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Forex Education

The most important step for a forex trader is to begin on a solid foundation of a good education. This is key to preserving capital and ensuring the long term survival and ultimate success of the Forex trader.

The key to a good forex education is to get a great Mentor. A Mentor is defined as a wise and trusted counselor; someone who has already proven themselves and can hold your hand and guide your footsteps as you walk along the path to success. Market Traders Institute, http://www.markettraders.com/landings/forexIQ/forexIQ.aspx?id=THEFOREXMOM(Blog), have been excellent mentors for me. They have provided me with a solid foundation for understanding the forex.

The easiest way to begin your forex education is to read my posts in this order:
1. Introduction to the forex
2. Candlestick Formations
3. Forex Trading Strategies

The three black crows candle formation does not happen very frequently in stock trading, but when it does occur swing traders should be very alert to the crow’s caw.

The candlestick pattern’s metaphor is three crows sitting in a tall three. Essentially, it is a reversal formation that occurs following a strong advance.

On the day the first black crow makes its appearance, the formation is most predictive if the first “crow” — or dark candlestick — closes below the white candle’s real body. That is the first step in setting up a Minor trend reversal — where today’s high is lower than yesterday’s high and today’s low is below yesterday’s low.

Two more long-bodied consecutive down days then ensue. On each of these days, it appears as if the stock wants to regain its former strength, as the stock opens higher than on the previous day. By the end of each session, however, the sellers regain control and the stock drops to a new closing low. Here is what three black crows candlestick pattern looks like:

Three Black Crows

Three Black Crows

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Bearish three outside down candlestick formation

Bearish three outside down candlestick formation

After an established uptrend a clear bearish Engulfing pattern occurs (one blue candle and a second bear move that drives price below the prior day low and closes near the bottom of the range). The third day is a red day with an even lower close than the second day.

In a market characterized by uptrend, day-twos red candle close completely below day-one, engulfing it completely. The first two days are a classic pattern that suggests a sell-off has taken over the market and is breaking the established trend.

This bearish reversal is confirmed by a still lower day on day-three. 

 Connections to Bearish Engulfing Pattern

The Bearish Three Outside Down pattern is just a continuation for Bearish Engulfing with the third day as confirmation for trend reversal. A Bearish Engulfing pattern by itself is a moderately reliable reversal signal, but when it is followed by a red day (forming the Bearish Three Outside Down), the pattern becomes much more reliable.

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Bullish Three Outside Up Candlestick formation

Bullish Three Outside Up Candlestick formation

After an established downtrend, day-one continues the trend with a red candle. Day-two is a long blue day that engulfs the body of the first day, closing well above the previous days open.  The third day is a blue day with an even higher close than the second day.

The Bullish Three Outside Up pattern is one of the more clear-cut three day bullish reversal patterns. The formation reflects buyers overtaking selling strength, and often precedes a continued rally in price. In fact up to day-two we have a bullish Engulfing Pattern, itself a strong two-day reversal pattern.

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Three Inside down candlestick formation

Three Inside down candlestick formation

Following an uptrend, a long blue day occurs.  The second day is a red day where the body is engulfed by the body of the first.  The third day is a red candle with a lower close than the previous day.

During an uptrend a large upward price movement occurs, illustrated by a long blue candlestick. The price is then driven down, as shown by a red candlestick, reversing some of the upward movement from the previous day. The reversal pattern is confirmed with the third days red candle completes the bearish pattern.

This pattern is a confirmation of the Harami pattern.

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Three Bullish Inside Up Candlestick Formation

Three Bullish Inside Up Candlestick Formation

After an established downtrend, day-one is long red day.  Day-two is a blue day that trades up to the midpoint of day-one.  The third day is a blue day carrying price above the first bearish candle

Up to day-two we have a simple Bullish Harami pattern. Haramis give a clear-cut formation reflecting buyers overtaking the strength in the downtrend. This formation often precedes a continued rally in price.

With just a Harami pattern, Candlestick analysts will usually wait for additional conformation before entering a long position. The Bullish Three Inside Three formation offers that confirmation.

Additional Confirmation For this candle to take full strength day-threes candle needs to close above day-ones high, creating a new high. The Bullish Three Inside Up formation suggest buyers have seized a degree of control from the bear trend and analysts will watch for buying opportunities to come.

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Bullish Three White Soldiers Pattern indicates a strong reversal in the market. It is found in a bearish market and consists of three long candlesticks stepping upward like a staircase. The opening of each candlestick is within the body of the previous day, and the opening of each day is slightly lower than the previous close.  It is better to see the opening prices above the middle of the previous day’s body. If the white candlesticks are very extended, one should be cautious about an overbought market.

Three White Soldiers

Three White Soldiers

Bearish Three White Soldiers Pattern indicates a strong reversal in the market. It is found in a bullish market and consists of three long candlesticks stepping downward like a staircase. The opening of each candlestick is within the body of the previous day, and the opening of each day is slightly higher than the previous close.  It is better to see the opening prices below the middle of the previous day’s body. If the white candlesticks are very extended, one should be cautious about an oversold market.

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There are many ways to determine whether the market is trending or sideways. Here are a couple ideas:
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Click on this page to see a list of videos I have made to help you work with the Meta Trader 4 platform. There is a little learning curve involved in learning this, but it is well worth it. Come back to this page periodically, I shall continue to make videos and add them to this list.  Continue reading

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Session

EUR/USD

GBP/USD

USD/CHF

USD/JPY

Tokyo

66

79

100

66

London

80

99

121

74

United States

67

78

101

60

You can see that the London session returns the most pips.

Day of the Week

EUR/USD

GBP/USD

USD/CHF

USD/JPY

Sunday

24

31

36

25

Monday

92

110

141

95

Tuesday

102

128

162

104

Wednesday

101

123

158

106

Thursday

83

98

121

77

Friday

80

96

117

72

These are the worse times to trade:

Fridays: Fridays are very unpredictable. This is a good day to trade if you want to lose all the profit you made during the rest of the week.

Sundays: There is very little movement on these days. Trade this day if you want to start off your week with NEGATIVE pips.

Holidays: Banks are closed which means very little volume for whatever country is having the holiday. Holidays are great to trade when you would rather lose your money than take a day off and enjoy the other finer things in life.

News Reports: No one really knows where the price will go when a news report comes out. You could lose a fortune trading during news releases if you don’t know what you’re doing. Price acts like a drunken monkey during these times and become unpredictable.

If you can’t trade the best times, try these suggestions:

  • Move to a better time zone. Move to London preferably. Sure you’d have to pack up and start a whole new life, but hey, at least you can trade right?
  • Trade at work (be sure you have some “real” work ready just in case your boss sneaks up behind you and asks what you’re working on). I also recommed you master the ALT-TAB key combination (if you use Windows) so you can quickly switch windows at a moment’s notice. This option can be the ultimate perk because your employer is basically paying you while you trade forex. Gettin’ paid while gettin’ paid if you know what I’m sayin’.
  • Become a swing or position trader. As a swing/position trader, you won’t have to constantly monitor the markets and you can check or look at them when you get off work.
  • Trade a different session even if it’s not the busiest one. If you can’t trade the London or U.S. session, then trade the Tokyo session.  However, you should be disciplined and trade it every day.  You will start to learn how it moves and can develop strategies that are specific to that session.
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    It is important to know the Daily Trading Range for each currency. Although this is just an average range for each currency, when the currency reaches this range it is likely to be exhausted and the trend will not continue.
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