The candlestick indicator is is one of the simplest and most effective methods of technical analysis for currency trading as well as stock trading. While there are other types of charts available including line and bar charts, the candle patterns are the most popular.

History Of Candlestick Charts

This type of price tracking chart was developed in Japan in the 18th century and that is why you will sometimes see them referred to as Japanese candlestick charts. It also explains why many of the common recognized patterns have Japanese names such as doji and marubozu.

The charts are believed to have been invented or at any rate used by the very successful Japanese commodity trader Mr. Homma who mainly profited from trading in the price of rice. Previously, simple line charts had been used to track commodity closing prices. Candlesticks gave traders a way of plotting more variables while staying within a two dimensional chart.

While bar charts can also plot the open, close, high and low, the advantage of candlesticks is their visual utility. Bullish and bearing periods are clearly visible at a glance.

Mr. Homma’s phenomenal success as a trader led other Japanese commodity traders to adopt his analysis tool and in the early 20th century it was introduced to the American stock market by Charles Dow, the founder of the Wall Street Journal and co-founder of the Dow Jones company.

What Is A Candlestick

A typical candlestick has a block that is the body of the candle, plus vertical lines known as shadows or wicks which stick up and down from the body. The top of the upper shadow is the highest price reached during the trading period and the bottom of the lower shadow is the low.

The top and bottom of the candle block mark the opening and closing prices in either order. The candle was originally unshaded (white) for a rising market where the open was the bottom of the candle and the close was the top, or shaded (black or green) for a falling market where the open was the top of the block and the close the bottom. You may now see other colors used, e.g. green or blue for a rising market and red for a fall.

In a case where there is some coinciding of prices and the open, close, high and low are not all different, the candle may look slightly different. Here are some examples:

Doji – period with an equal opening and closing price, looks like a cross.

Marubozu – period when the opening price was the low and the closing price was the high (white marubozu) or vice versa (black marubozu). Has a candle body block only, with no shadow sticks top or bottom.

Candlestick Analysis In Real Time Trading

Candlesticks can record any measured time period. Typically traders will use 5 or 15 minute candles with the resulting chart showing several hours, but it is possible to set your chart for a longer term or shorter term view. Patterns can be identified that indicate emerging trends or possible forthcoming breakouts. You can then compare with indicators or other time periods to check the signals.

Trading decisions in the live market often need to be made very fast. The colored blocks of candlestick analysis help traders to see movements and reversals at a glance and avoid mistakes.

Whether you are in the forex market as a broker, a professional trader or a complete beginner, you probably know the importance of good currency trading platforms. Finding the best one for your purposes is not always easy. Here are some tips to follow.

Broker Currency Trading Platforms

Brokers need a solution that is reliable and flexible so that they can adapt it to their particular business. Above all, they want it to be user friendly so that it is easy for their clients to use while providing all the information that clients want at their fingertips.

Most brokers either use custom built software or adapt something that is available out of the box. Custom platforms may seem like the ideal solution for a broker but they are expensive and take a long time. Even if you have delivery of your software, you can be waiting a long time for all of the bugs to be ironed out.

Pre designed forex trading platform packages have several advantages. First, you can be pretty sure they work so you are starting with a system instead of starting from scratch. A huge amount of time can be saved by your programmer, who will just have to change things around so that it does what you want.

Do not neglect the customization, however. It is important that broker trading software is branded to your own company and has a different feel for users than other companies’ platforms that they may have used before.

Trader Currency Trading Platforms

Traders will usually go with whatever interface their broker provides, but they will be looking for something that is easy to use and provides plenty of technical analysis. The software is often a very important factor in the choice of a broker.

Again, reliability is vital. You do not want to be linked up to a platform that makes errors or is frequently offline. Security is another factor. It is important that your funds are protected and your account cannot be accessed by hackers.

If you are using an automated forex system to trade for you on autopilot, it is essential to check that your selected broker’s software will work seamlessly with your robot. If you buy a premade robot or forex expert advisor you will usually receive a list of compatible brokers.

Many successful traders now have someone automate their system so that they can switch over to autopilot trading without changing their trading style. The platform of choice for most robots is Metatrader 4. This is free software on which your programmer can build a trading system for you. It is the most popular forex trading platform for the expert advisors that are sold on the open market and it is compatible with many broker currency trading platforms.

Our top recommendation for a Metatrader expert advisor is FAP Turbo which has been getting great results for ordinary users and in the independent tests that we have seen online.

FAP-Turbo

There is a very wide choice of forex broker companies online and when you are starting out in forex trading it can be difficult to find the best. We tend to be attracted by advertising, assuming they are all working in the same way. In fact this is not true. Foreign exchange brokers have very different business models which affect the way that they operate. In some cases, you may be surprised to hear that they could be working against their clients instead of for them.

Of course traditionally a broker carries out his clients’ instructions, placing orders for them in the market. Originally brokers worked with telephone orders and simply placed the order for the best price that they could get through their dealing desk. These days, everything is done online so that clients put in their orders for a certain price. However, you do still need a broker who will connect to the market through their software platform.

Many forex brokers still work in the old way, placing orders for clients as they are instructed. These are often the brokers who run standard forex accounts with minimum investment of $10,000 and upward. But the internet has opened up forex trading to people with much lower investment funds. More recently, companies have come on the scene to cater for these smaller investors and they do not necessarily follow the pattern of traditional brokers. To cut costs, they usually do not have their own dealing desks and they may operate in some very different ways. This can have important consequences for your funds and how they are managed.

So let’s take a look at the types of business model that you may come across in your search for a currency broker.

No Dealing Desk (NDD) Forex Broker

NDD brokers work in a similar way to brokers with dealing desks, but they use a range of liquidity providers to actually match their clients’ orders in the market. Competition between liquidity providers keeps the spread low, even though the broker usually increases the spread to cover their own costs and make some money.

Electronic Communications Network (ECN)

Forex brokers who use the ECN can access an online network where trades are filled. Many market makers work this way, as well as some brokers, banks and other large currency traders. Spread is usually low but you may be charged a fee per trade.

Market Makers

Market makers are not brokers in the true sense because instead of placing your order in the market they will match it themselves and then cover themselves against any loss by taking a position in the ECN or market that offsets their commitment to you either partially or fully. Market makers set their own prices, although of course these will be related to market prices. They often do not like clients to use scalping strategies because the very short term nature of these trades makes it hard for them to offset their risk. Some traders are happy to use market makers but others consider that they have a conflict of interest which may work against you as a trader.

Bucket Shops

Forex bucket shops are like bet takers in that they simply match your trade without necessarily taking any position in the market. They may not even have any connection into the real currency market. They win if you lose, so if you are successful they will probably close your account and return your funds. There is really no point in getting involved with a bucket shop unless you just want experience at very low levels of investment, and plan to lose money. They are illegal in some jurisdictions, and do not deserve to be described as a forex broker.

When you learn online forex currency trading you will see discussion of the two main types of forex analysis. These are technical analysis, where trading is based on historical and mathematical factors such as price charts and indicators, and fundamental analysis, where traders pay more attention to economic factors such as financial and political news.

Which one of these will give you more successful forex trading signals? It is a difficult question and the answer is not agreed by all traders. If you look around the internet you will probably find more discussion of technical analysis but that is partly because there is more to get a grip on. Beginners are frequently advised to identify trends on price charts and then trade on the basis of those alone. This is one of the easiest ways to begin forex trading and it can be successful.

Fundamental analysis depends on knowledge and news of the constantly changing real world. This makes it more difficult to take into account if you are not in the habit of checking out the financial section of your newspaper. However, there is no doubt that ultimately it is the economic factors which cause major price movements. Advocates of fundamental analysis will argue that any evidence on charts is historical and not predictive. In other words, the charts tell you what happened 5 minutes ago but not what is coming next.

One thing is for certain. Major financial reports and other events of national or international importance can have a huge and sudden effect on currency prices. So even if you prefer the technical method of forex analysis, it is wise to keep an ear to the ground and avoid being trapped in a bad trade when the US government announces a change in interest rates and the dollar leaps or plummets by 50 pips or more.

It can be helpful to think of price movements in the forex market as having a kind of elasticity. They are constantly stretching out to certain limits and then moving back, not necessarily to their starting point but often less or more. The fundamental factors are what make the prices move but technical analysis can be used to predict how far they are likely to stretch and when they are likely to start to reverse.

So the bottom line is that the best way to profit from forex trading is to make use of the technical tools such as charts and indicators but at the same time, be aware of the fundamental factors that are the real driving force behind any trends. The successful forex trader will be comfortable with both types of forex analysis, so it is best to cover both when you learn online forex currency trading.

An essential part of many types of forex trading system is learning to identify trends. This is your signal that the market is making a sustained move, either up or down, and you can profit from it by opening a trade. The famous saying ‘the trend is your friend’ is at the heart of this strategy.

Using trends to profit from forex trading may seem almost too simple. Yes, it is a simple strategy, but it works … provided you can tell the difference between an emerging trend and a mere fluctuation. That is where the skill, experience and tools come in. But really it is a very simple strategy and you should not try to complicate it.

There are several different ways of identifying a trend using either technical analysis (charts and indicators) or market knowledge (fundamental analysis). Drawing trend lines on a candlestick chart is probably the simplest method. You can identify triangle patterns that will predict a breakout in one direction or the other, and check these against other indicators such as the MACD crossover. It is also wise to check your pattern on charts for different periods, e.g. check hourly against daily charts etc.

There is no need to know all of the different methods for spotting a trend. Perfect one or two reliable methods and you have all you need to make money. Remember that all methods have their successes and their failures, and it is the overall profit or loss over the long term that counts. Do not be put off by one failure, and control your risk so that a couple of losses in a row will not have a big effect on your funds or on your confidence.

Experience can make all the difference and you would be well advised to practice on a demo account before trying out your method on the real market. Traders with many years of experience can often recognize patterns without even knowing that they are doing it. They do not consciously remember having seen a situation before, but long experience of watching and trading the markets gives them a deep knowledge that will often help them identify signals very fast. It is worth beginning to develop that experience before you leap in with real money.

In the beginning you will not be able to ride the whole of a trend from its starting point to its peak or trough. In fact, hardly any trader ever does this. You must wait to be sure that a trend is forming. Equally, do not try to hold out until the last moment to try to grab every last pip. Set your profit target and be happy with it. In the long term this will pay you better than trying to second guess the market.

Finally, do not follow any type of forex trading system that relies on changing your position size depending on whether your last trade was successful or unsuccessful. This is a recipe for disaster, as thousands of ruined gamblers have discovered. If you have a good system your profits will exceed your losses without resorting to gambling. Investing time in testing your forex trading system is the key to making money from the forex markets.

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If you ask any real successful foreign exchange traders you will find, for sure, that just about all of them use foreign exchange software. Automation is everywhere these days and forex trading is no exception. In fact in many ways the forex market is ahead of the game because it is so open to online innovation and automation.

What you will find however is that many traders struggle before they find the right automated forex trading system. Some buy them off the shelf and others have a programmer automate their own successful manual system, but they will certainly have used a lot of ‘money’ in demo accounts testing them before they found the right one.

Even designing a robot yourself from a system that you know to be profitable is not guaranteed to make money. Automated trading is a different experience than manual trading and even the best forex systems need some tweaking when they are translated into currency trading software.

So assuming that you are not a mega successful trader with a manual system that you are burning to have automated just for your own personal use, then probably you will be looking for something to buy off the shelf. How do you find the best foreign exchange software out there?

Testing a currency trading program in a demo account before you go live is absolutely essential, of course. You must accept that this will take time and not rush into real money trading.

It is also important to understand that the first currency trading program that you test will not necessarily be the best for you. Regardless of profits on paper or other people’s recommendations, you need to get something that you will understand and be able to operate successfully, something that is a good fit for you.

The best attitude to take is to assume from the outset that you will have to test several forex robots before you find the one that works best for you. This does require some investment of time and money but it is worth it. And before you panic at the idea of buying many robots in order to find one that works, remember that most of them come with a money back guarantee for at least one month, often two. Take advantage of this.

Many of the robots are sold through the online retailer Clickbank who will refund any returns with no question. Just be sure to apply to Clickbank for your refund and not the product developer’s support team. After all, if you bought some Nike running shoes that didn’t fit you, you wouldn’t expect a refund from the president of Nike, would you? You would return them to the store where you bought them.

At the same time, you will want to be sure that the product developer’s support team is there for you when you have technical questions about the software that you bought. That’s what they are for. Phone support is best, then you can have someone walk you through any problems. Emails should be answered in less than 24 hours. If you do not get that level of technical support, you may want to look for other foreign exchange software.

Our top recommendation for prewritten foreign exchange software is FAP Turbo which has been getting great results for ordinary users and in the independent tests that we have seen online.

FAP-Turbo

Want to know how to trade currency? We are not surprised! Forex or foreign exchange trading can be a very lucrative form of investment. It is attracting increasing numbers of investors but with a daily turnover of almost $4 trillion, this is a huge global market that can accommodate plenty more.

Let’s be clear from the get go: this is a risky business. Forex trading, like stock trading, is speculative. The prices change fast and you can be caught out. Your returns will not be steady or predictable. In fact, all traders expect to make losses from time to time. The aim is simply to make sure that the profitable trades outweigh any losses.

So what does it involve? Well, forex trading is another name for currency trading. As you probably know, the value of any currency tends to rise and fall depending on how well its country is performing economically. You have almost certainly heard news reports of the dollar strengthening or weakening compared with other currencies. So how to trade currency is very simple, you just exchange one currency for another depending on whether you think a currency price is rising or falling.

To take a very simple example, imagine that the euro was strengthening so you decided to buy euros. You might exchange $100 for 70 euros. Then you would wait for the rate to change. If it rose as you expected, you would change them back and you might get $102 for your 70 euros after broker costs. That is a profit of $2 or 2% of your investment – not bad when you multiply it up.

Leverage or trading on margins is what allows you to multiply up. Brokers know that a currency rate is never likely to change beyond certain boundaries in a very short time, so they are prepared to let you control a large trade with just a small investment fund. Leverage typically gives you a position size of 100 times your investment.

This means that in the above example, if you committed $100 to the trade through your broker, you would be controlling $10,000 on the market. So instead of having a profit of $2, you would make $200. That’s a pretty good return on a $100 investment!

Of course this also means that you could lose big time too, so you use stops to minimize your risk. A stop is an order to close your trade if the price goes against you. In this example you might set a stop at 10 pips below the opening price which would be triggered if the price fell. This would limit your loss to $10.

EUR/USD (the euro against the US dollar) has the highest volume of trades of all of the possible currency pairs so it is a good one for beginners to start with. However, you can trade any of the major forex currencies. You are not limited to the currency of your own country. If EUR or USD was going through a very unstable time you might prefer to switch to another pair.

Currency trading goes on all over the world. It operates in so many different time zones that trading is possible 24 hours a day during the business week. This can be a big advantage for home investors who have a regular job. Unlike the stock market, you can trade forex any time of the day or night.

Forex trading can be done from your home computer. You will need a broadband connection to hook up with your broker’s software which allows you to trade on live prices. Most brokers offer a demo account so that you can get to know their software and practice your trading skills. You will want to follow a forex trading system that will set certain parameters or trigger signals for your trades. You can test out the system in a demo account until you are completely comfortable before switching over to real money.

Alternatively, you can use a forex robot for your trading. This will be set up to trade automatically for you from your computer. It follows its own system according to the settings that you select. This is still not risk free but it makes trading much easier and also allows you to take advantage of the full 24 hour trading day. Instead of taking months developing your trading skills, you just need to put in the time to setting up the robot, which you can probably do in a few hours. Then you do not even need to learn how to trade currency yourself but just let the robot do it.

Our top recommendation for a forex robot is FAP Turbo which has been getting great results for ordinary users and in the independent tests that we have seen online.

FAP-Turbo

In an online forex trading forum, anybody from beginner to successful professional trader can go and discuss forex trading strategies and systems. Access is usually unrestricted and some forums are very popular. But can you believe all that you are told? Are forex forums a useful source of advice or just a waste of your time?

The history of the forum dates back to Roman times when the forum was an open place or square in the middle of the city where the male citizens would meet to discuss important matters such as politics or law. The word came to mean any discussion group or its location, and it was adopted by online communities to replace the old ‘bulletin boards’ of the 1990s where messages were posted in threads and often emailed to all members.

Now you simply log in and post your questions or comments on the forum. In an active forex trading forum you can post a question about currency trading and have an answer very fast. This can be useful but it can also be dangerous. Usually you do not know anything about the person who has replied to your question. Perhaps they know less than you do.

It is very easy to appear to be an expert in anything on the internet. All a person needs is to pick up the jargon of currency trading and sound confident. You do not usually know their real name or anything about them. You can see how many posts they have made, but all that means is that they are active in the forum, it does not prove that they are actively trading. They could be forum addicts, wasting all their time chatting online instead of making money. Be careful not to fall into that trap yourself!

Even if you really are seeing replies from successful and experienced traders, they may have different priorities or aims than yours, or they may use strategies that you would not be comfortable with. So although you can certainly get free forex trading advice on forex forums, you might want to be cautious in how you use it.

One of the best uses for a forex trading forum is to search for recommendations and reviews of products and services. For example if you are thinking of signing up with a particular broker or buying a certain forex robot, you can check the forums for feedback from other traders who have used that service.

This type of feedback can be very useful in helping you to decide whether a product is right for you, but again you will not necessarily want to take anybody’s word for anything. You may come across one person who has very strong views either for or against a product while you yourself might have a very different experience with that same product.

People are often very critical of a product that they could not figure out how to use, for example. You might find it easy to use and be very successful with it. On the other hand you will sometimes see glowing reviews from people who have used a product for a very short time and been lucky with it. Longer term the results might not be the same.

So remember that one person’s opinion is just that – it is not a universal truth. It is always best to gather responses from as many different people as possible when you are looking for free trading advice and reviews on a forex trading forum.

Knowing how to read a candlestick chart is essential for both stock trading and foreign currency trading. Candlesticks are a record of price movements that can help a trader to identify trends and spot upcoming breakouts and reversals or retracements. Many traders are able to develop profitable trading systems almost entirely on the basis of candlestick charts, and many more systems rely on them as a first or primary signal.

The chart is made up of a series of blocks or candles, each one showing the open, close, high and low prices over a period. These can be prices of anything: stocks, commodities, currencies or whatever. The open and close prices may be the prices for a day’s trading but in most cases you have control over the period and you can set your chart to show a candle for each hour, for 5 minutes or whatever. If you are designing systems around this type of chart you will probably want to check your signals over more than one time period before you open a trade.

If shown in monochrome, the candle will be unshaded or white for a price that rose during the period. In this case the open price is the bottom of the candle’s wide block and the close price is the top of the block. If the price fell during the period, the body of the candle will be shaded, either black or a color. In this case of course the upper edge of the body is the open price and the lower edge is the close.

In either case, the high during the period is the top of the vertical line or wick stretching upward from the top of the block. The low during the period is the bottom of the vertical line or wick running down from the bottom of the block.

Some charts these days are shown in two colors. You might have green or blue for a bullish period when the price was rising and red for a bearish period when the price was falling.

The beauty of candlesticks is that you can see the direction of price movements at a glance. Not only do you see whether the candle as a whole is above or below the previous one, but you can also tell by the colors whether it marked a reversal or a continuation of the trend.

Certain patterns are particularly important in learning how to read candlestick charts.

In some cases of course the open or close will be the high or the low. In that case you do not have a wick in one or both directions. If there is no wick in either direction, this is called a Marubozu pattern.

In another case, the opening and closing prices may have been the same. Then there is no candle body but only wicks stretching up and down from the horizontal line that marks the open and close. This is called a Doji pattern.

If the body of the candle is long with short or non existent wicks, close to Marubozu, this indicates a fairly steady movement, possibly part of a trend. The color of the candle will tell you whether it is an upward or downward movement.

On the other hand if the wicks are long and the body is short or non existent, more like the Doji pattern, this can indicate a choppy market with big fluctuations. Trend based trading will tend to be suspicious of Doji patterns, which may be a sign that the market is becoming unreliable.

Of course one candlestick by itself is not enough to form the basis of a trading decision. You will always look at a series of candles. For example, you can draw trend lines along the highest highs and lowest lows on candlestick charts. These will help you to identify whether a trend is forming, or if the lines are converging, whether a breakout may be expected. When you know how to read a candlestick chart you can base systems around these indications.

So you are putting in the time on your forex trading course currency trading training, but what is the number one secret to success in forex trading? What is it that forex traders need most of all if they are going to make money?

The answer is: consistency.

If you can be consistent in the face of a fast changing market and your own strong emotions, you have the best chance of making money in this crazy currency trading world. Being consistent means applying your system and your plan through everything, in every trade that you make.

Of course you need a good solid system to begin, and a plan that focuses on good risk management. Risk management is vital. The amount of risk can vary according to the system but it should never be more than 5% of your funds. 2% is better.

Having decided on your system and tested it thoroughly in a demo account, you should be confident that it is a good profitable system and will work for you. It is very important to have that confidence, so keep testing if you still have any doubts. Then you start to apply it, consistently. Sometimes you will have losses but it is important not to start doubting your system at that stage. Remind yourself that it works in the long term.

Take a look over your records if you need reassurance. Maybe you were recently having some very good runs with higher than expected profits. It is not surprising if you have a downturn after that. It is the long term that matters.

If you switch systems every time you have a few losses, you cannot hope to make money. The reason for this is simple. If you pull out every time you are down, you never give the system a chance to recover. You will probably switch to a system that has been performing well recently and then perhaps it will do badly when the market changes.

You could end up thinking that you are jinxed because every time you try something new, it starts to fail. But it is just because you are getting into a system when it is at the top and about to suffer a reversal. You would never do that with a single trade, and it is just as bad to do it with a system. In almost all cases you would have done better to stay with your original system.

If you are a person who tends to act on impulse, you will need to learn to change that habit through your currency trading training. Again using a demo account can help, but not if you treat it as a game. Use your demo trading to train yourself to be consistent in following a system instead of following your impulses and emotions.

Alternatively, you could use a forex trading robot which will apply your system with perfect consistency because it never suffers from impulses and emotion led trading. Of course you will need to set it up in a way that will make money, but once that is done, it will do exactly as it is told while you concentrate on your forex training course currency trading training to improve your own forex trading skills.