Beginners Corner - ABC Video #3 How to read a chart? Technical and Fundamental analysis
Beginners Corner - ABC Video #3 How to read a chart? Technical and Fundamental analysis
In this short educational video, Valeria Bednarik explains the bases of forex trading: technical analysis, charts, candelsticks and technical indicators, and also about fundamental analysis and macroeconomic data.
http://youtu.be/xtmLl8hBtJ4
Beginners Corner - ABC Video #4 What weights on the currency movements?
Beginners Corner - ABC Video #4 What weights on the currency movements?
In this short educational video, Valeria Bednarik briefly introduces concepts of intermarket correlations (stocks and commodities) as well as risk aversion, risk appetite, safe havens and high yields.
http://youtu.be/kmCHMwwTRkQ
How Banks, Hedge Funds, and Corporations Move Currencies
How Banks, Hedge Funds, and Corporations Move Currencies
Behind central banks in terms of size and ability to move the foreign exchange market are the banks which we learned about in our previous lessons which make up the Interbank market. It is important to understand here that in addition to executing trades on behalf of their clients, the bank's traders often times try to earn additional profits by taking speculative positions in the market as well.
While most of the other players we are going to discuss in this lesson do not have the size and clout to move the market in their favor, many of these bank traders are an exception to this rule and can leverage their huge buying power and inside knowledge of client order flow to move the market in their favor. This is why you hear about quick market jumps in the foreign exchange market being attributed to the clearing out the stops in the market or protecting an option level, things which we will learn more about in later lessons.
The next level of participants is the large hedge funds who trade in the foreign exchange market for speculative purposes to try and generate alpha, or a return for their investors that is over and above the average market return. Most forex hedge funds are trend following, meaning they tend to build into longer term positions over time to try and profit from a longer term uptrend or downtrend in the market. These funds are one of the reasons that currencies often times develop nice longer term trends, something that can be of benefit to the individual position trader.
Although not the typical way that Hedge funds profit from the market, probably the most famous example of a hedge fund trading foreign exchange is the example of George Soros' Quantum fund who made a very large amount of money betting against the Bank of England.
In short, the Bank of England had tried to fix the exchange rate of the British Pound at a particular level buy buying British Pounds, even though market forces were trying to push the value of the Pound Down. Soros felt that this was a losing battle and essentially bet the entire value of his $1 Billion hedge fund that the value of the pound would decrease. The market forces which were already at play, combined with Soro's huge position against the Bank of England, caused so much selling pressure on the pound that the Bank of England had to give up trying to prop up the currency and it preceded to fall over 5% in one day. This is a gigantic move for a major currency, and a move which netted Soros' Quantum Fund over $1 Billion in profits in one day.
Next in line are multinational corporations who are forced to be participants in the forex market because of their overseas earnings which are often converted back into US Dollars or other currencies depending on where the company is headquartered. As the value of the currency in which the overseas revenue was earned can rise or fall before that conversion, the company is exposed to potential losses and/or gains in revenue which have nothing to do with their business. To remove this exchange rate uncertainty many multinational corporations will hedge this risk by taking positions in the forex market which negate any exchange rate fluctuation on their overseas revenues.
Secondly these corporations also buy other corporations overseas, something which is known as cross boarder mergers and acquisitions. As the transaction for the company being bought or sold is done in that company's home country and currency, this can drive the value of a currency up as demand is created for the currency to buy the company or down as supply is created when the company is sold.
Lastly are individuals such as you and I who participate in the forex market in three main areas.
1. As Investors Seeking Yield: Although not very popular in the United States, overseas and particularly in Japan where interest rates have been close to zero for many years, individuals will buy the currencies or other assets of a country with a higher interest rate in order to earn a higher rate of return on their money. This is also referred to as a carry trade, something that we will learn more about in later lessons.
2. As Travelers: Obviously when traveling to a country which has a different currency individual travelers must exchange their home currency for the currency of the country where they are traveling.
3. Individual speculators who actively trade currencies trying to profit from the fluctuation of one currency against another. This is as we discussed in our last lesson a relatively new phenomenon but most likely the reason why you are watching this video and therefore a growing one.
http://youtu.be/jcavZW5kxs0
Understanding the Price of Currencies: A Brief Note
The largest financial market in the world is the foreign exchange market. People from all over the world can take part in this market and earn huge amount of profits. If you are a newbie, it is important that you know the market very well first. Then you can take part in forex trading. In this information is taken from easyMarkets, some terms are described that will help you to understand the price of currencies. Read on.
1. Exchange rate
Exchange rate means the ratio of one currency valued against another. The first currency is known as the base currency, and the second currency is known as the quote or counter currency. If you choose to buy, it is the exchange rate that specifies how much you have to pay in the quote or counter currency, in order to obtain one unit of the base currency. While you choose to sell, it is the exchange rate that specifies how much you get in the quote or counter currency in order to sell one unit of the base currency.
2. Ask/Bid price
The ask price is always higher than the bid price. While selling one unit of the base currency, the bid indicates what will be obtained in the quote currency. In order to obtain one unit of the base currency, what has to be paid in the quote currency is indicated by the ask price.
3. Spread
The difference between the ‘ask’ and the ‘bid’ price is known as the spread. There are many currencies that are traded directly against the US Dollar. Direct rates are the market rates that are expressed for such currency pairs. There are many cases, where the US Dollar is the base currency pair and the quote currency is expressed as a definite or certain number of units per 1 US Dollar.
4. Indirect rates
There are some currency pairs, for which the US dollar is not base currency but the quote or counter currency. The market rates expressed for such type of currency pairs are known as indirect rates. This is the case with NZD (New Zealand Dollar), AUD (Australian Dollar), EUR (Eurodollar) and GBP (British Pound or “Cable”).
5. Cross rates
If one currency is traded against any other currency but not the USD, then the market rate for this currency pair will be called as a cross rate. The exchange rate between two currencies (not involving the US dollar), is known as cross rate. If you want to trade between two non-US dollar currencies, you can do that by first trading one against the US dollar, and after that, trading the US dollar against the second non-US dollar currency. Some examples of non-US dollar currencies, which are traded directly, are EUR/CHF or GBP/EUR.
In order to trade currencies, it is important that you understand their value, the exchange rates and several other things. This article will help you in that.
Economic Releases that Move the US Dollar
Economic Releases that Move the US Dollar
How the market reacts to economic releases is generally determined by two factors:
1. How important the market considers a particular release to be.
2. How close to market estimates the number comes in at. Remember that markets anticipate news, so generally if an economic release comes out as expected, there is very little if any market reaction to that release.
How important the market considers a particular economic release to be, is something that changes over time depending on what is happening from a US Dollar fundamentals standpoint. If there are worries that the economy is going into recession, then the market is going to be extra sensitive to any numbers, such as non farm payrolls and consumer spending, which may provide early warning signs that this is the case. Conversely, if the economy is heating up and the markets are worried that inflation may become a problem, then the most market moving numbers may be price data releases, such as the CPI and the PPI. For your reference, in order of importance were:
1. Non Farm Payrolls
2. FOMC Releases
3. Retail Sales
4. ISM Manufacturing
5. Inflation
6. Producer Price Index
7. The Trade Balance
8. Existing Home Sales
9. Foreign Purchases of US Treasuries (TIC Data)
http://youtu.be/Ri8Bf6jYswY
How to Trade News Announcements
Forex News - How to Trade News Announcements
"Use the Forex News"
One of the reasons so many forex traders come to the Forex market is because of the potential to make fast money. With huge amounts of leverage, and extremely volatile price movements, many traders look to focus on trading forex news since this can produce some of the fastest movements that the forex market might see.
Unfortunately, a lot of these types of traders will fail. Forex news can be notoriously difficult to trade as price movements can be so wild and volatile. Not only can these movements be unpredictable, but forex traders will often employ sloppy risk management and end up turning a short-term trade into a long-term problem.
There has to be a better way to do this.
Some traders choose to just avoid trading forex news, or those trading longer-term strategies often try to 'trade around them.' But there are a few different ways to try to "use the forex news".
For one, since these price movements can be so wild and volatile, it may offer longer-term forex traders the opportunity to get a better entry price than they would have initially anticipated.
Let's say that the EURUSD is trading at 1.3000, and a trader wants to go long with a 100 pip stop and a 300 pip profit target; but NFP is 30 minutes away and our traders doesn't want to take the risk of losing 100 pips so shortly after placing a trade designed to be open for a few days. So our trader waits...
Once NFP comes out, the trader sees price hurry down to 1.2950 before finding support shortly after the data was announced. Our trader can then buy, keeping their stop at 1.2900, and now can look for a 350 pip profit target. Their original risk-reward was going to be 1-to-3. Now, it can be 1-to-7, and they were able to get long the EURUSD at a much better price.
The other way to use the forex news is to trade the volatility that can come from news announcements. This involves placing an entry order to go long above resistance, and an entry order to go short below support. This way, if the volatility from the news release creates a price movement that could go on for days, forex traders could potentially enter at the early portion of the move as prices initially move on to make new highs or lows.
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3 Ways For Finding Swing Points (Takes Only 15 Minutes Per Day)
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You will learn three simple reversals you can use (without indicators) and how to apply these setups to your daily analysis, even if you have a day job. These are simple, powerful naked trading patterns that repeat on all timeframes and all currency pairs. Bring your questions about the current charts, we will spend the last half of the webinar looking at the live markets.
http://youtu.be/KaaP7czojr4