Forex vs stock market.

g jnab g mujhey forex business mey kafi time hogya hai likan meny aj tak stock trading keh barey me nahi read kiya jnan g mey just trading forex trading keh barey me information rakhta ho jnanb g ye useful hai mere liye kafi

forex and stock market dono ashe he lekin forex ek fast tarike ke sath hmme profitdilata he lekin stock ke sath aap slow motion me trade krte ho to hmme profit milta he me hmesha hi forex me trade like krta hun bhai isme koi shk nhi

Dear stock market aur forex me bahut hi jayda difirence hai stock market me hame kam karne ke liye ek big capital ki jarurat hoti hai vahi forex market ko low capital se bhi start kar sakte hai aur good profit earn kar sakte hai esliye forex trading best hai.

Trends are usually noted by “higher highs” and “higher lows” in an uptrend and “lower highs” and “lower lows” in a downtrend.

When trading a trend-based strategy, traders usually pick the major currencies as well as any other currency utilizing the dollar because these pairs tend to trend and be more liquid than other pairs.

Liquidity is important in trend-based strategies. The more liquid a currency pair, the more movement (a. k. a. volatility) we can expect.

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Check out Huck’s EUR/USD win from following the trend.

The more movement a currency exhibits, the more opportunities there are for price to move strongly in one direction as opposed to bouncing around within small ranges.

Other than eyeballing price action, you can also make use of technical tools you have learned in previous sections to determine whether a currency pair is trending or not.

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ADX in a Trending Market

A way to determine if the market is trending is through the use of the Average Directional Index indicator or ADX for short.

Developed by J. Welles Wilder, this indicator uses values ranging from 0-100 to determine if price is moving strongly in one direction, i.e. trending, or simply ranging.

Values more than 25 usually indicate that price is trending or is already in a strong trend.

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The higher the number is, the stronger the trend.

However, the ADX is a lagging indicator which means that it doesn’t necessarily predict the future. It also is a non-directional indicator, which means it will report a positive figure whether price is trending up or down.

Take a look at this example. Price is clearly trending downwards even though ADX is greater than 25

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Moving Averages in a Trending Market

If you’re not a fan of the ADX, you can also make use of simple moving averages. Check this out!

Place a 7 period, a 20 period, and a 65 period Simple Moving Average on your chart. Then, wait until the three SMA’s compress together and begin to fan out.

If the 7 period SMA fans out on top of the 20 period SMA, and the 20 SMA on top of the 65 SMA, then price is trending up.

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One thing you should know about trends is that they are actually quite rare. Contrary to what you might think, prices really range 70-80 percent of the time. In other words, it is the norm for price to range.

So, if prices deviate from the “norm” then they must be in a trend right? What is one of the best technical tools we have mentioned in the previous ****es that measure deviation?

If you said a ruler, we give you mad props for effort.

If you said Bollinger bands, we’ll give you cyber milk and cookies! Here, take some.

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The sell zone is the area between the two bottom bands of the standard deviation 1 (SD 1) and standard deviation 2 (SD 2) bands. Bear in mind that price has to close within the bands in order to be considered in the sell zone.

The buy zone is the area between the two top bands of the SD 1 and SD 2 bands. Like the sell zone, price has to close within the two bands in order to be considered in the buy zone.

The area in between the standard deviation 1 bands is an area in which the market struggles to find direction. Price will close within this area if price is really in “No-Man’s Land”. Price direction is pretty much up for grabs.

The Bollinger bands make it easier to confirm a trend visually.

Downtrends can be confirmed when price is in the sell zone.

Uptrends can be confirmed when price is in the buy zone.

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What is a Range-Bound Market?
A range-bound market is one in which price bounces in between a specific high price and low price. The high price acts as a major resistance level in which price can’t seem to break through.

Likewise, the low price acts as major support level in which price can’t seem to break as well. Market movement could be classified as horizontal or sideways.

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Bollinger Bands in a Ranging Market

In essence, Bollinger bands contract when there is less volatility in the market and expand when there is more volatility. Because of that, Bollinger bands provide a good tool for breakout strategies.

When the bands are thin and contracted, volatility is low and there should be little movement of price in one direction. However, when bands start to expand, volatility is increasing and more movement of price in one direction is likely.

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Generally, range trading environments will contain somewhat narrow bands compared to wide bands and form horizontally. In this case, we can see that the Bollinger bands are contracted, as price is just moving within a tight range.

The basic idea of a range-bound strategy is that a currency pair has a high and low price that it normally trades between.

By buying near the low price, the forex trader is hoping to take profit around the high price. By selling near the high price, the trader is hoping to take profit around the low price. Popular tools to use are channels such as the one shown above and Bollinger bands.

Using oscillators, like Stochastic or RSI, will help increase the odds of you finding a turning point in a range as they can identify potentially oversold and overbought conditions. Here’s an example using GBP/USD.

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Bonus tip: The best pairs for trading range-bound strategies are currency crosses. By crosses, we mean those pairs that do not include the USD as one of the currencies in the pair.

One of the most well-known pair for trading ranges is the EUR/CHF. The similar growth rates shared by the European Union and Switzerland pretty much keep the exchange rate of the EUR/CHF stable.

Conclusion

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Conclusion

Whether you’re trading a pair that’s in a trending or ranging environment, you should take comfort in knowing that you can profit whatever the case may be.

Find out how you can pick tops and bottoms in both trending and ranging market environments.

By knowing what a trending environment and a ranging environment are and what they look like, you’ll be able to employ a specific strategy for each.

As the old wise man in Central Park says, “Only a fool dips his cookies in habanero salsa!”

You’ve been hit by the “Smooth Retracement!”

Nobody likes to be hit the “Smooth Retracement” but, sadly, it does happen.

Why?

In the above example, the forex trader failed to recognize the difference between a retracement and a reversal. Instead of being patient and riding the overall downtrend, the trader believed that a reversal was in motion and set a long entry. Whoops, there goes his money!

Check out how Happy Pip got fooled by the “Smooth Retracement” in one of her AUD/USD trades.

In this lesson, you will learn the characteristics of retracements and reversals, how to recognize them, and how to protect yourself from false signals.

What Should You Do?

When faced with a possible retracement or reversal, you have three options:

If in a position, you could hold onto your position. This could lead to losses if the retracement turns out to be a longer term reversal.
You could close your position and re-enter if the price starts moving with the overall trend again. Of course there could be a missed trade opportunity if price sharply moves on one-direction. Money is also wasted on spreads if you decide to re-enter.
You could close permanently. This could result in a loss (if price went against you) or a huge profit (if you closed at a top or bottom) depending on the structure of your trade and what happens after.
Because reversals can happen at any time, choosing the best option isn’t always easy. This is why using trailing stop loss points can be a great risk management technique when trading with the trend. You can employ it to protect your profits and make sure that you will always walk away with some pips in the event that a long-term reversal happens.

How to Identify Reversals
Properly distinguishing between retracements and reversals can reduce the number of losing trades and even set you up with some winning trades.

Classifying a price movement as a retracement or a reversal is very important. It’s up there with paying taxes *cough*.

There are several key differences in distinguishing a temporary price change retracement from a long-term trend reversal. Here they are:

Identifying Retracements

A popular way to identify retracements is to use Fibonacci levels.

For the most part, price retracements hang around the 38.2%, 50.0% and 61.8% Fibonacci retracement levels before continuing the overall trend.

If price goes beyond these levels, it may signal that a reversal is happening. Notice how we didn’t say will. As you may have figured out by now, technical analysis isn’t an exact science, which means nothing certain… especially in forex markets.

In this case, price took a breather and rested at the 61.8% Fibonacci retracement level before resuming the uptrend. After a while, it pulled back again and settled at the 50% retracement level before heading higher.

Another way to see if price is staging a reversal is to use pivot points.

In an uptrend, traders will look at the lower support points (S1, S2, S3) and wait for it to break. In a downtrend, forex traders will look at the higher resistance points (R1, R2, R3) and wait for it to break.

If broken, a reversal could be in the making! For more information or another refresher, check out the Pivot Points Lesson!

As we said before, reversals can happen at any time. Retracements can turn into reversals without warning.

This makes using trailing stops in trending markets very important. With trailing stop loss points, you can effectively prevent yourself from exiting a position too early during a retracement and exit a reversal in a pinch.

Conclusion

You don’t have to be shot down by the “Smooth Retracement”. You don’t have to lose all those pips. And you most certainly don’t need to wear pink arm floaties (although if pink’s your favorite color, it’s okay – we don’t judge).

Just know how to distinguish retracements from reversals. This is part of growing up as a trader. Having the ability to do so will effectively reduce your losses and prevent winners from turning into losers.