Indicators: types and application on Forex

August 25th, 2010

In order to make profit on the international foreign exchange market, a trader needs to constantly monitor price movements, in accordance with which he decides whether to buy or sell the currency. Various indicators are of great help in defining price fluctuations.

Indicators are graphically represented mathematical formulae, based on the data about price fluctuations and trade volume changes. They are aimed at showing the current price movement, signaling the price hitting significant levels and, under certain conditions, specifying these areas. There is no 100% accurate indicator though.

Many indicators have been offered for now. You can download and test them for free and thus select the one which would suit your trading style best. The indicators differ in the methods of price analysis.

The base is constituted of a certain period of time and price dynamics within the period. The analysis is carried out with application of several absolute and temporary parameters. The figures are then compared to price values – maximum, minimum, average ones – to traders’ activity on the market and many other market factors. The result received is a definite rate of the expected price movement, to which a trader is targeted. The value is demonstrated on charts as a combination of multicolor zones, lines and points. This is what most indicators look like.

Traders often tend to use several indicators in their work. There are 3 major groups of indicators:

  1. Trend indicators, showing price movements; defining the current and expected trend simultaneously or with a little lag;
  2. Oscillators, depicting the prolongation or change of the trend in advance or synchronically;
  3. Psychological indicators, which determine the sentiment of the market participants.

The indicators’ diagrams can be either extracted to a separate window or integrated into the price chart in MT4 terminal. You can use several indicators at the same time to make more accurate forecasts of further price movement.

At present, MT4 trading platform offers a wide range of integrated indicators.

Added by Tatyana Makhina,
InstaForex Clients’ relationship manager

Tags: , ,
Posted in Trading | No Comments »

Specifics of futures trading

July 28th, 2010

The financial market consists of different markets, for example futures market.

The futures trading allows traders to use the capital more efficiently and to increase profit on each profitable deal. The futures contracts make it possible to decrease considerably the potential risks and to protect the positions against losses.

What are futures and how to trade futures?

A futures contract is an agreement between two parties, according to which both parties agree to settle a bargain by a certain date in future. One of the parties undertakes to sell the asset specified in the contract and another party obliges to buy it. Entering into a contract, neither party pays.

Trading futures contracts has a number of advantages. The first is that the trader does not have to pay the full cost of a contract, he/she only makes so-called security deposit. As a rule the security deposit is about 5-10% of value of a contract. You can find the value of the security deposit at the web-site of the stock exchange, on which the futures is traded. Thus, the leverage is formed, for the use of which it is not needed to pay, as it is done in stock trading.

Another advantage of the futures contracts trading consists in low transaction costs. The futures trading allows to use different strategies in order to advance the possible profit and to hedge risks.

The futures trading has two approaches:

- closing of the open positions until the expiration of a futures contract
- delivery of an asset before the expiration of a futures contract

There are several types of futures contracts:

- Commodity futures, assumes that the buyer has to buy and the seller to sell the underlying item of the contract at a set date.

- Financial futures, assumes that only cash settlements are made between participants in the amount to the difference between the contract price and the actual price of the underlying asset when the contract expires without the physical delivery. This type of a contract is used for hedging against the risks.

How to trade futures?

The futures contract trading slightly differs from the trading on the international currency market Forex. The technical and fundamental analysis, same charts and indicators are used on the futures market. However, the futures market has a number of distinctions from Forex market. On Forex market the position can be opened for months or even years, but the futures contract has the specific closing date. If it is not closed by you, then it will be closed forcibly.

The abbreviation of futures contract consists of several parts. The first symbols point to the item (gold, oil, Dow index); next symbols indicate the month and year of futures delivery.

Generally accepted designation of the month in futures contract:

Month Code
January F
February G
March H
April J
May K
June M
July N
August Q
September U
October V
November X
December Z

Also during the futures trading you pay the spread (the difference between the bid price and ask price) as well as the commission. The amount of the commission is stated in the specification of futures contracts.

Futures trading is carried out on the futures exchanges, the well-known futures markets are:
- New York Mercantile Exchange, NYMEX, NMX
- Chicago Board of Trade, CBOT, CBT
- Chicago Mercantile Exchange, CME
- International Petroleum Exchange, IPE
- London International Financial Futures Exchange, LIFFE
- London Metals Exchange, LME

InstaForex Company offers its clients a possibility to trade CFD for the futures. At present over twenty of such-like trading instruments are at our clients’ disposal. At the page of the contracts specification of the company’s official website you can find out more about the futures.

Added by Alexey Skachilov,
InstaForex Clients’ relationship manager

Tags: , ,
Posted in Trading | 1 Comment »