Forex Indicator Definitions

Simple Moving Average (SMA) - The average price of a given time period, (5 minutes, 10 minutes, 1 day, etc.) where each of the chosen periods carries the same weight for the average. Example using the closing prices of the USD/JPY currency pair: Day 1 close = 124.00, Day 2 close = 126.00, Day 3 close = 124.00, Day 4 close = 126.00; The 4-day SMA is 125.00 (the average of the prior four closes).

Exponential Moving Average (EMA) - Here, the averages are calculated with the recent forex rates carrying more weight in the overall average; for example: In a 10-day exponential moving average, the last 5 days will have more effect on the average than the first 5 days. The idea is to use the most recent data as a better indication of trend direction

Bollinger Bands - The basic interpretation of Bollinger Bands is that prices tend to stay within the upper and lower bands. The distinctive characteristic of Bollinger Bands is that the spacing between the bands varies based on the volatility of the prices. During periods of extreme currency price changes (i.e., high volatility), the bands widen to become more forgiving. During periods of low volatility, the bands narrow to contain currency prices. The bands are plotted two standard deviations above and below a simple moving average. They indicate a "sell" when above the moving average (or close to the upper band) and a "buy" when below it (or close to the lower band). The bands are used by some forex traders in conjunction with other analyses, including RSI, MACD, CCI, and Rate of Change.

Parabolic SAR - The Parabolic SAR (stop-and-reversal) is a time/price trend following system used to set trailing price stops. The Parabolic SAR provides excellent exit points. Forex traders using this technical indicator should close long positions when the price falls below the SAR and close short positions when the price rises above the SAR. If you are long (i.e., the price is above the SAR), the SAR will move up every day, regardless of the direction the price is moving. The amount the SAR moves up depends on the amount that currency rates move.

Rate of Change - The oldest closing price divided into the most recent one.

RSI (Relative Strength Index) - The RSI is a price-following oscillator that ranges between 0 and 100. A popular method of analyzing the RSI is to look for a divergence in which the currency price is making a new high, but the RSI is failing to surpass its previous high. This divergence is an indication of an impending reversal. When the RSI then turns down and falls below its most recent trough, it is said to have completed a "failure swing." The failure swing is considered a confirmation of the impending reversal in the price of the currency.

Stochastics - Stochastic studies are based on the premise that as prices rise, closing prices tend to be near the high value. Conversely, as prices fall, closing prices are near the low for the period. Stochastic studies are made of two lines, %D and %K, that move between a scale of 0 and 100. The %D line is the moving average over a specified period of time of the %K line. The %K line measures where the closing price of a currency is compared to the price range for a given number of periods.

Momentum - Designed to measure the rate of price change, not the actual price level. Consists of the net difference between the current closing price and the oldest closing price from a predetermined period. The Momentum indicator can be used as either a trend-following oscillator similar to the MACD or as a leading indicator.

MACD - Moving Average Convergence/Divergence - Consists of two exponential moving averages that are plotted against the zero line. The zero line represents the times the values of the two moving averages are identical. The MACD is calculated by subtracting a 26-day moving average of a currency's price from a 12-day moving average of its price. The result is an indicator that oscillates above and below zero. When the MACD is above zero, it means the 12-day moving average is higher than the 26-day moving average. This is bullish as it shows that current expectations (i.e., the 12-day moving average) are more bullish than previous expectations (i.e., the 26-day average). This implies a bullish, or upward, shift in the forex rate. When the MACD falls below zero, it means that the 12-day moving average is less than the 26-day moving average, implying a bearish shift in the currency.

ADX - Measures the strength of a prevailing currency trend and whether or not there is direction in the currency market. Plotted from zero on up, usually a reading above 25 can be considered directional.

William's %R - A momentum indicator that measures overbought/oversold levels in the price of a currency. The interpretation of Williams' %R is very similar to that of the Stochastic Oscillator, except that %R is plotted upside-down and the Stochastic Oscillator has internal smoothing. Readings in the range of 80 to 100% indicate oversold, while readings in the 0 to 20% range suggest overbought.

Volatility - Measures the overall volatility of a currency in a given time period.

Learn To Trade Forex Profitably In 1 Weekend Or Less!

We have all herd the forex buzz in the past few years, thousands of beginner currency traders come into the market every month with the sure opinion that they will master the market and make millions. We all know how that ends up.

Forex Currency Trading For The Beginer does not have to be complicated at all in fact you will probably be shocked when I tell you what some traders I know are doing to make millions!

The first thing you need to get started is an online forex broker account you can easily and quickly make your trades from where ever you are in the world. Don't just settle for the first broker you come across check each one out and weigh up the pros and cons of each before making a decision. Most brokers now will allow you to trade in micro lots which is perfect for beginners, you can fund your account with as little as $100 to get started. Your account will have at least 100% margin which means you can control $10,000 with the $100 in your account.

All brokers have there own charting platform, don't get caught up in all the fancy indicators they will only confuse you. Remember we want to keep this simple!

Setting up your trading account should take 2-3 days in the mean time you need to start thinking about your trading system.

A trading system is simply a set of rules to get you in and out of trades. I am now going to outline a simple system which I know to be very profitable and perfect for a beginner who is new to currency trading.

First you will need to pick on currency pair, mine is the EURUSD you are only going to trade one pair. Get to know that pair and how it moves (this comes in time).

You will be using a 4 hour chart. The first thing you need to do is see what the trend is so zoom out a little until you can see at least 2 months of data now if the chart starts in the bottom corner and finishes in the top it is a up trend and if it starts at the top and finishes at the bottom it is a down trend.

We are only taking trades with the trend. Look at the current move is it with the trend if so wait for a retracement. Use the 50% retracement level and look for a support/resistance level that is in confluence with it.

Take your trade at this level with a 50 pip trailing stop never risking more than 3% of your account on each trade.

Here is the part that is really important to your success! When you have 100pips profit add to your position by half the amount of your original position. Keep looking for retracements to add to your position every 50 pips as it increases in profit. Never cut a winning position off until you have a good reason to believe it is over. You will not get good runs over a 100 pips all the time but they do happen at least once a month and when they do you will see the power of this simple system. During the time when you don't have huge moves your 50 pip trailing stop will usually take you out with a small profit.

That is all there is to it. Simple but it works very well and is perfect for the forex currency trading beginner.

Profits from Forex

As a trading advisor in the markets for almost half a decade, I have come to realize a few things about taking the profits. The first thing is to find a low risk trading opportunity then make sure your risk is lower than your potential gain and executing the trade with discipline. In the beginning the best thing is to do this on a demo account or on a single contract basis.

The good thing is that the most of the Commodity Trading Advisors say that you only need one type of strategy or pattern to trade the markets successfully. Become an expert in your form of market pattern or strategy. By this what I mean is that your form of entry and exit has to be low risk and high yielding. Ask yourself the following questions while developing a trading system. What do I want from the markets? How much is my risk when I am entering the trade?

What is my potential gain (make sure that it is bigger than your potential loss) and then trade this whole game with discipline. I have been teaching traders for a few years and the only one's who succeed have patience and discipline to trade my strategies on a demo account till they are comfortable without paying any money to the markets while gaining experience. I call it free experience! and then starting small accounts. Once you memorize the game, it is much easier to play. Happy trading and a prosperous life.