Since the early 1970s, with increasing internationalization of financial transactions, the foreign exchange market has been profoundly transformed, not only in size, but in coverage, architecture, and mode of operation. That transformation is the result of structural shifts in the world economy and in the international financial system. Among the major developments that have occurred in the global financial environment are the following.
Price indicators
Relative St rength Index (RSI): The RSI measures t he rat io of up-moves t o down-moves and normalizes t he calculat ion, so t hat t he index is expressed in a range of 0-100. If t he RSI is 70 or great er, t hen t he inst rument is assumed t o be overbought (a sit uat ion in which prices have risen more t han market expect at ions). An RSI of 30 or less is t aken as a signal t hat t he inst rument may be oversold (a sit uat ion in which prices have fallen more t han t he market expect at ions).
St ochast ic oscillat or: This is used t o indicat e overbought / oversold condit ions on a scale of 0-100%. The indicat or is based on t he observat ion t hat in a st rong up-t rend, period closing prices t end t o concent rat e in t he higher part of t he period's range. Conversely, as prices fall in a st rong down-t rend, closing prices t end t o be near t he ext reme low of t he period range. St ochast ic calculat ions produce t wo l ines, %K and %D, t hat are used t o indicat e overbought / oversold areas of a chart . Divergence bet ween t he st ochast ic l ines and t he price act ion of t he underlying inst rument gives a powerful t rading signal.
St ochast ic oscillat or: This is used t o indicat e overbought / oversold condit ions on a scale of 0-100%. The indicat or is based on t he observat ion t hat in a st rong up-t rend, period closing prices t end t o concent rat e in t he higher part of t he period's range. Conversely, as prices fall in a st rong down-t rend, closing prices t end t o be near t he ext reme low of t he period range. St ochast ic calculat ions produce t wo l ines, %K and %D, t hat are used t o indicat e overbought / oversold areas of a chart . Divergence bet ween t he st ochast ic l ines and t he price act ion of t he underlying inst rument gives a powerful t rading signal.
Charts and diagrams
Forex chart s are based on market act ion involving price. Chart s are maj or t ools in Forex t rading. There are many kinds of chart s, each of which helps t o visually analyze market condit ions, assess and creat e forecast s, and ident if y behavior pat t erns.
Most chart s present t he behavior of currency exchange rat es over t ime. Rat es (prices) are measured on t he vert ical axis and t ime is shown of t he horizont al axis.
Chart s are used by bot h t echnical and fundament al analyst s. The t echnical analyst analyzes t he “ micro” movement s, t rying t o mat ch t he act ual occurrence wit h known pat t erns. The fundament al analyst t ries t o f ind correlat ion bet ween t he t rend seen on t he chart and “ macro” event s occurring parallel t o t hat (polit ical and ot hers).
What is an appropriat e t ime scale t o use on a chart ?
It depends on t he t rader’ s st rat egy. The short -range invest or would probably select a day chart (unit s of hours, minut es), where t he medium and long- range invest or would use t he weekly or mont hly chart s. High resolut ion chart s (e. g. – minut es and seconds) may show “ noise” , meaning t hat wit h f ine det ails in view, it is somet imes harder t o see t he overall t rend.
The maj or t ypes of chart s:
Most chart s present t he behavior of currency exchange rat es over t ime. Rat es (prices) are measured on t he vert ical axis and t ime is shown of t he horizont al axis.
Chart s are used by bot h t echnical and fundament al analyst s. The t echnical analyst analyzes t he “ micro” movement s, t rying t o mat ch t he act ual occurrence wit h known pat t erns. The fundament al analyst t ries t o f ind correlat ion bet ween t he t rend seen on t he chart and “ macro” event s occurring parallel t o t hat (polit ical and ot hers).
What is an appropriat e t ime scale t o use on a chart ?
It depends on t he t rader’ s st rat egy. The short -range invest or would probably select a day chart (unit s of hours, minut es), where t he medium and long- range invest or would use t he weekly or mont hly chart s. High resolut ion chart s (e. g. – minut es and seconds) may show “ noise” , meaning t hat wit h f ine det ails in view, it is somet imes harder t o see t he overall t rend.
The maj or t ypes of chart s:
Online training, no downloads
Easy-Forex™ is dedicat ed t o educat ing it s cust omers. Cust omers can access FREE one-on-one online t raining. The t raining goal is t o t each people specific st rat egies for t rading currencies over t he int ernet . Bot h novice invest ors and expert day t raders have benefit ed f rom t he t raining provided by Easy-Forex™.
The “ demo” account idea
Many Forex plat forms of fer new regist rant s a “ demo” account . A t ypical example would provide 10, 000 “ demo” dollars t hat can be “ t raded” as a means of learning how t o succeed in Forex.
Easy-Forex™ does not of fer “ demo” account s. Coming t o underst and t hat reason must rule over emot ion is t he most import ant lesson a t rader can learn, and it cannot be done wit h play money. If t here is no consequence t o indulging in emot ional responses t o t he market , t here is no learning, so “ demo” account s t end t o have l it t le educat ional value. Rat her, Easy-Forex™ allows you t o st art t rading wit h j ust $100, including full access t o one-on-one t raining. New regist rant s are t hus able t o garner bot h an educat ional and experient ial benefit unavailable t hrough simulat ed sit uat ions.
Day Trading On a Forex Platform
(example, using the Easy-Forex platform
Step1: Deciding to perform a Forex deal
You have an intention to trade Forex, and you have your own reasoning for doing so - e.g. you feel that the USD will increase compared with the EUR. The EUR/USD exchange rate is, at the time, around 1.5000 (the common presentation of the Euro-US$ pair is EUR/USD, meaning 1.5000 US dollars for 1 Euro). Your feeling can be based on your experience, or on technical analysis, or fundamental analysis, etc. For whatever reason, you belive that the USD will rise to around 1.4850 (EUR willbe down, which means USD will go up. Or you will need less USD for 1 euro). You want to profit if your forecast is correct, and so choose to make a trade.
Step1: Deciding to perform a Forex deal
You have an intention to trade Forex, and you have your own reasoning for doing so - e.g. you feel that the USD will increase compared with the EUR. The EUR/USD exchange rate is, at the time, around 1.5000 (the common presentation of the Euro-US$ pair is EUR/USD, meaning 1.5000 US dollars for 1 Euro). Your feeling can be based on your experience, or on technical analysis, or fundamental analysis, etc. For whatever reason, you belive that the USD will rise to around 1.4850 (EUR willbe down, which means USD will go up. Or you will need less USD for 1 euro). You want to profit if your forecast is correct, and so choose to make a trade.
Fundamental Analysis
Fundamental analysis is a method of forecasting future price movements of a financial instrument based on economic, political, environmental and other relevant factors, as well as data that will affect the basic supply and demand of whatever underlies the financial instrument. In practice, many market players use technical analysis in conjunction with fundamental analysis to determine their trading strategy. One major advantage of technical analysis is that experienced analysis can follow many markets and market instruments, whereas the fundamental analysis focuses on what ought to happen in a market. Among the factors considered are; supply and demand; seasonal cycles; weather; govemment policy.
Technical Analysis
Technical analysis and fundamental analysis
This chapter and the next one provide insight into the two major methods of analysis used to forecast the behavior of the Forex market. Technical analysis and fundamental analysis differ greatly, but both can be useful forecasting tools for the Forex trader. They have the same goal - to predict a price or movement. The technician studies the effect, while the fundamentalist studies the causes of market movements.
Training for success
Overview of trading Forex online
How a Forex system operates in real time
Online foreign exchange trading occurs in real time. Exchange rates are constantly changing, in intervals of seconds. Quotes are accurate for the time they are displayed only. At any moment a different rate may be quoted. When a trader locks in a rate and executes a transaction, that transaction is immediately processed; the trade has been executed.
Up-to-date exchange rates
As rates change so rapidly , any Forex software must display the most up-to-date rates. To accomplish this, the Forex software is continuously communicating with a remote server that provides the most current exchange rates. The rates quoted , inlike traditional bank exchange rates, are actual tradable rates. A trader may choose to "lock in" to a rate (called the "freeze rate") only as long as it is displayed.
Online foreign exchange trading occurs in real time. Exchange rates are constantly changing, in intervals of seconds. Quotes are accurate for the time they are displayed only. At any moment a different rate may be quoted. When a trader locks in a rate and executes a transaction, that transaction is immediately processed; the trade has been executed.
Up-to-date exchange rates
As rates change so rapidly , any Forex software must display the most up-to-date rates. To accomplish this, the Forex software is continuously communicating with a remote server that provides the most current exchange rates. The rates quoted , inlike traditional bank exchange rates, are actual tradable rates. A trader may choose to "lock in" to a rate (called the "freeze rate") only as long as it is displayed.
What is the global Forex market?
The main attractions of short-term currency trading to private investors are:
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