this indicator so it’s worth knowing about.

What is the Stochastic Indicator?

The Stochastic is very similar to the RSI. It is an oscillator indicator and also part of the leading indicators category. The Stochastic uses 2 lines that are similar to the MACD lines in the sense that one line is faster than the other. And just like with the RSI, the Stochastic is scaled from 0 to 100. When the Stochastic lines are above 80, then it means the market is overbought. When the Stochastic lines are below 20, then it means that the market is oversold. You could then pretty much employ the above RSI Rollercoaster strategy with this indicator as well, modifying it to include the crossovers of the red and blue lines, and you would probably have great success. But lets get to what I use to determine overbought/oversold conditions.

What are Envelopes (what indicator do I suggest)?

Envelopes are actually an additional feature that you add to a moving average known inside the MT4 platform as Levels. In my lesson on using moving averages I briefly went into detail about how I use them in my trading. For this lesson I will expand on them a little more.

Envelopes are also known as standard deviations from the moving average and are represented as such on your chart as parallel lines running along side your moving average. To insert them on your chart, you can simply double click on the moving average you want to use and then click on the “Levels” tab to create the envelopes. What you’ll do is insert both a positive and negative value that are the same number only one is positive (serving as your upper band) and the other is negative (serving as your lower band). So lets say your determining that you want to use 45 as your standard deviation or level. Then you would click the add button under the Levels tab and enter 45 and click add again, then enter -45. Here’s an example of what it will look like on your chart:

As you can see, envelopes are similar to Bollinger Bands in appearance and in that you use them to determine the boundaries of the price action. By boundaries I mean the limits to an upward or downward push at which point the market is very likely going to reverse and go back towards the moving average. The essential part in all this is that you set your standard deviation settings so that the bands still catch or contain 90% of the candlestick bodies, otherwise they’re not as reliable at indicating overbought/oversold price action. This means that the value you use will have to change sometimes on a weekly basis in order to account for quite or volatile market conditions.

The method I use is to choose a timeframe (since the values change depending on the timeframe) and zoom out just enough to where you can see all of the candlesticks for at least a weeks worth of price action. For a lower timeframe you might only be able to include one day’s worth of candlesticks. Then physically count how many candlesticks actually close outside of your envelope bands with the current setting you are using. Then divide that number by the total number of candlesticks for that given period of time. You want to get the setting to where no more than 10% of the candlesticks actually close outside of the envelope bands. Therefore roughly 90% of the candlesticks do close within the bands. Now the next candlestick that closes outside of the bands represents an extreme level of price action thus predicting an overbought/oversold condition.

Think of envelopes as mini support and resistance lines that tell you how far the price action will stray away from your MA before it must return back towards it (at least an overwhelming majority of the time anyways). These are great areas to take your profit since they predict very well the limits to which any downward or upward move will stall out and probably move back towards the MA. Conversely, you can also consider them a great way to determine where to place a trade that’s in the opposite direction that the market is moving for some minor pip gains (30 to 60 pips as mentioned above).

I’ve found using envelopes fits my trading style and mentality the best. So as with any new trader who is trying to develop a trading strategy, always keep in mind that what works for some doesn’t mean it will also work for you. Also, I would never recommend you use more than one of these at the same time, because that would be both redundant and would make you more confused since often one indicator tells you it’s time to trade and the other says you should continue to wait. These indicators must be combined with other indicators such as support/resistance lines and pivot points in order to truly see the value they provide us retail traders. You will have far more success incorporating one of these indicators into your trading system, but first explore each one separately to decide what’s right for you.

Help Decide the Next Forex-Nation Lesson

Moderator — Mon, 13 Dec 2010 23:50:26 +0000

After running Forex-Nation for one year now, I’ve realized that the lesson content of my site is by far the most viewed and popular content. So I’ve decided that for this coming new year, I will be spending the majority of my time creating more lessons and hopefully more valuable content for you my visitors.

Get involved with the Nation

As such, I want to involve you all in the creation of the content. So what content would you like to see added? In other words: What topics interest or baffel you the most? What would you like to learn more about from me?

I have already received lots of requests over the past year for new content relating to:

Should you trust automated trading?
What’s the best way to design your system?
Best method for setting your S/L and T/P?
Which timeframes work best for new traders?
How to profit from using moving averages?
How to become less emotional and more disciplined at trading?

Those are just a few examples, but they are just a few of the important questions to ask when learning to trade currencies. Be specific and let me know what you think would be most benificial to your ongoing forex education? What content would be most valuable to you? Leave your suggestions below or visit my Facebook page to reply by private message. As always, good luck to you all!

Fibonacci Level 38.2 Continues to Support EUR/USD

Moderator — Tue, 07 Dec 2010 18:30:33 +0000

We are seeing the EUR/USD continue to consolidate in the 1.3400/1.3250 range. I continue to watch for a sustained break of 1.3270 where the 38.2 fib. level held price action up yesterday and again so far today as well. In the chart below we see both the 38.2 fib level, 200 MA and daily S1 have acted as support for the past two days. I think we can call the 1.3250/60′s a decent support level to watch! By the way, my fib level was drawn on the hourly chart from 1.3767 to 1.2968.

Not too much fundamental data to drive either currency for today or tomorrow, but look at the economic calendar for Thursday as we have some moderate economic reports that could be the kick in the pants this currency pair needs in order to see some decent trending price action. I’m looking to place small orders at the range borders I described above with fairly tight stops (40 pips). Good luck trading!

Also check out: Fibonacci Made Easy

A Look at the EUR/USD Chart

Moderator — Mon, 06 Dec 2010 18:14:27 +0000

Well it was an abysmal employment report last week but that didn’t mean risk off for the eur/usd as the market jumped to life after a brief risk aversion reaction to the unexpectedly low figure. That said the market closed Friday with some minor profit taking and consolidating going into the weekend.

Looking ahead it would appear that markets are still consolidating and has found decent support for the time being at the 200 MA and just above the Daily S1. My initial analysis is that the euro/usd will continue to climb back up the price ladder, but the only puzzling factor here is the crossover on our alligator which gives me a conflicting signal. So no trading for the day today as I wait for a definitive direction to iron itself out. Again my guess is for a continuation of the uptrend which started last week after price action reached the weekly S1 as well as a crucial fib level ( see Fibonacci Trading| 38.2 Retracement Reaches 138.2 Extension) but I remain on the sidelines until I get further confirmation signals.

Also here’s a quick snapshot of one of my charts to show you more of what I just mentioned.

Narrow Range Predicted Over the Next Year – Reuters Poll

Moderator — Mon, 06 Dec 2010 18:03:07 +0000

60 leading currency analysts are predicting a narrow range for the euro vs. both the dollar and pound over the next 12 months. The poll of 60 foreign exchange strategists, taken this week predicted the euro would be trading at $1.31 in a year’s time, weaker than the $1.33 predicted in last month’s poll. After an Irish rescue package of 85 billion euros from the European Union and the International Monetary Fund announced this week, worries remain that bailouts will be needed in other euro zone countries.

According to this recent poll, the euro decline from 1.4280 will not go far beyond recent lows over the next 12 months and will not perform a strong recovery either, as EUR/USD is expected to trade between 1.3000 and 1.3450 during the next 12 months. EUR/USD is expected to move around 1.3250 in one month time, and to pick up to 1.3450 in three months time, where the pair will peak, to ease to 1.3200 in 6 months time and 1.3050 by the end of next year, according to the median estimation of polled analysts’ forecasts.

‘The Euro Game Is Up! Just who the hell do you think you are?’ – Nigel Farage MEP

Moderator — Tue, 30 Nov 2010 18:17:39 +0000

Ireland’s formal request for an EU bailout continues to weigh heavily on the Euro, as Spain’s bond market begins to show signs of trouble as well. Portugal, Belgium, and Italy also remain potential trouble spots, and Greece is not out of the fire yet as well. This, coupled with initially fairly promising holiday retail numbers out of the US, should make for some interesting trading on the EUR/USD in the final weeks of the year. Comments from Nigel Farage (MEP, UKIP, Co-President of the EFD group) also shed a great deal of light on the serious tensions building with the Euro zone leadership. It’s quite a treat to see such frank and honest apprasial of the political and financial situation. Check it out below!