FXDD

PROS

- Allows Microtrading if you email them

- Fixed spreads (2pips for EUR/USD)

- Able to fill orders during volatile market

- Fast execution

CONS

- Spreads quite high (2pips for EUR/USD) but reasonable

-Cannot place orders on weekends

Conclusion

This is the best broker so far due to the fast execution and fixed spreads which is quite useful during the peak periods.

The only IMPORTANT chart patterns

SYMMETRICAL TRIANGLE

ASCENDING TRIANGLE

DESCENDING TRIANGLE

DOUBLE TOP

DOUBLE BOTTOM

HEAD AND SHOULDERS

REVERSE HEAD AND SHOULDERS

Stochastic Oscillator

In currencies we mainly use the Stochastic Oscillator on the 15 and 60 minute charts.

Normally, traders use two stochastic oscillator indicators to assess future variations in prices.

The two Stochastics indicator lines:

%K – Is the main line and is usually displayed as a solid line
%D – Is simply a moving average of the %K and is usually displayed as a dotted line.

Comparisons of these statistics are a good indicator of speed at which prices are changing. Ordinarily, the %K line will change direction before the %D line. However, when the %D line changes direction prior to the %K line, a slow and steady reversal is usually indicated. When both %K and %D change direction, and the faster %K line subsequently changes direction to retest a crossing of %D line, but doesn't cross it, this is a good confirmation of the stability of the prior reversal.

Currently, traders usually use the following two well known methods to make buy/sell decisions using Stochastics indicators (%K and %D):

The first method involves crossing of %K and %D signals. Analysts argue that %D can act as a trigger or signal line for %K. A buy signal can be identified when %K crosses up through %D, or a sell signal when it crosses down through %D. However, in real trading, such crossovers can occur too often. In order to avoid repeated whipsaws we can wait signal confirmation, for example, crossovers occurring together with an overbought/oversold pullback, or a peak or trough in the %D line appears. In the case that the price volatility is high, we can use simple moving average of the Stoch %D indicator to smooth out rapid fluctuations in price instead.

The second method involves basing buy and sell decisions on the assumption that %K and %D oscillate. Note that in general, %K or %D levels above 80 and below 20 can be interpreted as overbought or oversold. Therefore, for higher possibility of winning, it is recommended that buying and selling be timed to the return back from these thresholds. That means we should buy or sell after a bit of a reversal. Let phrase it in more meaningful statement: once the price exceeds one of these thresholds, we should wait for prices to return back through those thresholds to make buy/sell decisions (for example, if the oscillator were to go below 20, we should wait until it rises a little bit above 20 to start buying, if the oscillator were to go above 80, we waits until it falls below 80 to sell).

Use Stochastics in Trending market

The key is when the market is trending up, we will look for oversold conditions (when the Stochastics fall below the oversold level (below 20) and rises back above the same level) to get ready to trade, and in the same way, when the market is trending down we will only look for overbought conditions (when the Stochastics rise above the overbought level (above 80) and falls back below the same level.

Use Stochastic in Trend-less market 

Buy when %K falls below the oversold level (below 20) and rises back above the same level.
Sell when %K rises above the overbought level (above 80) and falls back below the same level.

Remember that if we use Stochastic in combination with other signals, it would be more accurate. After having a good combination, other steps should also be taken, e.g, money management strategies, testing before we can stick to the method.

FIBONACCI RETRACEMENT LEVELS

Trading with Fibonacci is one of the best method. It does not lag like other technical indicators as it is based mainly on price action. It is also very easy.

For normal trends, price will usually retrace to 3 levels: 78.4, 61.8 and 50.

For strong trends, price may just retrace to 38.2 and continue its trend.

Draw FIB lines on 4H charts, if there is no trend in 4H chart, I can move down to the 1H chart. But I will try not to use lower TFs as it may not be as accurate.

Draw the FIB of the last trend from peak to bottom. Remember to draw from left to right. So in an uptrend, we start from the low and draw to the high. And vice versa for downtrend, start from the high to the low.

From the image, I have drawn from the low to high. Price has retraced to the 61.8 level. As you can see the next candle is a long candle. (confirmation candle)

A morning star pattern is formed. Which shows a bullish reversal. 

I would have placed a long trade at the open of the candle after the confirmation candle which confirms the morning star. 

The trade is already positive 10 pips for me. If price retrace at 61.8 level, expectations will be for price to climb up to the 161 level. From this setup I am aiming for a 150pips.

My stop loss will be below the 78.4 level. Thus I am only risking 30 pips to gain 150pips.

So let me recap how I trade using FIBONACCI.

FIRST, I draw the FIB level from LEFT to RIGHT.

NEXT, I see a bounce on one of the 3 FIB retracement levels.

THEN, I will confirm the bounce, using a confirmation candle which is usually the immediate candle after the one that hit the retracement level.

FINALLY, I confirm a reversal candle pattern on the chart.

I THEN PLACE A TRADE AT THE OPEN OF THE CANDLE AFTER THE CONFIRMATION CANDLE.

This sound easy, but of coz there may be failures too. So it all depends on money management. I must be careful. 

THE SUPER BASICs OF FOREX

1. Currency pairs
The forex market is almost similar to the stock market. Instead of buying shares, you buy or sell currency pairs in FX (short form for Foreign exchange).

Currencies are traded in pairs, the 4 main pairs that are the most active are:
EUR/USD
GBP/USD
USD/JPY
USD/CHF

Each currency pair is made up of a base currency and a quote currency.
The base currency is the first currency and this is being bought or sold using the quote currency.
Currency pairs are traded in lots or mini lots.

1 lot is 100,000 units, while 1 minilot is 10,000 units

When you buy 1 lot of EUR/USD quoted at 1.4000, you are buying 1 lot of Euro dollars (100,000 Euro dollars) using 1.4000*100,000= 140,000 US dollars.


2. What is PIP
In the Forex market, prices are quoted in pips. Pip stands for "percentage in point" and is the smallest unit for price change. For most currency pairs, 1 pip is the 4th decimal place except the USD/JPY pair where 1 pip is the 2nd decimal place.

When you trade 1 lot of EUR/USD, 1 pip gain in price equals 100,000 * 0.0001 = USD 10 gain
When you trade 1 minilot of EUR/USD, 1 pip gain in price equals 10,000 * 0.0001 = USD1 gain


3. What is spread
Currency pairs’ quotes consist of a 'bid' and 'ask':
The 'bid' is the price at which you can sell the base currency
The 'ask' is the price at which you can buy the base currency
Spread is the difference between the ‘bid’ and ‘ask’ price.
In EUR/USD, a 2 pip spread is quoted as 1.2500/1.2502

The broker earns money from this spread instead of charging commissions.


4. LONG and SHORT
When you buy a currency pair, you are going long on the currency pair, when you sell a currency pair you are going short.


5. Technical Analysis
Using technical indicators like Stochastics, moving average to identify patterns in the market.


6. Candle stick charts
It is one of the most commonly used chart. If the price closes higher than previously, the candle will be green colour. If the price closes lower than previously, the candle will be red.


7. How to earn so much with so little capital?
The answer lies in LEVERAGE. Leverage enables you to hold a position worth up to 100 times more than your margin deposit. For example, a USD 2,000 deposit can command positions of up to USD 200,000 through leverage.

My main forex system

The main system that I used is based on Fibonnacci, Support/Resistance and Price action.

So what I do is to start from 4H TF chart and draw fibonnacci lines of the latest trend before a reversal. ( I will post Pics of what I mean soon )

E.g If price was going up and hit a peak, then it starts to go downwards, I will draw my fib lines based on the uptrend.

I will then draw many trend lines connecting the peaks and bottoms.

When I see trend line intersect with FIB line and S/R, it is a strong sign of a bounce upwards. I will always protect my profit at 20pips regardless if price will continue to go up.

If 20pips is hit, and price starts to go down, close trade. I can always enter again at a better price.

From my experience, when price retrace to 78 level, it will bounce first to 38 level and go back to bounce from 50/61 level. Sometimes on smaller TF like 5min, the price may even go back to 78 level before its trend continuation.

It is easier to trade on 1H chart, but if one cannot bear drawdowns psychologically, then it is safer for one to trade on 5min chart.

about this blog

I created this blog to record my trades so that I can understand better why certain trades work and why others don't. This will be my trading journal.

I am an Intraday trader, my favourite pair is the EUR/USD as it is the most stable currency pair. While the GBP/JPY would give the highest returns but the risks involved are too high too.

I have lost money when I started live trading, now I have finally followed a system which generates steady income.

This is my Forex account-

BALANCE: $250

Target: $20, 000

Basically, I will be doubling my account once a month.

So, it will look like this

$250, $500, $1000, $2000, $4000, $8000, $15000, $20000.

It should take 7 months to achieve this.