Knowing the Fundamentals – CPI

August 24th, 2012

Consumer Price Index ( CPI ) is one of the main tools to measure Inflation. Inflation as we know it, is a very vital factor in the fundamental analysis. It defines the decrease in the purchasing power of a currency which may lead to a higher unemployment rate.

The CPI as defined as Bureau of Labor Statistics in the United States of America is “a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

In order to calculate CPI, there are two basic data types that is needed: price data and weighting data. The price data is acquired by getting a sample of a product on a sales outlet within a sample location on a particular time. The weighting data is an estimate of the shares on the overall expenditure that is within the context of the index.

It has a scheduled released at 8:30 am EST on the 15th of each month, to keeps track on the average changes in the price of a basket of goods and services. Food, Accommodation, Clothes and Services, Transport, Medical Service, Entertainment, Other goods and services are the main categories that belongs to CPI. All of the changes in the price of mentioned categories together with other items are averaged to form the overall CPI. Since it is released annually, the cost of living may also be assessed through it.

Aside from the CPI, it is also essential to look at the “core rate.” It is also known as “Core Inflation” which excludes other products that are prone to price shocks, an unexpected change in the price, which may lead to a false impression to an inflation.

Stephen Stevenson

Free Devices from InstaForex

August 24th, 2012

InstaForex broker invites its clients to take part in the drawing of fancy gadgets which is held as a part of Trade Wise, Win Device campaign.

Each fortnight you have a great opportunity to become one of the lucky owners of 12 brand new devices: iPad, iPhone, Blackberry, and Samsung Galaxy Tab. Top up your account with 500 USD to add your name to the list of participants for three campaign rounds.

The winners will be determined by so-called Device Number. Thus, everyone can have a chance to get the modern mobile device! Fortune has already smiled to Yuriy Selivanov who gained Samsung Galaxy Tab.

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Register for the campaign and probably you will be among the winners!

InstaForex Company aims to create the most favorable conditions for cooperation which will contribute to trading development. Modern devices will help our clients to stay flexible not only in life but on Forex as well.

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Trade Wise, Win Device campaign is launched from a background of contests and campaigns with the total prize pool of more than 500,000 USD. The clients have a unique opportunity to get not only a part of this sum but also win sports car Lotus Evora and Porsche Cayenne or gain brand new mobile device.

Win easily with InstaForex!

Oil is Black Gold of Economy

August 22nd, 2012

Is there any relation between goods and currency markets?

It is worth noting that every currency unit is tied to inventories and has no value without them. Oil being an integral part of economy’s security and economic competitiveness of many countries ensures this value. The U.S. dollar directly depends on oil prices and has great influence on the international currency market.

As a rule, when oil prices rise, the dollar falls and vice versa. The same negative correlation could be seen in a currency of any country that depends on oil import. However, if it is one of major black gold exporters (Canada, for example), then oil price growth will have positive impact on the rate of national currency.

That is why oil price statistics can be a part of Forex fundamental analysis.

Added by Roman Tsepelev,
InstaForex development manager

Trader Best Friend: Emotions or Logics?

August 21st, 2012

Every time we take up something new, we have doubts. And this is normal! Doubts are the result of estimating yourself, of searching personal features that are needed for this new activity. At the beginning of the journey a trader cannot avoid being unconfident of his/ her abilities, knowledge and skills. This is exactly what urges to look for more information and for the advice of the experienced, to visit courses and webinars, and in fact, to being extremely cautious. It is concerns, that trigger our self-development, that appear to be the signs of success in the future activity.

Of course, for a totally green on Forex trader it is significant to master technical and fundamental analysis. This is needed to understand the way the international currency market operates, as “trader” is a very difficult occupation, which requires skills of analysis as well as special knowledge. The sign of that the work is effective can be non-randomness of profit, ability to explain what stands behind every step on Forex market.

It may seem that having realized the rules of the financial markets and read a lot of books, i.e. having acquired sufficient information about trading and Forex, one can easily add funds into a bank account merely sitting in front of the PC connected to the Internet. But it is not that simple!

The main part of people sees the most attractive feature of trading in the easy way to earn money and fast speed of getting rich. And of course, these ideas cannot but worry and evoke powerful emotions. A novice trader is so much captivated by a zest to yield, that he / she is incapable of realistic estimation of personal actions on Forex. Aside from knowledge and logics, in order to profit on Forex, discipline and cold reasoning are necessary. An ability to stop in time, to enter the market at the correct moment, to be very attentive, to monitor carefully the currency exchange rates and to behave with no hazard – all these skills are the main supporters of a profitable trader. Being absorbed by emotions is considered as the main obstacle for the newbies.

Emotions urge to act, help to go forward and never stop. But being overwhelmed by emotions disorient and has a negative impact on the attentiveness. Huge expectations from the trades conducted increase their importance so much that they cause a trader’s lack of self-trust. In this case, this self-doubt prevents from gradual development as a professional.

So, emotions or logics? Both! The Golden Mean Rule has never been cancelled.

Using knowledge and skills of analysis will definitely help you to work on Forex, but a certain share of emotions urging you to accomplishments will not be excessive.

Good luck in conquering new highs!

Added by Andrey Misyuk,
InstaForex Clients’ relationship manager

Acquaintance with the Charts

August 16th, 2012

Forex is measured through charts. It is a virtual representation that reflects the price movement of a quotation within a specific time. There are 2 coordinates that makes up a chart – Price and Time.
The price is shown on the vertical Y- axis while the time is shown in the horizontal X- axis.

The time which is broken down to different time frames may be viewed depending on the trader. The available time frames are usually: 1 month (MN), 1 week (W1), 1 day (D1), 4 hours (H4), 1 hour (H1), 30 minutes (M30), 15 minutes (M15), 5 minutes (M5), 1 minutes (M1), and an individual quoting tick or simply tick which materializes through the form of Bid and Ask.

The time frames are composed of 4 components: Open, Close, High Low

Open – the market price that is formed when the trading period starts.

Close – the market price which is given at the end of the trading period.

High – the highest price that is achieved within the trading period.

Low – the lowest price that was achieved within the trading period.

Chart Types:

Tick Chart – shows the tick movement of a specific currency pair without a specific time frame. It reflects the individual quotes of Bid and Ask prices given by market-maker and is often used to determine the support and resistance level.
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Line Chart – it may be easily distinguished through its simple form – Line. Line charts are plotted with the closing price that gives an easier view on technical analysis patterns. But this chart has a downside. The lack of some information, due to the fact that the closing price is reflected in the chart, hinders traders from evaluating the rise and fall of the price within the period.
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Bar Chart – are composed of stalk like vertical lines which has a small horizontal line on both sides. The upper end of the stalk is the maximum price achieved within the period. While the lower end of the stalk shows the minimum price within the period. The horizontal line on the left shows the opening price while the right horizontal line is for the closing price. The analysis with the help of this chart is a bit tricky. You have to consider the right line as the open price and the left line as the closing; if the left line is higher than its counterpart then the price has decreased within the period; and vice versa.
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Japanese candlesticks – it is the most famous chart and also has the same composition with the bar chart. The only difference is that it is more comfortable to look at when compared to the bar chart. Each candlestick has the same composition with the bar chart’s stalks.

The candlestick has 2 parts; the real body, and the shadow. The real body is depicted by a a vertically inclined rectangle which reflects the opening and closing price of the trading period. If the body is highlighted then it is called a solid real body which means that the closing price is lower than the opening price. A hollow or transparent body signifies that the closing price was higher than the opening.

The shadow depicts the minimum and maximum value achieved within the time period. The upper shadow located at the top of the candlestick shows the maximum value while the lower shadow located at the bottom of the candlestick shows the minimum value.
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Stephen Stevenson