The Forex market used to be the realm of governments, banks, financial institutions and very rich people. That was not so long ago either. Fifteen y...
The Forex market used to be the realm of governments, banks, financial institutions and very rich people. That was not so long ago either. Fifteen years ago, perhaps, maybe even less. The advancement that altered all that is the Internet. These days, the Forex market is played by small companies and even ordinary people as well as the big players of former times.
Whether or not it is a level playing field for the big and the small, you will have to decide for yourself, because so much shame has come to light recently about issues in other financial markets. However, the Forex is so big that it is hard to think that it can be manipulated. (Although George Soros is blamed for a run on the GBP in the early nineties).
It is probable that the big players have more access to information that the rest of us. Particularly governments as they make the policies that affect the way a currency moves. Information is the key to profitable Forex trading. Therefore, you have to know the terminology of the Forex market; how to utilize the financial instruments that your broker makes available to you and you have to be up-to-date on the information affecting your target currencies.
Therefore, it stands to reason that you should decide to open an account with a Forex broker that provides the most advanced trading platform, supplies the best training and distributes the best, up-to-date news and market analysis.
The best way of choosing an online Forex trading system is to Google “online Forex trading system” and pick six of the most impressive to you and save them into a folder in your ‘Favourites’ list. If you are new to Forex trading, you should read the companies’ training literature. This will give you an idea of how much the broker cares. Try putting some of the doctrines that you learn into practice in a ‘practice account’. The practice account is free, but sometimes you may only use a practice account for a month or so.
You will discover that some online Forex trading systems are simpler to use than others. One online Forex trading system might suit you but not suit me, it is a personal preference. Some online Forex trading systems will have all the bells and whistles, but you may prefer a simpler system. For example, if your computer is slow or your Internet connection is slow, you may want to be able to turn off any elements that you do not need in order to speed your system up.
Another feature that you should pay close attention to when choosing an online Forex trading system, is the system’s functionality for technical analysis. You will need free access to the historical data of the currencies that you are interested in. These data can then be interpreted by graphs, which may be able to help you determine which way a particular currency pair may go. Breaking news is also very important and your broker should provide you with all the latest news stories ‘hot off the wire’.
Owen Jones, the author of this article, writes on many subjects, but is now concerned with a . If you are interested in dealing with an , please go to our web site.
The Forex is a trading system for international currencies, similar to every country’s stock exchange system. However, the key difference is that the Forex is massive when compared to any stock exchange. In fact, it is enormous compared to all the stock exchanges in the world combined. The Forex is bigger than all the world’s stock exchanges combined, turning over more than 2 trillion dollars a day, every day.
If you open a Forex account with a good Forex trading account provider – a broker – the firm will provide you with reports on what is happening in the international currency markets. Some provide this information free of charge, other firms make a charge. The state of affairs is similar with regard to trading overheads.
Some Forex trading firms charge a fee per trade and others charge a spread or a percentage. You will have to work out which system is best for you. This is equally true of the minimum trading amount. Some firms allow a minimum trade of $100 others $1,000.
You also have to check how long your trade is valid for at minimum. Some companies insist on a 30 day minimum others require a 48 hour minimum turn-around. If you go with a long trading period, you will not be able to take advantage of very short term swings, which is similar to day trading on the stock exchange. Day trading is not recommended by experts, because it is very risky, although it can deliver good short term profits.
You can trade Forex on line or and off line, it makes no significant difference except that on line dealing is usually faster and cheaper. These are benefits, but the mechanics of the trade are basically the same. Being able to trade on line also means that you can trade from anywhere that there is an Internet access point anyplace in the world, which is cheaper than phoning your order through to your broker while you are on vacation.
Most online Forex trading systems or platforms will be ‘execution only’ services. This indicates that they will carry out your instructions, but will not offer any advice whatsoever. You can opt to work with an adviser from the brokerage firm, but that usually costs a great deal more and can slow things down too.
Whether you work with an consultant or not you will have to find a Forex broker that you can have confidence in. If you are taking advice, you have to believe that your consultant knows much more than you do otherwise there is no point. However, the advice you will be given will probably be the Forex industry’s standard point of view. Do not expect it to be revolutionary or trend-bucking. They are not going to go out on a limb for you, in case you sue, although they may have put get out clauses in the contract anyway.
However, even if you are on execution only, you will still want to work with a Forex trading company that you feel you can rely on to carry out your instructions in a timely manner. If you work out and believe that right now is the time to sell the dollar against the pound, you want to trade right now and not in four hours time when the exactly right entry point has slipped past.
Owen Jones, the author of this piece, writes on many subjects, but is presently involved with . If you are interested in dealing with an , please go over to our website.
I remember well enough what it was like trying to get started with Stock Trend Analysis. The learning curve was torturing on occasion. It seems no matter what I studied, I didn’t understand quite enough to put it into practice. Over time with some serious tenacity I became good at enough to start earning some real money in the stock market.
My own major hurdle to gaining skill was there are so many well meaning people willing to extend advice and so many resources online for technical descriptions of several indicators, but nothing I found seemed to help me realize how all these indicator definitions and macroeconomic information fit in concert to forge a decent understanding of technical trading. I imagine I can save you some time and tons of frustration with this convenient little introduction.
An overview of technical analysis.
I imagine if you are interested in technical analysis sufficiency to read this far, you are already familiar with how the stock market functions and how to purchase and trade stocks. I hope so because it is a requirement. Bear in mind this is an casual overview of the learning path many traders, myself included have taken to understand Technical Analysis.
Technical Analysis – Fundamental Topics. What is Technical Analysis? For the unaware, there are two major sorts of Stock Analysis.
Technical and Fundamental Analysis Although the two are not , traders tend to prefer one over the other. Fundamental Analysis looks at a company s assets, debt, earnings and cash flow. It gives the analyst a clear characterization of a company’s health. When an analysis of one company is compared to its peers (groups of companies in the same business) it presents clues about potential weaknesses and strengths of the company. Its also useful in appraising a company’s long term chances for growth.
Technical Analysis looks to take advantage of the mass knowledge of open market participants (other traders) who are by-and-large Fundamental Analysts. Technical Analysis is at its heart an analysis of supply and demand. So, lets discover precisely how Technical Analysts use the market as their guide on trading markets.
A Casual Technical Analysis Example: Price Speaks Volumes To begin, know that Price and Volume are both technical indicators. Price being naturally the chief indicator over any other. Each time a stock price moves up it signals a vote of confidence by all players. Sellers stood firm for a higher price than the predominating rate and buyers intervened and purchased at that price anyway. Sellers holding out for more money while buyers step in to pay the difference between the market and asking price shows market optimism.
Volume is the amount of shares exchanged over time. Technical traders watch price and volume in concert to approximate how bullish or pessimistic buyers and sellers are and perhaps are becoming. An increase in volume across a given time-frame indicates increasing involvement and therefore increasing conviction that prices will continue to move in the current direction. Whereas, when volume begins to wane it is an indicator that market players are losing their conviction that prices will continue in their current direction.
When volume is increasing along with prices, players anticipate prices to continue to go up. Technical traders speculate that prices will increase as long as volume is stronger than average. If prices continue to mount while at the same time volume begins to flatten out, the participants are voting with fewer shares. This circumstance is a variety of technical breakdown.
Typical Volume Based Price Breakdown. One more phenomenon to consider is that once price direction changes, volume may begin to grow, once again corroborating the conviction of market participants of the new price direction. When an indicator such as volume starts to correspond with the price direction, this is known as a variety of price confirmation.
Technical Analysis Indicators Apart from the simple indicators of price and volume, there are infinite indicators and more are produced every day. An indicator can frequently be something as simple as a moving average or far more complex involving long formulas. As you’ve seen already, indicators are an operative part of understanding and anticipating market action. All technical analysis indicators fit two different classes.
It is important to observe that market circumstances dictate which form you will use, but never ignore price. Indicators are forecasters, but price speaks volumes, only prices are reality.
Leading indicators are used in sideways markets. Leading indicators react before price does. Most leading indicators try to demonstrate shifts in the strength or force of price direction, or momentum. Leading indicators are useful to assist traders anticipate price trends because they can depict the strength or weakness of prices at their current level. Leading indicators do not do well as buy/sell indicators in steady trending markets (up or down) because they indicate changes in momentum. They do well in sideways markets and give traders precise signals about when to buy or sell.
Some usable leading indicators include Momentum, Stochastic and the Relative Strength Indicator (RSI). The RSI (leading indicator flags the overbought condition).
Lagging Indicators / Trend Following Indicators Use in trending markets (moving up / moving down).
Lagging indicators follow price moves. A moving average is a simplified kind of lagging indicator. Lagging indicators are frequently employed when the markets are in a very strong trend. They rapidly show traders the average direction of a stock price. They can send erroneous signals in markets that are trading at parity / proceeding sideways. Their optimal use is in trending markets because they can clearly show traders when to enter and how long to remain.
The most popular lagging Indicators include Moving Average, Exponential Moving Average and Moving Average Convergence Divergence (MACD) The moving average is a Trend Following Indicator.
Technical Analysis Understanding time frames. In Technical Analysis, indicators are meaningless without understanding them in the setting of time. Indicators, leading and lagging both use time and price as the very basis of any formula. It may help to think of time frames as magnification of detail. If you view a one year weekly chart and zoom into a one year daily chart, you are immediately aware that you can see price action in deeper detail. Also traveling from a one year daily chart to a three month daily chart gives even greater detail of the price activity.
More about time frames in technical analysis: Screening multiple time frames exposes greater detail.
What sort of trader are you? Do you buy into a trade and then watch impatiently at every tick in the stock price? Or are you more of a set it and forget it kind of trader who monitors the price every few days or weeks? Maybe your style is someplace in between? Why is this important and what does it have to do with time frames? read on.
The Day Trader Day Traders speedily buy and sell stocks multiple times a day to attempt to seal in quick profits. The Day Trader examines chart patterns and indicators which may span only a few hours or even a few minutes. Day trading is a speculative job where great amounts are realized or lost in mere seconds. Day Traders pay precise attention to tick-by-tick price information as it comes out on their screen in real time.
Under FINRA and NYSE rules, a trader once flagged and classified as a pattern day trader, must keep up a $25,000 account balance must obtain a margin account. For more info on day trading refer to the FINRA Notice to Members and the NYSE Information Memo.
The Active Trader – Momentum Trader Although there is no standard definition as with the Day Trader, the Active Trader looks for trends that span from a few months to as little as a few days. A typical trade for an Active Trader trader can be really brief, maybe a day or may last for many months as long as the on-going trend is intact.
Active Trader Strategy – The Swing Trader Although the strategy used by the swing trader is very similar to that of the Active Trader, the central departure is that the swing trader looks to maximize gains by capitalizing of the normal downswings in an broad upwards trending stock. The Swing Trader cycles in and out of the trade repeatedly until the broad trend softens before making a last exit. Swing traders must watch the price activity more frequently than the active momentum trader since the swing trade requires frequent attention.
To see the original article complete with example charts, visit www.StockChartGrabber.com
The stock market of the last ten years has been a wild ride. Let’s take a few moments to reflect on just how crazy things have been during this time. This has been a very memorable decade as far as the financial markets are concerned.
Just ten years ago, things were better than they had ever been in the stock market. Just about everything was at an all time high, and things showed no signs of slowing down. People were buying things blindly, despite the fact that P/E ratios were significantly higher than they had ever been.
People were doubling their money within months, and overnight millionaires were born. Just about everyone out there was trading stocks, and many quit their jobs for the sake of day trading. CNBC was a fixture on television sets around the country.
Unfortunately, reality hit soon after, and it hit main street pretty hard. The markets retreated from their all-time highs within a matter of months. Things plummeted as the reality of the tech bubble set in.
To think that the indexes were as high as they were seems ludicrous in hindsight. Within the span of a few months, the markets had corrected by over 20%. Late 2001 was even worse, as the events of September 11th brought about new financial worries.
A rebuilding mode set in during the next few years, and some steady gains followed through 2006, at which point some of the indexes once again set new records. Investors were optimistic about market conditions and money was beginning to flow back in.
It wasn’t just the stock market this time around. Many people chose to bet on oil prices, which hit highs of over $140 per barrel during 2008. People were quitting their jobs to trade forex currencies and the market hype was almost back to its old state.
Once again, the doom kicked back in and the markets hit their lowest points since the 1990s. Things have since rebounded a bit, but it makes you wonder where we might be headed next. Something tells me that wherever we go, it’ll be a wild ride
If you’re interested in Forex trading, take a look at this author’s article about the concerns.
