How can a person properly analyze
the market conditions? It is a really hard task, one that even
professionals find hard to perform. However, it is often a matter
of judgment rather than a lack of proper methodology that is the
reason for failure. Here we are going to review some methods that
can help you achieve better understand the trends on Forex.
The different types of
analysis
A Forex trader must always monitor
the conditions of his currencies. They are changing almost every
second and opportunities come and go in a matter of seconds too.
The analysis you can do can be of two basic types – technical and
Fundamental. The first one is all about charts and tools, while the
second is about more about macro-economic information that is based
on news. It is arguable which one is better – each of them has its
merits depending on the term of the period you want to analyze.
Over the years, currencies faced
major rifts in their price trends due to uncertain economic
conditions of various countries. The markets swung in all
directions as traders found it difficult to trade on a specific
currency. Let us review what currencies you should trade now and in
the future for best profit margins:
USD – The Global
Currency:
USD is the standard currency for
international trades. This portrays the credibility and stability
of the currency. Take the example of Euro which is steadily
declining every fiscal term. The European Union has found itself in
deepened crisis in 2014 as more and more countries report failing
economies and trade deficits. As a result Euro has absorbed
consistent blows to its value over the last three years. And this
trend continues till date, excluding rare occasions where Euro
value rises due to intervention by EU. USD is the strongest
currency in the G10 countries apart from the Japanese Yen and
directly benefits from the plummeting economy in Europe. This trend
is expected to follow in the near future as USD becomes more
powerful in comparison to Euro.
Traders often attempt to trade
breakouts but fail due to the price failing to move beyond a
previous high or low, despite the prediction indicated by the
trend. These failures are often very costly to unprepared traders.
It is possible for diligent traders to make a profit from these
breakout failures- the below contains a strategy to help traders
determine when to enter the market in order to profit from a
failure to breakout. The strategy is incomplete as it only provides
traders with indicators to enter the market- traders will need to
individually complete the strategy by determining appropriate exit
points in order to make the strategy viable. It is beneficial for
traders to prepare themselves to undertake learning this strategy
by becoming familiar with Fibonacci’s Retracement Levels. These
levels are a potential solution for needing to exit the market in
order to earn a profit from a breakout failure.
Nearly all trading strategies are
based upon predicting future market movements by analyzing the
price trends. A trader must also understand all the forces that
control the markets. Without this knowledge, a trader will not be
able to devise the best trading strategy. Here is a detailed
description of all such market forces:
Governments: The
regulatory policies devised by government and administrative bodies
play an important role in shaping the market trends. Many policies
including “Fiscal” and “Monetary” policies have
deep effects on trading market.
In a monetary policy, the
government in collaboration with the Federal Reserve or Central
Bank increases or decreases interest rates and controls the amount
of foreign exchange circulating in the open market. Through a
fiscal policy, the government decides when and how much to spend
for addressing situations like unemployment and inflation.
What is Fundamental analysis? This
is a basic question that is usually asked by the new entrants in
the market. Therefore, it is very important to know what
fundamental analysis is. It is a study of asset in which all the
internal and external factors that affect the asset price are taken
into account. The factors include, company data and global events
with many interrelated events that affect the price of various
underlying assets and its various classes.
So What Is It
About?
It is not possible for investors to
get a grip on all sorts of market data that is released, or to
understand it completely. However, after the introduction of the
internet, a trader can now focus on the selected assets and the
factors affecting those assets. Despite all this, it is still
necessary to stay updated with latest financial and global news so
as to use that information when placing a trade.
FOREX trading is conducted openly
resulting in different FOREX rates at different brokers. For retail
traders there are two choices to select a broker: market makers or
Electronic Communication Networks. Following review will help you
in choosing the best one.
Market
makers:
Market makers establish bid and ask
prices according to their own interests. They are ready to trade
with both banks and retail FOREX traders. Market makers have to buy
or sell with the traders, so they always set selling price more
than buying within a reasonable spread. The increased competition
between various market makers helps to keep the ask/bid prices in
check.
Before going into detail about
Fibonacci Retracement Lines, it is important to understand the
basic concept of Fibonacci number theory. This theory was put
forward by Leonardo Pisano (also known as Fibonacci). The Fibonacci
number theory is based on the sequence of numbers where the numbers
are derived by adding the previous two numbers. The sequence starts
from zero and then progresses by adding the preceding two numbers
to calculate the next number in the series. Therefore, the
Fibonacci series is formed like
0,1,1,2,3,5,8,13,21,34,55,89..etc.
These Fibonacci numbers follow a
very popular ratio called Golden Ratio. This ratio is one of the
most important ratios and is considered as a foundation of life. By
using this golden ratio, technical analysts have derived the
following percentages that are applied in the financial trading
through technical indicators called Fibonacci retracement:
There are many trading strategies
that traders are familiar with, such as, Double up Strategy,
Straddle or Market Pull Strategy. However, the Boundary Strategy
and the Ladder Trading Strategy are new to most of the traders
because these strategies are only used in a market where Ladder
Trades and Range Trading are offered. But being a trader, if you
want to apply these strategies, it is important for you to
understand what these strategies actually are and how they
work.
One of the benefits of trading in
the binary options market is that you can generate high returns
during a short period of time, and for that to happen, you need to
have a strong binary option strategy. Therefore, being a binary
options trader, you can use some of the advanced strategies that
can help you generate great profits. Following are some of the
strategies that are used by the investors who frequently trade in
the binary options market:
Doubling Up Trading
Strategy
It is a very straight forward and
easy to understand the strategy, but in order to understand it more
clearly, you should be well familiar with the concept of technical
as well as fundamental analysis. You can effectively employ this
strategy in binary options trading if you are experienced in
performing the market analysis. Doubling up trading strategy
requires you to double up on the money you invested when you are
receiving positive output on your initial investment and believe
that you will continue to receive positive outcome in the future.
However, you should know that by doubling up your investment, you
increase the risk exposure twice as much. So, it is better for you
to know the market well enough before you implement this
strategy.
This strategy revolves around
identifying different triangle patterns present on price charts,
and performing trades with suitable type of contract. A trader who
wants to implement this strategy must keep in mind:
He must be able to correctly trace
and identify the triangle patterns present in a trend chart.
Different triangle patterns suggest
trading with different binary option contracts. He must have
knowledge of trading different types of trades to implement this
strategy.
According to expiry times, there
are two types of brokers. Turnkey platforms offer a fixed set of
expiry times to choose from, while proprietary platforms allow you
to customize expiry times according to your liking. This makes
proprietary platforms more suitable for this
strategy.
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