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Emerald Passport Explains Forex Chart Trading

Emerald Passport Explains Forex Chart Trading



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Forex Trading Signals

By : T. Houser
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In forex trading, perceptions are that more complications are involved along with the lucrative chance to make more profits. However, experts suggest that if one is able to analyze patterns and trends in the graphic representation of forex price movements, making money becomes easier.

Forex Trading involves buying foreign currencies at a certain rate and selling it at another rate making use of the difference in exchange rates of this currency in various markets. Profit is made when the selling rate exceeds the buying rate.

In order to make profits, it is essential that the trader adopts certain scientific and non-scientific strategies such as simple moving averages, resistance and support levels etc. Along with these strategies, the trader must also be able to understand and perceive certain signals in forex price movements. These are called Forex Trading Signals.

The Forex Trading Signals are important as they are regular patterns found in price movements recorded for a certain period of time. Analysts of price movements believe that fixed patterns are always followed by the prices until a reversal in trend occurs. Therefore it is also believed that these patterns themselves indicate the possible occurrence of fall or rise in prices, reversal of trends etc.

The Forex Trading Signals are usually aimed at novices or people who do not have time to do their own analysis in forex price movements. People who perform their own analysis also like to complement their research with external trading signals.

The first step in identifying Forex Trading Signals is to plot the price movements of foreign currencies over a certain period of time using various technical indicators. These indicators and their uses are detailed here and then the signals that can be perceived from these are explained.

The more number of indicators used in plotting price movements, the more reliable the signals would be. The most widely used indicator is the Japanese candle sticks which are again of different types as follows:

* Minute-by-minute candlestick charts
* Hourly candlestick charts
* Daily candlestick charts

A candlestick is basically the Japanese method of recording the high, low, opening and closing prices of any commodity or currency for a day drawn over a period of time. The chart looks like a candle stick and hence the name. The body of the candle is denoted in white or green if the closing price is higher than the opening price for a particular day. Else it is denoted in black or red.

Other methods adopted are the Fibonacci charts, trend lines, support and resistance levels etc.

The bullish (positive) signals that arise from the above indicators are as follows:

* Candlesticks engulfing
* Trend line breaking upwards
* Positive divergences
* Crossovers of moving averages
* Strong, close support and weak, distant resistance levels

The negative or bearish signals are:

* Trend line breaking downwards
* Negative divergences
* Strong, close resistance levels
* Weak, distant support levels.

One has to carefully look for these Forex Trading Signals.

About the author:
Thomas D. Houser" target=_blank>

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