Archive for the "Important Announcements" Category

Elliot Wave theory was developed and popularized by Ralph Nelson Elliot in the beginning of the 20th century. Yet, traders stay vague about this theory. Some are absolutely sure about its efficiency; the others do not think so. Nonetheless, nowadays this method is very popular, while Elliot Waves are the key instruments for many traders. Moreover, Elliot theory is considered to be the basis of technical analysis on Forex.
According to Elliot, crowd behavior is cyclic and has an ordered system. The term «crowd behavior» is applicable to Forex society, for this reason trading is affected by some patterns as well as prices are affected by traders’ reactions to outside influences. Elliot discovered the following emotional chain which is true for both traders and prices: expansion – enthusiasm – euphoria – recession – depression.
Thus, the price movements can be represented on the chart within 5 waves, three of which are impulsive moving with the trend, while two of them are corrective moving against it. As a rule they are marked as 1, 2, 3, 4, and 5 on the chart. When the price action is down, it is possible to observe a pullback which is labeled on the chart as A, B, and C waves.

In order to maximize the profit, it is better to follow these rules:

  • the longer the impulsive waves are, the longer the corrective ones are
  • it is very important to distinguish the corrective waves from the impulsive ones before opening a position.

Wave identification is one of the most important and at the same time very complicated stages of wave analysis. If you have succeeded in identifying these waves, you have already gained half of the success. The one thing left to do is to take a potentially profitable wave and close the trade on time.
Good luck with trading!

Added by Andrey Misyuk,
InstaForex Clients’ relationship manager

Markets are designed to allow individuals to look after their private needs and to pursue profit. It’s really a great invention and I wouldn’t under-estimate the value of that, but they’re not designed to take care of social needs.” -George Soros

Forex Trading is really a profitable job and it is undoubtedly capable to continuously sustain the every need of an individual. A work without a boss to stress you and only self-will to drive you. Free knowledge is abundant on the world wide web and a hands-on education using the Demo account is supplied for free by your self-researched chosen broker.

A little capital will suffice for an aspiring trader to fire up an engine and start trading. Cent accounts are at the disposal for an individual to experience the real thing. And once confident and capable enough, a trader may jump into the currency market to try their luck by opening a Live account.

After omitting mistakes and learning from it in the process, we all hope to win trades consistently.
Once the hardships are conquered and our trading goals are achieved, with the help of our self-devised strategy, profit would start to flow.

But once we reached all of this, we might ask ourselves “Am I happy?” some might say yes but unfortunately some might say no. Those who replied the latter would start to reminisce the process that the they had gone through. Some of the question that might pop-up would be “Are there sacrifices made on the process?”. Unfortunately relationships are the usual casualty of this scenario, some are damaged and some are even broken beyond repair.

Most of the time, because of our indomitable will to succeed in trading, we lose sight on the things that are most important. So my advise to those who wants to venture in this career, “Work to live and not live to work”. Good day and happy trading.

Have you ever played Charade? Charade is a popular party game usually played during office occasions or even in family gatherings. Even though it doesn’t require critical thinking, you need to be able-enough to process the signals that your partner is acting out. The challenge of this game is to understand the message without even saying a single word. Careful analysis and paying keen attention to details is the key in winning the game. A similar situation is also done in Forex.

Traders does not trade blindly with just their instincts to aid them. They analyze the situation. Ideally traders catch the indications on where the wind is blowing and analyze it in order to serve as a favorable guide for their strategy. There are two ways in analyzing the situation, namely Fundamental and Technical analysis.

The concept of technical analysis is based on the statement that the relation between demand and supply represented in the price chart is complied with rules of mathematics.

There are three general principles under Technical analysis:

1. Look at the price!

The price should always be the center of your analysis. Although changes in the price consist of many factors such as political, economical, and psychological factors we should not be distracted by all of this things. Our main focus should still be on the supply and demand of the currency that we are trading.

2. Understand the trend

Before using it to our advantage, we should understand it first. There are three types of trend; Bullish, Bearish, and Flat.

Bullish means that the price is moving in an uptrend.

Bearish means the price is on moving in a downtrend.

Flat means when there is no price movement.

3. History repeats itself

No matter what happens, the way you analyze it would always be the same. The tools that you would use to analyze the market a month before would also be the tools that you would use today. The main tools are as follows: Oscillators, Japanese candlesticks, Bar char (intervals) , Line char, Trend indicators, and Wave analysis.

Contrary to the Technical analysis, is the Fundamental analysis. It says that economic news, either financial or political, would directly or indirectly affect the currency market. Elections, economical reforms, undertaking of international agreements etc. are some of the common news.

GNP, GDP, inflation rate, unemployment rate, CPI and PPI indexes, commodity and industrial price index, trade balance and balance payment are the most significant indicators that would most likely affect how the currencies behave most especially the main ones.

The GNP reflects how well a country’s economic status is doing. Consumption, investments, government expenditures, import and export rate are the main components that determines GDP. A high GNP rate indicates a good economic climate that in turn attract foreign investors thus strengthening the demand for the currency.

On the other end, the Unemployment rate determines how bad the economic climate is. Inflation would turn off the investors thus lowering the demand for that particular currency.

Aside from the former two; natural disasters and calamities, terrorist attacks, and other unpredictable occurrences could also affect currency movement.

Whenever mountaineers hike through unfamiliar treks, especially if the situation requires them to climb through dangerous mountain walls, there are tools that they use in order to ensure their safety.

Harness are used to secure themselves from unintentional slips that would put them to mortal danger. In Forex, traders also has this kind of tools. One of which is the Stop Loss.

Stop Loss is an order that is intended to close an opened position when a certain amounts of loss is accrued. Stop loss is designed to limit and restrict an investor’s loss when something negative happened suddenly on the market. There are 3 types of Stop Loss order:

1. Fixed Stop Loss – are set while opening a position and cannot be replaced until the deal is closed.

2. Sliding Stop Loss – is a Stop Loss that can be replaced any time depending on the price movement. It is on the traders discretion and advantage if he thinks that there’s a need for a sudden change in the order. Sliding Stop Loss is also known as Trailing stop, which can be replaced either manually or automatically depending on the setting.

3. Combined Stop Loss – is the combination of the former two.

There had been recent discussions regarding the importance of Stop Loss. Some traders pointed out that Stop Loss should be compulsory to trading because of its ability to secure and prevent further endangerment of the whole deposit. A safeguard from an unprecedented disaster for traders.

But some had ranted that it works as profits as well. When a position is opened a for a long time, temporary loss are incurred and that would be turned into real loss when a Stop Loss was suddenly activated.

Traders guided by the technical analysis are familiar with classical patterns. Anyway it is also useful to learn about quite rare reversal pattern called “Diamond Pattern”.

The pattern is formed between two spikes making it possible to get profit from the second one. The spike magnitude sometimes yields enough for buying a small diamond.

Support and resistance lines, which form a rhombus, help to find the diamond. The rhombus itself can be split into two triangles with a common base. Within the first one the price range formula reaches its maximum; in contrast, within the second one it goes down to a certain minimum. There are two types of diamond patterns: diamond top formed on an ascending trend and diamond bottom formed in the lower point of a descending trend.

Pattern diamond

Afterwards, there is a support breakdown followed by the upturn or resistance breakdown followed by the downfall. Fluctuations may exceed the rhombus bounds, but after a short period of time, relatively to the period of a diamond formation, there will be a spike and a trend change. It is better to enter the market when the pattern is already formed (the price on the chart is making either uptick or downtick breakdown).

The spike magnitude will be not less than the distance of the maximum amplitude in the rhombus (which is the length of the triangles’ common base). If we measure out this length from the breakdown point in the right direction, we will get a probable target and a point for a take profit order.

It takes more time for the diamond to form before the uptick than before the downtick. It is the result of different traders’ behavior during the ascending and descending trends. Within the short timeframes (less than one day) the diamond pattern may not work properly, to be more precise, may not indicate the future direction of the market development. That is why it is better to use this pattern within the large timeframes.

Added by Andrey Misyuk,
InstaForex Clients’ relationship manager