# The Best Book To Learn Forex Trading - PowerPoint PPT Presentation

The Best Book To Learn Forex Trading

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The Best Book To Learn Forex Trading

## The Best Book To Learn Forex Trading

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8. intuition are more helpful. However, two very simple methodscanbeusefulandyoucanusethemtoidentifya reversalwithmediocresuccess.Inthefirstmethodyoucan drawtwoExponentialMovingAveragesforexampleEMA(9) andEMA(15).WhenthefastEMA(9)crossoverorcrossunder theslowEMA(15),itisasignofareversal.Theothermethod is using of two regression lines. In an uptrend draw a regressionlinetangenttolowerlowsandoneregression linetangenttothelatesttwohigherhighs.Ifthesetwolines crosseachotherinsomepointitcanbeapotentialreversal point and if not, the trend may probably continue. In downtrend,drawalinetangenttohigherhighsandaline tangenttothelatesttwolowerlows.Iftwolinescrosseach otherthecrosspointcanbeapotentialreversalandifnot thedowntrendmorelikelywillcontinue. Figure6.4Confirmingareversalbycrossoftwo regressionlines 9

9. Figure6.5Confirmingareversalbycrossoftwo regressionlines Figure6.6Confirmingareversalbycrossoverofafast andaslowEMA 10

10. 12.ChartPatternsTradingStrategy 12.1TheMostProfitableForexChartPatterns Formanyreasons,Forexchartsusuallyformsomerepeated patterns.Ifyouworkwiththemandyoureyesaretrainedby lookingatthem,thesepatternsareverypowerfultoolsto guideyouduringyourtrades.Therearemanypatternsand eachofthemhasitsnamebuttobesimpleandshortI explainhereonlythemostprofitablepatternswhichalways workandyoucanrelyon. 12.1.1MandW(Bat)Patterns Thesearethemostfrequentchartpatternsandmoreor lesshaveMorWshape.Sometimes,onelegextendsor anotherleggetsshort. Figure12.1.1.1AW(bat)pattern 23

11. Thesearenotveryaccuratesignalsbuttheyhelpyoutoget aroughestimationofacurrencymove. 12.1.2Triangle(WeakeningMandStrengtheningW)Patterns ContrarytoMandWpatterns,triangle(orweakeningMand strengtheningWpatterns)areveryaccuratesignals(0.8or moreprobable).AweakeningMisformedwhenanupward (bullish)moveiscompleted,thenaweakerdownwardmove (onethirdorhalfofthefirstmove)happensandthenavery weak bullish (usually one candle) comes after it. After completion of the third move you can say with a high confidencethatthecurrencypricewillsharplydrop.Thisis the place you should sell the currency and make a nice profit.StrengtheningWpatternhasjustthesamestorybut inareverseorder. Figure12.1.2.1Atrianglepattern 24

12. Thepriceintrianglepatternsusuallyconvergestoatight rangeandthentendstobreakout.Ilovetrianglepatterns becausetheyareverystrongsignalsandnearlyalwaysare correct. Figure12.1.2.2Atrianglepattern 12.1.3Cascade(WeakeningUpwardorDownward)Patterns These are in fact upward or downward price moves that followacurvedpathandgetexhaustedduringthetime.For example,anupwardmovestartswiththreebullishcandles, then follows by one bearish candle, then two bullish and againonebearishandhenceforth.Itisobviousthatthe movegetsweakenandthentendstoreverse(amajoror minorreversaldependsonthesignificanceofsupportor resistancelevel,forexampleifaweakeningupwardcascade reachesamajorresistancelevelabigreversalishighly 25

15. Figure15.2Volume-priceanalysistrading Ontheabovepicture,arrow1showsashortbarbutthe volumespikesignalstheendofthedownwardmoveand dominanceofthebuyers.Asyousee,alongmovestarts immediately. Arrow 2 shows a short head pin bar. The relevantvolumespikesignalsthatsellershavetakenoverat higherhighandthenextshortmoveisconfirmed.Arrow3 anditsvolumespikeindicatesthedominanceofthebuyers at support level (lower low) and hence a long move is expected (that has already happened). Arrow 4 shows an eveningstarpinbaratresistancelevel.Thespikeinformsus thatashortmoveisontheway. Exercise10.OnhistoricalForexchartsactivatevolumeindicatorandfind somevolumespikes.Trytointerpretthepricechangesinrelationwith thevolumespikes. 44

16. 17.SentimentTradingStrategy 17.1WhatIsTradersSentiment? One of the most influential factors in financial markets including Forex is supply-demand pressure (or buyers- sellerspressure).InForex,asasparsemarket,wearenot abletomeasurethisfactorinrealtime,butfortunately,a verycloseestimationofitisinhandthatiscalledsentiment. Sentiment,asitisunderstandablefromthewordisthefeel oropinionofthetradersaboutthemarket.Inagiventime,a partofthetraderssensethemarketasbullishandtendto openlongpositionsandtheotherpartsensethemarketas bearish and tend to open short positions. This game is repeatedallthetimeandtheoppositesentimentsofthe massesactasaconsiderablesupply-demandforce.So,the trick is to look at the sentiment charts and follow the dominantgroup. Figure17.1.1Bull/bearsentimentevolvement 51

17. Fortunately,someofthebigbrokerspublishthesentiment oftheirtradersinrealtimeandthesetoolsarevaluable gemstoinformushowthecommunityoftradersthinks aboutthemarket.Thissentimentissimplyshowninpercent (percentoflongandshortopenpositions).Amongthebest sentimentchartsIhavetonameOanda,DukascopyBankand SaxoBank.Especially,Oandahasdoneagreatjobtogenerate avarietyofnice,informativechartsthatisquitefittoour purpose. http://fxtrade.oanda.com/analysis/open-position-ratios.shtml https://www.dukascopy.com/swiss/english/marketwatch/ sentiment http://www.saxobank.com/market-insight/saxotools/forex- open-positions 17.2HowtoUseSentimentChartsinTrading? Sentimentchartsshowlongandshortsentimentsinpercent intwocolorsrespectivelyblue(orgreen)andred.Asshown on the picture, for example in USD/JPY pair, the long sentiment(openpositions)is54%andtheshortsentiment (open positions) is 46%. We call these figures absolute sentimentastheyshowusthecumulativesentimentofthe traders(totalopenpositions)fromthecurrenttimedate backtoevenafewmonthsago.Theimportantpointhereis thatthesentimentchartsmaynotreflectthemostrecent sentiment of traders because they carry the sentiment informationofthemassfromthepastdates. 52