Meanwhile, a bullish divergence indicates a possible entry point for traders before the price begins rising. Forex divergence is one of the basic early signals. Divergence is easy to spot in any market and on any trading instrument. The daily EUR/USD chart below gives a clear example of hidden divergence and the trend reversal that follows. This sort of chart pattern means that when the stochastic was overbought the second time, EUR/USD buyers couldn’t push any higher. So, the upside was complete even though EUR/USD couldn’t make new highs. Trading based on divergence alone is not accurate. I strongly suggest …

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A correlation coefficient of -1 indicates that the currency pairs are perfectly negatively correlated, that is, a higher value for one pair tends to correspond to a lower value for the other. A correlation coefficient of 1 means that they are perfectly correlated, indicating a higher value for one variable tends to correspond to a higher value for the other. The weaker the relationship, the closer the correlation coefficient is to 0. To be an effective trader and understand your exposure, it is important to understand how different currency pairs move in relation to each other. Some currency pairs move …

In Forex, this candlestick is most of the time a doji or a spinning top, preceding a third candle which closes well below the body of the second candle and deeply into the first candle’s body. The first candle has to be relatively large in comparison to the preceding candles. This candlestick pattern generally indicates that confidence in the current trend has eroded and that bears are taking control. Daily candlesticks are the most effective way to view a candlestick chart, as they capture a full day of market info and price action. Another key candlestick signal to watch out …

Thousands of professionals also trade forex through funds, institutions, central banks, and commercial banks, among others. This leverage is great if a trader makes a winning bet because it can magnify profits. However, it can also magnify losses, even exceeding the initial amount borrowed. In addition, if a currency falls too much in value, leverage users open themselves up to margin calls, which may force them to sell their securities purchased with borrowed funds at a loss. Outside of possible losses, transaction costs can also add up and possibly eat into what was a profitable trade. There is a huge …