Australia releases its inflation figures only once per quarter, making every publication a big market-mover. Volatility did not disappoint this time either. The headline q/q figures came out at with a minor miss of 0.5% instead of 0.5% expected. Year over year, the miss was similar: 2.1% against 2.2% projected. AUD/USD still responded with a downfall, dipping [...]
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Is Forex Trading Charts Important in Your Trading Journey?
The movements in the price of currency are represented by numerical figures usually accurate to within 4 or 6 decimal places and also in graphical terms with a currency price chart. The pricing chart is mainly used as the essential instrument when performing any form of technical analysis. In order for a trader to increase the chance of a winning trade, the analysis needs to be performed on the currency pair being traded to try and get a level of confidence about the right entry and exit points into and out of the market. This analysis can be both technical and fundamental in nature and it is significant for a trader to be skilled in both.
It is no great shock that technical analysis deals with the technical factors influencing the price movement, factors that are definitive and measurable. In order for any technical analysis to be undertaken the information regarding the currency in question is displayed on a trade price chart. This way a trader or analyst can easily interpret the data being looked at as well as factor in any further influences they may think will affect the currency’s’ movement. Analysts and traders who view themselves as technical first and foremost employ pricing charts as their primary tool for collecting data and calculating their present and forward strategies.
A major advantage of Forex charts is their adaptability. An analyst or trader can look at a selected time period of data whether that in seconds, minutes, hours, days or weeks. The adjustability of a trading chart allows a trader to configure it exactly as needed. So if the strategy requires multiple entries and exits every day (scalping) then the chart can be set to show a very narrow time frame with great detail. Conversely, if a longer time frame is required, so trends and repeat patterns can be highlighted then this can be done easily as well. So charts can help traders whatever their selected strategy may be, both short and long term.
So the Forex chart is now showing the correct time intervals to be useful to the technical trader’s strategy. This is just the starting point from which the important data has to be looked at and analyzed. The many chief indicators that technical traders and analysts use are:
This is only the beginning of the depth of technical analysis that can be performed using trading charts but you can see why many Forex traders spend a great deal of time learning the different technical indicators, how to interpret them and ultimately use them to guide their trading decisions.
To complement the technical aspect to trading is a fundamental analysis which looks at outside influences that may well affect currency prices. Fundamental analysts schedule key financial and economic decisions and announcements into a global calendar so that they are prepared for the effects these may have on the foreign exchange market. Of particular interest would be national or federal budget announcements, GDP figures including official projections as well as unemployment figures and interest rates. Planned or expected decisions such as these often impact the Forex market but often unplanned events can have a bigger effect, such as terrorist attacks or natural disasters.
Charts are a crucial requirement to perform technical analysis but some traders trust these charts alone to guide their decisions and disregard all fundamental factors. This is a mistake as many traders, especially non-professional traders cannot react quickly enough to market reactions to fundamental factors. Regardless of traders preference toward either technical or fundamental analysis it is undeniable that unless you use both of them, trade charts won’t help you that much in achieving your Forex trading goals.
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Monthly Forex News Events that Might Affect EURUSD Volatility – May 2017
The EURUSD technical pattern has become more complex the same way the macro fundamental forces have become more unpredictable. Last month EURUSD continued to exhibit the same ranging pattern that has characterized EUR/USD over the past one and a half year. The biggest market uncertainty for the month ahead remains the 2nd round of the French election. After the first round, the centrist candidate Emmanuel Macron and far-right leader Marine Le Pen have qualified to the runoff on 7 May.
May is set to be an interesting month with major risk events that can disrupt the EURUSD volatility. Seasonally speaking the US dollar has a strong tendency to strengthen during the first half of the month, but at the same time, we can also note the EURUSD tendency to find a significant swing low at the end of the month. The seasonal pattern only gives us the tendency of a particular currency to exhibit a certain behavior at a certain time, so we have to carefully monitor the pattern and how the fundamental forces interact with the price action.
Going forward, we’re going to analyze and disseminate the major news event for the upcoming month that can be the catalyst for higher EURUSD volatility.
“Don’t risk significant money in front of key reports, since that is gambling not trading.”
– Paul Tudor Jones
The month of May will bring several risk events that can be the catalyst for the EURUSD to exhibit higher volatility. If the fundamentals align with the current technicals the EUR/USD can be in the process of reversal. However, we need the fundamental to shift and current monetary policy stances to reinforce the higher EURUSD exchange rates.
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The most important part of trading starts from right the beginning which is choosing your Forex Broker. Your Forex Broker is your partner and in many ways your banker. If you get the wrong partner from the start, then what would happen to your business venture? Yep… it’s pointless even if your business is profitable because your partner will swindle you so fast before you can even say “Yikes!”
How to Select the Right Forex Broker – one of the Forex Broker we use
Cost of Trading
The main cost of trading with an online foreign exchange broker is the spread. The spread is the difference between the price that a financial product can be purchased and the value at which it can be sold. The price to purchase a financial product is called the ask price and the price it is sold for is referred to as the bid price. The spread is how the broker makes money on the trade orders you are placing with them and varies greatly between brokers. Some brokers will also charge a commission on each trade order they execute for you. Usually, this is done with professional level trading accounts that have $50,000 or more in capital and come with lower spread costs. Most brokers will not charge a commission on trade orders placed with lower capital level trading accounts. The minimum amount of money you will need to open a beginner level account ranges from $100 to $500 typically.
The Spread and Pips
The spread will always be given in units called pips. A pip represents 1/100th of 1% and is referenced from the fourth decimal place in a currency pair quote. For example, the currency pair EUR/USD is quoted at 1.3387/1.3389 which means that you can buy 1 Euro for 1.3389 US dollars or you can sell 1 Euro for 1.3387 US dollars. The difference between the buy price and the sell price or the ask price and the bid price is 0.0002 which would be expressed as a spread of 2 pips. Pips will also be used as the unit to describe gains or losses with your investments.
Broker Location
A broker’s physical location can also be an important factor in selecting the right broker for a couple of reasons. You want to have a good internet connection with your broker of choice so that orders placed are executed right away. Things change fast in the foreign exchange markets and you don’t want to miss out on any profitable pips because of lag time between you and your broker. Also, spread values are different from one currency pair to another with the same broker as well as being different between brokers. A broker based in the United Kingdom will most likely have a larger spread on the USD/CAD currency pair than a broker based in the USA.
Leverage, Good and Bad
All brokers will offer some degree of leverage based on your credit up to a maximum limit for the broker. Maximum leverage amounts vary a great deal from one broker to the next topping out at around 500:1. Leveraging your limited capital to make money on money you do not have is an incredible opportunity, but before jumping in and buying 100,000 Euros with 500 US Dollars, there is a significant downside. Sure, you can make a ton of money on the fluctuating value of 100,000 Euro but if things do not go as planned you may lose the entire 500 US you put in plus any further losses taken before the broker was able to close your position.
A margin account is required to use leverage and funds will need to be deposited to cover the minimum margin level which is a pre-defined percentage of your investment. If your investment loses value to the point that the capital in your account does not cover the minimum margin amount then you will get a margin call from the broker which means that you will be required to deposit more funds into your account or the broker will liquidate your investment. It is your responsibility to maintain the minimum margin amount and your broker likely will not consult you before closing your position on an investment to limit the amount of loss taken. Movement comes fast in the foreign exchange markets which can be good or bad depending on the direction things move. Losses are a part of the big picture in foreign exchange trading and as long as you use proper risk management techniques, you will be able to continue to invest and offset your losses with some good profits.
Regulation
Finally, the foreign exchange market is not actually one single market, but multiple markets based all around the world. This fact makes it virtually impossible for a single group or organization to regulate the activities of all brokers and unfortunately opens the door for unethical people to take advantage of you. For the best protection possible, insist that your broker of choice be a member in good standing with the regulating body for the country in which they are based and doing business. The following are a few of the main regulators:
USA – Financial Industry Regulatory Authority and U.S. Securities and Exchange Commission
Australia – Australian Securities and Investments Commission
Japan – Financial Services Agency
Cyprus – Cyprus Securities and Exchange Commission
Switzerland – Swiss Financial Market Supervisory Authority
Germany – Federal Financial Supervisory Authority
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Trump calls out timber to the northern neighbor. Trudeau says Canada will respond firmly and reasonably. The issues of milk and lumber cause tension. The loonie is higher. What’s next? Here are two opinions: Here is their view, courtesy of eFXnews: USD/CAD: Breakout: A Strong Chance Of Hitting 1.40 – SocGen Societe Generale FX Strategy Research [...]
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US consumer confidence drops to 120.3, a bigger drop than had been expected but still a high score. New home sales jumped by 5.8% to 621K in March, much better than 583K projected. The figure for February was revised down from 592K to 587K. The US dollar is slightly stronger in the immediate aftermath, rising within the [...]
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No changes in the latest OpinionWay poll. En Marche candidate Emmanuel Macron leads Front Nationale Marine Le Pen with 61% against 39%. EUR/USD remains on high ground. It isn’t over until it is fully over. The first round is behind us and the countdown to the second round continues. EUR/USD is not only holding its ground [...]
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