Forex Trading Tips
Seven Essential Tips to Trade Forex Effectivelly
TIP (1): Understand What you are Trading
First of all, you need to understand what you are trading. Many investors believe that trading Forex currencies is the same as trading stocks or indices. They are 100% wrong. Trading Forex is a completely different story than trading any other financial market. The Forex market is characterized by 24/5 operation, enormous liquidity, extremely tight spreads, and almost perfect information. The combination of these four factors creates the ideal framework for competitive trading.
Forex is the Most Competitive Market Worldwide
The Forex Market is the most competitive financial market in the world, and this is due to several reasons:
There are millions or real currency buyers and sellers every single day (banks, importers/exporters, tourists, etc.)
There are millions of active Forex traders, and a great number of them trades currencies as a day job. Forex traders contribute about 95% of the aggregate market volumes
There are also thousands of arbitrageurs operating in a daily basis and enhancing further the liquidity of the market
There are many hundreds of retail and institutional Forex Brokers, NDD (Non-Dealing Desk) or DD (Dealing-Desk)
The aggregate market volume exceeds 4 trillion US Dollars on a daily basis
The Foreign Exchange Market enjoys almost perfect information (24/7 basis)
The Forex majors (EURUSD, USDJPY, GBPUSD, USDCHF) are offered in tiny spreads. It is cheaper to trade these four pairs than anything else in our financial world.
Combining Fibonacci with Major Technical Analysis Tools
The Fibonacci tools can be used for multiple purposes. They can indicate support and resistance areas for trading the price breakouts and reversals, but also they can be used for achieving the optimal take-profit and stop-loss placements.
The Fibonacci Retracement tool can play a key role in many breakout trading strategies. Any trading signal generated by other technical analysis tools can be confirmed using the Fibonacci Ratios and their PRZ. In addition, a stop-loss order can be more reliable and more accurate if it is placed above or below major Fibonacci support or resistance zones. The Fibonacci level can be combined perfectly with momentum oscillators and breakout indicators.
The two key Fibonacci ratios are 38.2% and 61.8%. When a price breakout finally occurs, usually the price will move significantly outside of the 38.2% and 61.8% ratios.
Combining the Fibonacci Retracement with MACD
The MACD is one of the most widely used technical analysis oscillators and can confirm almost perfectly the Fibonacci Retracement levels. The MACD actually indicates the relationship between two moving averages.
MACD can be used for indicating crossovers, divergences or strong trends.
Using MACD (12, 26, 9)
If you select MACD on its default settings (12, 26, 9) focus on three-time frames (H1, H4, and D1) where MACD is significantly reliable.
-When the MACD crosses above the signal line, a bullish signal is confirmed
-When the MACD falls below the signal line, a bearish signal is confirmed
-Search also for divergences between the slope of the MACD and the slope of the Price. These divergences are indicating price exhaustion.
Chart: Fibonacci Levels and MACD
Find Trading Tools and Tutorials:
eBOOK: TRADING WORLD MARKETS USING PHI AND THE FIBONACCI NUMBERS (2018)
Complete Guide to Fibonacci Trading with Reference to Elliott Waves, Gann Numbers, and Harmonic Patterns