Connect with us

Trading

CURRENCY MARKETS TECHNICAL ANALYSIS – LATEST TRENDS

Published

on

CURRENCY MARKETS TECHNICAL ANALYSIS – LATEST TRENDS 1

By Charis Mountis, Head of Dealing at ForexTime Limited

The currency markets have suffered through two major price shocks in as many months after December’s oil price crash, and January’s Swiss Franc surge against the Euro following the Swiss National Bank’s decision to remove the 1.20 CHF per Euro minimum exchange rate. Earthshaking volatility appears to have become the latest trend, but it’s not every trader that knows what to do in this situation. Therefore, it is an opportunity to take a look at trading during market shocks, and see how technical analysis can be best used during periods of high volatility.

During a sudden period of extreme volatility for an asset price, the usual support and resistance levels are most likely to be wiped out, so you might feel that you’re trading in a void because it’s so difficult to pinpoint entry and exit points. A return to the usual price range may take some time, so adapt to the new reality quickly by using a trading tool named the Average True Range (ATR), created by technical analysis innovator J. Welles Wilder.

The ATR tracks the difference between the high point and the low point of an asset price in a given period, and indicates the current level of volatility – high range or low range. Buying or selling signals can come from adding the ATR to the next day’s opening price and buying when the price moves above that level, or subtracting the ATR from the next day’s opening price and selling when the price moves below that level. Adding ‘stop losses’ to the trade is very important and not to be missed as part of your risk management strategy.

Charis Mountis

Charis Mountis

Wilder’s observation was that periods of low volatility – as between the Swiss Franc and Euro – would be followed by a period of high volatility. If you use this assumption as a rule for volatility, then the trigger itself doesn’t really matter – whether it’s a central bank’s decision or any other factor, the rule still holds that if there was low volatility in an asset’s price, the inevitable will happen and high volatility will follow.

Another factor to keep in mind is the knock-on effect, in which a sudden rise or fall in one asset has a knock-on effect on another linked asset, the most common example of this being Gold and the US dollar, which have an inverse relationship – when one rises, the other falls. When tracking volatility in one of these assets, it is always worth examining the volatility levels in the other, because more buy or sell signals could be available simply by understanding that a trend in one asset affects the other one.

When trading during volatile periods, it’s essential to remember that your risk management strategy is just as important as your trading strategy, even more so when the risks are higher – as they inevitably will be in periods of market shocks. Understanding your tolerance for risk is key for any trader.If you have low tolerance for risk, it’s better to stay out of these types of markets. Even those who have a high tolerance for risk must still be very careful and manage their exposure. A large market correction can take time to become the new norm, and this time can be used to take opportunities or simply to learn and watch how the market reacts to the new information. As markets tend to be cyclical, there’s always another turn of the wheel on its way. 

Disclaimer:The content in this article comprises personal opinions and ideas and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime Ltd, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Risk Warning:There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.

Trading

Factors That Affect the Direction of the Stock Market

Published

on

Factors That Affect the Direction of the Stock Market 2

A stock price represents the value of a particular stock of a particular entity, asset or another financial instrument. It is calculated by calculating the price per share of the stock at a particular price and period in time.

There are various factors that affect the direction of the stock market. These factors include interest rates and inflation rates as well as the state of the economy. If one of these factors is not in the favor of the stock market, then it could bring about a downfall of its value.

The stock prices are also affected by various stock indexes, which provide information on a particular company or industry. It helps to analyze the trends of the stock market and makes better decisions when buying and selling.

However, there are some major factors that can influence the performance of the stock market. One such factor is the state of the economy. The state of the economy refers to how well the economy is doing economically. If there is an economic decline in a particular country, then the state of the economy would be affected and the stock market would also take a hit.

Economic conditions can also affect the performance of the stock markets. For example, if the state of the economy is poor and the population is experiencing unemployment, then the economy will suffer and the stock prices will definitely take a hit.

Political turmoil can also bring about a negative effect on the stock markets because it affects the economic conditions and the way people relate to the government. When there is a lack of confidence in the state of the economy and people tend to sell off their stock at cheaper prices, the stocks of the company would suffer.

Another important factor that influences the direction of the stock market is the change in the global economy. It has been proven that the changes in the global economy are very large and it can affect the direction of the stock market in a major way. For example, during the global recession in 2020, the stock prices of many companies suffered a great deal and so did the profits of the company.

The most important thing that determines the direction of the stock market is the state of the economy and the state of the country in which the stock market is based. It is therefore, very important to invest in the stock market as a company that is in good condition. This is because it will help in ensuring the stability in the economy.

The price of the stock market is also affected by the political stability of the country in which the stock market is based. If there is a rise in the political instability, then the price of the stocks would surely go up. However, when the political stability improves, the prices of the stocks will definitely fall.

The factors that affect the direction of the stock market include the conditions in which the economy is doing. It is therefore, very important to have a good understanding of how the economic conditions in a certain country are progressing. This will help in making better investments.

There are certain countries that are very stable and these countries have a very high demand for the stocks of other countries. This means that people from those countries will invest in stocks of countries that are in good condition, and these investments will yield profits for them.

There are also certain countries that have very bad economic conditions and these countries have a very low demand for the stocks of other countries. These countries are also in need of investments and these investments will yield huge losses for them. Therefore, investing in these countries is not advised because these stocks will yield zero returns.

The stock markets are not stable unless there are good economic conditions prevailing in a country. This means that one has to know the economic condition of the country in order to make investments. Investing in the stock market is the best way to do this because investing will always yield returns, as long as the country in which one is investing is stable.

Continue Reading

Trading

How has the online trading landscape changed in 2020?

Published

on

How has the online trading landscape changed in 2020? 3

By Dáire Ferguson, CEO, AvaTrade 

This year has been all about change following the outbreak of coronavirus and the subsequent global economic downturn which has impacted nearly every aspect of personal and business life. The online trading world has been no exception to this change as volatility in the financial markets has soared.

Although the global markets have been on a rollercoaster for some time with various geopolitical tensions, the market swings that we have witnessed since March have undoubtedly been unlike anything seen before. While these are indeed challenging times, for the online trading community, the increased volatility has proven tempting for those looking to profit handsomely.

However, with the opportunity to make greater profits also comes the possibility to make a loss, so how has 2020 changed the online trading landscape and how can retail investors stay safe?

Lockdown boost

Interest rates offered by banks and other traditional forms of consumer investments have been uninspiring for some time, but with the current economic frailty, the Bank of England cut interest rates to an all-time low. This has left many people in search of more exciting and rewarding ways to grow their savings which is indeed something online trading can provide.

When the pandemic hit earlier this year, it was widely reported that user numbers for online trading rocketed due to disappointing savings rates but also because the enforced lockdown gave more people the time to learn a new skill and educate themselves on online trading.

Dáire Ferguson

Dáire Ferguson

A volatile market certainly offers great scope for profit and new sources of revenue for those that are savvy enough to put their convictions to the test. However, where people stand the chance to profit greatly from market volatility, there is also the possibility to make a loss, particularly for those that are new to online trading or who are still developing their understanding of the market.

The sharp rise in online trading over lockdown paired with this year’s unpredictable global economy has led to some financial losses, but with a number of risk management tools now available this does not necessarily have to be the case.

Protect your assets

Although not yet widely available across the retail market, risk management tools are slowly becoming more prevalent and being offered by online traders as an extra layer of security for those seeking to trade in riskier climates.

There are a range of options available for traders, but amongst the common tools are “take profit” orders in conjunction with “stop loss” orders. A take profit order is a type of limit order that specifies the exact price for traders to close out an open position for a profit, and if the price of the security does not reach the limit price, the take profit order will not be fulfilled. A stop loss order can limit the trader’s loss on a security position by buying or selling a stock when it reaches a certain price.

Take profit and stop loss orders are good for mitigating risk, but for those that are new to the game or who would prefer extra support, there are even some risk management tools, such as AvaProtect, that provide total protection against loss for a defined period. This means that if the market moves in the wrong direction than originally anticipated, traders can recoup their losses, minus the cost of taking out the protection.

Not a day has gone by this year without the news prompting a change in the financial markets. Until a cure for the coronavirus is discovered, we are unlikely to return to ‘normal’ and the global markets will continue to remain highly volatile. In addition, later this year we will witness one of the most critical US presidential elections in history and the UK’s transition period for Brexit will come to an end. The outcome of these events may well trigger further volatility.

Of course, this may also encourage more people to dip their toes into online trading for a chance to profit. As more people take an interest and sign up to online trading platforms, providers will certainly look to increase or improve the risk management tools on offer to try and keep new users on board, and this could spell a new era for the online trading world.

Continue Reading

Trading

Trading Strategies

Published

on

Trading Strategies 4

By Paddy Osborn, Academic Dean, London Academy of Trading

Whether you’re negotiating a business deal, playing a sport or trading financial markets, it’s vital that you have a plan. Top golfers will have a strategy to get around the course in the fewest number of shots possible, and without this plan, their score will undoubtedly be worse. It’s the same with trading. You can’t just open a trading account and trade off hunches and hopes. You need to create a structured and robust plan of attack. This will not only improve your profitability, but will also significantly reduce your stress levels during the decision-making process.

In my opinion, there are four stages to any trading strategy.

S – Set-up

T – Trigger

E – Execution

M – Management

Good trading performance STEMs from a structured trading process, so you should have one or more specific rules for each stage of this process.

Before executing any trades, you need to decide on your criteria for making your trading decisions. Should you base your trades off fundamental analysis, or maybe political news or macroeconomic data? If so, then you need to understand these subjects and how markets react to specific news events.

Alternatively, of course, there’s technical analysis, whereby you base your decisions off charts and previous price action, but again, you need a set of specific rules to enable you to trade with a consistent strategy. Many traders combine both fundamental and technical analysis to initiate their positions, which, I believe, has merit.

Set-up

What needs to happen for you to say “Ah, this looks interesting! Here’s a potential trade.”? It may be a news event, a major macro data announcement (such as interest rates, employment data or inflation), or a chart level breakout. The key ingredient throughout is to fix specific and measurable rules (not rough guidelines that can be over-ridden on a whim with an emotional decision). For me, I may take a view on the potential direction of an asset (i.e. whether to be long or short) through fundamental analysis, but the actual execution of the trade is always technical, based off a very specific set of rules.

To take a simple example, let’s assume an asset has been trending higher, but has stopped at a certain price, let’s say 150. The chart is telling us that, although buyers are in long-term control, sellers are dominant at 150, willing to sell each time the price touches this level. However, the uptrend may still be in place, since each time the price pulls back from the 150 level, the selling is weaker and the price makes a higher short-term low. This clearly suggests that upward pressure remains, and there’s potential to profit from the uptrend if the price breaks higher.

Trigger

Once you’ve found a potential new trade set-up, the next step is to decide when to pull the trigger on the trade. However, there are two steps to this process… finger on trigger, then pull the trigger to execute.

Paddy Osborn

Paddy Osborn

Continuing the example above, the trigger would be to buy if the price breaks above the resistance level at 150. This would indicate that the sellers at 150 have been exhausted, and the buyers have re-established control of the uptrend.  Also, it is often the case that after pause in a trend such as this, the pent-up buying returns and the price surges higher. So the trigger for this trade is a breakout above 150.

Execution

We have a finger on the trigger, but now we need to decide when to squeeze it. What if the price touches 150.10 for 10 seconds only? Has our resistance level broken sufficiently to execute the trade? I’d say not, so you need to set rules to define exactly how far the price needs to break above 150 – or for how long it needs to stay above 150 – for you to execute the trade. You’re basically looking for sufficient evidence that the uptrend is continuing. Of course, the higher the price goes (or the longer it stays above 150), the more confident you can be that the breakout is valid, but the higher price you will need to pay. There’s no perfect solution to this decision, and it depends on many things, such as the amount of other supporting evidence that you have, your levels of aggression, and so on. The critical point here is to fix a set of specific rules and stick to those rules every time.

Management

Good trade management can save a bad trade, while poor trade management can turn an excellent trade entry into a loser. I could talk for days about in-trade management, since there are many different methods you can use, but the essential ingredient for every trade is a stop loss. This is an order to exit your position for a loss if the market doesn’t perform as expected. By setting a stop loss, you can fix your maximum risk on a trade, which is essential to preserving your capital and managing your overall risk limits. Some traders set their stop loss and target levels and let the trade run to its conclusion, while others manage their trades more actively, trailing stop losses, taking interim profits, or even adding to winning positions. No matter how you decide to manage each trade, it must be the same every time, following a structured and robust process.

Review

The final step in the process is to review every trade to see if you can learn anything, particularly from your losing trades. Are you sticking to your trading rules? Could you have done better? Should you have done the trade in the first place? Only by doing these reviews will you discover any patterns of errors in your trading, and hence be able to put them right. In this way, it’s possible to monitor the success of your strategy. If your trades are random and emotional, with lots of manual intervention, then there’s no fixed process for you to review. You also need to be honest with yourself, and face up to your bad decisions in order to learn from them.

In this way, using a structured and robust trading strategy, you’ll be able to develop your trading skills – and your profits – without the stress of a more random approach.

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2020
2020 Global Banking & Finance Awards now open. Click Here

Latest Articles

How NatWest used social media to better target its communications 5 How NatWest used social media to better target its communications 6
Business5 mins ago

How NatWest used social media to better target its communications

By DuBose Cole, Head of Strategy, VaynerMedia London For banks, it is imperative to reach their existing – and potential...

It’s time to press ‘reset’ on travel and expense processes 7 It’s time to press ‘reset’ on travel and expense processes 8
Finance11 mins ago

It’s time to press ‘reset’ on travel and expense processes

By Rudy Daniello, EVP of Corporations, Amadeus Travel & Expenses(T&E) is a large spend category for companies across the globe....

Covid-19 and the rise of remote payment fraud: how do we catch a digital thief? 9 Covid-19 and the rise of remote payment fraud: how do we catch a digital thief? 10
Finance23 mins ago

Covid-19 and the rise of remote payment fraud: how do we catch a digital thief?

By Evgenia Loginova, co-founder and co-CEO of Radar Payments Covid -19 is finding different ways to hurt our finances –...

Seven easy ways to maximise online sales by expanding your marketplaces 11 Seven easy ways to maximise online sales by expanding your marketplaces 12
Finance34 mins ago

Seven easy ways to maximise online sales by expanding your marketplaces

By Nate Burke, CEO and Founder of Diginius, a UK provider of proprietary software for digital marketing and ecommerce solutions, shares...

Effective financial planning will secure businesses a certain future 13 Effective financial planning will secure businesses a certain future 14
Business47 mins ago

Effective financial planning will secure businesses a certain future

By Simon Bittlestone, CEO of financial analytics company Metapraxis 2020 has been an unpredictable year, bringing further volatility to already...

The Bank is Where the Heart Is 15 The Bank is Where the Heart Is 16
Banking58 mins ago

The Bank is Where the Heart Is

By Nick Barnes, Practice Director, Financial Services & Customer Success at JRNI When unexpected events occur, people turn to their banks to...

Will COVID-19 accelerate the transition to banking alternatives  17 Will COVID-19 accelerate the transition to banking alternatives  18
Banking1 hour ago

Will COVID-19 accelerate the transition to banking alternatives 

By Gael Itier – CEO & Founder at akt.io The COVID-19 crisis has led us to witness what will be...

Using payments to streamline everyday transport 19 Using payments to streamline everyday transport 20
Top Stories1 hour ago

Using payments to streamline everyday transport

By Venceslas Cartier, Global Head of Transportation & Smart Mobility at Ingenico Enterprise Retail Once upon a time the only...

WeWALK joins Microsoft’s AI for Accessibility Programme Using artificial intelligence to change the lives of the visually impaired  21 WeWALK joins Microsoft’s AI for Accessibility Programme Using artificial intelligence to change the lives of the visually impaired  22
Technology6 hours ago

WeWALK joins Microsoft’s AI for Accessibility Programme Using artificial intelligence to change the lives of the visually impaired 

WeWALK, the smart cane designed for people who are blind or with low vision which is now in use across...

Adoption of tech in private markets lags behind industry trends 23 Adoption of tech in private markets lags behind industry trends 24
Business22 hours ago

Adoption of tech in private markets lags behind industry trends

Nine out of ten financial institutions have accelerated their digitisation strategy as a result of Covid-19. Yet just 26% of...

Newsletters with Secrets & Analysis. Subscribe Now