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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.
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
Here came the holy festival we all have longed for. May Eid al-Adha bless the people, bring salvation to the poor and the needy, and peace and prosperity to the mankind, and show us the Right Path! Welfare you deserved is the best welfare. A friend reminiscent of Allah is the best friend. May you enjoy a blessed Eid al-Adha! May the years to come be holy and happy, healthy and wealthy for you and your dear ones! InstaForex Company extends the best greetings to our Muslim customers on the occasion of the Eid al-Adha holiday!
- The annual marathon of beauty and grace which has inspired traders for the whole year came to its end. Six most beautiful participants of the Miss Insta Asia 2011 contest were selected by the Internet voting at the official cite of the contest.
After a tough struggle for the beauty queen crown, the title of Miss Insta Asia 2011 was given to Kristina Onika with 52397 rating! She is followed far behind by Tatyana Daineko (6612), Jumatul Zahra (5753), Maria Klimova (2880), Elizaveta Vaisberg (1270) and Sofia Persitskaya (1020).
- InstaForex Contests and Campaigns administration congratulates the winners and wishes them remain beautiful, mysterious and charming forever!
The solemn ceremony of Miss Insta Asia 2011 will take place on November 11–12 within the Moscow Finance and Investment EXPO 2011 ShowFX World project. The winners of the contest will be given awards and bonus certificates to their trading accounts at the ceremony.
- 35 000 USD worth prize fund of the Miss Insta Asia 2011 contest will be shared by the winners as follows:
- Kristina Onika – Miss Insta Asia 2011, 20 000 USD prize;
- Tatyana Daineko – Forex Lady, 3000 USD prize;
- Jumatul Zahra – Miss Asia Enigma, 3000 USD prize;
- Maria Klimova – Miss Top Comment, 3000 USD prize;
- Elizaveta Vaisberg – Miss Sporty, 3000 USD prize;
- Sofia Persitskaya – Miss Bikini, 3000 USD prize.
The second stage of the contest was marked by more than 500 participants in more than 40 countries: from Indonesia, Malaysia and the Philippines to Island, the United Kingdom and the United States, and from Russia, Ukraine and Latvia to Iran, Kazakhstan and Azerbaijan. This was a whole year of thousands of lively, creative, distinguished and amazing pictures posted on the contest site. It has captured attention of hundreds of thousands Internet users and became a real spotlight!
- To learn more about results of Miss Insta Asia 2011 and its winners, go to the official site of the contest.
- Join us and feel the force of the beauty!
Added by Ekaterina Abramova,