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What is the crowd psychology behind a descending triangle? Every time the currency price goes down to a certain level that forms the support there are buyers who want to hold that level stubbornly for their own reasons. Buyers thus push the price up each time the support level is tested. Spotting a descending triangle in a downtrend signals the downside breakout of the support level.

Sellers are quite anxious to sell as they feel that the currency price should fall over time. Thus when the price bounces off the support level, the bears take the opportunity to short again.

If it is a down trend, spotting a descending triangle should allow you to be prepared for a downside breakout from the support level. Bulls and bears face a skirmish with both camps not feeling confident of the next market move as with an ascending triangle. This is the transition period from low volatility to high volatility.

When the support level is broken many of those long positions which have been placed above that level soon get stopped out. Prices tend to break in the middle or the final third part of the triangle formation.

Unless you have reversal signals in the form of technicals or turn around of the market sentiment, you should always assume the continuation of the prevailing trend. It tends to give off even more bearish vibes than if it is formed during an uptrend if the descending triangle is formed during an existing downtrend.

If the descending triangle appears in the midst of a downtrend, the triangle serves as a continuation pattern. A descending triangle should not be considered to be the final word on impending downside breakout. However, with that said prices also sometimes breakout from above the descending triangle successfully in a burst of bullish momentum.

Symmetrical Triangles: There are no horizontal lines in symmetrical triangles. This differentiates it from the ascending and the descending triangles. A symmetrical triangle consists of two converging trendlines that join a series of lower highs and higher lows. A symmetrical triangle has some resemblance to a wedge pattern.

As they are willing to accept less and less of the price over time, the lower highs reflect the mildly bearish conviction of the sellers. When buyers of the currency pair are willing to pay a bit more to get a piece of action, the higher lows are formed.

A symmetrical triangle tends to be less reliable as compared to an ascending or descending triangle. There is no way to predict the future breakout direction until one of the symmetrical triangle lines is penetrated. As with the other sloping triangles, breakouts usually occur in the middle or the final third of the triangle.

When trading triangle breakouts, you should always consider other pieces of information so that you can better pinpoint a higher probability trade set up. Besides the triangle formation, decreased volatility can also be detected with the exponential moving averages and the Bollinger bands.

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Know These Forex Charts. Learn Forex Trading!

You should know and understand triangle formations. Triangle formations appear relatively common in price charts. Through triangle formations you can ride on a potentially high momentum move that is likely to occur after a period of decreasing volatility. Triangles are one of the best depictions of decreasing price volatility in the currency price charts.

All triangles show decreasing price volatility in action. When a particular type of triangle has been identified by the trader, a high probability trade is in sight when the technicals are coupled with the current market sentiment.

Basically there are three types of triangle formations: 1) Ascending, 2) Descending and 3) Symmetrical. Triangles are also known as Wedges. Triangles are basically continuation patterns but they can also be reversal patterns. This depends on the different types of triangles and whether they occur in an uptrend or a downtrend.

Ascending Triangle: An ascending triangle can be easily identified by its upward sloping trendline. This upward sloping trendline creates the lower boundary of the ascending triangle. It is basically a bullish signal when you see an ascending triangle on the chart. An ascending triangle can be either a continuation or reversal pattern.

The upper boundary is roughly horizontal. This horizontal line should connect at least two price points. The horizontal line represents the resistance level. What is the crowd psychology behind an ascending triangle? The crowd psychology behind the ascending triangle is this that every time the currency price goes up to the resistance level; there is sellers in the market who push the price down.

There are buyers who believe very strongly that the currency price should rise based on their own reasons when the prices retreat from their high and are on the way down. They thus bid the prices higher than the previous low forming the upward slope of the triangle.

When these two lines, one sloping and the other horizontal converge at one point the triangle is formed. The appearance of an ascending triangle should prepare you for an upside breakout from the resistance. Breakouts tend to occur in the middle or the third of the triangle formation measuring from the start of the triangle to the tip.

It acts as a bullish reversal pattern if it formed during an existing downtrend. It is seen as an uptrend continuation pattern when you see an ascending triangle during an uptrend in general.

Descending Triangles: A descending triangle is viewed as a bearish formation even though it can be either a continuation or reversal pattern. A descending triangle works the opposite of an ascending triangle.

A descending triangle can be identified by the downward slope of the trendline which is formed by connecting the lower price highs. This downward sloping trendline forms the upper boundary of the triangle. The horizontal lower boundary of the triangle represents the support level and it is formed by connecting at least two price points.

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Know These Forex Charts. Learn Forex Trading!

Third Stage-Aging Trend: Aging trend is the period of consolidation as the trend comes to maturity. This is the period where lot of profit taking will take place. As the momentum of the trend exhausts itself, volatility tends to decrease at this stage of the trend.

Both the bulls and the bears are hesitant to make daring moves at this stage of the trend. Experienced traders try to get out of their trades at this stage of the trend by closing their positions. This satisfies the appetites of inexperienced traders as they consolidate their positions.

This is the period of consolidation and the prices tend to stay calm during this period. Currency prices have moved by a large amount in the previous period of high volatility. The trend takes a short break and the volatility is low during this stage of the trend.

End of Trend: This is the last stage of the trend and this is the time when the prevailing trend ends and reverses itself after some new information is revealed about a currency that changes the opinion of the crowd. As the market players tend to absorb the information, this results in the rapid adjustment of prices within a short time.

Traders become desperate to get out of their positions especially if they have been caught on the wrong side of the market. Many stops will get triggered during this stage of the trend.

During this stage of the trend there is a sharp follow through of the prices in the reversed direction. You can see even within a trend currency prices can experience decreased volatility followed by increased volatility as the crowd psychology keeps on changing.

Traders with open positions during this low period of volatility are the most vulnerable to unanticipated news. Decreased volatility can be found during trending or ranging phases.

However deceased volatility provides an excellent opportunity to traders to prepare and profit from an imminent change from low to high volatility. During this time gains can be made from the unsuspecting players and this is known as the Decreased Volatility Breakout Strategy.

But the success of this strategy lies in measuring the volatility of the forex market correctly. There are several technical indicators that can help you visualize the volatility in the currency prices.

You can use triangle patterns as one of the best indicators of decreasing price volatility in the currency price charts. Combine the triangle patterns with technical indicators to confirm or deny decreasing price volatility. Two of the most useful indicators that can help you measure the volatility of the currency prices are: 1) Moving Averages and 2) Bollinger Bands.

You can take advantage of the decreasing price volatility in the forex market through identifying the triangle formations. When a particular type of triangle has been identified by the trader, a high probability trade may be in sight. All triangles show decreasing price volatility in the forex market.

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Get Netpicks Forex Signals Free. Learn Forex Trading!

Trading breakouts is one of the most popular ways of making pips from the forex market. Decreased volatility breakout is one of the subsets of breakout trading. While this strategy is similar to the strategy of trading breakouts, but it is specific to a certain conditions in the forex market.

Volatility is a measure of the scale of price fluctuations over time. Volatility tends to be high when prices change to a large extent within a short span of time. The reverse also holds when prices oscillate more or less close to a certain price level without deviating much from it over a long span of time.

It is the periods of high volatility that lets traders make pips and it is the volatile nature of the forex market that attracts the risk seekers in search of high returns. However, entering the market in periods of high volatility can be stressful for most of the traders as they dont know whether the trade will go their way or not. Why not concentrate on the low volatility period instead of focusing on the high volatility market.

There is a tendency in the currency prices to alternate between periods of high volatility and low volatility in the forex market just like other financial markets. This recurrent pattern is due to the crowd psychology which is the force behind changes in the forex market. Forex market is just people trying to buy or sell currencies. It is the psychology of the crowd that rules the market in the end.

There are four main stages of a trend. There is a different crowd psychology behind each stage of the trend. These four stages are: 1) Nascent Trend, 2) Fully Charged Trend, 3) Aging Trend and 4) End of Trend. These four stages are closely linked to the cycle of volatility in the market. Lets discuss these stages of a trend in detail.

First Stage-Nascent Trend: Most market players are still skeptical about the possible new trend direction during the nascent stage of the trend. In the beginning when the new trend just starts either upside or downside, volatility is low as both bears and bulls tread carefully and are cautious. Nothing is clear at this nascent stage of the trend when it is forming. Market players are trying to confirm or deny the start of a new trend. So everyone is cautious whether the new trend will continue or it will fizzle out.

Second Stage-Fully Charged Trend: The trend is in full progress and it is time for more action now. During this stage the trend becomes well established. The trend becomes fully charged as there is now evidence from fundamental data that supports the trend direction. When the new information proves them wrong, traders who are caught on the opposite side of the market become exposed. They become desperate to get out of the wrong side of the market.

During this period a lot of changing positions will take place. This causes the currency prices to move more dramatically within that trend period. Traders who were initially on the wrong side of the market become new converts to the trend.

Traders become convinced of the direction of the trend and new information convinces most of the traders of the direction of the trend. Everyone wants to jump in the trend. More and more positions are established. Hence volatility tends to be high during this period. This brings prices to higher highs in an uptrend or lower lows in a down trend.

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Know These Forex Charts. Learn Forex Trading!

Human beings are emotional creatures. It is often said that we are our own worst enemy. In forex trading, this is the ultimate truth. Most of our trading decisions are guided more by emotional than logical thinking. Our mind is capable of playing emotional tricks on us.

Emotions can work for us and against us. Your battles are won or lost in your mind first. We can get seduced into unfavorable situations by our emotions. A traders mindset is the most important ingredient of success.

Do you have a strong desire to succeed in forex trading? Forex trading is not for everyone. If you just want to try your luck or dabble in trading, you will end up like the majority who end up losing their money. Do you have the passion for trading forex?

In order to become a successful forex trader, you must be highly self motivated. You must have a concrete plan of action and not be afraid of failure. Are you ready to devote a lot of time and effort into picking up trading skills and knowledge?

In order to become a successful forex trader, you need knowledge and skills in that field. A huge amount of time, effort and money is required for a trader to attain consistent success in forex trading.

Losses are the inevitable part of lack of experience and knowledge. But even if you develop the experience and knowledge to successfully trade the currency market, you cannot avoid losses. There is an inherent risk in trading currencies. No one can overcome that risk. Are you willing to accept losses as part of trading? You are going to make mistakes while trading. Do you understand that you can suffer losses in trading? Are you willing to learn from your mistakes? Do you have a traders log that you use to reflect on each lost trade and learn from it?

Most of the new traders read some market analysis from an analyst and enter into the trade on his/her recommendation. If the trade turns out to be a loser, most of us tend to blame on the market analysis. It is easy to blame others.

Dont be trigger happy? Only pull the trigger when you are confident that you have done your analysis to confirm what others are saying. Is it fair to blame someone when you could have done further market analysis on your own? When you could have planned your trade in a better way, it is foolish to blame others for your mistakes.

Fear and greed are the two most dominant emotions that affect not only the individual traders but also the currency markets. In fact, these two emotions are the main drivers of the forex markets.

Fear makes you over pessimistic about a currency pair. Similarly, greed is going to make you over optimistic in thinking that a currency is going to appreciate. In nutshell, fear and greed are behind the steering wheel of the currency market. When fear takes over, the market turns bearish. When greed takes over, the market becomes bullish.

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Know Swing Trading. Learn Forex Trading!

News straddling strategy depends on the use of a stop-limit order. A stop-limit order is basically an order that becomes a limit order once the currency reaches the designated stop price. At the specific price the stop-limit order becomes a limit order. The stop-limit order will instruct the broker to buy or sell at the specific price only when the specified stop price has been reached.

The main advantage of using the stop-limit order is that the trader can decide ahead of time the price at which the trade will get executed in the News Straddling strategy. However, the stop-limit order may not get filled at all. This is exactly what our strategy is. Either we get the price that we want or we dont trade!

Due to the fast moving nature of the market, the currency price may not stay within the limit range for the order to get executed. Second reason could be there is not enough supply and demand at the price at which the order is to be filled.

We are instructing the forex broker that the entry price is either filled at the limit price or better by placing the stop limit order. Using stop-limit order helps us avoid risking slippage. . If the price that we want is not possible than the order is not executed at all! If we are not able to trade at the entry price that we want, it is better that the position is not filled at all.

However some brokers do not allow stop-limit orders on their platforms. If the broker does not allow the use of stop-limit order, simply look for another broker that does allow it. Simple as that!

Most often, a horizontal channel is formed prior to the release of the news. The news straddling approach is conceptually similar to a channel breakout strategy. This channel may be identified on the intraday 5 minute or 60 minutes chart.

First draw a lower line connecting the two lowest points, forming the support line. Then draw a second line connecting the two highest points to form the resistance line. The two line snow forma channel. The channel should be roughly like 40 pips wide.

A channel basically tells that neither the bulls nor the bears are over enthusiastic about their bias before an important new release. Once you have identified and drawn the channel on the 5 minute chart, monitor it for 20 minutes prior to the news release.

Name of the game is that we either enter at the price that we want or we completely stay out of the market. Place your entry order not more than a few minutes before the news release. Place a stop limit long entry order a few pips above the resistance level and a stop limit short entry order a few pips below the support level of the channel.

For a long entry, a stop sell order is placed at least 20 pips below the resistance level. For a short order, a stop sell order is placed at least 20 pips above the support level. Each stop-limit entry order must be accompanied with a specified stop loss order and profit-limit orders.

The initial profit target could be equal to the width of the channel. A staggered profit taking could be considered. You can set your initial profit objective for half of your lot size. For the rest of the position, you could set profit target equal to the twice the width of the channel.

You should know the problem of slippage and how to avoid it if you want to successfully trade the news. Slippage occurs when the price you intend to enter or exit the market is different from your actual transacted price. Currency prices tend to move very fast during highly volatile market conditions. The risk of slippage is usually very high when trading the news.

Placing stop or market entry orders under such times do not guarantee anything. Slippage is the biggest problem when the market moves fast. These orders do get filled but mostly at different prices than you had intended.

Many market makers will wait till after the big move is over. Then they will fill your entry order. Sometimes, these entry orders may even get filled past your stop loss or profit target. This means that you would be left with immediate net loss.

Slippage is a trick that many forex brokers use in order to make profit by filling your position with a negative spread. Before filling your entry order with wide slippage, many brokers will fill your stop loss or take profit order. The wider the slippage, the fatter the profits the broker is going to make. Imagine the number of orders placed with each forex broker and the amount of profits the broker makes from one such single event.

Lets make it clear with an example. Imagine your profit limit for the EUR/USD is 1.2594. Your long entry stop for EUR/USD at 1.2564! The forex broker may first fill your take profit at 1.2594 and then fill your long entry stop at 1.2604 with a 40 pips slippage.

If filled at the prices you wanted, your trade would have resulted in a profit. But now you have a net realized loss. If the trade goes against you, the forex broker may fill your stop loss order first and then fill your entry order with slippage after that so as to widen their profits.

Suppose, you had set your long entry stop at 1.2564 and your stop loss at 1.2544. The broker could first fill your stop loss at 1.2544 then fill your long entry stop at 1.2594 with a slippage of 30 pips. So instead of planned 20 pips loss, you now have a net loss of 50 pips due to slippage.

You should know as an individual trader that your orders will be kept pending till you get stopped out or your profit limit is reached during the release of news when the market moves fast. The more you stand to lose and the more the forex broker stands to make a profit, the larger the slippage you experience. Some forex brokers add slippage to any of your orders to increase their profits during times of fast moving markets when the volatility is high.

Many traders readily accept the risk of slippage as one of the realities of trading the news. However, they should know that slippage can eat up a huge chunk of profits and in the end affect their overall profit/loss. You can overcome the problem of slippage through the use of stop-limit entry order. More on it in the next article!

When you look at the forex economic calendar, there are easily 15-20 daily economic data releases relating to the major currencies USD, CHF, CAD, EUR, JPY, GBP, AUD and NZD. If you know when and how to enter the market, trading news can be a very profitable strategy! Forex market react the most to the release of the US economic news.

An initial part of the news straddling strategy is to pick out the various market moving announcements that can have a big impact on the forex market. The currency market mostly responds violently to the release of US economic data figures. This is not surprising given that US is the largest economy of the world. US is also the worlds major trading partner. This is the main reason why the US economic news announcements have the greatest potential to influence other countries economies and their respective currencies.

Inflation, consumer confidence, trade balance, unemployment figure, home sales, interest rate decisions, industrial production, retail sales, manufacturing and business sentiment figures are of significance to the currency market. If these economic data released relates to US or Euro zone, the higher the impact will be.

Many economic reports are released once a month. If you want to trade these news releases, you should note the dates on your trading calendar. Other than the dates, you should also note the time of that economic data release. These news releases are usually made around 12:00 GMT or 13:00 GMT. At this time, it is morning in US and the European markets are still open.

News straddling strategy is an intraday trading strategy that tries to take advantage of the high amount of volatility that is usually generated with the news announcement. So it maybe more advantageous to focus on the more volatile currency pairs!

The most market moving news relates to US, the news straddling strategy should be applied on currency pairs that involve the USD. Some good candidates for this strategy are EUR/USD, USD/JPY, GBP/USD and USD/CHF.

The four major pairs ERU/USD, USD/CHF and GBP/USD tend to be better candidates than USD/JPY. Certain currency pairs among the majors respond better than others when it comes to trading major economic news release. So try to focus on the pairs involving the Euro zone currencies as the European markets are usually open at the time of US news release. However, the Asian markets where the JPY is mostly traded are closed by that time.

During the time of the news release, moderate to very high price volatility can be expected. News straddling strategy is only employed upon the release of significant scheduled economic news. Our aim is to profit from the resulting sharp market moves. But you have to be very careful. This is a risky strategy.

Based on its superior liquidity compared to the other major currency pairs for this strategy, you should mostly concentrate on the EUR/USD pair. You must be very nimble as the currency prices usually respond very quickly in a knee jerk reaction to a move in one direction and may correct themselves very quickly. This strategy requires fast entry and exit to make pips. One winning trade can give you a good amount of pips.