1. Price Indications (oscillators e.g. RSI)
2. Number theory (Fibonacci numbers, Gann Numbers)
3. Waves (Elliott's wave theory)
4. Gaps (High –low, open – close)
5. Gaps (High –low, open – close)
We will look into trend lines and how they can be used to maximize the information available to you through your superior charting tools on Septafx's MT5 platform. You can learn more about technical analysis by attending one of our FREE weekly webinars.
TYPES OF CHARTS
Below are some of the most common types of charts used by traders:
Point and figure Graph
Hedging, using it to your advantage:
Hedging can be a useful tool to the Forex trader. When you have an open position, for example, you are long on a USD/JPY trade and you want to hedge your position in order to protect your losses if the market moves the other way. In order to hedge this position you would need to open a position in the same instrument going the opposite way, (a USD/JPY short). You will now neither gain nor lose any equity in your account because the gains and the losses will cancel each other out and thus you are protected from any losses, but you will not make any profits either until you close one of the two positions (because you have one position in USD/JPY going long and one identical position short, hence negating any gains or losses from one another) and take a definitive decision on the market's direction, but hedging has bought you time to do just this.
Hedging can also be useful if the trade is in your favor
You may also hedge a winning trade to protect your gains, if you don't want to completely close your position. When you do this you won't gain or lose any more money with that position. The advantage to this would give you the opportunity to keep trading those positions in the future and give you a break. You can always close both positions. If you hedge a winning position you can follow the above steps 1-4 to keep trading your position the next trading day. Please note that hedging can get complicated. Try to keep it as simple as possible and try not to have a web of hedged and un-hedged positions open at the same time; as it becomes exponentially more difficult to keep track of, and what positions to let go etc. Hedging is also optional and you don't need to learn how to use this tool if you choose not to. You can be a successful trader by simply using stop and limit orders.
Hedging can help stem the bleeding
Hedging a losing trade won't solve your problems, but it will
Some traders will hedge losing trades instead of stopping out there position, because they have a chance to win back the losses of the original bad trade. For example: You are looking to 'Trade the Trend' so you go long on the EUR/USD. The indicators signaled BUY so you opened up a long position. In case the market goes against you; you choose to hedge instead of using a stop loss. In this case your fears are confirmed and the market moves against you. Now because you hedged your trade; you have a losing position and a winning position going in the opposite directions
When your position is hedged, you are safe and you won't lose any more money in your account. There are various options form here:
- Wait until another chart set up occurs and proceed to step 4. or go to step 2
- Wait till the next trading day or session and use your analysis tools to identify another trend
- Instead of opening up another position, simply get rid of the bad position that was hedged. So if the indicators the next day signaled long in the EUR/USD, like in the above example, then you would get rid of the short, losing hedge and hope that the price will rise enough to erase the previous day's losses to make a profit.
- If your position moves against you again you can hedge that position again and repeat steps 1-3.