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Bollinger bands are volatility based indicators. Volatility technical indicators are indicators that avails additional confirmation of price behaviors along with volume in the Forex Market. They are very useful in seeing potential market reversals. Reversals in trends essentially occur when volatility increases. What this means is that strong trends downwards reflect an increase in volatility while strong trends upwards show a decrease in volatility. Bollinger Bands indicators are very popular in the Forex market and are used to gauge as well as analyze periods of consolidation. They are also used to establish when a currency is overextended, buy and sell signals, continuation signals and determine price targets as well. Bollinger Bands utilizes statistical concept of standard deviation to get its bands. Bollinger Bands technical indicators are used to measure volatility in the market. It resembles Moving Average (MA) Envelope indicators in that both form lower and upper bands around a moving average. However, Bollinger Bands indicators incorporate statistics and standard deviation concepts in formation of lower and upper limits. Bollinger Bands were created when most analysts in the Forex market did not comprehend that volatility was a dynamic variable in the market that fluctuated with time unlike Moving Average (MA) Envelope indicators that have a static percentage band. Bollinger Bands technical indicators have 3 lines;  Middle Line (Moving Average)  Higher Band  Lower Band Interpretation of Bollinger Bands Standard deviation as it is well known is a statistical measure of volatility. Standard deviation will basically be higher when currency prices are changing drastically in the market and lower when price changing is calmer. Bollinger Bands widens and shrinks depending on the volatility in the currency market. When the volatility in the market is high the Bands widens while on the other hand if it is low the Bands shrinks. It is worth noting that volatility in the market is usually high during reversals like bottoms and tops. During a Forex market top, traders are usually euphoric and earning profits or in a state of fear, fearing that their short positions in the trade are not doing pretty well and they stand to lose revenue. As a Forex trader, you must keep in mind that a market top for the first trading currency in the pair is a definite market bottom for the second trading currency in the pair. Crucial Points When Trading Using Bollinger Bands  When there is an upswing in the market, the prices will remain within the central moving average and the upper band.  When there is a downswing in the market, the prices will stay within lower band and the central moving average.  Currency prices that close below the lower band or above the upper band are signs of trend continuation and not reversal signals.  Currency prices rides on the upper band when there is an uptrend and rides on the lower band when there is a downtrend.  As a Forex trader, you should always wait for the currency price to turn in the opposite direction after touching either lower or upper band before you consider that a reversal will happen. Conclusion Bollinger Bands indicators are very popular indicator in the Forex market especially in the contemporary world. However, just like other technical indicators used in Forex trading they should be used with other indicators both technical and fundamental for best results. Using Bollinger Bands exclusively might not be a wise decision, and if you want to make thousands of dollars in Forex market then you have to utilize all the tools that are available to you effectively and efficiently. Experts have it that Bollinger Bands technical indicators works effectively when used together with oversold/overbought oscillators. Bearing in mind that Bollinger Bands take into account trend and volatility, you should use them with other indicators that will capture momentum, open interest, sentiment and volume to avoid duplication of information. All the best in your trading!

In Forex trading, technical analysis is a strategy that is invaluable and together with other techniques, it can give a better prognosis. Technical analysis relies on three key principles which guide its interpretation of the market. The first of those principles states that prices embody all the information present in the market. This means that the prices are a sum total of all the opinion and news available in the market concerning a given currency. The second principle denotes the cyclic nature of prices. In other words history repeats itself and what came to be previously can recur in future. The third principle brings to the fore the fact that prices follow a trend. Technical analysts believe in price predictability and that the market normally follows a given established direction for while before breaking off. Developing an online Forex trading strategy using the technical analysis in order for one to be able to analyze the markets easily and make money out of it with a lot of ease and minimal research has become easier with time. In the current world most processes have gone online and investors have not been left out in coming up with an online trading element. Technical analysis is the use of a number of indicators offered by the Forex market which helps you to analyze the market and be able to determine if there exists any profit making trade and also shows how and when it’s ready for one to place trade in the existing market. There are many brokers who now incorporate the tools of technical analysis to software that enables Forex trading which help their clients in making informed decisions when they want to trade. Technical analyses have strategies that are used in the Forex market which also has indicators to which are tools used in the scouting of profitable opportunities. Here are some tools which are used in technical analysis, it has trend lines which are either diagonal or horizontal lines, it has also has Fibo Naccie which has retracement and also extension tools. It also has chart patterns and candlesticks, customized indicators and expert advisers are other customized tools it has, and also grid lines where it also has time charts which are determined hourly. Traders need to have well set strategies that are compatible with trading ways of a Forex trader. Most methods of the analysis are to be well used for long time trade and also for scalping. Most methods also try to show when a market is due for reversal since it has tapped out. Bollnger Band System is a strategy that can be used to note some conditions a market has which can tell a seller to have an order submitted and hence will successfully bring in some cash. Traders can use this strategy and its tools to trade, be able to find a potential trade and have entry points which are right using the trading platform hence it’s like the back bone of Technical Analysis. A trader can hear of news about a market but should first do an analysis of the market and make sure that the information is right so as to continue trading since some wired news are not true and are they are intended to rob off money from traders. In any efficient market, research shows that past prices should not be used exclusively to predict rates of exchange. When trading one should understand the long and short foreign currency positions which will help the trader get more profits and be successful in the online Forex trading business.

In Forex trading two types of analyses exists; technical analysis and fundamental analysis. Fundamental analysis makes use of the economic information which is sourced from different countries while technical analysis on the other hand is based on the analysis of prices, their behavior and movements and also the interpretation of charts. Assuming the past represents or has a bearing on the future then the accuracy of technical analysis can be substantiated. Historical data plays a major role in formulating a forecast for future price patterns and trends. Through the use of graphs, traders can be able to make a choice whether to buy or sell in a given circumstance. On the side of the investors, the interpretation of charts can inform their buying decisions as to whether it is at a fair price or otherwise. Technical analysis happens to be one of the oldest methods for carrying out of a behavioral analysis of the Forex trading market. The graph formation used by technical analysts can take two forms; the form that symbolizes a change in trend such as head and shoulders, double top or double bottom amongst other types. The other form of the graph signifies continuity in the prevailing trend. Formations such as the triangle, pennant and flag are among those announcing continuity. In technical analysis there are three major categories worth mentioning. There is the traditional technical analysis which capitalizes on graphs and charts. With this analysis it is common to see patterns such as head and shoulders dominating the analysis. The second category consists of the contemporary technical analysis which embodies quantitative techniques in its analysis. The use of stochastic indices and moving averages characterize this kind of analysis. The third category is more of psychological than any mathematical verifiable analysis. One of the theories that are synonymous with this kind of analysis is the one advanced by Elliott. In a nut shell, it states that any market movement goes through eight phases which can be broken down into five steps and three market corrections. Technical analysis as a technique in Forex trading draws from a wide range of tactics. For most traders, they would combine them for a wholesome view of the market, its behavior and trends. The principles used by technical analysts revolve around price and its behavior. Its major assumptions which also happen to be the basis for technical arguments are that the price prevailing at any given time is a representation of all the information available in the market at that particular moment. This therefore means that any available market information must be inculcated in the calculation of the price. The price according to technical analysts tends to adopt a cyclic behavior in that historic price movements tend to repeat themselves at a time in the future. Another aspect of price is that it follows a given pattern and the market participants using technical analysis tools can be able to predict with relative certainty the trend to be followed by the price. Pricing in technical analysis can be divided graphically into four groups; the opening price of a period, the last price of a period, minimum price and the maximum price. These periodical prices define the type of graphs that results. Candle stick charts, line charts and bar charts are some of the possible graphs that can capture the price changes over a given time frame. Technical indicators like cyclic indicators, trend indicators, volatility indicators, power indicators, momentum indicators and many others are also frequently used. The grouping of these indicators can be by price, volume, money flow and other criterion. These indicators give an insight into the Forex market and help the trader in the making of sound buy and sell decisions.

Mean reversion is a concept in Forex trading that suggests that prices and returns eventually move back towards the mean or the average. The essence of this concept is the assumption that both a stock's high and low stocks are temporary and that a stocks price will tend to move to the average price over time. Mean Reversion process entails identifying trading range for a stock and then computing average price using analytical techniques as it relates to earnings of the exchange. It has led to many strategies involving the purchase or sale of stocks and other securities whose recent performance has greatly differed from their historical average. However, a change in returns could be a sign that the particular currency no longer has the same prospects it once did. Reversion to the mean Forex trading is a statistical form of trading that is based on a pretty simply idea: the assumption that while the price will fluctuate between highs and lows it can generally be relied upon to return to its mean (or true) value with enough certainty to make trading the concept viable. In other words, Forex mean reversion trading is simply waiting for a currency to deviate significantly from the mean or average value and then bet on the price returning back to the average value. A simple glance at the concept just feels right and makes it seem like a viable idea. This makes trading systems very attractive as it is simple and straight forward to implement. So is this a safe bet to invest in? Will the money that you will have invested bring back impressive returns? Unfortunately, not all that glitters is gold, and so often things turn out to be not quite as easy as they seem. If we switch off our blind desire to make money for just long enough to see the flip side of it, we just might make an informed decision. So what are the flaws? First and foremost, markets often trend. While we can never be absolutely sure, if a strong upward or downward movement is part of a bigger trend, there is a very real possibility that the prices will continue their upward or downward trend, even if they are already way above or below their mean value. Secondly, market prices are not normally distributed. While it often appears that market prices are normally distributed every now and again, say every 5 or 10 years, movements happen that are so large and significant that we should not expect to see them if prices were normally distributed. Thirdly, occasionally there is a great difference between what is the average (mean) price and the median (middle) price. For instance, take the following sequence of numbers 6, 7,20,70,95. The median is 20, but the mean value is wildly different, 33. Last but not least, if it were really that simple, everyone would be doing it. If market prices really were normally distributed and the certainty of a reversion back to the mean could always be calculated mathematically everyone would be doing it and the strategy would lose its edge. With those flaws in mind, is Forex mean reversion trading worth the risk? The beauty of it is that there are a few trading systems, however, which are in principle based on mean reversion and seem to work pretty well: Bollinger Bands and Keltner Channels, over and above these important indicators, other factors also come into play here such as crowd expectation and market psychology. It is important to understand these aspects when trading using the Forex mean reversion. If you do you will make millions of dollars in this currency market!!!

Most trading strategies in the Forex Market can be categorized into categories; Mean Reverting and Trend Following. In this article, we are going to look into details; Trend Following. Forex trend following is mostly used by professional traders. Amateurs Forex traders and retail traders tend to avoid trading using this method. Analysts have it that most successful Forex traders in the world use this method of trading in their dealings. All you need to do as a trader is to devise a long term trend following formidable strategy which you can use to trade in currencies few hours a day to build long lasting wealth. You have to master the art of trend following currencies to reap huge benefits from the financial market using this method. Forex Trend Following Definition Trend following is basically a method of Forex trading that follows up or down trends in a currency pair which h can last for a week or extend for 52 weeks (1 Year). Using this method, a trader aims to get approximately 70% of the trends to make huge margins. Traders usually do not trade frequently but once in a while but makes huge profits from their trades. Forex trend following is one of the most profitable way in currencies trading. Does Trend Following Work? This is a question that usually boggles the minds of many traders especially newbies and retailer traders. The answer is yes, it does. Take time and analyze currency pair for a period of time and you will see a trend that lasts for a long period of time. These trends usually reflect economic cycles in the various countries the currencies represent. How to Devise a Trading Strategy on Your Own If you are planning to trade long term in the Forex market, then it is of paramount importance that you devise a formidable strategy that you can employ in the long run. Here are ways you can do that perfectly well:  Utilize weekly and monthly charts to see trends which might be hard to see from a daily chart  Use various momentum indicators (2 to 3 will do) to confirm your trading signals  Employ daily charts to time your trading signals  Enter the trade on breakouts from ranges to new price highs and lows. It is of utmost importance to enter a trade as the trend matures.  Set a stop loss on entry and stick to it. Follow these guidelines and you will generate huge profits from currency market in the long run. You will be in a position to execute a deal within an hour and get handsome margins from it. Why Trend Following is a Daunting Task for Most Traders Trend following is the most profitable method in Forex trading yet the toughest. Nothing comes on a silver platter and this applies even in currency trading. Before you get to that level of making huge profits from a single trade, you have to exercise patience and be committed to the course. You have to be disciplined and patient to enter the trade only when the trend matures but the truth of the matter is that most traders do not have these attributes. Most Forex traders get so excited when they start making profits and eventually throw their discipline in trading to the winds. This detrimental because a trader does not take ample time to analyze how the market is performing before venturing in the next trade. They just want to trade non-stop and before they realize all the huge profits they have made will be eroded and they start making losses. The worst a Forex trader can do is to submit to his emotions. As a trader you have to instill ice-cold discipline in your ventures if you want to enjoy loads of wealth in the long run. Conclusion Forex trend following will help you get great rewards in currencies trading but you have to exercise discipline and patience in your trading. You have to also master the art of ignoring short term pull backs in equity against you. This method of trading has been used by the best traders across the globe who have made millions of dollars in trading in currencies. If others are making it big using this strategy, you can also make it

Learning the essential skills in Forex, such as reading Forex Charts, is really important. This is so because once you secure this vital skill in Forex trading under your belt; it will be a lot easier and to make money in the Forex Market. This article will help you learn how to read Forex Charts. Also, it will help you to know the pitfalls that sometimes occur when reading the Forex Charts especially for newbies. 1. When you buy a currency pair, you should look at the chart of that pair to go up so that you can make a margin on your trading. You hope that the base of the currency pair will strengthen against the terms currency. On the flip side, if you sell the currency pair then you should be looking for the chart to go down so that you can benefit. This means that you are hopping that the base currency will weaken against the terms currency. Forex trading is all about buying and selling of currencies and thus you need to be keen on how the chart moves so that you can generate some money from the trade. 2. Secondly, make sure that you always check the displayed time frame. Most of the trading systems usually use various time frames to establish the entry of a trade. Some of the indicators that are used to determine overall trend of a currency pair are momentum, Moving Averages Convergence and Divergence (MACD), support and resistance lines. Before starting to trade, it is recommendable that you ascertain that the chart you are looking at has the right time span for your analysis. Set up charts with the right time frames and indicators on them for the trading system you are working on. You can save and even reuse this layout in your consequent trading. 3. Most charts display the bid price. But it is good to bear in mind that a price has a bid and an ask price (the ask price is usually higher than the bid price). So when you make a purchase, you do it at the ask price and when you sell then you sell at the bid price. When you use a chart price in determining the entry or exit of a trade then it is important to know that when you want to sell and the chart price indicates 1.220 then this the price you will set at if there will be no slippage. On the flip side, if you want to buy when the price chart is indicating the same amount, you will actually buy at a higher price than the one indicated. But this is not always the case because the Forex system will determine whether you will add a buffer in your trading or you will just follow the chart price. There is always an option to stop orders when the prices falls below a certain mark when selling or rises over a certain amount when buying. This is necessary ton protect your interests to mitigate the risks involved in your trading. 4. It is good to know that the times shown on the Forex charts are not standard but it depends on the time zone of the Forex charts provider, it can be New York, GMT and so forth. It is thus advisable that you have a world clock on your machine so that you can convert the various time zones to your time zone. This is especially so when you are waiting for important economic announcements that will affect the value of currency you want to trade in. 5. Always check the time on the Forex charts with correspondent with candle opening or closing. This is because if you are planning to either enter a trade or exit after a major economic announcement, then you need to be precise and to the point. You do not want to be blocked because you delayed with a few minutes, you need be exact. The trade usually witnesses a turnaround immediately after the announcement and not the candle afterwards. Time is of paramount importance at this juncture. I believe now you have all the essential steps on how to read Forex charts appropriately. Implement it accordingly to avoid pitfalls usually witnessed by newbies in Forex trading. It will also help you to make big steps in your trading within a record time!!! Now that you know this, get to it!

Forex trading is widespread and has become a global phenomenon. Its market is open 24 hours a day from Monday to Friday. The co-business in Forex trading is determining movements in ‘currency pairs’ overtime. To achieve this, a number of tools are employed. These tools capture trends, data and behavior of currencies and can be able to predict with lower margins of errors the likely currency movement. These tools help traders to make informed decisions and sound judgments as pertaining to trading decisions. Each tool has its own strength and at the same time, its weaknesses. It is incumbent upon the trader to analyze these strengths and weaknesses and determine the set of tools that serve his tastes and preferences. Chart indicators have often been used by traders because of their visual aspects and ease of understanding. They aid traders in making technical analyses in the currency market. Chart indicators can be classified as either lagging or leading. Before a new trend comes into being or prior to a reversal happening, there are indicators that can help you identify opportunities to trade. These early bird indicators are referred to as leading indicators. The reason they are loved by Forex traders is because they provide some sort of leakage into an imminent change in trend. Pivot points which are among the most effective indicators in this category help in establishing points where the trader can stop, take profit or enter a trade. Many methods have been devised to aid in the calculation of pivot points in the currency market. None of the methods is superior to the other and the resulting figures all lead to almost the same conclusion but with varying degrees of certainty. Pivot points are not the only leading indicators. The family is large and the other members include oscillators such as Parabolic SAR, RSI (Relative Strength Index) and stochastic patterns. The bottom line to all these leading indicators is that they help in the identification of potential reversal points in the Forex market. These are the points where the forces either bullish or bearish that have dominated for some time give way or diminish. At this point also, price changes direction. As tools of trading, leading indicators should be interpreted in the company of other indicators and never in isolation. Other analysis methodologies are usually invoked if a trader is to have a balanced conclusion on the likely happenings of the Forex market. The other set of indicators are known as lagging indicators. As opposed to the leading indicators, the lagging indicators identifying trading opportunities after the trends have taken shape. Due to the fact that they report events after they have already happened, these indicators are not very common with conventional traders. They have the potential to delay your entry into a trade. The advantage with lagging indicators is that they have minimal margins of errors since they are reporting trend reversals that have already taken place. Being momentum indicators, some lagging indicators are more popular than others. The Moving Average Convergence Divergence (MACD) is among the favorites in this category. Moving averages come in different types ranging from simple, weighted to exponential. To achieve success in Forex trading, traders most often combine both leading and lagging indicators in varying degrees and proportions. These help them in making concrete trade decisions which they are likely to profit from. An example is when a trader decides to employ stochastic and MACD in attempt to identify the existing trends in the Forex market. Though success is hard to come by in the Forex market, the secret lies in the mastery of the tools and techniques at the disposal of the trader.

Sure, no indicator can be used in isolation, they must be employed in a combination if success is to be achieved.

As a newbie in Forex trading you are bound to encounter various challenges as you master the art of trading in this financial market. There is a swarm of various methods that you will encounter and the onus is left to you to choose what works best for you. Discussed below are some of the indicators that you should know about before venturing into this exciting and challenging financial market. Understanding these indicators will give you a head start in Forex trading. RSI (Relative Strength Index) This is an indicator that is simple and very useful in Forex trading. It is an oscillator that enables you to establish when a currency has been oversold or overbought and thus a reversal is most likely to happen. Relative Strength Index will help to predict rightly such that you will be in a position to buy low and sell high to make your margin. Relative Strength Analysis helps you in locating better entries and exit prices in the market. When there is no clear direction in the market then you can settle for either buy or sell options. But when there is a clear trend, always enter the market in the favorable direction. RSI has values ranging from 0 to 100, where value of 100 is considered overbought and the value of 0 oversold. Thus, you will be able to analyze the trend before buying or selling the currencies. The Stochastic At times it is necessary to analyze environments that are overbought and oversold. Stochastic just like RSI, operate in an oscillator like fashion and helps in identification of reversals in price. There are two lines that characterize the stochastic indicator. These lines which also signal entry are % K and % D. In a bid to identify a buy signal which moves in the same direction like the trend, you just have to look at the % K line to cross over the % D line. This is due to the fact that the oscillator bears the same reading for overbought and oversold environments. Trading with MACD (Moving Average Convergence and Divergence) The MACD is commonly referred to as the key oscillator. In both trending and ranging markets, the MACD operates well because of its unique use of the moving averages. The changes in momentum are captured well through a visual display of the same. The identification of the market as either trending or ranging should be followed by an examination of two things. First and foremost you need to evaluate whether it is an upward or downward bias. This is made possible by identifying the lines with respect to the zero line. For a buy or sell, you may find it necessary to isolate a cross over or cross under in relation to the MACD line and the signal line. The MACD just like other indicators cannot work effectively in isolation. They need to be backed up with either a prior identified trend or a market with a definite range. Once these two have been identified, it is imperative that the MACD crossovers are taken towards the existing trend. It is advisable that stops and trade limits are put. These are necessary once you have entered the trade; the stops are normally put below the latest price extremes just before the crossover and the trade limit is usually set at an amount which is double your risk. Trade indicators therefore are very instrumental to the success of every trader. From momentum to trend indicators, the importance of these trading tools cannot be overemphasized. Success on the Forex market comes with mastering the essentials of trading amongst them the indicators. Just like traffic lights, they tell you when to go and when to stop.

Can one still make money in the low volatility financial markets? This question can be answered with mixed reactions since traders have either lost or gained during such times. What is Volatility Volatility being the rate at which a financial instrument moves, has both volume and price components. A highly volatile security fluctuates more than a low volatile security. Volatility is more often than note used as a measure of risk. Volatility can be aptly observed by taking a closer look at a stock’s price history. As one of the tools used in low volatility trading, volatility index has gained popularity as it shows clearly the element of risk associated with a given stock. This is important both for amateurs and experienced traders if they are to profit from a low volatile market. Despite the fact that this index does not give a definite signal of bearish or bullish market, its interpretation shows that market fluctuation is at its highest during uncertain times. Strategies and Tools to Use in Low Volatility Markets Making money in low volatility markets entails employment of strategies and analytical tools. Low volatility has historically been less exciting to traders but with these latest strategies you can comfortably close your trades without much struggle and anxiety. These strategies however are not popular as such because for most of them the traders trading objective is shifted from the present and quick returns to a long term projection. Volatility Index Defined Volatility index also referred to as fear index is a statistical measure of the expectations in volatility and price fluctuations of the standard and poor index. When this index shows higher values, it is an indication that the Standard and Poor 500 index is poised to fluctuate. The rising markets have been met by flat volatility and this has served as a turn off for most security traders. As the mantra goes ‘even cloud has a silver lining’ this typically means that even in the lowest of the levels of volatility one can still make money. Calendar Spread One such strategy is the calendar spread. This is a multi-month trading strategy which in essence makes the trader net-long volatility. Though not familiar with most security traders, this strategy is volatile-sensitive and hence with a rise in volatility, the calendar spread also appreciates in values leading to another round of increase in volatility levels. Market volatility is occasioned primarily by market news. When significant information hits the market, market traders react in a variety of ways in response to such information. This is leads to a huge spike in volatility. Most market traders are sensitive to a price changing market information and as such are keen to monitor any bit of information entering the market. Low volatility makes intraday moves to be less significant and this impact on most traders. Recently, most traders have been migrating from the low volatility climate to an environment where they get the opportunity to invest in major index products. It is therefore possible to profit a mid low volatility by adopting the necessary trading strategies and tools. Making use of the volatility index and calendar spread has seen people making fortunes even in low volatile times.

INTRODUCTION The financial markets prominently known for their volatility and sharp reactions to information can at times be so ridiculous. Ever witnessed a price that goes up and up without ever having a turn around? That is how crazy the financial market trends can get. Buyers who albeit at times become irrational and greedy, tend to buy more and more as prices of financial instruments hike hoping to sell at an even higher price and realize a return. This automatically turns financial stocks into Veblen instruments like jewelry; the more expensive they get the higher the demand. This is called the momentum effect and has been the subject of so many researches. The ‘momentum effect’ having passed all the profitability tests has come to be appreciated by technical analysts as a reliable and dependent strategy. In finding momentum stocks, the below discussed indicators are voted to be the best THE 50 DAY AND 200 DAY MOVING AVERAGES Moving averages has been both a mathematical and statistical tool used over quite along period of time. This trend following strategy is calculated by gathering the average share price over a given time period. This average is then plotted on a chart with the y-axis indicating the share prices and the x-axis indicating the time range. When the moving averages are plotted next to the daily or weekly share price movements, the volatility and jumpy nature of these price movements cancels out. The ironing out of the financial instruments price volatility leaves out a clear trend that is not only meaningful but also one that can be followed by the trader. The moving average lines have been used by many traders in decision making. For instance some would not invest unless the daily stock price steers clear above the 200 day moving average line; while to others albeit the risk taking category, close proximity of the stock prices to this line is sufficient to initiate a trade. The significance of the 50 day and 200 day moving averages in trading is at the point where the two lines cross. The 200 moving average which moves a bit slowly can give a signal for trader to go long when crossed above by the 50 day moving average. Inversely when crossed below, it gives clues for the momentum traders and investors to go short. Some financial market experts developed the 350 day moving average which works to boost the reliability of the 50 and 200 day moving averages. 52 WEEKS HIGHS AND VARIATIONS This indicator has produced varying results over different holding periods. A stock generally attains several highs and several lows in the course of a trading period. This indicator is powerful in that it brings into focus a whole year of trading (52 weeks). In the game of trading, research has established that investing in financial instruments making new 52 weeks highs and shorting those that are not has successfully produced earnings of up to sixty percentage points a month. This is when a six month period is considered; when considering an even shorter time period, the results are not only strong but also impressive. RELATIVE STRENGTH A stock or financial instrument when considered in isolation may not reveal much concerning its attributes amongst them price movement. Relative strength as a momentum indicator therefore compares or rather shows the difference in price movement of a stock vis-à-vis that of the market. This being a relative measurement attribute, it is not surprising to find it assuming positive values even in the case where the stock price under consideration is falling. The simple calculation here is that the market could have fallen further compared to the stock under observation. This measure unlike its absolute strength counterpart can help financial market participants pick instruments that clearly outperform the market even if their price movement has taken a dip. Trading experience has shown that relative strength and the other two momentum indicators discussed have shown consistency over time of usage and application. This is indeed what makes them ranked to among the rest.

Introduction Market volatility just like the emergence of price patterns in different time periods can open up an ocean of opportunities for the Forex trader. Just like explosions, they may scare other traders but the daring will remain to reap bountifully. The question thus comes-how prepared are you as a trader to cash in on these opportunities? It is a mantra that has transverse space and time that a lull comes before a storm. In the Forex markets, this holds true as price consolidation periods are considered a periods of low volume and indecisiveness on the part of market traders. What most traders may not be aware however is that this is a period of strategy formulation and forecasting. This is because the thereafter the prices may burst into paths that will take long to weaken and reverse. The two-edged sword A thorough knowledge of price consolidation is of paramount importance. A trader honed with price consolidation knowledge will have two main advantages in trading. It gives the trader the ability to take a short position to minimize likely losses following a bounce towards higher interest. The second platform of advantage for such a trader lies in the money making or profit position. Coupled with an established money management discipline, a trader may reap handsomely from price consolidation as profits potentials are high in such positions. Consolidation patterns and how to trade in them There are number of price consolidation patterns in the market and learning how to trade in them can be a great investment on the part of the trader. The discussion that follows captures two basic patterns and how one can effectively initiate trades without exposing themselves to unnecessary losses. These price consolidation patterns can be split into two categories; reversal patterns and continuation patterns. Continuation patterns continue the direction of the trend after consolidation while reversal patterns have a likelihood of reversing the trend after price consolidation. Flags These are continuation patterns. They form some of the dependable patterns and are common in explosive price movements. Flags in uptrend are bullish in nature referred to as Bull flags while in downtrends they are called Bear flags. They basically continue the existing trend. The price consolidation under bull flags is characterized by short lower tops and bottoms while under bear flags it is identified by short series of higher lows and higher highs. During the price consolidation period, volume normally flattens out. Trading the flag pattern To trade this pattern a trader must employ the use of trend lines to map the flag formation. The support and resistance levels are identified first. After the mapping of the trade channel, the points where the price movement tends towards either the support or resistance levels are marked clearly. As a cautious measure, it is prudent that a stop loss order be placed 66.7 percentage points below the previous sessions high so as to contain the trend should the price dip below the resistance level. It is also advisable to trade short; hold the security for a day. In anticipation of further gains, other traders also hold for longer periods but it all depends on the risk appetite. Wedges A wedge is a dual consolidation pattern. It can be a reversal as well as a continuation pattern. A falling wedge in both uptrend downtrends can be bullish. Volume diminishes during the consolidation period but then increase later on. Rising wedge on the other hand is bearish in both uptrend and downtrend. Like in the falling wedge, volume diminishes as consolidation is reached. Trading wedges The minimum estimated or forecasted profit target can be calculated by measuring the bottom of the wedge commonly referred to as the base. The ‘pole-like ‘move can also be used to measure the minimum profit target. This is done by identifying a pole- like move (the sharp price the formed the move). The bottom of the pole (beginning price) and top of the pole are measured. This is what is termed as the measured move. For a trader who is entering the market, he can move through to the last point which will serve as the failure and exit point. Movement through the apex can also be chosen as a failure and exit point. A trader should closely monitor volume changes as a chart pattern failing on an upsurge in volume could increase the probability of a price movement towards that direction. There are traders who get in before a break out occurs. In such a case as a trader, move through the ‘wrong side’ of the pattern using it as your failure and exit point. To help minimize losses and exit at the right time, monitor the volume movement as it can give indications of either a bullish or bearish run. The beauty with these trading strategies is that they can be applied by both amateurs and experts alike. Remember to apply both reversal and continuation patterns as the outburst direction may not be easily predictable.

Introduction The price of securities play a significant role in the volumes traded in any security market. Prices always move up and down in response to market reactions. One sure way of making a fortune is learning how to predict and follow trends. Chartists make use of price charts as their prime tools to track historical prices which they in turn use to accurately project the path prices are likely to take heading into the future. Technical analysis is simply defined as the process of analyzing past price patterns to enable an intelligent projection of future price movement. As opposed to technical analysis which determines the period to buy or sell a particular security, fundamental analysis on the other hand shows the security to be bought or sold. Prediction of trends is considered by many as an art instead of a science. In its complexity technical analysis is indispensable as a trading tool used in analyzing trends. Utilizing the trend Success in any security market lies in the identification of trends and intelligently inculcating them in trading. While a few traders clearly identify opportunities and threats, most traders in the market follow the crowd. It is thus paramount to understand the trends so that you will not have to follow masses but you will always be making an informed decision in your trading. By sharing the same sentiments towards a given security traders give the instrument momentum. Identifying and predicting such price movements means that one can either make profit or avoid losses. The path to be taken by security prices in future can be indicated by trends. When prices rise, one is to buy more securities so as to profit from the upward trend. On the other hand falling prices trigger traders to sell to avoid losses. Cases of price disagreements occur and during such moments, it is advisable that one holds their securities until a trend emerges. As it is generally known in trading, timing plays a significant role. The skills of identifying when prices will rise or fall can create immense opportunities to a trader. This skill is however anchored on recognizing upward and downward trends. Types of trends There are different types of trends that are formed by price movements. These are: Upward trends In trading, price patterns can form a series of higher highs and higher lows. This is what is termed as an upward trend. To an amateur trader, an upward trend can simply be put as a rise in security prices. The strength of such a trend however is bolstered by high trading volumes. Downward trends As opposed to the upward trends, downward trends occur when prices attain a series of lower highs and lower lows. In technical analysis this trend signifies a bearish run or can also be interpreted as bulls losing steam. When positively correlated with volume movement this trend provokes security traders to sell in order to avoid losses. Sideways trends The market at times attains a series of highs that are measurably at the same price level. This can easily be seen as a point of indecision by the market traders. Long-term trends There are some price patterns that dominate the market for a considerably longer period of time mostly a week. Such price movements form trends called long-term trends. Plotted against time long term trends show a display of lower highs and lower lows as time progresses. Intermediate trends This is represented by daily candle sticks. Also called minor trends, intermediate trends are considered temporal and anchored on the fundamental factors of companies. These trends can easily be identified on a chart by their characteristic stepped fashion movement. Short-term trends Also dubbed us micro trends, the short-term trends are the pinnacle of market volatility. Compared with long-term and intermediate trends, short –term trends are considered to last the shortest period of time and are more sensitive to market information. Trend trading therefore requires one to be able to clearly identify trend movement so as to know when to make a security instrument purchase or close a sell. A misinterpretation of trends is not only detrimental to a trader’s position but also a recipe for loss making.

Introduction Trading is all about exchange of money. Traders move lots of cash using their online trading accounts in response to the market temperature. In Forex trading, for instance if a trader suspects that a currency pair will move up, they will buy the concerned pair. On the other hand if they strongly feel that the pair will dip, they will sell to avoid getting into losses or maximize on favorable prices before they plunge. These actions of traders in the Forex market create what we call price patterns on the trading chart. Price patterns therefore refer to chart movements that mirror the actions of and feelings of the Forex market traders. A trader with a good grasp of the patterns trades at a leveraged position compared to the rest in the league. Price patterns give one the ability to clearly identify entry points and to project the far a currency pair can go after breaking out and starting to move. Price patterns are normally categorized into two: Continuation patterns-these are price patterns that inform the trader about the progression of a trend. They give an insight to the trader concerning when to enter the market and when to pick up his profit and exit a trade. Reversal patterns- these attempt to answer the question: will this trend continue? These patterns help to warn the trader of impending price reversals and likely movement in the opposite direction for the trader to take the necessary measures. Triangle price continuation pattern This is a continuation price pattern. A triangle price continuation pattern occurs when a currency pair attains the flat level of support or resistance and then moves towards a tighter consolidation range. Triangles can assume bearish or bullish status depending on the prevailing condition in the market before the formation of the triangles. If the prior conditions amounted to an upward trend, then the triangles are bullish. On the other hand, if the market was on a downtrend then the triangle will be a bearish continuation pattern. Triangle chart patterns have characteristics worthy discussing. These characteristic are: Resistance level In a bullish continuation (ascending triangle) pattern the resistance level is horizontal or flat. On a downward or bearish trend, the resistance level is converging on the support level (descending triangle). Support level A horizontal level of support signals a bearish market represented by a descending triangle. The support level is up-trending and converging with the resistance level in an exuberant or bullish market. Flag pole As discussed earlier, the pattern prior to the triangle formation is key. In a bullish market, the flag pole covers the distance between the beginnings of the pattern to the highest peak of the ascending triangle. In a bearish market on the other hand, the flagpole measures the distance from the onset of the trend to the lowest point of the descending triangle. Breakout point The price movement of currency pair differs as it is significantly influenced by the mood of the market. Break out refers to the point at which the currency pair breaks above the horizontal level of resistance in a bullish market characterized by an ascending triangle. In a bearish or descending triangle, the currency pair breaks down below the horizontal level of support. Price projection After the currency pair breaks out, there is a price to which it ends up assuming. Price projection in a bearish market refers to the price at which the currency pair will most probably dip to after breaking out. In the event of a bullish market, price projection will indicate to how far the price will rise after breaking out of the triangle. In either case, the distance the currency pair is estimated to move will be equal to the height of the flag pole. In a nutshell, triangle price chart patterns generally aid the trader to know whether a currency pair will continue with a particular trend in the market or not. If the answer is yes, triangle price chart patterns help the trader to analyze the duration of continuity. This is of great importance to a trader so that he can act accordingly to avoid making losses while at the same time working to maximize his returns.

INTRODUCTION In technical analysis, there are several items that are significant and worthy considering, key among the items of concern are the price of a security and volume. In technical and fundamental analysis, the price is taken to encompass all the information available in the market. Volume on the other hand is also a key factor of analytical interest that has to be considered. While grossly misinterpreted, volume refers to the number of securities or contracts traded within a particular duration it could be daily, weekly or even monthly. The volume is directly proportional to the activity of the security; the higher the volume the more active the security. Chart analysts make use of volume bars to establish volume movement. These bars indicate the number of shares traded within a particular period range. THE SIGNIFICANCE OF VOLUME Volume shows the strength or weakness of a trend Volume in technical analysis is considered shoulder to shoulder with price. It is used to determine how weak or strong a price movement is. If prices go up or down as they normally do accompanied by a large volume moved, such price movements are considered strong and the reverse holds true. Take for instance the price of a security increasing by 7% after being on a bearish trend. This could be easily mistaken for a trend reversal. Technical analysts however before making any conclusion usually study the accompanying volume. If large volumes were moved during the same period then it could be a strong sign of a trend reversal. Therefore the correlation between volume and prices is of paramount importance in determining the characteristics of a trend. A weak trend is seen where price movement is accompanied by a deterioration of volume. Where the volume and price movement are negatively correlated, it’s a sign of a divergence. A simple case of a divergence occurs where prices are moving upwards and volume is declining. Chart pattern determination Volume can also be used to determine chart patterns. The critical part of chart patterns is the pivotal points. There are several chart patterns such as triangles, flags, head and shoulders et cetera that volume can confirm. The quality of the signal that price patterns communicate to the chartists and technical analysts is considered weak if volume is not there to confirm the pivotal movements of the pattern. Volume as a price predictor Volume is a predictor of price. In technical analysis, volume movement is closely monitored as it gives a hint as to whether a price run is almost coming to an end or it just has begun. Volume enables chartists for instance to determine whether an upward trend in price movement is about to end by looking at whether such an upward run is accompanied by a decreasing or increasing volume traded. Volume as a tool to gauging market emotions Volume can also signify the market emotions. Market indecisiveness is typically identified by a high volatility and an insignificant change in security prices. If within a day prices charge up then come lower past the opening then maybe close at the day at the same price it opened, such a price pattern formed is called the Doji candlestick pattern. Now such a pattern is usually accompanied by a weak volume traded. The overall conclusion that can be made out of all this is that the market participants are indecisive accompanied by fear and greed. Volume thus plays a fundamental role in trading. Technical analysts using the volume moved can form different market opinions and forecasts. These form the basis upon which they hinge their trades and take different trading positions. A total disregard to volume is tantamount to blind trading which has been mostly associated with either amateurs or emotional traders. It is also advisable that as part of market analysis, volume should be one of the items that is prioritized reason being that it can easily show the direction of the market. In fact it is often said that show me the volume and I will tell you pointblank whether the business you are in is worth your pennies. Volume is thus so strategic to a trader the same way arrows and spears are to the hunter.

Introduction Candlesticks are the components of candlestick charts which convey or communicate price movement. By studying the candlestick patterns, one would know the price action or the movement of a currency pair over a given time period. Candlestick charts are based on the period of time over which they convey information; can be classified as hourly, daily, weekly charts and so forth. There are a variety of candlestick patterns that have come up over time. Candlesticks are vital in trading as they give traders an insight into market emotions; the reactions of dealers regarding certain changes in the market. Candlesticks therefore are very important trade indicators and should thus be carefully utilized. Consistent candlestick patterns For candlesticks to be relied upon, they have to display consistency. Among the many candlesticks patterns employed in the market today, the following are considered the most consistent in terms of price action and trend communication. Piercing Line This candlestick pattern is a bullish reversal pattern meaning sellers are slowly losing their market dominance. This pattern has two candles: the bullish candlestick and the bearish candlestick. For illustration purposes, assign the red bodied bearish candle Day 1 and the bullish candle Day 2. A piercing line pattern occurs when the green bodied Day 2 bullish candle closes the trading day above half of the Day 1 bearish candle. The price gaps down then filled to compensate the trading losses previously incurred in Day 1 bearish candle. The bullish market emotion can be read from the fact that the bulls on Day 2 reject the gap and push further into the previous bearish Day 1 losses. The rejection of the gap up by the bulls is a major bullish sign, and the fact that bulls were able to press further up into the losses of the previous day adds even more bullish sentiment. To confirm the consistency of the piercing pattern, more bullish trend is normally experienced before a buy signal is issued. Dark cloud cover This pattern signifies a buying momentum that is generally slower. It’s a typical bearish reversal pattern. The candle stick arrangement in this pattern consists of a long green bodied bullish candle followed by red candle. The bearish candle opens at a price higher than the previous bullish candle close. The bearish candle then plunges deep into the bullish candle’s body. The dark cloud cover is a sign that lower prices are coming up. Its appearance is interpreted to mean an up-trend. The market emotion conveyed by this candlestick pattern is that of an excited and energetic market. Consistent with other indicators, this pattern is signals a strong downward move and the deeper the red candlestick penetrates into the green candlestick, the more likely the trades made based on the dark cloud cover will succeed. Evening star Chart pattern This is a bearish reversal pattern. It indicates that after making new highs, the price pattern has changed. It is represented by three candlesticks with the middle or second candle being small also referred to as the star. The first warning that the trend is taking a downward plunge or that the bulls are losing steam is given by the star. This trend is popular among traders for its reliability as a change signal. It is advisable to trade immediately after the pattern has closed. To set a reliable profit take target however another technical or fundamental analysis tools have to be considered in addition. Morning star chart pattern. This is pattern signals that the trend has changed after making new lows. It is categorized under bullish reversal patterns. This pattern like the evening star consists of three candles. The first candle is red followed by small bodied green candle then a long green candle follows. The small candle signals market indecisiveness or bear exhaustion. The morning star gives a strong indication of a major market low. To trade this pattern, a trader is advised to wait until the pattern closes. After consulting and interpreting other results of technical analysis, the trader can take then a long position. Engulfing pattern This pattern gives an indication of a reversal. It is made up of two candlesticks red and green bodied candlesticks. Since it is a reversal, an engulfing pattern can be either a Bearish Engulfing Pattern or a Bullish engulfing pattern. In the event of a bullish engulfing pattern which occurs in a downward trend, the green candle’s body completely penetrates the previous red candlestick’s body. The Engulfing Pattern occurs where the red candlestick completely submerges into the previous green candlestick. The rationale behind this pattern is that either the bulls or bears are losing momentum during the first candle and the opposite (bear or bull) makes a strong run in the second candle which as we saw could either be red or green depending on the first candle. Appoint to note here is that the market has to be in a clear identifiable position prior to the occurrence of the Engulfing pattern. Also the candle body sizes matter a lot; the bigger the difference in size between the two candles, the more significant the reversal point is. For one to trade, they should ensure that the pattern has closed and confirmation should be made that it is truly an Engulfing pattern before one can trade it. In summary, these are the most reliable and consistent candle stick patterns. Remember before you enter any trade based on a given pattern, the occurrence of the pattern has to be established to avoid using inappropriate trading strategies.