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CandleStick Charts

Aug 17th, 2011
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Candlestick charts are the most effective type of charts for Forex trading. When looking quickly at a chart, candlesticks portray the greatest amount of information. They show opening and closing prices, highs and lows, and the body of the trading that is created. When color coded, candlesticks can show at a quick glance whether or not the price increased or decreased during the time period selected. A black body indicates that the price dropped while a white body shows an increase in price.

Candlestick charting originated in Japan to track the price of rice. Since then, the method hasn’t changed in look much other than the fact that they are now computerized. Candlestick charts no longer require hours of work to put together; at Zecco.com you can create them instantly with charting software packages. Additionally, you can use charting packages to automatically detect any patterns that you might wish to use. One of the other benefits of candlestick charts is that they have been around long enough that patterns have emerged that more often than not show where prices are headed. Patterns can have a placebo effect as well, because enough people expect something to happen, they act in a fashion that causes that event to occur. For example if a pattern says that the price of the dollar will drop, because people expect that to happen, they will exchange their greenbacks for other currencies, causing the dollar to drop anyway. Trading is as much psychology as it is technical analysis, knowing what candlesticks show is a vital part of trading.

The Three Major Types of Market Analysis

Nov 24th, 2010
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There are three ways to analyze the currencies market: fundamental, technical, and sentimental analysis. People often wonder which one of these is best suited for the forex market, but in reality it is all up to personal trading styles. Therefore, knowledge of each of these is helpful and will aid you in perfecting your own methods of trading. The more you know about each type, the better armed you will be in making your own trades.

Fundamental analysis looks at the basic underlying factors of a currency. These analysts look at economic signals, political news, and social realities in order to determine where a currency’s value is headed. Supply and demand is the fundamental analyst’s best friend. The better a country’s economic strength, the stronger its currency will be. There are fundamental indicators and data that help these analysts make their decisions.

Technical analysts look at charts to make their decisions. A chart alone is not enough information to base a decision upon, though. Because of this, these analysts use mathematical formulas within their charts to document and identify trends in order to help them predict where markets are headed. The basic premise of technical analysis is that markets move in cycles. Rather than moving randomly, markets oscillate up and down. By identifying these cycles, traders can get a jump on the currency’s momentum and make a profit. Using systems such as the Forex Profit Multiplier will allow you to take advantage of some solid market analysis.

Sentimental analysis is a method that takes traders’ emotions and psychology into account. The premise here is that these human factors influence where trade patterns go. Bull and bear markets are the most basic examples here. Is the market in a bullish pattern where traders think the price is rising? Or is it a bearish market where the prices are dropping? Identifying trader emotions and thoughts, you can sometimes make money off of the general momentum of the market.

Who Trades Currencies?

Nov 14th, 2010
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Knowing what type of entities are involved in the currency market will help you to gain a better understanding of how the Forex market functions, and consequently help you to make better informed trades. There are four major players in the Forex market: financial institutions, brokers, customers, and national banks. Each of these players fulfills a different function within the market.

Financial institutions account for the most activity in the Forex market. Banks will buy and sell currencies back and forth in an attempt to make a profit. This activity accounts for about two-thirds of all Forex transactions. This happens more often than you would at first imagine, but this is a major way for banks to add interest to their customers’ accounts.

Brokers help clients (who are oftentimes banks) find the best exchange rates possible. These brokers will charge a commission for any trade they conduct, allowing them to profit off of other people’s trades.

Customers, the third category, can be individuals, but the most prevalent type of customers are major corporations. These companies will buy and sell currency not necessarily as a profit making activity, but as a necessity for conducting business in foreign countries. Individual traders, although there are many that fit in this category, do not account for nearly as many dollars traded as what the major corporations will exchange.

National or central banks trade currencies for a number of reasons, the most common being a way for them to regulate their respective currency’s value. The Federal Reserve is an example of a central bank. The Fed might trade currencies in order to keep the dollar at a reasonable value, preventing inflation or other devaluations that the dollar might face.