New to the game

Im new to the whole forex market. I just finished elementary baby pips school grade 4 on SMAs and EMAs. I comprehend all the information and I get 80 and above on all the pip quizzes but I have no idea how in the world I would use fibonacci and SMAs and EMAs for my trading.

You have a way to go, and a lot of the questions you have at this stage will be answered by the time you finish the School.

Congratulations!

Maybe you will [I]never[/I] use fibonacci, or moving averages. Many traders use neither.

Fibonacci, as applied to trading, purports to show likely levels of price [I]retracement[/I] and/or price [I]continuation,[/I] based on a recent price [I]swing.[/I] Some traders incorporate fibonacci into their trading strategies to aid in selecting entry levels, stop-loss levels, and price targets.

But, traders are sharply divided on [I]whether fibonacci even makes sense.[/I] Some traders sneer at the idea that the market will respect price levels arbitrarily determined by special fibonacci percentages (38.2%, 50%, etc.). These traders view fibonacci as sort of voodoo number magic, which only works because enough people believe in it.

Others claim that fibonacci has real validity, regardless of what people [I]believe[/I] about it, because it’s based on number patterns that are fundamental to the whole universe.

In time, you will know which side of that debate you agree with.

Moving averages (SMA’s, EMA’s, etc.) are less subjective than fibonacci. But, they can be misused, notably by traders who choose the number of periods to be averaged, in order to validate a particular curve-fitting criterion. In other words, traders can adjust the number of periods in a moving average to make the average show a desired result.

Used intelligently, moving averages can be very useful in making trends recognizable. And some moving-average cross-over systems have proven to be successful.

But, not all traders use moving averages, and you may decide to be one of those who ignore them altogether.

If you experiment with different types of moving averages – simple, exponential, smoothed, etc. – all based on the same number of periods, you will find that the differences between the types are subtle.

After you have finished the School, you’ll be in a better position to understand the methodologies and strategies scattered throughout this forum, some of which employ moving averages. And, at that point, you’ll be able to evaluate their usefulness.

For now, master the concepts behind the various indicators presented to you in the School, and file them away for future reference. You may (or may not) need them later.

.

Excellent reply by Clint …

I would add that no system, no matter how appealing in its simplicity, will protect you from losing trades or flat periods: you should try to see every trade you make as a potential loss, and try to limit that loss, so that over time all your combined losses will be smaller than your combined winners, IRRESPECTIVE OF THE TRADING SYSTEM. Whether you use Fibonacci or SMAs, or any other indicator or strategy, what will make your trading succeed or fail in the end will be whether you manage to preserve enough capital during losing periods to allow for you to trade your way up during profitable periods.

when there is stock why people choose to trade forex

You need more capital to trade stocks, unless you mean penny stocks which have all sorts of liquidity issues to be aware of. You can use leverage to your advantage in Forex if you know what you are doing. If you have enough capital to choose between equities, futures, spot forex, stocks, then you may not choose forex but for the average retail trader spot forex is the only accessible route.

hi pipmehappy you can leverage up in stock too , i didnt mean penny stock just picking blue chip shares short trading the long term ! 25 to 50k is required yes you right

I think the seven main reasons are liquidity, accessibility, capitalisation, leverage, trading hours, volatility and (in some countries) tax considerations.

tax comes last after huge performance,its aint big deal

you take what you give

Lexy is right…let’s be real, if you did make a proper business plan with sufficient capital (very important, for which see this: How Much Trading Capital Do Forex Traders Need? | Investopedia), then you would of course need to do your sums in terms of business expenses, which includes taxation on any given profit. For people like me, and there are many such people on Babypips, who do not make trading a business or a steady source of income, tax considerations of this kind of course will not apply…

In the Uk, for example, trading forex through a spread betting account is tax free (up to a point).

really dont waste time on it if you dont double up

liquidity, accessibility, capitalisation, leverage, trading hours, volatility and (in some countries) tax considerations.

these are same even better in stocks and etf

How Much Trading Capital Do Forex Traders Need?

i just edited yes its need 25 to 50k

Helpful money spinning tip;

The future price will either go up, go down or stay the same

Good luck.

But you can’t daytrade stock unless you have $25,000 USD and if it goes under that 3-day trades within the same business week turn your account into the pattern day trader. With Forex you can make as many trades as you want in a day. That’s if you have the capital to make a trade.

You cannot say that accessibility and trading hours are better in stock. Seeing that when the stock market is close forex is open. Also not to many people want to trade blue chips that move 1% in a month. On top of that you need atleast $25,000 just to short in stocks. In forex i can have $100 and enter a short position.

Most systems can be profitable if you can identify the right conditions to use them, taking something simple like trend trading based on a price cross to the moving average of the prices, if you run an EA for one year across multiple pairs, some will win overall some will lose, my bet would be that sample a large set of pairs the net result would be close to zero profit.

So the success of the trending system on the pairs that won would be incidental to the fact that that particularly pair experienced a lot of well defined trending in the given period whereas overall there is no ‘Edge’ on trend trading that way. The key to making money if that were the case would be being able to predict with a high probability if the price movement in the near future is likely to be trending in this example based on the current information you have.

It’s very simple and extremely hard at the same time. Particularly for trending because you would need to find a way to classify a trend precisely [Mathematically] in a discrete time series and then find predictive relationships for the market being in that state in future.

If you are trading something else, say based on volatility expressed as ATR or True Range or trading based on something like Volume, as they tend to come in clusters, you can usually find autocorrelations that can help you predict with measurable accuracy the future state of either with regression models.

I would advise to start learning how to program if you don’t already on MT4 if that’s your platform of choice, it is not too difficult and will give you more options.

Choose a simple system, then 1. Try to identify what market conditions that system is profitable in, describe those conditions as precisely as possible and 2. Find a reliable way to predict if those conditions will exist in the near term.