Among the many tools that technical traders utilize, none is more prized than Fibonacci retracements and extensions. By now, I’m sure that most traders are at least vaguely familiar with the origin of the Fibonacci sequence. If not, here is the quick version; mathematician Leonardo Fibonacci identified the sequence in the 13th century. He was actually trying to calculate how many rabbits he could breed when he discovered this sequence of numbers. Nonetheless, the Fibonacci sequence has become the basis for many applications in our society. Today we will be discussing how the Fibonacci sequence is utilized in various aspects of trading.

This sequence isn’t nearly as important as the mathematical relationship between the numbers in the sequence. The Fibonacci retracement numbers used in trading are derived by dividing the prior number in the sequence by the next number. For example: 61.8% is a very important number in the Fibonacci sequence for traders, 55/89 = 0. 6179 and hence you arrive at the Fibonacci retracement number of 61.8. There are other important Fibonacci retracement numbers and they are 38.2%, 50%, and 61.8%. These are the most common numbers used by traders.

Generally speaking, traders will draw a line from peak to trough, or trough to peak, depending on whether the market is moving up or down. They will then calculate where 38.2%, 50%, and 61.8% fall on that line drawn. These days though, nearly every charting program automatically calculates these Fibonacci retracement levels and inserts them for the trader.

There is no sound theoretical backdrop for why these numbers are so important in trading. Some traders feel that the Fibonacci retracement numbers are natural stopping points for price movement based upon trader emotion, while others believe that because of the widespread use of Fibonacci retracements the market responds as a self-fulfilling prophecy. In my trading days I have listened to countless arguments as to the legitimacy of the Fibonacci retracements system. There can be no doubt that the market, more often than not, tends to respect these lines. Of course, the reason they respect these lines is not entirely clear.

But does it really matter?

In my trading, I do not concern myself with the “whys” of Fibonacci retracements as it is unimportant to me. The facts are simple; the market typically pays close attention to these lines and therefore I pay close attention to the lines. In essence, it is a chicken and egg argument. I don’t care if the chicken came first, or the egg came first, I know that these lines are of importance and I regularly chart them.

The lines formed by the Fibonacci retracements are generally referred to as support and resistance. Support refers to the levels to the downside that the market moves, and resistance is the point where the price stops when moving upward.

Does the market always respect Fibonacci retracement price levels?

Unfortunately, the answer to this question is no. This is one of the confounding aspects of Fibonacci trading. While the market often, even usually, respects the price levels of the sequence, there are times when the market blasts through the support and resistance line as if they were not even there. So often times the trader is forced to decide whether the market is actually trading through the resistance levels or going to honor the resistance levels. It can be a tough call, at times. By and large though, the market pauses (at the very least) at the Fibonacci levels.

In summary, we have looked at the way the Fibonacci sequence was discovered in learn how to calculate the Fibonacci retracement levels. Generally speaking, these levels represent support and resistance when they are drawn from peak to trough, or trough to peak. It is unclear exactly why Fibonacci retracements function as they do, but they function with enough frequency that they draw the attention of most traders, especially technical traders.

- About the Author: Sign up for our free daily e-mini instructional videos and get a feel for the method and techniques the E-mini Trading Professor employs. The videos are free and there is no obligation so click here and start learning immediately. You can learn to day trade emini contracts at an affordable price using time-tested techniques that give potential traders an excellent chance for success. Article Source

Where do you start? Charts or methods or do you buy a DIY package or attend seminars? All this was enough to put me off before I even started! So if you are in the same boat as I was then don’t panic! There are experts telling you what do to do and how to do it, theres loads of free info to read so lets start with the first do’s and donts of forex trading..

1)      Get some help! Learning from a successful trader can only help make you a better trader. Books and programs are good if you have the basics under your belt.

2)      Never start trading with your money use demo accounts, for example Forex Automoney is a trading platform that provides training and a demo account for you to practise on BEFORE you actually put any money on the markets. An estimated 90% of new starters fail to make a success of trading as they do not practise and learn the basics.

3)      Learn to manage risk. Do not use more than 1-2% of the capital in your trading account, big trades can mean big profits but also can mean big losses. Money management is the key to long term success in forex trading.

4)      Learn your methods well. New traders often are quick at placing trades but when they start making a loss do not get out! Apply methods strictly.

5)      Trading can be very exciting however it is necessary to keep calm and have a disciplined approach rather than get carried away with emotion.

Although the starting period for new traders may not yield life changing profits instantly, many traders have built a steady and successful income.

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- About the Author:

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I always believed that no system worth its salt can ever shatter me, having been there, done all at Forex myself. But, surprisingly, Forex Kagi is like a breathe of fresh air; that will sweep the Forex Traders off their feet and show them sure fire strategies that will minimize losses and maximize returns.

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- About the Author: www.businesstools.tk Article Source

Every trader has one primary goal; to trade. It is natural for a trader to be excited and enthusiastic about the prospects of trading his account. After all, it’s our job to trade. But one of the toughest lessons to learn in trading is when to trade and when not to trade. On certain days, even the poorest set up looks like a good trades and the trader is tempted to initiate a shaky trade.

Over trading is a problem that many novice traders suffer.  All setups are not created equal, and taking every set up that looks even marginally good can result in excessive losses. Of course, your futures broker will love you because you will pile up commissions at a record pace. As traders though, our job is to find high probability trades and ignore low probability trades. This skill is learned through study, experience, and proper mentoring.

Initiating a trade is done with the expectation of making money. It is the very reason we engage in trading activity. But one emotion, greed, can lead us to take temporary leave of our senses (or encounter temporary insanity, as it were) and begin trading at an excessive rate. Generally speaking, this behavior is called chasing the market. When you find yourself in this state, especially at the beginning of your career, it’s best to simply shut the computer off and study the trades you made throughout the course of the day. You’ll find that you entered trades with poor setups in the hopes the trade might go your way. More accurately, you entered the trade hoping you would get lucky and make some money.

And that’s the problem.

The desire to make lots of money and trading do not necessarily go hand-in-hand. When a novice trader is over trading, he or she is generally not giving proper consideration to the dynamics of the setup presented to them. In essence, they enter trades and hope it works out. That’s no way to trade, and experience will eventually teach them that you cannot trade on hold. Trading is a skilled profession, and properly evaluating every trade set up is the hallmark of a professional trader, of a profitable trader, too.

I trade using a scalping style which is a process where I take small chunks of profit in an ongoing trend, either an upward trend or a downward trend. Since I trade in this style, I make more trades than a trader who employs a buy and hold technique. On an average day, I may make 5 to 8 trades. There may be 25 potential trading opportunities that I evaluate, and approximately 20 of those opportunities I dismiss as low probability trades. This is the process that novice traders struggle mightily with. Without proper study and training, novice traders drive themselves nearly crazy in an attempt to find the sweet spot in profitable trading. Yet there are telltale signs that indicate trades that have a high probability of success and learning to spot those anomalies is the hallmark of an experienced trader.

Experienced traders don’t chase the market. They let the market come to them, and they never over trade their account. My mentor once told me, “You never lose money on a trade you don’t take.” That adage has stuck with me for many years, and if I am not confident in the probability of a trade I will generally pass on the trade rather than enter a trade and hope for the best. Profitable trading is not built on hope; it is the process of evaluating the probability of success in a given trading situation. You don’t guess or hope a trade comes to fruition.

In summary, if you find yourself consistently making more than 10 trades a day you are over trading your account. Granted, there may be the day when 10 bona fide trading opportunities occur, but those days are far and few between. Learn to evaluate your trades carefully and weed out the low probability trades in favor of only high probability trades. Your trading success and profitability will increase immeasurably.

- About the Author: I am a long time retail and institutional trader who now only trades part time, usually in the morning. I enjoy writing informational articles about my style of trading so others may benefit. Would it be convenient to recieve valuable trading tips every night in your email? You can sign up for our free video series by Clicking here These videos contain advanced trading strategies and will enhance your trading knowledge immeasurably. Best of all, they are free! So get your free videos and start trading like the pros. Article Source

If you missed the latest news, Forex Avalanche launched just yesterday and is already a “massive” hit.

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As you already know, this brand new year is bringing some important news for trading Forex…

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OBJECTIVITY

Yes, to rake in tens of thousands of Forex profits quickly and easily, as I do, you MUST be able to remove all emotion and trade objectively and strategically.

But wait, you ask, how can we possibly remove ALL emotion from our thoughts and decisions? We’re only human, right?!

Great question!

Because the answer is…. WE CAN’T.

We, as human beings, are primed to base our decisions and reasoning to a certain degree on emotion. We experience fear, excitement, joy, rage, you name it, and all of these turbulent feelings affect everything we do.

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Article Source:http://www.articlesbase.com/day-trading-articles/forex-avalanche-is-a-smash-hit-1676735.html

Stop loss orders are great insurance policies that cost you nothing and can save you a fortune. They are used to sell or buy at a specified price and greatly reduce the risk you take when you buy or sell a futures contract. Stop loss orders will automatically execute when the price specified is hit, and can take the emotion out of a buy or sell decision by setting a cap on the amount you are willing to lose in a trade that has gone against you. Stop loss orders don’t guarantee against losses but they drastically reduce risk by limiting potential losses.

With my system the only stop I use is what I call an emergency stop. My stop loss is automatically made when I make my initial trade at two points. It is only for emergencies, like news I wasn’t expecting, or anything that will make the market gyrate drastically and I never enter a trade without it. However I never expect to use this stop loss to exit my trade. I simply will not let the market move against my trade entry more than a tick or two. If I find that I exited the trade too soon I just reenter the trade but if the trade continues to move against me I have saved the loss of one or two points per. contract. Usually I will only have to exit and reenter a trade one time if I have entered a trade to early. This means I only lose a small commission per contract instead of fifty dollars per point- per contract, when trading the e-mini, and taking what many considera normal loss.

Trading the futures markets is a challenging but profitable opportunity for educated and experienced traders. However it is not easy, without a great trading system, and even traders with years of experience still incur losses. Finding a good trading system and trading in small increments with an emergency stop loss in place will allow those relatively new to futures trading to be successful. Once you have learned the skills you need to trade with consistent profits it will not be a problem but until that time it is absolutely critical that you do not take unnecessary losses. If you are new to trading futures you should never trade until you have a mentor with a trading system that gives you consistent profits.

A great way to protect profits if you have not established an exit strategy is the trailing stop. The trailing stop loss is an order that is entered once you enter your trade. Your stop price moves at a specified distance behind the market price. Trailing stops are raised when a price rises, in a long trade, but will remain stationary when it falls. Trailing will only occur when the market price moves in favor of the trade to which the order is attached. The trailing stop order is similar to the stop loss order, but you use it to protect a profit, as opposed to protect against losses. Trailing stops are designed to lock in profit levels and they literally trail along your increasing profit and adjust your stop loss levels accordingly. Often traders will find tailing stops confusing because they change them while in an open position. This is not a wise practice, and should be avoided. It is an indication that you are not sure of your trade and if one is not sure of a trade it would be wise to exit immediately. Trailing stops are ideal because they allow for further profit potential to enter due to momentum, while limiting risk. Trailing stops are an important component to a trader’s risk management unless they have an exit strategy in their system that might serve them better.

The market order is the simplest and quickest way to get your order filled to enter a trade or to use as a stop loss. A market order is a trade executed at the current market price and they are often used to exit trades to ensure that the order has the best possible chance of execution. A market order to exit is simply an order used to exit the trade immediately. Be aware that in a fast-changing market sometimes there is a disparity between the price when the market order is given and the actual price when it is filled.

Stop loss orders are used to exit trades, and are always used to limit the amount of loss, but some day traders use them as their only exit, while other traders use them as a backup exit only. If one uses them as their exit they will risk more than is necessary and might want to find a better system to trade. Stop loss orders allow you to define your risks before you open a position and in my opinion that risk should be minimal. Stop loss orders are one of the easiest ways to increase your chances of survival when trading commodities and futures and they are a powerful risk-management tool.

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