How to identify the trend

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FINMAX - INTAFOREX - FXCHOICE - OLYMPTRADE - XM - ZULUTRADE
This is where things go crazy!

Not really, actually this is the simplest part of the whole method. Albert Einstein once said: "Make things as simple as possible, but not simpler", and for this, here is a good way to identify if a market is in a trend.

Use two exponential moving averages:

21 EMA

55 EMA

When the 21 EMA is above 55 EMA, the trend has gone up.

When the 21 EMA is below the EMA 55, the trend is downward.

This is the definition of a trend, but it is where we started.

Keeping my graphics clean and comfortable. Usually, I like to see you.

For that reason, colors 21 and 55 of EMA are gray to blend with the white background of my graphics to a certain extent. On a black background, my preference would be a darker gray color for EMAs.

Below is an example of how my chart looks with the 21 and the 55 EMA

The lighter gray color on the white table does not become overwhelming and distracting, and this is important to keep in mind. As we operate with FMM, we will perform operations that occasionally go through the lines, and other times we will use the lines as objectives and as areas of support and resistance.

I do not want you to get too distracted with the lines, and having them subdued is a way of keeping them in the background. They are there when we need then and quiet when we do not need it.

Why the 21 and 55 EMAs?

You can experiment with other settings to your liking. The 13 and 21 are common for moving averages. During many tests, I have found that 21 and 55 are the most reliable to determine a trend. They are slow enough to determine when a real trend has legs, but fast enough not to delay the change of a long trend.

When looking at a graph with the 21 and the 55 EMA, you will see that these two MAs are extremely strong levels of dynamic support and resistance, and this element causes these large MAs to follow the trend.

The price never deviates too long before returning to the 21 EMA and then to the 55 EMA.

This is an important aspect to counteract trend trade, the price moves away from the moving averages, but will return very quickly to these levels. And because of the excellent ability to provide support and resistance, these moving averages are also incredible targets.

The 21 and the 55 EMA work in all periods, from the minute to the monthly. This simplifies things too, by not having to look at different MAs for different time frames, and as you know, simple is good!

Feel free to try out your own configuration, experiment with many combinations, with exponential and simple, or a combination of the two, you can find something that you feel works best for you. Either way, the following pages will show you how to use them

21 EMA and 55 EMA as support:

21 EMA and 55 EMA as resistance:

Even though the 21 and the 55 are large areas of support and resistance, they are also excellent to return the price. This concept alone makes these moving averages large targets in counter-trend operations.

Below is an example of gold (AU). Lately, gold has been in an incredible trend, and as you can see clearly, moving averages have provided excellent support as the price has risen, but at the same time, gold prices have always returned to moving averages.

Seeing the MA as support, resistance and objectives opens a new world of commercial possibilities!

In the next post we will show you how to confarm and follow the trend.

How To Eliminate Your Fear Of Losing Money When Transactions

If it is going to be a trader, you will lose money at some point, and if still in the phase of trying to avoid all missed transactions and look for a trading system for the " Holy Grail " with a strike rate of 75 %, you must forget all that now. No matter how cliché it sounds, really losing is part of winning as a trader ; The two are inseparable. If you learn to not lose properly, you will never make money as a trader consistently.

Reality check ... All professional traders lose money and understand that is only part of the "game". Unfortunately, for many traders, each trade is accompanied by a tremendous fear of losing money and sometimes an intense emotional attachment.

Some of the key reasons why traders fear losing their money include:

1. They do not understand that, mathematically, in a series of exchanges, a trader can lose most of their exchanges and still be widely profitable, simple mathematics prove it.

2. Simply fear losing money overall.

3. They are trading positions that are too large (more risk than they should actually be), causing fear, sleepless nights and enormous emotional changes.

In the rest of this lesson, I will give you an idea of ​​the fear of losing money in the markets and how to conquer it. These are some pretty powerful things, so make sure you read the entire article and read it again if necessary. What you learn here will empower you to eliminate your fear of losing money in the markets and help you become a confident and emotional trader.

Fear of losing money can be a good and natural emotion, but we need to transform their approach.

The fear of losing money is a good emotion in many areas of life, if we had not, there would be even more chaos in the world and markets. Humans are protective of their wealth and property acquired, and rightly so ; They worked hard for it

However, in trade, this natural to be defensive and emotional with money and refocus energy must be transformed into a different state of mind ...

Instead of being afraid of losing their money to negotiate, adopt the control you have over each operation; a trader has complete control over the risk management of each operation by stops loss and dimensioning position, [and more advanced, derivatives and hedging mechanisms (not discussed here) operators]. These tools of risk management are the way you control your money / funds and, instead of being afraid of losing money, should feel empowered and confident because it can predetermine how comfortable with the possibility of losing before entering trade by using these tools.

However, the mere use of these tools to manage your risk per trade is not enough to completely eliminate the fear of losing.

Do yourself some serious questions.

If you feel fear or any emotion when you do an exchange, you must "give a slap" in the face and make 3 big questions (and answer honestly):

1. Actually I have the knowledge and confidence to trade with real money first?

If you are exchanging your hard earned money in the markets, but do not know what your trading edge and does not have 100% confidence in their ability to analyze markets and market ... probably should not be operating. One of the most important reasons why traders fear losing their money is because they do not trust their own ability to trade! I know it seems silly, but it is very true; many traders simply have dominated trading strategy, do not have a trading journal, etc ... business plan simply are not prepared to risk real money in the markets still ... therefore they feel fear when negotiating. 

2. Am I changing position size is too big for my personal profile / risk tolerance to risk per trade?

If you do not know your risk tolerance per-trade, then you first need to solve it. Basically, it's just the dollar amount you feel like you are 100% comfortable with the possibility of losing any operation; Because you can lose in any trade ... remember that. You should consider your overall financial situation and then determine how much money should jeopardize realistically and honestly on the market in any operation ... be honest with yourself here. You have to think of yourself as a risk manager and as someone who is administering funds, instead of being a petty man trying to get lucky; commercial mindset will directly influence their business results.

3. Do we really understand math behind the trading?

When I say "math behind the trade", I refer mainly to reward risk and how it relates to their percentage of overall profits. For example, in a series of 20 operations, it is likely to lose at least between 35 and 45% of the operations, and most operators who succeed lose between 40 and 50% of the time, some even 60% of the operations. hour. But through the power of reward for risk, you can lose more than you earn and still come out very profitable. We will expand this below.

Embracing the belief that losing is okay

Losing is good if you are rapidly reducing their losses and understands that doing so is simply preserving capital and their winning trades will pay for their losing trades with profits remaining. This is the power of your reward ratio of average risk in a series of operations that come into play; We will see this in action below ...

Even very profitable traders often lose more than you win, to prove this point, let's look at a case study showing 14 operations with a profit rate of only 43%. To be clear, that means losing 57% of the time and gaining only 43% of the time. It can be difficult to associate "lose" most of its operations to make money, but as I mentioned in one of my recent articles, do not have to be right to make money .

This image shows that operators can lose more profitable operations they earn and still be very profitable in a series of operations. Therefore, losing money on every trade should not worry:

Trust your trust strategy and mathematics.

As we can see in the previous hypothetical history, the mathematical calculations show us that even while we lose 57% of our operations, if we allow our winners to run from 2 to 1 or more and reduce our losses to -1R or less, the profits are they will take care of themselves It is worth noting that we include a pair of 1.5R winners, because sometimes it will make more sense to get a reward of less than 2R, depending on market conditions. The average risk reward in this example was 1: 1.75, and if you can expect an average risk reward of around 1: 1.5 or 1: 2, in the long term you should get ahead. The "secret" is to keep ALL of your losers in 1R or less and ONLY to operate when our price action advantage is really present.

If you follow a real plan, losing is easier to accept, because at least had a plan and a roadmap on what I was trying to do; the brain sees it as more logical and, therefore, is less likely to experience fear or apprehension. The concept of set and forget I always talk will help train your brain to accept losses. Also it avoids interfering with many of its operations that can cause unnecessary losses.

The "test sleepless night"

Everything we said above is necessary and important, but it really is a simple "proof of fear" that I found very effective for most traders. That test is simply to evaluate how you feel at night before going to bed while you have an exchange. If you find you can not stop thinking about her (s) exchange (s) or is glued to the screen of your computer while you should be sleeping, still afraid of losing. So here is a very simple test for you: 

a simple rule ... if you can not sleep at night, comfortable and convenient with the exchanges that have in ...

1) or you are too exchanging a position size / risking too your stop level

2) Or, you have no idea what you're doing and you lack confidence in your operations

Conclusion:

Fears are historiasEl fear of losing money or losing trade can paralyze a trader, which makes high probability trade setups are lost, they question themselves constantly and can even cause can not sleep. Clearly, if we are to succeed in trading, we must overcome this fear. Conquering the fear of losing money and operations begins with acceptance; First we must accept that we will lose money and we have lost operations, even if we try to avoid them. Therefore, it makes no sense "try" to avoid losing operations, instead, we must learn to roll with them and hold them. We do this by following the concepts we discussed earlier, so resumámoslos briefly:

• Dominate our strategy of stock trading price and "trust" in it: master it, owned and believe in it.

• Manage your money and use sound risk management; this means reducing losses 1R or less and point to a risk reward decent about 1: 2 in each operation. We must also try and let some winners run for higher rewards risk as 1: 3, 1: 4 or more.

• Trust mathematics: the above example and remember that even a win rate of 40% can generate very good money with an average reward rate risk of about 1: 1.5 or more.

Markets For Price Action Trading

Price action analysis work in most actively traded markets, as long as reliable price data is available.

Generally, price action traders favor the forex, futures, and stock markets. A significant proportion of price action traders are active in the forex markets.

Essential Price Action Trading Concepts

Price Patterns

There are dozens of bar patterns and candlestick patterns. Given the right market context, these patterns offer trading opportunities and are known as trading setups.

These are some popular price action patterns:

• Hikkake

• Engulfing Candlestick

• Inside Bar

• NR7
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Pin Bar

Market Swings Trending Up
Market Swings
Market prices move in swings. Price action trading interprets higher highs and higher lows as a uptrend, and lower highs and lower lows as a downtrend.
A notable theory on the behavior of market swings is the Elliot Wave Theory. It postulates an 8-wave pattern as a fractal of market movement.

Frost and Pretcher’s Elliott Wave Principle: Key To Market Behavior offers in-depth information on this theory.
For a price action trading strategy that demonstrates how to trade an engulfing candlestick pattern with the support of swing highs and lows.

Support & Resistance

Price action traders also project support and resistance levels using swing pivot points.
Support areas are likely to reject price upwards, and resistance areas tend to prevent the market from rising above it.
Support and resistance are core price action trading concepts. The key to successful price action trading lies in finding effective support and resistance areas.
Learn: Improve Your Trading With Support/Resistance
Trend Lines & Channels
Trend lines connect swing pivots to track trend, and serve as support and resistance.
In a bull trend, trend lines are drawn by connecting pivot lows. In a bear trend, trend lines are drawn with pivot highs.
By extending a parallel line from the trend line, we can form a trading channel that is useful for anticipating support and resistance areas.

Learn: How To Trade A Channel

Price Action Trading
2.5 Price Action Trading Methods
Most price action trading strategies make use of price patterns together with support and resistance areas.
The standard approach involves looking for a bullish price pattern at a support area for a long trade, or a bearish price pattern at a resistance area for a short trade.
Pure Price Action

Some traders use price action analysis exclusively. They adopt a minimalist approach and do not place any indicators on their charts.

These traders are well-versed in spotting price patterns and support/resistance areas.

Price Action With Volume

Another tenet of the Dow theory is that volume should increase in the direction of the trend and decrease when moving against it.

Hence, it is not surprising that volume analysis is a common addition to price action trading. Classical volume analysis combines volume patterns with chart patterns to evaluate the trading opportunity.

Combining volume with price action has also led to the development of volume spread analysis, which is based on Richard Wyckoff’s work on relationship between volume and the spread (range) of the bar.

Price Action With Indicators

Despite the emphasis on price analysis, many price action traders still find value in indicators.

The most popular trading indicator among price action traders is the moving average. It serves as a trend indicator and a dynamic support/resistance at the same time.

An example is Al Brook’s trading approach that uses a 20-period exponential moving average.

In Steve Nison’s books on candlesticks, he also included chapters on analyzing candlestick patterns with the help of trading indicators.

NEXT ARTICLE:

Beginner’s Guide To Reading Price Action

FOREX ARQUERO TRADING STRATEGY

The following strategy is best suited to those who like to operate with indicators. It is one of those favorite strategies of traders, easy to use / easy to remember. You will see it for yourself.

BROKERS

FINMAX - XM 

Main ingredients:

Currency pairs - EUR / USD and other majors

Exponential moving average of 86 periods (EMA86);

Exponential moving average of 21 periods (EMA21)

Momentum indicator with period 8 and with the added 100 level

Indicator Heiken Ashi (average bars in Japanese) - indicator used in conjunction with candle charts for trend identification and price prediction. Just to remind you, I will briefly describe your main signals. There are 5 main signs: green candles without longer shadows that indicate a solid uptrend (the best time to buy); a candle with a small body surrounded by upper and lower shadows is a trend reversal signal; red candles indicate a downward trend (normally used to open short positions and exit long ones); Red candles without higher shadows are an indication of a strong bearish trend.

Stochastic Oscillator with 8-3-3 configuration

For a long configuration:

The EMA21 must cross the EMA86 from bottom to top; it must also be above EMA86;

The momentum indicator should be located above level 100;

The stochastic oscillator must be above level 40 and its main line must be above the supplementary one;

The Heiken Ashi indicator should form a green candle;

All the signals mentioned above should appear at the same moment;

The operation must be opened at the opening of the next candle;

Stop Loss = 50 pips;

Take Profit = 100 pips.

For short operations:

The EMA21 crosses the EMA86 from top to bottom; it must also be below the EMA86;

The momentum indicator must be below level 100;

The Stochastic Oscillator must be below level 80 and its main line must be below the supplementary one;

The Heiken Ashi indicator should form a red candle;

All the signals mentioned above should appear at the same moment;

You can open the operation at the opening price of the next candle;

Stop Loss = 50 pips;

Take Profit = 100 pips.

Forex Trading Strategy of Price Action

Price action: the "Footprint" of money

Basic concepts of the price action negotiation strategy:

"What is Price Action?" It is a frequent question of the aspiring operators. Obtaining an answer as "price action is the movement of price over time" or similar, leaves many beginning traders feeling that they still do not understand exactly what the price action is or how to trade with it. In this tutorial we will give examples of graphs of what action is exactly the price and explain how you can make use of it in your negotiation.

Ready? Let us begin…

Let's start with the basics. In the chart below, we are analyzing some of the most basic negotiation terminology with price action:

Note: The term "candle" describes the trade with candle graphics, you will see that "candle" and "bar" are sometimes used interchangeably, a "bar chart" is a form of graphic representation that does not use candles, but simple bars They show the same information as a candle, but in a less visually appealing way. For more information on candlestick charts, see this candlestick chart tutorial.

Ascending bar: an ascending bar or "bull bar" is a bar with a height higher and lower than the previous bar. The bars above marked above are in an uptrend. In general, the closure is higher than the open one in an upward bar, but sometimes it can have the closing lower than the open one and it can still be an upward bar, as with the black bar that we see in the previous example of "top bar". This can happen in aggressive tendencies like the ones we see above, because as you can see, the highs and lows of that black bar are still above the highs and lows of the previous bar. The ascending bars show that buyers or "bulls" are still in control

Descending bar: a descending bar or "bearish bar" is a bar with a lower level higher and a lower level lower than the previous bar. Notice in the previous example how the closing is lower than the open in the highlighted downs, this is typical of most lower bars, although not necessary, as we saw in the bar above. The descending bars show that sellers or "bears" are still in control.

Inner bar: also sometimes called narrow range bar, an inner bar is a bar with a height that is lower than the height of the previous bar and a minimum that is higher than the minimum of the previous bar. Some traders do not consider an interior bar that has a high equal or equal low as an internal bar, others do. The inner bars generally represent the indecision of the market. As in any bar, the closer they come between opening and closing, it shows how undecided the market is, since neither buyers nor sellers have control.

External bar: also sometimes called mother bar, wide range or envelope bar, an outer bar is a bar with a height that is higher than the previous or next bar and with a low that is lower than the previous or next bar. thus encompassing the previous bar or the next bar. Since the closing was substantially greater than the open bar example in the previous outer bar, it shows that buyers were in control.

When the opening is in the last quarter / third of the bar and the closing is in the upper quarter / third of the bar, it is said to be bullish and that the buyers are in control. When the open is in the upper quarter / third of the bar and the closing is in the last quarter / third, it is said to be bearish and is involved with the sellers in control.

Another definition used for this bar, especially if candlestick diagrams are used, is that opening and closing has to include the previous bars of opening and closing, and not only the highs and lows of the bar. With this definition, the wide-range bar or the surround bar does not need to have a higher high or lower low to qualify. The first definition probably came up with bar charts where opening and closing is harder to notice.

What is a price action trading signal?

As the markets move, they leave behind what I call a "footprint", this imprint is the action of the price and, sometimes, it leaves us clues as to which direction it is going. These "clues" are known as trading signals of price action / price action patterns / price action configurations or price action trading strategies.

What we are looking for is a price action signal to give us a certain "confirmation" of an entry in the market. We will see in a moment how to combine the action of the price with the "confluence" in the market to find high probability entries, but for now let's focus on an individual price action input trigger.

In the chart below we can see examples of one of my favorite price action trading strategies, the investment settings of the pin bar. Note; we include a configuration of "failed" pin bars only to show that not all configurations will work; just like in real-life trade:

Trading price action with confluence

Confluence: a point in the market where two or more levels cross each other, forming a point of "hot spot" or point of confluence in the market. In the dictionary, confluence means' a meeting of people or things; competition'. So, basically, when we look for confluent areas in the market, we are looking for areas where two or more levels or analysis tools intersect.

In the following chart, we are looking at an example of how to negotiate the price action with the confluence. A "confluent" level or point in the market is one that provides some weight to the configuration of the trade. For example, in the chart below, the pin bar shows the rejection of an obvious level of horizontal resistance in the market, as well as the dynamic resistance between the EMA of 8 and 21 days (red and blue lines). Another factor of confluence in the following graph is the bearish trend. If you have a price action configuration that is in line with the trend, such as the pin bar in the following chart, it is also considered a point of confluence. Therefore, in the chart below we have 3 confluence factors that validate and strengthen the case of a short entry from the configuration of the pin bar:

1) bearish trend

2) Rejection of horizontal resistance

3) Dynamic resistance rejection

How to use the price action to determine the market trend:

The following table has the maximums and minimums of the swing marked both in an uptrend and in a bearish trend. The price in a given time frame is in an uptrend if it is making a higher maximum (HH) and a higher minimum (HL) and in a downtrend if it is making the lower highs (LH) and the lows more low (LL). If the price is doing something else, it is in a consolidation pattern: range, triangle, pennant, rectangle, etc.

The trend is considered valid until the price no longer reaches higher and higher minimums in an uptrend or lower ups and downs and lower lows in a downtrend. After a trend breaks, there is usually a period of consolidation that is easier to see in a shorter time frame. With practice, you can visualize this without looking at the lowest time frame.

When the price is in a tight consolidation pattern, it will often be called "shear" or "lateral" price movement. When the price is in a higher consolidation pattern, it is said to be in a "quotation range" without a pattern of tendency to ups and downs. In the chart below, we can see an example of a stricter consolidation area or a "discontinued" price action and then a larger consolidation area that was a more defined "trading range":

Use the price action to trade with a trend and consolidation market

"Trading with the trend" is a fairly general phrase that often causes confusion for beginning traders who have not yet found an effective strategy for trend trading. The way I trade with the trend is simply to look for one of my high probability price action trading strategies to form with the daily chart trend, ideally from a "confluence level" within that trend. Trading in a consolidating market is best done when a market is limited to a range; in a larger consolidation phase rather than in a "choppy" consolidation phase. Adjusted consolidation can be negotiated, but it should be done in lower timeframe charts and it is better to leave it until you are very good at negotiating the daily chart first.

The following table is an excellent example of the action of the trading price "with the trend", as well as the stock price action in a limited range market:

In conclusion…

Now you must have a good understanding of the basic concepts of stock price trading. One thing I did not mention in this article is in what time frame you should start learning to trade. All the pictures in this lesson were made in the time frame of the daily chart, and it is very important that you first learn to negotiate in the daily charts before going further down in the time frame. The reason is simple, the daily chart offers the clearest and most accurate view of the price action of a market, and the lower in the time frame, the more random market noise exists. Just as you need a solid foundation to build a house, you need a solid foundation to become a successful trader, and learning how to trade in daily charts before going further down in the time frame will help you build that foundation.