forex - analyst.ue.wroc.pl · firstly, you usually play with high leverage, so it increases risk...
TRANSCRIPT
FOREX
WhatisForex?(ForeignExchange)•Forexisacurrencymarketinwhichyoucantradecurrenciesalmostfromallovertheworld.Itisdecentralised,sotransactionsalenotmadeinoneplacelikewecanobserveitonstockexchangemarket;
•Banks,individualinvestors,hedgefunds,investmentfundsmeetinthatplace;
• Itisthebiggestmarkettakingintoconsiderationmediumturnover(5,3trillionUSDollarsaday);
•Themostliquidmarket- itmeansthatyoucanbuyorsellanimmenseamountofcurrenciesinad-hoc;
• Tradingispossible24haday.Tradingsessionstartsat10pm.onSunday(10am.onMondayinWellington– startinghourofregulartradingonNewZealandStockExchangeor8am.onMondayinSydney- hourofopeningmarketinSydneyinAustralia)andendson10pm.onFriday(endinghouroftradingsessiononNYSE- NewYorkStockexchange);
•Thehighestturnoccurseverydaybetween9Am.And11Am.,14Pm.And15Pm..
StructureofForexmarket
Source:Jakubczyc,Forex,2012
StructureSmallindividualinvestorsusebroker’splatformtotrade.Itisconnectedwithrisks,butwewillmentionaboutthatlittlefurther.ItsisusuallyMetaTrader 4/5.
Forexfinancialinstrumentsandtransactions.•Spottransaction:
•Simplespottransactions(betweenbiginstitutionsusually)
•CFD(contractfordifference- it’skindofspottransaction);
•Contractswithdeliveryterm:
•SWAP;
•CIRS(CrossCurrencyInterestRateSwap);
•Options.
CFD- ContractForDifferencevol.1• ItisthemostpopularfinancialinstrumentonForexmarketforindividuals;•Onmarketforsmallindividualsyoucantakealongorshortpositionasitisoneverymarket;•Long(BUY)– youspeculatethatpricewillbehigherinthefuture;•Short(SELL)- youspeculatethatpricewillbelowerinthefuture;
•Aseveryfinancialinstrumentsthatderivativehasspread;
•SpreaddeterminesdifferencebetweenBID andASK prices;
•Whenyoutakealongposition,youstarttransactionwithASKandclosewithBID,andoppositetothatwhenyousellyouopenwithBIDandclosewithASK.
CFD-ContractForDifferencevol.2Howdoesbuyorsellpositionsettling(technicalissues)?
• BUYyouopenyourpositionsbybuyingaccordingtofirstquoteandclosebysellingaccordingtoanotherquote
•SELL youopenyourpositionbysellingaccordingtofirstquoteandclosebybuyingaccordingtoanotherquote.
CFD- ContractForDifferencevol.3Whenyoutradeyoushouldknowalsopossibilitiesofmakingandendingtransactions.
StopLoss- pricewithwhichtransactionswillbeclosedwhenpricewillgooppositetoyourexpectations(Short/Long)
Takeprofit- pricewithwhichtransactionswillbeclosed(buypricebreaklevelfromshorterlevel,
sellfromhigher);
Buystop- buyexecutionwhenpricewillbreakthelevelfromshorterlevel;
Sellstop- sellexecutionwhenpricewillbreakthelevelfromhigherlevel;
Buylimit- buyexecution whenpricewillbreakthelevelfromhigherlevel;
Selllimit- sellexecutionwhenpricewillbreakthelevelfromshorterlevel.
CFD- ContractForDifferencevol.4CFDusuallyisconnectedwithleverage.• Leveragesimplymeansthatyouborrowmoneytomaketransaction.Yourlossesandprofitsareconnectedwithamountofborrowedmoney (Maximalknownleverageknownformeis888:1butinPolanditislimitedto100:1byPolishFinancialSupervisionAuthority- Komisja Nadzoru Finansowego)andbignessoftransactionmeasuredinlots.(1lotequals100000unitsofbasecurrency).•Forexampleyouarebuying1lotofEUR/USDwithquote1,02000itmeansthatyouarebuying100000€for102000$.•Requireddeposit- minimumamountofmoneythatgivesyouapossibilityofmakingtransaction.•Yourleverageis100:1.YourdepositisbeingREGISTREDinPLN.•USD/PLNquote3.0000(fixedquotesetbybroker)•Thus,youneed(102000$*3USD/PLN)/100=3060PLNtoopentransaction.It’srequiredminimuminthiscase.•Yourprofitwillbecalculatedfromthatformula: {[ (futurequotingEUR/USDminuscurrentquotingEUR/USD)dividedbyminimalstep(0,00001)]multipliedby(valueoftransaction(100000unitsinthiscase)*minimalstep(0,00001)}multipliedbyquotingofUSD/PLNin(fixed).
CluesRememberthatthistypeoftransactionsareveryrisky:
Firstly,youusuallyplaywithhighleverage,soitincreasesriskbecauseyoumaketransactionsfornotyoursownmoney.
Secondly,duringtradingwithMarketMakers,theycanchangealittlebitquotestomakeasituationthatyouwilllossmoneybecauseofchangerealquote.BeforechoosingForexbrokerreadopinionaboutthattypeofinstitution.
Third,Don’ttradeduringappearingveryimportantpoliticalandalsoeconomydata.Inspiteof,bigliquiditysuddenlyitcandisappearbecauseofdecreasingpriceoforders(betweentwopricestherearenotanytransactions).
Technical&Fundamental Analysis
Technicalanalysisisatradingtoolemployedtoevaluatesecuritiesandattempttoforecasttheirfuturemovementbyanalyzingstatisticsgatheredfromtradingactivity,suchaspricemovementandvolume.
Technicalanalystsfocusonchartsofpricemovementandvariousanalyticaltoolstoevaluateasecurity'sstrengthorweaknessandforecastfuturepricechanges.
Fundamentalanalysisisamethodofevaluatingasecurityinanattempttomeasureitsintrinsicvalue,byexaminingrelatedeconomic,financialandotherqualitativeandquantitativefactors.
Fundamentalanalystsstudyanythingthatcanaffectthesecurity'svalue,includingmacroeconomicfactorssuchastheoveralleconomyandindustryconditions,andmicroeconomicfactorssuchasfinancialconditionsandcompanymanagement.
TheUnderlyingAssumptionsofTechnicalAnalysisTheassumptionthatpricediscountseverythingessentiallymeansthemarketpriceofasecurityatanygivenpointintimeaccuratelyreflectsallavailableinformation,andthereforerepresentsthetruefairvalueofthesecurity.Thisassumptionisbasedontheideathemarketpricealwaysreflectsthesumtotalknowledgeofallmarketparticipants.
Thesecondbasicassumptionunderlyingtechnicalanalysis,thenotionthatpricechangesarenotrandom,leadstothebeliefoftechnicalanalyststhatmarkettrends,bothshorttermandlongterm,canbeidentified,enablingmarkettraderstoprofitfrominvestingaccordingtotheexistingtrend.
HowTechnicalAnalysisIsUsedTechnicalanalysisisusedtoattempttoforecastthepricemovementofvirtuallyanytradableinstrumentthatisgenerallysubjecttoforcesofsupplyanddemand,includingstocks,bonds,futuresandcurrencypairs.
Itismostcommonlyappliedtopricechanges,butsomeanalystsmayadditionallytracknumbersotherthanjustprice,suchastradingvolumeoropeninterestfigures.
TechnicalindicatorsTechnicalindicatorshavebeendevelopedbyanalystsinattemptstoaccuratelyforecastfuturepricemovements.Someindicatorsarefocusedprimarilyonidentifyingthecurrentmarkettrend,includingsupportandresistanceareas,whileothersarefocusedondeterminingthestrengthofatrendandthelikelihoodofitscontinuation.Commonlyusedtechnicalindicatorsincludetrendlines,movingaverages andmomentumindicatorssuchasthemovingaverageconvergencedivergence (MACD)indicator.
Stochastic oscillatorThestochasticoscillatorisamomentumindicatorcomparingtheclosingpriceofasecuritytotherangeofitspricesoveracertainperiodoftime.
Where:C =themostrecentclosingpriceL14 =thelowofthe14previoustradingsessionsH14 =thehighestpricetradedduringthesame14-dayperiod%K =thecurrentmarketrateforthecurrencypair%D=3-periodmovingaverageof%K
%K= $%%('()$*)(,$*()$*) %𝐷 =
%𝐾$ +%𝐾1 +%𝐾23
Overbought vsOversoldLaneexpressedtheimportantrolethestochasticoscillatorcanplayinidentifyingoverboughtandoversoldlevels,becauseitisrangebound.Thisrange– from0to100– willremainconstant,nomatterhowquicklyorslowlyasecurityadvancesordeclines.
Consideringthemosttraditionalsettingsfortheoscillator,20istypicallyconsideredtheoversoldthresholdand80isconsideredtheoverboughtthreshold.However,thelevelsareadjustabletofitsecuritycharacteristicsandanalyticalneeds.
Resistance andsupport levels•Support levelandresistance level-areas ofprice at which the same numberofbuyers (demand)meet thesamenumberofsellers (supply).They cause thecorrection or may reverse atrend.
•Consolidation- Amomentwhen growing price meets resistance or falling price meets support.
Support• Support levelstendtostoppricefromfallingbelowaspecificpoint.
•Because ofalow price Demand
•Because ofalow price Supply
•Support is thepointthat loss stops
Resistance•Resistance levelsactlikeapriceceilingthatpricecannotbreakabove.
•Because theprice is highDemand
•Because theprice is highsupply
•Resistance is apointthat growths stops
Howtodraw resistance/support•Todraw aresistance or support wehave totake interval untill to8months andit’s better tocompare day-to-day charts than forexample hour-to-hour.
•Long-term resistance/support
are more important than short-term ones
Howtouse supportlevels andresistancelevels inpractice?
Supportlevels Resistance levels-Agood placetosetastoploss -Goodplacetosell for„buy pit,sell peak”investors-Crossing support is usually asignal tosell -Crossing resistance is usually asignal tobuy
-Agood placetosetstopbuy- it’s akind ofstoploss that isactivated when theprice exceed existing resistance
WHATISTREND,IMPULS,CORRECTION?WHATISTREND,IMPULS,CORRECTION?
TREND:thedirectionwhichisfollowedbytheprice
IMPULS:growthoftheprice(inuptrend)*
CORRECTION:falloftheprice(inuptrend)*
*indowntrenditisconversely
WHATISATRENDLINE?
- animportanttoolintechnicalanalysis- astraightlinethatconnectstwoormorepricepoints (historicallylinked)- actasalineofsupportorresistance
Uptrend andDowntrend
uptrend downtrend- hasapositive slope andisbyconnectingtwoormore low points- Thesecondlowmustbehigherthanthefirst- act assupport
- hasanegativeslope andisformedbyconnectingtwoormore high points- Thesecondhighmustbelowerthanthefirst
Channels
welinkednotonlylowsbutalsohighs
1) - wedrawparallelline tothetradeLine
- wereceivedachannel,whichisgoingtobepriceoutlookinthistrade =weexpectthatthispricewillmoveinthistrade
2)-weconnectedtwosuccessivelows/high (thesamelikedrawingtradeLine)
-wereceivedthetruecorrelation betweenhighs
-inthisexamplewegotdownwardchannelandthepriceisrecedingfromtheUpperBand=ACCELERATIONOFTHETREND
- ifweareabletogetthelasttwohighsinthemomentwhichispresentedonthechartwereceiveacceleratedtradeline
SLOWDOWN
- whensuccessivelowsandhigharestandingcloserandcloser (biggerdemandandsupply),tradelines,whicharelinkingthelasttwolowsandhighsaregoingtocross eachother
- wedrawaGreenLine(tradeline) andweseethathighsaregoinglowerandlower=DESCENDINGTRIANGLE
- thankstothegreenline,weseethatitcausessuccessivefalls.Inotherwords,wefoundawaytodesignatecorrection!
CONCLUSION
- tradelinesshowscorrelationbetweensupplyanddemand- remembertochoosehighsandlowsfromoneperiodoftime- trendlinescanoffergreatinsight,butifusedimproperly,theycanalsoproducefalsesignals- donotpaytoomuchattentiontodrawingthelines,becausethemarketisnotsoprecise
Marketdepth
Buystop
Buylimit
Selllimit
Sellstop
Market
MarketDepthIfyouuseMarketdepthtools(accessibleandpayableonfuturesmarketratherthanonCFD)
Youcancheckhowhighisliquidityonpricelevels.Itgivesyouapossibilityofcheckinghow”hard”supportorresistancewillbeprotected.Unfortunately,wecan’seebuystopsorsellstopsbecausewewouldseehowmanypeoplewanttobuyorsellinthatprices.Underthesecircumstancestradingdoesn’tmakesense(wewouldknowwhichpricewilloccurwhenbuystops,sellstopswillbeexecuted)
Demandandsupply
Demandandsupplyzones
Demandandsupplyzones
Demandandsupplyzones
Demandandsupplyzones
Demandandsupplyzones
Demandandsupplyzones