Category: Forex Education - Page 16

The Flag and Pennant Binary Options Trading Strategy

The Flag and Pennant strategy for trading binary options is a chart-pattern based strategy, like most of the other such strategies out there. What sets it apart from the majority of these schemes though is the fact that the Flag and the Pennant pattern are rather difficult to spot, for beginners and advanced traders alike. With that in mind, … Read more

The major players in the Forex market

by rcanessa

In this article we will list the major players or participants in the Forex market. As it is understood in a market where hundreds of variables are involved as is the case of the currency market, a quote is the sum of different factors that affect in one way or another the exchange rate of the currencies.

Commercial Banks and Investment Banks

Several of the major players that influence the behavior of the foreign exchange market are commercial banks and investment banks. Specialists put them at a level above the Forex market which is known in the investment community as interbank market.It could be considered that it is a form of parallel negotiation which is stablished by different banks that have their own trading platforms and data access prices in a similar way as Forex investors who connect with their own Forex broker.

However, transactions between banks have a much higher level of liquidity, so that the interbank market is a high level market with transactions of many millions of dollars a day.

Fundamental Analysis in Forex

by rcanessa

Fundamental Analysis of the Forex Market Forex fundamental analysis is a type of market analysis that identifies and measures factors that determine the intrinsic value of financial instruments such as economic and political environment. It is included in the fundamental analysis any factor affecting supply and demand of the instrument traded. For example, a study of fundamental analysis for a … Read more

Introduction to the Forex market

by rcanessa

The Forex market, which is commonly known as Forex (Foreign Exchange Market) or FX, is currently the largest and the most liquid financial market in the world with a daily trading volume of around $5 trillion U.S. dollars, which puts it well above other financial markets such as the stock market of the futures market. It is an Over The Counter (OTC) market.

The operation of Forex is based simply on the purchase of one currency and selling another. In this case the investor tries to make money with the rise or fall in prices of a particular currency against another. In Forex the trader can make money with both long positions (buy) or short positions (sell) as the purchase of a currency involves the sale of another and vice versa.

Gross Domestic Product (GDP) – Definition and Importance

by rcanessa

General definition The GDP or Gross Domestic Product is a report that includes the total value of all goods and services produced within a country in a given year, which is equal to the total of consumption, investment and government spending, plus the value of exports, minus the value of imports. The GDP report is disclosed at 8:30 am EST on the … Read more

Inflation and its impact on financial markets

by rcanessa

We can define inflation as the general increase in prices of goods and services in connection with a currency at a specific time period. When the price of these resources increases, the purchasing power of the country’s monetary unit drops so the people of the country can buy fewer goods and services and this has an overall impact on the economy. In other words, this means that inflation causes the purchasing power of a currency to decline.

Inflation has a negative effect on all members of society regardless of their socioeconomic level, and obviously, it affects all consumers in the economy of a country, for this reason, is one of the most important economic indicators for Central Banks and investors of financial markets such as Forex.

Many economists believe that inflation can be positive if it has a moderate level. Meanwhile, central banks invest huge efforts to keep inflation within well-established limits, so that the economy of the country can take advantage of the positive aspects of inflation while at the same time the negative effects of it are minimized.

One of the main measures implemented to counter the inflationary pressure is rising interest rates. When interest rates rise, commercial banks proceed to increase the interest of the loans they make to their customers.

Over The Counter Markets (OTC)

by rcanessa

Over The Counter trading refers to financial instruments trading on a different context than organized financial markets or exchanges.

The term OTC trading or OTC market can be used for contracts on financial instruments made directly between two parties and also for trading with derivative financial instruments traded through a dealer and not through a centralized market (such as the stock exhange).

For example, a futures contract is a standardized product traded in the futures market while a forward contract is an OTC product.

Fractals Indicator – How to use the Fractals Indicator?

by rcanessa

What are fractals?

Fractal geometry, defined by mathematician Benoit Mandelbrot, is a geometric figure that can be decomposed into parts, each one of these parts identical on a smaller scale to the original figure. However, the “fractal finance” applied to technical analysis is a geometric pattern that can be observed regardless of the time frame used, either 1 hour, 30, 15 or 1 minute. There are some books on this subject and one of the most popular is “Trading Chaos” that was written by Dr. Bill Williams. In this book, Dr. Williams entered two important concepts, the “Fractal UP” and “Down Fractal”, which can be used as support and resistance respectively. When both formations are crossed by the price, that indicate new levels for prices in both bull and bear markets.

The “Fractal Up” (it indicates a possible resistance), defined by Williams (Using a bar chart) is one pattern where the central bar has a maximum price that is greater than the maximum of the two bars to the right and higher than the maximum of the two bars on the left. On the other hand, the “Fractal Down” (it indicates a possible support) is one pattern where the central bar has a minimum price that is less than the minimum of the two bars to the right and less than minimum of two bars on the left. We can observe the ideal fractal in the image:

The Awesome Oscillator of Bill Williams

by rcanessa

The Awesome Oscillator (AO) is a technical indicator developed by Bill Williams which determines market momentum (the second of the five dimensions of the market according to Williams) at a specific time based on the last five bars, which momentum is compared with the momentum of the last 34 bars.

In this way the Awesome Oscillator is simply the difference between the simple moving average of 34 periods and the simple moving average of 5 periods which are calculated based on the midpoints of the bars (High + Low) / 2. The Awesome is displayed on the graph as a histogram:

Chart Patterns Formations in Trading

by rcanessa

Financial markets, including Forex, involves plenty of chart formations, while not all of them are effective. There are many pricing patterns available and some of them give an excellent profit while a few of them doesn’t work good. First and the foremost, the chart patterns must focus on double top pattern and it is the common criteria used to grab the best accuracy. With a possibility to grasp 78% result, trading becomes simple and effective.

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