Forex Strategy: Trading with Stochastics

Stochastics are amongst the most popular technical indicators when it comes to Forex Trading. Unfortunately most traders use them incorrectly. In this article we will review the correct way to use this popular technical indicator.

George Lane developed this indicator in the late 1950s. Stochastics measure the current close relative to the range (high/low) over a set of periods.

Stochastics consist of two lines:

%K - Is the main line and is usually displayed as a solid line

%D - Is simply a moving average of the %K and is usually displayed as a dotted line

There are three types of Stochastics: Full, fast and slow stochastics. Slow stochastics are simply a smother version of the fast stochastics, and full stochastics are even a smother version of the slow stochastics.

Interpretation:

Buy when %K falls below the oversold level (below 20) and rises back above the same level.

Sell when %K rises above de overbought level (above 80) and falls back below the same level.

The interpretation above is how most traders and investors use them; however, it only works when the market is trendless or ranging. When the market is trending, a reading above the overbought territory isn't necessary a bearish signal, while a reading below de oversold territory isn't necessary bullish signal.

Trending market

When the market is trending is necessary to adapt the oscillator to the same conditions: When the market is trending up, then the signals with the higher probability of success are those in direction of the trend "Buy signals", on the other hand when the market is trending down, selling signals offer the lowest risk opportunities.

Thus when the market is trending up, we will only look for oversold conditions (when the stochastics fall below the oversold level [below 20] and rises back above the same level) to get ready to trade, and in the same way, when the market is trending down we will only look for overbought conditions (when the stochastics rise above de overbought level [above 80] and falls back below the same level.

Taking all overbought/oversold signals during a trending market will lead us to many whipsaws. If you are not comfortable with the number of signals given, try expanding your trading to other currency pairs.

Trend-less market

During a ranging market we could use the interpretation explained above to trade off stochastics.

Divergence

Divergence trades are amongst the most reliable trading signals in the Forex market. A divergence occurs either when the indicator reaches new highs/lows and the market fails to do it or the market reaches new highs/lows and the indicator fails to do it. Both conditions mean that the market isn't as strong as it used to be giving us opportunities to profit from the market.

Stochastics can also be used to trade off divergences.

Price behavior

A price behavior can be incorporated into any kind of system or Forex strategy. When using divergences or overbought/oversold condition with a price behavior approach, the probability of success of our signals increases enormously. Why? Because price dictates at the end, how all indicators will behave, it also gives us a lot of information about the probable direction it will take in the future.

I hope this article helps you become a better trader.

Don't forget to read our risk disclaimer.

Forex Strategy: Trading with Stochastics

Stochastics are amongst the most popular technical indicators when it comes to Forex Trading. Unfortunately most traders use them incorrectly. In this article we will review the correct way to use this popular technical indicator.

George Lane developed this indicator in the late 1950s. Stochastics measure the current close relative to the range (high/low) over a set of periods.

Stochastics consist of two lines:

%K - Is the main line and is usually displayed as a solid line

%D - Is simply a moving average of the %K and is usually displayed as a dotted line

There are three types of Stochastics: Full, fast and slow stochastics. Slow stochastics are simply a smother version of the fast stochastics, and full stochastics are even a smother version of the slow stochastics.

Interpretation:

Buy when %K falls below the oversold level (below 20) and rises back above the same level.

Sell when %K rises above de overbought level (above 80) and falls back below the same level.

The interpretation above is how most traders and investors use them; however, it only works when the market is trendless or ranging. When the market is trending, a reading above the overbought territory isn't necessary a bearish signal, while a reading below de oversold territory isn't necessary bullish signal.

Trending market

When the market is trending is necessary to adapt the oscillator to the same conditions: When the market is trending up, then the signals with the higher probability of success are those in direction of the trend "Buy signals", on the other hand when the market is trending down, selling signals offer the lowest risk opportunities.

Thus when the market is trending up, we will only look for oversold conditions (when the stochastics fall below the oversold level [below 20] and rises back above the same level) to get ready to trade, and in the same way, when the market is trending down we will only look for overbought conditions (when the stochastics rise above de overbought level [above 80] and falls back below the same level.

Taking all overbought/oversold signals during a trending market will lead us to many whipsaws. If you are not comfortable with the number of signals given, try expanding your trading to other currency pairs.

Trend-less market

During a ranging market we could use the interpretation explained above to trade off stochastics.

Divergence

Divergence trades are amongst the most reliable trading signals in the Forex market. A divergence occurs either when the indicator reaches new highs/lows and the market fails to do it or the market reaches new highs/lows and the indicator fails to do it. Both conditions mean that the market isn't as strong as it used to be giving us opportunities to profit from the market.

Stochastics can also be used to trade off divergences.

Price behavior

A price behavior can be incorporated into any kind of system or Forex strategy. When using divergences or overbought/oversold condition with a price behavior approach, the probability of success of our signals increases enormously. Why? Because price dictates at the end, how all indicators will behave, it also gives us a lot of information about the probable direction it will take in the future.

I hope this article helps you become a better trader.

Don't forget to read our risk disclaimer.

Forex Broker: Choosing the right Forex Broker

Sometimes it's hard to make a decision on which Forex broker to open our trading account, there are just too many of them. Most of them have different features, capabilities, weaknesses and advantages, for this reason I have created a checklist that can help you decide the broker to use in your Forex adventure.

1. Is it regulated?

The first question you have to ask yourself is: is the broker I want to use Regulated ? There must be no doubt about this first point. All regulated brokers must submit financial reports to regulatory authorities, and when they fail to do it, authorities have the right to fine them or terminate their membership. This enforces Forex brokers to keep transparent financial reports.

The brokers must be regulated by their local regulatory authorities, for instance, for brokers based in the US , they must be regulated by the NFA (National Futures Association) and CFTC (Commodity Futures Trading Commission), Swiss based brokers must be regulated by the FDF (Swiss Federal Department of Finance) and so on.

Also when a Forex broker is regulated allows investors to dispute any resolution, increasing the investor protection.

2. Trading Conditions

This point refers to the features of the trading platform and the trading conditions with the chosen broker. Amongst the most important factors are:

Spread - Obviously the smaller the spread on currency pairs the better the conditions are for investors and traders.

Platform execution - Trading execution refers to how fast and consistent are the execution of trades. Some brokers guarantee fast and transparent executions during normal market conditions.

Fractional trading - Some brokers allow investors and traders to trade on a fractional basis, instead of trading full lots "100,000 units" or "300,000 units", they allow you to trade "163,345 units" or "325,911 units". This is very helpful for trades risking certain percentage of their balance on each trade.

Safety of funds - We need to make sure our trading funds are kept in a segregated account or at least insured.

Quarterly Window Dressing - A Recurrent Wall Street Scam

"The time has come the walrus said, to talk of many things": Of corrections--portfolios--- and window dressing--- of market cycles--- wizards--- and reality.

Quarterly portfolio window dressing is one of many immortal Jaberwock-like creatures that roam the granite canyons of the Manhattan triangle, sending inappropriate signals to unwary investors and media spokespersons. Many of you, like the unsuspecting young oysters in the Lewis Carroll classic, are responding to the daily news nonsense with fear instead of embracing the new opportunities that are surely right there, cloaked, just beyond your short-term vision field.

Older and wiser mollusks who have experienced the cyclical realities of the markets tend to stick with proven strategies that are based on a solid foundation of QDI (quality, diversification, and income production). They know that corrections lead to rallies, and that rallies always give way to corrections. If only the corrections could elicit patience instead of fear; if only rallies didn't produce greed and excess. There's a lot of confusion in a world that considers commodities safer instruments than corporate bonds.

Long lasting investment portfolios are consciously asset allocated between high quality income and equity securities. Each class of securities is then diversified properly to mitigate the risk that the failure of a single security issuer will bring down the entire enterprise. Simply put, a portfolio with 100% invested in the absolute, hands-down, best company on the planet is a high-risk portfolio. There is no cure for cyclical changes in security market values--- diversified portfolios thrive on it, in the long run.

The differences between a correction in either a market (equity or debt) or a market sector (financials, drugs, transportation, etc.), and a fall from grace in a specific company are important to appreciate. Corrections are broad downward movements that affect nearly all securities in a specific market. This particular one has impacted prices in both investment markets, while creating rallies in more speculative arenas. Ten years ago, the dot-com bubble began under very similar circumstances. Ten years earlier, it was interest rates--- and on, and on. When all prices are down, opportunity is at hand.

There are approximately 450 Investment Grade Value Stocks, and at least half are down significantly from their 52-week highs; fewer than ten per cent were in this condition just over a year ago. But very few companies have thrown in the towel, or even cut their dividends. Closed end income fund prices are still well below the levels they commanded when interest rates were much higher, yet they provide the same cash flow as before the financial crises. The economy and the markets have been through much worse.

Why aren't the wizards of Wall Street assuaging our nerves by explaining the cyclical nature of the markets and pointing out that similar crises have always preceded the attainment of new all time highs? Right, because the unhappy investor is Wall Street's best friend. Why can't politicians address economic problems with capitalist-economic solutions? Fear, and the panic it evokes, creates an easy market for walruses, oyster knives in hand.

Wall Street plays to the operative emotion of the day--- greed in the commodities markets and fear in the others. Once per quarter, they trim their holdings in unpopular sectors and add to their positions in areas that have strengthened. Under current conditions in the traditional investment arena, don't be surprised by larger than usual cash holdings (certainly not "Smart Cash"). Window dressing pushes the prices of your holdings lower, in spite of their continued income production and sustained quality ratings.

How have the wizards managed to re-define the long-term investment process as a quarterly horse race against indices and averages that have no relationship to investor goals, objectives, or portfolio content? Why do these proponents of long-term investment planning and thinking religiously conspire to make short-term decisions that prey upon the emotional weaknesses of their clients? The "art of looking smart" window-dressing exercise accomplishes several things in correcting markets:

The things you own are artificially manipulated lower in price to make you even more uncomfortable with them, while the things you don't have positions in stabilize or move higher. The glossies from the new fund family your advisor is talking about show no holdings in any of the current areas of weakness. It's easy to make fearful investors change positions and/or strategies. Sic 'em boys. Brilliant!

Value investors (those who invest in IGVSI stocks, and income securities with an unbroken cash flow track record) may lapse into fearful thinking as well, and this is where the Working Capital Model comes to the rescue. By focusing on the purpose of the securities you own, their enhanced attractiveness at lower prices becomes obvious. Higher yields at lower market valuations and more shares at lower prices equal faster realized profits as the numbers move higher during the next upward movement of the cycle. That's just the way it is. A reality you can count on.

Surprisingly few investors have the courage to take advantage of market corrections. Even more surprising is how reluctant the most respected institutional walruses are to suggest buying when prices are low. The instant gratification expectation of investors combined with the infallibility expected of professionals, by both the media and their employers, is the cause. Gurus are expected to know what, when, and how much. Consequently, they prefer to manipulate their portfolios to create an illusion of past brilliance, rather than taking the chance that they may actually be in the right position a few quarters down the road. There is no know in investing.

The stock market yard sale is in full swing--- add to your retirement accounts, buy more of IGVSI stocks at bargain prices, increase your dependable income and increase current yields at the same time. Apply patience, and vote for economic solutions to economic problems.

Perge'

About the Author

Steve Selengut http://www.sancoservices.com http://www.kiawahgolfinvestmentseminars.com Professional Portfolio Management since 1979 Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"

Trading it for Bigger Profits

Today, we have more news than ever and its delivered in the click of a mouse and many trader want to trade it and make profits - after all it’s the fundamental supply and demand situation that drives forex prices…

No it isn’t!

Supply and demand fundamentals are not important by themselves - it’s how they are perceived that determines price.

Here is a simple equation for market movement to illustrate the above:

Supply and Demand (facts and news) + investor Perception = Price

From the above you can see that it is investors who determine price.

We all have the same facts to look at but we don’t all draw the same conclusions from what we see and this is the problem when trading news stories.

If you could win by trading the news, with today’s quality of it and lightening communications, the percentage of traders who would win would be far greater but the fact is:

The same amount of people who lost in forex trading 50 years ago lose today and this statistic won’t change because you can’t trade news stories in isolation.

The problems with trading news stories are greater today than they have ever been.

Why?

Because we all get the information quickly and it’s instantly discounted by the market, we all have the information at the same time in any corner of the globe online and no one has an advantage of getting it first before the herd.

The problem that is always present and has been since markets started trading is:

You don’t know how the traders are going to view the news because their all driven by their individual motivations and emotions furthermore, the news always reflects the views of the crowd and the crowd is always wrong.

Will Rogers once said:

“I only believe what I read in the papers”

He was joking of course, but it’s surprising how many people read a paper or see a view on CNBC and think they can trade it and win - they can’t.

FACT:

Markets collapse and turn when they are most bullish and rally when they are most bearish - this is nothing to do with the facts but how the investors perceive them.

News stories can be used but it’s not in the way you may think.

If a bullish piece of news fails to push market higher, or bearish news fails to push a market lower, then you may have a trend change at hand.

You need to check and to do this, look at a forex chart and see the technical view of price only. Here you are seeing the reality or the truth in black and white.

This gives you a detached non emotional view of price and you can decide which way to trade. Using the news in this contrary fashion is a great way to spot situations which you can time entry with your technical indicators.

There is an old saying:

“If you can hold your head, when everyone around you is losing theirs you probably haven’t heard the news”

In the above instance you have - but you’re not taking the view of the majority.

If you use news in the above way and combine it with forex charts to time your trading signal, then you have a powerful combination for bigger forex profits.

How To Make Money In Your Sleep

Everyone knows that it is possible to work and make money. The more we work, the more we earn. Let s look at some ways we have to let the power of leverage return more to us even when we don t work more. With leverage, money gets returned to us in a sort of a self-propelled fashion. It doesn t matter to leverage if we are not working hard, or even if we are not awake.

Stockbrokers allow their clients to use leverage by buying stocks on margin. This means if you want to buy $1,000 worth of stock, your broker will lend you $1,000 more so you can buy twice as much. Therefore, if your stocks double in price, they become worth $4,000, and since you have only $1,000 of your money invested and $1,000 belongs to your broker, you have tripled your $1,000 to $3,000! You would have only doubled your money had you not been able to use the leverage provided by buying on margin.

Commodity brokers allow their clients to make money by using a lot of leverage. For about $1,500 you can control 5,000 bushels, or about $30,000 worth of soybeans. Here, if the price of the soybeans rises 10%, you make a profit of $3,000. Of course, it can go the other way, too, and if it does, you lose big. That s how it is with leverage. Still, fortunes have been made in commodities futures trading and it is a superb example of using leverage.

Another area where people can gain a large amount of leverage is through multilevel marketing. With multilevel marketing a person signs people into his down line. These people recruit and sell products for him, thus giving him the ability to make money with the leverage they provide.

Probably, the most ubiquitous form of leverage is the leverage you gain when you put down $40,000 to buy a $200,000 house. Sooner or later most families make a similar investment. It is leverage because the mortgage allows you to control an asset that is 5 times as big as the investment you have made. Should the price of your $200,000 property double, not at all an unheard of event in real estate, you will have made $200,000 on your $40,000 investment, or a return of 500%! Now that's leverage! It's no wonder people like to invest in real estate!

All these examples of leverage show ways to make money, even a lot of money, without doing more work. However, they all come with a potential downside. Certainly investing in stocks is a great thing to do, but the leverage found in stock investing isn't normally what one thinks of as very strong leverage. There is a lot of leverage in commodities futures trading but there is also an abnormal amount of risk. I find that it takes a certain type of person to trade commodities futures. Trading commodities futures isn t recommended for everyone. Multilevel marketing isn t recommended for everyone, either. Though many success stories have been written because of multilevel marketing, it is a type of business that many people never find success with.

Buying a house on the other hand, is recommended for everyone, even if it is bought only to provide a place for someone to live. The price of real estate doesn't always go up, however. In the area that I live and invest in, real estate had a major slump between 1988 and 1993. In this time frame, real estate lost value drastically. Anyone who bought real estate in 1988, had to weather the storm, and if they did, they were richly rewarded by the mid '90s and they made out very, very well if they re still holding that real estate. With real estate, it always seems that you'll come out ahead and make money if you don't give up. Buying at the right time can make you a lot of money in a real hurry, but buying at the wrong time can severely slow down your ascent to wealth. If you do buy at the wrong time, all you can do is hold on tight and wait for a turn around. So far, throughout history, real estate prices have always broken sharply upwards when coming out of slumps. If you are able to weather a real estate down cycle until the market turns around, it will be well worth your perseverance because as the price climbs, you will gain leverage you need to make a lot of money in a real hurry.

So go put down 20 percent, get a mortgage and go live in your new house. Then, go take a nap and dream of all those dollars flowing into your bank account!

Forex Avenue: The Road to Riches

In meinem anhaltenden Streben nach den Besuchern meiner Website mit einer großen Anzahl von Optionen zur Auswahl, wenn man von zu Hause aus arbeiten Ich habe schon einige Forschungen über Forex-Handel. Ich lernte während des Devisenhandels verfolgt meine MBA-Programm. Für diejenigen unter Ihnen, die haben noch nie davon gehört, Forex Trading ist der Austausch der ausländischen Währung. Ich weiß, ich hätte auch nie wissen, war dies eine Option für die Geld hatte ich nicht herausgefunden, in der Klasse. Die meisten der wirklich großen Konzerne haben Abteilungen von Menschen, die sich an diesem für ein lebendiges, weil sie kann sehr lukrativ, wenn sie richtig. Die beste Nachricht, die ich gelernt habe zu diesem Prozess der Umtausch von Währungen ist, dass viele der Webseiten, können Sie sich mit diesem Angebot zu tun kostenlose Trial-Accounts zu helfen, lernen Sie, bevor Sie Ihr Geld investieren in versuchen es. Sie werden keine Geld in den Test-Konten, wenn Sie sich gut, es ist nur so tun, sondern Geld im Wesentlichen mit den realen Marktbedingungen. Wenn Sie auch in den Test-Account werden Sie wissen, ob dies etwas ist, was Sie wollen, versuchen Sie es auf eigene Faust. Vorteile für die Forex Trading sind, die getan werden kann, 24 / 7, während die Börse ist eine der Geschäftszeiten nur Austausch. Es ist 24 / 7, weil es mit Ländern auf der ganzen Welt so deutlich, dass es Länder gibt, wach sind und arbeiten, während wir schlafen. Ein weiterer Vorteil ist, dass Sie die Kontrolle über den Handel auf Ihr Konto. Sie brauchen sich nicht zu engagieren, lizenzierten Broker, um Ihren Handwerks und Gebühren Gebühren. Entlang den gleichen Linien, wer noch keine Investitionen am ehesten weiß, dass einige Mittel erforderlich machen, um dann selbst für eine bestimmte Zeit oder ein frühzeitiges Ausscheiden Gebühren zahlen. Sie brauchen sich nicht zu befassen Sie sich mit diesen beiden. Ein letzter Vorteil, dass möchte ich darauf hinweisen, ist die Tatsache, dass Forex ist nicht wirklich gelten die gleichen Arten von Schaukeln auf dem Markt, die Bestände sind freibleibend. Natürlich immer, wenn Sie kaufen und verkaufen die gleichen Währungen, dann wird es Schaukeln Markt. Aber da gibt es hunderte von Währungen, die es gibt, gibt es immer etwas für Sie zu Geld machen, weil während einer Währung in eine andere Wert ist und umgekehrt. Es gibt viele Mittel zur Verfügung, um jemanden zu interessieren, die in dieser Art der Ausbildung. Die Federal Reserve Bank-Website ist nur ein Beispiel für die Informationen zur Verfügung - http://www.ny.frb.org/markets/foreignex.html. Hier ist ein weiterer Artikel, finden Sie in ab, die in diesem Bereich. Http://www.forex.com/pdf/pro2.pdf. Ich habe auch eine der Websites, bietet eine kostenlose Lektion. Zwar gibt es viele Vorteile für diese Art von Ausbildung, wie ich schon erwähnt, gibt es sicherlich auch Risiken. Es besteht die Gefahr, mit den Wechselkursen, Zentralbanken im Ausland, und die Risiken, die Zins-und Kredit. Forex wird schnell ein beliebter Weg, um Ihr Investment-Portfolio zu diversifizieren. Wenn Sie gut mit Verständnis investieren Konzepte und genießen Sie es tun, kann dies zu Hause Geschäftschance für Sie. Just do your Forschung und versuchen Sie eine der Websites bietet den kostenlosen Test-Account, um mit der Praxis, und Sie sind auch auf dem Weg der Road to Riches. Von Scott Bianchi