Connect with us

Trading

FOREX CHARTING THE EASY WAY

Published

on

Forex-Charting-the-Easy-Way

Traders have deployed various methods over the years to help them predict the movement of financial instruments. Forex charts are a very useful trading tool that facilitates individuals to conduct technical analysis, as well as fundamental analysis with great success. Charting tools enable traders to view historical data on price movements, pinpoint trends and identify key price points to enter and exit a trade.

On this article, we look at the Forex charts essentials, so we can read the various types of charts and identify trend lines.

What is a Forex chart?

A Forex chart is a graphical depiction of historical market moves within a given timeframe. There are various types of charts available for traders to use. Their aim is to assist traders to form a market overview, provide for better forecasting and spot the market’s patterns and behaviour.

Forex charts are beneficial for both technical and fundamental traders. The technical trader concentrates on the actual advent of events by reading common chart patterns, whereas the fundamental trader attempts to analyse the association between trends detectable on the chart and macro events, such as interest rates, inflation, employment, economic growth and political risk.

Which are the most important types of charts?

  • Line Chart

A line chart is the most basic type of chart used in Forex. It is formed by connecting the points, representing the closing rates of the instrument, over a time frame together with a homogeneous line. This form of chart offers the simplest way to chart the resistance and support levels. A line chart can give a trader a fairly good idea of where the price of a financial instrument has travelled over an interval of time, as it provides a panoramic overview of the overall trend. As the closing prices are frequently seen as the most significant ones to keep track of, it is not hard to see why line charts have become so widely-used.

FOREX CHARTING THE EASY WAY 9

  • Bar Chart

A bar chart is highly popular among the Forex world. In addition to the closing rate, each bar indicates the opening rate, as well as the high and low of the session in order to see the strength of a movement. The bar chart is formulated by a series of vertical lines that represent each data point. The top of the vertical line shows the highest price an instrument traded at during the day, while the bottom line indicates the lowest price. The closing and opening prices are represented on the vertical line by two horizontal dashes. The opening price is displayed with the dash on the left side of the vertical line, while the closing price is represented with the dash on the right side.

In general, if the left dash (opening price) is lower than the right dash (closing price), then the bar will be shaded black, indicating an up period for the instrument, meaning that it has gained value. Conversely, when the right dash (closing) is lower than the left dash (opening), it marks that the asset has fallen in value over that period. When looking at a daily chart/15 minute chart, each bar indicates one day/15 minute period of trading activity. This visual depiction of price activity over a certain timeframe provides detailed information of the price movement and it is used to pinpoint trends and patterns.

FOREX CHARTING THE EASY WAY 10

  • Candlestick Chart

Candlestick charts have been used for around 300 years and present a wealth of information over a small amount of time. Similar to the bar chart, the candlestick chart represents the opening, closing, high and low prices of an instrument for a selected time period. The wide part of the candle is called the “real body” and it shows the range between the opening and closing prices of the period’s trading. A transparent body dictates that the session closed higher than the open price (bullish). A filled in body means that the session closed below the open price (bearish).

Just above and below the real body are the “shadows”. Traders think of them as the wicks of the candle and they indicate the day’s high and low. When the upper shadow on a bearish day is short it means that the opening price was closer to the high of the day. A short upper shadow on a bullish day means that the closing price was near the high. The shapes of the candlesticks differ according to the relationship between the day’s high, low, opening and closing rates.

Candlestick charts are used to identify when to enter and exit a trade. By viewing a series of candlesticks, you are also able to see another crucial concept of charting: the trend.

FOREX CHARTING THE EASY WAY 11

What is a trend?

 A trend is the main direction in which a financial instrument is headed towards. Usually, prices trend in a sequence of progressively moving highs and lows. There are three types of trends; uptrend (bull market), downtrend (bear market) or sideways (range bound market). An uptrend is a sequence of rising high and low points, a downtrend is a sequence of declining low and high points, while sideways trend arises when there is negligible shift up or down.

In conjunction with the three types of trends, there are also three trend lengths that relate with the time interval in which the trend occurs. A term of any trend can be categorised as long-term, intermediate or short-term. A long-term trend consists of various intermediate trends, while short-term trends form intermediate and long-term trends.

Trend lines are used to assist traders to visually acknowledge which trend direction is in place. Until the trend is broken, traders can logically anticipate the trend to continue. Trend lines can also be used in identifying trend reversals. A trend reversal occurs when each successive high or low falls below or climbs above the previous point of the trend.

Drawing a trend line is simply drawing a straight line that connects two or more extreme highs or lows that follow the generic trend. An upward trend line connects the low points of an upward trend. This will indicate the support level where the price tends to find support as it is moving down. This means that the price is likely to bounce off this level rather than break through it. A downward trend line, on the other hand, connects the high points of a downward trend. This will dictate where the price tends to find resistance as it is going up. Similarly, this means that the price is more likely to bounce off this level, rather than break through it.

FOREX CHARTING THE EASY WAY 12

Fig. 4 Upward Trend Line – Support Level                            Fig. 5 Downward Trend Line – Resistance Level

 It is imperative that you know how to read charts and identify trends in order to form a successful Forex trading strategy and consistently profit in financial markets.

Trading

How has the online trading landscape changed in 2020?

Published

on

How has the online trading landscape changed in 2020? 13

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 14

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

Trading

Economic recovery likely to prove a ‘stuttering’ affair

Published

on

Economic recovery likely to prove a ‘stuttering’ affair 15

By Rupert Thompson, Chief Investment Officer at Kingswood

Equity markets continued their upward trend last week, with global equities gaining 1.2% in local currency terms. Beneath the surface, however, the recovery has been a choppy affair of late. China and the technology sector, the big outperformers year-to-date, retreated last week whereas the UK and Europe, the laggards so far this year, led the gains.

As for US equities, they have re-tested, but so far failed to break above, their post-Covid high in early June and their end-2019 level. The recent choppiness of markets is not that surprising given they are being buffeted by a whole series of conflicting forces.

Developments regarding Covid-19 as ever remain absolutely critical and it is a mixture of bad and good news at the moment. There have been reports of encouraging early trial results for a new treatment and potential vaccine but infection rates continue to climb in the US. Reopening has now been halted or reversed in states accounting for 80% of the population.

We are a long way away from a complete lockdown being re-imposed and these moves are not expected to throw the economy back into reverse. But they do emphasise that the economic recovery, not only in the US but also elsewhere, is likely to prove a ‘stuttering’ affair.

Indeed, the May GDP numbers in the UK undid some of the optimism which had been building recently. Rather than bouncing 5% m/m in May as had been expected, GDP rose a more meagre 1.8% and remains a massive 24.5% below its pre-Covid level in February.

Even in China, where the recovery is now well underway, there is room for some caution. GDP rose a larger than expected 11.5% q/q in the second quarter and regained all of its decline the previous quarter. However, the bounce back is being led by manufacturing and public sector investment, and the recovery in retail sales is proving much more hesitant.

China is not just a focus of attention at the moment because its economy is leading the global upturn but because of the increasing tensions with Hong Kong, the US and UK. UK telecoms companies have now been banned from using Huawei’s 5G equipment in the future and the US is talking of imposing restrictions on Tik Tok, the Chinese social media platform. While this escalation is not as yet a major problem, it is a potential source of market volatility and another, albeit as yet relatively small, unwelcome drag on the global economy.

Government support will be critical over coming months and longer if the global recovery is to be sustained. This week will be crucial in this respect for Europe and the US. The EU, at the time of writing, is still engaged in a marathon four-day summit, trying to reach an agreement on an economic recovery fund.  As is almost always the case, a messy compromise will probably end up being hammered out.

An agreement will be positive but the difficulty in reaching it does highlight the underlying tensions in the EU which have far from gone away with the departure of the UK. Meanwhile in the US, the Democrats and Republicans will this week be engaged in their own battle over extending the government support schemes which would otherwise come to an end this month.

Most of these tensions and uncertainties are not going away any time soon. Markets face a choppy period over the summer and autumn with equities remaining at risk of a correction.

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 can financial services firms keep pace with escalating requirements? 16 How can financial services firms keep pace with escalating requirements? 17
Top Stories2 mins ago

How can financial services firms keep pace with escalating requirements?

By Tim FitzGerald, UK Banking & Financial Services Sales Manager, InterSystems Financial services firms are currently coming up against a...

What Investors are Looking for in the Next Fintech 18 What Investors are Looking for in the Next Fintech 19
Investing6 mins ago

What Investors are Looking for in the Next Fintech

By Shaun Puckrin, Chief Product Officer, Global Processing Services Are investors getting pickier when it comes to fintech? It’s hard...

How payments can help streamline operations and boost customer satisfaction in the vending industry 20 How payments can help streamline operations and boost customer satisfaction in the vending industry 21
Finance14 mins ago

How payments can help streamline operations and boost customer satisfaction in the vending industry

By Darren Anderson, Business Development Manager, Self Service, Ingenico Enterprise Retail The COVID-19 pandemic has had an astounding impact on...

How virtual training is changing the game in remote learning 22 How virtual training is changing the game in remote learning 23
Business23 mins ago

How virtual training is changing the game in remote learning

By Aris Apostolopoulos, Senior Content Writer at TalentLMS and a faithful follower of the eLearning mentality. Along with the latest...

Businesses need to prepare for Brexit transition now 24 Businesses need to prepare for Brexit transition now 25
Business1 hour ago

Businesses need to prepare for Brexit transition now

THE Brexit process has been marred by uncertainty and it still remains unclear what our future relationship with the EU,...

How to maximise your virtual communications for effective team meetings 26 How to maximise your virtual communications for effective team meetings 27
Business1 hour ago

How to maximise your virtual communications for effective team meetings

By Tony Hughes, CEO at Huthwaite International leading global provider of sales, negotiation and communication skills development, shares advice on...

Business and data - building better operations 28 Business and data - building better operations 29
Business1 hour ago

Business and data – building better operations

By Bryan Kirschner, Vice President Strategy, DataStax Building your business on data. What have we learned so far? Coming into...

REIT Trends: Innovative Data Strategies for Better Investments 30 REIT Trends: Innovative Data Strategies for Better Investments 31
Investing2 hours ago

REIT Trends: Innovative Data Strategies for Better Investments

By Josh Miramant, CEO and founder of Blue Orange Digital Data transformation is this decade’s differentiator for REITs (Real Estate Investment...

Financial transformation is the new digital transformation 33 Financial transformation is the new digital transformation 34
Technology2 hours ago

Financial transformation is the new digital transformation

By Luke Fossett, ANZ Head of Sales for global recurring payments platform, GoCardless The term ‘digital transformation’ has become somewhat...

RegTech 2020: Exploring financial crime and the emergence of RegTech in the USA 35 RegTech 2020: Exploring financial crime and the emergence of RegTech in the USA 36
Technology3 hours ago

RegTech 2020: Exploring financial crime and the emergence of RegTech in the USA

with host, Alex Ford, VP Product and Marketing, Encompass, and guests, Dr Henry Balani, Head of Delivery, Encompass; Pawneet Abramowski,...

Newsletters with Secrets & Analysis. Subscribe Now