Learn To Trade the Breakout (Part I)

By Ahmad Hassam

When the currency price moves beyond the period of consolidation or range trading, a breakout typically occurs. Massive profits are what breakout trading can provide you. Who doesnt want to reap massive profits from a big price move in a short time?

A breakout occurs when the price moves above or below a support or resistance level whether temporarily or permanently. There are times when trading the breakout can be very profitable even though breakouts are known to be technically unstable.

In order to trade breakouts with a higher probability of success, you will have to take into account many market factors including both the technical and the fundamental analysis.

Information about volume is critical to trading the breakout. The volume information is easily available for stocks and futures as both are traded on a centralized exchange and at the end of the day the traders can find out the volume of each security that had been traded during the day.

This data cannot be collected due to the decentralized nature of the currency markets. Volume data is not available for currency markets due to its Over the Counter nature. Lack of forex volume data is a huge disadvantage to forex traders. Volume reveals where the market is positioned or positioning.

Volume is a very important criterion for any breakout trading strategy as successful breakouts are generally accompanied by a rise in volume. When the price attempts a breakout of a significant support or resistance level, it signals a change in the underlying supply and demand conditions possibly triggered by a change in market sentiments caused by some new markets fundamentals.

Price breakouts can be of two types: 1) Continuation Breakouts and 2) Reversal Breakouts. Successful breakouts must be accompanied with a strong surge of momentum in the direction of the breakout.

Continuation Breakout: In a continuation breakout, the price action climbs higher in continuation of an uptrend or falls further lower in a downtrend. Currency prices break out of an established price level to again resume the underlying trend. The breakout occurs after a period of consolidation. The buyers and sellers of the currency pair try to regroup and think about the next price move.

Reversal Breakout: Sometimes a breakout my lead to a trend reversal and the beginning of a new trend in the opposite direction.

A false breakout may occur. The prices may break the support or resistance but then retreat back into the previous price zone. There are many times when the price action does not move in a straightforward direction in the markets.

Stopping out most of the breakout traders if they have placed their stops just above or below the resistance or support levels! The worst kind of a breakout is the whipsaw type. - 23222

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Know The Forex Market. Learn Forex Trading!

The Forex Phantom

By Will Jones

Forex Phantom is one of the latest Forex systems to be released on to the market. This system has taken many successful features from previous systems and incorporated them into its own unique and revolutionary system. The forex phantom system has been developed with a unique algorithm which surpasses all systems built in the past. This algorithm is able to adapt to any condition within the forex market and therefore minimises your risks and maximises your profits.

The Forex Phantom system has been developed with the Forex trader in mind and therefore has a simple to use interface which even the less tech savvy traders can understand.

The Forex Phantom system has been developed with the Forex trader in mind and therefore has a simple to use interface which even the less tech savvy traders can understand.

The Forex Phantom system has been developed with the Forex trader in mind and therefore has a simple to use interface which even the less tech savvy traders can understand.

What is a Forex trading system?

A forex trading system often called a currency trading system is a piece of software which is created to adapt to certain points in the forex market such as the Forex Phantom system. When the software adapts to these certain points it is then able to predict which trades would be the most profitable and which trades would be the most risk free.

However to ensure you purchase a forex system which will actually benefit you and your work you need to ensure you purchase one of the latest forex systems, one which adapts to any market condition. Currently there is only one forex system which can do this (I shall talk about this later), it is very important you opt for the latest forex systems as they include a brand new algorithm which is adaptable to any market condition.

Why do you need a Forex System?

A foreign exchange system allows you to analyze the currency market and interpret the data you receive through the forex system. With a trading system your risks are minimized due to the advanced real life algorithm that some of these trading systems incorporate.

A foreign exchange system allows you to analyze the currency market and interpret the data you receive through the forex system. With a trading system your risks are minimized due to the advanced real life algorithm that some of these trading systems incorporate.

A foreign exchange system allows you to analyze the currency market and interpret the data you receive through the forex system. With a trading system your risks are minimized due to the advanced real life algorithm that some of these trading systems incorporate.

Why do some of these Forex Systems fail?

There are a variety of lower quality systems which were never tested for a long enough period of time to test different market conditions. These systems are unable to adapt to the changing market conditions and therefore fail to maximize traders profits by analyzing the market.

However there is one trading systems which has been able to develop the simple algorithms used in the lower quality systems and combine them in to a complex yet easy to use currency trading system which is able to adapt to future market conditions.

If your worried that your not the most tech savvy forex trader, then don't. These forex systems have been designed with you in mind and because of this they have been developed with easy to use interfaces which guarantee anyone can use these systems.

Currency trading systems are measured by results and the forex phantom system has months of positive results.

What is Forex Phantom?

Forex Phantom is a brand new Forex system which combines useful and unique features to bring the most advanced forex system. The system has a very unique algorithm which is used to ensure that each trade has the highest profitability ratio maximizing revenue. Stop loss and take profit orders are used intelligently to guarantee a profit even in today's economic climate.

Forex Phantom has created quite a buzz in the market, from its highly anticipated release to its magnificent launch everyone has been talking about Forex Phantom.

Forex Phantom's interface is simplistic, yet it includes every feature and function needed to ensure that you profit from each trade. This software enhances your capabilities of trading throughout the market and guarantees profitable trades. - 23222

About the Author:

If you're looking for a Forex companion then why not try out the Forex Phantom robot system everything you need from a Forex robot.

Trading Forex Using Price Action " The Engulfing Patterns

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. - 23222

About the Author:

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

When The Out Of The Money Covered Call Writing Strategy Fails Miserably

By Marc Abrams

There are many investment training strategy websites and e-books that promise you incredible things. One of the more common stock market trading strategies taught is to sell covered call options on stocks. These websites maintain that you can earn monthly returns up to 10% or more using that very strategy! Sound good? Read on.

I will be the first to admit that selling out-of-the-money covered calls can bring lucrative monthly returns under the right circumstances. I have successfully used this very strategy. However, this strategy is not without its disadvantages. Website and e-book marketers of this strategy fail to educate you properly. They market this strategy as conservative with little risk. They also leave you hanging when it all goes wrong.

Selling out-of-the-money covered calls works when the stock market is going up in value. Additionally, when the stock market is neutral (not going up or down by any meaningful amount), this strategy also works well. I don't know about you, but when was the last time the stock market traded sideways for any length of time?

We are currently in the midst of an extremely volatile market. The Dow frequently moves as much as 200 points either way in a single day. Hardly a profitable market for an out-of-the-money covered call writer. Your profits will start to evaporate once the stock you are holding starts to decline. I can assure you that profits can evaporate very quickly. I have seen the value of a stock drop from $10 to $1 over night! There is never enough premium on an option sale to cover that kind of decline.

You want the stock to get called, that is the key to out of the money covered call writing. Many so called experts do not want the stock to get called. They say you should keep the stock so you can continue to sell a covered call option on it in future months. This strategy is flawed. What you should do is select stocks that are moving up in value, in a rising market. Those stocks will make you the most money. I am happy when a stock gets called because I ended up making the profit that I expected.

What happens if the stock goes way up in value? The stock simply gets called away if it rises up past the strike price and stays there through expiration. Isn't that what you wanted in the first place? Because you did not participate in those gains you may feel like you left money on the table. If you feel that way just buy the stock outright and don't sell covered call options on it. Why not just let the stock get called away, take your profit and move on? Then look for stocks to buy and sell calls on for the next month.

Remember, selling out-of-the-money covered calls can provide an excellent source if income in a rising stock market. However, this strategy is less than ideal in a stock market like the one we find ourselves in today. There are, however, other strategies that will offer significant protection in a volatile or declining stock market. - 23222

About the Author:

Marc Abrams Is A Certified Public Accountant With Over 15 Years of Financial And Investing Experience. Visit Marc's Website at http://www.rebuildingmyfuture.com To Learn More About Successful Covered Call Option Writing Strategies In A Declining Market.

Money Management Principles in Forex 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 single most common factor that causes many currency traders to blow up their accounts and lose all their money is greed. You start taking unnecessary risks when you get greedy. You will spend many hours trying to find the Holy Grail technical indictor or a forex robot that can make you rich. You will believe that by discovering that secret, you will become rich.

Unfortunately there is no Holy Grail for anyone in trading. You will win and you will lose. So you must learn not to risk more than 2% of your account on one trade. Grow your account incrementally over time. Never ever be tempted to risk big making one single winning trade that can make you rich.

The most important thing that you should know is how much you are willing to risk in a single trade. This is more important than your trading strategy. I said dont risk more than 2% in a single trade. But if you are a risk taker and want to be aggressive, you can go up to 5%. Dont exceed 5%, stay between 1-5%. If you are risk averse and are conservative, on the other hand, 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 in more than one trade at the same time, the amount may be higher. Suppose, you are in 3 trades and you risk only $1,000 per trade. So the total amount at risk will be $3,000. Once you have determined your risk level, you are ready to determine the trade size.

Trade size is the number of currency pair contracts you purchase in any one single trade. You need to first determine where you want to put your stop loss in order to determine the trade size. Lets use a simple example to make it clear and 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 equal to $10, so the number of contracts that you can trade are 2= (1,000)/ (50) (10).

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 and simple money management rules will help you avoid the pitfall of losing almost all the money in your account. Never ever take more than 2-5% risk in any single trade. Learning to survive the markets and trading another day is the essence of trading. This can help take your trading to the next level of profitability. - 23222

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading and swing trading stocks and currencies. Trade Dow Futures. Learn Forex Trading.