What is a Pip?

Currency pairs that trade on the foreign exchange market are quoted in terms of “pips,” which stands for the “percentage in point.”  The pip is the smallest unit on the exchange, which is 1/100th of one percent.

Picking The Right Forex Broker

Picking the right forex broker is often the most important decision any new trader will make. In the past few years, there has been a virtual explosion in the number of forex brokers doing business. To the trader, this is great, as the number of brokers has helped lower the cost of trading and to provide better services and trading tools that were not available before.

Find Forex Signal Services

Forex signal services offer investors the ability to trade the foreign-exchange market without their own analysis.  Instead, investors can rely on professional advice from a currency trader.  It is important to remember that forex signal services are not the same as managed accounts; managed accounts are traded by an active manager whereas forex signals are traded by the subscriber.

Forex Stop Loss and Take Profit

Arguably, the stop loss and take profit orders are the two most important order types for foreign exchange traders. The two orders are essentially orders on top of another order. The stop loss allows you to determine at what price you want to cut your losing trades and the take profit allows you to enter what price you’d like to close a position for a profit.

Types of Forex Market Orders: Market and Limit

Now that we know what goes into a trade, we need to also know how to enter the trade to a broker. There are two main types of orders to buy currency, the first of which is a market order, the second is a limit order.

The Spread, A Forex Brokers Profit

In our example from the previous article, we actually alluded to a few things. The first, is that there were a few costs in our example trade of 1 lot of GBP/USD. The hidden cost is the “spread” or the commission the broker earns for completing our trade.

How Money is Made With Forex

So, you know how the forex market works, now its time to find out how investors make money with forex. The premise of the foreign exchange market is simple, to exchange one currency for another currency which you believe will go up in value. The basics are much like the stock market, so anyone with any financial experience should pick up the foreign exchange market rather quickly.

Forex Market Trading Times

The foreign exchange market is the only market in the world that is open 24/7. Investors are able to place trades every single day of the week, however, most pairs will move very little on the weekends as very few investors stick around to trade.

The Basics of The Forex Market

The foreign-exchange market, or forex, is the largest market in the world by volume. That is, more money exchanges hands on the foreign exchange than in any market in the world. Some $1.5 Trillion is exchanged daily compared to $25 billion on the New York Stock Exchange.

Alligator Indicator

The Alligator Indicator is an excellent technical indicator for forex traders, even if it is one of the most basic. In fact, the popular Alligator Indicator is nothing more than three smoothed moving averages, but the Alligator’s ability to find winning trades is second to none.

How to Trade with Elliot Wave Theory

Elliot Wave Theory is far easier to spot in our diagrams than it is in the markets. Markets don’t always make very perfect patterns. In fact, this is what you might see when looking at an Elliot Wave in action in the foreign exchange market:

Elliot Wave Theory’s Correction Patterns

Elliot was mostly open-ended on the interpretation and application of his wave theory. When it comes to corrections, however, Elliot had very firm guidelines for how these corrective wave patterns would look.

What Is Elliot Wave Theory

The Elliot Wave Theory suggests that market movements can be described with waves. Inside a large up or downtrend are several smaller trends that make up the whole of the market movement.

Reversals, Retracements, and Waves

If you have yet to notice, technical analysis focuses on trends. Remember: the market does trend 70% of the time, and that amount of trending is enough to make serious profits in the market.

Leading and Lagging Indicators

We have explored more than a few indicators in this lesson, some of which you may find practical for use, and some which you may prefer not to use. At the end of the day, technical analysis is all about making informed decisions on the future of the price based on price alone.

How to Use Bollinger Bands

Bollinger Bands may very well be one of the most useful technical indicators. Compared to other trading indicators, you can think of Bollinger Bands as a Swiss army knife—there’s so many uses for them that Bollinger Bands are almost ubiquitous with technical analysis.

Average Directional Index {ADI}

The Average Directional Index, or ADI, is a premier technical analysis indicator that shows investors when markets are trending. We can use the ADI to find key points of entry, and explore when a buy or sell ahead of a trend makes sense.

Relative Strength Index {RSI}

The relative strength index, or RSI, is a commonly-used indicator for spotting new trends in the price of a currency pair. By using the relative strength index, a trader can keep close tabs on the relative strength of a market movement, up or down.

Moving Average Convergence Divergence[MACD]

Previously, we explained how exponential moving averages were just modified simple moving averages. Now we’re going to explain the Moving Average Convergence Divergence, often known as simply “the MACD.”

Technical Analysis Indicators

By now you’ve become accustomed to the forex markets. You understand how they work, why they work, and basic methods for evaluating the markets for successful trades. Now we’re going to explore technical analysis to its fullest with indicators that forex traders use to make sense of the markets.