Forex Education

Education on Forex trading and financial markets for beginners and professional traders interested in earn money trading

ABC Correction Waves – Elliott Wave theory

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Following with the Elliott Wave theory that we have seen in the previous article, in this article we will see how the 5 impulse waves (in favor of the trend) proposed by Elliot are corrected and reversed by 3 waves against the trend called ABC Correction Waves.

Observe the following image:

ABC Correction Waves
ABC Correction Wave in a bull trend

The price swings marked by colored lines and the letters a, b, c form a corrective movement of the bullish wave formed by swings 1, 2, 3, 4 and 5.

Because we have used a bull market in the previous example does not mean that this theory does not apply to bear markets. The same pattern 5-3 may appear like this:

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What Should Your Forex Trading Plan Have?

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A trading plan can be simple or complex depending on how you want it to be, but most important of all in the end, is that you have a plan and follow its rules.

These are some of the essential points that every forex trading plan should have:

1- Trading system

This is the true essence of the trading plan. It should be your own trading system that you have tested a lot and in which you have traded for at least two months in a demo account of an online broker or in a cent account in which you risk little money.

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Risks of trading Forex with the news

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In a future article, we will see some techniques to trade the fundamental news in Forex. Before going on, you have to take into account the advantages mentioned in previous lessons about news trading but also the risks and disadvantages that I will expose next and that you will be able to experiment frequently when important market news is published. As with any trading technique, news trading can be profitable but risky, especially for novice traders

Increase of Bid-Ask spread

Some brokers can guarantee the execution of your orders during the publication of important news but not the spread, others can guarantee the spread but not the execution, and others may not guarantee either one thing or another and let the market decide what it can offer you. You will see very often how the spread increases considerably (2, 3, 10, or even more pips) moments before and after the publication of economic news or important economic indicator. If you are going to pursue small profits, 10 or 20 pips, this increase in the spread will also increase the chances of your trades ending up with losses.

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How to Invest in a Choppy Market?

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Today, I will talk about the choppy market, that is, the laterality in the market, how to approach it and take advantage of it.

Choppy means hectic or variable. The term Choppy Market, therefore, refers to when the prices of shares in the Stock Exchange or currencies in the Forex market rise and fall, or fluctuate uniformly, without following an upward or downward trend, so they remain lateral.

For a market to be considered “choppy”, the fluctuation can occur both in the short term, and in the long term. There are times when markets do follow a clear upward or downward trend.

But there are many times when they do not. That is why we can say that the market can enter a choppy or lateral state at any time. Or, failing that, the choppy state is one of the natural conditions of the market.

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RMB vs yuan: understanding the difference

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The national currency implies the money issued by a state central bank or any other state monetary institution. The Chinese currency is becoming popular and a more powerful international currency day by day. The most debatable issue in the international economy is due to the policy of artificial undervaluation of Chinese money against the United States dollar, to the extent that China has been gaining an advantage in export prices until 2015. During that period, the Chinese currency received an appreciation of its growing position in the world by the International Monetary Fund.

Before 2010, since it was under strict government control, the Chinese renminbi was never considered an international currency. But now the Standard Chartered Bank forecasts that 28% of international trade from China will be made in RMB in 2020.

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How have the main currencies behaved during 2018?

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The year 2018 has been marked by tensions and uncertainty. The commercial war between the United States and China has been carried to its maximum level, the rise of interest rates and QT (quantitative tapering) has continued in the US and in Europe the QE (quantitative easing) has been ended. Towards the end of the year the atmosphere is even more tense with the “gilets jaunes” (yellow vests) in France, the political escalation between the US and China and the fall of the world stock markets. On the other hand, the price of oil is practically at a minimum, although it seems to start to rise, which has helped to reduce the increase in global political-economic tensions.

On the one hand, the low price of oil contains inflation, which reduces the pressure towards the contraction of the monetary stimuli of the main world banks and on the other hand supposes an injection of disposable income for consumers.

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What are exotic currency pairs in the Forex market?

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The Forex market is the largest OTC market in the world, according to some estimates it moves almost 5 trillion dollars a day. Specifically, in the last triennial survey of the BIS, you can observe the level of negotiation and distribution among the main currency pairs that are traded in that market. This tells us clearly why it is the largest market in the world. But the fact is that not all the instruments that are traded in this market are the same. Each pair has its own characteristics and advantages and disadvantages.

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Overlay of the European session and the U.S. session

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Usually the currency markets have the highest trading activity when occur the overlap of the trading sessions of the two most important financial centers in the world: London and New York. In fact, generally the average range of price movement between 8 am and 12 pm EST time, is on average about 70 percent of the average total range of price movement during the European session and 80 percent of the average total range during the U.S. session. Undoubtedly, for all currency pairs this period is usually the most active and volatile, and for this reason is ideal for traders who want to get high profits in the market with fast price movements, ie traders with high tolerance risk.

By themselves, the above percentages indicate that traders who are interested in trading with highly volatile prices and wide price ranges must act precisely during the hours in which the markets of United States and Europe overlap, especially if they are unable to monitor the market all day.

Indirect quotation and direct quotation – Forex

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What is an indirect quote?

Is the price of a currency pair expressed as amount of foreign currency per unit of domestic currency.

In other words, when an indirect quote is given, the exchange rate is expressed relative to a fixed  amount of the national currency (1 unit),  while the amount of foreign currency is variable.

For example, if we are in the United States, the indirect quote for the Canadian dollar would be 1.17 CAD = 1 USD, so the exchange rate of the indirect quotation is expressed as USD/CAD 1.17 because it is the expression that reports the amount of CAD per unit of USD which is the national currency (for 1 USD we can obtain 1.17 CAD). If we were in Canada the indirect quotation of the US dollar would be 0.85 USD = 1 CAD (CAD/USD 0.85 indicates that for 1 CAD, which is the national currency, we get 0.85 USD). As we can see, in an indirect quote the base currency of the currency pair is the national currency.

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