Tradable FX Strategies
Foreign exchange (FX) is a worldwide currency market that exists as a large network of computer systems. Currencies traded on FX are priced in pairs. For example, the value of the dollar is meaningless unless you know what someone is willing to pay for it in euros, yen or another world currency. Price pairs can be bought and sold, much like stocks. If you can sell a pair for a higher price than you paid for it, you keep the difference as your profit.
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Trendline Strategy
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When an FX pair is rising in an uptrend, the price tends to take two steps forward for each step back. This creates a pattern of higher price highs and higher price lows. By using the drawing tool provided by many price charts, draw a line connecting the price lows, creating a trend line. When the price pulls back to the trend line, it offers a good opportunity to buy as prices often continue in the direction of the trend.
Moving Average Cross Signal
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A moving average is a calculation of the average price over a certain period of time. Moving averages are plotted as lines directly on the price chart. If you plot a slower 13-day average with a faster 7-day average on your FX pair chart, you create a cross signal system. When the 7-day average crosses up over the 13-day average, a buy signal is provided. When the 7-day line crosses down over the 13-day line, a sell signal is provided.
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MACD Signals
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The moving average, convergence-divergence (MACD) provides simple, relatively accurate buy and sell signals. The MACD is an indicator that uses a complex formula that factors recent price averages. It is plotted as two lines -- usually a black line and a red line -- that oscillate on a graph below the price area of a chart. When the black line crosses up over the red line, a buy signal is provided. When the black line crosses down over the red line, a sell signal is provided.
Bar Chart Reversal Signals
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A bar chart is a type of FX chart that plots the high, low and last price for each day. The last price is represented by a horizontal line and the high and low are represented by a vertical line. A reversal buy signal is provided when the price dips during the day, but closes near the high for the day, creating a price bar that looks like a cross with a long tail. This indicates that sellers ran out of steam and buyers were able to push the price higher once again by the end of the day.
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References
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