Category: Forex Education - Page 14

How affects the control of inflation the Forex market?

The increase in prices over time, which is inflation, in an economy experiencing growth is inevitable. Furthermore, it is accepted by most economists that a moderate rate of inflation is positive for the economy. In this regard, central banks try to control inflation to be kept within certain limits in order to exploit the positive effects of inflation and reduce the impact of negative effects. In this sense, monetary authorities maintain a constant struggle to control inflation and other monetary forces affecting the economy.

Increases in interest rates

Increasing interest rates is one of the main measures taken by central banks to reduce inflationary pressure when this is high. Moreover, it is easy to apply strategy whose effects are usually seen reflected faster in the economy in comparison with the effects of other methods. By raising interest rates, the central bank raise the benchmark interest rate at which commercial banks will look when granting loans to their clients.

Diamond Reversal Chart Pattern

by rcanessa

Diamonds Chart Patterns Explained

The diamond chart pattern is a very rare and exceptional form of chart formation which looks same like the head and shoulder or an inverted head and shoulder pattern. It is a reversal pattern which appears in a V shape. The diamond patterns will not frequently occur in the market bottoms and it usually takes place during the major top. As these diamonds chart pattern executes as a variant of head and shoulders chart patterns, the traders have to withstand their desire for differentiating the top that resembles a diamond formation. The basic reason for avoiding this pattern is that, the diamonds chart pattern will evoke a break in the trend very sooner when compared to the head and shoulders chart formation.

Basically there are two types of diamond patterns: the diamond bottoms which are formed in bearish trends and the diamond tops which are formed in bullish trends. In both cases the pattern is formed by two juxtaposed symmetrical triangles.

How to move the stop loss in a trading operation?

by rcanessa

We have already discussed in previous articles how important the stop loss is. For those who are not yet clear on the subject, the stop loss will be that price level from which our trade would cease to be valid and should be closed.

The stop loss can be automatic and programmed in the broker itself or manual. In the manual stop loss the trader makes the final closing of the transaction after checking the price in the market.

Knowing how to define the stop loss is very important. Depending on the distance of the stop loss from the price, we will have more or less profitability in the trade, provided that we respect an efficient money management.

The stop loss, once defined, may have a double evolution.

On the one hand we can have a fixed stop loss that does not evolve with the price. This type of stop loss is normally used on transactions with a high Risk/Profit ratio, so we are going to look for a price target that is much farther from the stop loss level.

Types of Forex Trading Accounts

by rcanessa

The first type of account that one usually opens with a retail Forex broker is a demo account. This simply lets the trader get a hang of the trading process and execution methods. Afterwards, a trader usually moves into either one of these three common types of accounts.

Standard Forex Accounts

The most common type of Forex account, this trading account has access to standard currency lots worth $100,000. Since the rules of leverage and margin are in order, this means that you don’t necessarily have to immediately invest $100,000 of capital to start a standard account. For a standard lot for trading, you only need to have $1,000 in the margin account.

Most brokers provide better perks and services to standard account bearers because of its adequate up-front capital. It is also the only type of account with each pip worth $10, meaning you get higher potential gains.

Trading Psychology and Trading Patterns – when the usdjpy broke the 100 level

by rcanessa

Trading with price charts in the currency markets implies looking for repetitive shapes that happened in the past and by the time current price is making a shape like that traders have an educated guess about the possible outcome. This is what is known as a price pattern.

So looking for patterns when trading is one of the things that traders have in common as this helps forecasting price for the next period, depending very much on the time frame the pattern is being identified. If, for example, a head and shoulders pattern is identified on the weekly or monthly chart, then the measured move for it implies quite a strong move price will make.

When patterns are being used in combination with market psychology, the analysis becomes even more complex. It gives the trader a competitive advantage as, on one side, the pattern represents something from the past that can be projected into the future and on the other side market psychology comes to confirm/infirm that specific move.

How to trade false breakouts in the markets?

by rcanessa

Trade false breakouts in a simple way

The trading techniques based on breakouts are very popular because they are quite profitable and can be used to trade in any market. Many traders know the fact that after the price get caught into an area of consolidation a breakout usually occurs by which the price make a violent and extensive movement outside the area where it was consolidated.

These movements could be so strong that a trader can obtain high profits if enters the market in the right direction. However, the problem is that in many cases the traders who jump when there is what appears is a breakout realize the fact that the price returns to the area of consolidation and ends losing money. This is known as a fakeout or false breakout.

In fact, the fakeouts are so common that many investors trade and make money with strategies based on false breakouts. Therefore, in this article we will show the basic way to trade false breakouts.

Piercing Line Candlestick Pattern

by rcanessa

The Piercing Line candlestick pattern is a reversal formation that occurs in downward trends and usually indicates a possible change from bullish to bearich trends. This pattern has a high reliability and can be identified as follows:

This formation is only formed during downtrends.
The first candle is always a big black candle (bearish).
The next candle should open below the low of the black candle.
The white candle of the next period should close at least above the midpoint of the real body of the black candlestick.

The Forex Market Requotes

by rcanessa

When we trade in the currency markets at some point we will cross with requotes. While this does not happen all the time, it can happen and the trader should know what they are, what they mean and how to avoid them.

What is a re-quoting?

A re-quoting in the Forex market means that the broker with which we are trading is not able to provide us with an entry into the market based on the price we asked at the beginning when we send the order. Usually, this occurs in highly volatile markets in which prices move up or down very quickly, usually in the periods in which important economic or political news are announced but also can be caused by some event that had a strong impact on the market.

In essence, a trader decides to buy or sell a currency pair at a particular price and click the appropriate button on the platform to do this. By the time the broker receives the order, the market price has moved too fast for the broker to execute the order at the price. When this happens the broker shows the announcement of a re-quote in the trading platform in order to tell the trader that the price has moved and to give its client the opportunity to decide whether or not to accept the new price. Almost always the new price is worse than the price requested by the trader. That is why serious brokers ask their clients before executing the trade with the new price.

United States Retail Sales

by rcanessa

General definition

The Retail Sales Index is a report that considers the sales of goods in the retail sector during the previous month. This is a monthly figure, which always refers to the previous month in which the Census Bureau and the Department of Commerce of United States issued the report. This report is compiled and issued approximately two weeks after the end of the month.

This index is based on data obtained from samples that are extrapolated to the entirety of the whole country.

How to Avoid a Fake Forex Blog

by rcanessa

No matter how absurd it may sound, a fake Forex blog does exist. Online foreign exchange traders go to Forex blogs to fill up the void in terms of trading information, news and insight. And when there is a need, there are also those that take advantage by filling that need with scam and useless information. It is risky enough to be in Forex trading, how much more so with the possibility to be drawn towards a fake Forex blog?

Look out for those outrageous headlines. For online users that have one time or the other been drawn to scams, the headlines might have done the trick. It is silly to put the finger on it but it is true: Be a millionaire trading foreign exchange! Gain $2000 a day trading Forex! These headlines provide easy solutions to everyday problems in a few words. In equipping oneself with trading knowledge, one finds out early on that these offers are impossible. Yet, trading can be complex that one just wishes for an easier path to the fulfillment of its goals. At the end of the trail, one is bound to be buying the blogs’ offerings and losing more money with nary the offered millions in sight.

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