Trade Fundamentals in Exchange Markets

The Exchange Trade History and Its Concept Fundamental Analysis

Factors affecting the market tendencies Monetary policy Economic calendar

Technical Analysis Chart types Trend and tendencies Reversal patterns

Capital Management Market enter signals Trading plan

Content

The Exchange Trade History and Its Concept

“In usum negotiatorum cujuseungue nationis ac Linguae”

(“For sales people of all nations and languages”)

Commodity Exchange

Stock Exchange

Foreign Exchange

FOREX Market Advantages

Minimal capital investments High liquidity No direct sales Exchange at any time High yield Large trade volume

FOREXWhat is it?

Concepts

CFD (Contract for difference) Contract for Difference allows to earn on both rise and

fall of price value

Margin Amount taken as a collateral for position opening Taken at the time of trade opening at the open price

and does not change anymore

Margin trading The system works through a brokerage company

providing leverage

Margin Trading Features Small start-up capital

Loans are granted in any currency

Trading is carried out without real money

Loan granting is charge-free in case of intraday trading

Broker allows interest on customer’s available funds

Trade is conducted remotely

Exchange rates

Base currency Quote currency Quote type

EUR USD Reverse

GBP USD Reverse

USD JPY Direct

USD CHF Direct

GBP CHF Cross rate

CAD JPY Cross rate

FOREX: Predictable!

Capital movement Data release and its expectation Policymakers announcements

Fundamental Analysis Definition

Method of price change forecasting through studying macroeconomic factors that influence the price

Purpose Determination of a financial asset true value based on

some macroeconomics factors

News type Unexpected

Scheduled

Factors Affecting the Market

Political Psychological Economic Force-majeureInstability in the country Meeting expectations Monetary policy Natural disasters

Elections Underestimation of events

Economic development Terrorism acts

Scandal resignations Mistaken expectations Catastrophes

Meeting of senior officials

Official statements

Press-conferences

Political scandals

Monetary Policy CB Interest rate correction

CB Interest rate – a rate at which commercial banks borrow funds from the Central Bank.

Change of required reserves rate Required reserves is a share of bank deposits in the

Central Bank

Open market operations – is a purchase/sale of government securities (bonds)

Currency Intervention Definition

Market enter of the CB for the purpose of forced adjustment of the national currency rate

Target National currency cheapening of countries-exporters

Country’s Economic Development Data

Inflation Depreciation of paper money due to its issue in sizes exceeding

the turnover needs that is accompanied by commodities price upturn and real wages drop.

Unemployment Socioeconomic phenomenon when a part of population cannot

find a job

GDP Consumption + government spending + investments + export –

import

Trade Balance The difference between exports and imports of goods

Economic Calendar

Trading Sessions

Session Stock Exchange GMT +3

Asian Tokyo, Singapore, Sydney.

01:00 – 09:00

European London, Frankfurt, Paris.

8:00 – 16:00

American New York 14:00 – 22:00

Technical Analysis Definition

Research method for market dynamics based on studying historical data

Purpose Forecasting of the future price movement

Axioms Price includes everything

Price moves in a certain direction

History repeats itself

Chart Types Line - closing price is marked only for every next

period.

Bar – shows maximal (high) and minimal prices (low), opening and closing prices.

Japanese candlestick – a rectangle between opening and closing prices called candlestick body. A dash from a candlestick body to maximal (high) and minimal (low) price values within this timeframe is called shadow.

Line Chart

Japanese Candlestick

Chart Timeframes М1, М5, М15, М30, H1, H4, D1, W1, MN

high

low

open

close

5M

1M

1M 1M

1M 1M

open

close

max

min

high

low

Black Candle Formation Black Candle Formation

White Candle Formation

open

close

min

max high

low

Trend Reversal Signals

Evening star Morning starShooting star

Open price = Close price

Doji

Trend

Trend is a vector of price movement

Main rule: “Trend is your friend”

Conclusion: “Do not work against trend”

Trend Classification By duration

Long-term– from 6 months to several years

Medium-term– from 2 weeks to 6 months

Short-term– up to 2 weeks

By movement direction Ascending – price goes up.

Descending – price goes down.

Flat – no certain move direction

Trend Line Definition

The line connecting successive data values for determining market direction.

Lines Support line – connects key lows of the market. Resistance line – connects key highs of the market.

Levels Historical level– distinguishing level which the market remembers

for a very long time. Psychological level – level occurring near round price values.

Downtrend

Uptrend and Local Trend

Flat

Reverse Pattern 1. Head & Shoulders

=

=1st shoulder 2nd shoulder

Head

Neck’s line sell

Continuation or Reverse Pattern TriangleTriangle

=

=buy

12

34 5

Min= 200 pipssell

Capital Management Investors

Positional

Speculative

Tactics

Averaging

Locking

Pyramid

Theory of probability

Trading Plan Definition

Systematic description of individual trading

Sections Descriptive part

Information Analysis

Forecast

Market enter signals

Target levels calculation

Threats

Trade opening or closing

Results analysis

FOREX entered the modern life and took its important place in it

FOREX gives opportunity to earn money by your own effort and intellect

FOREX and everything related to it are destined for success

History of FOREX is just beginning

Everyone has a chance to do part for the history of FOREX development!