Quotations by James Chen

Around 8:00 to 11:00 am NY time — represents among the most active, liquid, and volatile trading hours available in forex. From around 2:00 pm on Sunday to 5:00 pm on Friday, forex trading takes place 24 hours a day, five days a week. [2009] - James Chen

The most-traded currency, by far, is the U.S. dollar, with consistently greater than 85% of the average daily turnover in foreign exchange trading. The distant second place currency is the Eurozone’s euro, with around a 37% share. Rounding out the top currencies are the Japanese yen with approximately 16%, and the British pound with 15%. AUD/USD and USD/CAD are next in line in terms of trading activity, but are not generally considered among the majors. It is usually recommended for beginning traders to concentrate initially just on the major currencies. [2009] - James Chen

Trailing stop losses are often key components of professional risk management strategies, and can be used to great advantage by the typical foreign exchange trader. [2009] - James Chen

Most spreads on the major currency pairs, including EUR/USD, USD/JPY, GBP/USD, and USD/CHF, are usually in the vicinity of two to five pips wide. [2009] - James Chen

If a trader plans on ever buying and/or selling currencies during any type of fast market, it may perhaps be in the trader’s best interest to choose a fixed-spread broker. [2009] - James Chen

If a doji emerges during a rally, it increases the chances of a turn. [2009] - James Chen

Trends and patterns are usually much more reliable on longer-term charts like daily and higher. [2009] - James Chen

Knowing the trend at any given time is absolutely essential to analyzing charts effectively. A potential method that can be used for dealing with trends and timeframes is to concentrate on the trend indicated by a timeframe 4–6 times longer than the one traded. Although there are certainly a substantial number of successful counter trend technical traders, there are arguably more successful traders that are of the trend-following persuasion. [2009] - James Chen

Ideally, an uptrend is characterized by progressively higher lows and higher highs in price. An ideal downtrend, conversely, is characterized by progressively lower highs and lower lows. A low is considered a point of reversal between a downmove and an up move. A high is considered a point of reversal between an upmove and a downmove. Much more frequently, traders and analysts find on their charts uptrends that are only required to hit higher lows, and downtrends that are only required to hit lower highs. [2009] - James Chen

Systems using three different moving averages usually produce signals when the shortest period moving average crosses both longer moving averages, or when the shortest moving average crosses the middle one and then the middle one subsequently crosses the longest. Although crossover signals can often be exceptionally profitable, those traders that use them must be prepared for frequent losses resulting from common whipsaw action. The whipsaw is simply an unavoidable fact of trading with moving averages. [2009] - James Chen

The idea behind moving average trading methods, therefore, centers on the goal of gaining large profits during trending periods when crossovers are few and far between—-while at the same time withstanding the inevitable small losses during sideways whipsaw periods when crossovers are abundant. The greatest challenge with this type of trading lies in the ability of the trader to let the winning trades run while immediately closing losing trades. Only in this way can a trader using moving averages profit enough during trends to offset the many losses incurred during horizontal price activity. [2009] - James Chen

ADX is an important indicator that can help a trader determine whether to use trend-trading techniques or range-trading techniques. [2009] - James Chen

Many traders use MACD as their sole confirming oscillator. Some traders also take trading signals exclusively from MACD. [2009] - James Chen

RSI is a classic oscillator that excels at giving overbought and oversold signals in ranging markets. Its usefulness, like most other oscillators, tends to diminish considerably during trending markets.  [2009] - James Chen

Pivot points are a self-fulfilling prophecy. In other words, they work only because enough traders believe in them and trade off of them that there is bound to be some significant price activity at those levels. Fibonacci levels can be considered, to some extent, a self-fulfilling prophecy much like the pivot points. [2009] - James Chen

Although some detractors may deem Elliott Wave analysis as too subjective to be consistently effective, the fact that scores of successful traders have long abided by the tenets of this theory makes this a trading methodology that should not be ignored by traders. [2009] - James Chen

point & figure charting consists primarily of watching for price level breakouts. [2009] - James Chen

Rising interest rates (central bank tightening) have a tendency to contribute to an appreciation in a currency. If, on the other hand, there is a lowering of interest rates (central bank easing), the tendency is towards a depreciation of the currency. The direction of interest rate change is even more important. If the currency’s central bank continues to raise interest rates and indicates an intention to keep doing so, this can have a considerable impact on appreciation in the currency. [2009] - James Chen

It is imperative that foreign exchange traders pay close attention to interest rate differentials on all trades initiated, especially those that will likely remain as open positions for more than a day. [2009] - James Chen

The country with the higher rate will generally have the more valuable currency. The stronger economy, that with the higher GDP growth, lower inflation, greater productivity, political stability and a host of other factors will, over time, have the stronger currency. Any foreign investor in a country is also an investor in that country’s currency. [2009] - James Chen