Archive for the "Important Announcements" Category
Starting working on Forex every experienced trader came across the concept of multiple time frame analysis. One might look for the answer for such questions as “Which time frame is the best?”, “Which one is the most profitable?”, etc. In order to answer it, we should examine each of them.
Every time frame is designed to show the same information. The only distinguishing feature is the data provided in terms of different periods of time. In order to help you to choose the most appropriate, let us look at the most popular:
On the daily chart every bar represents one day; thus, changes on the chart will be observed once a day. On the 1-hour chart new bars appear every hour, providing trader with information. Bars on the 5-minute chart appear every five minutes, showing dynamically the current situation on the market.
In order to choose the most appropriate time frame, you should take into account several criteria: the period you will be working with the charts, profit, the amount of your deposit, and account management.
If you prefer a more moderate pace of work and you like to follow the changes of the chart every hour; if you consider that 1-hour chart is more reliable and it reflects precisely the price fluctuations as it does not show a great deal of that fuss about nothing that 5-minute chart contains, then 1-hour chart is ideally suited for you.
We may think over the other alternative. In case you have regular job and you do not have enough time to observe the situation or you think that changes which occur during the day do not influence the market on the whole, and it is better to analyze the final result in the evening; probably you want to participate in the trade at night making money work for you even when you sleep, consequently, it is better to use daily charts.
You have to choose the way you make money on Forex either participating in trading, using every chance, sitting in front of the monitor the whole day or making money relaxed observing price fluctuations from time to time and not breaking your daily routine.
Fundamental and Technical analyst alike are employing news to guide their trading decisions. Though their degree of usage may vary, it’s better for beginner traders to familiarize themselves with terms that are usually found within the news. Quantitative Easing for one.
Quantitative Easing is an unconventional monetary policy used by central banks to induce support on an economy. It is a stimulant aimed to assist an economy if in case it is in an unfavorable state. The concept behind it is that additional money will flood the market which will give the economy a push by by promoting an increase in lending and liquidity.
It is often carried out by buying financial assets from commercial banks and other private institutions with the newly created money to induce a specific amount of money in the economy.
At present, the world has already witnessed the said boost for three times already. First was during the time of George Bush back in 2008 wherein $500 billion was initially spent on mortgage backed securities. An additional $750 billion was made during the time of Barack Obama’s first term. By June of 2010, $2.1 trillion worth of assets was already bought by the bank.
The second round was demonstrated in 2010 when Federal Reserve provided $600 billion for long-term government bonds. Some claim that this effort was put in vain because the money just ended up in EU’s foreign reserves.
The third was the most recent. The buzz started when Ben Bernanke, chairman of the Federal Reserve in America, had announced last September 14,2012 that the third round of the quantitative easing will be given for the $40 billion a month bond purchasing program and also to continue the very low rates policy.
Though the unconventional way boosted the economy at first, its effect is dwindling as years passes by. Doubts and debates regarding its effectiveness arose from every corner and some became pessimistic about it. The previous rounds taught traders that they should perceive the possible chain reactions that the third easing will produce rather than just the short term effect.
The 2008 financial crisis really shook the world, most especially the wealthy. Economic debris is still on the mending process and some countries had just started to pick themselves up and their neighbors too. The U.S. economy has just stirred to stand back up from its huge fall since the Great Depression. Moreover, Greece had just received its rescue from its euro brothers while others’ turn is still yet to come.
But there are those who wasn’t standing on the epicenter, although shaken a bit, but utterly stable compared to others. Standing intact and able to withstood its impact, one of those who were able to maintain the capriccio of its citizen while others loom to survive was Australia.
Australia’s known for its abundant natural resources – more specifically it’s metal resources. Mining had started to boom around the early 19th century and since then fulfilled the financial needs of the barren centered country. Gold, iron ore, nickel, bauxite or aluminum, copper, and silver are just some of the widely mined resources that pumps money into economic veins of Australia.
It was the reason why Aussie is one of the commodity currencies. Its exports, most especially metals, greatly affects how its economy would perform. China’s been one of its major trading partner and the Sino – Australian relations is still growing stronger over the years. The aggregating demand of China to iron ores makes its pact with the currency commodity sturdier than ever.
However, many are speculating about its imminent halt in the near future. Everything is bound to end as the old always says, and sooner or later those fields will be exhausted. What would happen if it does?
Some are claiming that it was already over but experts says that the time has yet to come. If In case their resources were indeed exhausted, how do you think that their economy would fare?
Australia, although highly dependent on their exports, have other things to offer other than metals. Agricultural products, like wheat and wool, are also being exported. Not only that, energy sources such as liquified natural gas and coal are also being sold to other countries worldwide. Eco tourism would also be possible due to their vast land and sea mass. Although dessert terrains is abundant near the center, its outskirt really has something to offer.
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.
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.