Technical Analysis
Technical analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume
We already understood in our beginner’s guide about what the forex market is, what currency pairs are and how to trade in the market. Now we are going to upgrade our knowledge by learning advanced aspects of the forex market like how to use leverage, how to trade with indicators, what the trading platforms are & how to use it.
How to use Leverage?
Leverage is a unique advantage that separates forex market from other financial markets; high leverage gives an opportunity to retail traders who don’t have a huge amount of money to trade in the forex market with highest exposure value. Leverage in forex market varies from broker to broker and ranges between 100:1 & 1000:1. It means if you put 1 $ (in case of 1000:1) then broker provides you another $ 999 and your trading profit and loss will be on $ 1000. If the market goes in your favor then you make profit on $ 1000 rather than on $ 1 however leverage is a double edge sword, if the market goes against you then your losses will be on $ 1000 and it can wipe out your deposits if you don’t manage your risk properly.
How trading happens in the forex market?
This is very important to understand how trading happens in the market and who takes you opposite side of the trade. In the past forex market was traded through market makers. Market makers are nobody but your broker who takes the opposite side of your trade, if you buy a currency pair GBP/USD then you buy GBP and your broker/market maker purchase USD from you. It puts the broker in a conflict of interest situation and there are chances that your broker can manipulate the trade if the market goes adversely. In the recent years new platforms like ECN/STP are developed where the trader has access to large market participants like commercial banks & hedge funds and one side of trades is taken by them without even knowing who took the other side of the trade. Still the majority of the forex market is running on market maker, you get better liquidity and quotes by trading with ECN/STP brokers.
Trading Platform
Forex market trades on trading platforms, various types of platforms are available like Meta Trader 4 and 5 however there are a few brokers who provide their own customized platform including web based platforms to trade anytime just with internet connection. Meta traders 4 is the most popular trading platform and used by majority of brokers. It gives you every tool that is needed for trading, like charts, indicators, interface to use third party software, taking orders both instant and pending, use of stop loss, take profit, limit, buy stop & sell stop etc.
How to use Indicators
The majority of retail traders use technical analysis rather than fundamental to trade in the market. Indicators are the technical analysis tools that predict the movement of the market. Indicators are of various types- indicators that provide signal before the price action like moving average however there are certain indicators that give signals after the price action like RSI, Stochastic etc. Many times indicators give a false signal and that is the most important part of advanced trading tools, how to filter false single from true signal.
Moving Averages are used in pairs like fast moving average and slow moving average. If fast moving average crosses the slow moving average and diverges further and price action is above the moving average then it means that the market is an uptrend and you can buy positions. At the same time if you use stochastic and RSI and if it confirms that the stochastic line crosses the other line from below @ 20 oversold positions and rise further means there is an uptrend and RSI rising above @ 30 positions truly confirms the uptrend.
How to trade with News event?
During a major news event volatility in the market is extremely high and trading in these kinds of situations is like riding on an uneven road. Advance trading guide provides exhaustive details on how to prepare yourself for news event trading.
Conclusion
Advance trading guide would help you to master the art of forex trading to trade in any kinds of circumstances & situations.
Technical Analysis
Advanced Strategies
Learn about using and understanding advanced trading strategies and how to maximize your profits.
Oscillators
An oscillator is any object or data that moves back and forth between two points.