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Showing results for tags 'foreign exchange'.
Found 11 results
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How Can the Chaos Theory be Applied to Forex? Chaos Theory is a mathematical theory that studies systems, and how small differences in their initial conditions can have majorly differing outcomes. This is often explained and related to as the butterfly effect. This theory is that a small initial condition such as a butterfly flapping its wings could cause a large difference such as a change of weather on the other side of the world. Famous forex trader Bill Williams was one of the first to suggest that Chaos Theory could be applied to the markets, and devised a strategy behind it. The principle behind his ideas is that psychology plays a large part in success, and that the key is to find determinism within events in the market. Traditionally, traders will use technical and/or fundamental analysis to work out which way they think prices are going to move, but Bill Williams believes that this is an inferior way of trading, because neither method works for the dynamical system that is the real markets. There are two critical aspects that must be understood for Williams’ theory to work. The first is having confidence in your own judgement, and the second is proper understanding of the structure or dimensions of the market. According to Williams, there are five dimensions to the market, and analysing each one will reveal further information, building a bigger picture each time. These sections are the following: • Fractal – Trades should not be made before the first fractal appears; indeed, any signals from other dimensions can be disregarded initially. A buy fractal is five consecutive bars, in which the middle bar is the highest. The opposite configuration would be a sell fractal. • Momentum – The Awesome Oscillator illustrates the current market momentum of the last five bars. They are compared with the previous 34. • Acceleration / Deceleration – This dimension measures the acceleration and deceleration of the market momentum, by looking at the momentum and the five bar moving average. • Zone – The fourth dimension is known as the zone, and appears when the momentum and acceleration (or deceleration) are of the same direction. • Balance Line – The last dimension of the market is the balance line, which is the level at which the price would be if chaos was not having an effect on the market. This ‘chaos’ is any kind of information that might be hitting the markets. It is also described with the Awesome Oscillator. The idea is that it requires less energy for the price to move away from this line.
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When a central bank is attempting to limit volatility in the domestic currency, intervention measures are implemented. When foreign purchases are the cause of the excess volatility, Sterilized Intervention is used to treat markets.
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The International Foreign Exchange Master Agreement is aimed at standardizing forex transactions in all aspects of trading. The agreement also outlines practices for defaults or other circumstances seen when contracts are not sucessfully completed. -
The Interdealer Market in the f world is one of the most well known exchanges of this type. The high trading volumes that are seen allow for very tight bid and offer spreads as transactions are made.
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Foreign Exchange Options are often used in Hedging strategies to protect from additional risk for currency positions that are already open. Foreign Exchange Options can help to limit exposure by making potential gains for trades in an opposing direction.
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The Foreign Exchange Market is the largest financial market in the world. Because of the high liquidity levels that are present in these markets, some analysts have suggested there the Foreign Exchange Market is the most efficient of all financial market
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Foreign Exchange Intervention is a tool that is usually used to halt periods of extreme volatility. Since forex rates can have major effects on business activity in the country, excessive volatility is usually viewed as undesirable.
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The primary activity in the FINEX involves the trade of forex futures, as well as options on futures products. The FINE was established to capitalize on widespread interest in financial derivatives.
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The Australian Dollar is abbreviated in a number of ways, such as the AUD, A Dollar, or Aussie. Traders refer to the Aussie as a way of discussing the general strength or weakness of the currency. This comparison is usually made against the US Dollar but this comparison can be made to other currencies as well.
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In this article we will discuss about a widespread, well-known key element of technical analysis. Why do you think technical analysis especially some elements work so well for financial markets? Why do you think Fibonacci levels are usually strictly followed? Because thousands and billions of traders and computer programs for trading use these elements. This way everybody acts the same at the same time… This is why we decided to present in the category of technical analysis, the most used and well-known methods of predicting financial evolution. These methods are easy to understand and are very efficient. We will discuss about Fibonacci levels. We will find out what Fibonacci levels are and how they are calculated. We will use them in our charts and we will see how they act. We will discover how useful Fibonacci levels are and, at the end, we will draw the conclusions. We will use Fibonacci levels daily in our analyzing and trading system. 1. What are Fibonacci levels? The truth about Fibonacci levels is that they are useful (like all trading indicators). They do not work as a standalone system of trading and they are certainly not the “holy grail”, but can be a very effective component of your trading strategy. But who is Fibonacci and how can he help you with your trading? Leonardo Fibonacci was a great Italian mathematician who lived in the thirteenth century who first observed certain ratios of a number series that are regarded as describing the natural proportions of things in the universe, including price data. The ratios arise from the following number series: 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 This series of numbers is derived by starting with 1 followed by 2 and then adding 1 + 2 to get 3, the third number. Then, adding 2 + 3 to get 5, the fourth number, and so on. 2. How are Fibonacci levels calculated? The ratios are derived by dividing any number in the series by the next higher number, after 3 the ratio is always 0.625. After 89, it is always 0.618. If you divide any Fibonacci number by the preceding number, after 2 the number is always 1.6 and after 144 the number is always 1.618. These ratios are referred to as the “golden mean.” Additional ratios were then derived to create ratio sets as follows: The first set of ratios is used as price retracement levels and is used in trading as possible support and resistance levels. The reason we have this expectation is that traders all over the world are watching these levels and placing buy and sell orders at these levels which becomes a self-fulfilling expectation. The second set is used as price extension levels and is used in trading as possible profit taking levels. Again, traders all over the world are watching these levels and placing buy and sell orders to take profits at these levels which becomes a self-fulfilling expectation. Most good trading software packages include both Fibonacci Retracement Levels and Price Extension Levels. In order to apply Fibonacci levels to price charts, it is necessary to identify Swing Highs and Swing Lows. A Swing High is a short term high bar with at least two lower highs on both the left and right of the high bar. A Swing Low is a short term low bar with at least two higher lows on both the left and right of the low bar. Fibonacci Retracement Levels In an uptrend, the general idea is to go long the market on a retracement to a Fibonacci support level. The price retracement levels can be applied to the price bar chart of any market by clicking on a significant Swing Low and dragging the cursor to the most recent potential Swing High and clicking there. This will display each of the Retracement Levels showing both the ratio and corresponding price level. Let’s take a look at some examples of markets in an uptrend. The same points made by these examples are equally applicable to markets in a downtrend. 3. Chart examples for Dow and e-mini S&P 500. 1. In the first example we have an ascending trend and a Fibonacci retracement of 38%. After the price went down 38% of the entire going up value, it returned to an uptrend. The 38% retrace is the best moment to initiate long positions. 2. Here the image is reverse. We have a downtrend, a 38% pull back and then the price continued to go down. 3. The price had a 50% retrace during an ascending trend. 4. The ascending trend had a 61% pull back. 5. The last example shows a good moment to enter long after a 50% retrace 4. Conclusions a. Correctly used and followed, Fibonacci levels along other technical analysis and astrological analysis methods can offer complex and correct information for profitable transactions. b. Trading methods based on Fibonacci levels can be found and can work very well. These methods can be harmoniously correlated with other methods of financial analysis resulting in a complete and complex trading system approaching financial reality. c. We often use Fibonacci levels amongst other various methods of analysis that we will describe later. Dharmik Team
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Hi guys, Just checked the economic schedule for tomorrow. From what I see the rate is schedule to be released at 8:30am ET. Is it me or it's not the normal hour right? Looks like USD, CAD, EUR and GBP will all have their own news. This is probably the first time since started trading currencies I've seen so much news coincided at the same time. Was this intentional?
