Forex.Academy Education For Absolute Beginners – Session Three
Thank you for joining us for session 3 of forex trading for absolute beginners. Forex Academy has all your forex trading educational needs from complete novice through to professional trader, and it’s all free to our followers!
In session 1 and 2 we mentioned that Forex trading is very similar to gambling when trading with no understanding of how the market works, and where the odds can be stacked in your favor and where Forex trading becomes a profession when novice traders take the time to learn the ropes before opening a live trading account and diving in.
We also mentioned that Forex is mostly traded by using Technical Analysis, where traders use tools they drag onto their screen charts in order to visually see when markets are going up or down, and trade accordingly.
In Example A, we can see a line graph chart of the exchange rate of the British pound, with the black line showing the price moving up and down against the US dollar, AKA GBP:USD. On the face of it, it looks extremely erratic.
Let’s take a closer look in example B, where we have drawn some arrows showing the pair moving up and down, but it would be almost impossible to know when to trade.
But in example C, where we have changed the line graph for coloured bars, which are known as candlesticks, we can clearly see that the red candles help us to see when the price is moving down, and the green ones help us to identify with the price is moving up, such as in example D.
In example, E, we have added our first technical analysis indicator, which is called a stochastic oscillator. This tool tells traders when a pair may have gone too high or too low, which are also known as periods of overbought and oversold. It is clear to see that when the redline of the stochastic has moved to a high point and then crossed over the green, and they are both moving down, that the price of the pair moves lower, and when the green has crossed over the red after they have moved to a low, then the currency pair moves higher.
Here are just two simple tools that traders use to stack the odds in their favour.
But none of this would be any use at all without another aspect of trading, which we will discuss in session 4.