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Trading In A Forex Chanel

As far as Forex technical analysis is concerned, there are waves, and curves, and intersections, and every variance in between, but there are none clearer than the relatively simple Forex channel. So simple, as a matter of fact, that you almost don't have to draw any physical lines to see it on the charts.

The Forex channel is a great way to trade because of its simplicity. It not only gives you support and resistance in the Forex market, but it also gives you a trading range.

Simple charting

The whole concept of a Forex channel deals directly with trend lines. In order for a trend line to considered legitimate it should have at least three points. Obviously, the more points involved in the line, the more accurate the trend will be. These trend lines should have a top one and a bottom one.

This is where the definition of a Forex channel comes into play. In order for it to be a Forex channel, the top line and the bottom line must be parallel; otherwise it is considered something else. The frequency of this occurrence will surprise you.
You don't have to be a mathematical genius to use this method. There are no equations; as a matter of fact there's no math involved at all. In the old days when people bought weekly chart books, this was done with a ruler or a straight edge. Now, with live online Forex charts, the ability is as easy as a click of a button.

Once you can see an area of parallel lines on chart, you know that in front of you is a Forex channel. You know where the resistance, and you know where the support is.

Types of channels

There are three types involving a Forex channel, and the types are as obvious as the method.
There is the ascending Forex channel which shows an uptrend in the market. In this kind of situation there are going to be higher highs and lower lows. The resistance is going to be continually higher as the days go on along with the support.

There is the descending Forex channel which shows a downtrend in the market. This bearish version will show the highs of the day on a lower level and the market continues as well as the lows of the day being increasingly lower.

Then there is the probably the most frustrating one of the three. The horizontal channel. This kind of market shows a trading range. Oftentimes in slow market situations, the charts will show this kind of Forex channel. It's nothing to get bullish or bearish about, and it always appears that the Forex market is ready to do something but it is waiting around for an excuse to break out. It may or it may not. In either case, it's a great market to trade as long as you keep an eye on things to make sure there is no break out.

Keep an eye on things

You should always keep an eye on how the market treats your resistance and support levels. Because once these lines are definitively crossed, they still remain a line; whether it be support or resistance. That's one of the beauties of the Forex channel system. You don't necessarily leave a channel; in most cases all you are doing it entering another one.

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Understanding The Triangle Formation

Study and analysis of trading patterns forms an important part of your forex education. Although they are not by themselves actionable, in that they are prone to failures and false signals, patterns and formations can be very useful as advance warning about a possible trade.

There are many formations, like head and shoulders, the various kinds of triangles, tops and bottoms, but among them arguably one of the most common and important one is the triangle.
In this article, we’ll take a brief look at what causes this formation, and its properties. The triangle formation is in most cases an indicator of consolidation. This consolidation may be followed by a reversal, or a continuation, and the triangle by itself does not say which way the price action will go.

During the formation of a triangle, traders are unsure about where the market will eventually head. In the case of the symmetric triangle, for example, there is no obvious market consensus beyond the fact that both the upside and the downside provide enough reasoning for the two groups of traders (bulls and bears) to act.

In the case of the descending triangle, there is more bearish money in the market than there are bulls, but some of the bears are willing to check the advance of the downtrend when the price action gains a lot of momentum. And the opposite is the case with the ascending triangle. This stalemate will usually be broken with new information (statistical data, market news) or new money entering the market. Indeed, triangles are very common before news releases.

There are also other formations which resemble triangles but constitute stronger signals for trading decisions. These include pennants, flags, wedges, and a number of others that are commonplace on a day’s price action. The true triangles, on the other hand, rarely emit decisive signals.

The best way of using the triangle formation, as we mentioned, is using it as justification for further investigation into the nature of the price action. When you see an ascending or descending triangle, do not regard it as a continuation or reversal pattern, as that will only be obvious after the formation has fully developed, and will have little practical value.

However, by being alert and looking for crossovers, divergences on the oscillators, and other signals on your preferred indicators your can eventually filter out the false signals as much as possible, and with successful money management eventually realize a profitable trade balance.
The important point is avoiding any preconceptions or prejudices as to what is indicated by a triangle formation. Forex trading strategies can be created on any combination of indicators or patterns, and one can profit from them, provided that it is always born in mind how fallible the strategies are.

In short, and as always, money management, and not necessarily analysis, is the key to a successful forex experience.

Forex Market Maker

Just about any broker you may find on the Internet would be considered a Forex market maker. The term comes from exactly what they do. They make the market. When you put in an order with a broker, it doesn't go out on a trading floor, per se'. It stays on the Internet.

By definition of the term, the Forex market maker is on the other side of your trade. If you are the buyer, he is the seller. If you are the seller, he is the buyer. Once all the buy orders are exhausted at any particular price, the market will move. The Forex market maker is still guided by the number of buy and sell orders in any particular Forex pair. They can't skip around.

Conflict of interest?

At first glance, it might seem like the Forex market maker is operating in a conflict of interest. After all, they are not matching up buy and sell orders from individual traders; they are taking the opposite sides of the trade.

However, in order to create an even flow of volume and trends, the system seems to work out. Contrary to popular belief, the vast majority of Forex brokers are not working against their traders. They actually become the Forex market maker to help them and keep them in the market. It's not good policy to blow out your traders. It certainly doesn't lead to longevity for the broker if that's what he does.

Added extras

Traders who trade through a Forex market maker get added benefits. Most brokers provide online live charts; technical analysis; market news; and some even give educational tutorials.

A seasoned trader might not want or need any of the things a Forex market maker provides and prefers to trade with the commercial industries. That's where an ECN broker comes in. There is a commission involved and the quantities traded must be larger. The volatility is higher in price fluctuation; so it is definitely not for the novice.
There are advantages and disadvantages to both methods of trading. But that can be said about anything. To label a Forex market maker any particular way is leaving it short. There are a lot of traders out there making a very good living this way, and they're very happy with the market the way it is.

Is there room for improvement? Absolutely. With the CFTC regulation and other regulatory commissions keeping a close watch on the Forex market, it will only get better. But with trillions of dollars being traded daily, the market is doing pretty well as it is.

No one is doing it for a philanthropic exercise and the brokers who act as a Forex market maker are certainly out to make money themselves. But in order for them to continue they have to make the markets attractive to the traders participating, and it will continue to do so. So, although it is still a long way from a perfect system, the system does allow for some great trading and great opportunities.

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Forex Exit Strategy

Your trading plan should have a whole chapter on this, so I will try explaining myself as much as possible about what a Forex exit strategy is and how to include it in your trading. Also to be included in your trading plan of course.

We take so much time and effort to analyze when it the most appropriate time to enter a trade, lots of charts, indicators, setups and probability checks to make us feel secure before the open of the trade that sometimes nobody talks on when to exit the trade, ie the Forex exit strategy. You exit at point of panic and fear or greed? Of course, how to exit without major regrets from the position of course we shall try to focus upon.

How many of you have exited a trade out of fear when they have seen the market run further just after closing the position, losing all those possible pips. How many times did you close a position on the other hand at a nominal loss out of fear of getting worse, only to watch it retrace back to your profit target soon after you closed the trade licking up your wounds. If these have been happening to you than your Forex exit strategy is not properly in place or it is not as sound as it should to make you feel comfortable.

First of all however make sure to pause your emotions and try as much as possible to get them out of your trading plan as both fear and greed are going to bang on your head so often that they might lose your focus and concentration on the trades and targets you want to achieve.

Indicators are extensively used to find entry points as previously said but that should not be it. Indicators will also help you to understand if the open position is exhausted or not. The principle of market movements with a lot of smaller retracements always is in place as you should have already noticed from your trading by now. So if you know of them do not make them leave you react negatively and click that closing trigger too soon or too late.

Use again the indicators to see oversold or overbought areas in order to understand if the turning point is near. Use support and resistance points, Fibs are also a great way to target your trades as they will always reach important retracement points that any currency pair reacts upon them. So even if it is not the full Forex exit strategy still try to collect part profits and move your stop loss to breakeven regularly to secure long term survival.

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Bad Habits In Your Forex Trading

During the New Year usually most of us would do resolutions for the year to come in order to improve our life, some would go for traditional resolutions like quit smoking or work smarter whilst some would try to be more creative in their thoughts like learn how to fly an airplane. I would like to pose in front of you a challenge however, I am not the kind of person myself to do any New Year resolutions but let me pose this challenge on the table for you, and why not, even for myself.

Remove at least one bad habit from your forex trading! Yes, you read it right, get rid of the most harmful bad habit that is harming your trading profits. Do not tell me that you do not have bad habits cause if you don’t it is either that you are a millionaire already by now from trading or you are using an automated Forex trading software and you do not take any decisions. Possibly you are not noticing the bad habits but you sure have some, try to be honest with yourself on this. Do not forget that if you are trading, you want to make money so let us help each other to make money from trading.

What are the possible bad habits, the most common is overtrading, this is when you just jump into trades too fast or when you want to always be in a trade. This might sound not a bad habit but it is very dangerous actually. You are easily swiped out when you do this. So often people keep on opening trades one after the other because they are just chasing the ultimate profitable trade or better they hope to get into that special trade that will make the profit flow.

Another common bad habit is over leverage your account. Keep your equity in shape, do not trade all your account on a single trade if you do not want to end up stopping before starting! This could lead to constantly adding money to your account which generates frustration and distress, something which is a definite killer for your correct state of mind that is required to trade. If you want to trade profitably you do need the correct frame of mind, focused on what you see.

Lack of trading plans, this is a classic. How can you drive a car without a steering? So often fellow newbie traders start their trading journey without developing a proper trading plan. Spend time researching the markets and prepare the blueprint to your success. Whichever your bad habit, just accept it and work hard to get rid of it before it is too late.
Happy Trading!