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Forex Basics that I use to take short term Positions

A trading terminal contains a lot of indicators which are just too difficult to master without giving too much of time to them and demo accounts can be too helpful for this purpose.But it is impossible to succeed with demo account if we do not know what is the right time to enter the market.And my experience tells me that every indicator's time does not coincide with each other.Though I don't count myself among successful traders and I am not a forex-expert I am sharing these basic ideas which helps me a lot while trading forex.

The Trend Line and equidistant parallel Lines

The trend can be either uptrend or downtrend. Uptrend consists of a series of higher highs and adowntrend consists of the series of lower lows.We should always know the present trend by drawing a trend line or a parallel equidistant line.I often use the equidistant parallel line because I find it easier to use.On the uptrend it can be drawn by joining the largest no. of possible highs or the largest no. of possible lows to determine the current trend. When drawing an uptrend line, you draw a straight line up to the right along successive "reaction" lows. A downtrend line is drawn to the right along successive rally peaks. The more times that rally highs or reaction lows touch the trend line, the more powerful the trend line becomes.

Methodologies for drawing trend lines on the charts vary. Like much of technical analysis, it is more art than science. There really are no hard and fast rules, but it is a must from my view to find out where to take position and where should we close it. The key to trend line analysis is that a trend in motion will stay alive till it doesn't cross the trend line.When the price approaches the trend line, it actually returns back from there or else it should give a spike to break the present trend.The case is much easier with the equidistant parallel lines as the other parallel line itself indicates how much is the most probable price range within the chart of given time interval.That is, To negate a trend line, prices must penetrate the trend line resistance or support level. However, if prices make a big push above or below the trend line,then the present trend line should be negated and then we should draw a new trend line so that we could find out the present trend.

Pivot Point,Support and Resistance

Daily pivot points can be found on many sites or even be calculated from the table below too and can be potentially useful if we mark the points S1,S2,S3 and R1,R2,R3 along with the pivot point on the chart.But for taking short term position we should mark every highs and lows during the past on the chart.My chart looks quite dirty but it contains almost all necessary trading tools from my view.

Trend lines,Support and resistances alone can also help a trader to trader to take positions,put stop loss as well as setting take profit level too effectively.
Learning candlestick patterns is a must in addition to these which we can find on many different sites.I personally learned it from candlestickforum.

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Fibonacci Retracements

                                                                                                                                                                                                                   Retracement levels are the other key points which a trader should always be aware of as the market normally shows quite a different behaviour at these retracement levels.The retracement levels can be 61.8%,50%,38.2%,23.6%.The behaviour of market as it approaches the retracement levels can be shown by the charts below.

                                                                                                                                                                             

The price most of the time show corrections when price approaches the fibonacci retracement levels.If the price level cross the first level retracement then I always expect correction on other retracement level.

Fibonacci level can be determined by drawing the fibonacci retracement on the chart or by using the table below.

The Fibonacci Calculator Powered by Forexpros - The Leading Financial Portal.

Moving Average

                  Moving Averages are another basic tool that helps trader not to take wrong position.The rules are simple here and this alone from my view is just not sufficient for taking positions. Moving Average in combination with other indicators can form a good combination.Generally I use moving averages of period 4,9,18 at once.The rules are:                                                                                              When prices are above moving average then it says we should not sell but buy and when prices are below it we should just not take buying position.When the short term moving average that is the MA of period 4 goes above the two higher period moving averages then I think it is the best time to buy and when the shorter term moving averages move below the higher ones then I just do not take buy positions.

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