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Monday, October 7, 2013

Top 5 Characteristics of a Successful Online Forex Trader

Not anybody can be a Online Forex trader. Trading occasionally, as a side income or professionally requires certain skills and characteristics.
Are you up for it? Here are 5 critical traits that any trader needs.
  1. Seeing the big picture: Are you able to separate the small details from the bigger picture? This is critical in two aspects. First, separating the current movements from the bigger trend. The second aspect relates to money management: being able to separate your current trade from the situation in your account and the bigger plan.
  2. Patience: Too many traders lack the patience to educate themselves before jumping into a trade, or don’t wait for a really good opportunity, as Andriy mentions. Others don’t wait long enough for their trade to run its course. Or, upon meeting success, they have the patience to continue trading in the same position sizes, and quickly double the positions, hoping to win more but actually burning their account fast.
  3. Being able to adapt: Market conditions change all the time, and a good trader needs to be able to adapt. Your trading system cannot work well forever. Changes in patterns occur all the time, and you’ll need to tweak the system, if not completely change it. Being able to adapt also applies to fundamental analysis: strong currencies may hit the wall when the tide turns against their respective economy. A weak currency can help a country’s economy recover over time.
  4. Cautiousness: When uncertainty is high in the markets, a good trader will be extra careful when taking risks. This means focusing on more predictable currencies, lowering position sizes when necessary or even taking a break from the markets. Winning in forex trading isn’t limited to making winning trades, but also minimizing losing ones.
  5. Identifying your weaknesses: If you are able to be fully aware of your weaknesses, you are half the way to solving your problems. All the important traits mentioned above will be closer to reach if you can see when you are too far from them and acknowledge them. Your basic character will not change, but you’ll still adapt better to changing conditions and you’ll be able to stay a bit more patient than usual.
What traits are important in your opinion? Can you identify your strengths and your weaknesses?

The Hiden Truth About Relative Strength Index(RSI): Online Forex Trading.

Relative Strength Index, or RSI, is similar to the stochastic in that it identifies overbought and oversold conditions in the market. It is also scaled from 0 to 100. Typically, readings below 30 indicate oversold, while readings over 70 indicate overbought.



How to Trade Using RSI

RSI can be used just like the stochastic. We can use it to pick potential tops and bottoms depending on whether the market is overbought or oversold.
Below is a 4-hour chart of EUR/USD.





EUR/USD had been dropping the week, falling about 400 pips over the course of two weeks.


On June 7, it was already trading below the 1.2000 handle. However, RSI dropped below 30, signalling that there might be no more sellers left in the market and that the move could be over. Price then reversed and headed back up over the next couple of weeks.

Determining the Trend using RSI

RSI is a very popular tool because it can also be used to confirm trend formations. If you think a trend is forming, take a quick look at the RSI and look at whether it is above or below 50.
If you are looking at a possible uptrend, then make sure the RSI is above 50. If you are looking at a possible downtrend, then make sure the RSI is below 50.





In the beginning of the chart above, we can see that a possible downtrend was forming. To avoid fake outs, we can wait for RSI to cross below 50 to confirm our trend. Sure enough, as RSI passes below 50, it is a good confirmation that a downtrend has actually formed. 



Bollinger Bands As Online Forex Best Scalping Indicator.

For better understanding am going to compare trading to building a house. You wouldn’t use a hammer on a screw, right? Nor would you use a buzz saw to drive in nails. There’s a proper tool for each situation.
Just like in trading, some trading tools and indicators are best used in particular environments or situations. So, the more tools you have, the better you can adapt to the ever changing market environment.
Or if you want to focus on a few specific trading environments or tools, that’s cool too. It’s good to have a specialist when installing your electricity or plumbing in a house, just like it’s cool to be a Bollinger Band.

There are a million different ways to grab some pips! and Bollinger Bands is one of the best especially on scalping.
Bollinger Bands, a chart indicator developed by John Bollinger, are used to measure a market’s volatility.
Basically, this little tool tells us whether the market is quiet or whether the market is LOUD! When the market is quiet, the bands contract and when the market is LOUD, the bands expand.
Notice on the chart below that when price is quiet, the bands are close together. When price moves up, the bands spread apart.

   
That’s all there is to it. Yes, I could go on and bore you by going into the history of the Bollinger Band, how it is calculated, the mathematical formulas behind it, and so on and so forth, but I really didn’t feel like typing it all out.
In all honesty, you don’t need to know any of that junk. I think it’s more important that I show you some ways you can apply the Bollinger Bands to your trading.
Note: If you really want to learn about the calculations of a Bollinger Band, then you can go to www.bollingerbands.com.

The Bollinger Bounce

One thing you should know about Bollinger Bands is that price tends to return to the middle of the bands. That is the whole idea behind the Bollinger bounce. By looking at the chart below, can you tell us where the price might go next?




If you said down, then you are correct! As you can see, the price settled back down towards the middle area of the bands.



What you just saw was a classic Bollinger Bounce. The reason these bounces occur is because Bollinger bands act like dynamic support and resistance levels.
The longer the time frame you are in, the stronger these bands tend to be. Many traders have developed systems that thrive on these bounces and this strategy is best used when the market is ranging and there is no clear trend.
Now let’s look at a way to use Bollinger Bands when the market does trend.

Bollinger Squeeze

The Bollinger Squeeze is pretty self-explanatory. When the bands squeeze together, it usually means that a breakout is getting ready to happen.
If the candles start to break out above the top band, then the move will usually continue to go up. If the candles start to break out below the lower band, then price will usually continue to go down.





Looking at the chart above, you can see the bands squeezing together. The price has just started to break out of the top band. Based on this information, where do you think the price will go?



If you said up, you are correct again!
This is how a typical Bollinger Squeeze works.
This strategy is designed for you to catch a move as early as possible. Setups like these don’t occur every day, but you can probably spot them a few times a week if you are looking at a 15-minute chart.
There are many other things you can do with Bollinger Bands, but these are the 2 most common strategies associated with them.

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