The Aroon Oscillator is a variation and is developed from the Aroon Indicator. The Aroon Indicator is a trend measuring indicator which is commonly used in the Forex Market. The indicator shows how strong the current trend in the market is. It measures the trend and whether they are likely to go on for a while or a reversal can be expected in the near future. The two types of trends in the Forex Market are up and down and the Aroon Indicator has assigned its name to both of them. The Aroon Up measures the number of time periods that have elapsed since the price reached its highest level. The Aroon Down measures the number of time periods have passed since the price was at the bottom level.

Calculation and Interpretation of the Aroon Oscillator

The Aroon Oscillator is calculated using the simple formula: Aroon Up – Aroon Down. The solution of this formula is an effective market indicator as well as a signal for the Forex Traders to act in a certain way. The value of the oscillator is an important signal. If the answer is positive, which means it is above zero, it means that a positive growth is present in the Forex Market and that the market is on an uptrend. On the other hand, a negative, or less than zero reading indicates there is a negative growth rate in the Forex Market and that a downtrend is prevalent at that time.

Well, there is a third possibility as well. If the reading lingers near zero, whether above or below, it means that the current trend can reverse at any moment. However, the reading can change in a matter of small time periods and the Forex Traders can then consolidate their current position.

The Aroon Oscillator moves between the range – 100 to 100. It is a big range but the oscillator never goes below or above the prescribed limits. As mentioned above, a positive reading indicates and uptrend and a negative reading indicates a downtrend.

Calculation and Importance of the Aroon Up and Aroon Down

The calculation of the Aroon Up and Aroon Down indicators is not as simple as that of the oscillator. Not only is authentic information required but also the trader needs to be adept as using the information correctly. For the Aroon Up, you have to see the time that has passed since the price was at its highest level. It can be difficult if you don’t have the exact time. The number of time periods that have passed have to be known and then they will be calculated as a percentage of the total time that has passed since the market opened. This will be the value of the Aroon Up. Aroon Up will be 100 when the price is at the highest level for the day.

The calculation of the Aroon Down is similar and you will be looking for the number of time periods that have gone since the price was at its lowest level. Aroon Down will be – 100 when the price is at its lowest level for the day.

Reading the Aroon Up and Aroon Down

It is possible that both the Aroon Up and Aroon Down start moving downwards or upwards in close proximity with each other. The trend of the market can not be gauged during that period and it can be said that the market is consolidating and the current trend is not very strong. For the Forex Traders, the Aroon Up and Aroon Down indicators can be effective signals to enter and exit the market and also to set the stop loss limits.

In the case that the Aroon Up is under 50, then it means that the uptrend in the Forex Market is losing its strength. Similarly, when the Aroon Down is higher than – 50, the downtrend in the market is growing weak. A value higher than 70 for the Aroon Up and less than – 70 for the Aroon Down is a clear indicator that the trend is strong in the direction of either one of them. A value of lower than 30 for the Aroon Up and more then – 30 for the Aroon Down shows that the trend is strong but in the opposite direction, depending on which value is higher or lower. 

Read our latest Forex brokers reviews of: AVAFX, Plus500

Tweet This Post

1. Focus On One General Forum

There are so many forex forums that it is easy to spend all day surfing from one to another. If you want to make your mark in a forum and still have some time left over to trade, not to mention eat and sleep, you are going to have to concentrate on one.

So it’s fine to spend a few days looking around, but then pick out one active and helpful forex trading forum and concentrate on building your presence there. Points to look for in a good forum are:

- positive and helpful comments from moderators and other members;
- the presence of some members who are clearly successful and experienced traders;
- useful product and broker reviews and interesting discussions;
- an active community, with posts being made by a lot of different members every day;
- any spam or flaming is quickly dealt with by moderators.

2. Use Product Specific Forums Too

Of course, if you have bought into something like an expert advisor or a downloadable system where the product vendor provides a users’ forum, you will want to take advantage of that too. That is the place for specific questions about that product. You will probably find many useful hints and tips for making the most of it, and perhaps you can offer some help to others too.

3. Ask The Right Questions

If you are a beginner, do not waste people’s time with very basic questions that could easily be answered by a quick search on Google. Of course, if you have looked all over and cannot find an explanation, that is a different matter. Go ahead and ask, but be sure that you have also used the search facility within the forex trading forum to see whether somebody else has asked that question before.

4. Look To The Future

If you become a successful trader and continue to use the forum, then it is quite like that sooner or later you will become one of the experts who is helping others. Perhaps you will even be invited to be a moderator, which often means that you are paid a fee. Or you may develop your own coaching program and want to offer it to forum members. At that stage, people are likely to check back over your old posts to find out more about you.

Keep that in mind every time you make a post, and it will help you focus on the positive. It may also help you keep your temper when threads in the forex trading forum are becoming heated!

Tweet This Post

1. Broker rules

Check your broker’s terms and conditions if you want to trade around news announcements. Some will automatically close your currency trades at times of high volatility. Others will not allow you to open a new trade.

Many brokers will increase the spread at these times and you may not be told by how much. Higher spread can mean that you end up losing on a trade where you thought you made a profit, so it is very important to take this into account. The higher spread can be anywhere up to 5 times the normal spread for that currency pair.

2. Bigger slippage

Slippage happens when you do not get the price that you saw on your screen. It is more common with some brokers than others because it depends on their business model and whether they have to cover the risk represented by your trade.

With some market makers you can experience significant slippage even in relatively stable times. Around the time of a forex trading news release it is even more likely because the price can change in the split second between you seeing it on screen and clicking a button.

The same applies to stop and limit orders: you are much less likely to get the price you expected at these times. This can mean that a system that worked well on back tests has very different results in real time.

3. Expectations

Any trader who plans to make money from forex news must take into account the effect of prior expectations on the market. This means allowing for any movement that has already happened in anticipation of the announcement.

Let’s take an example. Imagine that the US GDP is about to be announced. You are expecting the news will be good, so the dollar should rise. However, if everybody else expects the same thing, the dollar may already have risen in the hours and days before the announcement.

Then maybe, when the GDP is actually announced, it turns out not to have increased quite as much as people expected. So in that situation, the dollar might actually fall. The news was still pretty good, but it did not reach the market’s expectations.

The alternative to trading with the aim of making money from news announcements is, of course, to stay out of the market any time that a major announcement is due.

Most traders who rely on technical analysis for their forex trading systems prefer this approach and it is highly recommended that beginners do this. You need considerable experience as a forex trading to make money from the price fluctuations around forex trading news.

Tweet This Post

This is partly the fault of advertising. It is advertising that trains us to want it all, right now. It is down to the brokers, robot developers and other people who make money from selling forex trading services.

They show mouth watering pictures of the amazing houses, cars and lifestyle that you can have when you are earning thousands of pounds a day as a top level forex trader.

What they do not say, or only in the fine print, is that this is the tiny minority of traders and they didn’t get there without some sleepless nights, some losses and some hard work.

Most online forex trading beginners lose money: in fact, most lose so much that they quit, and it is usually because they tried to run before they could walk.

There are certain important things in forex trading that you can only learn from experience. These include how to handle the stress and how to deal with the situations that arise in the real market. It is not about systems.

Systems have their place but they do not have to be complex or difficult. In fact, simple systems are better because you do not have to spend so long on analyzing the signals before you open a trade.

However, you do have to be sure that you have enough of an indication that there is a good chance of a successful trade. Never trade on hopes or intuition. It simply does not work.

Another point where simplicity works well is in your training. There must be thousands of books, courses, ebooks, video series and websites that all claim to teach you the best way to success with online forex trading.

Most of them probably contain a lot of good information. But the sheer number of them can cause people to chase their tail, hopping from one to another without ever completing anything.

So if you value your sanity, make a rule that if you buy, attend or download a forex course you will work all the way through it and test it out (in demo) so that you have completely understood it before getting into anything else. Do not just flick through it and then look for something else because it did not look as easy as you hoped.

If you keep looking for the magic system that will turn the average person a millionaire by the end of the week you will just waste time and money because it does not exist.

If your temperament is suited to forex (you are cool headed and analytical) you will learn faster than somebody who is not, but you still have to study and practice in a disciplined, focused way. Then it may be possible to make money with online forex trading.

Tweet This Post

First let’s rule out some systems that never make money for anybody, at least not in the long term. These are the kind of systems that gamblers sometimes call loss recovery systems. They involve varying the risk according to whether the last trade won or lost.

The idea is that if your last trade lost, then your next is more likely to win, so you take a bigger position. However this idea is completely wrong. Statistics disprove it every time. Gamblers lose their shirts on these systems and it would be crazy for a forex trader to use a system like that.

So with that rant out of the way, let’s look at how to identify a profitable system. To do that we will introduce the concept of edge.

Edge is the measure of a system’s returns over a period of time. It is a simple calculation but you do need a reasonable number of results to measure it from. Back testing is a good way to get those results.

Demo testing is even better because it is closer to the real situation, but it can take a long time to collect enough results from demo testing so most people use back tests which are quicker.

Edge is simply the probability of a win multiplied by the average profit on a winning trade, minus the probability of a loss multiplied by the average loss on a losing trade. Results are calculated after subtracting the spread and any other per trade costs.

So if we take a scalping system that makes an average of 20 pips on a profitable trade and loses an average 30 pips on a losing trade, with 80% of its trades being profitable and only 20% losses, this is the edge for this system:

Edge = (80% x 20 pips) – (20% x 30 pips) = 10 pips

That would be a profitable system and a good one to use if you were interested in becoming a scalper. However, you might find a very different type of system that had results that were just as good.

For example, you might come across a system that worked the opposite way, with a lot of small losses, say 60% losses of 10 pips each time, and then some bigger gains, making say 40 pips average profit on successful trades. For this system,

Edge = (40% x 40) – (60% x 10) = 10 pips

So these two very different systems have exactly the same results, and the decision on which was the best forex trading system for you would be entirely dependent on your trading style.

A good way to test this out would be to operate both systems in a demo account, say for one month each. At the end of the month you could analyze the theoretical results from a back test over the month to see how your own results varied from the back tests.

This would give you an idea of how successful you would be operating that system for real. Comparing with back test results for the same period would prevent you from throwing out a system just because it happened to have a bad month. This could be a useful comparison when selecting the best forex trading system from a number of systems that are profitable in theory.

Tweet This Post

There is a popular saying among traders, ‘the trend is your best friend’. It can help you identify which way prices are moving so that you can ride a wave for a medium or long period and make money from it. This is well known, and yet most people who begin forex trading just lose money. Why is this?

The beginner starting out with trading often spends a lot of time online. This is necessary in order to understand the market and master any viable trading system.

However, it leads to beginners assuming that they need to be constantly looking for trading opportunities and trading as often as possible once they start trading for real.

Beginners often have a gambling mindset. They do not have the patience to wait for the ideal opportunity: they want to be in the market all the time, even if it means making more losses.

They will jump in at the slightest indication without checking other factors, and they often use short term day trading or scalping strategies for a quick entry and exit. This is not the best strategy for a beginner.

Instead, it is important to be sure that the price is going in a certain direction before opening a trade. This may mean being patient and perhaps only opening one or two trades a week, but it does give us a better chance of making money.

It is easy to see this with an example. Consider two traders who are both successful. Trader A is a scalper and likes to be in the market as often as possible. He makes several trades a day with small gains on each and a few larger losses. On average, he makes 10 pips a day, so 50 pips a week.

Trader B takes a longer view. He will only open one or two trades in a week but he expects them to make 50-100 pips each. Occasionally of course he has losses but they are rare because he has waited for situations where he is almost sure of the price going his way.

So on average, he will make more money than Trader A. He also has a lot more free time and a less stressful life.

Therefore, if you want to stay in forex trading for the long term and actually make money with it instead of being one of the many losers in this market, it is important to look for forex trading tips that will help you learn to follow the trends in price movements.

Tweet This Post

Many beginners start with day trading because they like the idea of being in and out of the market quickly. It seems to a beginner that there must be less risk because you are not exposed to danger for so long. But in fact this is not true. The chances of having a trade go against you are just as big.

Of course, it is common for forex day trading strategies to involve a smaller position than longer term trading, or they can have a smaller range in terms of stops and profit targets.

So in a sense the risk is lessened, when looking at one trade. But when you consider all of the trades that the system undertakes in a month, it is clear that overall there is no particular safety in day trading.

So does that mean we should not do it? Not necessarily. Just be sure to do it for the right reasons.

Some people consider that day trading systems are less stressful. Again this can be an illusion, but it is true that day trading seems to suit some people better than others. The pace of trading is much faster, with decisions being made on a very tight timescale under more stress.

But on the other hand, at the end of the day you can switch off your computer knowing that every trade is closed and nothing is going to happen to your account balance while you sleep, so it can be easier to relax and forget about trading when it is time to take care of the rest of your life.

If you are considering day trade currency systems, be aware that an estimated 80% of day traders are losing money. Of course this may be because so many of them are beginners who do not know what they are doing.

However, you want to be sure before you start that you have a good chance of being in the other 20%. This means testing out systems thoroughly in demo mode as well as back testing before ever considering going live in the real market.

Then start small because it is hard to know how the pace is going to affect our decision making powers until we are trading for real. Never assume that because you made money in demo, it is going to be easy when it comes to the real market.

Many people make this mistake: you will surely have seen people complaining in forums about some system that worked in demo but not when they went live. They do not seem to understand that this is not likely to be the fault of the forex day trading system!

Tweet This Post

When you trade currency, you are not limited to business hours as you would be with the stock market. Forex is a global market so it crosses many different time zones. But is it actually open for trading 24/7?

The answer to that is no. The forex market is open 24 hours a day, but only five days a week. You might also find it closed in most countries (and very quiet in others) on days that are holidays in most of the major economic powers, such as Christmas. But generally it is open 24 hours Monday through Friday.

In fact in many parts of the world, forex trading times begin on Sunday evening or even earlier. This is because the first markets to open are in Australia and New Zealand, which are ahead of most other parts of the world. At 8 am Monday in Sydney it is 10 pm Sunday in London, 5 pm Sunday in New York and 2 pm Sunday in Los Angeles.

Those times may vary a little because of seasonal hour adjustments in the different countries but for most people it means that if you want to start trading Sunday night, you can.

However, the market is going to be pretty quite at that time, at least until the clock gets around to 8 am in London and the British and European trading floors open up for business.

Before that, it’s what is known as the Asian session which might be a good time to be online if you are trading a cross pair whose markets are both open such as the Aussie dollar and the yen, but otherwise there is less happening.

Some systems are based around a quiet market but for most beginners it is better to start trading at busier times when you are more likely to get the prices that you see.

This means that the best forex trading times for beginners are when the London and New York markets are open, and especially during the overlap of those times. These are the two busiest trading floors.

The overlap happens when it’s morning in New York and afternoon in the UK, and that is when you will see the highest volume of trading in just about all currency pairs.

Remember, we are not limited to trading our own country’s currency, so a trader in New York may be dealing in EUR/GBP or just about any other pair.

At the other end of the week the situation repeats, with the Sydney market closing first, when it is still Thursday in many other time zones. The last of the big markets to close is New York at 4 pm EST on Friday. So forex trading times run 24 hours a day from 5 pm Sunday to 4 pm Friday EST.

Tweet This Post

But even with a demo account, it is important to take your trading seriously from the start. Here are 3 pointers that will help you make money with any forex trading system.

1. The One Trade Rule

It is best to open trades one by one. Even for an experienced trader, it is important not to have too many trades at risk at the same time.

This does not necessarily mean that you only ever have one trade open. If you have a trade that is in profit and you have moved a trailing stop beyond the entry point so that this trade cannot lose, it is possible to open another. But it is important to have moved that stop.

Always keep in mind that some unpredictable event such as a natural disaster, war or sudden death of a political leader could throw the whole market into confusion. Or what if your phone lines go down and your internet connection is lost?

2. Risk: Not Too High …

Risk management is vital for successful currency trading. You can succeed without being the perfect technical analyst but you cannot make money with global forex trading without understanding risk management.

If you are risking too much on each trade then at some time or another your funds will be wiped out. All systems have their ups and downs and if your risk is too high, your account balance will not be able to recover from the downs.

3. … And Not Too Low

On the other hand, if your leverage is too low, you will not make much money even from a profitable system. And if your stop loss is too close to your entry point, it will be triggered too soon.

So risk must be optimized for your system. It depends on drawdown and average profit or loss per trade, but a good rule of thumb is to risk between 1% and 5% of your funds on each trade.

Only take the higher figure if losing your entire balance would not be a disaster. Generally, the more money a trader has in their account, the more careful they are with it.

Some traders consider that having a set risk per trade is too inflexible and the risk should depend on the strength of a signal. That is fine as long as the variable risk is still defined according to the system.

What you want to avoid is varying the risk depending on intuition, or depending on the result that you had from the last trade. That is a recipe for disaster in global forex trading.

Tweet This Post

Savvy traders are keen to lay their hands on any information that can help them increase their profits and minimize their losses, while beginners need guidance for sure if they going to survive in these dangerous waters.

It is possible to find study courses and seminars offline, but pretty much everyone prefers to choose an online forex trading course. The prices can vary enormously but usually they are cheap by comparison with offline seminars, and you get a lot of information.

You will usually receive an ebook that you can download instantly and either read online or print out to study later. This is very convenient because there is no waiting.

Your online course may include other elements too, that cannot be included in a printed book. For example, in some cases you might have access to a private forum where you can ask questions and chat with other traders who are taking the course.

If this is not provided, then at least you will have some method of getting support for anything you do not understand. You will be able to log a support ticket and you can expect to receive fast support from the author of the program or a staff member.

Often you will have access to video training which allows you to watch over the shoulder of a trader so that you can see example trades happening in real time.

If a picture paints a thousand words, a video can take the place of ten thousand words in many cases. There is nothing to beat seeing the system you are planning to use, actually working in action before your very eyes.

Of course, all of this is available to you whenever you want it. There are no scheduled classes to attend. If sometimes your forex course might include a webinar (an online seminar) or conference call, it will almost certainly be recorded so that you can listen in later if you are not available for the live event.

Forex trading courses are usually very practical in their emphasis. You can expect to learn at least one practical trading system that you can put into action and make money with.

Of course you should test it in a demo account first, but if it does not appear to be successful for you, you should be asking questions to find out what went wrong. You could not get this kind of feedback if you just went out and bought a book.

If you have some experience with forex trading, you will probably find that you are already familiar with some of the material. In this case you can skip through to the parts that interest you.

Understand that the author has to provide enough basic information for a beginner to follow, and try not to become impatient with this. You may find that as much as 90% of the course material is information that you already know. That does not matter. The remaining 10% that is new to you could be hugely valuable for you.

Concentrate on that and you will still get great value for money from your online forex trading course.

Tweet This Post