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Aging Trend: This is the period of consolidation as the trend comes to maturity. Volatility tends to decrease at this stage of the trend as the momentum of the trend exhausts itself. This is the period where lot of profit taking will take place.

Both the bulls and the bears are hesitant to make daring moves at this stage of the trend. Experienced traders now know that the trend has aged and it is the best time to get out of the trend. They try to get out of their trades at this stage of the trend by closing their positions. This satisfies the appetites of inexperienced traders as they consolidate their positions by taking on the positions abandoned by the experienced traders.

The trend takes a short break and the volatility is low during this stage of the trend. This is the period of consolidation and the prices tend to stay calm during this period. Currency prices have moved by a large amount in the previous period of high volatility.

The US Dollar Index is used by traders to get the big picture of the overall trend of the dollar. It is widely quoted in the press and on quote services. The US Dollar Index is traded on the New York Board of Trade at Finex and at the Chicago Mercantile Exchange (CME).

The Federal Reserve Board had introduced the US Dollar Index in 2003. The index is the result of the Smithsonian Agreement that had replaced the Bretton Woods Agreement. The US Dollar Index is similar to the Feds Dollar Index which is a trade weighted index. The Fed gives value to each individual currency in the index based on how much it trades with the US.

However, the value of US Dollar Index and the Feds Dollar Index is different and it should not be confused with one another. The futures contract expires on March, June, September and December. The minimum tick on the US Dollar Index is 0.1 and equals $10.

The overall value of the contract on the index is 1,000 times the value of the index in dollars. Delivery is physical. It means that you receive dollars based on the value of the index on the second business day prior to the third Wednesday during the month of the expiring contract.

Suppose you believe that the currency prices will not be able to follow through action in the direction of the breakout. Fading breakouts refers to trading against breakouts. When we believe that breakouts from support and resistance levels to be false and unsustainable we fade breakouts.

False breakouts are a bane for breakout traders but boon for breakout faders. False breakouts are also known as fakeouts. Fading breakouts tends to be more effective as a short term strategy. Fading breakout is not meant to be a long term strategy.

Support and resistance are seen as the price floor and the price ceiling respectively. Support level attracts the buyers enthusiasm for higher bids and prevents the price from falling further. The resistance level attracts the sellers enthusiasm for shorting. It prevents the price action from advancing higher.

It is perfectly logical for the crowd to think that if the support level is penetrated, then the price action should move downward. The crowd is more likely to sell than to buy when the price action breaks the support level from above. The idea of trading breakouts appeals to many independent traders especially those new to currency trading. The crowd likes to trade the breakout.

Economic growth of countries can also have a big impact on the overall currency market sentiment besides the interest rates. When the economy overheats, inflationary pressures increase forcing the Central Banks to increase the interest rates in order to cool the economy. US economy is the key factor in determining the global currency market sentiment. United States is the largest economy in the world. US economic news can and does affect the major currency pairs like EUR/USD, GBP/USD, CHF/USD and JPY/USD.

A strong economic expansion coupled with a healthy labor market tends to boost consumer spending in the country. Good economic growth means low unemployment. Low unemployment means jobs for the people. It helps in selling the stuff produced by the local companies and businesses.

A country with a strong economy is in a better position to attract foreign investors. But this economic performance should be consistent and not erratic. With consistent economic growth spread over a decade, foreign investors become interested. Foreign investment flowing into the country increases the demand for that currency. This increased demand for that currency causes it to appreciate against other currencies.

How do you view the forex market is very important. Do you see it as a big mechanical matrix which is devoid of emotions? Most traders have a love hate relationship with the forex market. Most think that the market is either against them or for them.

At anyone time, the market is emanating the emotions of currency speculators around the world. The truth is that forex market is just the compressed display of emotions.

You should think of a market as a big living organism. Think that this organism is made up of millions of cells. Each cell is doing its own functions. Each cell also interacts with other cells of the body keeping the living organism alive and kicking around the clock.

Knowing what the market thinks at anyone time and how it thinks is crucial to your trading success. Forex market comprises millions of traders acting out their perceptions and emotions about the different currency pairs.

You need to know what the other participants are thinking. Ultimately, you as the trader are dealing with other traders out there whether they are big institutional players or an independent trader.

Traders use different approaches in their trading. There are always advantages and disadvantages of different systems. Majority of successful traders use self developed mechanical trading systems. The majority of unsuccessful traders depend on discrete trading method.

Many traders use their own developed trading systems. There are many actively developed trading systems for sale as computer programs also known as Expert Advisors or Robots. Theses robots vary widely in prices. It can be from a few hundred dollars to a few hundred thousand dollars.

The significant advantage of these programs is that they generate signals that can be used by the trader for trading. Sometimes these computer programs are developed for a certain bank or a corporation.

The discrete trading method used by many traders is like an artist trying to adapt to different market conditions and using flexibility and tactics corresponding to the particular market condition.

In case of a discrete trading method, the traders mood and health can greatly affect the outcome of each trade. The main disadvantage of the discrete trading approach is due to the stress factor influencing the trader, the unstable trade results.

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.

What you are looking for is when the price action and MACD do not agree. For example, if the price is making a series of higher highs and MACD is making a series of lower lows, something is wrong between the two.

MACD is seen as a sign that fewer and fewer traders are in the trend. No one is trading against the trend. Yet fewer and fewer traders are in the trend. Most probably the traders are getting nervous and slowly fading out of their trades.

The only traders in the trend are nervous and jittery. They want to exit. Most of them are likely to exit their trade at the first sign of trouble. As soon as the bears muster up enough guts to short. MACD is diverging from the bullish trend. The bulls will exit and the bears will take over.