Category: Forex Education - Page 16

How to calculate the position size in Forex trading?

Well, now that we know how to calculate the value of 1 pip, calculate the position size that will be used in a trade is really simple.

In this article we will not discuss about how much risk in a trade, which would be the subject of another article, so the first thing to calculate is the monetary amount you are willing to lose in the transaction.

Assuming for example that the size of our trading account is 2,000 EUR and we apply a monetary management in which we risk 1.5% of the account, it is easy to determine that the maximum loss we are willing to assume in a trade is 30 EUR (2000 EUR * 1.5%).

We assume also that the position opened will have a stop loss set in advance. Therefore, as the value of 1 pip is known, then would be easy to calculate the loss in the account in case the price reaches the stop loss for each contract involved in the transaction.

Let’s see some examples:

Indirect quotation and direct quotation in Forex

by rcanessa

Indirect quotes and direct quotes in Forex

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.

DeMarker Indicator

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DeMarker – A good tool for market trends analysis

DeMarker indicator (DI) is a technical indicator (specifically an oscillator) created by Tom Demark and it is used to analyze the trend of the price of an instrument such as a currency pair (Forex) in the market. It can also be used to study the trends of other instruments such as stocks and commodities for example. It is an oscillator created to identify new buying and selling opportunities. In some way, is similar to the Directional Movement Indicators developed by Welles Wilder. In general, Demark goal was to create an indicator that overcome the problems normally associated with other technical indicators and tools used to identify overbought and oversold trading conditions in the market.

This indicator tracks the market sentiment of an asset by comparing the asset’s present price with the price of the previous period. The basic concept behind the DI is that it can be used to detect changing market interest in an asset and by doing so identify market highs and lows.

Demark designed this forecasting method to predict the beginning of a trend in the medium and long term, and is based on specially designed coefficients.

Why it is so difficult to succeed in the Market?

by rcanessa

The financial markets such as the currency market (Forex), futures, commodities, stocks and other offer excellent opportunities to invest our capital and make money speculating on the price of these assets. But statistics tell us that the vast majority of those who venture into the market end up losing money. In fact, it is interesting that statistically speaking it is easier to become a lawyer, engineer or doctor that a successful trader. More interesting is the fact that the success in this field has little to do with intelligence or preparation of the individual. There have been cases of smart and well prepared academically speaking people who never saw a penny in the market and instead I have known other cases of people with an intellectual and educational average level who earn tons of money constantly trading in the market.

For this reason, we will discuss in this article some of the main reasons leading to failure of most novice traders.

The Flag and Pennant Binary Options Trading Strategy

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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

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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

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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

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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

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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

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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.

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