2Bull Forex Blog

Certain formations on Japanese candlestick charts can provide a reliable Forex signal if you interpret them right and realize the limitations of candlesticks in the foreign exchange market.

Candlestick formations work particularly well in some markets where there are clearly defined opening and closing periods such as the futures and equity markets. The Forex on the other hand is a 24 hour market place that runs for nearly six days a week and therefore it doesn’t have the distinct open and close timings that make Japanese candlestick formations such significant indicators.

However, there is a significant candlestick formation that can be used as a Forex signal taking into account the open closing times of various markets (New York, European, Asian sessions) and the overlapping times when market reaction is more pronounced.

This Forex signal is commonly called the Tweezer shape. It consists of two candles side by side with short bodies at the base and long wicks that extend upward. The two candles can be either identical in shape or they may simply have approximately the same size body and wick. Conversely they can be the other way, a short body at the top with long wicks extending downward.

Why can the tweezer candle formation be a significant Forex signal?

It helps to understand what is represented by a candlestick. There is a need to go behind the scenes and perceive what is actually going on in the market.

Every candle represents a battle between the bears and the bulls, struggling to gain dominance. In the case of a tweezer candle formation at the top of a price move, the bulls took price up to a certain level but were unable to hold it and price came back.

In the second candle period, the bulls again tried to take price up but only succeeded in reaching the high of the previous candle and again their efforts failed with price coming back. A new high was reached, then an attempt made to pass it which failed, the bears wresting control from the bulls.

If a tweezer formation is seen at the end of a large downward move in price, then the opposite is true. The bears have not been able to maintain new lows and the bulls have wrested control.

The tweezer candlestick formation as a reliable Forex signal is conditional however on other factors.

When can the tweezer candle formation be a significant Forex signal?

It is probably unwise to just take a tweezer formation as an instant Forex signal to go long if the tweezers form at the top of a run up in price or short in a drop in price. A reliable Forex signal involves many factors not just one.

Here are some key points to keep in mind:

* Tweezer formations on higher time frames (1 hour, 4 hour) are more significant. At times a tweezer on a 15 minute chart can provide a good Forex signal if it coincides with other factors mentioned below.
* Tweezer formations can be significant when they come at a key level of resistance or support, or if they are on a pivot line, or a Fibonacci retracement or extension level.
* Tweezer formations are not such a reliable Forex signal if they come in a consolidation pattern when price is caught in a channel.
* Tweezer formations can be significant if they come at the end of a major run in price that is equal to or exceeds the average daily range. If you pull up your Average True Range indicator and see what the average price movement has been for that currency pair for the last five days and compare it with the current price movement, if price has already moved by the average number of pips and you now see a tweezer formation, there is a higher probability you can safely enter a trade in the opposite direction.
* Tweezer formations can also be a reliable Forex signal if you take into account the average daily range and the time of day when the tweezer formation appears. If it appears at the close of the London session for example, or the end of the New York session, it is unlikely price is going to go much farther for the remainder of that day. The likelihood is price will retrace and that is where you can catch some good pips.

Trying to find the perfect Forex signal is a futile exercise as no such signal exists. However, there are certain indicators that when put together can constitute a reliable Forex signal that works more times than it fails.

Learn to recognize the tweezer candlestick formation. Take note of where it appears in relation to price action, check the time of day, look at your other favorite indicators, and if they all line up, pull the trigger!

The rise in popularity of online currency trading has seen a huge surge in the number of forex day trading systems sold. They are an attractive option for many novice traders, who see them as a low risk high reward way of trading.

Let’s look in more detail at these forex day trading systems and how you can profit from them.

Forex day trading systems don’t work and if you don’t believe me, read on and you will see why this method of trading should be avoided at all costs.

1. The Data Is Unreliable

The data is absolutely meaningless because the time period is to short so if as with most forex trading systems they are using forex charts to generate signals the system is doomed to fail.

For example, when a life assurance company works out premiums they don’t just use 1, 2 or 10 people, they look at the bigger picture. They use millions of people to calculate the odds and it’s the same in forex trading:

You need data that gives you a big enough snapshot to calculate the odds.

2. The Proof

If you want proof try and find a forex day trading system that has a real time track record of profits when you go to buy one, over the long term and you won’t get one.

All you will get is hypothetical one in hindsight (not exactly hard to make a profit when you know the closing prices!) so these should be treated with extreme caution unless they have been tracked in real time currency trading.

3. Profits and Losses

Day trading also breaks another rule that is the cornerstone of all successful forex trading strategies – Run your profits to cover your inevitable losses.

In day trading losses are kept small (even thought he odds are high you will lose) but running profits is never in the equation.

Most forex day trading systems look at scalping a quick profit or closing the position out quickly – so even if the currency day trader has a profit he doesn’t run it!

The result is, the total loss of equity in the account.

4. The Real Way to Make Money

Is to have the odds on your side and be able to calculate the odds.

If you want to learn forex trading look at swing trading, or long term trend following and base your forex trading strategy on these methods - you then have meaningful data that can help you calculate the odds.

Forex day trading systems sound great in theory, but the reality is these systems are sold by vendors who have enticing marketing copy and nothing to back it up.

They make money selling systems NOT from trading.

Avoid day trading and don’t make it part of your forex education, or you will never achieve currency trading success.

If you are using technical analysis and forex Charts, then using the simple combination below, will help you catch the really big trends that yield the big profits and make your profits soar.

Let’s look at this combination on Forex charts and how to turn it into profit.

We are going to look at a 3 step process that anyone can incorporate in their forex strategy that can make it more successful.

1. The weekly trend

Very few forex traders look at the weekly charts, but the weekly chart shows you the longer term trends and effectively separates out the “wood from the trees”, so you can see the important trends.

When looking at the weekly chart you simply need to look for valid support and resistance.

By valid – we mean areas of support that are considered important by the market and have been tested several times in different time frames.

2. The daily chart

Look for the points above, to be in sync with the daily chart, so the same important price levels are lining up on both charts.

Note:

If you have support and resistance that is valid then chances are there are stops behind these levels and trend following systems waiting to kick in if these levels are broken, so the break will continue and a new trend develop.

When these breaks occur they tend to move quickly and they don’t retrace much, so you need to be prepared to buy the break and miss the first part of the move.

Don’t try and anticipate and get in anyway – this won’t work!

A breakout is only valid after it occurs and if a level has been tested then of course it can hold as well, so you need to trade on confirmation only.

3. Getting confirmation

The way to see if a break is going to continue or reverse is to look at price momentum.

There are lots of momentum indicators to look at but two that work well in combination are the Relative Strength Index RSI and the stochastic.

Watch for a rising RSI and for the stochastic lines to pointing in the direction of the break if they have crossed with bullish or bearish divergence just before, all the better.

If you don’t know how to use these indicators – they are an essential part of your forex education!

There easy to learn and apply, so check our other articles.

The biggest profits from the really big moves

If you follow the above tips you will tap into the really big profits from the big moves – they don’t occur often just a few times a year, but these are the trends that yield the biggest profits and the lowest risk.

Most traders don’t do this and most traders don’t win!

Most traders hate buying breakouts, as they think they have missed the first part of the move and want to wait for the pullback to get a better price – but on valid breaks prices move quickly and you need to be in
as prices wont come back quickly and you will never get a better price.

If you can buy or sell breakouts, keep in mind they normally pile up big profits so the fact you have missed a little bit of the initial move is fine there is plenty more to come and of course it is missing this bit that gives you the odds in your favor.

Watch your profits soar

The majority of currency traders can’t psychologically buy or sell breakouts, but the majority don’t win – so don’t let that worry you - join the winning elite who can and do make huge profits.

If you incorporate the above in your forex trading, it can lead you to currency trading success and really help your profits soar.

Forex trading alert is an idiosyncratic service and it uphold currency traders very close to the speedily changing forex trading capital market even when they are far away from their screens by using the certain parameters of their forex trading strategy to set forex alerts appropriately on rates and mechanical indicators, plus to generate modified reminders for imperative dates or events. Unlike any other forex trading market, the forex offers trading services 24 hours a day, 5 days a week. Of course you can take the time to watch this Forex market by yourself, but who has the time. More outstandingly, the factor to be noticed here is the knowledge and the know-how for constantly making a profit.

Initially, only a couple of well-used and established methods, which provide the best overall returns, are used. One method utilized is a scalping forex strategy where it is uses super-tight stops for lesser profit objectives since it lessens the forex risk to a minimum. You are in the forex trading market repeatedly for a few hours. Secondly, Forex Alerts does not use mechanized programs in order to make a large number of alerts, most of that might not be money-making at all. This is how the Forex trading alerts give the highest quality alerts.

By receiving live forex trading alerts from a team of expert forex traders the professionals or some other persons tell you when it is good to trade the foreign exchange market. In fact it is that it could take some years for you to study how to successfully trade the forex market. Also you would have to spend immeasurable hours watching the forex market. You get notification by email instantaneously with Forex alerts and that email could get directed to your mobile phone as well or PDA.

We question only a few choose foreign trading exchange alerts for a week, but these alerts are more probable to offer constantly profitable outcomes. The aim is not to trade more recurrently; but the aim is to trade more advantageously. Forex traders have been trading the Forex markets successfully for years and years, and their strategies have now been developed into a forex charting system in a helpful manner allowing for retail currency traders.

The most obvious difference between stocks and bonds are that – stocks enable the investor to own a part of the company, while the bonds are nothing but loans that the investors provide to the company. Stockholders would benefit or lose as per the fate of the company, but investors in bonds will get a fixed rate of return; this would be a percentage that would be the original offering price on the bond, known as the coupon rate. Moreover, bonds have a maturity date after which the principal amount is returned. These maturity dates could go as long as thirty years for maturity.

There are credit ratings to determine how the companies stand in respect of paying back the principal amounts of the bonds. Standard and Poor & Moody’s Investor Service are two such institutions that provide credit ratings to the banks. Credit ratings are given on a scale of AAA to D. Companies with higher credit ratings are safer investments, but then they would give a lower coupon rate.

Among foreign bonds, the bonds of US companies are considered to be the safest type. Companies with long-standing performance records are called as the blue chip corporations. These also are very safe bond investments. The companies that are small corporations are the common defaulters of principals on their bonds. However if the company does go bankrupt, the bondholders are on the priority list to get compensated.

Buying and selling of bonds is done on the open market. The value of the bonds would fluctuate depending on the level of the interest rates in the general economy. Consider this: suppose a bond of $1000 pays 5% a year in interest. Then this bond can be sold at a higher face value if the interest rate is kept below 5%. If the interest rates rise above 5%, then the bond can be sold; but at a lower price than the face value. Consequently, the investors can get better interest rates that what the bond pays.

Bonds are generally traded in the over-the-counter market set up by banks and security firms. The stock exchange is also used for trading, which enable stockbrokers to sell bonds. New bonds are mostly sold in increments of $5,000 while bonds bought and sold after initial issues are done in increments of $100. A bond that is listed at 96 is selling for $96 per $100 face value.

This could clear the air about whether to invest in stocks or in bonds. A careful investigation must be done by the investor as to the risks and the potentials involved. Stocks can increase faster, but then they can also decrease as fast. Investment grade bonds with a rating of BBB or better are quite safe, but they provide smaller benefits.

Hence, if you are looking for a short term investment, then the bonds will give you better security and return. If the investment is being planned for more than ten years, then the stock market is much better in returns. Companies would increase in their worth over such significant periods of time and short-term fluctuations would be taken care of.

Most portfolios still figure bonds prominently in them. This shows that they are considered to be safe investments and as a buffer to the stock market fluctuation. Wise investors would blend bonds and stocks from various industries together to achieve maximum profits, and also for security of investments.