Forex patterns & probabilities trading strategies for trending & range-bound markets pdf

Corpus ID: Forex Patterns and Probabilities: Trading Strategies for Trending and Range-Bound Markets. @inproceedings{PonsiForexPA.
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Steven York.

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The introductory guide to candlestick trading and to the most effective strategies of Technical Analysis. Arrebatos carnales. Capitalists, Arise! Hunter Lovins. No More! Is recycling sensible? Learning the Business Side of the Music Business! Legend of the Galactic Heroes, Vol. Who decides which currency is the base currency, and which is the counter or quote currency? The ISO determines the currency codes and the order of the currencies within each pair. Whenever a currency pair is rising on a chart, this means that the base currency is strengthening versus the counter currency.

Forex Patterns and Probabilities: Trading Strategies for Trending and Range-Bound Markets

This is true for every currency pair see Figure 2. The opposite is also true—if the base currency is growing weaker versus the counter currency, the chart will show the exchange rate of that currency pair falling see Figure 2. Lots In the stock market, traders buy and sell shares. In the futures market, traders buy and sell contracts. Entry The entry or entry point is the point at which a long or short position is opened.

[PDF Download] Forex Patterns and Probabilities: Trading Strategies for Trending and Range-Bound

This is where the trade begins. Stop or Protective Stop A stop order is an order that is placed to exit a trade if the exchange rate makes an unfavorable move. This is done to keep losses minimal and under control. Target A target is placed to exit a position if the exchange rate makes a favorable move. For example, suppose you want to buy a bottle of water. You are thirsty, so you want the water right now. You negotiate with the storeowner, taking inflation, supply and demand, and future uncertainty into consideration.

You have now entered into a futures contract for water. This is because there are more buyers and sellers in a liquid market like forex. For example, one lot of a currency pair has a value of , units of currency—, euros or , U. Do we actually need to possess , euros or , U. We could say that a person who controls one lot in this fashion is using to1 leverage. Support is not an exact price point, but an area. Think of support as the floor beneath you see Figure 2.

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Resistance Resistance is a point on the chart where the exchange rate has shown a tendency to stop rising. Like support, resistance is an area, not an exact price level.

Think of resistance as the ceiling above you see Figure 2. Breakout A breakout occurs when the exchange rate breaks beneath support or above resistance see Figure 2. Trend A trend occurs when the exchange rate moves consistently in one direction, either higher or lower see Figure 2. Range A range occurs when the exchange rate has no clear direction and is contained within visible support and resistance levels see Figure 2.

Resistance Consolidation A consolidation occurs when the exchange rate is trapped in an evernarrowing area. Consolidations often lead to breakouts see Figure 2. Volatility Volatility is a measure of the amount by which a currency pair is expected to fluctuate over a given period.

A volatile currency pair tends to make rapid, forceful moves, while a pair that lacks volatility tends to trade in a more predictable fashion. The base currency is the euro, because that is the first member of the pair. In fact, this is true for all of the pairs that have USD as the quote second currency. Along the way, some questions will inevitably occur. In this chapter, I answer some of the most common questions about forex. The forex market which goes by many names, including FX, foreign exchange, the global market, and the currency market may seem like the new kid on the block, but it has been the market of choice for global hedge funds and institutional investors for years.

Yet this market seems brand new to many individual traders, because the barriers to entry that used to keep the little guy out of the forex market have only recently fallen away. In the past few years, the popularity of forex trading has taken off—and for good reason. Forex traders also have the ability to use tremendous leverage, which can be greater than to Because of this superior leverage, the barriers to entry for forex traders are very low. Traders can open accounts with as little as a few hundred dollars. Traditionally, access to this market had been restricted to major corporations, hedge funds, and other institutional investors.

In the s, the forex market was finally able to open its doors to retail clientele. This means that individuals can now trade alongside the biggest banks in the world and even use the same techniques and strategies that professional traders use. Currency traders simply attempt to profit from changes in the exchange rate.

Because of the tremendous leverage available to forex traders, a very small change in the exchange rate can result in a large profit or loss. Fortunes can be made or lost quickly in this market; even a move in the exchange rate that is equivalent to a few hundredths of a penny can be magnified into a substantial gain or loss. Most traders consider themselves members of one of two major categories, technical traders and fundamental traders.

Technical traders focus on technical analysis, which is the study of charts historic price action and indicators, to trade forex. They believe that all of the pertinent information needed to place a trade is contained within the chart. Fundamental traders use fundamental analysis, which we can loosely describe as the study of economics especially interest rates to trade the forex market.

Most individuals are interested in the technical aspects of currency trading and have a tendency to feel intimidated when it comes to fundamental analysis. This is probably because charts are a visual device for pattern recognition, and can be interpreted quickly with experience.

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Meanwhile, economics is a subject that is usually presented in a manner that can best be described as wordy and boring. Generally, the fault is not with the subject, but with the manner of presentation. While this book primarily deals with the technical strategies and techniques of forex trading, I want to encourage you to think of the technical and fundamental aspects of forex as intertwined. Whenever you enter a currency trade, there are two currencies involved.

Every foreign exchange transaction, or forex trade, involves two currencies and one exchange rate. The best way to illustrate the reason for this is to attempt to initiate a currency transaction that involves just one currency. Imagine the difficulty involved in trying to trade just one currency.

How to scalp a range-bound market

Remember, we are not speaking about collectible coins or interest-bearing loans, just a pure currency exchange. Conversely, a clever trader might offer less than one British pound in exchange for one British pound, but only a fool would accept this proposition. This explains why we cannot trade just one currency at a time.

Forex Patterns and Probabilities: Trading Strategies for Trending and Range-Bound Markets | Wiley

This is because the value of a currency itself does not change, but its value can change in relation to another currency. This is why we must trade currencies in pairs. Many traders find it helpful to think of a currency pair as a single instrument, just like a stock. Similarly, if a forex trader believes that the euro will rise against the U. If the same trader believed that the euro might weaken against the U. If you are trading the U. One of the major advantages of the spot forex market is the fact that it is a seamless, hour trading market. Instead of conforming to a rigid schedule, traders can decide for themselves when to trade, whether it is morning, afternoon, or night.

Even part-time traders who work full-time jobs can trade forex. No matter where you are located in the world, no matter what hours you keep, you can trade the forex market. For most traders, the forex trading day begins at P. Eastern U. New York time, P. London time. Because forex trades 24 hours per day, the trading day also ends at P. Why is this particular time used? Consider that when it is P. According to the International Date Line, Monday morning reaches this part of the world before any other active forex trading area. Hence, it marks the beginning of the trading day.

Overall, volume is low at this time of day because the three biggest forex trading centers—Great Britain, the United States, and Japan—are quiet at this time.


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However, the Australian dollar and the New Zealand dollar may see some action during these hours. The Asian Session A few hours later, at around P. This is considered the beginning of the Asian session. Japan is the third largest forex trading center, and comprises about 10 percent of all forex trading volume. Activity in the Japanese yen pairs begins to surge at this time of day. This is considered to be the beginning of the European session.

Roughly 30 percent of all foreign exchange volume comes from the trading desks of London. The U. Session At around A. New York time, about halfway through the London trading session, U. This is considered to be the beginning of the U. Trading is especially active early in the U. Now the two giants of forex, London and New York, are both in play at the same time.