AlfaTrade: How to Trade the Ever Common Inverted Hammer Candlestick

AlfaTrade on Trading Inverted Hammer CandlestickIf you’ve been trading forex for some time now or has been studying up to trade the $5-trillion-per-day market, there’s a high probability you’ve encountered a tool called candlestick, which traders use to make sense of what currency pairs are doing. Using candlestick patterns as signals for entering and exiting forex positions is a viable way to make consistent returns on investment. Read on further as we discuss what candlesticks are and how to specifically use an Inverted Hammer candlestick to trade the market.

Origin of Candlesticks

It’s important to first understand what candlesticks are before you can go deeper into individual patterns that have emerged from its study. The origin of candlestick charting was first discovered by a Japanese rice farmer named Munehisa Homma who successfully predicted the rise and fall of the commodity. Over the years, practitioners of candlestick analysis have added new patterns and formations to the palette.

What is an Inverted Hammer?

In a nutshell, an inverted hammer is a single candlestick pattern that resembles a hammer flipped outside down. The body of the candlestick is usually bearish and the upper wick is at least three times longer than the lower wick, which may also sometimes be nonexistent. The latter is the common result of bears quickly reversing the bullish momentum during the last few minutes of the candlestick.

Is it the Holy Grail?

A simple definition of the candlestick does nothing for your account balance. One must learn and master how to trade it. When using candlesticks or any form of technical or fundamental analysis, it’s important to realize that such signals aren’t one-size-fits-all. You have to account for the context or the current price action that it is in. Not all economic news reports will result in expected market reaction, and certainly not all inverted hammers will predict a bearish reversal.

How to Trade

Inverted hammers generally signal a bearish reversal in a bullish market. However, it is unwise to trade the first inverted hammer that is created in a strong and long-standing uptrend. Instead, expect for price to pop up higher than the inverted hammer’s high. A good candlestick that could signal an even more reliable bearish reversal in the making is two or three small bullish candlesticks with a decent body size and small upper and lower wicks.

What to Watch Out For

As mentioned earlier, inverted hammers and other candlestick patterns do not signal an absolute occurrence. They are not the Holy Grail system that’s been long sought after by investors and gamblers alike. Instead, know which cycles or patterns have the highest probability of turning out correct. If the US dollar versus Japanese yen pair, for example, is in a ranging pattern on the 4-hour or Daily chart, it’s better to interpret an inverted hammer that appears at the support level of the range as a bullish signal.

The Bullish Counterpart

A hammer is the bullish equivalent of an inverted hammer. It’s a hammer with the lower wick at least three times longer than the top wick. A hammer is used to signal a bullish continuation or a bullish reversal if the market’s in a downtrend. Bullish hammers can also denote a bearish reversal if it appears at the top of a protracted bull trend. Place a sell order on your trading platform, such as AlfaTrade, if the next candlestick breaches the low of the previous hammer and set a stop loss a few pips above the high of the hammer.

Complementary Tools

You can increase the odds of an inverted hammer being right by adding other technical and/or fundamental parameters. For example, an inverted hammer that appears while your choice of oscillator, be it RSI or Stochastics, is at an overbought price level makes it more reliable to assume that a selloff is imminent. Another example is if an inverted hammer appears at the bottom band of a Bollinger Band while economic forecasts for the currency is bullish. This could signal an impending bounce.

Tips When Trading With Candlesticks

Manage risk is the first and foremost tip you should be heeding wholeheartedly. It’s what differentiates professional traders from gamblers. Adjust the lot sizes you trade with according to the probability of the setup as well as the size of your trading account. If you have $2,000 for example, it’s not really a smart decision to trade 1 standard lot of New Zealand Kiwi versus US dollar, which costs $1,600 in margin. While it is possible to win a huge sum of money doing this, it’s more probable that you’ll get margin called.

Summary

While inverted hammers are a standalone pattern unlike bullish engulfing or three black crows, it’s definitely a powerful signal when placed at the right context. It creates a way to extract consistent profits in the market without needing too much legwork.

UltraTrade: Why beginner traders should trade binary options

Why beginner traders should trade binary options by UltraTradeBinary options are relatively new when it comes to their availability to the general public. These types of financial bets offer what more traditional online brokerage accounts don’t. These benefits include limited downside risk, ability to make small bets, and opportunities to trade many markets from a single account. Here, we present an overview as to why binary options can be a right trading solution for new traders.

It’s simple to trade binary options

Trading binary options has been made simple by online brokers. With plain types of binary options, once you select an asset to trade, all you need to do is bet on it going up or down. By buying a Call, you bet that the price will close above a certain level when the option expires, and vice versa with Puts. You also get to choose a time period (it can be 60 seconds or as long few hours, if not longer). Finally, you specify the amount of a bet.

The system will show you the payout, both in terms of percentage gain if the trade is won, and as a dollar amount (based on your bet). That’s not possible with traditional trading accounts where you’ll never know what the profit will be if you’re correct with your trade.

It doesn’t take long to understand a binary options trading system, so there’s no need to spend much time on learning it (although, understanding the markets is something that takes time). It’s so because online binary options trading systems offered to retail traders are designed to be simple to use.

You can start trading with small sums of money

With a broker like UltraTrade, you can open an account with as little as $350. From this account, you can trade foreign exchange, stocks, stock indices, and commodities. If you wanted to trade these in an account other than a binary options account, you’d need to deposit much more, perhaps going into many thousands of dollars.

What’s even better is that you can place trades that are only for several dollars. When it comes to trading stocks, commodities, and forex with more traditional online brokers, these options are simply not viable. Your trades need to involve much bigger financial stakes.

You limit your risk

When you trade stocks in a traditional way, you can limit the risk my placing stop orders. But, much of the time, there’s no guarantee that a trade will be executed exactly at your stop. The stop will only activate your trade. If you keep a position open over the night, and the stock opens much lower, you stand to lose much more than expected.

The same thing applies to forex and commodity trading. For example, a few years ago when the central bank in Switzerland let the franc move freely, many forex traders lost their entire accounts and ended up owing money to their currency brokers.

On the other hand, with standard binary option bets, you only limit your risk to your bet amount, which can also be tiny. This is especially advantageous to new traders who don’t have much experience.

You get access to more markets

With binary options, you get to bet on price action in multiple markets- whether stocks, commodities, or foreign exchange. Many new traders, for example, would like to trade stocks, but choose currency trading because currency brokers offer better leverage than stock brokers. With binary options, it pretty much doesn’t matter which asset you trade because you trade from a single account.

This way the new traders also get to see with which markets they do the best, so there’s an extra learning taking place. On the other hand, to trade these markets with more traditional brokers, you’d likely need to open several accounts (for stocks, commodities, and forex), only leading to confusion.

You still get access to trading tools

Even though deposit requirements to open an account are small with some binary options brokers, the research, charts, trading signals, and analysis are still provided, even for those who make tiny bets. So, as a new trader with small capital, you still get access to all these tools and markets to trade.

There are other perks offered by brokers such as UltraTrade which include 1-on-1 trading sessions, cash bonuses, secured trades, and so on. Exactly what you get will also depend on your deposit amount. What is also attractive (when it comes to this particular broker) is the ability to get trading signals that help the new traders to get better ideas about the markets and developing trends.

Binary options trading can be for you. It’s a way to test the deep waters of international financial markets without the need to come out with large sums of money. By limiting the risk on each trade, you also don’t stand to lose the shirt by one wrong move.

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Average Directional Index (ADX): Short Term Trading Method

Average Directional IndexAverage Directional Index (ADX) consist of a short-term trading method that, in comparison with other ones, will indicate you the potential of a trend in order to avoid entering into one that is not available and wasting time in it. Other trading methods will only let you know whether to expect a low tendency trend and you may probably get lower profit too, no matter if the trade was in the direction that you predicted. However, ADX will guarantee the prediction of a powerful trend and its complete comprehension in order to obtain more trades with higher incomes and you must use it with other trading methods to get better results.

How does it work?
If you want to get more advantage of the ADX, it is important that you take into account the combining of other trading methods with ADX, since this method per se is not independent and only indicates the potential of the trend and not the direction of it. Also, this is a method that works the best with ECN Forex Brokers.

You also must keep in mind that ADX does not reflect alterations on the price, so if you want to master the use of this tool, you just have to follow these simple indications.
● First, you will find a scale from 0-100, in which 0 indicates that there is no trend and 100 indicates a strong one.
● Second, the market will not have any alteration, or perhaps a few corrections, if the ADX is close to 0 (sideways moving trend may appear). Third, if the ADX is low, you should close the trade unless you want to get incomes from a sideways moving market.

Otherwise, if the ADX is high, it will be a good chance to enter a trade (fast moving trend may appear). Now you can notice that it is very simple to use this tool, you only have to remember that ADX is just an indicator of the potential of the trend.

It is important to make clear that while values on the scale of ADX and potential trends are normally higher than 50, values lower than 20 will show weak trends.

A Practical Example
In order to have a better idea of how you can use the ADX to examine the trend, below you will find an example that will help you:

After examining the example, these are the conclusions: first, you can notice that at the beginning of the chart, you have a potential low tendency trend and, consequently, the ADX (shown on the bottom) will be high. The ADX falls below 20 when the trend finishes and, in this part, a sideways phase may appear. It is important to consider that when the ADX reach the end of the trend, it could help you to leave the trade in order to take advantage of time and resources in other worthy currency pairs.

If you want to improve your skills with this tool and enlarge your incomes, you only have to take into account that you must use the ADX indicator with other trading methods.

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The Citizens Advice Super Complaint, Ten Years on… What’s changed in PPI?

PPI issuesSince the problem became main stream news, banks and lenders have been forced to shell out billions to compensate those who were wrongly mis-sold PPI. Even now after the complaints are beginning to die down, the banks are still adding millions into the pots.

The banks have also had to pay out billions to mis-sold customers, but the Financial Conduct Authority have also slapped millions of pounds worth of fines and penalties on the banks and lenders. The big penalties decrease the ability of banks and lenders to survive.

The highest amount of that the Citizens Advice dealt with in any given year was a huge 15,000 back in 2013.

The original concept behind PPI is to protect people’s loan repayments should they fall ill or lose their jobs, but in many cases people weren’t even aware they had a policy and some were unable to claim a penny back anyway. The awareness of getting claim is the most important factor of losing the jobs.

The impact of PPI has been so huge that in 2012, it was stated that the economy grew by 0.8% over two years, mostly down to people spending their payments. Economic growing is related to people’s payment spending.

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Further PPI Scandal

PPI ScandalThe UK’s big four banks are again facing another round of pay outs, this time in relation to the commission earned from selling PPI policies.

Last November the Supreme Court ruled that if a customer was unaware that the salesmen would be earning commission then it breached the 1974 Consumer Credit Act and therefore it would be deemed unfair for the customer.

Barclays, HSBC, RBS & Lloyds are all guilty of breaching the act and made huge money by selling PPI and financial products in branch and not disclosing what commission was being earnt. The FCA has assessed just how far the Supreme Court’s ruling stretches, which means the banks could be on course to shell out a further £33 billion in compensation. The compensation was getting bigger due to the violation of Supreme Court’s ruling stretches.

So in theory this opens up a brand new avenue, for further PPI refund claims. So even customers who have already claimed and won, could be entitled to further compensation. Some very revealing figures show that at its peak PPI was netting the banks £2.6 billion a year and they could earn £1,200 profit from a policy that costs on £20 to implement.

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