Important Pivot Point Trading In Your Forex Trading

Important Pivot Point Trading In Your Forex Trading

Pivot points are some of the exciting trigger points fortraders to enter positions inforex market as well as equity trading, although this is more or less extensively used inforex market. Calculating the pivot points is pretty simple and makes the trading day an eventful one if you got yourcalculations right.

So what is a pivot point? Quite expectedly the pivot point is one at which the market changes its direction for the day.

How to Calculate Pivot Points?

Use the simple formula for calculation:

Pivot point for the day = High (previous) + Low (previous) + Close (previous)

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In short pivot point for the current day equals the average of high, low and close values for the previous day. Once having calculated the pivot point, you need to find out derivatives like three supports and resistance levels each for the current day. Here are the formulae to use for the purpose.

R3 = High + 2*(Pivot - Low)

R2 = Pivot + (R1 - S1)

R1 = 2 * Pivot - Low

S1 = 2 * Pivot - High

S2 = Pivot - (R1 - S1)

S3 = Low - 2*(High - Pivot)

So you have 7 points all put together; 3 resistances and 3 supports and one pivot point. Most of the action is going to be around S1, R1 and pivot points for the day. This is because by the time market could reach R2, R3 or S2, S3 it will already be over bought or sold.

Going forward, it would be invitation for going short if the market opens below the pivot and long if it is other way round. However, real world strategies differ hugely from this ideal situation.

Trading Strategies Using Pivot Points

There are several strategies for the vivid day trader who can use the pivot point. Some of them are rather simplistic while others are advanced where one needs to consult additional indicators such as MACD.

Basically, at every support levels and resistance levels, if the rend reverses you have the chance to enter long positions or short positions and put stop-losses at the preceding low or highs respectively. Some times the market pulls back from a support which is a signal for short entry. This trend continues for quite some time if, at that point the MACD is in a selling mode.

It is prudent for the trader to refer back to MACD at critical stages before entering into positions.

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Always Remember Trading is all about psychology

Always Remember Trading is all about psychology

Many new traders may think that it is very easy to make money, especially when they are trying a broker service using a free practice account.

Generally, those traders generate a substantial performance in a short period of time, thinking that trading is an easy job and that they can easily generate a great revenue out of there trading activity.

Unfortunately, when they decide to start trading with live accounts with real money deposited, the activity becomes more complex and easy days of outstanding day trading performance become suddenly like an old souvenir.

Those fresh traders are just entering in the most difficult step of there training: “the psychology of trading”.
Indeed it is very easy to trade when the risk is of loss does not exist, the trader feels automatically comfortable when the market moves against his positions, so he automatically keeps his focus on his price objective and waits for the market moving in his direction without his personal emotion to interfere.

Emotions are the trader’s worse enemy, they lead most of the time to loss as they are 9 times of a 10 oriented in the wrong direction. Emotions generate what Roland Barach Phd in psychology calls “mind traps”.

Many mind traps have been identified, such as greed, fear, paralyse by analyse etc. All these mind traps exist in any trader, the matter is to recognize them, understand them and try to neutralize them. This process is base of any trader’s training.

A good confirmed trader is someone that masters his emotions and doesn’t let those affect his performance. You can tell a trader masters his emotions when it is not possible to notice if he is making or loosing money by looking at his face.

Following this theory we could think that the perfect trader would be a machine which is not able of emotions like those black boxes build by some scientist. Those machines work for a period of time but can only generate performance during a certain period of time and become quickly obsolete in case of drawdown.

Perfection cannot exist in trading as it is held by humans in a market made by humans but a good profitable trading can be operated by a trader that really knows how to manage his emotions, some people can be already skilled for it but the best way of reaching such a level is the experience made on the market. Before knowing how to win it is therefore important to accept the losses.
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Do You Know What Does It Mean To Become A Forex Trader?

Do You Know What Does It Mean To Become  A Forex Trader?

It Means Mastering The Tools Of The Trade 

The Forex market is very much a technical market and as such it is supported by a barrage of software tools which are not simply helpful to the trader but are an absolutely essential part of trading in a market which enjoys both high volume and considerable volatility. It is essential therefore that traders not only know what tools are available to them but are skilled in their use.

At the heart of Forex trading is a wealth of information which has to be not only constantly updated but which also has to be accurate. Such data, which is essentially displayed through a series of computer screens, needs to cover both current currency price data and historical price data and the systems in use needs to be able to analyze and display this data in a form that is of value to the trader.

In addition traders need to have fast and easy access to current and historical political and economic data and have to have the ability to analyze currency movements in relation to such information.

There are two fundamental forms of trading in operation today - reactive trading (in which a trader buys and sells in direct response to political and economic events) and speculative trading (in which a trader buys and sells on the basis of his prediction of the direction in which the market will move in response to current political and economic events). Whether a trader is buying and selling on a reactive or speculative basis it is essential that he has accurate and up-to-date information on which to base his decision.

But information alone is not enough and traders also need to have access to a range of tools that allow them to analyze this information, whether such analysis is fundamental or technical in nature.

Fundamental analysis is based upon the belief that the market moves in response to such things as political events, economic news, changes in trading patterns, movements in interest and similar events. Tools required here will therefore include such things as software programs that can plot currency movements against trade data and interest rate data and use historic data to build models which predict movements in a huge variety of different political and economic conditions.

Technical analysis by contrast is based upon the belief that the market follows a pattern which has been well established over time and that future movements in the market can be predicted by analyzing and charting historical data to produce a series of models which can be used to predict future patterns.

Whatever your position either as a reactive or speculative trading and whether you are buying or selling on the basis of a fundamental or technical analysis of the market the one thing you need is information. In essence this means using a range of complex analytical tools and you will need to take the time to familiarize yourself with the tools available to you and then to master the skill of using these tools.

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The Novice Forex Trader Needs To Be Aware Of 5 Common Risks

 The Novice Forex Trader Needs To Be Aware Of 5 Common Risks

Forex trading, just like most other forms of trading, carries risks and the novice Forex trader needs to be aware of these before dipping a toe into the foreign exchange pond. Here we will consider the 5 most common risks of foreign currency trading.

1. Forex scams. In recent years the industry has done a great deal to put its house in order and today Forex scams are certainly far less common than they used to be. They do however still exist.

It is fairly easy to open a Forex trading account, especially online, and a Forex scam in its simplest form is a case of a crook setting up a website posing as a broker, inviting you to open an account and deposit money into it and then disappearing without trace.

To ensure that you do not get caught out check out any broker carefully before opening an account. Choose a broker who is associated with a major financial institution (for example, a bank or insurance company) and who is also registered as a broker. In the United States brokers will be registered with the Commodities Futures Trading Commission (CFTC) or will be a member of the National Futures Association (NFA).

2. Exchange Rates. One of the attractions of the foreign exchange market is that it can be extremely volatile with currencies moving significantly against each other in very short periods of time giving rise to fast and substantial gains. The other side of this coin however is that the market can also produce substantial and rapid losses.

Fortunately there are tools available to the trader to limit this risk, such as stop loss orders, and novice traders need to familiarize themselves with these tools and to ensure that they make full use of them whenever they enter a trade.

3. Credit Risk. Because there are two parties (a seller and a buyer) involved in every transaction there is a possibility that one party will fail to honor his or her commitment once a deal is closed. This usually happens where a bank or financial institution declares insolvency.

You can reduce any credit risk considerably by trading only on regulated exchanges which require members to be monitored to ensure their credit worthiness.

4. Interest Rates. When trading any pair of currencies traders need to watch for discrepancies between the underlying interest rates in the two countries in question, as any discrepancy can result in a difference between the profit predicted and that which is actually received.

5. Country Risk. Occasionally a government will intervene in the foreign currency exchange markets to limit the flow of its country’s currency. It is unlikely that this will happen in the case of a major world currency but could occur in the case of minor and less frequently traded currencies.

These of course are just some of the risks involved in Forex trading and novice traders will need to familiarize themselves with the others as they go along. However, a good understanding of the 5 risks detailed here is essential before you enter the trading arena.

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