Category: Forex Education - Page 7

USD/MXN: Dollar recovers advantage as risky assets falter

Fears of a second wave of contagion dominate sentiment earlier in the week
USD/MXN is consolidating the correction thanks to the demand for safe-haven assets

After Thursday’s blow to the Mexican peso along with other emerging currencies, risk appetite returned to end the week as two-thirds of Thursday’s losses recovered on Friday, leaving USD/MXN only 3.6% higher in a week dominated by the Fed’s grim recession warning, as Covid-19 cases re-emerge worldwide.

But this week begins with complications for the Mexican peso, which has fallen 2.5% against the US dollar since Friday’s close. Added to the weakness of the peso is the drop in oil prices, with a 4.5% drop in US crude since the start of the new week, as a surprising increase in US inventories gave another blow to the commodity, which has lost $5 a barrel from last week’s highs.

The Rectangle Pattern – Trend continuation chart pattern

by rcanessa

The rectangle is a trend continuation pattern and consists of a price formation in which demand and supply are apparently balanced for a certain period of time. The price moves in a narrow range where it finds a support at the bottom of the rectangle and a resistance at the top of the figure.

Finally, the price ends up breaking out the rectangle range, either through support or resistance. If the previous trend was bullish, then the breakout is most likely to be bullish, but if the previous trend was bearish, the move will most likely be bearish.

However, the rectangle can also be a reversal trend pattern, for example if the previous trend was bullish and the pattern breakout occurs on the downside or when the previous trend was bearish and the price breaks through resistance.

Economic Cycle – Concept and Definition

by rcanessa

The economic cycle is a series of phases that the economy goes through and that happen in order until reaching the final phase in which the economic cycle begins again.

Each cycle goes through periods of recession and periods of expansion. This phenomenon has been common throughout economic history, being known by other names such as “business cycles” or “cyclical fluctuations“.

It is known as economic cycle because once finished it starts again from the beginning forming a continuous wheel. However, due to its unpredictability this cannot be taken as a formal rule.

In the upward phases the economy improves and jobs are created, while in the downward phases the economy decreases. It is in the periods of contraction when economic crises break out. When oscillations of great intensity occur, economies can experience economic bubbles.

The Schiff Pitchfork – Construction and Variants

by rcanessa

In a previous post we saw the use of the Andrews Pitchfork, a trading technique very used and known by many traders. But there is a less known variant of this method developed by a student of Andrews surnamed Shiff, who worked as a trader on the NYSE. The technique developed by this trader is intended to solve the problem that occurs when the Andrews Pitchfork presents a very marked inclination.

In this case, the Schiff Pitchfork shares with the Andrews Pitchfork the use of the line that is between points A and B, which is referred to as midline. The main difference however is that the construction of both Pitchforks is somewhat different. To construct the Schiff Pitchfork the following procedure is used:

The Best Forex Daytrading Strategies II

by rcanessa

In a previous article we explained some basic day trading strategies for Forex and other markets, mainly based on price action.

Continuing with the series on daytrading strategies based exclusively on Price Action (the most common price patterns), we are now going to present another series of strategies based on classic price patterns of technical analysis.

You can access the first article in the series at the following link: The Best Forex Daytrading Strategies I

Economic recession – Definition and Concept

by rcanessa

A recession is a decrease in economic activity over a period of time. Officially, a recession is considered to exist when the GDP variation rate is negative for two consecutive quarters. It is also known as a period of economic contraction.

The economic recession is the phase of the economic cycle in which economic activity decreases, consumption and investment decrease, and unemployment increases.

In the following chart, we can see an example of a recession, with two-quarters of negative growth. If the negative growth continued, it would be a long economic recession. However, if the negative growth were to occur for only one quarter, we could not officially consider that decrease as an economic recession.

Financial Options – Types and Example

by rcanessa

A financial option is a financial derivative that involves a contract to buy or sell an underlying asset, such as a stock, currency pair, commodity or other, which grants the buyer the right to buy or sell the agreed underlying asset at a future date previously agreed, depending on whether it is a call option or a put option.

The main characteristics of an option are indicated by its own name. The term ‘option’ refers precisely to the fact that the buyer of this financial derivative has the right (has the option) to execute the provisions of the contract. At the same time, the seller of an option is required to buy or sell (depending on the type of option) if the buyer exercises his right once the contract expires.

The Euclidean Attractor in Trading

by rcanessa

The Euclidean Attractor is a fundamental model for managing timings and achieving optimal entries. We will divide the explanation of its operation into three parts for its perfect use. They are as follows:

Pivot.
Location of scenarios and their cataloging.
Cycles.

Reserve Currency – Definition and Concept

by rcanessa

A reserve currency is the one used as a means of payment in international transactions due to its confidence. In other words, investors expect their value to be maintained over time. Currently, the dollar is the currency that mainly meets these characteristics.

An important part of the international reserves of each country is denominated in some reserve currency. The bodies responsible for pursuing this objective are the central banks.

Reserve currencies also serve to set the prices of commodities such as oil, gold, and other raw materials. The same happens with financial costs and international transport.

Efficient Market – What is it, Definition and Concept

by rcanessa

An efficient market is one in which the prices of the assets traded in it reflect at all times the information available on the market.

Financial asset prices react strongly to market information. When the information is released, the different market agents analyze it and use it to make decisions. So this information is incorporated into the price as it arrives.

Therefore, the more information on the market, the greater the efficiency of prices and the greater reflection of the fundamental value of assets. In this way, an efficient market can be considered as a market in which assets are quoted at their fair price and this price also truly reflects their real value at all times.

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