Knowledge Base

There is a variety of Forex market news sites that include currency news, market news, Forex calendar events and other Forex news. You need to learn how to stay in touch at all times.

Apart from that, there are plenty of other useful resources such as the Forex market calendar, various apps and other resources that we will elaborate on in due time.

Forex & Currency News

As far as Forex market news go, a huge portion goes to reports on currencies and major events that will ultimately affect the prices of currency pairs. Some Forex traders rely almost exclusively on news reports for the decision-making process. The truth is that the professionals have factored in every possible outcome long before the event even took place. Still, staying appraised of current developments is highly advised, at least in relation to your favorite currencies.

A good read: How Does Currency Work?

Of course, most news articles on this subject will concern major currencies and economies. U.S. dollar, Chinese Yuan, Japanese Yen, British Pound and the Euro are going to comprise most of the topics for these articles. The other currencies come in from time to time, but the interest in them is much lower and there are fewer major developments to report about.

U.S. dollar

The good old $ is essentially the most traded currency that Forex has to offer. It comprises the bulk of the monetary mass at play, paired up with other currencies. This should come as no surprise, as even in the old days, the U.S. currency was used as an intermediary on this market.

Back when banks and corporations were the only ones allowed and used Forex for purely practical purpose, U.S. dollar was used as an intermediary. Any other currency had to be converted to dollar and then dollars had to be converted into the desired currency. Nowadays this process has been simplified and there are plenty of currency pairs with or without the “USD” part in them.

Even traders who try to avoid dealing with U.S. currency are usually forced to read Forex market news reports on U.S. economy. Still, there is no shortage of CPI updates, FED speeches as well as FOMC minutes and other events pertaining to the value of the U.S. dollar. The same goes for prognosis and future forecasts of market performance, such as the ones from these links below.

Be sure to check out: Federal Reserve & DailyFX

Euro

The official currency of 19 EU member states and several outside the Euro Zone. The Euro (EUR) does not lag behind the U.S. dollar in terms of frequency. In fact, the EUR/USD pair is arguably the bread and butter of Forex trading.

This is the most popular currency pair in the world. Naturally, there are plenty of things to look out. Major events include G8 and G20 summits, as well as major reports regarding the economy of any EU member state. Look out for ECB (the European Central Bank) announcements and related articles.

Link: ECB

Pound Sterling

The Pound Sterling or the British Pound (GBP) has seen some abysmal performance ever since Brexit became a grim reality. But overall it was considered one of the world’s strongest and one of the most stable currencies there are.

A good read: Brexit Effect on Pound

It will undoubtedly return most if not all of its former glory. When it does, it will have something to do with major news regarding the economy of the UK, as well as reports from the Bank of England (BOE) and analysis of their policies.

Link: Bank of England

Chinese Yuan

Chinese Yuan (CNY) seems to be gaining in popularity as China’s importance on the world stage grows. While not a ‘major’ currency in a traditional sense, its importance is no less significant because of it.

The Yuan used to be pegged to the U.S. dollar. But even since it ‘broke free’ there has been a looming currency war in the making. If it does happen eventually, a shrewd Forex trader would most likely deduce it ahead of time based on reports from the Central Bank of China.

Links: Bank of China & DailyFX

Japanese Yen

Another Asian currency on this short list is the Japanese Yen (JPY). If the U.S. dollar is the most traded currency on Forex markets and the Euro is a distant second, then the yen is definitely entrenched at the third position.

A good read: The Bladerunner Trade Strategy

The fact that many countries use it says something. The Bank of Japan is considered the authority on this matter. Any Forex trader dealing with pairs involving the Japanese currency should keep an eye on news and rumors from this source. Other than that, GDP reports and major developments pertaining to Japanese economy are a good hint as to where their economy is going.

Links: Bank of Japan & DailyFX

Economy/Market News

Main economic indicators are also an important factor. Any news that impact the perception of economic performance of a particular country can and will affect the value of its currency.

GDP, Central Banks, Unemployment rates…

Gross domestic product is one of the leading indicators that Forex traders turn to in order to appraise the situation and base their currency speculations on. The International Monetary Fund is among the most trusted sources on GDP for individual countries.

• International Monetary Fund
• Unemployment rates and other factors

Forex Economic Calendar

The whole purpose of the Forex economic calendar is to list all the major events that may or may not be important enough for the Forex market news. In fact, it would behoove any Forex trader to have an abroad plan of their trades, preferably in advance.

This calendar enables them to exploit or avoid various scheduled events that may have a profound effect on their market strategy. For some traders, especially ones whose strategy is based on high volatility, predicting the outcome of these events represents a golden opportunity.

Traders with stable trading strategies that do not respond well to sudden and unforeseen price movements tend to schedule their trading habits around these events. So that the only thing they need to worry about are the unforeseen events.

Other resources

Apart from Forex market news, there are all sorts of resources and apps. The apps themselves can be easily downloaded from various app stores, mostly App store for iPhones and Google Play for Androids.

• iTunes
• Google Play Store

Not all of them are the same and there are some recommendations. We are not talking about apps from brokers that allow clients to trade via their Smartphones and iPhones. This is about apps that can help you keep track of news, enhancing your productivity and effectiveness as a trader.

For instance, MetaTrader and Trade Interceptor are among the most widely used for their ability to deliver accurate and latest quotes to their users. They even allow them to place orders online. MetaTrader is better when it comes to technical indicators, but Trade Interceptor has better features, including better training and practice methods.

• MetaTrader
• Trade Interceptor

Apps such as NetDania Forex, Trade Optimizer, and Swiss Forex are among the most useful for any type of analysis. The first one allows you to stay appraised of news sources and market indexes for free. The charting options are also amazing.

The Trade Optimizer is slightly better and features a currency calculator. But unlike the other two, this one is not free. It is the most accurate one, but it comes with a price. Finally, the Swiss Forex specializes in fundamental and technical analysis and is completely free of charge. It also features many Forex-related commentaries, charts and event calendars.

• Trade Optimizer
• Swiss Forex

One of the most powerful tools for a trader is Divergence. You cannot start your trading journey without knowing how to spot and use divergence indicator. But first of all, you must understand it.

Divergence is spotted by comparing price action to an indicator. It can be the RSI, MACD, Stochastic or any other suitable indicator (usually oscillators). Price and indicators usually move together – price goes up and the same is seen in the indicator; price comes down, the indicator comes down. But sometimes, the indicator doesn’t match the movement of price. Price makes a higher high, but the indicator fails to rise to new highs; instead it just forms a lower high. This is Divergence and a sign that price will possibly come down.

Divergence Indicator

Divergence is identified by comparing two Highs or Lows of price with the corresponding ones on the divergence indicator. There are two types of divergence: regular and hidden. Next we are going to talk about both of them:

• Regular bullish divergence forms when price makes Lower Lows, but the indicator makes Higher Lows. This signals a possible bottom and a trend reversal.
• Regular bearish divergence forms when price makes Higher Highs, but the indicator makes Lower Highs. This signals a possible top and a trend reversal.
• Hidden bullish divergence forms when price makes Higher Lows, but the indicator makes Lower Lows. This is indicative of a possible trend continuation.
• Hidden bearish divergence forms when price makes Lower Highs, but the indicator makes   Higher Highs. This is indicative of a possible trend continuation.

Try to spot divergences on the charts using the classification from above. It will be hard in the beginning, but you will get used to it eventually and you will see that Divergence can be a great help.

No matter how good an divergence indicator, a pattern or any trading tool is, don’t use it by itself and try to confirm your signals with some other type of analysis. You can do this by using confluence. Confluence forms in a spot where you have more than one indication of where price will go. For example, confluence occurs where price reaches a confirmed horizontal level of support or resistance and a confirmed trend line. This is a two point confluence. If in that point, you see divergence forming, confirming your direction, you will have a stronger signal and a higher probability of price going your way.  Here is an example:

When price touched the trend line, it also touched the resistance level. Add to that the hidden bearish divergence on the RSI and the fact that the RSI is almost reaching overbought territory and you have a good short trade. You must understand that these are just examples and that price sometimes doesn’t go your way no matter how much confluence you have when you enter the trade.

It never hurts to have extra confirmation when you enter a trade and you should always make decisions based on several factors.

When it comes to technical analysis, there are few concepts that are as discussed – or important – as support and resistance. Since technical analysis is a must for successful forex trading, it goes without saying that anyone who aims to build a career in this fields will have to encounter and deal with support and resistance. In order to facilitate this, we are going to attempt to shed some light on this matter and focus on things that are absolutely essential. In other words, this article will try to explain the meaning of support and resistance, their importance as well as other key aspects of these two.

Support and Resistance 101: What are they?

First and foremost, do not be misled by the fact that support and resistance come in various forms; this subject matter is actually a lot simpler than it may seem at a first glance. For example, any experienced trader has realized that certain assets can only be pushed so far in a single direction, regardless of how hard they try to influence their price. If the price of an asset has some serious difficulties climbing past a certain point, and cannot seem to achieve this, then this may in fact be its resistance level. Or, if it cannot seem to fall below a certain price, we are talking about a support level. When analyzing charts, support and resistance levels are often referred to as a floor or a ceiling respectively, mostly because this is as far as prices will go. Also, do not take these things for granted, as support and resistance are not set in stone and will get breached – eventually. Rather, the support and resistance level of a certain asset can be moved in accordance with market conditions.

However, being able to identify when these support and resistance-related events are going to occur (or not going to occur) is what makes or breaks a forex (or any other kind of) trader. For instance, if a trader manages to correctly identify the support level of an asset, then they have also identified a perfect opportunity to acquire it at rock bottom prices, before they inevitably bounce back up, at which point they can be sold at a nice profit. The mechanics behind this process involves other traders who will eventually pick up on this opportunity and start buying as well, effectively driving the price up again. Of course, support and resistance being two opposite sides of the same coin, the reverse also applies on resistance level. In other words, correctly identifying the point where the price of a certain asset will cease to rise will put a trader in the most advantageous position to sell said assets off at maximum profit, before everyone else start losing money. The process is actually the same, except it works in the opposite direction.

Support and Resistance: Trends and Trendlines

Without going into financial trends, it should be said that they are related to an earlier point that was made in this text, about no support and resistance being set in stone. These barriers can and do change with time, and what directs those changes are general trends. This is why trends and trendlines are just as important as support and resistance, especially for rookies who have yet to get their bearing in the industry. As markets trend upwards, resistance levels become stronger as traders slow down, expecting the price to fall down towards previously established borders. This “plateau” effect can be discussed further at another time, but it involves prices standing relatively still or even dropping slightly, before a new resistance level is established, as the market stabilizes yet again. Needless to say, support levels work in the exact same manner, except the price in this process goes down, rather than up. As the actual price gets closer to the perceived support level, the trading gears up toward short positions, expecting the prices to recover in the near future. When applied to a chart, the line that signifies the price will peak either at the upside or a downside; connecting these peaks is how a trendline is formed, and it is used as a general indicator as to whether the price is expected to rise or fall. However, in spite of their objectivity and accuracy, the fact that the use of trendlines is so widespread these days can often lead to problems of its own, as people start relying on these things too much and leave their positions vulnerable to traders who can think outside the box.

Support and Resistance: The Magic of Round Numbers

This may be a purely psychological effect, but whenever the price of an asset hits a round number, it faces difficulties moving away from it. Statistically, most traders tend to buy or sell an asset once it reaches a round number, as if it is objectively valued and this tends to affect trading in a way that is similar to support and resistance, albeit far more subjective. The fact that people tend to place stop orders and target prices at $40 rather than $39 or $41 means that round numbers can be considered to be effective price stoppers. As this is not a result of an objective situation, it can be relied upon regardless of other trends, at least for a while. In other words, whenever the price of an asset approaches a round number, it will tend to stick around for a while before continuing the trend (or reversing it).

Support and Resistance Indicators

In their quest for finding a perfect tool for identifying exact support and resistance levels, traders have often turned to all sorts of solutions and means, although by far the most widely used means is the moving average. Since it is a line that always changes in response to the market events, it can be used to predict future trends, albeit with dubious success record. Finding the perfect time period is often regarded as the key issue, while the fact that this is a reactionary tool is often overlooked. Other instruments include the Fibonacci retracement and various mathematical formulas. If there was such a thing as a truly effective way of predicting support and resistance, people would have heard of it by now.

Managed forex accounts are ideal for traders who are looking for someone to trade on their behalf. Reasons for this decision can vary. If you are not the person who wants to go through the process of learning the basics, build up on them and to develope necessary skill set to enter the trading world, managed forex accounts are something you might be interested in. Think of it like hiring an experienced advisor to do all the work for you. The logic is simple, make things happen by letting people with proper knowledge handle everything.

But don’t think that you’re avoiding all those risks by relying on managed forex accounts, because you’re most definitively not. It comes as no surprise really that you should assess all your alternatives and make a smart choice. Also, every account manager will charge you with a fee. There’s no such thing as a free lunch, remember.

Advantages of Managed Forex Accounts

First one we already mentioned – the experience. Managed forex accounts come with brokers who have proven long-term trading involvement. The second thing to consider is pressure. Make no mistake, trading can be both frustrating and exhausting. Letting your emotions take over is a safe way to the abyss. You don’t want to do that. Instead, it’s better to rely on managed forex accounts and traders who make rational decisions when pressure comes into the game. Finally, ask yourself the following questions – Do you really want to become a trader? Are you willing to reshuffle your time and transfer a significant part of it to build your trading mindset. Will you stay commited to it? If motivation as well as clear objectives lack, forget it. Managed forex accounts are the way to go.

Is there a downside? Of course there is. What did you think? No trader will ever agree to deal with managed forex accounts without an interest. Be careful out there. Don’t fall for a sweet smile, fancy promise and a 100 dollar tie. Assess your options and do your own cost-benefit analysis. Between you and your trader there should be a reasonable amount of blind trust. Nobody can check someone constantly. You have better things to do. Managed forex accounts are brilliant really, but only if you set up a good foundation for it. Ultimately, it’s your money. You can do whatever you want with it. Managed forex accounts require you to be diligent and to know exactly in what you are getting into. At least that’s with we’re suggesting.

So, managed forex accounts are not so bad, but you must take into consideration two major questions: “Is the account manager that I am going to trust with my money really as good at trading as he says?” and “Is this for real, or is it a scam?” Try to get in contact with people he traded for, write a contract with him, if he works for a site, review the site. Just do everything you can to make sure your money is safe.

Forex scalping is pro way of denoting the “skimming” of small profits with consistency.  In other words, going in and out of positions several times per day.

As we know, a Day Trader is a trader that usually closes all his positions at the end of the day. Day trading is considered a fast way of pocketing profits, benefiting from short term moves in price. A day trader is more focused on technical analysis and chart analysis and doesn’t pay that much attention to the fundamentals. Usually, long term traders use the higher time frame charts like daily and weekly, with a strong focus on economics and politics. But a long term trader can have a trade open for 2-3 days, a week or even more. Of course, if the trade closes in profit, it will bring him a lot of pips because as we know, a candle on the daily chart contains much more pips than a 15 minutes candle, even if they both look the same. Look at the two pictures below. First one is a daily chart and the second one is a 15 minutes chart.

Forex Scalping – Beyond the surface

As you can see, even if they look approximately the same, the two candles are very different when we look at the pips contained by them. The daily candle has 146 pips and the 15 minutes candle only has 18 pips. This is why the long term traders make a lot more pips from one successful trade than a day trader. But there are some things that must be considered: a trade on the daily charts takes a lot more time to conclude and the risk involved in higher because you need a wider stop loss.

While a long term trader waits for his trade to close, a day trader can take a lot more trades, with a smaller risk on each one of them, thus being capable of making more profit than the long term trader.
Now, think about how many trades could be entered by a trader that uses the 1 and 5 minute chart and just aims for 3-5 pips profit and exits his trades in less than 5 minutes. The amount of trades can be huge during the course of one day. This fast paced way of trading is called “Forex Scalping” and it can bring a lot of profit, but also it requires a lot of concentration and constant monitoring of the trade. Profits come from the amount of successful trades, even if the profit from one or two trades is insignificant and that’s why a trader must be constantly in front of his computer.

A scalper does not need to be aware of economic environment or long term trends because even if we have a strong uptrend on the 4H chart, surely we can take 3 pips profit on a short trade on the 1 minute chart. Because the move we are looking for is a very small one, it is much more probable to happen even if the overall sentiment is against the direction of our trade.

Forex scalping is not for everyone and if you think about applying this technique, you must make sure that it fits your trading style. A scalper always takes small profits that add up, but some traders can become frustrated if they only took 5 pips profit but price continued to move in the original direction for 50 more pips.

There is another thing you must take into consideration when scalping: the broker you are trading with. Forex scalping is not approved by all brokers and that is why you must ask them if they allow scalping before opening an account with them.

When it comes to forex scalping strategies, most of the longer term strategies can work because the same principles apply, but on a smaller scale. Maybe the settings for the indicators must be adjusted to give early signals and also proper money management techniques must be applied. Of course, if you adapt a 1H strategy to 5 minutes, you must make some changes.

Always keep in mind that forex scalping is very risky, just like any form of forex trading.