20 proven Forex Trading Strategies #3 and #4

5 Min Trading System # 3


Pairs:
EUR/USD, GBP/USD, USD/JPY, USD/CHF

Indicators:
Bollinger Band (20,2)
Stochastic (5,3,3)


Trading Rules:

* A close must happen outside the bollinger band.

* Stochastic oscillator must be in oversold area (below 20) or overbought area
(above 80)

* If market is in uptrend, look for a red candle. If market is in a downtrend, look for a green candle. We will call these the “signal candle”.

* Once you see your signal candle, enter in that same direction and aim for 10 pips.


* Stop loss at 20 pips or according to your trading rules.

5 Min Trading System # 4

Pairs:
EUR/USD, GBP/USD, GBP/JPY

Indicators:

Bollinger Band (20,2)

Rules For Long Trades:

* Bollinger band must slope up
* Go long when the price touches the middle bollinger band from above
* Stop loss at lower band or 15 pip
* Take profit at upper band

Rules For Short Trades:

* Bollinger band must slope down
* Go short when the price touches the middle bollinger band from below
* Stop loss at upper band or 15 min

* Take profit at lower band.

from the book 20 proven Forex Strategies 

20 proven Forex Trading Strategies #1 and #2

5 Min Trading System # 1


Pair:

EUR/USD

Indicators:
MACD (12,26,1)
Stochastic (5,3,3)
EMA 5 to the close
EMA 5 to the open


Buy Signal:

When the stochastic crosses up from the 20 line and is not overbought
The MACD closses higher than the previous time interval
The signal candle closes higher bullish
The 5 EMA to the close has crossed the 5 EMA to the open
Stop loss is 20 pips
Close when the 5 EMA to the close has crossed the 5 EMA to the open




Sell Signal
When the stochastic crosses down from the 80 line and is not oversold
The MACD closses lower than the previous time interval
The signal candle closes lower bearish
The 5 EMA to the close has crossed the 5 EMA to the open
Stop loss is 20 pips
Close when the 5 EMA to the close has crossed the 5 EMA to the open



5 Min Trading system # 2

Pairs:

EUR/USD

Indicators:
10 EMA
21 EMA
50 EMA

System Rules:
Wait for a trend to shown on the 5 min chart, higher highs in an up trend and lower
low in a down trend, look at the 50 EMA for trend strength and direction.
Make sure you are not in the Asian session or at the end of the London or US
session.

Check there is no major upcoming news about to come out before you place a
trade.

Once price enters into the ZONE, wait for the pullback and open a trade, sell for
down trend and buy for up trend.

Set stop loss at 5 pips + spread
Set take profit at 10 pips
ZONE is the area between 10 EMA and 21 EMA. The 50 EMA is our gauge for the
strength of the trend, in a good strong trend it should be pointing up or down at about 30
degrees from horizontal.


From the book: 20 Proven Forex Strategies - Thomas Carter.

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HIGH-FREQUENCY TRADING (part 1 )

It is important to realize that a large and increasing part of the daily stock, futures, exchange-traded fund, currency, commodity, and options volume is being executed by high-frequency trading (HFT) firms that have algorithms designed by quantitative analysts called quants. 



Most of the programmers have master's degrees or PhDs in mathematics, quantitative analysis, engineering, programming, or physics, and the best ones make a $1 million a year for their efforts. Some algorithms hold positions for a fraction of a second, and others for an hour or two. Every imaginable strategy is used, including models based on complex financial analysis of huge volumes of data, to simple statistical aberrations. Every idea has to have sound logic, and back-testing has to confirm that it is effective. Some programmers tweak their programs during the day to give them an edge for the next few hours.



Many programs operate in the world of nanoseconds (a billionth of a second), and every advance in hardware and software that reduces the latency between receiving data and getting orders filled is employed. The fastest programming languages and operating systems are also used to reduce the latency. Since their edge is very small and hundreds of millions of dollars are at stake, HFT firms tend to be secretive, stealthy, and filled with smart people.


CBS's 60 Minutes ran a story on HFT in October 2010 and reported that as much as 70 percent of the volume and over a billion shares of stock daily were being traded by HFT programs. This is somewhat misleading because the HFT firms are only part of the algorithm trading world. There are other programs that are designed for longerterm trading and are also part of that 70 percent. Both the instantaneous high-frequency trading software and the longer-term program trading software are created by quantitative analysts. These quants are mathematicians, and the ones who design the HFT programs care nothing about charts or fundamentals and are interested only in short-term market tendencies based on statistical analysis. Most of them don't even care about 5 minute charts, and their trading has nothing to do with whatever chart you are watching during the day.

Forex vs Stock Market

What are the differences between trading in the FOREX and operating in the stock
market?


The FOREX market is always open. Like some supermarkets that are open 24 hours, the FOREX is a “supermarket” of currencies, open 24 hours a day, 5 days a week. The FOREX opens in most of the brokers on Sunday at 3 to 5 p.m. Eastern Time (ET) and stays open until Friday at 4 p.m. EST (it must be borne in mind that the opening and closing—Sunday and Friday—may vary from broker to broker). In this way, traders have the ability to operate eitherin the American, Asian, or European markets, which gives them the advantage of being able to react to certain events or news that is bound to emerge andalso gives them the opportunity to decide their schedules.


No commission is charged. Most brokers do not charge additional fees or commissions to buy or sell currencies, whether online or by telephone. This isso because of the use of a fixed spread that is consistent and transparent. The cost of a buy/sell in the FOREX market is much lower than in any other market (e.g., stock, futures, etc.). A side note to this is that because of the competition for narrower spreads and faster executions, some brokers are providing very tight spreads and extremely fast execution with little latency.
In order for them to do this, however, they are now starting to charge

commissions. The commissions vary, and with a little due diligence, you will be able to find just the right broker.



Orders are executed instantly. In normal market conditions, the execution of ordersat a given price is done instantly. The trader places the order at the quoted price, which is being updated in real time. There is no difference between the price shown by the broker and the price at which the purchase order is executed. There are special conditions, though, in which market volatility is such that orders can be delayed or requoted, but under normal conditions, there are no such delays.


There are no restrictions on short selling. Unlike the stock market, the FOREX has no restrictions to open sell positions (short). In the FOREX, there is a chance to buy or sell regardless of whether the market is bullish or bearish. Owing to the fact that in the FOREX there is always someone buying a currency and selling another at the same time, there is no structural bias in the market. A trader can operate both upward and downward in the market.


What, then, is the relationship between the stock market and the FOREX? The stock market serves as a key indicator for the FOREX market. Technology has facilitated the possibility of investing in markets other than the local market/country, no matter their geographic location. Therefore, it has forged a relationship between the stock market and the currency of the country like this: If the stock market is going upward, it increasesthe investment in dollars, but in a market that is on the downside, investors tend to sell shares of companies in that country, attempting to recover capital and investing inanother country.

There are no intermediaries. Stock markets that tend to be centralized have advantages for the operator. But a problem with this is the need for an intermediary between the stock market and the trader. However, FOREX intermediaries do not exist, and thus the trader may buy or sell in the FOREXmarket without physical intermediaries that can buy or sell a particular pair at the time that they wish or think is appropriate. In the absence of an intermediary, the trader gets higher profits at lower costs.




The market is not controlled for buys or sells. The stock market is more susceptible to speculation based primarily on rumors of buying or selling by other companies. I can see this when a big company buys another relatively smaller company, and the value of the company’s shares increase. But the stock market is also likely to go down when you think that a company has been making profits and that investors tend to take profits by selling the shares.




Four currencies against thousands of shares. In the FOREX market, there are six major pairs, whereas in the stock market, there are thousands of companies. So analyzing four key pairs is much easier than analyzing thousands of companies. In the FOREX, obviously there are more than a hundred pairs, but those that are the most subject to transactions include only six major pairs.

A HISTORY OF THE FOREX

The FOREX (i.e., FOReign EXchange) market is an international market where the money (currency) of every country is sold and bought freely. It was launched in the 1970s at the moment of introduction of free exchange rates, and the price of one currency against another that occurs from supply and demand is determined only by market participants.


There is no external control, and competition is free because all the participants can decide to transact or not. In this respect, the FOREX is a perfect market because it can’t be controlled or monopolized by any of its participants. The enormous number of transactions executed day after day in a continuous activity make it the biggest liquid financial market. According to various assessments, money masses in the market constitute up to US $4.5 trillion a day.


Trading is conducted all over the world through telecommunications and electronic networks 24 hours a day, 5 days a week starting from 00:00 Greenwich Mean Time (GMT) on Monday (some starting a little earlier) to 10:00 p.m. GMT on Friday (some closing a little later). There are dealers quoting currencies in every time zone through

the main central markets: Frankfurt, London, New York, Tokyo, Hong Kong, Australia, New Zealand, etc.

To get a better understanding of FOREX quotes, you just have to know that one unit of
the base currency is equivalent to the exchange rate in the quote currency. For example,
if EUR/USD is trading at 1.2762, the price of 1 euro (base currency) in dollars (quote

currency) will be 1.2762 dollars.


FOREX trading is conducted through individual contracts. The standard contract size (also called a lot) is usually 100,000 units. This means that for every standard contract you acquire, you are controlling 100,000 units of the base currency. For this contract

size, each pip (the smallest price increment) is worth $10. Many companies offer mini accounts in which you can trade units of 10,000, where the pip value is $1 or even smaller.


In comparison with other markets, trading the FOREX market allows very low margin requirements because of leverage. In FOREX, you don’t need to obligatorily buy a currency first in order to sell it later. It is possible to open positions for buying and selling any currency without actually having it at hand: For a standard account size,

usually Internet brokers establish a minimum deposit such as $2000 for trading in the FOREX market and grant a leverage of 1:100. That is, opening the position at $100,000, a trader invests $1000 and receives $99,000 as a credit.



The FOREX is able to maintain its objectivity and avoid being controlled or manipulated by one or few of its participants because the volume transacted is so high that if any of them would want to do so, by changing prices at will, they would have to operate with tens of billions of dollars. This is the reason why the FOREX can’t be influenced by any single participant, and even though there are situations where a huge transaction can seem to take control of the market for a few moments, the balance is established again almost immediately because of the great liquidity involved. This also allows traders to get a profit by opening and closing positions within a few seconds.



The FOREX market is always moving. You can chose to maintain a position for a very short time or for longer periods, even years; it will depend only on your own trading strategies.

In the FOREX, it is possible to perform speculative activities without the need for a real money supply. This is referred to as marginal trading. The amount required as a guarantee for the transaction is low, thus providing an opportunity to open positions with a small account in U.S. dollars (some local brokers also accept some of the main currencies, such as the euro, pound sterling, Japanese yen, etc.) and buy or sell a lot of other different currencies.

What is Forex?

What is FOREX? FOREX (also known as FX) is the contracted name of FOReign
EXchange, an international trading market where banks, businesses, and public and
private investors of all the countries in the world can obtain and exchange their respective currencies so as to perform commercial transactions or simply speculate.


This market functions in a different way from the stock market; the stock exchange has a
fixed daily schedule for opening and closing, whereas the FOREX is open 24 hours a day, five days a week nonstop. 


FOREX activities start on Sunday afternoon at 5 p.m. Eastern Time (ET) and close on Friday at 4 p.m. ET. This continuous activity is possible because there are always open markets around the world, and today there is no need for the traders to be physically present at the exchange location because the funds can be traded electronically from any country.

The main markets involved in the FOREX are New Zealand, Sydney, Tokyo, China,

Frankfurt, London, Zurich, and New York. The FOREX market is the largest in the

world, where more than $3.2 trillion is being transacted every day (traditional daily

turnover was reported to be over US $3.2 trillion in April 2007 by the Bank for

International Settlements. Source: Triennial Central Bank Survey, BIS, December

2007), which is many times larger than the combined volume of all U.S. equities and

futures markets, and thus the FOREX is also the market that possesses the greatest

liquidity. Late in 2008, with all the uncertainty in the equities markets, the FOREX daily

turnover surpassed US $6.5 trillion in a day. This market will continue to attract more

and more investors.

Currency trading used to be an exclusive activity reserved to government central
banks and commercial and investment banks. In recent years, the market has opened up and become available to smaller investors and speculators, thanks to computers and the
Internet.


There is a broad electronic network that allows central banks from all over the world
to share their quotes and actual currency rates. This is known as the Interbank.In this
way, central banks are able to exchange and convert their currencies one into another in
real time. The currencies that are traded most commonly are the U.S. dollar, the Japanese yen, the euro, the British pound, the Swiss franc, the Canadian dollar, and the Australian dollar. The Interbank’s activity being continuous, and thanks to decentralization from any physical location or exchange, access to real quotes and the speed at which transactions can be performed are greatly increased.



When you are transacting on the FOREX market, you are simultaneously buying one
currency and selling another. Currencies are always traded in pairs, for example, pound
sterling/U.S. dollar (GBP/USD) or U.S. dollar/Canadian dollar (USD/CAD).



You would be executing a trade when there is an expectation that the currency you are
buying increases in respect to the one you are selling. If the value of the currency you
have bought effectively increases, you then would sell the position and take a profit.
Currency pairs are composed of a base currency, which is the first on the quote, and a
counter currency (also called the quote or payment currency), which appears as second

on the quote. When the U.S. dollar is the base currency, quotes are given in $1 USD per
counter currency, for example USD/CAD or USD/JPY.









The role of the FOREX in the world economy is very important because there is
always an increasing need of currency exchange owing to the development of
technology, communications, and general international commerce. Countries need the
FOREX market to be able to sell their products to other countries and receive payment
in their own currency or pay for their imported goods to the foreign producer in its own currency.