Chart Pattern

line chart

A line chart is the most basic and simplest type of stock charts that are used in technical analysis. The line chart is also called a close-only chart as it plots the closing price of the underlying security, with a line connecting the dots formed by the close price. In a line chart the price data for the underlying security is plotted on a graph with the time plotted from left to right along the horizontal axis, or the x-axis and price levels plotted from the bottom up along the vertical axis, or the y-axis. 

The price data used in line charts is usually the close price of the underlying security. The uncluttered simplicity of the line chart is its greatest strength as it provides a clean, easily recognizable, visual display of the price movement. This makes it an ideal tool for use in identifying the dominant support and resistance levels, trend lines, and certain chart patterns.

Bar chart

Bar charts are one of the most popular forms of stock charts and are probably the most widely used charts. Bar charts are drawn on a graph that plots time on the horizontal axis and price levels on the vertical axis. The chart consists of a series of vertical bars that indicate various price data for each time-frame on the chart. This data can be either the open price, the high price, the low price and the close price, making it an OHLC bar chart, or the high price, the low price and the close price, making it an HLC bar chart. The height of each OHLC and HLC bar indicates the price range for that period with the high at the top of the bar and the low at the bottom of the bar. Each OHLC and HLC bar has a small horizontal tick to the right of the bar to indicate the close price for that period. An OHLC bar will also have a small horizontal tick to the left of the bar to indicate the open price for that period.

The extra information is one of the reasons why the OHLC charts are more popular than HLC charts. In addition, some charting applications use colors to indicate bullish or bearishness of a bar in relation to the close of the previous bar. This makes the OHLC bar chart quite similar to the candlestick chart, except that the OHLC chart does not indicate bullishness or bearishness of the period of one bar as clearly as the candlestick chart (the color of an OHLC bar is always in relation to the close of the pervious bar rather than the open and close of the current bar).

Point and Figure Charts

Point and Figure (P&F) charts date back to at least 1880's and differ from other stock charts as it does not plot price movement from left to right within fixed time intervals. It also does not plot the volume traded. Instead it plots unidirectional price movements in one vertical column and moves to the next column when the price changes direction. It represent increases in price by plotting X's in the column and decreases in price by plotting O's. Each X and O represents a box of a set size or price amount. This box size determines how far the price must move before another X or O is added to the chart, depending on the direction of the price movement. Thus if the box sixe is set at 15, the price must move 15 points above the previous box before the next X or O is plotted. Any movement below 15 is ignored. For this reason, very little plotting occurs during stagnant market conditions while a considerable amount of plotting may occur during volatile market conditions.

The chart also has a box reversal amount that determines how many boxes must occur in the opposite direction before it is seen as a reversal. Only once the price is seen as having reversed is a new column started. In a 3 box reversal requires the price to move three boxes (of 45 points if each box represents 15 points) against the current direction before it is seen as a reversal.

Candlestick Charts

Japanese candlestick charts form the basis of the oldest form of technical analysis. They were developed in the 17th century by a Japanese rice trader named Homma. Candlestick charts provide the same information as OHLC bar charts, namely open price, high price, low price and close price, however, candlestick charting also provide a visual indication of market psychology, market sentiment, and potential weakness, making it a rather valuable trading tool.

Candlesticks indicate a bullish up bar, when the closing price is higher than the opening price, using a light color such as white or green, and a bearish down bar, when the closing price is lower than the opening price, using a darker color such as black or red for the real body of the candlestick. Thus, on a green candlestick, the close price will be at the top of the candlestick real body and the open price at the bottom as the close price is higher than the open price; conversely on a red bar the close price will be at the bottom of the candlestick real body and the open price at the top as the close price is lower than the open price.

 For both a bullish and a bearish candlestick, the high price and the low and the low price for the session will be indicated by the top and bottom of the thin vertical line above and below the real body. This vertical line is called the shadow or the wick.

The shape and color of a candlestick can change several times during its formation. Therefore the trader must wait for the candlestick to be formed completely at the end of the time-frame to analyze the candlestick, forcing the trader to wait for the bar to close.

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Trading strategies

Types of currency trading strategies.

Currency trading strategies can fall into a couple of basic categories. The main reason is normally the driving force behind the signals that this strategies produce. The type of currency trading strategy that you choose is an entirely personal thing, but should be based upon comfort, and the overall trading results.

One type of currency trading strategy is based completely on the differential of two countries interest rates. What is meant by this is that if the interest rate of Great Britain happens to be 2%, and the interest rate of Japan is 0.5%, the trader would by British Pounds, and sell the Japanese Yen. The thinking behind this is that money tends to flow where it is treated better. With a higher interest rate and Great Britain, it should follow that there will be more investment in that country. As investors flood into the UK, it stands to reason that they will be buying the British Pound.

Another type currency trading strategies based upon the fundamentals of both countries. And while this somewhat ties in with the differential of interest rate type of strategy, it does take into account a much larger picture of economic information. The idea is to buying the currency of the country that is more likely to raise interest rates in the future that another. If you find that the economic numbers out of a particular country are better than another, you will apply that currency and sell the other one. Fundamental trading can be a bit tricky however, as it generally doesn't have a set entry or exit point.

One of the most common types of trading strategies in the currency market are systems that are based on technical analysis. Under this heading, there are literally hundreds and thousands of systems to choose from. These systems tend to incorporate a technical indicator, or group of them, with simple price action. They can be as basic as systems that incorporate support and resistance with trend lines, or a bit more complicated such as a system that incorporates the ADX, MACD and the RSI, along with price action and perhaps moving average or two.

The simple truth is that there is no "one size fits all" type of trading system out there for the currency trader to use. You simply have to try and figure out what works best for you personally. While it takes a little bit of trial and error, and diligent record-keeping, going through the process of finding the perfect system for your situation is the foundation for becoming a profitable trader.

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Article for Day Trading, Tips and Online Trading

1.Currency Trading Strategies
Currency trading strategies can fall into a couple of basic categories. The main reason is normally the driving force behind the signals that this strategies produce. The type of currency trading strategy........Currency Trading Strategies

2.Trading Tips
The following is a short list of trading tips that can help you stay focused and on a profitable path while day trading. . . . Trading tips

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Basic Terms

Trading Basics

Learn All About Trading Basics

Trading Basics covers the founding principles of online foreign currency and trading. Read up on anything and everything you need to know about trading Indices , Commodities such Oil and Gold, and popular forex pairs such as the EUR/USD and GBP/USD.

An indicative market price, when used in Forex, refers to the prevailing exchange rate of the quoted currency at that moment. A quote will always be for a currency pair; for example EUR/USD, AUD/JPY or USD/JPY. The first currency in the pair is the quoted currency, while the second currency is referred to as the counterpart.

A currency pair is usually quoted to a 1/10,000 degree of precision (i.e. until the 4th digit right of the decimal point); except for Japanese yen pairs, where quotes are usually made to 1/100 degree of precision (i.e. to the second digit right of the decimal point).
A quote will always be provided in a form of two figures. The first figure is always the Bid or selling price, while the second is the Ask or buying price.

Bid/Ask 

The Bid or the selling price is the exchange rate at which a currency is offered for sale. The Ask or buying price is the exchange rate at which a currency can be bought.
In the example above the EUR/USD pair (Euro vs. US dollar) is quoted at 1.5034/1.5037. In other words, the quote for the EUR/USD pair is 1.5034/1.5037, where 1.5034 is the Bid price and 1.5037 is the Ask price. Meaning if you wish to sell the quoted currency – in this case the Euro – then you would receive 1.5034 US Dollars per 1 Euro. On the other hand, if you were buying the quoted currency, then the quote tells you that to buy Euros for US dollars, you would need to pay 1.5037  dollars per 1 euro.

Lot  

A lot is the standard unit size of a transaction. It represents the minimum quantity which can be traded in any given instrument.
For Forex Trading, Markets.com standard lot size is 1,000 units of the quoted currency.
For CFD Trading, the standard lot size varies from 1 to 500 units of the quoted CFD.

Pip 

This is the smallest value in a currency quote and can be different for different currencies. For most currency pairs a pip is the 1/10,000 (0.0001) fraction of the quoted currency. However, in Japanese yen pairs, a pip refers to a 1/100 (0.01) fraction of the quoted currency.
Profits on a trade can be expressed in pips, for example: Suppose you bought the EUR/USD at an exchange rate of 1.5016 and sold it at an exchange rate of 1.5037. 37-16=21. You made a 21 pip profit.

Pip Value 

The pip value can be either variable or fixed, depending on the  currency pair it refers to and the base currency (i.e. measuring  currency) of your account. The pip value is also a function of the amount traded.

The simplest way to calculate the pip value is to divide 1 pip by the exchange rate and multiply it by the lot size. This gives you the pip value in terms of the quoted currency. If the base currency of your account is other than the quoted currency, then simply multiply this by the applicable exchange rate.
For example: What is the pip value of a trade in GBP/JPY with a price of 128.92?
 The pip value of 1 standard lot (5,000) of GBP/JPY which is traded at 128.92 is:

0.01/128.92 = 0.00007756 GB
0.00007756 x 5,000=0.387 GBP

The base currency of your account is USD. If the exchange rate for GBP/USD is 2.0612, then the pip value for 1 standard lot in terms of the account's base currency is: 0.387x 2.0612 = $0.80.

Spread 

This is the difference between the bid price and the ask price. For example: If the quote for the EUR/USD pair is 1.5034/1.5037 (in other words the bid price is 1.5034 and the ask price is 1.5037), then the spread for the EUR/USD in this case is 3 pips. Low spreads ensure that traders can get in and out of their trades at very low slippage.

Leverage 

This is the use of borrowed capital to increase potential return.  Trading on leveraged capital means that you can trade amounts significantly higher than the balance of your funds, which only serves as the margin.
High leverage can significantly increase the potential return, but it can also significantly increase potential losses.

 The leverage is specified as a ratio, such as 200:1. This means that the trader can trade amounts 200 times higher than the sum in his or her margin account.
If the trader has $1,000 in his account, it means that he can now open trades worth $200,000.

Interest 

In a sense, interest is the price of money. It is the amount paid on loans and received on deposits.

Long 

A trader going long expects the price to go up when buying a currency pair or a CFD.

Short 

A trader going short expects the price to go down when selling a currency pair or a CFD.
Value date
The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments.

Rollover 

Process where the settlement of a deal is rolled forward to another value date and a charge is levied based on the difference in rates of interest of the two currencies.
Every day, at 21:00GMT, open positions are rolled over to the next day and the positions gain or lose interest based on the interest differential between the bought and sold currencies.
If you buy overnight a currency pair where the base currency has a higher interest rate than the terms currency, then you’ll receive interest and vice versa.

Margin

Margin can be thought of as a good faith deposit required to maintain open positions. This is not a fee or a transaction cost, it is simply a portion of your account equity set aside and allocated as a margin deposit.
Margin requirements (per 1k lot) are determined by taking a percentage of the notional trade size plus a small cushion. A cushion is added to help alleviate daily/weekly fluctuations.
Trading on margin can both positively and negatively affect your trading experience as both profits and losses can be dramatically amplified.

Bear

A person who believes that the price of a particular security or the market as a whole will go lower.
Bearish

The outlook of a person anticipating lower prices in a particular security or the market as a whole.

Bear Market

Any market in which prices are trending lower.

Bullish

The outlook of a person anticipating higher prices in a particular security or the market as a whole.

Bull Market

Any market in which prices are trending higher.

Bull Spread

Generally speaking, it is any spread that theoretically profits when the market moves up. Specifically it refers to a vertical spread.

Butterfly spread

An option position composed of either all calls or all puts (with the exception of an iron butterfly), with long options and short options at three different strikes. The options are all on the same stock and of the same expiration, with the quantity of long options and the quantity of short options netting to zero. The strikes are equidistant from each other. For example, a long 50/60/70 put butterfly is long 1*50 put, short 2*60 puts, and long 1*70 put.

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