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Tutorials for Forex Beginners

This section aims at providing the basic knowledge for the beginning forex traders. The following topics are covered.

  • Basic Concepts
  • Technical Analysis
  • Candlesticks Charting
  • Chart Patterns
  • Fibonacci Analysis
  • Technical Indicators

For more advanced trading strategies, remember to download our free ebook Advanced Candlesticks and Ichimoku Strategies for Forex Trading



Candlestick VI: Using Candlestick Patterns in Trending Markets Print E-mail
Beginners Tutorials | Written by ActionForex.com |
The candlestick pattern serves to confirm the fact that the market is acknowledging the importance of the retracement level. Traders should look to enter the position just outside of the reversal candle's range. At that point, there is sufficient reason to believe that the retracement is over and that the primary trend is ready to resume.
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Candlestick VII: Candlestick Patterns Confirming Reversals Print E-mail
Beginners Tutorials | Written by ActionForex.com |
Candlestick patterns are used to confirm reversals. Often when a price moves towards a support or resistance level, it is unclear for several periods on the chart whether it is going to break through or reverse. Intraday penetrations of important technical levels are often misleading signals, but quick bounces off support can be false signals as well. Candlestick patterns offer a means of confirming that a price has reversed itself at a key technical level. They also provide a precise entry point and ensure that the market's momentum is in the direction of the trader's position at the time of entry.
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Chart Patterns I: Introduction to Reversal Patterns and Continuation Patterns Print E-mail
Beginners Tutorials | Written by ActionForex.com |
There are two major ways to trade the financial markets: swing trading and trend following. Swing traders use technical analysis to look for short-term price movement and capture gains in a relative short-term period. They look for the price patterns that hint for a reversal, in order that they can pick the tops and bottoms of the trend. Trend followers pay attention to the general direction of the price movement and enter trades by following the current direction. They would look for continuation patterns on the price charts to predict the future direction of the trend, or exit the trade until the reversal patterns appear.
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Chart Patterns II: Rules for identifying Reversal Patterns Print E-mail
Beginners Tutorials | Written by ActionForex.com |
The following are the three basic tenets about identifying reversal patterns. While they may seem obvious and even simplistic, they are important for successfully using these patterns. A Trend Must Exist - A trend must exist before a reversal of the trend. There can be no reversal if a trend does not exist in the first place. A reversal pattern that follows a large trend will have much more movement to retrace, and so the strength of the move after the reversal pattern will likely be stronger.
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Chart Patterns III: Head and Shoulders Print E-mail
Beginners Tutorials | Written by ActionForex.com |
The Head and Shoulders pattern is one of the most famous reversal patterns and one that gives a clear signal and entry point. The head and shoulders in an uptrend consists of three relative highs: the first and last peaks are of nearly equal size and are the shoulders of the formation. The middle peak is greater than the other two and forms the head of the pattern. The relative lows in between the head and shoulders form a neckline at the base of the pattern. Once the pattern is completed, the neckline becomes a key support level; the market can bounce off it and reverse, or it can break through it and gather momentum.
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Chart Patterns IV: Double Tops and Bottoms Print E-mail
Beginners Tutorials | Written by ActionForex.com |
The double top formation is a straightforward pattern that is easy to recognize on a chart. One of the features of a market in an uptrend is a series of increasing highs and relatively higher lows. If the market on one of its high points fails to break above the previous high, but instead stalls at the same price, this is an indication that the trend is weakening and may reverse. A double top is therefore a simple horizontal line that connects two relative highs at the same price.
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Chart Patterns V: Triple Tops and Bottoms Print E-mail
Beginners Tutorials | Written by ActionForex.com |
A triple top is the same charting pattern as the double top with an extra relative high that touches the same resistance level. A triple top creates a strong resistance level and a neckline connecting the two relative lows in the middle of the pattern. A trader should enter a short position when the daily candle closes below the neckline of the triple top.
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Chart Patterns XII: Rectangles Print E-mail
Beginners Tutorials | Written by ActionForex.com |
The rectangle formation is often a very simple one to recognize. It is essentially a market that is trading in a range between two horizontal lines. The rectangle formation represents consolidation of the move that preceded it, creating a foundation for a continuation of a further move in the same direction.
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Fibonacci I: Retracements Print E-mail
Beginners Tutorials | Written by ActionForex.com |
The price movement of any financial market is in wave format. Suppose a currency pair is on an up-trend, going from 1.0000 to 1.1000. After reaches certain top "boundary", 1.1000 for instance, it will retrace - meaning pull back down - before resuming its initial up-trend. Fibonacci Retracements are levels at which the market is expected to retrace to after a strong trend.
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Fibonacci II: Sample Fibonacci Trades Print E-mail
Beginners Tutorials | Written by ActionForex.com |
The charts below show sample trades using the Fibonacci retracement. GBP/USD was going on an up-trend from November 2003. During an up-trend, traders would look for pullback and buy in. In January 2004, GBP/USD reached its first top at 1.8580 and started pullback. The pullback was until 1.7820 which was the 38.2% retracement of the up-trend. A bullish engulfing pattern at the 38.2% retracement level confirmed the pullback. The trend resumed its upward momentum and reached 1.9140 in Feburary.
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