Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of a security's price. A nine-day EMA of the MACD called the "signal line," is then plotted on top of the MACD line, which can function as a trigger for buy and sell signals.
All in One MACD Indicator Basic & Scalping Strategy for Forex Trading. Before apply this strategy in real account minimum practice 15 days in demo account first. This strategy is Better for True ECN or LOW Spread Accounts.
An FX trader is any individual who exchanges one currency for another. Individual traders commonly use different platforms to exchange foreign currency. These include banks, financial institutions, money changers, or FX brokers. Most trades are completed over-the-counter, which means that the trade is facilitated via a bank rather than a centralised entity.
What is a Forex Pip?
PIP is the abbreviation of “point in price” or percentage in point” and it is the smallest unit of price movement in the foreign exchange market. For example, when the exchange rate of EUR/USD moves to 1.1552 from 1.1550, the currency pair has risen by 2 pips (or 0.0002).
What is Forex Scalping?
Forex scalping is a trading strategy which aims to benefit from small price movements in the market. Scalp traders will target intraday price movements and only hold positions for a small amount of time to take advantage of small market opportunities. Forex scalpers must be prepared to monitor the markets all day long.
What is Forex Leverage?
Forex leverage is offered by brokers to enable traders to maximize their trading potential. The forex market offers higher leverage than other markets, and this attracts potential traders. Leverage allows traders to deposit small amounts and trade with high volumes. The term ultimately means borrowing money in order to increase the potential returns on a trade, but this means losses get increased too.
What is a Forex Spread?
The difference between the ask price and bid price is known as the spread. The spread represents the cost of a transaction; the lower the spread, the lower the cost. A spread is influenced by a number of factors: the supply of the asset, the stock’s trading activity, and the total demand or interest in a particular asset.
What is Forex Hedging?
Hedging is a technique designed to reduce the risk caused by adverse price fluctuations. Investors and traders might implement a forex hedge in order to protect their position from risk as exchange rates change. Foreign currency options are a common hedging method, and grant the trader the possibility to buy or sell at a future exchange rate.
What is a Forex Swap?
A swap is simply an exchange of one currency for another. At a later date, the two parties who made the swap will receive their original currency back with a forward rate. The forward rate locks in a specific exchange rate and therefore acts as a kind of hedge. The swap varies significantly among different financial instruments.
What is a Forex Drawdown?
A drawdown is the difference between a relative peak and a relative trough in the value of an investment. After a new high is reached, drawdowns track the percentage change between the previous high and the smallest trough. In this way, drawdowns are useful for determining the financial risk of a certain asset.
What is Forex Slippage?
Slippage refers to the difference between the requested price of a trade and the price at which it is eventually executed. Slippage is usually found when the markets are particularly volatile, and prices have moved quickly during the time it takes for the trade to be ordered and completed. Slippage can have positive and negative consequences.
Forex Trading Fundamentals
Understanding Trading Fundamentals
What are Forex Reserves?
Forex reserves are foreign currencies held by a central bank in order to grant greater flexibility and resilience.
A reserve is any currency held by a financial authority which is centralised. The reserve assets can be used to endure market shocks if a particular currency becomes devalued or suddenly crashes. Higher foreign currency reserves ultimately mean lower risks associated with exchange rate fluctuations.
Forex reserves are usually held in US dollars, British pound sterling, euros, Chinese yuan or Japanese yen. This is due to these currencies being the most common on the foreign exchange market.
What are Forex Signals?
Forex signals are trade forecasts usually issued by knowledgeable and experienced signal providers.
The signals are based upon a series of technical analyses or news events, and are used by traders to help them decide whether they should buy or sell a currency pair. Day traders in particular may use a variety of forex signals to inform their next trade. Forex signal systems produce either manual or automated signals.
In a manual system, the trader actively looks for signals and interprets them to choose whether to buy or sell. In an automated system, the software identifies a signal and makes the programmed response.
What is Foreign Exchange?
Foreign exchange is the market where one currency is exchanged for another. It is always done in pairs; for example if a trader wants to buy Euro and sell the US Dollar, then he would be trading the EUR/USD currency pair.
Similarly if a trader wants to sell the US Dollar and buy the Japanese Yen he would be trading the USD/JPY pair. The price of a currency pair is called the exchange rate. It is determined by political, economic and environmental factors.
Transactions in foreign exchange are usually conducted in high volumes. Foreign exchange market has no physical location and hence it is called a decentralised market. It is open 24 hours a day, 5 days a week and is the largest market in the world.
Paul Tudor Jones II (born September 28, 1954) is an American billionaire hedge fund manager, conservationist and philanthropist. In 1980, he founded his hedge fund, Tudor Investment Corporation, an asset management firm headquartered in Stamford, Connecticut. Eight years later he founded the Robin Hood Foundation, which focuses on poverty reduction.
In 1976 after graduating from the University of Virginia Jones asked his cousin William Dunavant Jr. for an introduction to trading. Dunavant was the CEO of Dunavant Enterprises, one of the world’s largest cotton merchants. Dunavant sent Jones to talk with commodity broker Eli Tullis in New Orleans. Tullis represented some of the largest cotton traders in the world. Tullis hired Jones and mentored him in trading cotton futures at the New York Cotton Exchange. Eli Tullis fired Jones when he fell asleep at his desk after a night of partying in New Orleans. Many years later Jones served as treasurer in 1986 and then as chairman of the New York Cotton Exchange from August 1992 through June 1995.
As reported in Market Wizards and the press, Jones futures trading style and beliefs are as follows:
Contrarian attempt to buy and sell turning points. Keeps trying the single trade idea until he changes his mind, fundamentally. Otherwise, he keeps cutting his position size down. Then he trades the smallest amount when his trading is at its worst.
Considers himself as a premier market opportunist. When he develops an idea, he pursues it from a very-low-risk standpoint until he has been proven wrong repeatedly, or until he changes his viewpoint.
Swing trader, the best money is made at the market turns. Has missed a lot of meat in the middle, but catches a lot of tops and bottoms.
Spends his day making himself happy and relaxed. Gets out of a losing position that is making him uncomfortable. Nothing’s better than a fresh start. Key is to play great defense, not great offense.
Never average losers. Decreases his trading size when he is doing poorly, increase when he is trading well.
He has mental stops. If it hits that number, he is out no matter what. He uses not only price stops, but time stops.
Monitors the whole portfolio equity (risk) in real time.
He believes prices move first and fundamentals come second.
He doesn’t care about mistakes made three seconds ago, but what he is going to do from the next moment on.
Don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.
Jones’s global macro trading style is based primarily on technical analysis, as opposed to value investing, with an emphasis momentum factors driving markets. In a 2000 interview, he suggested however he regretted not being more involved with venture investing in technology firms during the 1990s.