Engulfing Patterns in Forex Trading

By Tim Barnby

Few things are more satisfying to me that bare chart trading. Ive seen traders with so many indicators on their screen that I could not even see the price of the currency pair. What do any of these indicators tell you anyway? Do I need a MACD or a CCI? I can see which direction the trend is moving without them. How about a stochastic? I can see where candles are closing relative to the high or low. Other than some horizontal lines at key support and resistance levels, some Fibonacci retracements, and trend lines I often have nothing on my charts at all. All of these are topics for future articles.

A bullish engulfing pattern is characterized by having a real body which completely engulfs the real body of the preceding candle. A simpler way of describing this is that the bullish engulfing candle has a higher open and a lower close than the preceding candle. A bearish engulfing candle has a lower open and a higher close than the bar immediately preceding it.

The bullish and bearish engulfing patterns are powerful indicators of a trend reversal. Engulfing patterns must appear after a significant run up or down in price to be considered valid. When the engulfing pattern presents itself at a probable price reversal zone, or a confluence of support or resistance it is even more reliable. My experience has shown these patterns to be over 75% reliable, and normally offer at least a two to one reward to risk ratio when traded on the one hour or four hour charts. They are even more reliable on the daily and weekly charts.

There are a couple of valid methods for trading engulfing patterns. The first is pretty basic. You place a market order at the close of the candle. Your stop loss order goes a few pips past the opposite side of the engulfing candle, and the target goes somewhere at least twice the distance of the stop loss. Using this method, if the engulfing candle has a 50 pip range, your stop loss would be about 55 pips and your target would be about 110 pips away from your entry. The more advanced method involves pulling a Fibonacci retracement tool on the engulfing candle. Place your entry order at the 38.2%, 50% or 61.8% Fibonacci level of the candle, and place the stop loss in the same position as the first method. This method gives you a smaller stop loss, which offers you a much high per pip value, and a bigger target. It has a lower rate of successful fills, so youll have fewer trades using this entry method.

No matter what your method of entry is, you will profit from trading these powerful reversal indicators. Youll also save yourself the stress of conflicting technical indicators and cluttered screens. Trade this pattern for a week and see if I am wrong. - 23218

About the Author:

For more information on Forex Trading, please come to the Market Mover Edge and look at our mentoring programs and live trading rooms. You can join my FREE forex signals list at Forex Master-Mind Newsletter

Mutual Fund Secrets

By Mike Swanson

Many people are wary about making investments in times like these, mostly because they don't know what they're doing. However, you can come out very well if you use something like mutual funds, where investments are put into various areas. You should at least consider this option.

To begin, you'll want to decide how you're going to buy the funds. You can do this directly or with a broker, but you can also go online or through an agent or your bank. No matter what, someone's going to make sure they only get the best investments, so you're going to want to learn as much as possible.

There are lots of ways to make this process work for you, but three are especially effective. First, there is capital appreciation, where you simply sell your shares for more than you initially paid for them. This is a good option for people who want to make money quickly.

Dividends are another option where available. When a company earns money, part of this goes out to the stockholders, and as a stockholder, you will make money off the deal. You'll also make money or earn more stocks through distributions when a manager sells a stock and sends off the profits.

The more you hear about these options, the more you're going to need to know about them. Whatever you do, put your money in as many different things as possible. That way, you might lose some, but you'll still have the rest in other areas, so you'll have to take fewer risks.

Of course, you're going to be taking on some element of chance. Thankfully, though, this is rather limited when it comes to mutual funds. In the end, you'll be glad you jumped into things and took the time to investigate an option other people might not ever be willing to discover. - 23218

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Money Management in Currency Trading (Part III)

By Ahmad Hassam

Perhaps the best advice that you will receive from someone is live to trade another day. Currency markets are brutal, volatile and ruthless. In minutes you can lose many pips. You should learn to survive in the markets in the long run. Do not lose all your money in a single day.

The most common factor that causes many currency traders and investors to blow up their accounts and lose all their money is greed. Once you start taking unnecessary risks you are in trouble. You want a secret formula that never loses a trade. You will start looking for the Holy Grail technical indictor or a forex robot that can make you rich. You will believe that by discovering one, you will become rich.

Unfortunately there is no such Holy Grail for anyone. No one has ever found such a secret. You cannot always win. You will win and you will lose. Learn not to risk more than 2% of your account on one single trade. Grow your account incrementally and slowly over time. Never ever get into the temptation to risk big trying to make one single winning trade that can make you rich.

Now, know how much you are willing to risk in a single trade. I have said 2%. But if you want to be aggressive you can go up to 5%. But stay between 2-5%. Dont exceed it. On the other hand, if you are conservative, you should consider risking between 1-2% only.

Once you have decided on the amount of risk you are willing to take, the rest is simple. Suppose you have a $50,000 account. You decide on a risk of 2% only. How much you can risk on a single trade? (50,000)(0.02)=$1,000. This is the maximum amount you should risk on a single trade.

However, if you are going to trade more than one position at the same time, the amount may become higher. Lets assume you are in 3 trades at the same time trading three currency pairs! You should risk only $1,000 per trade. So your total money at risk will be (3) (1000) =$3,000. Once you have calculated your risk, you are can determine the trade size.

Trade size is the number of contracts you purchase in any one trade. To determine the trade size, you need to first determine where you want to put your stop loss. Lets use an example to make it clear. Suppose you are willing to risk $1000 on trading EUR/USD pair. You decide on a stop loss of 50 pips. Each pip on EUR/USD pair is $10 worth. So the number of contracts that you need to trade are (1,000)/ (50) (10) =2.

By calculating your trade size, you have taken the guesswork out of your trading once you have determined your risk level. You can sleep well now. You know how much of your money is at risk. You are going to be able to trade tomorrow. No matter what happens today.

Using these common money management rules will help you avoid the pitfall of losing almost all the money in your account. Learning to survive the markets and trade another day is the essence of trading. This can help your trading take the next level of profitability. - 23218

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading and swing trading stocks and currencies. Trade Dow Futures. Learn Forex Trading.

Secrets to Investing in the China

By Michael Swanson

Following over 20 years of minimal to no growth, the Chinese economy is finally reaching the potential predicted by many financial analysts in the mid nineteen eighties. As a result, many Hedge Fund managers and portfolio stock companies are looking to the East and for ways to invest in China.

Early investors are obviously reaping the benefits from the manufacture and distribution of fundamentals such as clothing and computers. Furniture too is a profitable investment; though this has been checked somewhat by recent stories of spurious materials and the consumer effect of moving towards "greener" and home grown manufacture.

Another area where investment has been huge, and returns generous, is throughout the toy industry. An industry that never seems to suffer particularly hard no matter the worldwide financial situation; toys can be produced cheaply, effectively and sold for huge profits in western malls and shopping districts.

Whilst the boat has not quite sailed for new investors to these industries, those looking for their first opportunity to invest in China have many more options. And these may prove even more profitable than their predecessors. For example, China is the second consumer of oil, and the biggest consumer of coal.

For those looking for a greener, and more responsible investment, the huge railway project could be attractive. Already one of the best in the world, (in metropolis areas anyway), the Chinese government recognize the benefits of mass public transportation clearly. With contracts passed to western companies as much as Chinese tenders, this really could be a clever investment.

Before you invest in China, a word to the wise; do be prepared to take a major hit occasionally. Emerging markets are notorious for their volatility and vulnerability. Whilst recovery continues, China are still reeling from a 65% stock market loss at the end of 2008; indicative of how the global economy is having an effect in even growing markets. - 23218

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For more on investing in China grab our China stocks report.

Is Your Forex Signal Provider Providing Value?

By Tim Barnby

Is your forex signal provider providing enough value? Signal providers offer a valuable service. They monitor the markets and alert traders of great setups. I like to look at it as an affordable outsourcing solution. Instead of staring at the computer all day and night, I can spend time with my family.

The question remains, however, whether or not signal providers provide enough value to their clients. For a few traders, the traditional signal provider is a great solution. Those traders have no interest in learning to trade and simply want someone to tell them what, when and for how much, to trade. Most, however, seem to want more.

There is a new type of service that offers ongoing education, mentoring, and consistent contact between clients and the trader(s) who generate those signals. These new hybrid services offer hosted live trading rooms, libraries of e-books and video courses, trading systems with training, money management systems. The best among them offer private Master Mind forums with trading system support and even trading system development forums where aspiring professional traders and system marketers can work with others to develop new products and personal systems. At the very top of the class you'll find even more features.

The leaders of this pack offer detailed weekly forecasts, and even daily video analysis of the major forex pairs. These new service providers offer signals as a way to pay for the service. The trader pays a monthly fee, has access to all of the features, and gains all of the benefits, then receives a few cherry-picked signals that help pay for that service. It's almost like the service provider is building a business model that pays him but costs the client nothing. In fact, the service should actually make money for the client.

The Market Mover Edge is a service that offers all of the above features and more. Clients even get a live telephone consultation with the owner. The signals provided are based on the daily and weekly charts and consistently make money. Members are given a money management system, very simple systems to trade, live trading room sessions, and ongoing mentoring and support provided by a professional currency trader. - 23218

About the Author:

No matter which FX trading system you choose, to be profitable in Forex you must gather three elements: Money Management, Proper (Instructor Led) Training and the Mental Game (comes from the first two). We provide everything you need from live trading rooms to intense individualized mentoring programs at The Market Mover Edge