Most of the people had never heard of trading the foreign exchange markets only a few years ago. The recent stock market crash in 2008 has made the word forex trading among the small investors popular. Much information is available online. A mass of information will become available for free. You just have to type in the word forex training in a search engine.

Bollinger Bands are based on the standard deviation. A standard deviation is the measure of the spread of a set of number. The higher the difference between the closing prices of a currency pair and the average price, the larger the standard deviation and the volatility of the currency pair. 95% of the recent closing prices are expected to be within the two standard deviations of the currency pair when the markets are range bound. In a range bound market, in other words, if the price pops above or below the Bollinger Bands, it does not belong there.

We rely on forex markets volatility as a means to make pips and profits in currency trading. When the currency pairs price moves up and down we make pips and profits. There are no pips or profits to be made if the price does not change. We want to make pips from the change in the price level when the market produces a consistent, repeatable move up or down. The more the price changes and moves up and down, the more pips you make.

A moving average is an average of a predetermined number of prices such as the closing prices calculated over a number of periods like 50 candles. The higher the number of candles in the average, the smoother the line is.

Interpreting a MACD divergence can be very useful in your trading. What does a MACD Divergence means? Just that the current price trend is running out of steam. It may not happen right away. But a MACD Divergence is a powerful hint that the market is changing. Spotting a MACD divergence correctly will only come after practice. It is easy to spot MACD crossovers and dramatic rises but not so a MACD divergence.

Moving Average Convergence Divergence (MACD pronounced Mac Dee) is one of the most reliable and simple tool in your trading arsenal as a currency trader. MACD is a trend following momentum oscillator or indicator.

Suppose you have the data for the currency correlations of the major pairs. The correlation between GBP/USD and EUR/USD is 0.68. It means that both the pairs move in the same direction 68% of the time.

If you are a currency trader and focus on the four major currency pairs EUR/USD, GBP/USD, USD/CHF and USD/JPY, then you should consider yourself a specialist in USD. Yes, its true! You are a specialist in trading the greenback.

Know that day trading isnt investing. Day trading is also not gambling. But the lines between trading, gambling and investing can be thin. You should understand where the difference is. You will be in a better position to follow your trading strategy. You will also make more money. You should avoid the trap of gambling. This way you will be in a better position to preserve your capital.

For new forex traders, learning forex trading is like building a new car from scratch without an instruction manual. Many of you acquire quality parts like brakes, wheels, motors, seats, steering wheels etc.