What is Technical Analysis?

23 Jan 2010

Technical analysis on the prediction of exchange rate movements based solely on statistics and price patterns Simply put, technical analysis is the analysis of the market based on price action. While fundamental analysis looks at economic factors and geopolitical circumstances (such as economic numbers, capital flows, and the major political events), in an attempt to predict exchange rates, technical analysis is based on the statistics and patterns in price movement for its forecastTechnical analysis on the prediction of exchange rate movements based solely on statistics and price patterns Simply put, technical analysis is the analysis of the market based on price action. While fundamental analysis looks at economic factors and geopolitical circumstances (such as economic numbers, capital flows, and the major political events), in an attempt to predict exchange rates, technical analysis is based on the statistics and patterns in price movement for its forecast. Technical analysis has gained popularity in recent history, especially the development of computerized trading continue to develop and active traders continue their strategies to best assess what is happening in the market at any time to refine. In today's marketplace, technical analysis has become an essential tool for every aspiring entrepreneur.
Why Technical Analysis Works •
Extremely popular, and thus provides insight into what many traders do • more clear and less controversial than fundamental analysis • A simple way to make commercial decisions Many traders believe that technical analysis is a self-fulfilling prophecy - in other words, it only works because it is popular and is used by many traders. For example, many technical traders put a 20 days moving average line on maps because the moving average is not statistically significant itself, but because it is a very common indicator used by active traders in all sizes.
The reason is simple: as so many traders make decisions off moving averages and other indicators, then the indicators should be closely monitored because they offer insight into what a strong majority of traders in the market are doing. For this reason, traders focus on the most popular indicators in the business community, and must be used in the most traditional way. This is the best way of tapping into the "psychology" of the market - in other words, it is a simple but highly effective way to understand what other entrepreneurs are and how to move the market because of it. Contrary to popular belief, it is not a study that complex mathematics or computer algorithms. It is rather a study to look at other traders use the same tools to understand what is happening in the market. Below is a list of the most used indicators, all of which will be discussed in the following lessons:
• Key Candlestick Patterns
• Fibonacci retracement
• moving averages
• RSI
• Stochastics
• MACD
• Bollinger Bands
While it may seem intimidating, technical analysis is actually quite simple - often much simpler than fundamental analysis. It requires only an abundance of the two qualities most needed for a successful trader: discipline and patience.
Different Time Frames
Technical analysis tools are valid at all times, but we recommend the daily charts for most of your analysis. Medium-term positions based on daily charts, tables an hour for the use of more precise entry points, have two advantages over short-term positions at 5 or 15 minutes charts. 1) The spread is less important for longer term position. 5 pips of a price target of 20 was a huge obstacle to overcome in the trade after trade. 5 pips from a 100 pip target is manageable. 2) longer term charts are statistically more reliable because they are based on more data.
Indicators have a higher degree of confidence on a daily chart than one hours 15 minutes chart or graph. Trading on a weekly or monthly chart would probably accurate from a technical standpoint than a daily chart would be, but a slower time frame means less accurate access, and the wider stops needed to chart a monthly trade are often outside the capacity many accounts. We recommend as a general rule, do not risk more than 2% of the balance of your account on a single trade, which is difficult with a monthly or weekly chart

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22 Jan 2010

A market order is an order to buy or sell a currency pair at the current market price. Thus the FX Trading Station will always show two prices for each currency pair - the price you can buy (also known as the questions), and the price you can sell (also known as the bid).A market order is an order to buy or sell a currency pair at the current market price. Thus the FX Trading Station will always show two prices for each currency pair - the price you can buy (also known as the questions), and the price you can sell (also known as the bid).
Thus the market price of EUR / USD at 1.2200 to 1.2205 - meaning traders can buy the EUR / USD at 1.2205, but would have to sell at 1.2200. These prices reflect the current market prices, and traders who choose to enter market orders would be filled at the rate they see. The main advantage of the market orders is that they provide the trader that he / she will function. The main drawback is that the trader is not the best price they could have been given had they used a different type.
Another drawback - and one often overlooked - is that market orders are more conducive to his reckless and without discipline used. Use with other tasks, such as stop and limit orders, are better suited for helping companies stay disciplined. Entry Orders

• Advantage: more likely that the trader gets the price he / she wants.

• Disadvantage: can not reach the market rate given the trader, and so the operator may miss the opportunity.

All orders are essentially conditional entry orders, they will only be filled if the market reaches the specified rate. Suppose you are trading USD / JPY and the current quote is 120,50-55. You can buy one item to at 120.15, for example, so your order will only be filled when the market reached 120.15. This you may receive a better price. There are two types of entry orders: limit entry orders and stop entry orders.

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What is the Margin?

If you supply a default cash account, you know that money must be deposited for the full amount of the position you are trading, or if you have a margin account for at least half of the position. This was in contrast to the FX market, where only a small percentage of the actual position value must be paid prior to entering the trade.
If you supply a default cash account, you know that money must be deposited for the full amount of the position you are trading, or if you have a margin account for at least half of the position. This was in contrast to the FX market, where only a small percentage of the actual position value must be paid prior to entering the trade.
This small deposit, known as the margin is not a deposit, but rather a performance bond or good faith deposit guarantee scheme to ensure against trading losses. The margin requirement allows traders to hold positions much larger than their account value. Margin requirements are as low as 1% (and as low as 0.5% on the mini-account), which means that for every standard lot size of 100,000 units, you must commit $ 1000. But, if you wanted a $ 100,000 check in the stock market, you would pay at least $ 50,000.
Even in the futures market, you should deposit at least $ 5000 for a $ 100,000 position control. On your trading station you can see that there are two types of margins: useful and used. You use margin is the amount of funds you have committed to existing positions, and your usable margin is the amount of money you have available to commit to new positions. Equity is your account balance plus or minus a floating profit or loss.
Suppose you open an account with $ 10,000. At the moment your balance and equity are both $ 10,000, your usable margin is $ 10,000 and you use margin is $ 0, as you have a box to place. Then buy 7 lots of USD / JPY, which you $ 7000 in equity to maintain. Buy your used margin is $ 7000 and your usable margin is $ 3000. This essentially means that the market losses of $ 3000 for your account falls below the required minimum margin of $ 7000, then the dealing desk closes all open positions can support. This automatic margin call feature prevents your account ever reach a negative balance.

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Remember To Control Your Risk

20 Jan 2010

Trading is about risk management first and then on making money. To make money, you must continue to lose control. This means that you reduce the amount you risk of each trade a "reasonable" amount.  To do this, you should use a stop loss order.  As a rule of thumb (do not you love that?), You should not risk more than 5% of your account value on any one trade. Let's do an example to drive this point home. Let's say you open an account with $ 10,000 and your broker margin requirement is 1%. As usual currency traded in lots (or pieces) of $ 100,000 (1 lot = $ 100,000), this means that for every $ 1000 in your account (1% of $ 100,000), you are able to trade 1 lot of $ 100,000. This also means that a $ 10,000 account, you can trade a maximum of 10 Parties ($ 1000 for each party). In real life, this amount of trade much is too risky. Let us use the equation to see why:  Max Lots = (Acct Size x% loss) / Stop Loss Price Let's assume that your% loss (or the maximum amount you are willing to risk per trade) is 5% and that your stop loss is 10 pips, or $ 100 (usually very active traders set a stop from 5 to 10 pips):  Max Lots = (10,000 x 0.05) / 100 = 5 plots This means that 10 lots is two times the maximum amount of lots you should trade. Even though I'm like 5% rule of thumb, in reality less this is even better. The lower the figure, the longer you remains in the game. If we would have done the above example with 1% (an amount commonly used by traders strict) instead of 5%, the maximum number of parties would have been 1 instead of 5.

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