Free Forex MQL Training

When you decide to trade forex online , one of the first differences that you notice between the stock and forex markets is the absence of a central exchange for the latter. Banks and traders trade over-the-counter in this market through phone calls, electronic trades, and through other possible channels, but there is no central house where the positions of each trader are registered and declared publicly for the study and analysis of traders. One way that traders have discovered over the years for overcoming this problem is the use of the volume data from the various commodity exchanges in the world as a kind of early warning system on spot market behavior. Currencies are just commodities in most ways, the main difference being that their value is also measured in terms of other currencies, while that of oil, for instance, is measured by dollar.

Volume can clarify the strength or weakness of a trend for us, as stock traders know very well. A strong trend, that shows great momentum but diminishing volumes is regarded as weakening and being prone to a sudden reversal as the high-fliers notice that they have lost their wings. Conversely, a period of consolidation with increasing market volume often indicates a potential for an eventual burst of energy that can culminate in a powerful breakthrough. The COT report of the Chicago Board of Trade stating the commitment of traders in various commodity options is an excellent substitute for the volume statistics of the stock market.

There are many ways of using this tool which lie somewhat outside the scope of this article. It is well-known, for example, that extremes in currency option positioning often precedes reversal in trends. Some traders also like to go against the positions of small speculators with the assumption that they are on the wrong side of the market. The big firms control the market, and by siding with their consensus (whether they are net long or short a particular currency), we can make profits just as they do. Finally, the put/call ratio, which determines the proportion of traders who are short in relation to those who are long a currency in the option contracts, can be used to predetermine market reversals. When the puts are too numerous in comparison to calls, a market bottom may be in place, and vice versa.

To get reliable forex reports it is a good idea to visit the COT site, or subscribe to a site that reports on trader positioning. In all cases, the COT report is a magnificent tool that really lifts the curtain on the actions of big players, and can be very beneficial if used with consistency and patience in your trading choices.

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Risk Warning (Disclaimer): Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Investatech Inc., its employees or the authors of this website cannot be held responsible for any losses occured to you due to trading forex or taking advice from this website. Trade at your own discretion.