How To Trade

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.

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.

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.

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

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)

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.

Force Index

Introduction

The Force Index is an indicator that uses price and volume to assess the power behind a move or identify possible turning points. Developed by Alexander Elder, the Force Index was introduced in his classic book, Trading for a Living. According to Elder, there are three essential elements to a stock's price movement: direction, extent and volume. The Force Index combines all three as an oscillator that fluctuates in positive and negative territory as the balance of power shifts. The Force Index can be used to reinforce the overall trend, identify playable corrections or foreshadow reversals with divergences.

Calculation

Calculation for the one period Force Index is straight forward. Simply subtract the prior close from the current close and multiply by volume. The Force Index for more than one day is simply an exponential moving average of the 1-period Force Index. For example, a 13-Period Force Index is a 13-period EMA of the 1-period Force Index values for the last 13 periods.
Three factors affect Force Index values. First, the Force Index is positive when the current close is above the prior close. The Force Index is negative when the current close is below the prior close. Second, the extent of the move determines the volume multiplier. Bigger moves warrant larger multipliers that influence the Force Index accordingly. Small moves produce small multipliers that reduce the influence. Third, volume plays a key role. A big move on big volume produces a high Force Index values. Small moves on low volume produce relatively low Force Index values. The table below shows the Force Index calculations for Pfizer (PFE). Line 27 marks the biggest move (+84 cents) and the biggest volume (162,619). This combination produces the biggest Force Index value on the table (136,600).

The chart above shows the Force Index in action. Notice how the 1-period Force Index fluctuates above/below the zero line and looks quite jagged. Elder recommends smoothing the indicator with a 13-period EMA to reduce the positive-negative crossovers. Chartists should experiment with different smoothing periods to determine what best suits their analytical needs.

Interpretation

As noted above, there are three elements to the Force Index. First, there is either a positive or negative price change. A positive price change signals that buyers were stronger than sellers, while a negative price change signals that sellers were stronger than buyers. Second, there is the extent of the price change, which is simply the current close less the prior close. The "extent" shows us just how far prices moved. A big advance shows strong buying pressure, while a big decline shows strong selling pressure. The third and final element is volume, which, according to Elder, measures commitment. Just how committed are the buyers and sellers? A big advance on heavy volume shows a strong commitment from buyers. Likewise, a big decline on heavy volume shows a strong commitment from sellers. The Force Index quantifies these three elements into one indicator that measures buying and selling pressure.

Trend Identification

The Force Index can be used to reinforce or determine the trend. The trend in question, short-term, medium-term or long-term, depends on the Force Index parameters. While the default Force Index parameter is 13, chartists can use a higher number for more smoothing or a lower number for less smoothing. The chart below shows Home Depot with a 100-day Force Index and a 13-day Force Index. Notice how the 13-day Force Index is more volatile and jagged. The 100-day Force Index is smoother and crosses the zero line fewer times. In this regard, the 100-day Force Index can be used to determine the medium or long-term trend. Notice how a resistance breakout on the price chart corresponds to a resistance breakout on the 100-day Force Index. The 100-day Force Index moved into positive territory and broke resistance in mid February. The indicator remained positive during the entire uptrend and turned negative in mid May. The early June support break on the price chart was confirmed with a support break in the Force Index.

Divergences

Bullish and bearish divergence can alert chartists of a potential trend change. Divergences are classic signals associate with oscillators. A bullish divergence forms when the indicator moves higher as the security moves lower. The indicator is not confirming weakness in price and this can foreshadow a bullish trend reversal. A bearish divergence forms when the indicator moves lower as the security moves higher. Even though the security is moving higher, the indicator shows underlying weakness by moving lower. This discrepancy can foreshadow a bearish trend reversal.
Confirmation is an important part of bullish and bearish divergences. Even though the divergences signal something is amiss, confirmation from the indicator or price chart is needed. A bullish divergence can be confirmed with the Force Index moving into positive territory or a resistance breakout on the price chart. A bearish divergence can be confirmed with the Force Index moving into negative territory or a support break on the price chart. Chartists can also use candlesticks, moving average crosses, pattern breaks and other forms of technical analysis for confirmation.

The chart above shows Best Buy (BBY) with the Force Index (39) sporting a series of divergences. The green lines show bullish divergences, while the red lines show bearish divergences. A bullish divergence is confirmed when the Force Index (39) crosses into positive territory (green dotted lines). A bearish divergence is confirmed when the Force Index (39) crosses into negative territory (red dotted lines). Chartists can also use trendline breaks on the price chart for confirmation.
This chart shows two versions of the Force Index. The Force Index (13) captures short-term fluctuations and is more sensitive. The Force Index (39) captures medium-term fluctuations and is smoother. The 39-day Force Index produces fewer zero line crossovers and these crossovers last longer. There is no right or wrong answer for these settings. It depends on trading objectives, time horizon and analytical style.

Identifying Corrections

The Force Index can be used in conjunction with a trend following indicator to identify short-term corrections within that trend. A pullback from overbought levels represents a short-term correction within an uptrend. An oversold bounce represents a short-term correction within a downtrend. Yes, corrections can be up or down, it depends on the direction of the bigger trend. Alexander Elder recommends using a 22-day EMA for trend identification and a 2-day Force Index to identify corrections. The trend is up when the 22-day EMA is moving higher, which means the 2-day Force Index would be used to identify short-term pullbacks for buying. The trend is down when the 22-day EMA is moving lower, which means the 2-day Force Index would be used to identify short-term bounces for selling. This is an aggressive strategy best suiting for active traders. The timeframe can be adjusted by using a longer moving average and timeframe for the Force Index. For example, medium-term traders might experiment with a 100-day EMA and 10-day Force Index.
There are two-schools of thought regarding the correction play. Traders can either act as soon as the correction is evident or act when there is evidence the correction has ended. Let's look at an example with the 22-day EMA and 2-day Force Index. Keep in mind that this is designed to identify very short corrections within a bigger trend. The chart below shows Texas Instruments (TXN) with the 22-day EMA turning up in mid September.

With the 22-day EMA rising, traders are looking for very short-term pullbacks when the 2-day Force Index turns negative. Traders can act when the Force Index turns negative or wait for it to move back into positive territory. Acting when negative may improve the reward-to-risk ratio, but the correction could extend a few more days. Waiting for the Force Index to turn positive again shows some strength that could signal the correction has ended. The green dotted lines show when the 2-day Force Index turns negative.

Conclusions

The Force Index is uses both price and volume to measure buying and selling pressure. The price portion covers the trend, while the volume portion determines the intensity. At its most basic, chartists can use a long-term Force Index to confirm the underlying trend. The bulls have the edge when the 100-day Force Index is positive. The bears have the edge when the 100-day Force Index is negative. Armed with this information, traders can then look for short-term setups in harmony with the larger trend, such as bullish setups in a larger uptrend or bearish setups within a larger downtrend. As with all indicators, traders should use the Force Index in conjunction with other indicators and analysis techniques.

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.

i already have my demo account and i traded with it, i want to know how can i can change my demo account to real money account...pls. help me..also how to fund the real account?

Originally Posted by RafaelGlimb

i already have my demo account and i traded with it, i want to know how can i can change my demo account to real money account...pls. help me..also how to fund the real account?

MetaQuotes company is not a broker so you may have demo account only with them. To get real money account - you should seletc the broker and open account with selected broker (demo or real).

You can open demo accounts for many brokers using same instance of Metatrader - read this small article about MT5 (it is same for MT4): https://www.metatrader5.com/en/terminal/help/acc_open