Wednesday, July 29, 2009
Market participants
Unlike a stock market, where all participants have access to the same prices, the foreign exchange market is divided into levels of access. At the top is the inter-bank market, which is made up of the largest investment banking firms. Within the inter-bank market, spreads, which are the difference between the bid and ask prices, are razor sharp and usually unavailable, and not known to players outside the inner circle. The difference between the bid and ask prices widens (from 0-1 pip to 1-2 pips for some currencies such as the EUR). This is due to volume. If a trader can guarantee large numbers of transactions for large amounts, they can demand a smaller difference between the bid and ask price, which is referred to as a better spread. The levels of access that make up the foreign exchange market are determined by the size of the “line” (the amount of money with which they are trading). The top-tier inter-bank market accounts for 53% of all transactions. After that there are usually smaller investment banks, followed by large multi-national corporations (which need to hedge risk and pay employees in different countries), large hedge funds, and even some of the retail FX-metal market makers. According to Galati and Melvin, “Pension funds, insurance companies, mutual funds, and other institutional investors have played an increasingly important role in financial markets in general, and in FX markets in particular, since the early 2000s.” (2004) In addition, he notes, “Hedge funds have grown markedly over the 2001–2004 period in terms of both number and overall size” Central banks also participate in the foreign exchange market to align currencies to their economic needs.
Retail foreign exchange broker
There are two types of retail brokers offering the opportunity for speculative trading: retail foreign exchange brokers and market makers. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks. Retail brokers, while largely controlled and regulated by the CFTC and NFA might be subject to foreign exchange scams. At present, the NFA and CFTC are imposing stricter requirements, particularly in relation to the amount of Net Capitalization required of its members. As a result many of the smaller, and perhaps questionable brokers are now gone. It is not widely understood that retail brokers and market makers typically trade against their clients and frequently take the other side of their trades. This can often create a potential conflict of interest and give rise to some of the unpleasant experiences some traders have had. A move toward NDD (No Dealing Desk) and STP (Straight Through Processing) has helped to resolve some of these concerns and restore trader confidence, but caution is still advised in ensuring that all is as it is presented.
Financial instruments
A spot transaction is a two-day delivery transaction (except in the case of the Canadian dollar and the Mexican Nuevo Peso, which settle the next day), as opposed to the futures contracts, which are usually three months. This trade represents a “direct exchange” between two currencies, has the shortest time frame, involves cash rather than a contract; and interest is not included in the agreed-upon transaction. The data for this study come from the spot market. Spot transactions has the second largest turnover by volume after Swap transactions among all FX transactions in the Global FX market.
Option A foreign exchange
A foreign exchange option (commonly shortened to just FX option) is a derivative where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. The FX options market is the deepest, largest and most liquid market for options of any kind in the world.
Future
Foreign currency futures are exchange traded forward transactions with standard contract sizes and maturity dates — for example, $1000 for next November at an agreed rate [4],[5]. Futures are standardized and are usually traded on an exchange created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts.
Investment management firms
Investment management firms (who typically manage large accounts on behalf of customers such as pension funds and endowments) use the foreign exchange market to facilitate transactions in foreign securities. For example, an investment manager bearing an international equity portfolio needs to purchase and sell several pairs of foreign currencies to pay for foreign securities purchases.
Some investment management firms also have more speculative specialist currency overlay operations, which manage clients' currency exposures with the aim of generating profits as well as limiting risk. Whilst the number of this type of specialist firms is quite small, many have a large value of assets under management (AUM), and hence can generate large trades.
Determinants of FX Rates
The following theories explain the fluctuations in FX rates in a floating exchange rate regime (In a fixed exchange rate regime, FX rates are decided by its government):
(a) International parity conditions viz; purchasing power parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions [e.g., free flow of goods, services and capital] which seldom hold true in the real world.
(b) Balance of payments model (see exchange rate). This model, however, focuses largely on tradable goods and services, ignoring the increasing role of global capital flows. It failed to provide any explanation for continuous appreciation of dollar during 1980s and most part of 1990s in face of soaring US current account deficit.
(c) Asset market model (see exchange rate) views currencies as an important asset class for constructing investment portfolios. Assets prices are influenced mostly by people’s willingness to hold the existing quantities of assets, which in turn depends on their expectations on the future worth of these assets. The asset market model of exchange rate determination states that “the exchange rate between two currencies represents the price that just balances the relative supplies of, and demand for, assets denominated in those currencies.”
None of the models developed so far succeed to explain FX rates levels and volatility in the longer time frames. For shorter time frames (less than a few days) algorithm can be devised to predict prices. Large and small institutions and professional individual traders have made consistent profits from it. It is understood from above models that many macroeconomic factors affect the exchange rates and in the end currency prices are a result of dual forces of demand and supply. The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses (and distills) as much of what is going on in the world at any given time as foreign exchange.
Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions and market psychology.
Market psychology
- Flights to quality
- Unsettling international events can lead to a "flight to quality," with investors seeking a "safe haven". There will be a greater demand, thus a higher price, for currencies perceived as stronger over their relatively weaker counterparts. The Swiss franc has been a traditional safe haven during times of political or economic uncertainty.[12]
- Long-term trends
- Currency markets often move in visible long-term trends. Although currencies do not have an annual growing season like physical commodities, business cycles do make themselves felt. Cycle analysis looks at longer-term price trends that may rise from economic or political trends. [13]
- "Buy the rumor, sell the fact"
- This market truism can apply to many currency situations. It is the tendency for the price of a currency to reflect the impact of a particular action before it occurs and, when the anticipated event comes to pass, react in exactly the opposite direction. This may also be referred to as a market being "oversold" or "overbought".[14] To buy the rumor or sell the fact can also be an example of the cognitive bias known as anchoring, when investors focus too much on the relevance of outside events to currency prices.
- Economic numbers
- While economic numbers can certainly reflect economic policy, some reports and numbers take on a talisman-like effect: the number itself becomes important to market psychology and may have an immediate impact on short-term market moves. "What to watch" can change over time. In recent years, for example, money supply, employment, trade balance figures and inflation numbers have all taken turns in the spotlight.
- Technical trading considerations
- As in other markets, the accumulated price movements in a currency pair such as EUR/USD can form apparent patterns that traders may attempt to use. Many traders study price charts in order to identify such patterns
Trading characteristics
centrally cleared market for the majority of FX trades, and there is very little cross-border regulation. Due to the over-the-counter (OTC) nature of currency markets, there are rather a number of interconnected marketplaces, where different currencies instruments are traded. This implies that there is not a single exchange rate but rather a number of different rates (prices), depending on what bank or market maker is trading, and where it is. In practice the rates are often very close, otherwise they could be exploited by arbitrageursinstantaneously. Due to London's dominance in the market, a particular currency's quoted price is usually the London market price. A joint venture of theChicago Mercantile Exchange and Reuters, called Fxmarketspace opened in 2007 and aspired but failed to the role of a central market clearing mechanism.
The main trading center is London, but New York, Tokyo, Hong Kong andSingapore are all important centers as well. Banks throughout the world participate. Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session begins, followed by the North American session and then back to the Asian session, excluding weekends.
Fluctuations in exchange rates are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes ingross domestic product (GDP) growth, inflation (purchasing power parity theory), interest rates (interest rate parity, Domestic Fisher effect, International Fisher effect), budget and trade deficits or surpluses, large cross-border M&A deals and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time. However, the large banks have an important advantage; they can see their customers' order flow.
Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX is expressed (called base currency). For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.5465 dollar. Out of convention, the first currency in the pair, the base currency, was the stronger currency at the creation of the pair. The second currency, counter currency, was the weaker currency at the creation of the pair.
The factors affecting XXX will affect both XXX/YYY and XXX/ZZZ. This causes positive currency correlation between XXX/YYY and XXX/ZZZ.
On the spot market, according to the BIS study, the most heavily traded products were:
and the US currency was involved in 86.3% of transactions, followed by the euro (37.0%), the yen (17.0%), and sterling (15.0%) (see table). Note that volume percentages should add up to 200%: 100% for all the sellers and 100% for all the buyers.
Trading in the euro has grown considerably since the currency's creation in January 1999, and how long the foreign exchange market will remain dollar-centered is open to debate. Until recently, trading the euro versus a non-European currency ZZZ would have usually involved two trades: EUR/USD and USD/ZZZ. The exception to this is EUR/JPY, which is an established traded currency pair in the interbank spot market. As the dollar's value has eroded during 2008, interest in using the euro as reference currency for prices in commodities (such as oil), as well as a larger component of foreign reserves by banks, has increased dramatically. Transactions in the currencies of commodity-producing countries, such as AUD, NZD, CAD, have also increased.
Economic factors
These include: (a)economic policy, disseminated by government agencies and central banks, (b)economic conditions, generally revealed through economic reports, and other economic indicators.
- Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and "cost" of money, which is reflected by the level of interest rates).
- Economic conditions include:
- Government budget deficits or surpluses
- The market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.
- Balance of trade levels and trends
- The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
- Inflation levels and trends
- Typically a currency will lose value if there is a high level of inflation in the country or if inflation levels are perceived to be rising [. This is because inflation erodes purchasing power, thus demand, for that particular currency. However, a currency may sometimes strengthen when inflation rises because of expectations that the central bank will raise short-term interest rates to combat rising inflation.
- Economic growth and health
- Reports such as GDP, employment levels, retail sales, capacity utilization and others, detail the levels of a country's economic growth and health. Generally, the more healthy and robust a country's economy, the better its currency will perform, and the more demand for it there will be.
- Productivity of an economy
- Increasing productivity in an economy should positively influence the value of its currency. It affects are more prominent if the increase is in the traded sector
Determinants of FX Rates
The following theories explain the fluctuations in FX rates in a floating exchange rate regime (In a fixed exchange rate regime, FX rates are decided by its government):
(a) International parity conditions viz; purchasing power parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions [e.g., free flow of goods, services and capital] which seldom hold true in the real world.
(b) Balance of payments model (see exchange rate). This model, however, focuses largely on tradable goods and services, ignoring the increasing role of global capital flows. It failed to provide any explanation for continuous appreciation of dollar during 1980s and most part of 1990s in face of soaring US current account deficit.
(c) Asset market model (see exchange rate) views currencies as an important asset class for constructing investment portfolios. Assets prices are influenced mostly by people’s willingness to hold the existing quantities of assets, which in turn depends on their expectations on the future worth of these assets. The asset market model of exchange rate determination states that “the exchange rate between two currencies represents the price that just balances the relative supplies of, and demand for, assets denominated in those currencies.”
None of the models developed so far succeed to explain FX rates levels and volatility in the longer time frames. For shorter time frames (less than a few days) algorithm can be devised to predict prices. Large and small institutions and professional individual traders have made consistent profits from it. It is understood from above models that many macroeconomic factors affect the exchange rates and in the end currency prices are a result of dual forces of demand and supply. The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses (and distills) as much of what is going on in the world at any given time as foreign exchange.
Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions and market psychology.
(a) International parity conditions viz; purchasing power parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions [e.g., free flow of goods, services and capital] which seldom hold true in the real world.
(b) Balance of payments model (see exchange rate). This model, however, focuses largely on tradable goods and services, ignoring the increasing role of global capital flows. It failed to provide any explanation for continuous appreciation of dollar during 1980s and most part of 1990s in face of soaring US current account deficit.
(c) Asset market model (see exchange rate) views currencies as an important asset class for constructing investment portfolios. Assets prices are influenced mostly by people’s willingness to hold the existing quantities of assets, which in turn depends on their expectations on the future worth of these assets. The asset market model of exchange rate determination states that “the exchange rate between two currencies represents the price that just balances the relative supplies of, and demand for, assets denominated in those currencies.”
None of the models developed so far succeed to explain FX rates levels and volatility in the longer time frames. For shorter time frames (less than a few days) algorithm can be devised to predict prices. Large and small institutions and professional individual traders have made consistent profits from it. It is understood from above models that many macroeconomic factors affect the exchange rates and in the end currency prices are a result of dual forces of demand and supply. The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses (and distills) as much of what is going on in the world at any given time as foreign exchange.
Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions and market psychology.
Saturday, June 27, 2009
WHY TRADE FOREX
WHY TRADE FOREX
24 hour tradingOne of the major advantages of trading Forex is the opportunity to trade 24 hours a day from Sunday evening (20:00 GMT) to Friday evening (22:00 GMT). This gives you a unique opportunity to react instantly to breaking news that is affecting the markets.
Superior liquidityThe Forex market is so liquid that there are always buyers and sellers to trade with. The liquidity of this market, especially that of the major currencies, helps ensure price stability and narrow spreads. The liquidity comes mainly from banks that provide liquidity to investors, companies, institutions and other currency market players.
No commissionsThe fact that Forex is often traded without commissions makes it very attractive as an investment opportunity for investors who want to deal on a frequent basis. Trading the “majors” is also cheaper than trading other cross because of the high level of liquidity. For more information on the trading conditions of Saxo Bank, go to the Account Summary on your SaxoTrader and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary.
100:1 LeverageLeverage (gearing) enables you to hold a position worth up to 100 times more than your margin deposit. For example, a USD 10,000 deposit can command positions of up to USD 1,000,000 through leverage. You can leverage the first USD 25,000 of your investment up to 100 times and additional collateral up to 50 times.
Profit potential in falling marketsSince the market is constantly moving, there are always trading opportunities, whether a currency is strengthening or weakening in relation to another currency. When you trade currencies, they literally work against each other. If the EURUSD declines, for example, it is because the US dollar gets stronger against the euro and vice versa. So, if you think the EURUSD will decline (that is, that the euro will weaken versus the dollar), you would sell EUR now and then later you buy euro back at a lower price. In case that the EURUSD indeed declines, then you can take your profit. The opposite trading scenario would occur if the EURUSD appreciates
24 hour tradingOne of the major advantages of trading Forex is the opportunity to trade 24 hours a day from Sunday evening (20:00 GMT) to Friday evening (22:00 GMT). This gives you a unique opportunity to react instantly to breaking news that is affecting the markets.
Superior liquidityThe Forex market is so liquid that there are always buyers and sellers to trade with. The liquidity of this market, especially that of the major currencies, helps ensure price stability and narrow spreads. The liquidity comes mainly from banks that provide liquidity to investors, companies, institutions and other currency market players.
No commissionsThe fact that Forex is often traded without commissions makes it very attractive as an investment opportunity for investors who want to deal on a frequent basis. Trading the “majors” is also cheaper than trading other cross because of the high level of liquidity. For more information on the trading conditions of Saxo Bank, go to the Account Summary on your SaxoTrader and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary.
100:1 LeverageLeverage (gearing) enables you to hold a position worth up to 100 times more than your margin deposit. For example, a USD 10,000 deposit can command positions of up to USD 1,000,000 through leverage. You can leverage the first USD 25,000 of your investment up to 100 times and additional collateral up to 50 times.
Profit potential in falling marketsSince the market is constantly moving, there are always trading opportunities, whether a currency is strengthening or weakening in relation to another currency. When you trade currencies, they literally work against each other. If the EURUSD declines, for example, it is because the US dollar gets stronger against the euro and vice versa. So, if you think the EURUSD will decline (that is, that the euro will weaken versus the dollar), you would sell EUR now and then later you buy euro back at a lower price. In case that the EURUSD indeed declines, then you can take your profit. The opposite trading scenario would occur if the EURUSD appreciates
TRADE VIEW FOREX
Tradeview Forex provides clients optimum trading solutions through the user-friendly Metatrader 4 platform with a number of sophisticated enhancements. We offer full 24 hour support, and a technology team with many years of experience. With ongoing updates to the MT4 and its supporting systems, traders can rely on us.
Supporting 24 hour-a-day trading requires intensive support, and many FCMs are forced to outsource their technology needs. At Tradeview, we are able to work directly with FTechnics, our in-house trading technology company. With a combined 40 years of experience, this company designs and executes network trading platforms and solutions used by many large financial institutions. This means we have direct control over our platform, and the ability to rapidly develop and test more advanced solutions in response to ongoing demand.
Tradeview Forex will continue to improve upon the promise we make to our clients: Providing optimum support, execution, and trading solutions that are unrivaled in the industry.
To learn more, give us a call at 212 482 8275 or email tradeview@ikongm.com
Expert Advisor
A forex Expert Advisor is a mechanical trading system based on MQL-4 programming language. The MT4 platform is designed specifically with automated trading in mind. MetaTrader 4 can be programmed to alert you about trading opportunities, and can also trade your account for you, from sending orders directly to your broker, or adjusting stop loss and take profit levels.Expert advisors for MetaTrader 4 are all different and unique in the way they enter and exit the market. Expert advisors provide a different way of trading Forex, as they help to eliminate emotionally based decisions. Expert advisors in MT4 utilize a disciplined approach and design to evaluate multiple factors at once, which may help the trader make better decisions.All of the forex technical indicators available in MetaTrader 4 can be analyzed logically. You can also test and create your own technical indicators with MetaTrader tools. More>>
Forex
Online currency trading is a market open 24 hours, 6 days at week where currencies from different nations around the world are traded usually through banks and brokers. Foreign currencies are sold and bought across local and global markets. The trader´s investment increases or decreases depending on the currency movements. Conditions of the online currency trading can change at any time in response to real-time events.The following are the main attraction for online currency trading-FX:
24 hour trading, with complete access to forex traders all over the world.
A market that allows trading most currencies.
The possibility to profit in rising or falling markets.
Leverage trading.The general idea in online currency trading, Forex is to profit from the shifts on foreign currency prices. Forex trading or online currency trading is always done in pairs. More>>
Supporting 24 hour-a-day trading requires intensive support, and many FCMs are forced to outsource their technology needs. At Tradeview, we are able to work directly with FTechnics, our in-house trading technology company. With a combined 40 years of experience, this company designs and executes network trading platforms and solutions used by many large financial institutions. This means we have direct control over our platform, and the ability to rapidly develop and test more advanced solutions in response to ongoing demand.
Tradeview Forex will continue to improve upon the promise we make to our clients: Providing optimum support, execution, and trading solutions that are unrivaled in the industry.
To learn more, give us a call at 212 482 8275 or email tradeview@ikongm.com
Expert Advisor
A forex Expert Advisor is a mechanical trading system based on MQL-4 programming language. The MT4 platform is designed specifically with automated trading in mind. MetaTrader 4 can be programmed to alert you about trading opportunities, and can also trade your account for you, from sending orders directly to your broker, or adjusting stop loss and take profit levels.Expert advisors for MetaTrader 4 are all different and unique in the way they enter and exit the market. Expert advisors provide a different way of trading Forex, as they help to eliminate emotionally based decisions. Expert advisors in MT4 utilize a disciplined approach and design to evaluate multiple factors at once, which may help the trader make better decisions.All of the forex technical indicators available in MetaTrader 4 can be analyzed logically. You can also test and create your own technical indicators with MetaTrader tools. More>>
Forex
Online currency trading is a market open 24 hours, 6 days at week where currencies from different nations around the world are traded usually through banks and brokers. Foreign currencies are sold and bought across local and global markets. The trader´s investment increases or decreases depending on the currency movements. Conditions of the online currency trading can change at any time in response to real-time events.The following are the main attraction for online currency trading-FX:
24 hour trading, with complete access to forex traders all over the world.
A market that allows trading most currencies.
The possibility to profit in rising or falling markets.
Leverage trading.The general idea in online currency trading, Forex is to profit from the shifts on foreign currency prices. Forex trading or online currency trading is always done in pairs. More>>
LEARN FOREX TRADING
Learn to Trade Forex encompasses the extensive knowledge and expertise of GAIN Capital Group's senior trading and market analyst teams.GAIN Capital Group is one of the most respected online forex trading firms in the industry. The company provides a full range of forex investment services to institutional and individual traders worldwide, currently serving clients from over 110 countries.For individual investors, GAIN offers FOREX.com, a service tailored to meet the needs of the retail trading community. Through FOREX.com, GAIN offers individual investors access to award-winning trading technology and professional-level services. GAIN also operates a successful Managed Accounts (MAC) program for investors who prefer to have their investments professionally managed.Recognized industry-wide as FX market experts, GAIN's senior traders are regularly sought after by major news organizations such as The Wall Street Journal, Reuters, Bloomberg, Dow Jones, CNBC and other media outlets for market commentary. GAIN also regularly tops the charts of FX Week's "Currency Index" by consistently providing accurate market forecasts.GAIN traders have a level of market awareness that is simply unrivaled in the industry, making them an ideal source to tap into for practical know-how and trading skills.Dedicated to advancing trading education, GAIN Capital Group is pleased to introduce Learn to Trade Forex as a complete educational resource for novice traders.
HOW THE FOREX BUSSINESS IS?
For the last three decades Foreign Exchange market - briefly Forex or FX, had integrated into the world's biggest financial market. The volume of daily transactions is about 1-3 trillion of US dollars. The trading instruments on this market are the currencies of different countries, so the fluctuation of currency's rates allows to gain a real profit.
Of course monetary assets of different countries exchanged since the term money appeared as well as an idea to obtain profit from currency's rates difference. Now it is not a new idea, but the transformation of foreign exchange market to the modern stage with an opportunity to conduct conversional operations of such volumes arose only after an introduction of floating rates regime by the state-members of IMF. Within this regime's framework the rate of one currency to another is defining only by the supply and demand on the market.
Presently Forex market is a global telecommunication network of banks and different financial organizations. It does not have any fixed trading place and time restrictions - the trade starts on Monday morning in New Zealand and closes on Friday evening in USA
The advantages of Forex market are:
Round-the-clock trading access: the ability to trade for 24 hours a day;
Liquidity: the market works with a huge money and gives the customers complete freedom to open or close their position of different volume;
Leverage: an ability to use leverage. It decreases requirements to the sum of the initial deposit (margin trade). So in case you deposit 10 000 USD into your account you'd have an opportunity to work with 1 000 000 USD (leverage 1:100);
Objectivity: no exterior regulated structures, so the currency's rate is establishing in accordance with current supply and demand on the market;
Globality: everyone can become a market participant irrespective to the living place, as trading requires only your skills and Internet access.
At present mostly all the operations on the market are conducting only to obtain profit. With the development of Internet and other means of communication this sector of the financial markets becomes more accessible and attractive for the investors of different levels.
Of course monetary assets of different countries exchanged since the term money appeared as well as an idea to obtain profit from currency's rates difference. Now it is not a new idea, but the transformation of foreign exchange market to the modern stage with an opportunity to conduct conversional operations of such volumes arose only after an introduction of floating rates regime by the state-members of IMF. Within this regime's framework the rate of one currency to another is defining only by the supply and demand on the market.
Presently Forex market is a global telecommunication network of banks and different financial organizations. It does not have any fixed trading place and time restrictions - the trade starts on Monday morning in New Zealand and closes on Friday evening in USA
The advantages of Forex market are:
Round-the-clock trading access: the ability to trade for 24 hours a day;
Liquidity: the market works with a huge money and gives the customers complete freedom to open or close their position of different volume;
Leverage: an ability to use leverage. It decreases requirements to the sum of the initial deposit (margin trade). So in case you deposit 10 000 USD into your account you'd have an opportunity to work with 1 000 000 USD (leverage 1:100);
Objectivity: no exterior regulated structures, so the currency's rate is establishing in accordance with current supply and demand on the market;
Globality: everyone can become a market participant irrespective to the living place, as trading requires only your skills and Internet access.
At present mostly all the operations on the market are conducting only to obtain profit. With the development of Internet and other means of communication this sector of the financial markets becomes more accessible and attractive for the investors of different levels.
Today's Currency World
Today's Currency World
the 30 years since the collapse of the last gentlemanly agreement on currency rates, many momentous events have occurred that have affected currencies worldwide. The Japanese yen gained prominence because of Japan's heavy export relationship with the United States. The USSR collapsed. We have had several undeclared wars, the south Asian economies have risen and collapsed, and several investor bubbles have come and gone.Each time, currencies have come away with a newly earned respect by the masses. There has also been a constant element of surprise that keeps you guessing what's next.Current conditions, such as the United States' perpetual war on “terror”, the permanent introduction and dominance of the euro currency, the steady O.P.E.C. increases in oil prices, and gold's renaissance as a store of value, will likely have a tremendous impact on the future of what it means to trade currencies.This could be a fundamental shift in the next phase of currency development.
the 30 years since the collapse of the last gentlemanly agreement on currency rates, many momentous events have occurred that have affected currencies worldwide. The Japanese yen gained prominence because of Japan's heavy export relationship with the United States. The USSR collapsed. We have had several undeclared wars, the south Asian economies have risen and collapsed, and several investor bubbles have come and gone.Each time, currencies have come away with a newly earned respect by the masses. There has also been a constant element of surprise that keeps you guessing what's next.Current conditions, such as the United States' perpetual war on “terror”, the permanent introduction and dominance of the euro currency, the steady O.P.E.C. increases in oil prices, and gold's renaissance as a store of value, will likely have a tremendous impact on the future of what it means to trade currencies.This could be a fundamental shift in the next phase of currency development.
New Rules of Currency
New Rules of Currency
In 1971, the Smithsonian Agreement replaced the Bretton Woods Agreement and authorized “forward currency contracts”, adding validity to the Eurodollar phenomenon. It didn’t work. A year later the European Joint Float was established. It, and the Smithsonian Agreement, were scrapped in 1973. Even though they were dissolved the concept of “forward currency contracts” stayed as part of the banking system.Once currencies began to “free-float”, they immediately moved away from their gentlemanly 1% fluctuations on either side to huge price ranges, going anywhere from 20-25% daily.From 1970-1973, the total foreign exchange volume went from US$25 Billion to US$100 Billion. With oil prices up, gold prices up, and an economy still reeling from the rapid currency shift, “stagflation”, rising inflation while real incomes remained the same, soon hit the United States.
In 1971, the Smithsonian Agreement replaced the Bretton Woods Agreement and authorized “forward currency contracts”, adding validity to the Eurodollar phenomenon. It didn’t work. A year later the European Joint Float was established. It, and the Smithsonian Agreement, were scrapped in 1973. Even though they were dissolved the concept of “forward currency contracts” stayed as part of the banking system.Once currencies began to “free-float”, they immediately moved away from their gentlemanly 1% fluctuations on either side to huge price ranges, going anywhere from 20-25% daily.From 1970-1973, the total foreign exchange volume went from US$25 Billion to US$100 Billion. With oil prices up, gold prices up, and an economy still reeling from the rapid currency shift, “stagflation”, rising inflation while real incomes remained the same, soon hit the United States.
about automatic forex trading software
Before we answer that question, let us first talk about the two different types of automatic forex trading software available in the market. The first one is the web based software, one of the advantages of a web based software is you do not have to worry about the security of your system. The owners of the software are the ones responsible for the maintenance of the system. Another benefit of having a web based software is your ability to access the system anywhere you are. However, one disadvantage is that with most internet based software, you will need to pay a monthly premium so you can access the system.
The other type is the desktop based software. Now, the desktop software is the most common type of forex software or robot in the market. These are the programs that you will need to download and run in your computer. Unlike the web based software, you are responsible for the security of your computer and your system. So you need to tighten up the security of your PC. But the advantage of the desktop systems is that you do not need to pay a monthly fee for the use of the software. Most of there software's only require a one time payment and that's it.
Now back to the original question, do you really need an automatic forex trading software? Well the answer is a big yes. With all the advancements in technology, currency trading has never been much easier. You only need to figure out what kind of system u need depending on your trading style.
There are many forex software's available in the market today, what you need is to do is research the one that will fit your needs and budget.
The other type is the desktop based software. Now, the desktop software is the most common type of forex software or robot in the market. These are the programs that you will need to download and run in your computer. Unlike the web based software, you are responsible for the security of your computer and your system. So you need to tighten up the security of your PC. But the advantage of the desktop systems is that you do not need to pay a monthly fee for the use of the software. Most of there software's only require a one time payment and that's it.
Now back to the original question, do you really need an automatic forex trading software? Well the answer is a big yes. With all the advancements in technology, currency trading has never been much easier. You only need to figure out what kind of system u need depending on your trading style.
There are many forex software's available in the market today, what you need is to do is research the one that will fit your needs and budget.
technical analysis for newbies
Technical Analysis
Unlike fundamental analysis, technical chartists are not interested in company data, forecasts, currency movements etc. They predict the future movement of price by looking at historical price. All the news and data makes up the price movement which can be seen on charts.
Technical analysis uses chart patterns which are created from the movement of price, and a number of indicators to help the chartists analyze the future movement of the price.
Chart Patterns
Chart patterns are a very important part of technical analysis. They are used to spot possible price reversals and for spotting continuations in current trends. Below are some of the more popular chart patterns.
Reversal Patterns:
Double Tops & bottoms- Double bottoms can be a sign of a possible bottom which could mean the current trend is coming to an end and a reversal is going to take place. The price has been in a downtrend and then pulls back. It then continues rising then stops, and starts it's way back down again. It then stops and works it's way back up again. A double bottom is known as a W as that's the shape it takes. Once the neck of the W is broken this can be a good place to enter long. If the neck doesn't break and then starts a downtrend, this show that particular security is weak and is struggling to find strength. The possibility of a stronger double bottom is when the second low of the W is higher than the first low. Double tops are the inverse of the double bottom.
The line going across where the middle point of the W touches is called the neck. Once the neck line is broken the trader will be looking at the volume to see if this is increasing. If this is increasing whilst the price is rising this is a good sign the bulls are taking control for a reversal.
Double Top
The line going across where the middle point of the W touches is called the neck. Once the neck line is broken the trader will be looking at the volume to see if this is increasing. If this is increasing whilst the price is dropping, this is a good sign the bears are taking control for a reversal.
Rounded Tops & Bottoms- Rounded tops and bottoms are not as common as double tops and bottoms, but when they do happen they should be taken notice of. They are another reversal pattern which indicate a possible top or bottom has been hit.
Rounded Top
The price has been in an uptrend and then slows down. It then starts forming an arched shape where the bulls and the bears are fighting, but neither are taking full control. Once the price breaks the neckline (this is found by drawing a horizontal line across from where the formation started) and volume starts to pick up this is a good sign the bears have taken control and a possible reversal has occurred.
Rounded Bottom
The price has been in an down trend and then slows down. It then starts forming an arched shape where the bulls and the bears are fighting, but neither are taking full control. Once the price breaks the neckline (this is found by drawing a horizontal line across from where the formation started) and volume starts to pick up this is a good sign the bulls have taken control and a possible reversal has occurred.
Head & Shoulders- the head and shoulders is another reversal pattern. The price has been in a downtrend for some time. It then pulls back slightly which is then followed by a drop in price. Suddenly there is some bullish activity and the price rises to a now developed neck line. There is a slight pull back and then the price continues to rise breaking the neck line. By now you should be watching the volume. If it is continuing to increase this is a good sign that the bulls are taking control.
A head and shoulders pattern can occur in an uptrend. The price has been in an uptrend and then pulls back slightly to create the left shoulder. The bulls then continue to push the price up until the bears take over and pull the price back to the new formed neck line. There is a slight pull back from the bulls (forming the right shoulder) and then the bears take full control and break the neck line where the price continues to drop. Once the neck line is broken the trader should be looking at the volume. If this is rising whilst the price is dropping, this is a good indication that the bears have taken control and a reversal may be occurring.
Continuation Patterns:
Cup & Handle- this pattern is a good pattern for spotting a continuation in the current trend. It occurs when price starts to hit new highs or lows. It then fails to break the high or low, and then pulls back between 30-40% of the prior trend. It then starts to form a shape like the rounded top or bottom and tries to test the high or low once again. It fails and then starts to pull back about 20-30% of the 'U' that was created. This pull back creates the handle of the cup. Price then turns and starts heading up to test the current trend line. once it has broken the trend line and volume starts to increase, this is a good sign the price is going to test and possibly break the high or low. The more like a 'U' shape the bowl is, the higher the possibility of the pattern being created. 'V' shape bottoms or tops should be avoided and handles that are too deep should also be avoided.
Pennants & Flags- Pennants happen after a consolidation of price takes place during an trend. The price then moves withing a range that gets smaller and smaller as volume diminishes. There is then a sharp increase of volume with an increase of price which then continues to make new highs or lows.
The flag pattern is another continuation pattern that takes a break after a trend. It pulls back slightly and consolidates in a range. A channel can be drawn, and the channel can be used as support and resistance. Once the resistance is broken and there is an increase in volume, this can be interpreted as a continuation of the trend.
Rectangles- Rectangle patterns are usually used as continuation patterns. The price has been trending and then starts to consolidate. It starts to range where a channel is created. The highs and lows are being tested during the consolidation channel but the bulls and bears are undecided. Eventually the channel is broken in the direction of the previous trend, and the price starts to increase whilst the volume increases.
Triangles- There are symmetrical triangles, ascending and descending triangle patterns. Symmetrical triangles are formed when there is a consolidation period between the bulls and the bears. A side way triangle shape is formed when there is a move to the upside with a sharp pull back of the price and vice-versus. Once the price has broken through the triangle resistance line the price should continue to rise in the direction of the trend.
Ascending triangles have a higher probability if found in an uptrend. The bottom part of it forms a trend line whilst the top of the line can be quite flat. The volume starts to diminish and the range becomes narrow. Once the price breaks the top of the triangle and the volume starts to pick up, this is a good sign of a continuation of the trend.
Descending triangles have a higher possibility once found in a downtrend. The top line forms a trend line and the bottom line is quite flat. The volume starts to diminish and the range become narrow. Once the price breaks the bottom of the triangle and the volume starts to pick up, this is a good sign of a continuation of the trend.
Indicators
Indicators help the chartists confirm the direction of where the price may be heading. It must be realized that there are thousands of indicators as more and more custom indicators are being put together which are being used by traders. A number of the more popular indicators are mentioned below:
Average directional movement (ADX)- this is a trending indicator which shows you the strength of the trend but not the direction of the trend. It has a scale between 0-100. Once the line crosses up above the 30 line this can start to show the beginning of good strength in the trend. When the ADX is at 70 the trend is in full strength. Once it goes around 80 and starts turning south, the trend has lost steam and is coming to the end.
Bollinger Bands- this is a trending indicator and is one of the most popular indicators that is used by traders. They are used to determine a break out by combining a moving average, an upper standard deviation (upper band) and a lower standard deviation (lower band).
Commodity channel index (CCI)- this indicator is used to identify over-brought and over-sold conditions. The price is said to be over-brought once the CCI line goes above 100. If the line then drop back below the 0 line this can be an indication to go short. Conversely, the price is said to be over-sold once it drops below the -100 line. If the CCI line then goes back above the -100 line this can be a signal that the price might rise.
Directional movement indicator (DMI)- this is part of the ADX indicator and can be seen on the chart as %2BDMI and -DMI lines. If the %2BDMI line crosses above the -DMI line this can be seen as the possibility of the start of a trend. If the -DMI line crosses below the %2BDMI this can be part of a sell confirmation.
Exponential moving average (EMA)- this indicator is used to spot reversals and a possible start of a trend. They react quicker than normal moving averages, which can be an advantage if the trade does continue in that direction. The main problem is EMA's can give false signals due to whipsaws.
Fibonacci- the most used Fibonacci tool is the Fibonacci retracement. This is found by taking the high and low of a trend and placing the retracement tool. This will draw percentages of that movement. The key levels being 23.8%, 32.8%, 50%, 61.8% and 100%. The 50% retracement is a popular level that is used. For instance, say the price has been in an uptrend for some time. The price then starts to correct as some traders are starting to take some profit from the trade. The 50% retracement level would then be a key point for traders then to start buying again as the price could start continuing it's trend to the upside.
Gann theory- the Gann theory is based on fans that are drawn from peaks and bottoms, which are then used for support and resistance. Once a major fan is broken it can be an indication the price is going to continue moving in that direction.
Hull moving average- this is an improvement to the standard moving average offering a smoothing which reduces lag. It can be used to spot the start or end of the trend.
Keltner Channel- this indicator is similar to the bollinger bands, but it measures the volatility of the price movement with an upper and lower moving average band. If the price closes above the upper band it could signal a start of an up trend. If the price closes below the lower band this could signal a start of a down trend. The Keltner channel also works well with range trading strategies which can be seen by clicking the link below.
Linear regression channel- the linear regression channel is made up of a linear regression line, an upper channel line and a lower channel line. The channel is used to spot potential reversals of price. If the price drops below the lower channel line, it is said to be in the buy zone area. Other indicators can then be used to confirm the price moving to the upside. If the price moves above the top regression line it is said to be in the sell zone. Other indicators can be used to confirm a reversal in price.
Moving average convergence divergence (MACD)- this is a very popular indicator which is used to detect the beginning of a trend. There are 3 components to this indicator. The first being the MACD which is normally set to a 12 EMA minus a 26 EMA. Next is the signal line which is normally set to a 9 EMA. The third part is the MACD histogram. Sometimes you may find the histogram by itself without the moving averages. A buy signal is in place when the12-26 EMA line crosses above the 9 EMA line. The indicator has a scale and the trend it more likely to be stronger if the cross over happens below the 0 line. A sell signal is in place when the 12-26 EMA crosses below the 9 EMA. This is a stronger if it happens above the 0 line.
On balance volume (OBV)- the on balance volume indicator combines volume with price to determine whether a certain price movement has strength or weakness. It adds or takes away volume at the close of a bar. If the price is rising and the OBV continues to rise, you know there is strength in the price movement as buying volume is increasing. But if the price makes higher highs whilst the OBV makes lower lows, you know there is a possibility of a price reversal. If the price falls and the OBV keeps falling you know there is strength in the downtrend as there is a continuing selling volume. But if the price makes lower lows and the OBV makes higher highs, there is a possibility of a price reversal. Spotting divergences between price and the OBV indicator indicates a good possibility of a reversal.
Parabolic stop and reverse (SAR)- this indicator works by combining time and price to generate buy and sell signals. It is also very useful for placing stop losses and take profit positions. A buy signal is created once price is closed above the upper SAR dot. If you were short, once the price closed below the upper SAR dot this would be a time to close your position. A sell signal is created once price closes below the lower SAR dot. If you were in a long position and the price close below the lower SAR dot, this would be a sign to close your position.
Relative strength index (RSI)- the relative strength index is an oscillating indicator which measures the size of gains and losses which are recentto try and determine whether the price is over brought or oversold. It has a scale ranging from 0-100. 0-30 being the oversold zone and 70-100 being the over brought zone. A buy signal is generated once the RSI goes through the 30 line. A sell signal is generated once the RSI goes below the 70 line.
Stochastic- this is a very popular oscillating indicator. It can also be used to spot the beginning of trends. It is created by comparing the closing price of a security to it's price range over a given time. It contains two lines known as the %D and %K lines. They fluctuate on a scale of 0-100 like the RSI. 20 and below represents the oversold area and 80 above represents the over brought zone. A buy signal is in place when the %D and %K lines crossover above the 20 value. A sell signal is in place when the %D and %K lines crosses below the 80 value. The stochastic indicator works best in a choppy market condition.
Triangular moving average (TMA)- the triangular moving average is a smoothed out simple moving average. It is simply smoothed out twice to reduce lagging and to produce a wave look which is easier to see. When the price crosses and closes above the TMA a buy signal is produced. When price closes below the TMA a sell signla is produced. The TMA can also act as support and resistance.
Ultimate oscillator- this indicator combines 3 different time periods of price action that gives over brought and oversold conditions. 30 being the oversold line and 70 being the over brought line. It is also used to spot divergences between the indicator and price.
Volume- this is a very important indicator. It reflects the amount of people that have placed a trade within that trading session. If the price is rising and volume is increasing this indicates there is good buying power. If the price is falling and the volume is increasing this shows there is good selling power. Volume can also be used to spot reversals by watching the volume bars. If the price has been in a downtrend the bars will be falling. If the volume bars start rising and the price starts rising this might show the bears have backed off and the bulls are starting to take control. The converse for an uptrend. Volume is also very important when buying stocks. If you want to buy a stock but you check it's volume is usually low it is a good sign not to enter. Remember, it is always easy to get into a trade but it isn't always easy to get out. You want to be trading stocks with a high daily volume.
Williams %R- this is another indicator that looks for over brought and oversold conditions. Like nearly all over brought and oversold indicators it has a scale of 0-100. 20 and below being the oversold zone and 80 and above being the over brought zone. It is very similar to the fast stochastic indicator.
Zig Zag indicator- the zig zag indicator is used for determining trends. It is a line that connects the highs and lows of the price movement. It is also very usefull in spotting chart patterns as the connecting line make the patterns more visible. Support and resistance levels also becomes easier to visualize. This can be useful for drawing extra lines to mark out possible break out points.
Unlike fundamental analysis, technical chartists are not interested in company data, forecasts, currency movements etc. They predict the future movement of price by looking at historical price. All the news and data makes up the price movement which can be seen on charts.
Technical analysis uses chart patterns which are created from the movement of price, and a number of indicators to help the chartists analyze the future movement of the price.
Chart Patterns
Chart patterns are a very important part of technical analysis. They are used to spot possible price reversals and for spotting continuations in current trends. Below are some of the more popular chart patterns.
Reversal Patterns:
Double Tops & bottoms- Double bottoms can be a sign of a possible bottom which could mean the current trend is coming to an end and a reversal is going to take place. The price has been in a downtrend and then pulls back. It then continues rising then stops, and starts it's way back down again. It then stops and works it's way back up again. A double bottom is known as a W as that's the shape it takes. Once the neck of the W is broken this can be a good place to enter long. If the neck doesn't break and then starts a downtrend, this show that particular security is weak and is struggling to find strength. The possibility of a stronger double bottom is when the second low of the W is higher than the first low. Double tops are the inverse of the double bottom.
The line going across where the middle point of the W touches is called the neck. Once the neck line is broken the trader will be looking at the volume to see if this is increasing. If this is increasing whilst the price is rising this is a good sign the bulls are taking control for a reversal.
Double Top
The line going across where the middle point of the W touches is called the neck. Once the neck line is broken the trader will be looking at the volume to see if this is increasing. If this is increasing whilst the price is dropping, this is a good sign the bears are taking control for a reversal.
Rounded Tops & Bottoms- Rounded tops and bottoms are not as common as double tops and bottoms, but when they do happen they should be taken notice of. They are another reversal pattern which indicate a possible top or bottom has been hit.
Rounded Top
The price has been in an uptrend and then slows down. It then starts forming an arched shape where the bulls and the bears are fighting, but neither are taking full control. Once the price breaks the neckline (this is found by drawing a horizontal line across from where the formation started) and volume starts to pick up this is a good sign the bears have taken control and a possible reversal has occurred.
Rounded Bottom
The price has been in an down trend and then slows down. It then starts forming an arched shape where the bulls and the bears are fighting, but neither are taking full control. Once the price breaks the neckline (this is found by drawing a horizontal line across from where the formation started) and volume starts to pick up this is a good sign the bulls have taken control and a possible reversal has occurred.
Head & Shoulders- the head and shoulders is another reversal pattern. The price has been in a downtrend for some time. It then pulls back slightly which is then followed by a drop in price. Suddenly there is some bullish activity and the price rises to a now developed neck line. There is a slight pull back and then the price continues to rise breaking the neck line. By now you should be watching the volume. If it is continuing to increase this is a good sign that the bulls are taking control.
A head and shoulders pattern can occur in an uptrend. The price has been in an uptrend and then pulls back slightly to create the left shoulder. The bulls then continue to push the price up until the bears take over and pull the price back to the new formed neck line. There is a slight pull back from the bulls (forming the right shoulder) and then the bears take full control and break the neck line where the price continues to drop. Once the neck line is broken the trader should be looking at the volume. If this is rising whilst the price is dropping, this is a good indication that the bears have taken control and a reversal may be occurring.
Continuation Patterns:
Cup & Handle- this pattern is a good pattern for spotting a continuation in the current trend. It occurs when price starts to hit new highs or lows. It then fails to break the high or low, and then pulls back between 30-40% of the prior trend. It then starts to form a shape like the rounded top or bottom and tries to test the high or low once again. It fails and then starts to pull back about 20-30% of the 'U' that was created. This pull back creates the handle of the cup. Price then turns and starts heading up to test the current trend line. once it has broken the trend line and volume starts to increase, this is a good sign the price is going to test and possibly break the high or low. The more like a 'U' shape the bowl is, the higher the possibility of the pattern being created. 'V' shape bottoms or tops should be avoided and handles that are too deep should also be avoided.
Pennants & Flags- Pennants happen after a consolidation of price takes place during an trend. The price then moves withing a range that gets smaller and smaller as volume diminishes. There is then a sharp increase of volume with an increase of price which then continues to make new highs or lows.
The flag pattern is another continuation pattern that takes a break after a trend. It pulls back slightly and consolidates in a range. A channel can be drawn, and the channel can be used as support and resistance. Once the resistance is broken and there is an increase in volume, this can be interpreted as a continuation of the trend.
Rectangles- Rectangle patterns are usually used as continuation patterns. The price has been trending and then starts to consolidate. It starts to range where a channel is created. The highs and lows are being tested during the consolidation channel but the bulls and bears are undecided. Eventually the channel is broken in the direction of the previous trend, and the price starts to increase whilst the volume increases.
Triangles- There are symmetrical triangles, ascending and descending triangle patterns. Symmetrical triangles are formed when there is a consolidation period between the bulls and the bears. A side way triangle shape is formed when there is a move to the upside with a sharp pull back of the price and vice-versus. Once the price has broken through the triangle resistance line the price should continue to rise in the direction of the trend.
Ascending triangles have a higher probability if found in an uptrend. The bottom part of it forms a trend line whilst the top of the line can be quite flat. The volume starts to diminish and the range becomes narrow. Once the price breaks the top of the triangle and the volume starts to pick up, this is a good sign of a continuation of the trend.
Descending triangles have a higher possibility once found in a downtrend. The top line forms a trend line and the bottom line is quite flat. The volume starts to diminish and the range become narrow. Once the price breaks the bottom of the triangle and the volume starts to pick up, this is a good sign of a continuation of the trend.
Indicators
Indicators help the chartists confirm the direction of where the price may be heading. It must be realized that there are thousands of indicators as more and more custom indicators are being put together which are being used by traders. A number of the more popular indicators are mentioned below:
Average directional movement (ADX)- this is a trending indicator which shows you the strength of the trend but not the direction of the trend. It has a scale between 0-100. Once the line crosses up above the 30 line this can start to show the beginning of good strength in the trend. When the ADX is at 70 the trend is in full strength. Once it goes around 80 and starts turning south, the trend has lost steam and is coming to the end.
Bollinger Bands- this is a trending indicator and is one of the most popular indicators that is used by traders. They are used to determine a break out by combining a moving average, an upper standard deviation (upper band) and a lower standard deviation (lower band).
Commodity channel index (CCI)- this indicator is used to identify over-brought and over-sold conditions. The price is said to be over-brought once the CCI line goes above 100. If the line then drop back below the 0 line this can be an indication to go short. Conversely, the price is said to be over-sold once it drops below the -100 line. If the CCI line then goes back above the -100 line this can be a signal that the price might rise.
Directional movement indicator (DMI)- this is part of the ADX indicator and can be seen on the chart as %2BDMI and -DMI lines. If the %2BDMI line crosses above the -DMI line this can be seen as the possibility of the start of a trend. If the -DMI line crosses below the %2BDMI this can be part of a sell confirmation.
Exponential moving average (EMA)- this indicator is used to spot reversals and a possible start of a trend. They react quicker than normal moving averages, which can be an advantage if the trade does continue in that direction. The main problem is EMA's can give false signals due to whipsaws.
Fibonacci- the most used Fibonacci tool is the Fibonacci retracement. This is found by taking the high and low of a trend and placing the retracement tool. This will draw percentages of that movement. The key levels being 23.8%, 32.8%, 50%, 61.8% and 100%. The 50% retracement is a popular level that is used. For instance, say the price has been in an uptrend for some time. The price then starts to correct as some traders are starting to take some profit from the trade. The 50% retracement level would then be a key point for traders then to start buying again as the price could start continuing it's trend to the upside.
Gann theory- the Gann theory is based on fans that are drawn from peaks and bottoms, which are then used for support and resistance. Once a major fan is broken it can be an indication the price is going to continue moving in that direction.
Hull moving average- this is an improvement to the standard moving average offering a smoothing which reduces lag. It can be used to spot the start or end of the trend.
Keltner Channel- this indicator is similar to the bollinger bands, but it measures the volatility of the price movement with an upper and lower moving average band. If the price closes above the upper band it could signal a start of an up trend. If the price closes below the lower band this could signal a start of a down trend. The Keltner channel also works well with range trading strategies which can be seen by clicking the link below.
Linear regression channel- the linear regression channel is made up of a linear regression line, an upper channel line and a lower channel line. The channel is used to spot potential reversals of price. If the price drops below the lower channel line, it is said to be in the buy zone area. Other indicators can then be used to confirm the price moving to the upside. If the price moves above the top regression line it is said to be in the sell zone. Other indicators can be used to confirm a reversal in price.
Moving average convergence divergence (MACD)- this is a very popular indicator which is used to detect the beginning of a trend. There are 3 components to this indicator. The first being the MACD which is normally set to a 12 EMA minus a 26 EMA. Next is the signal line which is normally set to a 9 EMA. The third part is the MACD histogram. Sometimes you may find the histogram by itself without the moving averages. A buy signal is in place when the12-26 EMA line crosses above the 9 EMA line. The indicator has a scale and the trend it more likely to be stronger if the cross over happens below the 0 line. A sell signal is in place when the 12-26 EMA crosses below the 9 EMA. This is a stronger if it happens above the 0 line.
On balance volume (OBV)- the on balance volume indicator combines volume with price to determine whether a certain price movement has strength or weakness. It adds or takes away volume at the close of a bar. If the price is rising and the OBV continues to rise, you know there is strength in the price movement as buying volume is increasing. But if the price makes higher highs whilst the OBV makes lower lows, you know there is a possibility of a price reversal. If the price falls and the OBV keeps falling you know there is strength in the downtrend as there is a continuing selling volume. But if the price makes lower lows and the OBV makes higher highs, there is a possibility of a price reversal. Spotting divergences between price and the OBV indicator indicates a good possibility of a reversal.
Parabolic stop and reverse (SAR)- this indicator works by combining time and price to generate buy and sell signals. It is also very useful for placing stop losses and take profit positions. A buy signal is created once price is closed above the upper SAR dot. If you were short, once the price closed below the upper SAR dot this would be a time to close your position. A sell signal is created once price closes below the lower SAR dot. If you were in a long position and the price close below the lower SAR dot, this would be a sign to close your position.
Relative strength index (RSI)- the relative strength index is an oscillating indicator which measures the size of gains and losses which are recentto try and determine whether the price is over brought or oversold. It has a scale ranging from 0-100. 0-30 being the oversold zone and 70-100 being the over brought zone. A buy signal is generated once the RSI goes through the 30 line. A sell signal is generated once the RSI goes below the 70 line.
Stochastic- this is a very popular oscillating indicator. It can also be used to spot the beginning of trends. It is created by comparing the closing price of a security to it's price range over a given time. It contains two lines known as the %D and %K lines. They fluctuate on a scale of 0-100 like the RSI. 20 and below represents the oversold area and 80 above represents the over brought zone. A buy signal is in place when the %D and %K lines crossover above the 20 value. A sell signal is in place when the %D and %K lines crosses below the 80 value. The stochastic indicator works best in a choppy market condition.
Triangular moving average (TMA)- the triangular moving average is a smoothed out simple moving average. It is simply smoothed out twice to reduce lagging and to produce a wave look which is easier to see. When the price crosses and closes above the TMA a buy signal is produced. When price closes below the TMA a sell signla is produced. The TMA can also act as support and resistance.
Ultimate oscillator- this indicator combines 3 different time periods of price action that gives over brought and oversold conditions. 30 being the oversold line and 70 being the over brought line. It is also used to spot divergences between the indicator and price.
Volume- this is a very important indicator. It reflects the amount of people that have placed a trade within that trading session. If the price is rising and volume is increasing this indicates there is good buying power. If the price is falling and the volume is increasing this shows there is good selling power. Volume can also be used to spot reversals by watching the volume bars. If the price has been in a downtrend the bars will be falling. If the volume bars start rising and the price starts rising this might show the bears have backed off and the bulls are starting to take control. The converse for an uptrend. Volume is also very important when buying stocks. If you want to buy a stock but you check it's volume is usually low it is a good sign not to enter. Remember, it is always easy to get into a trade but it isn't always easy to get out. You want to be trading stocks with a high daily volume.
Williams %R- this is another indicator that looks for over brought and oversold conditions. Like nearly all over brought and oversold indicators it has a scale of 0-100. 20 and below being the oversold zone and 80 and above being the over brought zone. It is very similar to the fast stochastic indicator.
Zig Zag indicator- the zig zag indicator is used for determining trends. It is a line that connects the highs and lows of the price movement. It is also very usefull in spotting chart patterns as the connecting line make the patterns more visible. Support and resistance levels also becomes easier to visualize. This can be useful for drawing extra lines to mark out possible break out points.
wealthy forex trading
Forex trading has recently become a major focus of many wanting to earn extra income and even build wealth. This is mostly because the world economy is in turmoil and no longer provides the sense of security that workers used to have. Mass layoffs are the order of the day as more and more companies succumb to the economic crisis. This has led to more people thinking of additional ways to earn money.
The Internet offers a myriad of ways to supplement one's income while keeping one's current job. A lot of online programs have become very popular as they promise financial freedom and stability.
Forex is one of the new ways for many people to gain financial freedom. For some, it has moved to become a full-time job from being the past-time wealth building facility. Actually, forex trading is nothing new. But usually only banks and many large multinational companies used to indulge in forex trading, i.e., trading foreign currencies.
Earlier, currency was traded only by the biggies of the financial world, namely the banks and the large corporations since it was only they who had the resources to gain knowledge about the markets. But since then, the situation has changed with a lot of ordinary people trading in currency via newly emerged softwares specialized for the same. Ever since the softwares, a lot of new people have jumped into the field of forex trading.
Daily, more than $4 trillion dollars is being traded, that shows the lucrative aspects of this industry that can make someone with a lot of insider information, very wealthy. While many think that forex trading is quite like stock trading, there some fundamental differences between the two of them. The major difference between the two is the forex prices have lot more fluctuation that the stock prices, which depends on those who deal with the same unlike in the stock market. Large banks usually have a say in the price-setting who deal in the forex of million dollars.
For people who want to build wealth conveniently, forex would be a boon to them. Even ordinary people are realizing its importance and getting into this business in large numbers; and the softwares that are available only accentuates the number of people getting into forex trading. With such ammunitions, even amateurs trade like professionals, and the market has no longer been dominated by only the financial mighty.
Forex Wealth Builder is one of the best softwares available that is very convenient to help in the business with its easy-understand flow. This helps even an amateur with no information or knowledge to get into forex and trade like professionals. It even includes practices with test-trades to understand better and test their skills in the system. People can thus work keeping their jobs at their own pace, while watching their wealth profits grow.
The Internet offers a myriad of ways to supplement one's income while keeping one's current job. A lot of online programs have become very popular as they promise financial freedom and stability.
Forex is one of the new ways for many people to gain financial freedom. For some, it has moved to become a full-time job from being the past-time wealth building facility. Actually, forex trading is nothing new. But usually only banks and many large multinational companies used to indulge in forex trading, i.e., trading foreign currencies.
Earlier, currency was traded only by the biggies of the financial world, namely the banks and the large corporations since it was only they who had the resources to gain knowledge about the markets. But since then, the situation has changed with a lot of ordinary people trading in currency via newly emerged softwares specialized for the same. Ever since the softwares, a lot of new people have jumped into the field of forex trading.
Daily, more than $4 trillion dollars is being traded, that shows the lucrative aspects of this industry that can make someone with a lot of insider information, very wealthy. While many think that forex trading is quite like stock trading, there some fundamental differences between the two of them. The major difference between the two is the forex prices have lot more fluctuation that the stock prices, which depends on those who deal with the same unlike in the stock market. Large banks usually have a say in the price-setting who deal in the forex of million dollars.
For people who want to build wealth conveniently, forex would be a boon to them. Even ordinary people are realizing its importance and getting into this business in large numbers; and the softwares that are available only accentuates the number of people getting into forex trading. With such ammunitions, even amateurs trade like professionals, and the market has no longer been dominated by only the financial mighty.
Forex Wealth Builder is one of the best softwares available that is very convenient to help in the business with its easy-understand flow. This helps even an amateur with no information or knowledge to get into forex and trade like professionals. It even includes practices with test-trades to understand better and test their skills in the system. People can thus work keeping their jobs at their own pace, while watching their wealth profits grow.
The History of Forex
The History of Forex
The Forex trading market is a relatively new phenomenon. Never before in the history of the world have we seen such an amazing event. In only 30 years, this industry has developed from almost nothing to a daily US$1.5 trillion market. How did this happen? Was it by design? Or was it by accident?Well the answer falls somewhere in between. There are three distinct time frames that set the stage for today's style of currency trading. The first time frame is the pre-currency trading era of the 1950s. The second time frame is the worldwide, politically volatile atmosphere of the 1970s. The third time frame is what has occurred in this free market economy since the demise of the gold standard 30 years ago. In each time frame, there have been three catalysts: war, gold, and foreign banks- that have played a significant role in propelling currency development
The Forex trading market is a relatively new phenomenon. Never before in the history of the world have we seen such an amazing event. In only 30 years, this industry has developed from almost nothing to a daily US$1.5 trillion market. How did this happen? Was it by design? Or was it by accident?Well the answer falls somewhere in between. There are three distinct time frames that set the stage for today's style of currency trading. The first time frame is the pre-currency trading era of the 1950s. The second time frame is the worldwide, politically volatile atmosphere of the 1970s. The third time frame is what has occurred in this free market economy since the demise of the gold standard 30 years ago. In each time frame, there have been three catalysts: war, gold, and foreign banks- that have played a significant role in propelling currency development
The 1970's United States Currency Policy Meltdown
Once again, we are hit with the triumvirate of war, the restrictive gold standard, and dollars in foreign banks.This time, each problem was feeding directly off of the others. The Vietnam Conflict had drained our gold reserves heavily. By 1970, Fort Knox only held US$12 Billion.The growth of the oil business and the increase in foreign trade caused a boom in the demand for US dollars in foreign banks. Over US$ 47 Billion was sitting in overseas banks.On paper, our gold reserves were over-leveraged by almost 4 to 1. As a nation, we did not know how to react to such an overbearing assault on our currency. Then along came the invention of the Eurodollar to make our nightmare worse.Foreign banks with US dollars would make low-interest loans in US dollars to importers and exporters. Although the dollars were never repatriated, the US was still on the hook to exchange these “credit”-created dollars for the gold we kept on reserve.Then came a miracle in disguise . The Bretton Woods Agreement collapsed. In the over-leveraged gold-dollar environment, many countries began to feel frustrated with the artificial peg.In blatant defiance to the agreement in 1971, Germany declared that they would float the Deutsche mark. They were tired of the artificial peg that was keeping their economy depressed.In the first hour of trading, over US$1 billion were exchanged for Deutsche marks. For the first time, the public had voiced their opinion against being so heavily weighted with dollars.With Germany completely ignoring the Bretton Woods Agreement by floating their currency, the US government had nothing left to do but put the final nail in the coffin of the U.S.'s currency policy. The Bretton Woods Agreement was dissolved.Three short months after the Deutsche mark began to float, the US moved off of the gold standard. Gold was allowed to float freely like any other currency. Oil, although priced in US dollars, soon switched to a peg against gold. Gold and oil prices jumped ten-fold.The currency dynamics were soon changed on a global scale and it became accepted practice that countries began to float their own currency.
getting started online forextrading
Forex trading is a very flexible business and you're the one calling the shots. Still, if you're not careful, you can find yourself losing your modal as well. Therefore, here are a few things that you should know before you get started.
1. Having a broker
You will first need a broker to execute your orders and sometimes, to advise you in your trading decisions. There are many brokers out there and you'll need to be extra careful in finding one who can execute your orders anytime. Consider looking at each brokers' trade records and see how they've done in forex trading over the years. Most important thing is you need a broker that you feel comfortable with and who is also comfortable with you.
2. Diagrams
Next thing that you need to do is to understand how to read the diagram. You will need to understand the diagrams as only then you know the movement of the market. By choosing shorter time frames, you can clearly see the progress of the market by the minute. Usually, diagram software will use bars and lines to represent progress. Take your own sweet time figuring out each style and which one you are most comfortable with.
3. Using a demo account
Previously, you have to take risk without the experience or expertise to invest in forex trading. Nowadays, there are mock accounts which enable you to earn valuable experiences before going into live trades. As you would have a broker by now, he/she will usually let you have a trial in trading by using mock money. So, know your way around the software before you jump into the money making channel.
4. Going into live trades
So you've figured out everything you need to go into live trade. First rule is: don't be greedy. You might earn some the first few times but it doesn't mean you'll always score in the forex market. If you do lose, keep calm and do not give up completely but to see it as a learning experience or a mistake that you wouldn't do next time. Learning never stops so keep trying and it wouldn't be long before you earn your real satisfying profit.
It's easy to start trading Forex online, BUT you will lose money without proper education.
Find out more tips on trading currency online at Optimindzer.com now and start making your live changing income!
1. Having a broker
You will first need a broker to execute your orders and sometimes, to advise you in your trading decisions. There are many brokers out there and you'll need to be extra careful in finding one who can execute your orders anytime. Consider looking at each brokers' trade records and see how they've done in forex trading over the years. Most important thing is you need a broker that you feel comfortable with and who is also comfortable with you.
2. Diagrams
Next thing that you need to do is to understand how to read the diagram. You will need to understand the diagrams as only then you know the movement of the market. By choosing shorter time frames, you can clearly see the progress of the market by the minute. Usually, diagram software will use bars and lines to represent progress. Take your own sweet time figuring out each style and which one you are most comfortable with.
3. Using a demo account
Previously, you have to take risk without the experience or expertise to invest in forex trading. Nowadays, there are mock accounts which enable you to earn valuable experiences before going into live trades. As you would have a broker by now, he/she will usually let you have a trial in trading by using mock money. So, know your way around the software before you jump into the money making channel.
4. Going into live trades
So you've figured out everything you need to go into live trade. First rule is: don't be greedy. You might earn some the first few times but it doesn't mean you'll always score in the forex market. If you do lose, keep calm and do not give up completely but to see it as a learning experience or a mistake that you wouldn't do next time. Learning never stops so keep trying and it wouldn't be long before you earn your real satisfying profit.
It's easy to start trading Forex online, BUT you will lose money without proper education.
Find out more tips on trading currency online at Optimindzer.com now and start making your live changing income!
6 tips to choose best forex trader
Forex broker is an agent that does trading on your behalf. As such, the collect some commission everytime you make a trade no matter if you're making losses or earnings. So, here are a few points to consider when you're choosing a forex broker.
Reputation
Reputation of a broker usually exceeds them and it's easy to see who makes money and who are experienced. In this case, you can check their record to see whether they are consistent in forex trading. In this part you should do a thorough check because it is important to see who you have as your broker.
Broker regulations
As been said before, determining which broker you want includes checking their profiles. One way to do this is by checking with Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission(CTFC) and a member of the National Futures Association(NFA). Find a broker that has a squeaky clean record and save yourself from worrying while making your trades.
Reasonable Deposit
One way of choosing a broker is by looking at initial deposit that they ask. Initial deposit is not needed as it is not for investment purposes, but just to pay the broker in case they're not paid during the course of investment. The ideal payment should be between $200 to $500 depending on the market movement.
Good software
A good software should be simple, easy to use and at the same time is clear on the investment that you're making. If you are new to forex trading, your broker should be able to let you trade on a demo account. A demo account works the same as a real software but it gives you the opportunity to test it before you actually make your first real trade.
Variety of Currency Pairs
Every good broker should be involved in different currency pairs and that makes them offer a lot of selections. So, choose at least a broker that has currency pairs that you are most interested in. Remember that every currency pairs have their own patterns in the market.
Customer support
With every currency pairs that you trade in, its actually different across the whole world. Therefore, you won't want to call a broker who is sleeping half a world away when you want to make your trade. Therefore, it is vital to have a broker who can take your orders anytime you want. Try to contact the customer service desk and see how they respond to your questions regarding forex trading. Make sure you're comfortable as these guys are who you entrust your money with.
Therefore, make sure you do enough homework regarding the aspects above before you really proceed into the forex market!
What's the next step for your online Forex Trading success after choosing the right broker?
Go to http://www.eforextrading.info now, and get the latest Forex trading tips, advices and information from the professional traders
Reputation
Reputation of a broker usually exceeds them and it's easy to see who makes money and who are experienced. In this case, you can check their record to see whether they are consistent in forex trading. In this part you should do a thorough check because it is important to see who you have as your broker.
Broker regulations
As been said before, determining which broker you want includes checking their profiles. One way to do this is by checking with Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission(CTFC) and a member of the National Futures Association(NFA). Find a broker that has a squeaky clean record and save yourself from worrying while making your trades.
Reasonable Deposit
One way of choosing a broker is by looking at initial deposit that they ask. Initial deposit is not needed as it is not for investment purposes, but just to pay the broker in case they're not paid during the course of investment. The ideal payment should be between $200 to $500 depending on the market movement.
Good software
A good software should be simple, easy to use and at the same time is clear on the investment that you're making. If you are new to forex trading, your broker should be able to let you trade on a demo account. A demo account works the same as a real software but it gives you the opportunity to test it before you actually make your first real trade.
Variety of Currency Pairs
Every good broker should be involved in different currency pairs and that makes them offer a lot of selections. So, choose at least a broker that has currency pairs that you are most interested in. Remember that every currency pairs have their own patterns in the market.
Customer support
With every currency pairs that you trade in, its actually different across the whole world. Therefore, you won't want to call a broker who is sleeping half a world away when you want to make your trade. Therefore, it is vital to have a broker who can take your orders anytime you want. Try to contact the customer service desk and see how they respond to your questions regarding forex trading. Make sure you're comfortable as these guys are who you entrust your money with.
Therefore, make sure you do enough homework regarding the aspects above before you really proceed into the forex market!
What's the next step for your online Forex Trading success after choosing the right broker?
Go to http://www.eforextrading.info now, and get the latest Forex trading tips, advices and information from the professional traders
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