Forex Blog

Heikin-Ashi is charting technique (which can be even called an indicator) that substitutes the traditional Japanese candles on the chart with the more «balanced» versions of the candles. Each parameter of a candle — Close, Open, High and Low — is derived from the common candle’s parameters via the special formulas. The purpose of this charting technique is to eliminate the irregularities present on the chart and show the price trends and consolidations more clearly. Today I uploaded an e-book about Heikin-Ashi technique to my site. It’s called Using The Heikin-Ashi Trading Technique and was written by Dan Valcu. It’s quite a short e-book that features a very detailed description of Heikin-Ashi, explains its constructing process and offers the trading strategies that can be used with the Heikin-Ashi charts. If you want to find a new way of looking at the charts, I strongly recommend learning the Heikin-Ashi technique with this e-book.

By the way, the MetaTrader 4 software has Heikin-Ashi as the standard indicator. So, you don’t need to search for it or create one yourself. Just read about this technique, attach the indicator to your MT4 chart and have fun trading.

Are your technical skills good enough to earn by themselves? Can you trade without any fundamental information? Is technical analysis can be considered a self-sufficient tool at all? You can try to find the answers to these questions using an interesting financial training tool from Inspectd.com. It shows you only a bare six months chart of an unknown stock with only one moving average as an indicator. You have to decide whether to buy, sell, or skip this stock, the period of holding if you open a position and a percentage of funds to use. Then the stock and is further chart is revealed and you get your profit or loss. A very simple concept but it’s very addictive and very interesting in terms of the minimalistic technical analysis.

Why write about stock market thingie here? Because wouldn’t be very different if the same was implemented for the Forex trading. In fact, before you know the name of the stock it can be completely anything. There are only two factors that make it more useful to stocks traders rather than Forex ones. First, stock’s price range — it can be seen before you decide on the trade and knowing that it’s some penny stock or some heavy-weight stock might help sometimes. Second, the market volume is shown — there is no real market volume indicator in Forex. Nevertheless the number of price changes in a period is often used in place of the market volume in Forex trading. So, it’s not that big difference.

Anyway, I’ve found Inspectd.com to be both interesting as a trading emulator and as a technical analysis trainer. If you like any of these, you’ll like Inspect.com too. It’s a very new site (launched less than a month ago), but it’s already quite popular and a lot of new features can be expected soon.

Today EUR/USD renewed its long term maximum once again - 1.3842 is the highest rate since the November 1995. The lack of important economical releases for this day didn’t stop EUR/USD bulls from holding Euro above the crucial 1.3800 mark. But how will EUR/USD behave in the near future? Will it go for 1.4000 and then for the new absolute historical maximums? Or will it just stuck in the 1.3800-1.3900 range until the bearish force will pull it down? Let’s look at this EUR/USD weekly chart:

Don’t be confused with the red arrow - it’s just a purposed direction for the next medium term market movement. As seen on the chart a “W” formation of the Wolfe Waves theory can be clearly recognized within the first 4 red-marked waves. The next wave should follow as the correctional for these four. Looking at the chart this forecast is quite obvious. But I am almost sure that before the correction will start (which in my opinion will last for 4-5 weeks with the bottom around 1.3600) current bullish wave will live for another one or two weeks leading EUR/USD to around 1.3900 level. But nevertheless, even if the above mentioned correction will take its place, the further EUR/USD behavior is more bullish-orientated with the possible 1.3400-1.34500 targets by the end of 2007.

When it comes to Forex trading it is usually associated intraday trading or more rarely - intraweek trading. This is caused mainly by the high volatility of major currency pairs which makes them potentially profitable in the small amounts of time, while making it too risky in longer terms. Second reason for the short-term Forex trading being more popular is a high leverage margin accounts - 1:100 or even higher – this increases single position risk and profit making it deadly risky in a long term.

Long-term trading in Forex can be defined as deliberate maintaining of open positions for more than a week. Under one week term is still considered a short-term for Forex – position lives through just a few different news releases and is not caused by long-term forecasting. Whereas position which is kept open for several weeks usually lives through some news releases on the same topic (but with different) and thus requires some long-term forecasting and technical analysis on daily/weekly charts.

Success in Forex trading (like in any other financial trading) depends greatly on trader’s psychology and emotions. Some traders are comfortable with fast and exciting (if trading can be exciting) trading style when positions are open and closed within minutes. Others prefer keeping their positions open for several hours – watch them rise or fall and have some time to react to the market moves. Trying to trade in the time periods that don’t suit your character type won’t bring you any profit. To trade successfully one must be emotionally integral and calm. If trader is uncomfortable with intraday or daily trading he needs to try something different. Long-term Forex trading is good for:

1. Traders that don’t have time to sit in front of their terminal for the whole day.
2. Traders that like to spend a lot of time in fundamental or technical analysis.
3. Those that can spend more than one day when it comes to the actual trading decision.

If you feel that you fall into one of the above categories of Forex traders I suggest you at least to try long-term trading. Perhaps, it will dramatically improve your trading results.
The best charts for the long-term trading in Forex market are daily and weekly charts (and other charts of bigger periods). Personally I prefer using a weekly chart for EUR/USD pair, since technical analysis patterns can be clearly seen on such chart (unlike short-term charts that often behave against all possible predictions). Determining a trend or breakout is not hard on the long-term charts usually. But even if a trader fails to recognize a pattern and opens a wrong position he will have many days to close it, and often he will have a chance to close even a bad position with a small profit. Using fundamental analysis in long-term Forex trading isn’t hard too. Trader just needs to analyze general trades in central banks’ interest rates decisions and act according to possible carry trade trends. Long-term trader also shouldn’t forget about general global trends – like oil prices, commodities, political situation and others. Maintaining stop-losses is very important and especially if trader uses high leverage – stop-loss shouldn’t be to far away from the open price. Trailing stop is good, but it should be manual, not automatic. Stop loss moving should be based on the Forex market behavior. Position target should be set according to the trader’s plan – when analyzing the long-term chart it is really not difficult to determine the most probable targets for the currency pair to land.

So, if you think that short-term Forex trading doesn’t posses a good potential for you as a Forex trader – try long-term trading. In Forex it is still good as it is with stocks. Just don’t forget that you are trading with leverage, that main trends are caused by central banks’ interest rates decisions and that stop-loss/target-profit should be placed according to charts technical analysis.