Tag Archives: market

Technical Analysis

Technical Analysis

Technical analysis may be the framework by which traders study cost movement.

The idea is that an individual can take a look at historic cost actions and see the present buying and selling conditions and potential cost movement.

The primary evidence for implementing technical analysis is the fact that, theoretically, all market details are reflected in cost. If cost reflects all the details that’s available, then cost action is you might really should create a trade.

Now, did you ever hear that old adage, “History has a tendency to repeat itself”?

Well, that’s essentially what technical analysis is about! If your cost level held like a key support or resistance previously, traders will look out for this and base their trades around that historic cost level.

Technical experts search for similar designs which have created previously, and can form trade ideas thinking that cost will act exactly as it did before.

Technical Analysis

In the realm of buying and selling, when someone states technical analysis, the very first factor that involves thoughts are a chart. Technical experts use charts since they’re the simplest method to visualize historic data!

You can try past data that will help you place trends and designs which can help you have some great buying and selling possibilities.

In addition is the fact that with the traders who depend on technical analysis available, these cost designs and indicator signals often become self-fulfilling.

As more traders search for certain cost levels and chart designs, the much more likely these designs will manifest themselves within the marketplaces.

You need to know though that technical analysis is extremely subjective.

Simply because Rob and Frederick are searching in the identical chart setup or indications does not mean that they’ll develop exactly the same concept of where cost might be headed.

The key factor is you comprehend the concepts under technical analysis which means you will not get nosebleeds whenever somebody begins speaking about Fibonacci, Bollinger bands, or pivot points.

Now we all know you are thinking to yourself, “Geez, these men are wise. They will use crazy words like ‘Fibonacci’ and ‘Bollinger’. I’m able to never learn these items!Inch

Don’t be concerned yourself an excessive amount of. After you are completed with the college of Pipsology, you also is going to be just like… uhmmm… “wise” as us.

Incidentally, do you experience feeling that eco-friendly pill kicking in yet? Bark just like a dog!

Now, after learning technical analysis, let’s take a look at what Fundamental analysis boasts.

Foreign Exchange – Protect YoSelf Before You Wreck Yoself

Foreign Exchange Trading – Safeguard YourSelf Before You Decide To Wreck Yourself

Before we go any further we will be 100% honest along with you and let you know the next before you think about foreign exchange trading & currencies:

Foreign Exchange Protection

1. All foreign exchange traders, and that we do mean ALL traders, Generate losses on trades.

90 percent of traders generate losses, largely because of insufficient planning, training, discipline, and getting poor management of your capital rules.

Should you hate to get rid of or really are a super perfectionist, you will also most likely possess a difficult time modifying to buying and selling because all traders lose a trade sooner or later or any other.

2. Foreign exchange trading isn’t for the unemployed, individuals on low earnings, are knee-deep in credit card debt or who can not afford to pay for their utility bill or manage to eat.

You ought to have a minimum of $10,000 of buying and selling capital (inside a small account) that you could manage to lose. Pricier to begin a merchant account having a couple of $ 100 and expect to become gazillionaire.

The foreign exchange market is among the most widely used marketplaces for speculation, because of its enormous size, liquidity, and inclination for foreign currencies to maneuver in strong trends. What you know already traders around the globe will make a killing, but success continues to be restricted to really small number of traders.

However , many traders include the misguided hope of creating a million dollars, but actually, they don’t have the discipline needed for really learning the skill of buying and selling. Many people usually don’t have the discipline to stay with an eating plan or to visit a fitness center three occasions per week.

If you cannot even do this, how can you think you are likely to succeed probably the most difficult, but financially rewarding, endeavors recognized to guy?

Temporary buying and selling Isn’t for amateurs, which is rarely the road to “get wealthy quick”. You cannot make gigantic profits if you don’t take gigantic risks.

A buying and selling strategy which involves going for a massive amount of risk means suffering sporadic buying and selling performance and enormous deficits. An investor who this most likely does not actually have a buying and selling strategy unless of course you call gambling a buying and selling strategy!

Foreign exchange Trading isn’t a Get-Wealthy-Quick Plan

Foreign exchange Trading is really a SKILL that needs time to work to understand.

Skilled traders can and make profit in this area. However, like every other occupation or career, success does not just happen overnight. Foreign exchang trading is not simple (as many people would love you to think).

Consider it, whether it was, everybody buying and selling would be riches.

The fact is that even expert traders with many years of experience still encounter periodic deficits.

Drill this inside your mind: you will find NO cutting corners to foreign exchange trading

It requires numerous of PRACTICE and EXPERIENCE to understand.

There’s no replacement for effort, deliberate practice, and diligence.

Practice buying and selling on the DEMO ACCOUNT until you get a method you know inside and outside, and may easily execute fairly. Essentially, discover the way which works for you!!!

Kinds of Orders

Orders – Kinds of Orders

The word “orders” describes how to enter or exit a trade. Ideas discuss the different sorts of orders that may be place into the forex market.

Ensure that you know which kinds of orders your broker accepts. Different brokers accept various kinds of orders.

You will find some fundamental types of orders that brokers provide plus some others that seem strange.

Types of Orders

Types of Orders

Market orders

A market order is definitely an order to purchase or sell in the best available cost.

For instance, the bid cost for EUR/USD is presently at 1.2140 and also the request cost reaches 1.2142. Should you wished to buy EUR/USD at market, then it might be offered for you in the request cost of just 1.2142. You’d click buy as well as your buying and selling platform would instantly perform buy order at this exact cost.

Should you ever shop on Amazon. com, it’s kinda like utilizing their 1-Click ordering. You want the present cost, clicking once and it is yours! The only real difference is that you simply are purchasing or selling one currency against another currency rather than purchasing an Attacking Young Boys Compact disc.

Limit Entry Orders

A limit entry is definitely an order placed either to buy underneath the market or sell over the market in a certain cost.

For instance, EUR/USD is presently buying and selling at 1.2050. You need to go short when the cost reaches 1.2070. You may either sit before your monitor and wait for this hitting 1.2070 (after which you’d click a sell market order), or set a sell limit order at 1.2070 (then you may leave behind your pc to go to your ballroom dancing class).

When the cost rises to at least 1.2070, your buying and selling platform will instantly perform sell order in the best available cost.

You utilize this kind of entry order whenever you believe cost will reverse upon striking the cost you specified!

Stop-Entry Orders

A stop-entry order is definitely an order placed to purchase over the market or sell underneath the market in a certain cost.

For instance, GBP/USD is presently buying and selling at 1.5050 and it is heading upward. You think that cost continues within this direction whether it hits 1.5060. That you can do among the following to experience this belief: sit before your pc and purchase at market if this hits 1.5060 OR set an end-entry order at 1.5060. You utilize stop-entry orders whenever you believe that cost will move one way!

Stop-Loss Orders

Stop-loss orders are a kind of order associated with a trade with regards to stopping additional deficits if cost is the opposite of you. REMEMBER This Kind Of ORDER. A stop-loss order remains essentially before the position is liquidated or else you cancel the stop-loss order.

For instance, you went lengthy (buy) EUR/USD at 1.2230. To limit your maximum loss, you place a stop-loss order at 1.2200. What this means is should you be dead wrong and EUR/USD drops to at least 1.2200 rather than upgrading, your buying and selling platform would instantly perform sell order at 1.2200 the very best available cost and shut your position for any 30-pip loss.

Stop-losses are very helpful if you won’t want to sit before your monitor all day long worried that you’ll lose all of your money. You can just set a stop-loss order on any open positions which means you will not miss your basket weaving class or elephant polo game.

Trailing Stop Orders

Trailing stop orders are a kind of stop-loss order mounted on a trade that moves as cost changes.

Let us state that you’ve made the decision to short USD/JPY at 90.80, having a trailing stop of 20 pips. Which means that initially, your stop-loss reaches 91.00. If cost goes lower and hits 90.50, your trailing stop would move lower to 90.70.

Keep in mind though, that the stop will remain only at that cost. It won’t widen if cost opposes you. Returning towards the example, having a trailing stop of 20 pips, if USD/JPY hits 90.50, your stop would proceed to 90.70. However, if cost would all of a sudden progress to 90.60, your stop would stay at 90.70.

Your trade will stay open as lengthy as cost doesn’t move against you by 20 pips. Once cost hits your trailing stop, a stop-loss order is going to be triggered as well as your position is going to be closed.

Strange Orders

“Can I order a grande extra hot soy with extra foam, extra hot split quad shot having a half squirt of sugar-free whitened chocolate . 5 squirt of sugar-free cinnamon, one half packet of Splenda and set that inside a venti cup and fill the “room” with extra whipped cream with caramel and chocolate sauce rained on the top?”

Ooops, wrong strange orders.

Good ‘Till Cancelled (GTC)

A GTC order remains mixed up in market until you choose to cancel it. Your broker won’t cancel an order anytime. Therefore it is your responsibility to understand that you will find the order scheduled.

Good for the day (GFD)

A GFD orders remain mixed up in market before the end of the buying and selling day. Because foreign exchange is really a 24-hour market, this results in 5:00 pm EST since this is the time U.S. marketplaces close, but we’d recommend you make sure together with your broker.

One-Cancels-the-Other (OCO)

An OCO orders are  a combination of two entry and/or stop-loss orders. Two orders with cost and duration variables are put above and underneath the current cost. When among the orders is performed another order is canceled.

Let us the cost of EUR/USD is 1.2040. You need to either buy at 1.2095 within the level of resistance awaiting an outbreak or initiate a selling position when the cost falls below 1.1985. The understanding is when 1.2095 is arrived at, your buy order is going to be triggered and also the 1.1985 sell order is going to be instantly canceled.

One-Triggers-the-Other

An OTO may be the complete opposite of the OCO, because it only wears orders once the parent order is triggered. You place an OTO order when you wish to create profit taking and prevent loss levels in advance, even before getting inside a trade.

For instance, USD/CHF is presently buying and selling at 1.2000. You think that when it hits 1.2100, it’ll reverse and mind downwards only as much as 1.1900. However , you’ll be gone for a whole week because you need to enroll in a basket weaving competition towards the top of Mt. Fiji where there’s no internet.

To be able to catch the move when you are away, you place a sell limit at 1.2000 and simultaneously, place an associated buy limit at 1.1900, and merely just in case, place an end-loss at 1.2100. Being an OTO, both buy limit and also the stop-loss orders are only placed in case your initial sell order at 1.2000 will get triggered.

To conclude…

The fundamental order types (market, limit entry, stop-entry, stop-loss, and trailing stop) are often everything most traders ever need.

Unless of course you’re a veteran trader (don’t be concerned, with more experience and time you’ll be), do not get fancy and style a method of buying and selling needing a lot of orders sandwiched on the market whatsoever occasions.

Stick to the fundamental stuff first.

Make certain you completely understand and therefore are confident with your broker’s order entry system before performing a trade.

Also, check together with your broker for particular orders information and to ascertain if any rollover costs is going to be applied if your position is held more than eventually. Keeping your ordering rules simple is the greatest strategy.

Don’t do business with real cash til you have a very high level of comfort using the buying and selling platform you use and its order entry system. Erroneous trades tend to be more common than you believe!

Freshest Forex Lingo

Forex Lingo – Only the Freshest Terms to Impress your Date

In every skill that you’ll learn, you also need to learn the language or lingo to be able to have a smoother communication. As a newbie, it is very imperative for you to learn and understand certain terms like the back of your hand before you go into trading forex. You have already learned some of these terms, but it would be a good idea to review & freshen up your minds and memories before dealing anything about forex trading.

Forex Lingo

Major and Minor Currencies in Forex

Among the most traded major currencies in forex also known as “majors” are USD, EUR, JPY, GBP, CHF, CAD, NZD, and AUD. They are considered to be the most liquid and sexiest currencies.  All of the other currencies in forex are referred to as minor currencies.

Base Currency in Forex

The first currency in any currency pair is called the base currency. The currency quote presents how much the base currency is worth as measured versus the second currency. Let’s take this as an example, if the USD/CHF rate equals 1.6350, then one USD is worth CHF 1.6350.

When we talk about the forex market, normally, the U.S. dollar is considered the “base” currency for quotes. This means that the quotes are expressed as a unit of 1 USD per the other currency quoted in the pair. British pound, the euro, and the Australian and New Zealand dollar are among the primary exceptions to this rule.

Quote Currency in Forex

The second currency in any currency pair is called the quote currency. This is also known as the pip currency. Remember that any unrealized profit or loss is expressed in this currency.

Pip in Forex

The smallest unit of price for any currency is called a pip. Nearly all currency pairs consist of 5 significant digits and most pairs have the decimal point immediately after the first digit, that is, EUR/USD equals 1.2538. In this situation, a single pip is equal to the smallest change in the fourth decimal place – that is, 0.0001. You have to remember that if the quote currency in any pair is USD, then one pip is always equal to 1/100 of a cent.

Pairs like  the Japanese yen where a pip equals 0.01 are considered to be the notable exceptions .

Pipette in Forex

Pip is a term used to describe one-tenth of a pip. In this instance, fractional pips, or pipettes, for added precision in quoting rates are being quoted by some brokers. For example, if EUR/USD moved from 1.32156 to 1.32158, it moved 2 pipettes.

Bid Price in Forex

If the market is prepared to buy a specific currency pair in the forex market, then they need to have a bid price.  At this price, the base currency can be sold by the trader. You can see it on the left side of the quotation.

Let’s take this as an example, in the quote GBP/USD 1.8812/15, 1.8812 is the the bid price. This means one British pound can be sold for 1.8812 U.S. dollars.

Ask/Offer Price in Forex

If the market is prepared to sell a specific currency pair in the forex market, then they need to have an ask or offer price. At this price, the base currency can be bought. You can see it on the right side of the quotation.

For example, in the quote EUR/USD 1.2812/15, 1.2815 is the the ask price. This means that one euro can be bought for 1.2815 U.S. dollars. The ask price is also called the offer price.

Bid/Ask Spread in Forex

The difference between the bid and ask price is called the spread. The first few digits of an exchange rate is a dealer expression called “big figure quote” . These digits are often omitted in dealer quotes. Let’s take this as an example, the USD/JPY rate might be 118.30/118.34, without the first three digits  it could be quoted as “30/34.” In this example, USD/JPY has a spread of 4-pip.

Quote Convention in Forex

Exchange rates in the forex market are expressed using the following format:
Base currency / Quote currency = Bid / Ask

Transaction Cost in Forex

The transaction cost for a round-turn trade is also considered as the the critical characteristic of the bid/ask spread . Round-turn means a buy (or sell) trade and an offsetting sell (or buy) trade of the same size in the same currency pair. Let’s take this as an example, in the case of the EUR/USD rate of 1.2812/15, the transaction cost is 3 pips.

The formula for computing the cost of transaction  is:

Transaction cost (spread) = Ask Price – Bid Price

Cross Currency in Forex

When neither currency is the U.S. dollar, it is called a cross currency. These pairs may show unpredictable changes in price behavior since the trader has, in effect, initiated 2 USD trades. Let’s take this as an example, initiating a long (buy) EUR/GBP is equal to buying a EUR/USD currency pair and selling GBP/USD. Cross currency pairs usually carry a transaction cost that is higher.

Margin in Forex

You must deposit a minimum amount with a broker to be able to open a a new margin account . This minimum deposit varies from one broker to another broker and can be as low as $100 to as high as $100,000.

Each time you make a new trade, a definite percentage of the account balance in the margin account will be set aside as the initial margin requirement for the new trade based upon the underlying currency pair, its current price, and the number of units (or lots) traded. The base currency always refers to the lots size.

Let’s take this as an example, if you are going to open a mini account which provides a 200:1 leverage or 0.5% margin. Mini accounts means trading mini lots as well. Let’s say one mini lot is equivalent to $10,000. If you decide to open a one mini-lot, then instead of providing the full $10,000, you would only need $50 ($10,000 x 0.5% = $50).

Leverage in Forex

The ratio of the amount capital used in a transaction to the required security margin is called the Leverage. It is considered to be a powerful process since it has the ability to control large amounts of dollars of a security with a relatively smaller amount of capital.  Leveraging varies significantly from one broker to another broker, ranging from 2:1 to 500:1.

These are just among the most common forex lingo. With that, I think it’s time to  learn the different types of trade orders?

Proceed to the Next Lesson: Different Types of Trade Orders

Go Back to the Previous Lesson: Trading Lots, Leverage, and Profit & Loss

Pip and Pipettes

Pip and Pipettes

Pip And Pipettes

This is the time to do a little math. I know many people don’t like this, but you will surely love this subject when it comes to trading forex. You’ve probably heard of the common terms such as “pips”, “pipettes,” and “lots” thrown around, and here we’re going to explain what they are and show you how their values are calculated.

In this lesson, I would like you to take your time understanding the information. You need to know and learn this by heart because this is very important for every forex trader. It is very imperative not to trade until you are comfortable with the pip values and calculating profit and loss.

Now, what is a pip? How about a Pipette?

A “Pip” is a unit of measurement to express the change in value between two currencies. Let’s take this one as a simple example, if EUR/USD moves from 1.2250 to 1.2251, the .0001 difference is ONE PIP. The last decimal place of a quotation is usually considered to be a pip. However, you have to remember that most pairs go out to 4 decimals, except some currencies like Japanese yen, which goes out to 2 decimal places.

A Pip to Remember:

There are some brokers that quote currency pairs beyond the standard “2 and 4″decimal places to “3 to 5″decimal places. Pipettes is a term used to describe fractional pips. For instance, if GBP/USD moves from 1.51542 to 1.51543, that .00001 USD move higher is ONE PIPETTE.

Each currency has its own relative values, thus it is essential to compute the value of a pip for that specific currency pair. In the next presentation, we will be using a 4 decimal places quote.

To better understand the calculations and computations, we are going to express the exchange rates will be as a ratio (i.e., EUR/USD at 1.2500 will be written as “1 EUR/ 1.2500 USD”).

Example:

Exchange rate ratio : USD/CAD = 1.0200. To be expressed as 1 USD to 1.0200 CAD (or 1 USD/1.0200 CAD)
(The value change in counter currency) times the exchange rate ratio = pip value 

Here:

[.0001 CAD] x [1 USD/1.0200 CAD]
Or Simply
[(.0001 CAD) / (1.0200 CAD)] x 1 USD = 0.00009804 USD per unit traded

Using the example given above, if we traded 10,000 units of USD/CAD, then a one pip alteration to the exchange rate would be about a 0.98 USD change in the value position, that’s, 10,000 units x 0.0000984 USD/unit. Always remember that the exchange rate changes, as well as the movement of each pip.

Finding the Pip Value in your Account Denomination

One of the most common questions that a market player asks when figuring out the pip value of a position is, “What is the pip value when I am referring to my account currency?”Forex is a global market, thus not everyone has their account denominated in the same currency. This only means that the value of the pip will have to be converted to whatever currency our account may be traded in.

The process of computation is probably the easiest of all; multiplying and dividing the “found value of pip”  by the exchange rate of your account currency and the currency in question is simple.

Let’s take this as an example:

GBP/JPY

First, let us convert the found pip value of 0913 GBP to the pip Value in USD by using the GBP/USD at 1.5590 as our exchange rate ratio. If you are converting a counter currency of the exchange rate, all you need to do is divide the “found pip value” by the corresponding rate ratio:

.813 GBP per pip / (1 GBP/1.5590 USD)
Or
[(.813 GBP) / (1 GBP)] x (1.5590 USD) = 1.2674 USD per pip move

Therefore, fore every 0.01 pip move in GBP/JPY, the 10,000 value unit position changes by about 1.27 USD.

Furthermore, if the currency you are converting to is the base currency of the conversion exchange ratio, then the “found pip value”  should be multiplied by the conversion rate ratio.

0.98 USD per pip X (1 NZD/.7900 USD)

 In this kind of computation, you don’t need to be a math genius, at least when it comes to pip values. I know you have a question running in your mind. Maybe you are asking, “Do I really need to do and work all this out?” Well, the simple yet very powerful answer is NO. Nearly almost all forex brokers will work these things out for you automatically. However, as a market player it is a good idea to know, learn and understand how these things work for you.

You can always use a Pip Value Calculator available over the internet world.

In the next lesson, you will  surely learn how to add up to these seemingly insignificant amounts.

Proceed to the Next Lesson: Lots, Leverage, and Profit and Loss

Go Back to the Previous Lesson: Time To Make Some Money in Trading Forex

Know Your History! – Forex

Forex – Know Your History

When the World War II ended, the entire world experienced so much chaos and problems. The major Western governments felt the need to make an organized system to stabilize the global economy.

Thanks to the system known as “Bretton Woods System” that made the agreement to set the exchange rate of all currencies against gold possible. This agreement made the exchange rates stabilised for a while. However, major economies of the world started to grow and change at different speeds which made the rules of the system obsolete and limiting.

In 1971, the famous Brettons Woods Agreement was abolished and replaced by a different syste m to measure currency valuation. United States started and tested the new system. The currency market evolved to a free-floating one. This time, exchange rates were determined by supply and demand.

It was a quite a tedious task to use the new method to determine the exchange rates at first. Again, with the advancement of technology and communication, things became easier.

In the year 1990s, along with the advancement of computers and internet, banks started to create their own trading platforms that were used to stream live quotes to their clients. This allowed them to execute trades instantly.

As the new platforms made things easier, several smart business-minded marketing machines also introduced internet-based trading platforms for individual market player.

The entities known as “retail forex broker” made the life of individual trader easier by allowing them to trade small sizes. Retail forex brokers allowed market players to trade as little as 1000 units which was far much lower compared to that of the interbank market where the standard trade size is one million units.

Retail Forex Brokers

In the past, currency traders were only limited to those big speculators and highly capitalized investment funds. However, that is not the case in today’s era anymore. Thanks to the advent of retail forex brokers and the internet. Small market players can now definitely join the forex market.

In today’s ruling, anybody could just contact a retail forex broker to open up an account and deposit some money. What makes it even much rewarding is that, anyone can trade forex from the comfort of his home.

Retail Forex brokers basically come in two forms:

1. Market Makers – These are the people who make or set their own bid and ask prices themselves.

2. Electronic Communications Network (ECN) – These use the best bid and ask prices available to them. These prices come from the different institutions on the interbank market.

Market Makers

If you are planning to go to a certain country like France or Germany, then you need to abide to several rules and regulations set by the country when it comes to currency. Before you can buy anything like foods and drinks, you need to have some money converted in their currency to enjoy shopping and purchasing items. To do this, you need to go to the nearest bank or foreign currency exchange office. For them to be able to take the oppositie side of your transaction, you have to agree to exchange your own country currency for the Euros (or new Country) at the specific prices they set.

Business is business. Like any other business transactions, currency exchange rates come in the form of the bid/ask spread.

Let’s take for example, if the bank’s buying price or bid for EUR/USD is 1.2000, and their selling/ask price is 1.2002, then the bid/ask spread is 0.0002. This amount seems small, right? But when we talk about millions or billions of these forex’s daily transactions, then it would surely add up to create a huge profit and revenues among market makers.

In this kind of situation, you can actually say that these market makers are the fundamental building blocks of the forex market. These retail market makers basically provide liquidity by “repackaging” large contract sizes from wholesalers into bite size pieces.  Trading forex would be very hard for middle earner without these market makers.

Electronic Communications Network (ECN)

Electronic Communication Network is known to automatically match customers’ buy and sell orders at stated prices. ECN is also the name given for retail forex trading platforms. Market makers, banks, and other traders that create several stated prices use ECN. You have to always remember that a certain sell or buy order is made and matched up to the best bid/ask price out there.

ECN brokers usually charge a very small amount of commission for the trades you take. This is due to the ability of the market players to set their own prices. The combination of tight spreads and small commission create cheaper transactions costs on ECN brokers.

Now that you’ve learned the Forex market structure, market players and history, then do you think it’s time to join forex market? Of course you could, but it’s totally not enough. As a market player, you need to know when is the best time for you to trade forex. In the next lesson, you will be able to learn and understand the perfect timing to trade forex.

Proceed to the next lesson: When Can You Trade Forex

Back to Previous Lesson: Market Players