Analysis
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As a rule, all discussions about trend reversal on the currency market are reduced to various tools of technical analysis: graphical formations and Japanese candlesticks, breakdown of trend lines and Fibonacci indicators. But is it possible to trace a trend change using fundamental analysis, you might ask? We answer: you can and should! Central banks are the "parents" of powerful trends If you look at the dynamics of currency trading from "great heights" it becomes obvious that all powerful trends are created by central banks. Regulators traditionally use monetary policy instruments to manage economic growth and inflation. The effectiveness of these measures can be viewed in different ways. For example, many economists believe that monetary authorities merely relieve the symptoms of disease, rather than...
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Fundamental factors in the foreign exchange market can be compared to air currents, without knowledge of which no pilot will be able to get a plane from point "A" to point "B". Marking lines alone are not enough to steer an airplane, just as successful news trading requires not only technical levels, but also understanding of the global macroeconomic picture. Unfortunately, many traders do not take into account the pitfalls hidden in the fundamental analysis methodology, and therefore fail one after another. Today we will discuss the mistakes investors make when analyzing the economic background and trading on the news. Mistake 1. Trading on upcoming news So, most market newbies are interested in...
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The "Baskerville Dog" trend continuation pattern was first mentioned by the financial markets legend Alexander Elder in his book "The Fundamentals of Trading". The figure is quite widespread and, in fact, is a failed "Head and Shoulders" trend reversal figure. In the technical analysis of the market it is accepted to consider the "Hound of the Baskervilles" as the figure of the trend continuation, although most market researchers do not include it in the list of classical figures of the trend continuation: flag, wedge, triangle, etc. How is the "Hound of the Baskervilles" figure built on As mentioned above, the "Hound of the Baskervilles" figure of technical analysis is a failed "Head and Shoulders" trend reversal figure. Head and shoulders" figure indicates the end of the uptrend, its reversal and, as a consequence, the opening of the...
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Political events sometimes influence the currency market even more than economic events, because the economic dynamics is largely determined by the course chosen by the country's leadership. Let us find out what is the political risk in trading, what kinds of political risks exist, how they are reflected on the Forex market and how you can profit from them. Why does politics affect currency rates? In the classical sense of the term, political risk for any entrepreneur is the threat of reduction of profits or incurrence of losses as a result of state policy. First of all, it is connected with possible changes in the rate or the very composition of the government. However for traders and investors on the currency market political changes...
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"Cup with handle" in technical analysis is a trend continuation pattern. This pattern was introduced and popularized by the famous American trader William O'Neill and came to the foreign exchange market from the stock market. The appearance of this candlestick pattern is really reminiscent of a cup of coffee or tea, which probably every trader has next to the keyboard. It should be noted right away that the "Cup with a pen" is a continuation pattern only for an uptrend. Let's break down the conditions for the emergence of this candlestick analysis pattern, ways to use it in trading, as well as some features. The most important condition for the formation of a "Cup with a Handle" trend continuation pattern is the presence of...
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A "bow tie" trend reversal pattern is not an ordinary pattern, as it is based not on a repeating stable price pattern with a predictable development, as in most widely used patterns, but on a model formed by technical indicators. More precisely, it is a pattern formed by the intersection of three moving averages. Exactly this feature gives the "Bow Tie" pattern one very important advantage - it's the ability to easily and unambiguously determine this pattern, which is especially important for beginners who do not have much experience with patterns. We can consider the "Bow Tie" pattern as an example of a trading strategy using moving averages. Rules of constructing "Bow Tie" pattern The "Bow Tie" pattern owes its name to the intersection of...
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If you are new to trading and read analytical tapes, fundamental analysis can seem like a set of highly subjective conclusions and assumptions of analysts. Often experts hold diametrically opposed views on the same events, juggling information as they see fit to justify their own position. Meanwhile, an analysis based on clearly defined and verifiable rules can be called objective. Even if those rules are based on fundamental analysis, they can be objective and thus verifiable. For example, "buy when interest rates rise, sell when interest rates fall" is quite an objective rule, while the idea of technical analysis "buy on an uptrend and sell on a downtrend" smacks of subjectivity in...
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Under normal economic conditions, rational investors choose assets that bring high returns, but in the era of instability the determining factor in choosing trading instruments is their reliability rather than profitability. This is why there are the following types of currencies on the currency market: shelter currencies and high-yielding currencies. Let us try to figure out what factors influence the dynamics of these types of currencies and how to predict them. Sanctuary currency for investment preservation Sanctuary currency, or in other words, a safety currency, is a type of currency that strengthens during periods of anxiety and market uncertainty, when investors seek to preserve their savings. Currencies of countries characterized by political and economic stability, low inflation and confidence in the central bank are considered safe...
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Head and shoulders is a classic figure of technical analysis, which signals the reversal of the current trend. The Head and shoulders figure exists in two variants: "Head and shoulders" - for an uptrend, inverted or reversed head and shoulders - for a downtrend. It should also be noted that Double Top and Triple Top are the special cases of Head and Shoulders figures. It should be noted that in spite of the fact that this figure is a classic one, its formation is rather conventional. It means that different traders may build the same Head and shoulders a bit differently depending on chosen timeframe and their understanding of currency mechanisms.
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Under the conditions of the global fall in quotations on stock exchanges and commodity prices, the attention of investors is increasingly attracted to the debt market, the dynamics of which has a direct impact on the change in exchange rates in the international market FOREX. To understand the mechanism of how government bond yields influence currency quotes, it is necessary to refer to the basics of fundamental analysis. State credit and bond yields The activity of any state in the financial sphere is characterized by budget deficit or surplus. In the first case, the country's expenditures for various purposes exceed its income in the form of taxes or non-tax payments, which forces the use of public credit in order to cover the difference between them. The main form of public credit in...
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The economic calendar and planned economic events and news increase volatility on the currency market and often cause unfortunate failures for "technical" traders. We advise to follow the economic statistics releases even to the most ardent opponents of the fundamental analysis and trading on the news: forewarned is forearmed. Below you can find the most important economic releases during the month for the key currencies. Economic Calendar for the US Dollar (USD) America starts the month on the foreign exchange market with the manufacturing and non-manufacturing PMI from ISM (the first and third day of the month, respectively). The first Wednesday of the month is NFP by ADP (non-farm payrolls) .....
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Fundamental economic factors and trading on the fundamental analysis of the Forex market is not an abstract concept. Every day traders encounter events in the form of news published in the economic calendar. Economic indicators are issued in the form of reports at a set time (weekly, monthly, quarterly). Approaches to using the economic calendar by a Forex trader There are different approaches to using the economic calendar in the market. Some traders trade "on the news", i.e. they open positions according to their expectations of a changing economic indicator (for example, growth of GDP in the Eurozone is expected - they buy Euros). Others, on the contrary, avoid the news, as trading on them involves some risk. Such traders prefer to wait for the market to "digest" the news,...
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There is no more pressing topic than the imposition of economic sanctions. At the same time, few understand the forms, methods and goals of these sanctions. Restrictions always affect both sides, affecting the economy, the business climate and consumer sentiment. Figuratively speaking, sanctions are a weapon that shoots at both sides. Economic sanctions - concept and objectives Economic sanctions are measures of an economic nature applied by one or more countries against another country or group of countries. Economic sanctions can take the form of complete or partial bans on imports of goods from or exports to a country as well as restrictions on financial transactions. The purpose of...
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It is possible to make money in the Forex currency market with the help of various strategies. Some traders develop trading systems based on technical analysis, others stick to fundamental views. Someone combines both types of analysis and tries to realize an ideal model. For the last several years trading robots based on certain algorithms are gaining popularity. But there are some traders who trade only on the Carry Trade strategy. What is this trading tactic and what are the pitfalls? Let's consider it in details. Carry trade is the game based on the difference of interest rates of central banks Carry trade enjoys great popularity among both non-professional participants of the currency market and institutional investors. This can be explained by...
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The pattern "Dragon" is one of the "exotic" varieties of reversal patterns in the market and, to be exact, is a more modified version of the pattern "Double bottom", at the same time it signals about the change of bearish market to bullish one. Correspondingly, "Inverse Dragon" pattern is formed when the growing trend is over and the market starts its decline. Signals of the inverse pattern are similar to the signals during the formation of the pattern "Double top". How is the pattern "Dragon" formed on the price chart? The pattern "Dragon" is formed in a falling market. Its formation begins with the Head (1). It represents the local maximum of the upward correction in a falling market. After the formation of the Head of the Dragon pattern, the market continues to fall, as a result of which the price chart...
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Замечали ли вы когда-нибудь, что некоторые валютные пары движутся в одинаковых направлениях? Например, пара NZD/USD в большинстве случаев повторяет траекторию движения пары AUD/USD. Это явление называется «корреляция». Итак, валютная корреляция – мера взаимной зависимости двух валютных пар. Коэффициент корреляции представляется в десятичном формате и варьируется в диапазоне от +1.0 до -1.0. Корреляция +1 (положительная, прямая) означает, что две валютные пары 100% времени движутся в одном направлении. Корреляция -1 (отрицательная, обратная), наоборот, означает, что две пары 100% времени движутся в противоположных направлениях. Нулевая корреляция означает, что две пары никак не зависят друг от друга. Наиболее яркими примерами пар, имеющих прямую корреляцию,…
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In the last issue of ForTrader.org, we learned about the general fundamental factors that cause exchange rates to move. Now we will take a look at the specifics inherent to specific currencies. To begin with, it is worth mentioning that currencies are divided into "shelter currencies" and "risky currencies" in terms of how investors view risk. Refugee currencies strengthen during times of market anxiety and uncertainty as investors seek to preserve their assets. Risky currencies are the currencies of commodity-exporting countries. The demand for them grows during the periods of relative stability in the world economy and politics. Indicators of investors' appetite for risk can be seen in the dynamics of global stock markets (growth points to the appetite for risk, decline - the aversion of investors to risk). Now let us turn to...
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Forex market analysis is divided into technical and fundamental. Technical analysis relies solely on the price chart and shows what is and has been happening in the market. Fundamental analysis explains what fundamental, or in other words, economic factors caused the price movement. Traders who want more than "buy on the green and sell on the red" must understand these factors. We will begin our master class with a general overview of the fundamental factors. In the following issues, you will learn how to use them in trading for maximum efficiency. Economic Indicators In general, a currency can rise in value for two reasons - if its supply (volume in circulation) in the world market decreases, or if...
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The proverb "Haste makes history" also applies to the stock market. Let me illustrate this with a live example. Sberbank's live "head" At the moment, an inverted "head and shoulders" pattern is forming on the chart of Sberbank's common stock. Other articles from the "Stock Market. The "Diamond" or "Rhombus" pattern: dangerous signal for traders The "widening formation" pattern teaches to relax A little more about TA figures: "triangle" or "head and shoulders"? "Flags" and "pennants": a pattern analysis peculiarities. Should we be tempted by the falling Russian stocks? Despite the fact that the figure has not yet completed the drawing of its second "shoulder", not to mention the breakdown of the "neck line",...
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As I promised last time, today I will tell you what happens when an insidious "expanding formation" pattern merges with an equally insidious "symmetrical triangle" pattern as part of my study of classical technical analysis for the stock market. But it's simple: there appears a rare and little-studied on the daily data of the Russian stocks "Diamond" or Rhombus trend reversal pattern. Figure "Diamond" - the rules of formation The figure "Diamond" is a strange figure, because the process of its formation takes a long time. Russian shares quotations are too emotional to stay in a limited range for a long time. In classical technical analysis literature you can see not only the terms of formation and description of "Diamond" and "Rhombus" figures, but also find out...
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