Overbought and Oversold

December 7th, 2012

Often, when we check the market analysis for the day, the term overbought and oversold is included in the analysis. But what does it really mean and how will you discern which is which? How will it affect the market movement?

By definition, Overbought refers to a situation wherein the demand for the currency pairs exceeds what is expected of it, resulting to a very significant movement, which can no longer be supported by the fundamentals. It is a sudden upward movement of the currency that surpasses its acceptable level. On the other hand, Oversold means that the price had a drastic fall and its level is beyond what is expected. It is usually an effect by the market overreaction or panic selling.

Now that we have provided its definition, how can we know if a currency is overbought or oversold? In technical analysis, there are is a type of technical indicator which detects whether a pair is overbought or oversold. They are called Oscillators.

Oscillators are technical indicators which measures the momentum through the use of its price compared to its historical price within a given time period. The most famous indicators of this kind are the RSI (Relative Strength Index) and Stochastic. The indicators, after inserted to a chart, will displaythe market movement within a scale of 0-100. In the case of Stochastic, if the indicator goes beyond the value of 80 then the pair is overbought. Meanwhile, if it goes below 80 then the market is considered to be oversold. But in the RSI, the overbought value is 70 and the oversold value is 30.

What happens if it does push through those values? The longer the indicator exceeds those values, the higher the chance of a reversal. But please take into account that a pair may sustain an overbought or oversold status for a long time especially on a strong trend. So it must only assist your main trading strategy by signaling when a reversal might occur.

Stephen Stevenson

How to Make Money Trading Futures?

December 5th, 2012

What does a word “futures” imply? It is a derivative from English word “future”. Futures contract is a certain agreement to make a deal in the future at the fixed price. The main advantage is small start-up investments. Thus, if you buy futures, you can earn even more a bit later than when you buy stocks.

There are three types of futures: commodity, financial and stock index futures. How to make a choice? Better choose the instrument which liquidity is high enough to enter and exit the trade easily.

In order to make money while trading futures, be sure that the price is changing noticeably. Only in this case you can snatch a large sum. If the fluctuations are insignificant, you will not earn a lot.

With every year the demand for futures is increasing. For some futures contracts is a good opportunity to trade actively, for the others (as a rule seasoned traders) – a great instrument which can be used instead of stocks and can help to decrease expenses. Such kind of investment is beneficial for both bulls and bears.

Doubting if you can earn with futures? Do not hesitate, everyone can make a good profit trading futures! But do not be emotional: rely on common sense and do not invest your last penny.

InstaForex Participated in ShowFx World Expo in Kiev

November 30th, 2012

ShowFx World financial exposition took place on November 17-18, 2012. InstaForex Company was the title partner and the participant of this event. Exhibition in Kiev proved to be a great chance for introduction of company’s services and offers as well as it gave an opportunity to meet potential and current clients.

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The guests were very interested in company’s booth and asked many questions about innovative broker’s services, bonuses and ways of funds replenishment and withdrawal. Every visitor received InstaForex Club card which enables to accumulate bonuses up to 40% for every replenishment.

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Official program was accompanied by the performances of well-known specialists in the field of market analysis. The guests readily participated in discussions of speakers’ reports.
All the visitors enjoyed the solemn award ceremony of Miss Insta Asia 2012 finalists. Ekaterina Nagornaya was chosen as the most beautiful lady and got the crown together with $20,000 prize money. Five other winners shared the rest of the prize pool.

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As a part of exhibition, InstaForex raffled off valuable prizes and bonus accounts. Some of the guests were lucky to get three $500 bonus certificates, and fancy mobile devices such as iPad, iPhone, and Samsung Galaxy Ace 2.

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InstaForex Company expresses its appreciation to ShowFx World administration for high-level organization of exhibition in Kiev and also thanks all the visitors for their attention and participation in promo campaigns. InstaForex hopes to see you again at the next financial event!

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You can find a photo report here.

Forex Holidays

November 28th, 2012

Prior to starting trading actively on Forex, the trader should consider many factors which affect the market behavior, including holidays in different countries. When trader knows the dates of major holidays, it helps him to understand the market peculiarities at different periods of time.

To begin with, Forex working schedule is very convenient: it operates 5 days a week, from Monday to Friday. The weekends are set for Saturday and Sunday, but even during these days the trading does not stop, just shrinks significantly and can be carried out mainly on major currency pairs. Apart from the weekends, Forex activity can be interrupted during public holidays which widely affect the work of the market. As far as Forex is subdivided into 4 sessions: the European, the American, the Asian, and the Pacific, and due to public holidays in different countries, the market activity is changing constantly. When there is a holiday in a country or a group of countries, the trade can be performed with a delay and at the end of the weekends the situation may turn against the trader. That is why it is necessary to pay the outmost attention to such deals.

Undoubtedly, not all public holidays are of great importance and can trigger slowdown in activity of several countries. Basically, there are just New Year, Catholic Christmas, and Labor Day. But the work does not stop completely on currency exchange and in the economic world even during such occasions: information and finance flow provide trader with a great volume of information for Forex analysis. Despite that the price of some currency pairs moves much slower, after the break is over, traders expect new changes as Forex, undoubtedly, will react to new events.

Fiscal Cliff: The Valley of Debt

November 27th, 2012

One of the key points in the recently concluded election was about how the “would be president” then would tackle the ominous fiscal cliff. But many, especially non Americans, are still unfamiliar with the term.

The term “Fiscal cliff” was an expression that was used throughout the history especially on budget talks. According to research, the earliest reference to the term was traced back in 1957, when it was used in a New York Times article about home ownership.

At present, the term denotes the effect of a number of laws in the United States which may lead to spending cuts and tax increases. The whooping $7 trillion in spending cuts and tax increases was scheduled to take place at the beginning of this incoming year, 2013, which is approximately 35 days from now. The buzz word first entered the scene during a speech by Federal Reserve Chairman Ben Bernanke to the House committee on Financial Services last February 29,2012.

Under current law, on January 1st, 2013, there is going to be a massive fiscal cliff of large spending cuts and tax increases. I hope that Congress will look at that and figure out ways to achieve the same long run fiscal improvement without having it all happen at – at one date.

The laws involved are the Bush tax cuts and the Budget Control Act of 2011. The Bush tax cuts or Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 is an act centered on the two-year extension of the Economic Growth and Tax Relief Reconciliation Act of 2011 provisions which was intended to delay the return of tax rates similar to the Clinton administration. It was passed by the United States Congress back in December 16,2010 and was signed as law by President Barack Obama a day after. It is scheduled to expire at the start of 2013 which would result to tax increases.

Meanwhile, the Budget Control Act of 2011 is a federal statute and was signed as a law by President Barack Obama on August 2,2011 which mainly focuses on debt ceiling and deficit reduction. It is also scheduled to expire almost the same time as the Bush tax cuts and would result to spending cuts.

The two effects would lead to a reduction in the budget deficit in 2013. The abrupt deficit would then lead then to an increased recession on the same year which would greatly damage its present economic recovery.

Stephen Stevenson