Commodity Channel Index

When watching the CCI in relation to the current price, it is useful to watch for new highs and lows. If the price of the forex trading market is reaching new highs and the CCI is not reaching new highs, a price correction may be coming.

The CCI typically ranges in value-100 to +100. Values above this range indicate that the particular forex market may be becoming overbought; values below this range indicate it may be becoming oversold. As with other overbought/oversold indicators, this can often mean the price will correct to more typical levels.

Force Index

A negative Force Index would then signal that "the bears are in control." If the Index remains close to zero neither side has control and no strong trends exist.

The greater the distance from zero, the stronger the signal. If the Force Index flattens out it indicates that either volumes are falling or large volumes have failed to significantly move prices. Either situation is likely to precede a reversal.

Ichimoku Kinko Hyo

Ichimoku Kinko Hyo was made with the thought in mind that the market price movement was determined by time span instead of by the range of prices. That is, in Ichimoku the subject of a market price movement is defined by time to the last, and a price is a result.

STANDARD LINE = (High for the last 26 business days + Low for the last 26 business days) / 2.  The most important idea of the standard line (Std line) is not o nly where it is plotted in the chart, but also where it points.

TURNING LINE = (High for the last 9 business days + Low for the last 9 business days) / 2. Turning line shows strength of a trend, coordinated with Std line. Remarkable characteristic is to become a support line when a trend forms extensive phase.

SPAN is composed of Leading Upside / Downside. Leading upside is a price continuation of mid prices between standard line and turning line shifted forward by 26 business days. Leading downside is a price continuation of mid prices between the last 52-days high and low shifted forward by 26 business days. Usage for span is expectation from past price fluctuation / trade activity, which determines future prices to some extents.

 
DELAYED LINE emphasized simplification of no calculation but it never can be disregarded. It consists of a price continuation of closing prices just shifted backward by 26 business day.

The space between precedence SPAN 1 and precedence SPAN 2 is called clouds (or a support belt, a resistance belt).

Dealing Signals:

Many analysis methods are shown in Ichimoku. Below signals are basic:

 If a STANDARD LINE is under a TURNING LINE and a market price is in a rise trend and if a STANDARD LINE is over a TURNING LINE, a market price is in a downward trend.

 If a TURNING LINE across over STANDARD LINE from down side to upper side, then buying signal. And if reverse, it is selling signal.

 If DELAYED LINE across over the day price chat from down side to upper side in the term between today and the 26-day past, then buying signal. And if reverse, it is selling signal.

 The point which precedence SPAN 1 and precedence SPAN 2 cross is called change day, and it regards as the turning point of a market price.

 When clouds are located below a price, it regards that a market price is in a rise trend.

 When clouds are located above a price, it regards that a market price is in a downward trend.

 It regards that support (resistance) is strong, if clouds are thick.

 If the closing price goes through clouds to the upper side, it is a buying signal. If the closing price goes through clouds to the down side, it is a selling signal.

About forex

The purpose of this article is to introduce the Forex market to those who have little clue about. As with many markets there are many derivative of the central market such as Futures, Options and Forwards. In this article we will only be discussing the Forex Market. The word FOREX is derived from the words “Foreign Exchange” and is the largest financial market in the world. Unlike many markets the Forex Market is open 24 hours per day and has an estimated $1.3 trillion in turnover every day. This tends to lead to a very liquid market and thus a desirable market to trade because the volume is always there. Unlike many other securities the Forex Market does not have a fixed exchange. It is primarily traded through financial institutions, banks, brokers, dealers and private individuals. Trades are executed through phone and increasingly through the Internet. It is only in the last few years that the smaller investor has been able to gain access to this market. Previously the large amounts of deposits required precluded the smaller investors. With the advantage of the Internet and growing competition it is now easily within the reach of most investors.

The Foreign Exchange Market owes its existence to the 1971 abandonment of the Bretton Woods accord and the subsequent unwinding of the regime of universal fixed exchange rates.

Although currency trading is inherently governmental (central banks) and institutional (commercial and investment banks), the Foreign Exchange market is also the province of non-banking international corporations, hedge funds and individual private investors and speculators. Technological innovations like the Internet have made it available for private investors to monitor currency markets and to trade via intermediaries (Forex Brokers). The Forex Market is very attractive for private investors because : 1. They can trade 24 hours, 5 days a week with continuous access to global dealers just using an Internet connection or a phone; 2. The “playground” is an enormous liquid market making it easy to exchange most currencies; 3. The market volatility leads to large profits in a very short time (e.g.: +USD 300 / 20 minutes trading session); 4. Leveraged trading with low margin requirements; 5. No commission taken by the Forex Brokers. The Forex trading instruments are margin products, which means that your investment exposure can be a multiple of the cash that you lay down.

Margin enables traders to trade in markets with high minimum units of trading and enhances the profit rate. Forex is still a relatively unknown territory and most investors are afraid of investing in it.

It is true that it is the most dangerous trading market. Advantages come with disadvantages. And so with Forex Trading.

Technical indicators

Relative Strength Index (RSI):

The RSI measures the ratio of up-moves to down-moves and normalizes the calculation so that the index is expressed in a range of 0-100. If the RSI is 70 or greater, then the instrument is assumed to be overbought (a situation in which prices have risen more than market expectations). An RSI of 30 or less is taken as a signal that the instrument may be oversold (a situation in which prices have fallen more than the market expectations).

Stochastic oscillator:

This is used to indicate overbought/oversold conditions on a scale of 0-100%. The indicator is based on the observation that in a strong up trend, period closing prices tend to concentrate in the higher part of the period's range. Conversely, as prices fall in a strong down trend, closing prices tend to be near to the extreme low of the period range. Stochastic calculations produce two lines, %K and %D that are used to indicate overbought/oversold areas of a chart. Divergence between the stochastic lines and the price action of the underlying instrument gives a powerful trading signal.

Moving Average Convergence Divergence (MACD):

This indicator involves plotting two momentum lines. The MACD line is the difference between two exponential moving averages and the signal or trigger line, which is an exponential moving average of the difference. If the MACD and trigger lines cross, then this is taken as a signal that a change in the trend is likely.

Number theory:

Fibonacci numbers: The Fibonacci number sequence (1,1,2,3,5,8,13,21,34...) is constructed by adding the first two numbers to arrive at the third. The ratio of any number to the next larger number is 62%, which is a popular Fibonacci retracement number. The inverse of 62%, which is 38%, is also used as a Fibonacci retracement number.

Gann numbers:

W.D. Gann was a stock and a commodity trader working in the '50s who reputedly made over $50 million in the markets. He made his fortune using methods that he developed for trading instruments based on relationships between price movement and time, known as time/price equivalents. There is no easy explanation for Gann's methods, but in essence he used angles in charts to determine support and resistance areas and predict the times of future trend changes. He also used lines in charts to predict support and resistance areas.

Waves

Elliott wave theory: The Elliott wave theory is an approach to market analysis that is based on repetitive wave patterns and the Fibonacci number sequence. An ideal Elliott wave patterns shows a five-wave advance followed by a three-wave decline.

Gaps

Gaps are spaces left on the bar chart where no trading has taken place. An up gap is formed when the lowest price on a trading day is higher than the highest high of the previous day. A down gap is formed when the highest price of the day is lower than the lowest price of the prior day. An up gap is usually a sign of market strength, while a down gap is a sign of market weakness. A breakaway gap is a price gap that forms on the completion of an important price pattern. It usually signals the beginning of an important price move. A runaway gap is a price gap that usually occurs around the mid-point of an important market trend. For that reason, it is also called a measuring gap. An exhaustion gap is a price gap that occurs at the end of an important trend and signals that the trend is ending.

Trends

A trend refers to the direction of prices. The breaking of a trend line usually signals a trend reversal. Horizontal peaks and troughs characterize a trading range. Moving averages are used to smooth price information in order to confirm trends and support and resistance levels. They are also useful in deciding on a trading strategy, particularly in futures trading or a market with a strong up or down trend.