- Ask Price (Offer): Ask is the market selling price, the price at which the market is prepared to sell a specified Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation, for instance 1.4527-1.4532
- Back-Test: A comparison of historical data to see what results might have been using a specific trading strategy. Since historical data is limited to high, low, open and close on each bar, actual results may differ from back-test results. Profitable back-test results do not guarantee future success.
- Base Currency: The first currency in a Currency Pair. A currency against which the exchange rate is applied. Usually, it stands first in the codes of currency rates. It shows how much the base currency is worth against the second one. For instance, if the USD/CHF rate equals 1.6215, then one USD is worth CHF1.6215.
- Bid Price: Bid is the market buying price, the price at which the market is prepared to buy a specified Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can sell foreign exchange. It is shown in the left side of the quotation, for example:1.4527- 1.4532
- Bid Figure Quote: A currency rate without the last two digits. Examples: USD/JPY rate of 122.05/122.10, the big figure is 122. EUR/USD rate of 0.9325/0.9330, the big figure is 0.93.
- Buy Limit: An order set to execute a buy if the Ask price comes down to or below the entry price.
- Buy Stop: An order set to execute a buy if the Ask price comes up to or above the entry price.
- Cash Settled: The closing out of currency contracts with the exchange of cash based upon the difference in the value of when the position was opened and the value of when it is closed, rather than the delivery of currency.
- Closed Position: Exposures in Foreign Currencies that no longer exist. The process of closing a position is the selling or buying a certain amount of currency to offset an equal amount of open positions. This will "square" the open position.
- Commission: The fee levied by an institution to undertake a trade.
- Contract: An Over The Counter (OTC) agreement between the broker and Customer to buy or sell Currency.
- Counter Currency: The second listed Currency in a Currency Pair.
- Cross Currency Pairs: A foreign exchange transaction in which one Foreign Currency is traded against a second Foreign Currency.
- Cross Rate: An exchange rate between two non-US currencies.
- Currency symbols: AUD - Australian Dollar, CAD - Canadian Dollar,EUR– Euro,
- JPY - Japanese Yen, GBP - British Pound, and CHF - Swiss Franc.
- Currency Trading: The act of exchanging the legal tender of one country for another.
- Currency Pair: The two currencies that make up a foreign exchange rate. IE: USD/CHF.
- Daily Cut-Off: The point in time for each Business Day selected by a broker to signify the End of the Business Day.
- Delivery Cut-Off: The point in time that signifies the end of the Trade Date. The Trade Date of any Contract entered into after the Daily Cut-off shall be the next Business Day. The Daily Cut-off will occur at 5 p.m. Eastern time (2 p.m. Pacific time).
- Demo Trading: Free interactive online demonstration sub-system of the actual broker system available to potential customers.
- Equity: The amount currently held in a customer's account calculated as if all the opened positions will be closed at the current market quotes. The account is comprised of Unrealized gains, less Unrealized Losses and plus or minus storage.
- Expert Advisor: The Expert Advisor allows traders to automate their trading strategies. Once the strategy is programmed, traders can either use it as a prompt to initiate the trade or can set it to trade automatically.
- Fair Market Value: The price for a financial instrument that is determined in an open market environment between a willing buyer and seller.
- Filled Trade: A trade that is fully executed on behalf of a Customer's Account pursuant to an Order. Once filled, an Order cannot be cancelled, amended or waived by Customer.
- Floating Profit/Loss: Unrealized profit (loss) in an open position.
- Foreign Exchange Contract: A Spot Contract for the purchase or sale of a Foreign Currency.
- Foreign Exchange Rate: The price relationships between two currencies that are freely determined by the forces of supply and demand.
- Fundamental Analysis: Analysis based on economic and political factors (see Technical Analysis).
- Initial Margin Requirement: Also known as 'Opening Margin Requirement'. The minimum Margin required to establish a new Open Position.
- Leverage: The ratio of the amount used in a transaction to the required security deposit (margin).
- Limit Order: An order to buy or sell Foreign Currency, or pairs of Currencies, at a specified price or exchange rate. A Limit Order to buy generally will be executed when the ask price equals or falls below the price or exchange rate specified in the Limit Order. A Limit Order to sell generally will be executed when the bid price equals or exceeds the price or exchange rate specified in the Limit Order. Customers should note, however, that market conditions may often prevent execution of an individual Customer's Limit Order despite other dealing activity at that price level.
- Long Position: In foreign exchange trading, when the base currency in the pair is bought, the position is said to be long in that currency. It is understood that when the base currency in the pair is 'long', the second currency will be 'short'.
- Lot: A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots.
- Margin: The amount of cash or other Eligible Collateral that a broker requires a Customer to deposit or maintain in the Customer's Account in connection with the Customer's trading activity.
- Margin Call: A demand for the deposit of additional Margin as described in Customer Agreement.
- Market Order: An order to buy or sell the identified currency, or pairs of currencies, at the current market price. An order to buy is executed at the ask price; and order to sell is executed at the bid price.
- Market Quote: The current quote of a currency pair.
- Open Position: Any deal that has not been offset by an equal and opposite deal.
- Overnight Position: Trader's open long or short position that is not closed by the end of a trading day.
- Order: Generally, an instruction by a Customer (or Customer's authorized agent) to a broker to attempt to execute a trade for Customer's Account.
- Over the Counter: OTC: Off-exchange markets in which market participants, such as a broker and the customer, enter into privately negotiated Contracts or other transactions directly with each other.
- PIP/Point: The smallest unit of price for any Foreign Currency (e.g., for USD/CHF one point (or pip) equals .0001 Swiss Francs and for USD/JPY one point (or pip) equals 0.01 Japanese Yen).
- Posted Margin: That part of the Margin Balance that is posted to the brokerage account in support of the Customer's Open Position and Unrealized Losses.
- Profit/Loss: P/L or Gain/Loss: The actual gain or loss in U.S. Dollars resulting from trading activities on Closed Positions, plus the theoretical gain or loss on Open Positions that have been Marked to Market.
- Quote: A simultaneous bid and offer in a currency pair.
- Realized Gain/Loss: The actual gain or loss resulting from closing an Open Position.
- Required Margin: A sum equal to the greater of the Initial Margin Requirement or the Initial Margin Requirement less Unrealized Losses and storage, plus Unrealized Gains, provided it is not less than 30% of the Initial Margin Required.
- Sell Limit: An order set to execute a sell if the Bid price comes up to or above the entry price.
- Sell Stop: An order set to execute a sell if the Bid price comes down to or below the entry price.
- Short Position: Selling a currency in which you have no position in anticipation of it falling in value. At that point you will be able to 'cover' your short by buying back the currency at a lower price. (If physical delivery of the currency is involved, the short seller will need to borrow the currency in order to make the delivery to the buyer). In foreign exchange, when the base currency in the pair is sold, the position is said to be short in that currency. It is understood that when the base currency in the pair is 'short', the second currency will be 'long'.
- Rollovers: The process of extending an existing market position through one or more Spot Settlements.
- Spread: The difference between the ask (offer) and bid price in a market quote. The spread is the reason why a newly opened position's mark to market, or valuation, will likely be negative. If a trader buys a particular currency she will pay the ask (offer) price, but the current mark to market will be based upon what the marketplace is presently paying for this currency. That price would be found on the bid side of the market quote, Competitive lower than where she just bought the currency.
- Stop/Loss Order: An order to buy or sell at a specified Foreign Exchange Rate away from the current market for the purpose of liquidating an Open Position during market conditions in which the Open Position has declined in value. Execution of such an order can occur at rates below (or above) the specified Foreign Exchange Rate.
- Take Profit: The level at which you wish to close a position in order to realize profits.
- Technical Analysis: Analysis of market price action. Technical analysis studies historical price changes with the aim to forecast future price movements. By studying price charts and a host of supporting technical indicators, we in effect let the market tell us which way it is most likely to trend. The whole purpose of charting the price action of a market is to identify trends in the early stages of their development and then trade in the direction of those trends. One of the two types of analysis used to analyze the currency market (see Fundamental Analysis).
- Trailing Stop: A complex stop-loss order in which the stop loss price is set at some fixed percentage below the market price. If the market price rises, the stop loss price rises proportionately, but if the stock price falls, the stop loss price doesn't change. This technique allows an investor to set a limit on the maximum possible loss without setting a limit on the maximum possible gain, and without requiring paying attention to the investment on an ongoing basis.
- Used Margin: The amount in the client's account required to support all the current positions.
- Volume: The number of times the price changed on a previous bar or the number of times the price has changed on the current bar.
Sunday, July 25, 2010
Glossary of Terms Using in Forex Trading
Saturday, July 24, 2010
17 Money Making Candlestick Formations
Graphics & text from: Japanese Candlestick Charting Techniques by Steve Nison
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Candlestick Line Candlestick lines and charts traditional Japanese charts whose individual lines look like candles, hence their name. The candlestick line is comprised of a real body and shadows. See "Real body" and "shadow."
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Candlestick Formation 1 Belt-hold line -- there are bullish and bearish belt holds. A bullish belt hold is a tall white candlestick that opens on its low. It is also called a white opening shaven bottom. At a low price area, this is a bullish signal. A bearish belt hold is a long black candlestick which opens on its high. Also referred to as a black opening shaven head. At a high price level, it is considered bearish.
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Candlestick Formation 2 Counterattack lines -- following a black (white) candlestick in a downtrend (uptrend), the market gaps sharply lower (higher) on the opening and then closes unchanged from the prior session's close. A pattern which reflects a stalemate between the bulls and bears.
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Candlestick Formation 3 Dark-cloud cover -- a bearish reversal signal. In an uptrend a long white candlestick is followed by a black candlestick that opens above the prior white candlestick's high. It then closes well into the white candlestick's real body.
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Candlestick Formation 4 Doji --a session in which the open and close are the same (or almost the same). There are different varieties of doji lines (such as a gravestone or long-legged doji) depending on where the opening and closing are in relation to the entire range. Doji lines are among the most important individual candlestick lines. They are also components of important candlestick patterns.
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Candlestick Formation 5 Engulfing patterns -- there is a bullish and bearish engulfing pattern. A bullish engulfing pattern is comprised of a large white real body which engulfs a small black real body in a downtrend. The bullish engulfing pattern is an important bottom reversal. A bearish engulfing pattern (a major top reversal pattern), occurs when selling pressure overwhelms buying pressure as reflected by a long black real body engulfing a small white real body in an uptrend.
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Candlestick Formation 6 Doji star -- a doji line which gaps from a long white or black candlestick. An important reversal pattern with confirmation during the next session.
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Candlestick Formation 7 Evening star -- a major top reversal pattern formed by three candlesticks. The first is a tall white real body, the second is a small real body (white or black) which gaps higher to form a star, the third is a black candlestick which closes well into the first session's white real body.
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Candlestick Formation 8 Evening doji star -- the same as an evening star except the middle candlestick (i.e., the star portion) is a doji instead of a small real body. Because there is a doji in this patter, it is considered more bearish than the regular evening star.
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Candlestick Formation 9 Hammer --- an important bottoming candlestick line. The hammer and the hanging man are both the same line, that is a small real body (white or black) at the top of the session's range and a very long lower shadow with little or no upper shadow. When this line appears during a downtrend it becomes a bullish hammer. For a classic hammer, the lower shadow should be at least twice the height of the real body.
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Candlestick Formation 10 Hanging man -- an important top reversal. The hanging man and the hammer are both the same type of candlestick line (i.e., a small real body (white or black), with little or no upper shadow, at the top of the session's range and a very long lower shadow). But when this line appears during an uptrend, it becomes a bearish hanging man. It signals the market has become vulnerable, but there should be bearish confirmation the next session (i.e., a black candlestick session with a lower close or a weaker opening) to signal a top. In principle, the hanging man's lower shadow should be two or three times the height of the real body.
Money Making Candlestick Formations - Page 4
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Candlestick Formation 11 Harami -- a two candlestick pattern in which a small real body holds within the prior session's unusually large real body. The harami implies the immediately preceding trend is concluded and that the bulls and bears are now in a state of truce. The color of the second real body can be white or black. Most often the second real body is the opposite color of the first real body.
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Candlestick Formation 12 Harami cross -- a harami with a doji on the second session instead of a small real body. An important top (bottom) reversal signal especially after a tall white (black) candlestick line. It is also called a petrifying pattern.
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Candlestick Formation 13 Inverted hammer --- following a downtrend, this is a candlestick line that has a long upper shadow and a small real body at the lower end of the session. There should be no, or very little, lower shadow. It has the same shape as the bearish shooting star, but when this line occurs in a downtrend, it is a bullish bottom reversal signal with confirmation the next session (i.e., a white candlestick with a higher close or a higher opening).
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Candlestick Formation 14 Morning star -- a major bottom reversal pattern formed by three candlesticks. The first is a long black real body; the second is a small real body (white or black) which gaps lower to form a star; the third is a white candlestick that closes well into the first session's black real body.
Money Making Candlestick Formations - Page 5
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Candlestick Formation 15 Morning doji star -- the same as a morning star except the middle candlestick is a doji instead of a small real body. Because there is a doji in this pattern it is considered more bullish than the regular morning star.
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Candlestick Formation 16 Piercing pattern -- a bottom reversal signal. In a downtrend, a long black candlestick is followed by a gap lower during the next session. This session finishes as a strong white candlestick which closes more than halfway into the prior black candlestick's real body. Compare to the on-neck line, the in-neck line, and the thrusting line.
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Candlestick Formation 17 TOPS BOTTOMS Tweezers top and bottom -- when the same highs or lows are tested the next session or within a few sessions. They are minor reversal signals that take on extra importance if the two candlesticks that comprise the tweezers pattern also form another candlestick indicator. For example, if both sessions of a harami cross have the same high it could be an important top reversal since there would be a tweezers top and a bearish harami cross made by the same two candlestick lines.
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Friday, July 23, 2010
Forex Chart Types
Chart is a graphical description of forex price movements over a specific period of time. There are two important parameters in forex chart, the X axis represents time, and the y axis represents price.
Forex Charts usually consist of three types :
Line chart shows a series of data points which is connected together in a line. Commonly used data are closing prices as they are the most important feed to see in forex. Line chart is a basic type of chart used in forex and other financial studies.
GBP/USD 1 minute Line Chart
Bar Chart
Bar charts provide more detailed information compared to Line chart. It shows not only closing price, but consists of opening price, highest price, and lowest price during a time period (timeframe). For example if you use 5 minutes chart, it means every price movements within 5 minutes period are represented by 1 single bar.
GBP/USD 1 minute Bar Chart
Open = Opening price of the period is indicated by horizontal line on the left side of the bar
High = Highest price of the period is indicated by the top of the vertical line
Low = Lowest price of the period is indicated by the bottom of the vertical line
Close = Closing price of the period is indicated by horizontal line on the right side of the bar

CandleStick Chart
Candlestick charts have the same characteristics of bar charts as they provide open, high, low, and close prices within one bar, but the main difference is the ease of interpretation purpose. We can easily interpret bullish and bearish pattern from the color of their bodies.
Candlesticks are used since the 17th century in Japan and have been improved in the 18th century by a well known Japanese rice trader from Sakata, Homma Munehisa, and now are widely used in forex trading due to the ability to display multiple data points instead of one.
Steve Nison's 1991 book, Japanese Candlestick Charting Techniques, called back into traders' memory this particular form of charting, which had already been picked up by Charles Dow around 1900. Today it is one of the most commonly used chart displaying methods with traders.
GBP/USD 1 minute CandleStick Chart
Candlesticks are usually composed of the body (white/green or black/red), an upper and a lower shadow (wick). The wick indicates the highest and lowest currency traded prices. Colors of the body correspond to bullish or bearish condition.
If the body is white (or green), it means opening price is lower than closing price (the price is moving uptrend/bullish). In the other hand, if the body is black (or red), it means opening price is higher than closing price (the price is moving downtrend/bearish).
Bullish Candle
Bearish Candle

Colored Candle Compariso
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Forex Charts usually consist of three types :
- Line Chart
- Bar Chart
- CandleStick Chart
Line chart shows a series of data points which is connected together in a line. Commonly used data are closing prices as they are the most important feed to see in forex. Line chart is a basic type of chart used in forex and other financial studies.
Bar Chart
Bar charts provide more detailed information compared to Line chart. It shows not only closing price, but consists of opening price, highest price, and lowest price during a time period (timeframe). For example if you use 5 minutes chart, it means every price movements within 5 minutes period are represented by 1 single bar.
Open = Opening price of the period is indicated by horizontal line on the left side of the bar
High = Highest price of the period is indicated by the top of the vertical line
Low = Lowest price of the period is indicated by the bottom of the vertical line
Close = Closing price of the period is indicated by horizontal line on the right side of the bar
Candlestick charts have the same characteristics of bar charts as they provide open, high, low, and close prices within one bar, but the main difference is the ease of interpretation purpose. We can easily interpret bullish and bearish pattern from the color of their bodies.
Candlesticks are used since the 17th century in Japan and have been improved in the 18th century by a well known Japanese rice trader from Sakata, Homma Munehisa, and now are widely used in forex trading due to the ability to display multiple data points instead of one.
Steve Nison's 1991 book, Japanese Candlestick Charting Techniques, called back into traders' memory this particular form of charting, which had already been picked up by Charles Dow around 1900. Today it is one of the most commonly used chart displaying methods with traders.
Candlesticks are usually composed of the body (white/green or black/red), an upper and a lower shadow (wick). The wick indicates the highest and lowest currency traded prices. Colors of the body correspond to bullish or bearish condition.
If the body is white (or green), it means opening price is lower than closing price (the price is moving uptrend/bullish). In the other hand, if the body is black (or red), it means opening price is higher than closing price (the price is moving downtrend/bearish).
Bearish Candle
Colored Candle Compariso
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CandleStick Patterns
Here are basic candlestick patterns used in Forex Trading:
- White CandleStick
Signals uptrend movement (those occur in different lengths, the longer the body, the more significant the price increase) - Black CandleStick
Signals downtrend movement (those occur in different lengths, the longer the body, the more significant the price decrease) - Long Lower Shadow
Bullish signal (the lower shadow must be at least the body's size, the longer the lower shadow, the more reliable the signal) - Long Upper Shadow
Bearish signal (the upper shadow must be at least the body's size, the longer the upper shadow, the more reliable the signal) - Hammer
A bullish pattern during a downtrend (long lower shadow and small or no body) - Inverted Hammer
Signals bottom reversal, however confirmation must be obtained from next trade (may be either a white or black body) - Spinning Top White
The White Spinning Top is a single candlestick pattern. Its shape is a small white body with upper and lower shadows that have a greater length than the body's length. Neutral pattern, meaningful in combination with other candlestick patterns - Spinning Top Black
The Black Spinning Top is a single candlestick pattern. Its shape is a small black body with upper and lower shadows having a greater length than the body's length Neutral pattern, meaningful in combination with other candlestick patterns - Doji
If a currency has virtually equal opening and closing prices, this leads to a Doji. The length of the upper and lower shadows of a Doji can vary and consequently the resulting candlestick may look like a cross, inverted cross or a plus sign. Doji, taken alone, is a neutral pattern, meaningful in combination with other candlestick patterns - Long Legged Doji
Signals a top reversal - Dragonfly Doji
Signals trend reversal (no upper shadow, long lower shadow) - Gravestone Doji
Signals trend reversal (no lower shadow, long upper shadow) - Marubozu White
Dominant bullish trades, continued bullish trend (no upper, no lower shadow) - Marubozu Black
Dominant bearish trades, continued bearish trend (no upper, no lower shadow)
Bullish Reversal Patterns
Piercing Line | Morning Doji Star |
Morning Star | Three White Soldiers |
Bullish Engulfing | Bullish Harami |
Bullish Harami Cross | Hammer |
Inverted Hammer | |
Rising Three Methods | Mat Hold |
Long White CandleStick | White Marubozu |
Opening Marubozu White | Closing Marubozu White |
Bearish Reversal Patterns
Dark Cloud Cover | Evening Star |
Evening Doji Star | Three Black Crows |
Bearish Engulfing | Bearish Harami |
Bearish Harami Cross | Hanging Man |
Shooting Star | |
Bearish Continuation Patterns
Falling Three Methods | Long Black CandleStick |
Black Marubozu | Opening Marubozu Black |
Closing Marubozu Black | |
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