The Psychology Of Fx Trading

Is there anything like the psychology of Forex trading? I would say yes!  I think that, for you to be a successful trader one must understand the fundamental principles of the market.

just like in any subject, be it Accounting, Economics or Mathematics. the first step in understanding the subject, is to understand the guiding principles that govern the subject. Same goes for trading. one cannot make profit in the market in the long term if he or she does not understand the fundamental principles that govern how trades are made.

there are no short cuts, indeed no quick fix to trade effectively in the  market, despite what anyone might say. I think that, the only way to be successful  is to get  the psychology of trading.

thanks for reading

BLOG ARTICLE REFERENCES

Thomas .J, Yeomans, Fundamentals, Economic Theories Applied To The Foreign Exchange Market.



School of pipsolpgy by babypips.com.



Encarta, Encyclopedia.



Wikipedia, Online Encyclopedia

STRATEGIES PART ONE : SCALPING

Scalping is a short-term forex trading strategy. Scalping involves trading larger lots ( Lots are the way foreign currencies are traded in the  market) with small pips. Scalping trades only take minutes or seconds.

This trading strategy may not be for everyone, because it requires a lot of cash plus it's a very risky strategy.

thank you for reading.

Understanding Pivot Points

Pivot points are very interesting to me. especially when I can use them to increase the number of zero's in my trading account.

THINGS I KNOW ABOUT PIVOT POINT

Pivot point are points reached by a support or resistance level which than reverse in the opposite support or resistance levels. Pivot points can be compared to a pendulum ball that goes back and forth. many traders like me use pivot points to identify important support and resistance level. they are important because at this levels the price can change direction, which could be a loss or a gain.

I use pivot points for my short term trades especially for scalping, taking advantage of all those small price changes between pivot points.

HOW TO CALCULATE PIVOT POINTS

You don't need to know how to calculate pivot points many forex plate forms do it for you. But, just for fun (as they say where i come from no knowledge is a waste). to calculate pivot point you will have to know the last sessions Open, High, Low, and Closing prices.

this is the formular to calculate pivot point:

PP = ( High + Low + Close) /3

Since pivot points are directly related to support and resistance levels, you will have to calculate the pivot point for each support and resistance level.

Formular for the first pivot point support level:

Support 1 = ( 2* PP) - High price

Formular for the first resistance pivot point level:

Resistance 1 = ( 2* PP) - Low

This is just for the first level, I really don't won't to go any further before I get accused of being a mathematical show off, and as I said earlier this calculation is already done my most plate forms. And from what I have seen many of this  trading plate forms even give additional pivot point, like pivot points in between support and resistance levels, and many other features.

Thank you for reading.

TWO FOREX TRADING ROBOTS

there are many good and bad robots out there. in another article I will tell you how to choose the good ones and avoid the bad ones. but for now this are two robots I'm studying.

FAP TURBO

so many people have written about this forex robot and you may know about it. they say it's very flexible and adaptable, they say it could be used effectively both in a short term trading plan for a trading strategy known as scalping or in a long term trading plan for big profits. for me I believe this is sales pitch and hype the best way to prove this, is to use it.

 MEGADRIOD

the megadriod is said to have artificial intelligence, it can think on its own. I have not used it but if, it can think on its own, I guess I will try it out on a demo account.

thanks for reading.

WHAT ARE ROBOTS?

the forex market is a very profitable market. but many may not have time to learn the guiding fundamental principles that would increase their probability of being successful. but, with robots busy people can also trade  and earn some money. But, what are  robots?

FOREX ROBOTS

in my own opinion  robots are automated software that can trade the fx market. robots are programed to make complex trading decision in the absence or presence of the human trader.  robots can be compared to video game software that is programed to play games against a person, so that on a boring day anyone can sit back play a game and waste his or her time.

just like everything  robots have there advantages and disadvantages, let see some.

ADVANTAGES OF  ROBOTS

To be a successful trader a person has to trade according to his or her personality and  robots fit into the personality of almost everyone. all a person needs to do is buy them, install them, use them and than relax and they do all the work.  robots can trade all through the year. now let's look at the disadvantages

DISADVANTAGES OF  ROBOTS

to use  robots well one must know about the  market and this is a disadvantage for people who may not have time to patiently learn the principles behind trading decisions, let's be realistic if one knows nothing about the market how does he or she know his not being sold a fake  robot and how sensible is it to invest your hard earn money into something you know nothing about. so one needs at least a basic education about  trading to use  robots effectively.

robots make money but they also loss money. many  robots sales people online say their  robots is the best and promise huge profits if one buys the robot, don't get me wrong good  robots do make huge profits, but not all promise about a  robot is true, in my own opinion the great number of unsuccessful  traders who use  robots show that some  robots can actually make one loss all his or her trading money.

also the foreign exchang market is dynamic and not all  robots may have being programed to adapt to it's erratic nature. this could lead to loss of money or missing profitable trading opportunities. Also,  robots are very expensive.

thanks for reading

TYPES OF ROBOTS

I will provide more information later.


 ROBOTS


1. FAP Turbo

2.  Megadroid

3.  Growth Bot

4.  Cash Evolution

5.  Autopilot

6.  Ambush

A Very Cool Technical Indicator- Stochastic

Stochastic indicator is an oscillator ( an oscillator is an indicator that can only be at two points- overbought or oversold).

the financial analyst Dr. G. lane in the 1950's promoted the use of stochastic, he observed that in an up trend, prices may close near there high and in a down trend prices may close near there low.

stochastic has two lines one line reacts to price movement fast, while the other is slow to react to price movement, why this occurs will be discussed later.

stochastic is scaled from 0 to 100, and as stated earlier it shows when the forex market is overbought or oversold. when the faster line cross over the slower line and goes up above the 70 scale the market is overbought (at this point a lot of traders are buying so it's time to go short). when the faster line cross under the slower line and goes down below the 30 scale the market is oversold, at this point its time to go long.

just like every indicator stochastic could give wrong data, with this in mind stochastic should not be the only indicator used to trade. i believe that other fundamental and technical indicators should be used with it, and incorporated in to a reliable trading system (i will say what a trading system is later).

finally, stochastic also shows when a previous trend will end, when it shows this, it could mean that price is about to change direction.

I'm still studying this indicator and i will provide more details later.

thank you for reading.

My first trading lecture

      As I remember it, it was funny. I woke up in the morning prepared and left. on my way I was a little excited, I thought to myself  "what would I learn?" I hope it will be fun! to be honest I didn't know much about trading.

   I arrived at the hall where the class was to hold. A lady to my right was sitting on a white plastic chair with a white plastic table in front of her. she was wearing a red blouse and black trousers with a conspicuous necklace and a big bangle. she look up at me as I approach her, we exchange pleasantries, I handed her my entrance money, she gave me a slip, I walk in and took my sit waiting for the program to start.

   the teacher came in, he was wearing a light brown suit with a white shirt and black shoes. at first, I actually thought he was also a student but as he walked to the stage, i knew he was the teacher.
The hall was full! by my count I think they where up to one thousand people in the hall and more people where coming in. within 30 minutes an image from a projector flashed on the wall at the stage, the teacher welcomed everyone and with a brief introduction of himself he started the class. he introduced the basic concept of  trading- buying and selling foreign currency- and he talk about how  trading in it's early days was for only top financial institutions and big companies basically, because they had the big cash required to trade, and how little guys like us where not allowed to trade, but as the internet was invented anyone who was interested could trade.

what he was saying was interesting, than a guy touched my arm, distracting me, I turned to him wondering what could be so important. the guy started talking about the cloths the teacher was wearing, how the suit may be cheap and how on stylish the black shoes where. in my mind I said gee's this guy must be a poor jealous fashion analysis, but, openly I just laughed.

  About two hours into the class, the electricity went off . than something happened which I did not expect.

Article One: Technical Indicators-Moving Average Convergence Divergence (MACD)

Moving Avergae Convergence Divergence (MACD) indicator was invented by Gerald Appel in 1970. he used it to identify changes in strength, direction, force and period of a trend in stock prices. although MACD was originally used for stock trading it is now used for  trading.

MACD is a lagging indicator, which shows the average of historical price movement and indicates new trend formation, be it bullish (buy) or bearish (sell).

MACD usually has three numbers. the first, is the number of periods used to calculate the faster moving average. the second is the number used to calculate the slower moving average. the third, is a bar chart or signal line used to calculate the moving average of the difference between the faster and the slower moving average. the first number is the faster line while the second number is the slower line of the MACD indicator. the first line responds to price movement fast, because the number of periods used to calculate the faster moving average line is short, while the second line responds to price movement slowly, because the number of periods used to calculate the slower moving average line is long.

when the MACD moving average lines move towards each other they are said to converge and when they move away from each other they are said to diverge this gives this indicator it's name Moving Average Convergence Divergence (MACD).

This indicator is best used when the  market has a definite trend, and it may give a wrong or conflicting data when the market is ranging.

Moving Average Convergence Divergence (MACD) crossover:

in 1986 Thomas Aspray added a histogram to Geralds Appel MACD indicator. he did this so he could know when the  MACD lines cross each other.

when the lines cross it's called a crossover. MACD cross over usually indicates a new trend formation. if the faster moving average line cross under the slower moving average and goes down it could indicate the start of a new bearish trend and if the faster moving average line crosses over the slower moving average and goes up it may indicate a new bullish trend. when the lines cross, at the point they cross the difference between them is zero, this means that there is no difference between the faster moving average and the slower moving average.

NOTE: just like all indicators the MACD may give false signals which could result in loss of money. The MACD is a good indicator but it should not be used as the only technical indicator while trading. other indicators should be used to complement it, this should be coupled with a sound understanding of fundamental analysis and all the other economic activities that control the forex market.

thank you for reading.