Fibonacci Levels in Forex

Using Fibonacci Levels is the cornerstone of many successful forex traders’ systems and it is based on centuries old mathematical techniques that can be applied to almost everything in nature. The numerous Forex trading systems based on this “Fibonacci numbers sequence” result in billions of dollars in profit annually by traders worldwide, and indeed, after trading Forex for a few years, I have come to use them myself every chance I get.

I’ve learned that the ratio between numbers in the Fibonacci sequence that is significant, rather than the actual numbers in the sequence. Read more

RSI (Relative Strength Index)

RSI stands for Relative Strength Index. The RSI measures the markets activity as to whether it is over bought or over sold. It gives a trader an indication as to which way the Market is moving. It is important to note, that this is a leading indicator and thus allows one to see what the market is about to do and then act accordingly. The higher the RSI number, the more over bought it is and conversely the lower the RSI number, the more over sold it is. It is a great leading indicator for the micro and macro reversals in the forex market. In the example avove, RSI is in the middle window and I have made two red lines to indicate when the pair has been overbought or oversold, respcetively, I put my lower line at 20 even though most exeprts say put it at 25. Here I’ve used RSI on a longer time frame, but for swing trading, you might want to drill down to 5 or 1 minute charts (or 50 to 100 tick charts).

Got this advice elsewhere, please someone verify if this helps in Forex, I can see it does but have little indication why these settings are the best.

By using an RSI on the 1 minute chart set at a period of 18 and overlaid on the bottom of your charts tend to give the best entry signals. This can also be applied to the 5-minute chart as well. The two significant entry numbers are 25 and 75.

RSI does not (and I believe CAN not) be an accurate way to find the top and bottom of a move in Forex. Sometimes an overbought market in Forex (after a move upward) will be followed by retracement (or a correction downward) in order to gather momentum so it will continue its trend upward. Conveersely, an oversold market in Forex will be followed up by a retracement upward and gains momentum and goes down further, continuing the downtrend.

Drawing Fibonacci levels will help the most at this stage to determine possible retracement levels. In the example above, I’ve used the trend lind approach to find entries and exits in addition to reading the RSI indicator.

Forex Market Hours Around the World

(posted at www.mo4forex.com) Here’s a list of times of Markets around the world. Here in the USA, offiical trading time is from Sunday 2-5PM (depending on your broker) to Friday 5PM. But that is of no consequence when talking about how certain time periods and market hours affect what is going on with certain currencies. I thought it would be useful to me and anyone out there who isn’t away of them to know the times markets open around the world and its signifigance to your Forex Trading. Technically, there are no Forex Market hours persay, just Forex brokers tapping in to other market makers and institutions that are trading currencies. Why market hours concern us is stocks and commodoties have as great an impact on the “big” forex traders’ sentiment as the traders trading the stocks, commodities or whatever it is they are trading.

Of course holidays and weekends do not factor into these time listings here and they are subject to change, please comment me back if you know of any errors I make, as I thought this is the most up to date info available.

When looking at a map of the world and going East to West, the first major market with a great impact on Forex prices to open is Tokyo, Japan, at 7:00 pm EST.

The Singapore and Hong Kong markets both open at 9:00 pm (EST).

The German market in Frankfurt opens at 2:00 am (EST).

The London Market Opens At 3:00 am (EST). Officially marks start of European Open and it’s busiest time while one hour later at 4:00 am EST, all Asian markets have closed.

The United States starts in New York at 8:00 am (EST). By this time, the European market is coming to a close.

The New Zealand market opens at 4:00PM (EST) AND can have an impact on your trading if you trade NZD pairs, which probably have a huge margin attached to them.

The Australian market opens approximately 5:00 pm EST, slightly after the New Zealand markets, the AUD/NZD pair is usually a nice mover around this time, but again, the spread might be too much.

7:00 pm, the Tokyo market is ready to open once more, which is the end or beginning of the trading cycle.

Not knowing when markets open and close even if they aren’t currency markets can have an adverse effect on your Forex trading. In fact, you might be a Forex loser if you repeatedly miss opportunities or have the markets go against you because you were not away of Forex market hours.

Using Trend Channels to Trade Forex

Using Trend Channels to Trade Forex by Mo4Forex.com

I’ve been learning a lot about trend lines and their significance to my daily trading in Forex. By drawing a proper channel line that the price follows I am able to find possible swing highs and lows telling me I should start to look for possible entries, exits, take profit and stop loss orders. Most trading platforms have a draw channel function, if not, well, I have prepared some examples I’ve recently used myself. Channel lines are drawn on the 3 points, A (high) B (low) C (2nd High) or vice versa in a downward trend. These lines are basically just parallel lines, however, in between there are lines of demarcations at 25% intervals. I’ve noticed that the price action usually fluctuates at these levels more so than at other points, for instance in the second image here, you see the price was on it’s way down from the upper channel and finds support at this middle line. When the price hits the upper or lower channel and can not retrace back to the correlating level, volume has dissapated and/or the trend channel might be broken. I know a few times I’ll draw a trend channel only to have that channel violated with price action that breaks the channel. But, for the most part, I have been able to make quite a few trades that I call, “riding the waves” in between channel lines. 5 to 10 minute scalps that make 10-15 pips (minus spread) 5 or 6 times per pair. This method has its faults I’ve noticed, especially when counter trend trading, as every time I buy into downward market (even on a clear retrace) it is a much “longer haul” than simply trading with the direction of the trend.

To the left is an example of how you can use a Trend Channel and Trend Line to enter a short position in anticipation of the price bouncing off this top trend channel line and reaching the bottom channel within a certain period of time. I simply don’t enter when the price hits this top line, I wait for other conditions to line up together then I get in at a point where I think that trend is over (trend lines help for that). After I get in, I set my stop loss somewhere below the bottom channel and my take profit a little below the upper trend channel line. Depending on the time frame and amount of pips I’m going after, this can take anywhere from 1 minute to days! It all depends, but in this example, I’m looking to make a profit in 15 minutes or less, so I’m trading on a 2 minute chart.

To the right we see how this method actually earned whoever is smart enough to trust it lots of pips in a single day. The last section of this post shows you how this method works on a shorter time frame (all but essential if you want to find the best place to enter or exit). Results will vary based on how patient the trader wants to be. I for one did not ride this short position for too much time, but I wanted to make a note of it because it really is a beautiful thing to behold when it happens. The trend line approach in conjunction with this also helps you find an exit, but in this trade, it was pretty steep price action to be able to draw a viable trend line to the downside here, at least that’s what I felt.

Below is an example of how Trend Channels don’t always work, but probably because of human error. I know for sure this was my own fault because I entered a trade during low volatility hours, and I was counter trend trading, which will always experience more resistance than a position that is with the trend. Even though the price eventually hit the upper channel, it wasn’t before my stops were hit for a loss during a retracement. I was however up 10 pips twice but had my Take Profit at 12 or something, it was a long time ago, but I remember almost turning a profit here.

Example of how trend Channels don’t always work

Another important thing I learned that really does make you money is the use of Trend Channels with Trend Lines. Trend Channel lines can be used with Trend Lines (some use the term Trend Capture Lines), which allow to spot the end of one trend and the begginning of another. Here you see I drew a trend line that on the lows of each bar, and when that line is broken, it’s a good indication that the trend is over; this can work on almost any time frame, including tick charts. Some say more effectively on tick charts, but I’m still trying out both.Trend lines, just like trend channels work on all time frames, but most effectively on longer time frames. It involves drawing a line above or below all the closing prices in a trend. In the example on the left, this is a drilled down version of the channel I was looking at above, we see the price reach the upper channel and at the same time begin to break the trend line. Now, this shouldn’t be an automatic signal to sell, I looked at a few other factors, including volume, time of day, and balance point line. And, if I had just jumped right in, I’d be waiting hours for the price to go in my direction, as light volume couldn’t push the price too far in either direction. If I had been short from that point I’d have to ride out a retracement that might have hit my stops for a loss.

Instead, as we see on the right, I could have waited for the volume to pick up, at which time I’d have to contend with the idea that the price might go back up, to the channel once more, and in truth, there’s nothing that would have prevented it in theory, which is why it’s important to have reasonable stop loss levels when looking to short here. But in reality, what happens is volume picks up more to the sell side and over the next 24 hours the bottom trend line is touched again. Now, when looking for an exit, it would be wise to have a trailing stop based on what ever the situation calls for, and to draw another trend line in the opposite direction, when that line is broken, it might be a good place to sell, especially if it is near the bottom channel. It’s all a matter of how patient I want to be, am I going to freak out every time the trend line is broken for a minute or two, or will I go by what I see and trust the trend? I put in that little comment, this isn’t magic, to remind myself that this should be common sense, the trend is my friend, trend channels help find the trend, trend lines help pinpoint where to find entries and when to exit.

Best Times To Trade Forex

Ok, now it’s time to set my alarm clock to some important times here. I’ve missed alot of opportunities trading Forex because I did not have these times imprinted on my mind! We should all know these times like the back of hour hands if we want to be serious Forex traders. I’m sure professional traders have a certain time period at which they trade, negating opportunities in other times, but sticks to a strict Forex method that includes not straying from your plan. If we are going to enter a respectable number of trades that are winners, we need to enter trades at times when we are more certain the pair has enough strength or weakness to hit our target. Therefore it is only common sense we should enter our trades when the trading volume for the pair or pairs is the highest. During the times when the major world markets overlap, we find the biggest increases in volatility (relatively speaking) and are most likely the most opportune times to trade Forex.

At any given time, somebody somewhere in the world is buying and selling currencies. As one Forex market closes another Forex market opens. Market hours frequently overlap, and Foreign Exchange continues around the clock with little respite.

Here’s some interesting facts I’ve collected about Forex hours. Forex is 24 hour market and it starts from Sunday 5pm EST through Friday 4pm EST. Rollover (or swap) is calculated each day at 5pm EST.Forex Trading begins in New Zealand, followed by Australia, Asia, the Middle East, Europe, and America The US & UK account for more than 50% of the market transactions. There are three Major Forex markets: London, New York, Tokyo. Nearly two-thirds of NY activity occurs in the morning hours while European markets are open. Forex Trading activity is heaviest when major markets overlap.

Forex markets are open worldwide with the following schedule:

• New York Market trade times: 8am-4pm EST
• London Market trade times: 2am-12Noon EST
• Great Britain Market trade times: 3am-11am EST
• Tokyo Market trade times: 8pm-4am EST
• Australia Market trade times: 7pm-3am EST

Forex markets have also these timing characteristics:

Tehnically, Forex worldwide trading begins in New Zealand at 4PM EST, followed by Australia, Asia, the Middle East, Europe, and the United States. Since nearly two-thirds of NY activity occurs in the morning hours while European markets are open, this is probably the most active time to trade. Too bad most people around where I live are dead asleep.

Forex market volume fluctuates all day, but certainly expereinces a peak when the Asian market (which includes Australian & Kiwi markets), the European market and the U.S. market are all open simultaneously, even if it is for only a few minutes. More notes on trading hours coming soon. his article and topic also tie in closely with my questions on which Forex Pairs are the best to trade because of volatility.

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