Forex Trading Strategies – Panic Selling Method

panic-selling-method

‘Panic selling occurs when the price goes down rapidly at high volume. This often occurs when some market participants log on to neutralize the movement, or when the trader is taking a sell position to force prices down far enough.

 

Panic selling process happens because there is a tremendous opportunity when traders were taking long positions, and make prices move down sharply mainly occurs when the fundamental statement that smacks of speculative (such as economic news or opinion of the analyst).

Here, we will explain the process of panic selling that can help you to predict the right time to take long positions after a phase of panic selling occurs.

 

Process

Panic selling occurs in several stages. The figure below illustrates a scenario of panic selling as happens when the data was released.

Let’s discuss what happens at each step in the chart:

 

Step 1 – Something happened that caused prices to move rapidly decreases with higher volume.

Step 2 – The high volume occurs when buyers and sellers into the market to control the trend. The winner of that process then takes the trend to low volume.

Step 3 – If there is no significant trend change that occurred at a point 2 to perform the movement of the resumption, then usually there is another point to the high volume in which the movement of substantial reversal may occur.

Step 4 – This process will continue until the trend moves upwards, confirmed by technical factors or fundamental.

Now we will see how we can predict when a trend change will occur.

 

Selling Moment

Moment of selling will stop when the price has reached a support level. This can be seen by using a combination of trend indicators, volume by taking into account the trend has changed. There are various indicators that can be used to confirm that the trend has changed.

 

As a trader, you can choose how many indicators to confirm the trend liking. The fewer confirmation indicators are used, the higher the risk and the higher the rewards will be (in the sense that, the longer you wait to be confirmed, the potential benefits will be reduced).

 

Rules for using the moment of selling are as follows:

  1. The first price should decrease rapidly with high volume
  2. The volume will spike, make a new low, and appears to reverse the trend. Look for candlestick patterns that indicate a battle between buyers and sellers (engulfing).
  3. Price wave higher low to be seen, this is the moment of opening a buy position.
  4. A sideways movement in the area below the trendline would happen.
  5. Moving averages with 40 and / or 50 days to be penetrated by the price.
  6. Note that you can use moving averages by connecting the highs or lows. Typically, the period of sideways from a larger moving average will indicate when a sideways moving average with a smaller trend.

Conclusion

Panic selling naturally creates the opportunity for traders to open long positions with a lot greater benefit. Those who know when it will happen panic selling will potentially benefit more from phase retracements or price movements that occur after that.

How to find Your Trading Style

how-to-find-your-trading-style

The forex market offers many opportunities that can be taken to make profits in forex trading. But to be successful, you have to know beforehand advantages and weaknesses. Most forex tutorial teaching only “The right way for trading”. And this is not entirely true. As an adult, you will be hard to change your style of trading, while the market is changing all the time. Therefore, it is much easier to find a trading technique that fits your personality rather than trying to adjust to the way trading other people who may be “expert trader”. Forex tutorial article will discuss how to find your style of trading.
Trading strategy

So why fishing and skiing downhill so important? Believe it or not, this is the question of trends and counter trends in trading. Anglers are the trend, skier likened contrarian trend. Trader trends, they are like anglers bait several times before finally getting the fish. On the other hand, downhill skiers, seeking the sensation of speed before he reached the end goal. If the note is similar to profit as soon as possible because the currency price movements are fast. Does fishing always lead to trends and ski bucking the trend? Of course not. However, the activity you choose certainly reflect your trading style.
Time Frame
The second most important question is whether you are more comfortable using the time frame for the short-term or long-term? Generally, traders who trade based on the trend would choose a longer time frame for developing trends in forex trading by months rather than days. While that prefers to use a fast changing market sentiment will operate on a shorter time frame.

Typically, the short time frame that is effectively used is the hourly chart with a target average profit / risk of at least 30 points, due to the nature of the market that spreads led to a smaller time frame less effective. For example, the pair EUR / USD, which is the most liquid instrument in the world and usually widespread bid and ask ya 3 points. A trader with a profit target of 10 points should get 13 points profit (10 points + 3 points spread), but sometimes he just gets 7 points only (10 points – 3-point spread). This is what causes many traders think negatively because of the difficulty of finding profits in short time frames.
Analysis Type

Once you determine the best time frames, the next question is: what kind of analysis you will use to trade forex? There are currently a lot of debate between fundamentalists and technically
Fundamentalists mock technical attempts to forecast future price movements by looking at the current price movement on the chart. Proponents of fundamental analysis technical analysis consider such ancient rituals forecast the future of the stomach contents of dead animals. News, economic reports and comments from monetary officials is the main tool fundamentalists. Technically ignore the data as something sad and contradictory, they believe the market response in addressing the news will be reflected in the price movement before and will be a guide to future price movements.

Which one will be the winner? None. Trading in terms of technical or fundamental only as figments, like boxing in the race for the world title with one hand tied behind my back. Fundamentalists can talk, due to the global demand for oil will push crude prices to $ 100 / bbl and they buy the Canadian dollar as the greenback, but when seen in near-term chart of USD / CAD looks oversold, then it is likely they will lose money

– even when a few moments later turned out they were right analysis. Conversely, technically  use Fibonacci numbers to determine benchmark prices suddenly no economic news makes the market turmoil, the level of resistance that has been made will be torn down as traders tried to cover their positions.
Fundamental to Long term, Technical for short term

You need to remember, that the fundamental factors tend to have a strong impact on long-term trade, while the technical aspects will be a strong impact on short-term trading. For the long term will usually respond to economic news as GDP growth, interest rates, and other economic factors.

For example, we see the movement of GBP / USD in 2005 in the image above. At that time the Federal Reserve Bank of New York was raising interest rates by 200 basis points from 2.25% to 4.25%, while the Bank of England, which was at that time the UK is experiencing a slowing economy and depressed consumer sentiment, choose lower interest rates from 4.75% to 4.5%. The difference in interest between the two currencies converted to almost 0% (at the beginning of 2006, has reached 0%). Traders who trade long term and short term are equally benefited for GBP / USD decline.

This pattern is similar to the movement of the USD / JPY but reversed. USD moving while the Japanese Yen remained 0%, this has led to traders taking positions with the hope of profit 20% in a matter of months. In 2006, analysts predict that the US tightening cycle coming to an end while Japan is just starting, traders responded immediately so that they can benefit substantial and analysis that they made proved to be correct.

From the above events, we can see that the fundamental factors have an effect in the long term, while technical analysis reacts within a shorter period of time. Perhaps one of the reasons why this happens is that the smaller time frame news information was not considered significant, therefore, prices tend to move to areas of support and resistance. For example, as shown in the picture hourly chart EUR / USD below, note the area swing high and swing low of, traders can install Sell position when prices were resistance and Buy at support area to benefit.

NOTE: This article Forex Tutorial:

Whether you are a long term trader or technical fundamentalist short term, the forex market can all accommodate your style. Despite the disagreement between the two is never resolved, but the undeniable truth is that you have to use a style that best suits your personality. If not, you are not likely to succeed. Therefore, the first question for the novice forex trader is not “What if the price going up or down?” But “Trader whether I have”.

Basic Forex Risk And Money Management

Risk Management

Risk affiliated factor of any business. True, there is no business that free from risk. Risks can not be deleted, but can be “controlled”.

The risks faced every form of business is a loss. Similarly in the futures trading business like this. Futures trading is a form of business that potentially high risk. However, chances of profit (return) offered no less high.

Well, in order to maximize the chances of looses it (as well as minimize the risk) risk management is needed, or what is known as the “risk management”.

By applying risk management, meaning we implement full control over our money. We can limit the extent of losses that might be we experienced. Like a game of chess, we must prepare what steps we will run and anticipation if we step it wrong.

Remember that no single person could determine the future. Thus, also nobody knows exactly where price will move. Most novice traders fail because they do not have a good risk management basis.

Risk Management Tools

In forex trading, the application of risk management is assisted by four engineering risk management: cut loss, switching, averaging and hedging / locking.

1. Cut loss

Cut loss immediately ends the transaction carried out with the losers in order to avoid the potential for greater risks.
For example, we predict the price will go down, and we do Sell 1 lot at 1.50200 level. It turned out that in fact the price moves up to the level of 1.50500, so we suffered a loss of -300 pips. Because we do not want to face the risk of greater losses, then at the level of 1.50500 Sell position before we close, with the consequences we suffered a loss of -300 pips.

2. Switching

The goal is to get rid of a loss position so as not greater then his cover by opening a new transaction as opposed to the initial transaction. Usually done for the conditions when the price movement is relatively tight.

For example, we open a Sell position at 1.50200, and even the price moves up. Arriving at the 1.50500 level, the position we’ve suffered a loss of -300 pips. If we assume that the price movement is still going up, then at the 1.50500 level we close our SELL position earlier. At the same time, we also opened a Buy position at 1.50500 level.

If it turns out the price actually increased up to the level of 1.50800, then the Buy position we were going to get a profit of +300 pips. That is, losses -300 pips due to Sell positions had been covered.

New switching should we do when we really believe that prices will continue the direction of movement. Therefore, by switching means we open a new position that would have the potential loss as well, if the prices reversed direction again. Here the required maturity level analysis and mental readiness for a trader.

3. Averaging

Averaging (or ‘cost-averaging’) is a form of risk management that is quite extreme, because basically these techniques “against” the direction of price movement. This technique can only be used for traders who have a mental “steel” and also must have substantial funds.

Suppose we do Sell 1 lot at 1.50000 level. When the price moves up to the level of 1.50500, we are not closing position earlier loss, but we add another one position Sell 1 lot. At this level, our losses have reached -500 pips.

Apparently, the price rose again to the level of 1.51000. At this level, we’ve become a total loss -1500 pips. Our loss will be covered if the price falls again to the level of 1.50500. If at this level we closed all our sell position, then our losses will be zero.

If the price falls again to the level of 1.50000, then we will get a profit of +1500 pips.

This technique is good only if we use the sideway market situation, because the opportunities for price back to our starting position is greater.

4. Hedging

There was also a call “locking”. Actually, this technique is a technique which is strange, because the trader who suffered actual losses can not do anything against the losses that have been suffered.

You should not do this. The only reason this technique described here is to let you know that there are some traders who use this technique.

When a trader sell 1 lot at 1.50000 level, he will experience a loss of -500 pips if the price rises to the level of 1.50500. (Remember yes, he has a loss, guys!)

But he did not want to “throw” the loss on an existing position. He just made a Buy 1 Lot at the price of 1.50500. Well, at this moment the trader “lock in” the loss of -500 pips. That is, wherever the price moves later, suffered losses only amounted to “lock” it.

Whatever it is, clear the trader already suffered losses. It’s no different to cut losses, it’s just that there are no closed position.

When the price rises to 1.51000, the trader closes a Buy position accomplishments in the price of 1.50500 earlier. Although this benefit a Buy position +500 pips, but do not forget SELL position remains on the bottom (the current losses of -1000 pips!). Therefore, our traders are still suffering a loss of -500 pips.

The trader losses will be covered if the price moves down to the level of 1.50500, if at this price he closes Sell position for the first time did (at the price of 1.50000). +500 Pips profit will be obtained if prices fall to the level of 1.50000.

This is the “justification” is often used as an excuse for the perpetrators locking. And to be examined again, the above incident is no different than to cut losses at the price of 1.50500, then SELL again at the price of 1.51000. Try any reckoning!

In determining the level of entry (buy or sell) and cut loss level, switching, and so on, we can combine them with technical analysis as we know.

Strategic Capital Management (Money Management)

Averaging technique has several developments that can be tailored to the resilience of capital that we have, so it is often also referred to as “capital management”.

Some developing averaging technique is pyramiding, martingale and anti-martingale.

• Pyramiding

Pyramidingis the opposite of cost-averaging. If the cost averaging we add an open position whenever a loss, then the pyramiding we add to the open position each time benefit.

In the picture shown, every time we get a profit of 500 pips, then we add again buy 1 lot. When the price dropped from 1.51000 to 1.50750, we still left a total profit of 750 pips. At this level we have met all of our buy position. If the price falls to the level of 1.50500, then the entire transaction we will break even.

This technique is good if we use the time in a state trending prices.

• Martingale

Martingale is similar to the cost-averaging. But the martingale, we add to the open position doubled from the previous position each time losses.

In this example it was shown that the trader to add short positions as much as twice the previous position every increase of 500 pips. Should prices still rose to 1.51500, then the trader will add as many as 8 Lot Sell position.

In this example, it was shown that the benefits gained when prices return to 1.50500.

To watch is if prices continue to rise, then the losses will be even greater.

This technique is worthy when market conditions sideway.

• Anti-martingale

Anti-martingale precisely similar to pyramiding, and is the opposite of the martingale, which we add to the open position doubled from the previous position each time benefit.

We should continue to pay attention to price movements, not to make a profit that reversed the direction we’ve collected instead turned into a loss.

Understand Channel in Forex

Channel is one of the tools of technical analysis which is the development of the trendline. How to draw quite simple, we just duplicate the trendline that we have made. The steps, the first time we are drawing the first trendline in accordance with the direction of the trend. In the image below, for example, we draw a trendline on the current uptrend.

upchannel

 

Then, we draw a line parallel to the trendline. This second line then we project that connects the dots peak. Similarly, the trendline, this line must be at least connecting the two peaks. Be a UP CHANNEL or also commonly referred to as ASCENDING CHANNEL. Simple right?

As for drawing a CHANNEL DOWN; or often referred to as DESCENDING CHANNEL; as simple as drawing a bullish channel. First, the first image trendline that connects at least two peaks. Then create a line parallel to the trendline connecting at least two valleys. Below is an example of down channel.

downchannel

 

Although, this channel is very useful. These channels can later be utilized to estimate the area of buy or sell. The second line of the channel serves as support and resistance. The line that above serves as resistance, while the line below serves as a support. To make it easy we call it the two lines as lines of support and resistance lines.

 

When prices are in the area support line, then we can try to look for confirmation in the form of a bullish signal to buy, with a target at the resistance line. Beware if the price breaks below the support line. If it happens, it’s good to consider removing such transactions. Of course, this will also have to see the development of the market situation. This issue will be discussed later, in the topic further.

 

Similarly, when prices are in the area resistance line. At that time we could try to look for bearish confirmation signal to sell with a target at the support line. Of course, we should be wary if the resistance line breaks after we do sell.

 

Sideways Channel

sidewaychannel

There are times when prices move sideways, so we can not draw up the channel or channel down well. In these circumstances, we can draw a horizontal channel. We call this channel such as a channel or ranging sideways channel.

 

Below is an example of a graph that presents three types of channels that we have discussed, the channel up, channel down and sideways channel.

 

channel

The Trendline in Forex

The trendline is a very common tool used in technical analysis. In fact, its role is very important, because most good trading strategy it is a trend-following trading price movement. If we can draw a trendline correctly, then these lines can be as accurate as other methods of trading. So prepare yourself to better recognize simple line called this trendline, which unfortunately a lot of overlooked by traders. Lots of traders are still wrong in drawing a trendline, whereas simple lines are the core of technical analysis along with support and resistance.

 

OK, before going any further, we will discuss the types of trends first. Basically, there are only three trends: rising (uptrend), down (downtrend) and flat (sideways). We will discuss them one by one.

 

1. The upward trend (uptrend)

It’s simple: the ascending trend (uptrend) is the state when prices are moving up. But still, there are prerequisites to determine that the market is in an uptrend. Consider the following picture.

uptrendline

Caption: P = Peak (Peak), L = Valley (Trough)

 

Prerequisites uptrend is their series of PEAK (peak) of the higher and TROUGH (valley) were also higher. Because of the word “series”, there should be more than one. That is, there must be a minimum of two peaks in the two valleys MORE AND HIGH.

 

Examples uptrend in the candlestick chart:

uptrendlinegrafik

 

2. Downtrend (downtrend)

Unnecessarily complicated-complicated: down trend (downtrend) is the state when prices are moving down. But as the uptrend, there are also prerequisites.

downtrendline

Caption: P = Peak (Peak), L = Valley (Trough)

Prerequisites downtrend is their series of PEAK (peak) increasingly valley and TROUGH (valley) were also lower. Because of the word “series”, then there should be more than one. That is, there must be a minimum of two peaks in the two valleys MORE AND LOW.

Example downtrend on a candlestick chart:

downtrendlinegrafik

 

3. Flat (sideways)

Well, this is too simple. It means not sideway movement uptrend and downtrend instead. What does it mean? Yes, flat course. Remain there up and down but is limited in a certain range. In other words, there must be on the uptrend or downtrend can not be found.

sidewaytrendline

Caption: P = Peak (Peak), L = Valley (Trough)

 

Example sideways on a candlestick chart:

sidewaytrendlinegrafik