Online Foreign Currency Trading

CHF - SWISS FRANC

Definition: CHF is the currency symbol for the Swiss Franc. The Swiss Franc is the currency of Switzerland.

CZK - CZECH REPUBLIC KORUNA

Definition: CZK stand for the Czech Republic Koruna

DKK - DANISH KRONE

Definition: DKK stands for Danish Krone. The Danish Krone is the official currency of Denmark

EUR - EURO

Definition: EUR is the currency symbol for the Euro. The Euro is the official currency for the countries that make up the European union.

GBP - GREAT BRITISH POUND

Definition: GBP is the currency symbol for the Great British Pound. The British Pound is the currency of United Kingdom.

HUF - HUNGARIAN FORINT

Definition: HUF is the currency symbol for the Hungarian Forint. The Hungarian Forint is the currency of Hungary.

INR - INDIAN RUPEE

Definition: INR is the currency symbol for the Indian Rupee. The Indian Rupee is the currency of India.

JPY - JAPANESE YEN

Definition: JPY is the currency symbol for the Japanese Yen. The Japanese yen is the currency of Japan.

MXN - MEXICAN PESO

Definition: MXN is the currency symbol for the Mexican Peso. The Mexican Peso is the currency of Mexico.

CHART PRICING OPTION

Understanding Chart Pricing Option

Forex charts can have several different display options for pricing. Prices can be displayed with the asking price, the bidding price, or the average price. The choice you make might depend on your bias, or which direction you intend to trade.

Asking Price

The asking price is the price at which a currency pair can be sold. If you are looking to make a short trade, the asking price is the price that your order will be filled at.

Bid Price

The bid price is the price at which a currency pair can be bought to go long. If you are going long, your order will be filled at the bid price.

Average Price

The average price is between the bid and ask price. The average price is not a price that you can trade, but it is a good way to display the price on the chart because it is not biased towards buying or selling. It gives you a balanced view of the price action.

The Spread

The difference between the bid and ask price is called the spread. The spread is how forex brokers make money while avoiding charging a commission. Theoretically, one trader can put in a sell order on a currency pair and the forex broker can match that order up with an order placed at the same time by another trader to buy the same pair. The seller pays the asking price, and the bidder pays the bid price and the broker keeps the difference in the middle.

A BRIEF GUIDE TO FUNDAMENTAL ANALYSIS

What is Fundamental Analysis?

Fundamental analysis is the study of data and reports on the economic health of a country. Every country releases reports that discuss a different aspect of its economy. The different aspects of the economy include employment report , inflation, productivity, trade, and growth. Reports are released on regular intervals varying from weekly to quarterly.

Different markets will respond in different ways to each report. For example, the bond, stock, and currency markets can respond differently depending upon the data in the report, expectations from previous reports, and general economic conditions.

Why is it Important?

While each economic report is important in its own right, economic reports are not created equal. Certain reports carry more weight and have more impact than others. In the United States, most markets are generally very sensitive to the inflation and employment data. Markets may rally when these reports are released.

Expectations

The actual economic figures are very important. However, many analysts believe that the market actually responds to its expectations of the economic figures. If the market’s expectation was consistent with the actual figure, the market may not respond dramatically. However, if the market’s expectation was significantly higher or lower than the actual figure, a market rally may ensue.

Who uses Fundamental Analysis?

Fundamental analysis is used to varying degrees by nearly every trader. However, Forex traders rely primarily on technical analysis in their currency forecasting. Still, most Forex traders will watch for the nonfarm payrolls report , which is released on the first trading day of every month.

Other traders will rely on a wide array of economic reports to determine the demand (or price movement) of a currency. Every trader decides which reports are most useful for the type of currency trades entered.

Fundamental versus Technical Analysis

An unfortunate conflict has developed between traders. Some traders believe that fundamental analysis is more important because it considers the net demand for a currency. Other traders believe that technical analysis is more important because it analyzes the price momentum of a currency pair and can accurately pinpoint the entry and exit points for a Forex trade.

A trader does not need to choose only one approach. Most experienced traders report that a combined approach to predicting the price movement of a currency pair (using both technical and fundamental analysis) provides the most accurate results.

Fundamental traders use information about the global and national economies, and the financial state of the companies involved, as well as non financial information such as current political and weather information. Fundamental traders believe that the markets will react to events in certain ways and that they can predict future market prices based on these events. For example, if a company receives regulatory approval for a new product, a fundamental trader might expect the company's stock price to rise. Conversely, if a company has a financial scandal, a fundamental trader might expect its stock price to fall. Fundamental traders need access to all of the available information as soon as it is available, and are therefore often institutional traders with large support teams, rather than individuals. Fundamental analysis has probably been in use since there were markets to trade, and has traditionally been done manually, but as computing power increases it has become possible for some fundamental information to be processed automatically.

Technical traders use trading information (such as previous prices and trading volume) along with mathematical indicators to make their trading decisions. This information is usually displayed on a graphical chart and is updated in real time throughout the trading day. Technical traders believe that all of the information about a market is already included in the price movement, so they do not need any other fundamental information (such as earnings reports). There are many different types of charts and many different mathematical indicators. Some indicators are better suited to short term trading, and others are better suited for longer term trend following trading. Individual traders are usually technical traders. Technical analysis appears to have been used at least 200 years ago in Japan. Modern technical analysis is usually performed by the trader interpreting their charts, but can just as easily be automated because it is mathematical. Some traders prefer automatic analysis because it removes the emotional component from their trading, and allows them to take trades based purely on the trading signals.

When day trading, a trader makes the decision about what to trade, when to trade, and how to trade, using either fundamental or technical analysis. Both forms of analysis involve looking at the available information and making a decision about the future price of the market being traded, but the information that is used is completely different. Is it possible to use both fundamental and technical analysis together, but it is more common for a trader to choose one or the other.

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ECONOMIC INDICATORS

Economic indicators are pieces of data from important economic reports. Most of economic indicators are published by government agencies or select private groups. When taking multiple economic indicators into account for a country, traders can get a well rounded sense of a country's financial health.

Major Economic Indicators

Employment Reports
Reports on Inflation and Money Supply
Interest Rate Statements
Retail Sales Reports
Gross Domestic Product

Using Economic Indicators in Forex Trading

Economic indicators can help you get a sense for the general economic trend of a country. For example, an employment report that shows more jobs being created month after month, can show that an economy is becoming more productive. While a falling retail sales report can be a warning that growth is starting to contract.

Over the longer term, these trends can be the basis for a trade. You can invest in countries that are showing strength and trade against countries that are slowing down. This is the most basic element of fundamental analysis.

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NOK - NORWEGIAN KRONE

Definition: NOK is the currency symbol for the Norwegian Krone. The Norwegian Krone is the currency of Norway.

NZD - NEW ZEALAND DOLLAR

Definition: NZD is the currency symbol for the New Zealand Dollar. The New Zealand Dollar is the currency of New Zeland.

PLN - POLISH ZLOTY

Definition: PLN is the currency symbol for the Polish Zloty. The Polish Zloty is the currency of Poland.

SAR - SAUDI RIYAL

Definition: SAR is the currency symbol for the Saudi Riyal. The Saudi Riyal is the currency of Saudi Arabia.

SEK - SWEDISH KRONA

Definition: SEK is the currency symbol for the Swedish Krona. The Swedish Krona is the currency of Sweden.

TRY - TURKISH LIRA

Definition: TRY is the currency symbol for the Turkish Lira. The Turkish Lira is the currency of Turkey.

TWD - TAIWAN DOLLAR

Definition: TWD is the currency symbol for the Taiwan Dollar. The Taiwan Dollar is the currency of Thailand.

USD - US DOLLAR

Definition: USD is the currency symbol for the US Dollar. The US Dollar is the currency of the United States of America.

ZAR - SOUTH AFRICAN RAND

Definition: ZAR is the currency symbol for the South African Rand. The South African rand is the currency of South Africa.

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TECHNICAL ANALYSIS

One of the best reasons to learn how to read a chart properly is so you can apply technical analysis. Not every trader believes in using technical analysis, but it can be useful, even if it is not your primary method of trading. Technical analysis relies on the price that is on the chart you are using. Most charting systems will allow you to add technical analysis tools as overlays on your chart.

Understanding Support And Resistance

Support and Resistance

The concept of support and resistance is simple. Support can be thought of as a floor for the price while resistance can be thought of as the ceiling for the price. When the price breaks through a resistance, that level becomes the new support level. The reverse is true when the price breaks through a support level.

The best use of support and resistance is during trend trading. If the trend is up, you want to go long at support and take profit at resistance. If the trend is down, you want to go short at resistance and take profit at support.

Support and resistance levels are sometimes not exact price levels. Many times, they will be a small range of prices. Once the price clearly breaks past that range of prices, support or resistance is to be considered broken.

Support and resistance should be used as reference points when looking at a forex chart and trying to make a decision. They can give you a good idea of where to put your stop loss or take profit orders.

Technical Analysis

Technical analysis is the study of charts and indicators to determine the past and future price movement of a currency pair. Unlike fundamental analysis , technical analysis relies on the use of charts and mathematical techniques to examine various aspects of a currency pair’s price movement. With the growth of the Internet, technical indicators that were once available only to brokers and professional traders are now available to any trader with a computer.

What Do Charts Tell Me?

Charts can provide a lot of information about the price movement of a currency pair. Many traders say that a chart tells a story about the currency pair. With more than 50 types of technical indicators , a trader can receive a wealth of information about how a currency pair is moving. From this historical information, the trader can deduce the future movement of a currency pair.

Support and Resistance

Most traders are looking for support and resistance lines to tell them where and how the currency price is likely to move. A support line lies below the currency pair price. A resistance line lies above the currency pair price. Depending on the strength of these lines, prices tend to trade between the support and resistance levels, bouncing off one and heading towards the other. Support and resistance lines are basic types of trend lines that can be determined by the moving average lines or by more complex technical methods.

Trends

Many traders will also be looking for a trend line. A trend line shows how a currency pair price is moving (or trending) – up, down, or sideways. Finding a trend can be very helpful in determining future price movement. The saying that “the trend is your friend” is quite true and many traders rely on the existence of a trend to predict price movements.

TECHNICAL INDICATORS

Definition: A technical indicator is a graphical representation of price action. Technical Indicators can appear at the bottom of the chart or on top of the price.

Examples: Technical indicators are often used in forex trading.

A technical indicator studies a particular aspect of a currency pair. Technical indicators are very similar to economic reports in that they study the health and movement of a currency pair while economic reports study the health and growth of an economy. Some technical indicators are basic such as the moving average line . Other indicators are complex calculations like Bollinger Bands or the MACD .

Number of Indicators

Traders can use many different kinds of indicators or they can focus on a few. Most experienced traders will focus their efforts on using only a few types of technical indicators to provide them with the information needed to trade.

Why Use Technical Analysis?

Technical analysis provides information on the best entry and exit points for a trade. On a chart, the trader can see where momentum is rising, a trend is forming, a price is dipping or other events are developing that show the best entry point and time for the most profitable trade. With the constant movement of various currencies against each other in the Forex market, most traders will focus on using technical indicators to find and place their trades.

Is Technical Analysis Difficult?

Technical analysis is not difficult, but it requires studying different types of charts such as the hourly or daily charts, knowing which technical indicators to use and how to use them. Computers and the Internet have made this process much easier. Most brokers provide basic charts and technical indicators for free or at a very low cost. One way to avoid getting frustrated by all the lines, colors, and graphics is to focus on using only a few indicators that will provide you with the information needed. Try not to clutter your chart with too much information.

Remember that the chart is telling a story.

INTRODUCTION TO MOVING AVERAGES

Moving averages are one of the most commonly used technical indicators in forex trading. The moving average helps traders to track the overall pricing trend of a currency. It is called a moving average because it incorporates the new pricing data as it develops.

Main Objective

The main objective of moving average is to give you a simple view of the trend. The moving average can reduce the amount of “noise” and the chart and give you a simple direction to base your trades on.

Time Period Options

Moving averages come in several different flavors. They can be adjusted for the level of average that you want. If you are trading on an hourly chart, you can set a moving average that will give you the average price over the past 8 hours. This is called an 8 period moving average. Traders develop their own theories on what average works best for them. It’s best to experiment with different settings until you find one that makes sense to you.

Types of Moving Averages

SMA – Simple Moving Average

A simple moving average is the most basic style of moving average. It simply tracks price data as it occurs and gives you the average direction based on the time period you select.

WMA- Weighted Moving Average

A weighted moving average focuses on more recent price action. The moving average line will consider recent price movements to be more important than older price movements. This is also commonly referred to as an exponential moving average or EMA.

Using moving averages alone is not a catch all solution, but they will help you determine the overall trend. Used in conjunction with your other preferred technical indicators, they are an asset to any trading system.

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Risk Disclaimer
“Trading in the Forex market is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. Nothing in this presentation is a recommendation to buy or sell currencies and FXcharles is not liable for any loss or damage.”