An inside bar is easy to identify, it is simply a bar where:
- The high is lower than the previous bars high.
- The low is higher than the previous bars low.

An inside bar can indicate the following:
- Consolidation – The market is taking a breather before moving on in the direction indicated by the previous bar.
- Indecision – The market does not make new highs or lows because it is unsure of the direction it wants to go.

Studies have found the following results following inside bars:
- Very little movement in the market for the following two days if the previous bar is not a strong bar.
- If the inside bar follows a strong UP or DOWN bar there can be significant statistical results can often be found for the following 2 – 3 days.

2. Programming trading software (like WealthLab) to trade a Forex system. You will need some programming skills to do this (or know someone who does), but if you have a good mechanical trading system this is a good option.

- No need to rollover contracts
- Futures contracts are generally for large dollar amounts, a Forex mini trading account will allow you to trade just $10,000 of currency
- The spot Forex market offers up to 200:1 leverage

- The spot Forex market is more liquid than futures
- Interest is calculated daily, not in the contract price
- Many brokers offer more currency pairs than they do futures

If you’re taxed in the U.S. it is possible to make a tax election so that your spot Forex trades receive the same concessional treatment as futures trades do.

If you’re familiar with trading commodities, it will not take you long to learn how spot Forex works, many Forex brokers offer free practise accounts so you can learn how it all works before putting any money on the line.

To read more articles on learn Forex currency trading online click here.

The best time to trade the Forex market is when there is plenty of action and a large volume of trades, during these times currencies make their big moves providing the Forex trader with opportunities to profit.

There are several major Forex trading sessions, these are; New York, London, Sydney and Tokyo. The biggest currency moves and volume generally occur when two of these markets overlap.

The Forex Trading Hours are therefore (in EST);
New York / London – 8:00 am – 12:00 noon
Sydney / Tokyo – 7:00 pm – 2:00 am
London / Tokyo – 3:00 am – 4:00 am

The most active currency pairs in these hours are as follows;
New York/London
- EUR/USD
- USD/CHF
- GBP/USD
Tokyo/Sydney
- EUR/JPY
- AUD/USD
- USD/JPY
- AUD/JPY

Using this information you can determine which currency pairs should be traded for each trading session to maximize your chance of finding profitable trades.

The most active days for trading Forex are: Tuesday, Wednesday and Thursday. The Sunday opening and Monday are generally low volume days as traders are using the time to analyze the market and determine strategies for the coming week. Friday can also be a low volume day with most trading completed before noon, as traders close positions and knock-off for the weekend.

If you would like to be able to manipulate the charts yourself or you are looking for a real time foreign currency exchange rate the cheapest option is to open a free currency demo trading account. Most Forex brokers offer a free demo account with real time data and a certain amount of historical data. My favorite Forex software is Meta Trader 4 and best of all it’s free. Here are some of the advantages I’ve found:

- Meta Trader 4 is very popular, this means it is offered by a huge range of Forex brokers.
- There is a huge range of custom indicators and expert advisor’s available.
- Meta Trader 4 contains a very comprehensive list of built in technical indicators.
- Unlike E-signal each time you load a chart in Meta Trader 4 new data is added with no historical data taken away.
- Easy to use and with so many people using it help should not be hard to find.

Good luck with your search for free Forex charts, fortunately with so many Forex brokers offering currency demo trading accounts you should find what you need.

This tremendous liquidity together with the availability of different currency pairs can result in a high level of volatility on a day-to-day basis. Forex markets are also highly affected by financial news releases which are relatively frequent and can bring about huge swings in the value of a currency. These fluctuations in price give traders opportunity to profit. Forex markets offer investors the ability to profit in both rising and falling markets. With a wide range of instruments to trade and highly leveraged trading, it is possible to begin trading Forex with a very small account.

Most of the instruments traded on the Forex market have a minimum trade size, calculated on the base currency, a common minimum trade size is 100,000 units, for this reason the use of leverage is essential for traders. Many Forex brokers offer mini accounts, where traders are able to place trades with a minimum size of 10,000 units.

Currencies are always priced in pairs, with each trade resulting in the purchase of one currency and the sale of another. If the currency you are buying increases in value relative to the currency you are selling, you will make money. The first currency in a pair is the base currency and the second is the counter or quote currency.

Forex quotes include two prices, a bid and an ask price. The bid price is the price at which you can sell the base currency in exchange for the counter currency. The ask price is the price at which you can buy the base currency in exchange for the counter currency. There is always a gap between the two prices, referred to as the spread. You can calculate the spread by looking at the last two numbers in the bid and ask prices, for example if the prices are 1.8967 / 1.8971, the spread is 4 pips, so the trade would need to move in your favor by 4 pips for you to break-even.

Margin in Forex is a deposit taken from the trader’s account to cover any future trading losses. The margin required is calculated automatically by your Forex broker before the trade is placed. Your Forex broker will generally close all positions held if the trade turns against you and your trading losses are close to emptying your account.

If you hold a currency pair overnight, you will be charged or paid the difference between the two interest rates of the currencies you are holding. Your interest will be calculated each day as part of the rollover process. If you don’t hold a position overnight you will not pay or receive any interest.

Trading in Forex can be quite similar to trading other instruments but does require a slightly different way of thinking. The best way to learn how it all works is to open a currency trading demo account and start experimenting with placing trades. The high level of leverage available to Forex traders can bring great opportunities but also has the potential to bring significant risk. Before trading with any real money traders need to have a money management plan to ensure the decisions they make are appropriate for their account balance.

The goal of a Forex scalper is to buy or short a pair of currency at the bid or ask price and then sell quickly when the trade is in profit by a few pips. Using this trading strategy of taking a few pips out of the Forex market at a time, can easily compound into large gains as long as a strict exit strategy is used to prevent losing trades absorbing all profits.

Generally Forex scalpers use the 1 min, 5 min and hourly charts to find trades that can make them a small profit. As the Forex scalper is only interested in making a few pips per trade it is essential to use a broker with low spreads and instant execution of trades.

A few things that can improve your chances of being successful as a Forex scalper are:

- Make sure you know when news relevant to your currency pair is coming out.
- Write down the previous days Open, High, Low and Close.
- Learn some basic candlestick patterns so you can identify them when they occur.
- Draw in major trendlines and pivot points on the daily and hourly charts of your currency.
- Determine the major direction for the day, Bullish or Bearish, trading in the longer term direction will gives trades more chance of being successful.
- Adjust your stop when you are 10 pips in profit.
- If the trade is taking to long to go in your direction or you don’t feel comfortable with it, get out.

One advantage of Forex scalping is that the small targets of 5-15 pips are easier to achieve. One of the frustrations Forex traders have is when the trend reverses during a trade, because Forex scalper’s get in and out of the market quickly this is less likely to happen. Many people have been successful with Forex scalping, so there is proof that it can be a profitable Forex trading method. A disadvantage is that the risk to reward ratio can be very low. As the profit per trade is so low, one bad trade can wipe out all the profits for a day. This means it is especially important to set and move a stop loss.

There are a couple of traps that new Forex traders fall into when they begin Forex scalping. They may become addicted to making random profits, especially if they are immediately successful. This can lead to the trader taking more risky trades and not sticking to their plan. A second trap is trying to make up for the losses of yesterday. New traders often think about how they can win back the money they lost a previous day, this tends to cloud their judgment and can lead to emotional trades that are doomed for failure.

No form of investment is guaranteed to make money and Forex is not an exception. As a matter of fact due to the amount of leverage available to traders and investors in the Forex market, greed can easily take over and all commonsense is thrown out the window. Experienced investors and Forex traders realize that some of their trades, even up to half of their trades, will lose money. The reason why they are successful is that they have a good money management plan so when they do lose, it doesn’t wipe out their portfolio.

In any Forex trading method, there will be a drawdown. The problem is, we don’t know when the drawdown will begin. If a Forex trading method proves it is 80% successful, that means approximately 20 out of every 100 trades won’t be successful. If those 20 trades all happened in a row (yes, it can happen!) your account could be completely wiped out if you are not using sensible money management and you wouldn’t be able to keep trading the method for the next 80 potentially profitable trades.

Some aggressive Forex traders argue that the best way to accumulate huge profits rapidly is to risk more of your money. While this may be true, it is also the fastest way to lose all your money and should really be thought of as gambling. There are many stories out there of those that made their first million trading Forex and then lost it. The most successful Forex traders and investors did not become rich fast, they took a slow and steady attitude and learnt to generate money trading Forex for the long-term.

An experienced Forex trader only risks a limited percentage of their investment money on each trade. The profits will not be as large as those of the aggressive trader, but when the drawdown comes, the Forex trader practicing sensible money management will be more prepared to survive the storm.

Sure, building up capital slowly is not an exciting plan. But, you’re in the Forex market to make consistent profits, not for the excitement. If you’re not using sensible money management when investing and trading the Forex market, you are downright gambling. Even professionals that make their living playing poker and other casino games use some sort of money management method. They realize that they can’t win every single tournament or game they enter, so they only risk a limited percentage of their bankroll on each one. This allows them to bounce back much more quickly when a losing run hits.

In conclusion, don’t allow the promise of making money rapidly let all commonsense be dismissed. Trading Forex is not a way to get rich rapidly, it’s an investment option that can make consistent profits for those who practice sensible money management.

When I first opened the Cracking the Forex Code e-book I was quite surprised that it was only 28 pages. Most e-books on the topic of forex have at least 100 pages. But, the point of the e-book is to teach easy forex trading methods not provide the whole history of the forex market and other topics that are not really relevant to explaining the method.

So, in order to use the Cracking the Forex Code e-book you do need to have a basic understanding of forex and how to enter and exit trades. These basics are taught by many brokers for free, so it’s not really a big deal they aren’t covered in the e-book. Customers that buy the Cracking the Forex Code e-book might even be happy that they can get through reading the e-book in an hour and don’t have to wade through stuff they already know.

I was a little annoyed when I got to the end of the e-book and found a great big ad for another forex e-book. If this forex method is supposed to make me a ton of money as the author claims, why would I need something else?

Fortunately though, the Cracking the Forex Code e-book comes with a 56 day no questions asked money back guarantee. So, you can pretty much try the system out risk-free. Or, so you think, internet reviews seem to suggest that e-mail requests for refunds or support are completely ignored.

Previous customers also seem to think that the author of Cracking the Forex Code is also the author of Blazing Forex System and Impact Forex System. All e-books that are not receiving good reviews from customers.

The first Cracking the Forex Code method uses 3 EMA’s, with the second method using 2 EMA’s and the parabolic star. You can find methods exceptionally similar to these on most forex forums. I wouldn’t be surprised at all if the author has copied a method from a forum or book and is now selling it as his own.

So is Cracking the Forex Code a scam? I guess it depends which way you look at it. For not living up to their promise of giving a no questions asked refund I would have to say yes, it’s a scam. It also seems pretty dishonest to me that the author has simply stolen this method and re-worked it into his own e-book.

Instead of buying Cracking the Forex Code, we recommend Forex Trading Machine. Forex Trading Machine receives good reviews from users and the methods taught in it are often spoken highly of among forex traders.

Obviously with $1.2 trillion being traded, the forex market is extremely liquid. This means that with a click of your mouse you can immediately buy and sell forex at the prevailing rate. You will never be caught holding currency you need to sell.

With the invention of the internet, trading forex has never been easier. As forex is such a highly traded market, there are a lot of brokers to choose from, offering various rates of commission (also referred to as spread) and trading platforms with different features. Most platforms will allow you to pre-enter buy and sell orders at your preferred price, along with stop loss (to minimize your loss if the trade goes against you) and profit target. Many firms also offer free ‘demo’ accounts. A demo account will allow you to practise your trading skills with virtual money before you put any real money at risk. Most brokers also offer real-time charts for forex and popular technical analysis tools.

A large advantage of trading forex is the amount of leverage that can be used with some firms offering as much as 200 to 1 leverage, allowing you to place a $10,000 trade with a $50 margin. The use of leverage can assist those with limited funds to trade large quantities on the forex market. A large number of brokers also offer ‘mini’ accounts allowing traders to place much smaller trades than standard accounts.

Forex trading also has the advantage that you can trade both sides of the market, you are able to enter trades both LONG (anticipating the market will go up) and SHORT (anticipating the market will go down).

The forex market is open 24 hours, closed only from Friday evening to Sunday evening. This means you will never be caught with opening/closing gap problems. The fact that the forex market is open 24 hours makes it a more accessible market for part-time traders as trades can be placed at a time that is practical for you.

The ICWR forex strategy is based on a combination of the Elliott Wave Theory and Fibonacci ratios. Traders have found that corrective waves have a inclination to retrace the preceding impulsive waves by a Fibonacci ratio.

So what are corrective waves? Corrective waves are short-term corrections that move against the long-term market trend. The major waves in in alignment with the long-term market are called impulsive waves. Bring up a chart of a major currency (say the GBP/USD) with the time frame set on daily and you will easily see the long-term trend, along with several corrective waves.

The most frequent Fibonacci ratios observed in the ICWR forex strategy are 25%, 38%, 50%, 61% and 75%.

Most traders use the ICWR forex strategy with an existing entry strategy to help refine their exit strategy to get out the maximum profit possible out of the trade. In fact many traders have found that managing a trade and determining the exit point is more important than choosing an entry point and direction to trade in.

The ICWR forex strategy is very easy to use. Simply bring up a chart of an interval you wish to trade, find the preceding impulsive wave (in the direction of the long-term trend) and compute the Fibonacci ratios. Now record the Fibonacci ratios on your chart. For example if the preceding impulsive wave UP was 100 pips, for the Fibonacci ratio of 25% you will place a line 25 pips below the high of the impulsive wave. Most charting packages come with a Fibonacci tool built in, calculating the ratios and drawing in lines for you.

These Fibonacci ratios can then be used in a number of ways:
- move your stop loss with every impulsive wave in your favor to maximize profit and minimize risk (the 75% ratio is usually used for this)
- determine when the corrective wave is likely to conclude in order to determine good entry points.

Traders often tend to despair when their trade is in profit and it starts to move against them. By using the ICWR forex strategy you will be ready to ride out the corrective waves in order to get out the maximum profit from your trades.

In other news the Bank of England’s (BoE) inflation report contributed to pressure on the GBP as the Forex market reduced its interest rate expectations. The BoE expects inflation to drop below the desired 2% annual CPI over the next 12 months. The GBP fell briefly as the inflation report was released, but quickly recovered to stabilize about 1.95.

Attention will soon turn to the USD as Forex Investors await Federal Reserve chairman Ben Bernanke’s testimony to Congress, which is expected to cause further weakness to the dollar. The Forex market is expecting Bernanke to suggest that inflation is stabilizing on recent news of retail sales only showing modest gains.

In this article, divided in 2 part, you’ll get a basic understanding of the different use of Technical Analysis in Forex Trading.

Pivot Point
Pivot points are frequently used by Forex traders as a means to calculate resistance and support levels which are, in turn, used as visual cues to execute trades. With the use of an arithmetic program (pivot point calculator), Forex traders will try to anticipate price movements.

As a technical analysis tool, pivot points have proven themselves to be far more effective in currency trading than equities markets. This is largely due to the fact that price movements in the trillion dollar foreign exchange market are not generally subject to the kinds of manipulation that stem from unforeseen insider trading, corporate mismanagement, misrepresentation, or the actions of institutional investors.

Basic Forex pivot point trading is based on two prevailing tendencies. If a day’s price action begins above the pivot point, prices will tend to stay above that point (fulcrum) until it reaches a resistance point. Conversely, if a day’s pricing action begins below the pivot point, the price will tend to stay below that point until it reaches a support point. A resistance level is a price that tends to prevent further upward movement. A support price is a price action point that tends to prevent further downward movement.

In its simplest form pivot point trading is based on these two tendencies and is also knows as “trading between the lines”. The most popular and hence the most successful form of pivot trading is based on reversals. Simply put, when price approaches a pivot above, a trader waits for a reversal at that point and sells. The opposite is true when price action is moving downward. The patient pivot trader waits for a bounce off the pivot of support and places an order to buy.

If the market opens or later trades at the extremes R2 or S2, pricing will exhibit a tendency to trade back toward the pivot point. Hence, traders tend to avoid buying high (at R2) or selling at the low (S2). The wisdom of this is even greater the further the price moves away from the day’s pivot point.

There are a number of formulas traders use to calculate resistance and support levels and they are based on a variety of factors but those based on price are the most popular if, for no other reason, they are the easiest to calculate. Pivot trading begins with the calculation of the pivot point which is an average of the previous day’s high, low and closing price. While the Forex is a 24 hour market, “closing” is generally defined as 5 p.m. EST which coincides with the closing of the New York Stock Exchange. However, traders use various closing times, 12 a.m. EST also being a popular reference point for calculations.

In the following formula “H” represents the previous day’s high, “L” represents the previous day’s low, and “C” represents the previous day’s closing price.

Pivot Point = (H+L+C)/3

Support & Resistance
Support and resistance levels are points where a chart experiences recurring upward or downward pressure. A support level is usually the low point in any chart pattern (hourly, weekly or annually), whereas a resistance level is the high or the peak point of the pattern. These points are identified as support and resistance when they show a tendency to reappear. It is best to buy/sell near support/resistance levels that are unlikely to be broken.

Once these levels are broken, they tend to become the opposite obstacle. Thus, in a rising market, a resistance level that is broken, could serve as a support for the upward trend, whereas in a falling market; once a support level is broken, it could turn into a resistance.

Once the day’s pivot point has been calculated, traders turn to the calculation of the initial resistance (R1) and support (S1) levels which assumes that trading will continue pretty much in the same range as the previous day.

Resistance Level 1 = (2*PP)-L
Support Level 1 = (2*PP)-H

A second set of resistance and support points, R2 and S2, are used in the event that the price breaks through the previous day’s trading range and continues until it meets a second higher level of resistance or lower level of support.

Resistance Level 2 = (PP-S1) + R1
Support Level 2 = PP – (R1 – S1)

Some traders attend to the calculation of extreme price fluctuations (R3, S3) but only a small minority of them actually trade on them because such price movements are a sure sign of volatility.

Resistance Level 3 = (PP-S2)+R2
Support Level 3 = PP – (R2-S2)

Some calculators also generate midpoints – trading levels that lie at the midpoint between R2 and R1, S2 and S1, R1 and PP, and finally S1 and PP. As long as trading ranges are not too narrow, these reference points hold the same relative importance as their paired resistance and support levels.

M1= (S2+S1)/2
M2= (S1+PP)/2
M3 = (R1+PP)/2
M4 = (R2+R1)/2

Fibonacci Retracement
Fibonacci retracement is a very popular tool among Forex technical traders and is based on the key numbers identified by mathematician Leonardo Fibonacci in the 13th century. However, Fibonacci’s sequence of numbers is not as important as the mathematical relationships, expressed as ratios, between the numbers in the series. In technical analysis, Fibonacci retracement is created by taking two extreme points (usually a major peak and trough) on a currency pair chart and dividing the vertical distance by the key Fibonacci ratios of 0%, 38.2%, 50%, 61.8%, 78.6% and 100%. Once these levels are identified, horizontal lines are drawn and used to identify possible support and resistance levels.

For reasons that are unclear, these ratios seem to play an important role in the Forex market, just as they do in nature, and can be used to determine critical points that cause the price to reverse. The direction of the prior trend is likely to continue once the price has retraced to one of the ratios listed above.

Trend Lines & Channels
Trend lines are a simple and widely used technical analysis construction drawn on the currency pairs charts in Forex trading.

A trend line is a bounding line for the price movement of a currency pair. The principal trendline is an upsloping line drawn through lower extremes of price that is in an up trend, or its mirror image, a downsloping line drawn through the upper extremes of the price action that is in a down trend.

The other, less widely used type of trendline is an upsloping line drawn through high extremes in an uptrend, or a down sloping line drawn through lower extremes in a downtrend.

Trend lines are used in many ways by traders. One way is that when price returns to an existing principal trendline it may be an opportunity to open new positions in the direction of the trend, in the belief that the trendline will hold and the trend will continue further. A second way is that when price action breaks through the principal trendline of an existing trend, it is evidence that the trend may be going to fail, and a trader may consider trading in the opposite direction to the existing trend, or exiting positions in the direction of the trend.

In the next part of our Technical analysis article, we’ll talk more about Moving Averages, MACD, Parabolic SAR, Stochastic Oscillator and Bollinger Bands.