Day trading is a good way to trade financial markets for those who have limited amount of money. You can trade using leverage and increase your chances of making monthly and annual income with a few thousand bucks as initial capital. However, one has to have reliable day trading strategies, an edge and proper money management system. You need to have an edge to be able to make profit, a strategy to be able to apply your insights into some practical steps and a plan how you are going to limit risks. Today I want to talk more on the aspect of trading strategy and how you can use support and resistance levels to do that.

Firstly, I do believe you should always be trading seeing the big picture. You should know what is the main direction in the market (up or down) and trade only in the main direction of a trend. If you know that a trend is up you need to wait for a currency pair to go down to support level and start buying there. If the trend is down you need to wait for a currency to rally and reach some resistance level, then jump into a short trade.

The most recent examples with eur/jpy and gbp/jpy illustrate that very well. We know that the trend for Yen was down. It means we should be looking for opportunities to go long in eur/jpy. It also means we need to wait for the pair to go to support level. However, if you simply take traditional technical analysis you often end up with having a lot of technical support and resistance levels without knowing which one of them is going to work.

You need some price action showing that prices stopped dropping and the pair is ready to go up again. I noticed that 123 reversal pattern on 1 and 4 hour charts works best to spot a good support level where I can jump back into direction of the main trend. On the 16-17th and 23-24th of January two reversal patterns were formed near support and after that the pair rallied 220 and 450 pips. You simply had to place a buy stop order above point number 2 and go with the market when your order was opened.

This is how you can identify support and resistance best. You need to see volatility and bullish candles confirming that market has returned to its’ bullishness and ready to go up again.

See also:

Day trading tips
Day trading rules
Day trading

Euro has been rising for months against British pound. It was an expansion in the form of waves. Every bullish wave was followed by a bearish wave. However, we always saw higher highs and higher lows, which was a clear indication of an uptrend. However, the last wave up was very strong with minimum sideways action and very miserable retracements (counter trend moves). It was also fast. Just look at your daily chart to see this. The move is overextended and there has to be a correction.

In my opinion tomorrow’s data (BOE minutes) can influence the collapse in eur/gbp and form another bearish wave. I do not rule the possibility that this bearish move can also end the uptrend in the pair. I also believe it can be very sharp. The stronger the climb up, the stronger the reversal is when it finally comes. If this week fails to cause Euro collapse I will wait for a congestion of daily candles to be broken to go short. As of now there seems to be non, but if the price fails to go above today’s high, today’s low could be a good place to start shorting Euro against Pound.

Today I was looking at eur/jpy and gbp/jpy pairs and saw some bullishness continuation signs. It is rather difficult for most traders to stay bullish on pairs that have been running so strong for so long. Both pairs have soared from the middle of November. Bank of Japan bearish comments and upcoming elections cause Yen to collapse. Fundamental picture might not be as gloomy as most paint, but as we do not see any signs of reversal yet we should be trading Yen from short side.

If you look at 1 and 4 hour charts of both pairs you will see bullish triangles. Furthermore, both pairs are above their 200 simple moving averages. eur/jpy is also above its’ 50 simple moving average. Of course, technical indicators might not be that good forecasters for upcoming moves, but they do show current sentiment pretty well.

We should also remember that we have very important decisions coming from central banks of Europe and England tomorrow. BOE interest rate decision is at 12:00 GMT and ECB releases its’ decision 45 minutes later. Everybody, of course will concentrate more on how those guys articulate their monetary policy or any changes in their speech rather than the fact whether they keep interest rates unchanged or not.

Looking at the eur/usd and gbp/usd you can see some positioning taking place. Lots of shorts in Euro and Pound have been covered and prices jumped off their supports. eur/jpy and gbp/jpy pairs do not reflect that, but the same bearishness that US dollar shows might appear in Japanese Yen pairs sooner rather than later.

When you see that some Forex pair is in a trend you should stay with the trend as long as you see clear reversal signs and trade only in the direction of the trend. As eur/jpy and gbp/jpy have been in a prolonged trend you should still be willing to go long if you see that the move has not exhausted itself. It looks that it hasn’t yet.

Today I want to share with you eur/aud support and resistance levels. The pair is in a clear range and a few days ago after failing to break the top of the range it is now headed to the bottom of it. It is important to trade in the direction of a trend or swing, so one should be looking how to short Euro against Australian dollar. Wait for rallies before you start shorting.

Let us define resistance levels:

They are: 1.2810, 1.2670, 1.2586, 1.2536

Let us look at support levels now:

They are: 1.2440, 1.2385, 1.2280, 1.2150.

As always even numbers often serve as exit areas for big boys. Have this in mind too.

For more: eur/aud

Trading news in forex market is one of my favorite trading systems that I have been using for about eight years. Most traders do not recommend trading news due to extreme volatility around fundamental news releases, but if you know how to limit your losses and increase profits by news trading, it can add consistent profits to your forex trading account on a monthly basis. Below are some of the actions that I take before trading news.
Before trading news or chart patterns or just support and resistance, I do some analysis, ask myself some questions and then trade accordingly.
Let's say we have some news from USA after 4 hours and 20 minutes. I start screening all pairs looking for the best technical setups and do analysis of technical as well as fundamental conditions in the market. I try to identify how much a pair is overbought or oversold on 1hour, 4hour and daily charts.
I take each dollar pair and analyze the charts. Let us say the first pair on the list is nzd/usd. By looking at the chart of the pair I see that it is slightly oversold on 1hour chart and neither oversold nor overbought on 4hour chart. I also see that on daily chart it hit important support. So, if it is neither overbought, nor oversold it is not a top trade where I could risk 10 percent of my account. No way. It is not even a trade where I can afford risking 5 percent. I would say 2 percent would be ok. Generally speaking, risking more than 2 percent of your account in day trading is not advisable. You can accumulate a line of positions in a trend and risk more than 10 percent, but you should not do that in day trading.
After I have decided on these things I check if there is no other data from New Zealand or USA that could affect the pair before that specific news which I am waiting for comes out. If there isn’t, I can prepare for placing orders, if there is, I might choose not to trade the pair at all. Why? I need a good package of facts that would show me that this pair is good for trading this or that particular piece of news.
What do I do after I have identified technical set ups and conditions and evaluated fundamental picture of the pair? I simply define the upper part of the range and lower part of the range which I expect to be broken after news release. Then I place a sell order below the lower part of the range and a buy order above the upper part of the range. When news hits the market either my buy or sell position is opened and I move together with the short term trend. I also cancel the order which has not been opened. As news trading method is short term I tend to close my position before the end of the day, usually with nice profit.

So, these are some of the questions that I ask myself screening all dollar pairs while getting ready to trade news and trying to single out which piece of news is of top importance.
See also: How to make money trading
http://trend0.blogspot.com/

In the post I want to share a few thoughts regarding following Forex signals. I know that those who come to Forex market and seeing that it is not easy at all to make money they are tempted to start searching for Forex signal providers, because they are not sure if they ever be able to make money trading themselves. The problem is not whether you are going to find one or not. The problem that you have to solve is to ask yourself whether you want to become a better trader or you want others to make decisions on your behalf. If you choose to follow signals you will hardly ever be able to become a successful trader.

How can you? If every trade you make you follow somebody else’s advice and strategy! These are not your trading decisions. These are signals provider’s decisions. To tell the truth I believe following somebody else’s advice will weaken your chances to make good trading decisions on your own. Those guys that provide signals do their homework, chart analysis, fundamental studies and etc. So should you if you want to be better in Forex. Trading, losing, making profits is part of the game to gaining perfection in trading. You learn from your own experience. Well, you can from others too, but that is hardly the case.

Who is responsible if you lose everything? Well, you can blame the signal provider. He will probably try to prove that you did something wrong. What if he decides to stop giving the services? What happens then? Would you try to find another one or start investing in your own education? I am convinced it does not take so much time to create your trading systems and style as most people imagine. Even if it does, it is worthwhile for you will gain priceless education and if you are successful you will be more than happy.

In the process you will find what kind of trader you are: day trader, swing trader or trend trader. You will also decide whether you want to continue speculating or decide to invest. You will find out a lot of things. I do think that trading psychology, risk management and a good trading system are the backbone of successful trading. And you, you alone will have to achieve it on your own. So, the choice is yours. Have a nice day.

Best Forex trading system.

What is more important: a good trading system or a trader’s personality? In short, both are important, but if you cannot control yourself and follow your plan with discipline no trading system will help you. If, on the other hand, you diligently analyze markets and are able to see what works under different market conditions you will be able to use not only one, but a number systems that will be good for that specific state market is in at that specific moment.

Ability to see what state market is in is a key to successful trading. If you are a trend trader and want to apply trend trading strategy for a range bound market you will definitely be disappointed. If you want to be a good trader you have to expand your knowledge. I do not agree with people who say you should follow only one currency pair and trade only small time frames. You will not be able to see larger picture if you follow these kind of tips.

Yes, you can be a good day trader if you want. There is nothing wrong with that. But you can expand your opportunities by analyzing most currency pairs and then selecting (speculating) which are going to be leaders in upcoming move and those that will (possibly) present you with the biggest profits odds.

There will be times when (after analyzing the market) you decide not to trade and maybe not to trade the whole month. On other occasions you would be willing to make a dozen pairs and add to your position by building a large line that you will close with big profit. Seeing big picture and ability to control yourself puts you in a position where you are able to see the biggest opportunities and to squeeze the biggest profits from those opportunities.

The same can be said about day trading, scalping, range trading or any other trading method you are willing to use. You need to see the best times for using those trading methods. Yes, you can be a very profitable trader using one system, but that depends on a very simple fact whether you are able to analytically evaluate the market and control your emotions while waiting for best opportunities.
Ok, sorry if my thoughts were too erratic. Hope you understood my point.

I wrote a post on top trading strategies a few days ago and if you are interested you can find it here: Trend: Top 15 Forex trading strategies for profit

I have been interested in financial markets for a long time now. If I remember well it could be around 8 years. During that time I have had a lot of good and bad experiences. As you may understand trading is very risky and by having very high expectations to get a lot of money very fast you may be quite disappointed... very fast! Like any other job it requires time to master and you cannot expect to become a professional over a night. Being a trader is a unique profession as nobody guarantees to you that you will get a salary each month. No, you may actually pay yourself to the market and its' participants, because you do not know how to trade it.

One thing that I have learned immediately after starting trading is that a trend is your friend. Another thing that I learned was that trends do not happen very often. So, my friend would not visit me a lot and I would have to wait for him many months. What I was not told was that range was not my enemy either. I understood it myself after trading Forex for about three years. I started noticing certain technical patterns which are repetitive throughout markets and one can use his technical skills to trade those patterns.

Range trading can be very profitable if you have proper instruments in your trading portfolio. One of the instruments is understanding of support and resistance levels. In a range prices go to the highest level of the range and fall back to the lowest level of the range. Prices usually reverse at those levels. Just by having this knowledge you can make a lot of profitable decisions every week trading various pairs in Forex market, stocks in Stock markets and commodities in futures market. You will need more than that, but without 'that' you would better not think about 'more'.

Various technical indicators will help you to identify exact entry points for your trades. I am going to discuss those in my future posts. For the time being you have to know that support and resistance are key elements in range trading. Remember it, for you will need it any time you sit down to trade during range seasons in financial markets.

See also:

Gold, silver

Trading currencies or other securities on the first day of a week can be quite tricky. I would not say that it is difficult, but not easy. How come? The first day of the week usually has low volatility and generally nothing important happens in terms of fundamental analysis. I try not to trade on Mondays, if I do not see extremely good risk/reward ratio trades. Occasionally, I might have some trades from previous week (when I go in the direction of the prevailing trend and try to squeeze all possible juice from the move). But that happens very rarely.

However, as I like watching for tendencies I know of certain opportunities that are there on Mondays. What happens on Monday often depends on what happened on Friday. This isn’t that I expect to see every week, but I still follow price action on the last day of the week in order to predict what I can expect in the beginning of the next week. What I want to know about Friday is whether it was very volatile or not. Did the prices move strongly or the market did not move much. Why does that interest me? I noticed a tendency that after very volatile Fridays we have pretty sharp reversals on Mondays. This as you may understand creates excellent opportunities to trade a reversal on Monday and make some nice cash.

Talking from a technical point of view I would want to see a signal about an upcoming reversal in a pair I expect to reverse. What kind of signal would I expect to see? In most cases that would be a 123 structure, which is known as a reversal pattern in technical analysis. Another pattern I would wait for is head and shoulders. That is another pattern indicating a possible reversal. So, if a currency pair moved sharply upwards on Friday and during Sunday opening and Asian session formed one of the above mentioned patterns I would be willing to short the currency pair when the pattern was confirmed (by going through number 2 in 123 pattern and going below the neckline in head and shoulders pattern. I would place sell stop order below number 2 in 123 pattern and the same order below the neckline of head and shoulders pattern.

This Friday was a pretty volatile day, so there is a chance of a reversal in some currency pairs on Monday. I will particularly close gbp/usd more carefully and wait for a reversal at the point 1.5820. Look at the chart below.

See also:

Long term or intraday trading, swing trading, day trading strategies and rules for dummies, stock and share trading tips and strategies

Today I want to talk a little about trading strategy that quite a lot of day traders enjoy. It is economic news trading system. I know that no investor would consider using this kind of approach in trading for a lot of reasons, but a person who might be starting his/her career in trading it is useful to know about this trading method and possible profits as well as risks involved with it.

You probably know that all investors want to have a thorough understanding of a specific economy he is going to invest to. Fundamental news releases can convey it (in part) to investor. That’s why all traders follow what numbers are released each week from different countries and make decisions about possible areas of investing their capital.

The good news for day trader is that when the news is released it very often creates volatility in the financial markets which a trader can use to his advantage to make some nice cash. It is difficult to make money when markets are not moving anywhere. It is quite easy when they do.
The best part about this strategy is: even though a trader trades a fundamental event he does not necessarily have to know anything about fundamental analysis. One just has to know that a news release can create big moves and use this knowledge to place orders outside the most recent range (the most recent high and low) with an expectation that those would be triggered after the news is actually released.

One would naturally place a long order above the most recent high and a short order below the most recent low. The rest might be obvious for those who know what happens in the first fifteen minutes after a news release. Prices usually go wild and start moving upwards or downwards. One of the orders will be opened. And that order will start showing profit very fast. After a few minutes trader will have to close the second order which was not opened. Then you continue going forward with the market with the position that was opened as long as volatility is present. When it goes down you exit the game. Most often with nice profit.

I hope you see how you can trade fundamental news events. For more trading strategies you can visit a website trends and find out what you need. Read also articles: support, range trading technical analysis and resistance levels.

Support and resistance is one of the most important price action tools in technical analysis. It helps an average trader to analyze all financial markets, not only forex. Personally, I have not used any technical indicators for a number of years in my trading and relied purely on support and resistance levels. I think this is due to the fact that those levels are psychological areas and most traders know that. That is why they usually stop trading when a price approaches important support or resistance level and watch price action there. Depending on what kind of traders they are they might try to trade a breakout or make a reversal trade.

Generally speaking support and resistance levels are areas where supply and demand meets. If price has been going up for some time and hitting a certain area jumped off it and was not able to break through, we would call that area resistance. And vice versa, if the price in any given currency pair was going down and suddenly jumped off a certain level and was not able to go down any further, we would call that area support. If price hits certain level several times and is rejected that level could be called very important support or resistance. Sometimes a price can be contained between support and resistance areas for many months until a break comes. So, every newbie trader should be concerned about those levels and study them on a daily basis, analyze them on charts and make trading decisions based on the conclusions made from those studies.

There are a few possibilities how these levels can be traded. I usually have two strategies to trade support and resistance. One is my range trading strategy and another is breakout trading strategy. When prices are in ranges for months and fluctuate between support and resistance levels I look for reversal patterns at the top and bottom of those ranges. Let’s say I studied my charts in eur/usd pair and decided that support for the pair is 1.3600 and resistance is 1.4300. Having this information I watch very carefully price action when the pair approaches 1.36 level. What I look for are certain reversal structures like 123 pattern, two support points that are usually made the same day and price is not able to pass through those points. I would also check some candle formations that would indicate to me that bears’ power is exhausted. Then I would probably place a limit buy order above that day’s high and would wait for it to be opened. If it is opened I just go with the market and move my stops accordingly.

Another way to trade these levels is to wait for a breakout. Although prices stay in ranges for a long time they finally break out and pairs start trending. The best way to trade a breakout is to place a limit order above the resistance and a support level and wait for the level to be broken. I also noticed that breakouts usually happen when there are some important news announcements, very often on Fridays. So, to filter some false breakouts you could wait not only for the level to be broken, but also try to combine fundamental news releases and technical trading. Place limit orders only when there is important news to be released. In this way the chances for a true breakout increase. When the order is opened, go with the market and move your stops accordingly.

See also:

Trend trading
What is MACD
Forex factory

Throughout my trading career I have used one trading system that is very risky, but also very profitable and that is economic news trading system. Not many traders want to practice this method, but if you know how to do it, you can possibly make money every week, because there is always some economic news coming. Usually there could be about 2 or 4 important news coming from some country and using some technical set ups you can trade each one of them.

Generally speaking, if you know what support and resistance is, you know half the job. So, what you need to do is to define a resistance level on 1 hour chart and a support level on 1 hour chart. The idea is: when news come out it gives such a stimulus to currency pairs that they sometimes jump more than one hundred pips per second. So, either your resistance or support level is broken. Now, before news come you place an order below support and one more order above resistance. When the price reaches either one of those levels your order is opened and you go with the price.

When the price runs out of steam you close your order and spend the rest of the day as you wish. In fact, this type of system does not require you much time to invest. You just mark those support and resistance levels before news and place the orders. If the market does not go wild and your orders are not opened you just remove them and wait for the other news release, perhaps another day.

I particularly like news from Great Britain as pound is a very volatile pair and news creates some nice moves in pound pairs and creates much bigger opportunities than in any other pair. I also enjoy Canadian dollar pairs as these make some nice moves too. eur/cad and gbp/cad are the biggest movers in Canadian dollar pairs. You can definitely use eur/usd or Japanese yen pairs to trade these macroeconomic events as well.

Before you trade the system I would recommend practicing it on a demo account and see for yourself whether it fits your trading style and personality. And while trading never risk more than you can afford. Learn to trade while practicing and only then play with real money. Good luck.

See also:
Trend
RSI
MACD

I have been looking at eur/aud pair recently expecting it to reverse at 1.3230 level. The level was hit on the 11th of May this year while the pair was going down. On the 8th of this month the level was revisited again. I usually expect prices to reverse when a security comes back to the same territory after a few months (at least a slight reversal). However, this time the price did not manage to go up and plunged decisively through 1.3230 point today. The pair might come back to visit previous level again, but if it does not, my strategy would be selling rallies.

I like trading range breakouts especially if the securities have stayed in it at least a month (the longer the better). I want to see at least two points of support that would be established during the range if I expect a breakout downwards and two points of resistance that would be established during the range if I expect a breakout upwards. The most recent example in eur/aud deals with a break downwards and a sell stop should have been placed below 1.3228 level today. At the break we would be going with the flow.

This kind of trading has both advantages and disadvantages. The advantage is of course that when breakout occurs there is pretty strong power behind the move as a lot of sell orders below the breakout level are triggered. It is also good when a breakout is triggered by some kind of fundamental news. Then it is more often genuine than fake. After a prolonged range the price range usually gets narrower until a breakout occurs and when it happens, price gets huge momentum and is moving very strong (usually without looking backwards). Not all situations are ideal of course. Looking at today’s breakout I am not absolutely sure if we are going to see a straightforward flight to 1.2925 (next support level). However, going down in waves is highly probable.

Disadvantage of trading breakouts is that we have too many false breakouts nowadays. Price goes through breakout zone and retraces back, it goes again through the zone and comes back again. You have to take serious measures to control risks using this type of trading strategy. Do not risk more than 2 percent of your deposit on your first trade. If the price keeps moving in the direction of a breakout you can add to a position and as time goes on build a line of positions. Just be sure to move your stops too (to protect your profit).

Trend analysis

eur/aud