The use of trendline analysis is just to help forex traders establish levels of resistance and support for your market prices. With this analysis intact, you will be able to know when to get in and out of your trading positions.

Although, many traders do not focus on using trendline analysis, because they feel it is excessively subjective in nature. Well, that is not altogether false, but there are also many advantages that are offered to traders, such as focusing the attention on the price movement, and filtering out the market noise.

So if these reasons are there, trendline analysis is the first thing to consider when determining the existence of the trend. If you do not get anything from your trendline analysis, then there is not a trend afterall.


Trendline analysis is most suited when it starts with a long timeframes such as the daily or weekly charts, then it moves into a more shorter timeframe (hourly or 4-hourly). By using this, shorter support/resistance can be seen. You will surely be able to recognize the vital support/resistance levels first, and then the less vital onces next.

With this feature, you will be able to focus on good, long trends, rather than staying on short trends that show themselves.

Another technical indicator which can be used to identify if a trend is in place is the directional movement indicator (DMI). With the use of DMI, guesswork is removed, and the confirmation of the trend is validated in combination with trendline analysis.


The DMI system composes of the ADX (average directional movement index) and the DI+ and DI- lines.

The ADX can determine if there is a market trend, not minding if it is an uptrend or downtrend. If you get a measurement above 25, it indicates there is a trend in position, and a reading below 20 means that there is no trend in position. Also you can determine the strength of a trend. If the ADX is high, then the trend is strong, and if the ADX is low, the trend is not strong.

The DMI system gives the best result when the components are both used. You can use the DI+ and DI- lines as your trading signals. When the DI+ line crosses up through the DI- line, it means a buy signal, and when the DI- crosses up through the DI+ line, then it means a sell signal.

Knowing which technical indicator to use in the identifying of trends is vitally important as much as making profits from the forex market.

Trust me, the trend can go agaoinst you if you don't have a good strategy, if you can't identify it, and if you don't know which technical indicator to use. You can be sure the trend will be your enemy at this time.

For the purpose of study, we will discuss on which technical indicator you can use to identify trends.

You should also be aware that trend do not occur as usual as sideways movement. Sideways occurs all the time, but when trends show up, it is an opportunity for you to tap into it and enjoy the ride to profits making.


As an example, currency market have shown to have more long-term trends than many other markets. These long-term trends as we know from previous discussions are caused as a result of macroeconomic elements.

In the history of the forex market, the analysis have shown that the periods that trend occurs are only 1/3, while that of no trend accounts for 2/3 of the market price over a period of time.


Making the situation more difficult is by using one or two technical indicators to identify the direction of the market, and then open a position based on this analysis. This type of approach opens traders to the trend/no-trend paradox. So you will usually find many forex traders closing a position and then realizing that the main and real trend is just unfolding and starting to move. Apparently, they miss out the action.

Again, there are traders who hold on to an open position, thinking a trend will come out of it, whereas there is no trend at all.

In other not to be caught in this trend/no-trend paradox, there are several indicators and techniques that will be shown to you to help you determine when trends are coming into existence.

The essence of this information is to give you an indication of your real entry point, and your real exit point. Also you get opportunities to know what risk management strategies will work for you. You apparently do not need to set up a lot of techniques, but you can get just a few techniques and turn profits into your accounts daily.

These are some trade examples that will help you know that forex trading is real. You can check up the statistics whenever you want to, and also be confident to study it from time to time.

I have also learnt that examples help fores traders to set goals, and targets for their trading techniques, which is a good thing. Here are some examples for your learning.


1. The first example was between the EUR/USD pair, and it occurred in the fourth week of June 2002.

Fisrt, i want you to observe the hourly and 10-minute EUR/USD charts. Take note of when the price is above the 200-period moving averages on the two charts. On the hourly chart, the price is almost above the 200-hour moving average, and it very much means an uptrend. On the 10-minute chart, prices reman above the moving average towards the last third of the chart. So what you have to look out for is find an entry point, that is the market is within 20 points of the moving average on the 10-minute chart, and also the stochastic lines ave made a cross.

So at about 1 p.m. and the midnight on June 27, the requirements are met. That is the entry point is where the fast stochastic cross over the slow stochastic, when the indicator is below 20 points.

You see there is a buy at the 0.9883 price at about 8 p.m., and a stop loss is placed at 0.9858, which is 10 points below the 200-bar moving average. And this stop loss is trailed upwards whenever the price rises. And also the currency pair gets to its top at 0.9992, and the stop loss is now at 0.9967 where the market position was closed and a profit of 84 pips was made which is $840 profit.


2. The second example gives an illustration that is similar to the one above, but in this case it is the USD/JPY currency pair.

Take note that prices were trading mch below the 200-moving average after the 21st of June. On the 10-minute chart, the market prices went below the moving average after 10 a.m. on 27th June, which clearly indicates going short on the currency. Also observe that prices went below the 20 points of the moving average. At 5 p.m., a position was opened at 119.57, just as the fast stochastic line crossed below the slow stochastic line, when the indicator was above 80. A trailing stop was placed at 119.86, and the trade was still on till the next day, and it was closed at price 118.58 for a 99 pips profit.

You might want to look at one of the tools and rules of certain instruments. This is very helpful if you want be successful in your trading experience. Before you can actually master this rules, you have to work by certain steps to help you find your way through the whole process.

Step 1 - Identify a trend. You should also make a comparation between the moving averages on the 10-minutes and hourly charts. You can identify a trend when you notice that the price is persistently above/below the moving average as seen on the two charts.


Step 2 - Determine your point of entry. As soon as you identify a trend, you should look for these conditions on a 10-minute chart at the same time.

First, look for when the market is 20 points above or below the moving average (to buy and to sell respectively).

Second, look for when the fast stochastic line crosses over the slow stochastic line below 20, which is a buy signal, or below the slow stochastic line above 80, which means to sell.

The conditions you look for means you are about to see a shrt-term downtrend, or uptrend, and again it means that the currency is pulling back or stopped.


Step 3 - Ride with the trend, but set trailing stop immediately you enter. If you buy, set a stop loss order about 10 points below the 200-period moving average on the 10-minute chart, and if you sell do the same thing above. As profits begin to come in, raise your stop loss order higher or lower to save some profits.

* Stochastics refresher
As we know, there are two lines which are the %K, and the %D. The general and main stochastics calculation gives a comparation of the most recent close to the range of the price, over a time period (the high of the range - the low of the range). A five-bar stochastic calculation gives the difference between the most recent bar's close and the lowest low of the last five days divided by the difference between the highest high and the lowest low of the last five days. After all these calculations, you then multiply the result by 100.

Below is the formula for this calculation, that is the %K.

%K = 100*{(Ct-Ln)/(Hn-Ln)} , where
Ct = the most recent bar's closing price
Ln = the lowest price of the most recent n bars
Hn = the highest price of the most recent n bars
(for a stochastic calculated on daily bars, the default is five days).
The second line, %D, is simply a three-period moving average of %K: average(%K,3)

For you to be successful as a forex trader, you definitely need to understand the use of indicators for determining the direction of the market.

Getting to understand this aspect of forex trading gives a real edge over ordinary speculators. Although it also takes time to be able to understand them, but once you do, then you are on the beginning of your wealth creation using forex trading.

For the purpose of introduction, you will be given a few technical indications that usually help forex users get a view of where the market is going over a period of time. This time period may be one day for intra-day traders, or a long term for long term traders. Also, mastering these technical indicators is also very important.

Some of these indicators that are helpful are grouped into different category for your easy knowledge and understanding.


1. Strength indicators
These type of indicators gives you an idea of the strength of the market and its direction with regards to price and time, with the amount of participation of in a trade.

An example of this indicator is the "volume indicator". With this indicator you can be sure you are forcasting the right market direction.


2. Trend indicators
The word trend in forex means the consistent movement of price in a particular direction with regards to time. There are 3 types of trends, which are the up trend, down trend, and sideways. With this kind type of address, you can simply figure out when to enter and get out of a position.

Some examples are the moving averages, trend lines, and others.


3. Cycle indicators
This type of indicators gives a repetition of patterns on market direction. Such events as eletions, particular seasons, and many other activities fall under this cycle indicator.

Examples are the Elliott wave indicator.


4. Volatility indicators
An example is the Bollinger bands. This kind of indicator describes sizes, and variations in market prices.
Of course prices flunctuates, and getting the right indicator is the key.


5. Support/resistance indicators
With this type of indicator you can determine the limits of the market prices. This means that you can set a resistance for price rise, and a support for price falls.


6. Momentum indicators
Examples are Stochastic, MACD, RSI. With this, you can figure out the speed of market prices with relationship to time.

Technical analysis simply means the use of past market information and direction, with the use of certain indicators to determine the next direction and trend of the market.

Many Forex technicians take a lot of market data from various market prices targets, and compare it with each other.

Price data is the most widely used information data to determine the next future market direction. Some other forex technicians will concentrate on volumes and other technical indicators.

The most important thing when using technical indicators is to concentrate, and focus on the market direction, with systematic analysis. This information is not collected within one day's trade, it is collected over time, or a long period of time.

And once you master the technique of using the indicators with an average level of accuracy, then i can guarantee you at least more that 60 percent success with your forex trading.

In short, all traders use at least one form of technical indicator. Even a beginner will first look at the chart, see the movement pattern, and then choose where to enter and which direction to face in the trade, whether going long or short.

The charts they look at help them determine the market price, and the movement over time. Although just gambling into a trade will not help you at all, and you can lose a hug chunk of your deposit.

Charts can also be a very useful tool for an advanced forex trader. The most important thing is know when to enter and get out of a trade position. An advanced forex trader will use more sophisticated technical analytical method to fugure out where a market direction is going.

Also fundamental data and informations will also help a technician to determine the market direction. But the truth also is that all the fundamental data is still embedded in the price dat, so if you do not know how to get across and understand your chart and data, then you might need the help of an experienced forex trader to help you figure it out.

Fundamentalists will tell you all they need is the happenings around the world, and they know when to go in and out of a trade. So don't bother about that, since we are talking about technical analysis on this page.

Entering the market at the right time, will help you guarantee a sizabe profit for your investment.

The assumptions of technical analysis are that all market prices, and market fundamentals are represented on the chart. Also you don't need to see or look for the hopes, anxiety, and other factors in the chart or market data.

Also technicians have discovered that history repeats itself, and the market moves in a direction that is exactly similar or at least in a way predictable. These are referred to as signals. These signals are patterns generated by the movement of price.

So therefore, technical analysis uncovers the secrets of the future market prices after studying and observing past market prices.


Prices have been discovered to move in trend, and technicians know that they are not just random movement, they are moving in a real predictable pattern. Prices moves in three directions: sideways, up and down.

Usually, trends continue over a period of time, once they are identified. So what technicians do are to look for the possibility of a trend movement and then they buy or sell into the market.

The main components of a forex technician are the volume charts, price charts, and many other graphical representations of different market informations that can be used to measure the strength and movement of a trend. This means that to be a technician, you must be able to use many other technical tools to forecast market direction, and not just rely on price charts alone.

If you are desiring to be a technician, you have to be very disclipned. The use of these technical tools require discipline. There are cases where many traders will still hang on to a position, even when the technical analysis tells them to enter or get out. All these are what a technician to be should handle.

For example, assuming you are long on the EUR/USD pair, and you establish a stop loss at around 30 pips from your entry point. If for some reasons your expectations are not correct, and the price moves and gets to your stop loss point, you should not hold on to that position expecting it to turn around and rise. You must have a real trading plan, on where to take your profits, and cut your losses.

Don't hang on to a lossing trade.

An interest thing to do in forex is cashing in on short-term trends. It is sometimes difficult to identify a trend, and when you do not get a trend, that doesn't mean you have no traders to make that day.

If you want to use this trading strategy, you need to two time frames in other to identify this short-term trend. The first one is an overbought -oversold indicator to get a good entry point into the market, and the second is a trailing stop. This trailing stop helps you protect your profits on good and viable trades.

The trading strategies of many fores traders are that they assume that the market will stay in between a given range. But you can only give this assumptions if you use the right indicators to back up the reasons. A large percentage of the time, you will discover that the market prices moves back and forward with a resistant and support level, or randomly flunctuate. The other percentage of time, the market is seen to move in a persistent direction of price. This simply means that the trends certainly break over or above the resistant and support levels.

Well, in as much as many traders have benefitted from using this strategies, many other traders who try to exploit these trends have failed and have lost a lot of money in that process. The only way to use this strategy of cashing in on short-term trends is to be able to locate trend signals of when to enter and get out of the market.

To be successful, you need to identify these entrt points, and then also limit your losses by employing the use of good and sound risk management techniques. As a aspirant of a successful trader, you need to focus on your trading strategies and let your profits come to you, and cut your losses to the barest minimum.

As part of these informations articles given here, we will later be talking about how the system of trading works for you.

The currency market, or forex market has many opportunity for you to make money, but you also have to "opportunity" to lose money. Dealing with the major currencies which are the US dollars, Euro, Japanese yen, British pounds, Canadian dollar, Swiss franc, and the Australian dollar.

Certainly more than 85 percent of all daily trade involves the major currencies.

Quoting currencies is one important part of forex trading you must understand so well enough. The currencies you trade must be well stated, and their relationship with each other, and also their worth to each other should be known.

At the beginning of your forex trading experience, it may seem complex and confusing. This confusion comes about because currencies are quoted in various ways, different from the way equities are quoted.

So understanding the quoting of currencies will become very easy for you if you understand that the base currency is the first currency that is quoted. Again you must know that value of the base currency is 1.

Let's give an example so that you can understand how it works.

If you see a USD/CAD quote of about 1.5000, this simply means that 1 USD is equal to 1.5000 Canadian dollars. Or it means that you can buy one USD with 1.5000 Canadian dollars.

Similarly, if you see the USD/JPY currency pair, first you know that the US dollar is the bse currency, and the value is 1. So for a quote of USD/JPY of 118.00, this simply means that you can buy 1 USD with only 118.00 Japanese Yen, or 1 USD is equal to 118.00 Japanese Yen.


As soon as the US dollars is the base currency, this principle works very fine. But there are some exceptions to this principle, and this is seen in the case of these 3 currencies; the British pound (GBP), the European currency unit (EUR), and the Australian dollar (AUS). So if you see a case where the British pound is the base currency, then it means the value of the GBP is 1. So in a case of the GBP/USD quote of 2.0000, this simply means that 1 British pounds is equal to 2.0000 US dollars, or 1 GBP can buy 2 USD.

Also, the rise of the base currency means that the value of that currency has appreciated against the other one. If US dollars is the base currency against the Yen, and the price goes up, it means that the US dollars is appreciating against the Yen, or you will need more Yen to buy the US dollars.

For example, if the USD/JPY quote is 118.00, and it rises to 119.00, that means the dollars have appreciated. It also means the same thing if the prices fall, that the US dollars have depreciated against the Yen.

But in the case where the base currency is not the US dollars, a rising price simply means that the US dollars is depreciating.

There are many advantages of trading Forex, and they will be outline for you shortly.

1. Execution costs
Other financial market will charge commissions for trade, but the Forex market does not. The cost of execution is the difference in price between the Bid/Ask. This is called the spread.

This spread varies from broker to broker.


2. Trendiness
There are usually trends in the Forex markets, which has been noticed and seen over time. The trend moves differs from one currency to another because they all have their specific uniqueness.

Once this trends are identified, moving with it can bring about great profits in the Forex market.


3. Focus
Unlike stocks and other financial markets where you have lots and lots of stocks, bonds, and others, the Forez market only concentrates on 1-4 currencies. The most common are the British Pounds, Japanese Yen, Swiss Franc, and the Euro. Successful traders will usually concentrate on just a few currency pairs, and beginners usually take one pair for their Forex trading.


4. Margin Accounts
Before the commencement of trading, you need to open a margin account. The margin account varies from broker to broker. Some require a high margin account of about $5,000, while some will require only $1,000.

Your trading period will also determine your margin account. If you want to hold a position for a day, it requires a low margin account, but if you wish to hold a trade for days, weeks, months, you should be expecting a high margin account.
All orders are to be carried out through a Forex broker.

Note: A margin account is just like a performance bond. To become a Forex trader you need a margin account. When profits are made, they are automatically deposited into your account, and when you make losses, they are also taken out of you account. This system makes it plain and reliable, as you can see your account balance yourself.
You should also be sure that your profits can get back to you, not just sit in your account. Forex brokers will usually advice that you withdraw profits from time to time to allow you gain confidence with the system.

When a trader withdraws his profit, he feels so comfortable and willing to trade more as to increase his account balance for the next withdrawal.

You profits can also get back to you in various ways. It can be wire transferred, or sent by cheques.

The meaning of 'Margin' in stock is not the same when it comes to forex. They simply mean different thing.

In stocks trading you need about 50 percent margin to trade which is very high. An example is this, if the value of microsoft shares is valued at $300/share, purchasing 200 units wil require you to pay $60,000 ($300 multiply by 200 units), and when you use margin, you will pay about $30,000 for the value of those 200 units.

The rest of the money is borrowed, and interest is being paid on such money. So as you can see, margin trading in stock is quite expensive, interest focused, and not suitable for all traders.

In forex, margin trading is something more interesting. Margin is the smallest money that you are required to open a trade. When an account is opened, the deposit you pay is the margin, and it is basically 1% of the worth of the position. As an example, when you purchase about $100,000 of USD/JPY, and this is at a leverage of 100:1, the amount that is required is only 1% which is about $1,000.

Where is the other $99,999 coming from?

The other money is collaterized with the rest in your account, and another interesting thing, you will not be paying any interest. You should also be aware that when you increase your leverage, you consequently increase your risk. The only way to reduce this risk is to watch your account balance on a regular basis, and also make use of stop-loss orders to cut down losses.

Lets give you a demostration of the effect of leverage.

If you have an acount balance of $5,000, and you want to purchase the USD/CHF pair, because you think the USD will rise in value. Ok thats a good one. At a current bid/ask price of 1.2300/1.2305, which you can sell 1 USD for 1.2300, and buy CHF for 1.2305. The spread is 5 pips, take note of that.

If your leverage is 100:1, your first deposit will be $1,000 for this trade.
And if at your speculation, the rise moves from its intial cost to 1.2380/1.2385, which is considered a rise of 80 pips, you need to sell off your USD for the CHF. Now selling price will be at 1.2380. So selling your position gives you a profit of about 750 CHF. Converted to USD, you will have a profit of $605.

This calculation is arrived at by dividing the profit in CHF by the current rate (750 divided by 1.2380).

In summary, you bought a trade with $1,000, and made $605 as profit, you return is about 60%. So if you bought this trade without the use of leverage, you won't make any significant return, and it will certainly be less than 1%.