Forex Guides

The chart used to show the price movement in your live/virtual account. The best chart which is fix with your understanding. Normally, professionals using the candlestick cart.Bar patterns
There are a variety of charts that show price action. The most common are bar charts. Each bar will represent one period of time and that period can be anything from one minute to one month to several years. These charts will show distinct price patterns that develop over time.

Candlestick patterns
Like bar charts patterns, candlestick patterns can be used to forecast the market. Because of their colored bodies, candlesticks provide greater visual detail in their chart patterns than bar charts.

Point & figure patterns
Point and figure patterns are essentially the same patterns found in bar charts but Xs and Os are used to market changes in price direction. In addition, point and figure charts make no use of time scales to indicate the particular day associated with certain price action.

Traders are anxiously awaiting next month’s data releases. It will be the first glimpse of the U.S. economy during September, when the Fed Funds Rate was cut by 50 basis points. Admittedly, the cut didn’t occur until September 18–just over halfway through the month. This hardly allows time for cut-related liquidity to work its way through the system. Still, the cut was widely anticipated. It’s likely a 25-to-50 basis point cut was priced into certain business decisions (exporting, borrowing, manufacturing, etc.). It was certainly priced into the financial markets.

Traders will get an early look at September data during Friday’s Chicago PMI release. As we’ve noted before, the Chicago PMI is the best regional proxy for next week’s key ISM Manufacturing survey. This isn’t just an opinion; it was confirmed in a study by Briefing.com. While the correlation is stronger in the long-term, the two indicators still print the same direction about 60% of the time on a month-to-month basis. Last month, the Chicago PMI registered at 53.8. Read the rest…

What is Expected

Time of release: 09/18/2007 18:15 GMT, 14:15 EST
Primary Pair Impact : EURUSD
Expected: 5.00%
Previous: 5.25%

Effect of The FOMC’s Rate Decision on EURUSD After Previous Releases

June 2006 FOMC Rate Decision

For some insight into price action following a rate decision that involves some level of uncertainty, we look back to June 29, 2006 when the Fed last changed rates at the end of its 2005-2006 tightening cycle. The central bank’s consistent hikes had become a staple for all investors in the financial markets and another 25 basis point increase to the benchmark rate to 5.25 percent alone was somewhat played down. This conditioning likely contributed to the strong price reaction in the dollar when the statement hit the wires. The Fed made mention of moderating indicators that prompted the comment that further policy changes would be based on both growth and inflation forecasts. The change prompts a dollar sell off and a trade that books 30 and 60-point targets.

Read the rest…

Dollar Continues Higher, Focus Turns to FOMC Minutes

Dollar extends strength as market’s focus is turning to the release of FOMC minutes today. Minutes of the Sep 18 meeting, where a 50bps cut in federal funds rate was decided, will be closely examined by the markets for guidance on Fed’s next move when policymakers meet again on Oct 31. The major question is whether the 50bps cut is one off, or is it the start of a short policy easing cycle which will see more rate cuts down the road. Markets have aggressively scaled back expectation for another cut in Oct after last Friday’s Sep job report. However, they’re still pricing another rate cut by December and will look into today’s minutes to grab more proofs for such expectation. Read the rest…

Technical analysis assumes that:

• All market fundamentals are depicted in the actual market data. So the actual market fundamentals and various factors, such as the differing opinions, hopes, fears, and moods of market participants, need not be studied.
• History repeats itself and therefore markets move in fairly predictable, or at least quantifiable, patterns. These patterns, generated by price movement, are called signals. The goal in technical analysis is to uncover the signals given off in a current market by examining past market signals. Read the rest…

RSI signals that are not derived from overbought or oversold

Ever wondered how you can generate signals from RSI apart from the usual overbought and oversold levels? It can be done although personally I wouldn’t trade on signals that do not include an input from price. Let’s face it RSI can be very frustrating when it fails to reach overbought or oversold for long periods of time. Well, let’s just consider what RSI is telling us and whether we can use that concept in another way.

In fact RSI is calculated by measuring the sum of the higher closes and also the sum of the lower closes and normalizing the ratio of the result within a band of zero to 100. Clearly, when price rises then the sum of the positive close movement is larger than that of the negative close movement and thus RSI moves higher. The opposite is also obviously true.

Therefore RSI is reacting to sustained directional moves in one direction. What we need try and obtain from that information is when the RSI moves sufficiently in one direction is there risk of follow-through.

We actually do this type of thing with price by placing Bollinger Bands around price and looking for breaks of the upper or lower bands. It is possible to do just that with RSI. It will look like this:

Read the rest…

The exponential moving average (EMA) is a less popular but more sophisticated version of the simple moving averages. You need a computer trading program such as FutureSource to employ an EMA indicator. With the EMA, more importance is put on the recent price action, but all the price data in the futures contract is used. I’ll define the EMA below and then I’ll discuss how I use and rank this trading tool in my “Trading Toolbox.”

An EMA is another type of moving average. In a simple moving average, the price data have an equal weight in the computation of the average. Also, in a simple moving average, the oldest price data are removed from the moving average as a new price is added to the computation. The EMA assigns a weight to the price data as the average is calculated. Thus, the oldest price data in the EMA are never removed, but they have only a minimal impact on the moving average. The EMA calculation is achieved by subtracting yesterday’s exponential moving average from today’s price. Adding this result to yesterday’s exponential moving average results in today’s moving average. Read the rest…

Traders are anxiously awaiting next month’s data releases. It will be the first glimpse of the U.S. economy during September, when the Fed Funds Rate was cut by 50 basis points. Admittedly, the cut didn’t occur until September 18–just over halfway through the month. This hardly allows time for cut-related liquidity to work its way through the system. Still, the cut was widely anticipated. It’s likely a 25-to-50 basis point cut was priced into certain business decisions (exporting, borrowing, manufacturing, etc.). It was certainly priced into the financial markets.

Traders will get an early look at September data during Friday’s Chicago PMI release. As we’ve noted before, the Chicago PMI is the best regional proxy for next week’s key ISM Manufacturing survey. This isn’t just an opinion; it was confirmed in a study by Briefing.com. While the correlation is stronger Read the rest…

One of the most basic and widely used indicators in a technical analyst’s tool box, moving averages help traders verify existing trends, identify emerging trends, and view overextended trends about to reverse. Moving averages are lines overlaid on a chart indicating long term price trends with short term fluctuations smoothed out.

There are three basic types of moving averages:

• Simple
• Weighted
• Exponential

A simple moving average gives equal weight to each price point over the specified period. The user defines whether the high, low, or close is used and these price points are added together and averaged. This average price point is then added to the existing string and a line is formed. With the addition of each new price point the sample set drops off the oldest point. The simple moving average is probably the most widely used moving average. Read the rest…