Fundamental analysis
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There is an opinion that the fundamental analysis of the currency market is a work with news flow and trading on the news itself, but this opinion is wrong! In fact, trading on the news is catching volatility; you do not even need to analyze the values of this or that macroeconomic indicator. The Essence of Fundamental Analysis Most of what we see in the economic calendar is not necessary for intraday trading. To be fair, it should be noted that it is difficult to apply the findings of the fundamental analysis to intraday trading, rather this information will be useful for position traders, ie, those who trade on a medium- and long-term basis. In my opinion, the whole essence of the fundamental analysis comes to...
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Articles in the economic media are full of the word "default," and the average reader with no economic education gets the impression that default is at least the local end of the world. And there is a widespread desire to urgently exchange the dollars (euros, Mexican pesos or Mongolian tugriks) stashed away for something that this "terrible default" will not touch. Let's find out what "default" really means. There are no shortage of defaults in the world First of all, we should note that the term "default" (Default) means any refusal to fulfill a debt obligation. In fact, default is the worst kind of bankruptcy. However...
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Everyone has heard about the "shale revolution" and the "shale boom" in the United States, but few people have any idea what shale oil is, how it is produced, or whether it is such a threat to "classic" oil. Types of shale oil Shale oil is a mineral and, like "classic" oil, is formed from organic residues that have fallen under the influence of certain geological factors. The modern energy industry distinguishes between two types of shale oil depending on how it is produced: Tight Oil This type of oil consists of light fractions and is found in reservoirs with low permeability, which is the reason for its name. Tight oil is produced by hydraulic fracturing and drilling...
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In order to predict the future dynamics of a currency pair a huge number of techniques have been developed. Nevertheless, quantity has not turned into quality and getting a fairly effective forecast is not the easiest task. Let's take a look at the four most common methods of forecasting currency pair rates. Purchasing power parity theory (PPP) Purchasing power parity (PPP) is probably the most popular method. It is the most often cited in economics textbooks. PPP theory is based on the principle of the "law of one price," which states that the cost of identical goods in different countries must be the same. For example, the price of a cabinet in Canada must be the same as the price of the same cabinet in the United States, taking in...
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Отслеживая краткосрочные колебания валютных пар, так же легко упустить из виду общие рыночные тренды, как и не заметить более широкую торговую экосистему, сосредоточившись на незначительных колебаниях курсов по открытым позициям. Рынок – это полноценный мир с широчайшим диапазоном участников от частных трейдеров, как вы, до межбанковских сетей и центробанков. Выступая в качестве индивидуального розничного трейдера, вы находитесь внизу пищевой цепочки, вы – мелкая рыбёшка. Хотя имеете возможность покупать и продавать те же самые валютные пары, что и другие участники, тем не менее, вам необходимо преодолевать более длинные цепочки транзакций, в сравнении с другими, чтобы получить ликвидность, так как вы не…
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This article considers an algorithm for probing the state of the market for randomness and algorithms for trading in a chaotic and trending market. As numerous researches of the market[1] have shown, (20 -25)% time it is in a state of trends, and (75-80)% time it is in a quiet state of motion similar to Brownian motion, i.e. "chaos". Thus, the main qualitative characteristic of the market state is the chaotic mode of its behavior in time. Chaotic market 80% time is stable with respect to small perturbations. It is these considerations that underlie the modern notion of dynamic chaos. The mathematical representation of the established regime of the chaos state of the market is the limit cycle, and the disruptor of the regime is the trend market state with resonance phenomena (continuous jumps) .....
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When a player performs a technical analysis of an exchange, he analyzes the changes that have already taken place in the exchange rate. He studies what exactly is happening to the currency pair, which he is interested in. During the fundamental analysis, the player is trying to get to the bottom of what caused certain changes, why the market moves in a certain way and not otherwise. This approach is usually more effective, because in this case a trader can make a forecast about the future course of the currency rate. Well, fragmentary analysis, in fact, combines both of these methods and their methods of economic analysis. Plus with the passage of time, with a certain practice the player can make...
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Among active traders actively working in all kinds of stock markets, including the foreign exchange market, there are two basic approaches to the analysis of price movements. These are technical and fundamental analysis. It can be noted that the differences between these two approaches are, we can say, fundamental and somewhere even philosophical in character, at that extreme representatives of these two schools of analysis of exchange markets do not admit each other, considering their direction as the only right one. The golden mean a It has happened historically that most of private traders in our country preach mainly technical analysis, sometimes rejecting the advantages of the other approach. Ardent adherents of technical analysis, as a rule, are not interested in anything but charts,...
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If currency rates did not change, we would not have to wonder every day what the current exchange rate is for the dollar, the euro, or the pound sterling. We would always know that one British pound is equal to so many U.S. dollars. It used to be that way. That all changed in the early seventies of the twentieth century, when the major world powers made their national currencies float. Since then, the market has determined the rate of each national currency. And what does it mean - "the market determines"? It means that the rate of a currency (in other words, its price) is determined by a basic law of the market-the law of supply and demand. Currencies whose demand is increasing become more expensive. A currency, the demand for which is falling, is...
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With the onset of the global financial crisis, the economies of many countries were threatened by the onset of recession. Governments reacted quickly and began to help their economies by rolling out stimulus programs. Within a year, governments around the world had already spent more than $10 trillion on stimulus. Such injections have borne fruit, and economies have shown the first signs of recovery. Observing the positive shifts, many scientists and experts began to talk about the strategy of stopping the stimulus. This article will discuss why it is important to end the stimulus in time and how to know when to end the stimulus. Why is it important to end the stimulus on time? The question of the timing of stopping the stimulus is important because both too early and...
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If we look at the structure of the Central Bank's reserves, we find that part of the reserves are held in SDRs (Special Drawing Rights). The essence and purpose of SDRs is the subject of this article. The concept of SDRs SDR is the potential right to a portion of the money of the International Monetary Fund. The SDR is also often referred to as a synthetic currency. When a country joins the IMF, it makes a contribution. The Fund, in turn, issues SDRs and distributes them to countries in proportion to their contributions. At this point, part of the money contributed is actually exchanged for SDRs. At the end of these operations, the country has those same SDRs in its accounts. If the country needs the money, it can sell some of it.
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The world currency market has developed its own specifics. Currency pairs are divided into a number of blocks according to their degree of influence and dependence on certain factors. Major currency pairs on the Forex market The major block includes currency pairs with the US dollar. The exceptional role of these three currencies on global markets is due to several factors: Firstly, a special role of the US dollar established by the Bretton Woods and later the Jamaica agreement. According to these agreements, the global financial system is based on the national currency of the United States. The dollar has three important functions: USD is a universal means of payment in international trade, besides, it acts as a basic asset...
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Only in the period from November 1636 to February 1637 the price of tulip bulbs in Holland increased more than hundred times, reaching the price that is now equivalent to tens of thousands of dollars per bulb. But already on February 3, 1637 it became clear that no one was buying bulbs at those prices anymore, and the prices went down sharply: by May 1 the prices had dropped more than a hundred times and reached the level of 1636, while they kept on dropping. Thus unfolded the events of one of the most famous financial crises in history - the tulip speculation bubble. Many bubbles have burst since then, and economists are faced with the task of...
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As the global financial crisis unfolded, it turned out that securities backed by U.S. mortgages were very widespread: many companies, from giant investment banks to small investment funds, owned them. When these securities turned out to be problematic, it caused a lot of trouble, and the widespread nature of these securities ensured that the problems were truly systemic in nature. In this article, however, we are not going to touch on the causes of the crisis, but rather examine another phenomenon: the securitization mechanism that makes securities, such as mortgages, so widely available. The concept of securitization Formally, securitization (from the English word "securities") is a way of raising finance that involves the issuance of asset-backed securities,...
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I think you have seen more than once how the market seems to react paradoxically to certain news. Yesterday on the increase of inflation in the UK the pound went up by 50 points, although a year ago it hardly reacted to this news, yesterday on Consumer Confidence the market did not react at all, and in a couple of months it will make flights of wounded woodcock at the slightest deviation of the released data from consensus forecasts of Reuters or Bloomberg. So what's the point? The point is that the market reacts differently to the same news at different stages of the economic cycle. But it's all "blah, blah, blah, blah," as they used to say in one...
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Financial crises are a very common phenomenon in today's economy and bring a lot of trouble to both businesses and governments. Financial crises, their mechanisms and consequences are quite diverse. In order to better understand the essence of the phenomena taking place, it is useful to be able to identify crises. To "get acquainted" with financial crises we will look at their typology and the general characteristics of each type. A financial crisis can be defined as a situation where some financial companies or assets (like stocks or bonds) lose a large amount of their value. Clearly, financial crises primarily affect the financial sector of the economy. However, due to the fact that the real sector is closely...
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Eurozone - 12 countries that use the euro to calculate gross national product: Germany, France, Italy, Spain, the Netherlands, Belgium, Austria, Finland, Portugal, Ireland, Luxembourg and Greece. European Central Bank (ECB) Supervises the monetary policy of the Eurozone. The decision-making body is the Governing Council, which consists of the Board and the national central bank governors. The Board consists of the President of the ECB, the Vice President, and four other members. Policy objectives of the European Central Bank The main goal of the ECB is price stability. There are two main "pillars" of monetary policy here. The first is the perspective of price developments and the risks of price stability. Price stability is defined as keeping the Harmonized Index of Consumer Prices (HICP) at...
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Knowledge of economic cycles helps us understand the meaning of changes in the currency or stock market, in a company or enterprise, and in the economy as a whole. The development of economic processes is cyclical: growth is necessarily accompanied by a decline, followed by recovery and new growth. Economic cycles are periodic fluctuations in the levels of production and consumption (supply and demand). Usually the dynamics of the economic cycle can be divided into the following phases: 1. Recession or downturn. There is a decline in business activity, a drop in production, a decrease in employment and income. Depending on the degree of economic decline and the time factor of the recession, a distinction is made between a crisis and a depression. A crisis is an imbalance in the economy,...
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Exchange rates of the world's major currencies are created when banks trade on the world market and are determined by supply and demand for a particular currency. The currency of the country will be in demand and competitive in the market, if the economic and political state of the country is stable. The central bank of any country has a large number of financial instruments to support the stability of its own national currency. The main method for this task is to regulate the amount of money in circulation. An oversupply of one currency in the market creates an increase in its supply and causes a decline in the rate of that currency in relation to others. In turn, a shortage of currency in the market generates a demand for it and will lead to an increase in the exchange rate....
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Currently, there are many quantitative approaches based on the search for nonlinear and chaotic dynamics in the behavior of financial markets. Among these approaches, a significant role is played by fractal and multifractal methods, which are also used to predict stock market crises. Among them, a class based on the study of the local regularity of financial time series can be distinguished. For this purpose, various indicators are usually constructed, analyzing which it is possible to draw conclusions regarding the regularity of the exchange rate series. In order to get an effective forecasting model it is necessary to thoroughly analyze the nature of the influence of factors which influence the formation of the exchange rate. The important role is played here by the availability of statistical data related to the considered factors and exchange rate dynamics. The development of the market is determined by fundamental...
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