Get started

Forex-trading-signals

Dollar IndexHello everyone! There are many tools on the market to understand the general state of the economy or the company. As a rule, indexes are responsible for this. And today we will discuss the Dollar Index. A little history In 1973, the dollar Index (DXY) was invented and first introduced by JP Morgan. Level 100 is the base value of the index. If the instrument shows, for example, a value of 110, it means that the dollar has grown by 10% relative to the base value. As you may remember, in March 1973, the largest countries in the world introduced a floating exchange rate – this date was the beginning of the index. About the index With the help of the dollar index, analysts determine the strength of the dollar as a whole. This is a very simple analysis tool that almost every analyst uses and shows the index how strong or weak the dollar is relative to other world currencies. Method of calculating the dollar index The index consists of weighted components of the following currencies: euro (57.5%), Japanese yen (13.6%), British pound sterling (11.9%), Canadian dollar (9.1%), Swedish krona (4.2%) and Swiss franc (3.6%). As you can see, the currencies with which the dollar is compared are European countries, which is why DXY is called an "anti-European" index. Based on the number of currencies in the index, people believe that the US is compared with six European countries, which is incorrect, since the euro is officially the currency of 19 EU countries: Austria, Belgium, Germany, Greece, Ireland, Spain, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, Finland, France, Estonia. Add to this 5 more countries — Japan, Great Britain, Canada, Sweden and Switzerland and we get almost the entire civilized world. Although all countries are united by one currency, their economies are still different and therefore each currency of a separate country has a corresponding weight in the index. Dollar Smile One of the Morgan Stanley analysts noticed an interesting feature of the dollar – the dollar can strengthen in both bad and good economic conditions. This analyst was Stephen Jen and it was he who came up with the "dollar smile theory", the essence of which is that the dollar adheres to three scenarios: 1. "safe harbor" - investors believe that the economy is experiencing difficulties, so everyone is investing in less risky dollar assets. 2. When the US economy is weak, the dollar falls. The fall is strongly influenced by interest rates, as a result, everyone gets rid of the dollar, and the smile becomes wider. 3. Perhaps the easiest period to understand is the growth of the dollar due to the economic growth of the United States. People increasingly believe in the country and the currency, which contributes to a greater growth of the dollar. Thanks to this theory, it is easier to understand the market situation in general and the cyclical nature of the market. How to use the index The index is usually used to analyze currency pairs. The index helps to determine the relative strength of the currency relative to the dollar, at those moments when you trade currencies in which there is USD, for example, EURUSD, GBPUSD, USDCHF, etc. The index is also used to find discrepancies. If DXY falls and the dollar weakens, then you will see growth on the GBPUSD chart. If the dollar is the base currency, for example, USDJPY, then the index and the currency pair will move in the same direction. Often you will notice that the dollar index is growing, and the currency pair is standing still – this is the discrepancy, which is very profitable for an observant analyst. In addition to correlation with currency pairs, DXY correlates with oil. The fact is that the largest oil consumers are hedgers of dollar inflation. Hence the inverse correlation of these instruments. Professional analysts, before currency trading, look at the dollar index to understand the trend directions. Conclusions Thanks to the index, you can understand the state of the US economy. DXY is a great addition to your strategy, which helps you identify trends or find discrepancies on the charts. Using the index you will avoid mistakes and increase your profit.
Education
by DeGRAM
3
ERRORS ON PIN-BARSThere are a large number of technical analysis figures, there are many different patterns, but as you know, they do not work 100% of the time. No matter what you trade, you should always pay attention to the market context and the pin bar is no exception. Pin bar is a very profitable pattern, provided that you trade it correctly. Beginners often make mistakes trying to trade every pin bar that is formed in the market. Today we will try to analyze the most common mistakes of beginners when trading a pin bar. 1. Trading pin bars in trending markets To begin with, every beginner should learn how to trade a pin bar in trending markets, because any pattern will work itself out if it trades in the direction of the trend. The trend is still our friend and we should use its strength to open positions. Look for an entry point on the pin bar in the direction of the trend and avoid losses. 2. Pin bar on daily charts A trader should be able to trade a pin bar on daily charts, because a daily chart is the best chart for trading. This is a fact. If you do not know how to trade a pattern on a daily chart, then you will not be able to trade it on smaller timeframes. As you know, the market is full of trading noise on low timeframes. That is why patterns are most difficult to work out there. In such noise, false signals appear that confuse beginners, but an experienced trader will be able to determine a really profitable entry point. 3. Market conditions It is very important to understand where to expect the right pin bar, which will bring profit. Pin bars can be found anywhere in the market, but this does not mean that each of them will bring you profit. No. The strongest signals occur near strong levels, it is at such points that it is worth looking for an entrance. 4. Stop loss Very often, traders trade a reversal pin bar, hoping to catch a trend change. If you catch such a movement, you can earn a lot, but it's difficult to do it. The price rarely immediately reverses after the pin bar, the market will fluctuate and if you put a stop loss too close to the position opening point, you may be knocked out. It is most correct to put a stop loss where the closing of the position will be correct, perhaps a little further than the opening point. No one wants to be knocked out of position ahead of time and watch the price go where we wanted, but without us. Conclusion The strongest signals simply cannot appear everywhere on the chart. You need to be able to filter out the signals correctly and use the most profitable ones. To do this, first study the theory, gain experience on older timeframes and only then practice more. Take your time. Good luck! Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩‍💻
Education
by Lingrid
13
THE MAGIC OF COMPOUND INTERESTEach of us wants to get rich in order to fulfill our dreams: to fly around the world, buy a car or a house, and maybe even buy a plane. Investing can help make a dream come true, but not everyone has enough knowledge to make money trading. And what to do? Capitalization magic increases numbers to high values very quickly. Naturally, it also works with money, but a little slower. This is called compound interest, and that's what we can use now, no matter how deeply you understand investments. The most frequent advice in the financial sphere is to accumulate your funds and invest them as early as possible. When you start accumulating as early as possible, time is on your side, and the accrual of compound interest plays a big role in this. The best way to demonstrate compound interest in action is the following example. There is Louis and Jen, both 20 years old. They are given the opportunity to make a long-term investment with a starting capital of $ 5,000 at 10% per annum for the next 45 years. And they have to make a choice: 1. Annually collect the earned interest or 2. Reinvest interest income annually. Louis likes to get paid. He already has ideas on how to spend the first interest payment. However, Jen is looking to the future. She decides to reinvest them. Louis invests his funds and receives the same income of $500 every year. Louis is happy to take his $500 every year. After 45 years, nothing changes for him. He still has his original $5,000 and 45 years of interest spent. The power of capitalization Jen is obsessed with savings. She knows that over time, interest will bring her much more money. The first few years of capitalization are pretty boring, but Jen waits patiently, because every year her interest income is higher than in the previous one. Little by little, but the snowball effect is gaining momentum. Around the ninth year, the picture becomes fascinating. Jen gets enough interest income to double her first deposit. Soon, the interest income exceeds her initial investment amount of $5,000. And she gets a percentage of her interest. This is the power of compound interest. Imagine what Jen could have done if she had invested $5,000 in work every year for the same period of time. Currently, 10% look too optimistic, but let's take, for example, that she earned 6% annually on this money. At this interest rate, Jen's total income would be $1,196,363 (by the way, at a rate of 10%, her total income would be $4,318,429). Rule 72 Rule 72 is a simple way to estimate the time required to double an investment based on a fixed rate of return. If you divide 72 by the rate of return, you get an approximate number of years during which the investment will double. For example: if you invested $ 1000 at 4% per annum, then in order to turn your investment into $ 2000, you will need about 18 years (72/4 = 18). Using this formula, you can also determine the rate of return needed to double your money in 10 years: divide 72 by the number of years, 72/10 = 7.2%. Regardless of the investment instrument, whether it's bond yields or dividends, Rule 72 gives you an idea of how long it takes to double your money at a given interest rate. Don't let it work against you! No matter how good capitalization looks, there are 4 factors that weaken it and work against you: • Inflation. There are ways to avoid or reduce this risk; • Taxes. Taxes eat up profits, so use tax-advantaged accounts like IRA and 401k's; • Expenses. For example, taxes, fees and commissions also eat up profits. The less you pay them, the better; • Time. The longer you wait, the less profit is accrued to you under the compound interest system. The basics of mathematics do funny things with money over time. In the early stages, compound interest acts slowly and brings little income, and this is probably why many people ignore it in the early stages. But once it starts, it speeds up exponentially the longer you let it go. If you don't have a billion dollar idea in your mind, then compound interest is the best thing you can use to increase your funds and achieve wealth. Don't waste your time, be patient and use compound interest correctly.
Education
by DeGRAM
3
How to study indicators?Hello everyone Today I want to talk about indicators. Every trader has used indicators at least once in his trading, but not everyone knows how they work and why they should be used at all. The best way to understand something is to look for answers to questions yourself. Below I will give you some questions that you will have to answer in order to understand the operation of the indicator. Problem Most beginners start their way of studying indicators with books or articles on the Internet, where it is told: buy here when this line crosses this one, when the indicator enters this zone, and so on. With such a study, the trader does not understand how the indicator actually works, which indicators are similar to each other and why the indicator gives these signals. By answering these and other questions, the trader will be able to understand for himself whether he needs this indicator. Our task is as follows: 1) find out how the indicator is calculated; 2) understand how this indicator reacts to changes in parameters; 3) to understand what all this means in the context of market data. Find answers to the questions If you really want to get into the essence of the work of this or that indicator, do the following: 1. To begin with, you can start by studying the history of this indicator. It is best to look for the original source to understand what the creator of the indicator put into this tool. Any information will be useful for understanding the tasks that were set before the indicator at the time. 2. How can the indicator help us or why is it more useful for us to use the indicator than just looking at the chart? 3. Which indicators are similar to this one? Of course, it will not be possible to study all the indicators, but it is not necessary. It is enough to observe and understand where the indicators give the same signals. Thus, we will remove unnecessary repetition of signals on the chart. 4. What exactly is taken into account when the indicator is working? For this work, you need to be able to calculate or program at least in general terms. You can use third-party special programs. The main goal is to understand the details of the indicator calculation. 5. Change the data tracked by the indicator to see how it reacts to controlled price changes. Examples are: a market in flat, where a trend begins to emerge, and then a second return to flat occurs; a game on trend strength; a flat with one subsequent large price jump; "ladder" markets; stable long-term trends and their reversals; fluctuations (for example, sinusoidal) with different periods. 6. Take the knowledge you have gained and look at the indicator on the price charts. Notice how it reacts to price spikes. Analyze this stage of information collection. Your goal is to see how this indicator works on a large amount of data, and not to dig deep. 7. Now find out how you can test what you see in paragraph 6. Is it possible to test this indicator manually, or will a software algorithm be required to test it. 8. Having received all the data and understood the work of the indicator, you should understand whether this indicator is needed in your strategy? It will be difficult to answer all the questions, but the benefits will be tangible. You may spend several days or weeks searching for answers, on the other hand, you will learn something that most traders do not know. You will be able to really understand the signals of the indicators and be able to use the right indicator at the right time – which most do not know at all. If you do not learn how to understand and use trading tools correctly, you simply will not be able to trade in a plus. Good luck! Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩‍💻
Education
by Lingrid
6
Economic data that a trader should be able to understand.Part 3. Turnover or retail volumes, orders and inventories This type of data measures retail trade turnover. As a rule, the retail business is, in simple words, a place where you and I go to shop to buy basic necessities and luxury goods. It is important because it is an excellent indicator of consumer demand within a particular economy. In certain countries, especially in the G8 countries, retail trade volumes may account for two-thirds of all consumer spending. They are a key indicator of consumer confidence. If consumers are confident in their economic situation, additional demand for goods and services is created. Economists track the growth of trade turnover – it helps to determine whether the economy is doing well. If the trade turnover falls, things are bad in the economy. Turnover or volume of wholesale trade, orders and stocks This type of data measures the turnover of wholesale businesses. It is important because it is an indicator of consumer demand – which, as we know, is a serious thing. A decrease in wholesale sales or inventories may imply or confirm a decrease in business activity and retail demand. This means that there are free resources that are not currently being used, but they will be used if demand increases again. This type of data is not as important as retail trade volumes, but most economists believe that it is still worth keeping an eye on. Import of goods and services In this type of data, purchases of domestic companies from companies from abroad are measured. If, for example, you are a Canadian company that buys raw materials from China, then this is considered an import of goods to Canada. This type of data is important, since imports may eventually replace domestic production, which may cause tension in financial resources. For example, if everyone in the United States starts buying only German car brands, such as BMW and Audi, this will lead to a lack of demand for cars manufactured in the United States, such as Ford and GM. Which will have a negative impact on domestic car manufacturers in the United States. As a rule, a country imports those goods and services that it is not able to produce on its own. But, of course, this is not always the case. Often people and companies buy abroad because prices are lower there. Another reason is that there may be goods of the desired quality abroad that are not available at home. For example, if you live in the United States and have a strong desire to drive around in a Rolls Royce or Bentley that has just rolled off the assembly line, you will have to buy your car in the UK. Oil is often not taken into account in the US data, as it has developed that the states are always forced to import it – the country does not produce enough oil to meet domestic demand. However, thanks to the new drilling technology in the US, oil production is growing – there are chances that over time it will be enough to cover the demand. You may have to do a little independent research on this topic – it depends on when you read this material. Export of goods and services This type of data measures the country's trade turnover with other countries around the world. Simply put, this is the direct opposite of importing goods and services. It is important because exports generate an influx of foreign currency, which can have a good effect on economic growth. It happens that a foreign currency is more valuable than a local one – this creates additional profit in the balance sheet of a local company. For example, if a company from Canada sells its product to the UK, it receives British pounds as payment. This is a very attractive deal, since (at the time of writing this article) 1 pound can be exchanged for 1 Canadian dollar 75 cents. Export growth can boost GDP, which will have a positive impact on the economy. The higher the ratio of a country's exports to its GDP, the faster its economic output will grow. Trade balance, the balance of trade in goods In this type of data, the balance or the difference between all exported goods and all imported goods for a certain time period is measured. The main question is – what is more in the country, exports or imports? It is important because it is an indicator of a country's fundamental trading position in relation to other countries. Obviously, most countries prefer their exports to be higher than imports. A large foreign trade deficit may suggest to economists that there are difficulties with the supply – companies are unable to meet the demand coming from abroad. The trade balance reflects the ratio between national savings and investments of citizens and companies of the country in question. The deficit is an indicator that investments exceed savings in their volumes, and the use of real monetary resources exceeds the overall economic result of the country. Index of export and import prices, unit price of the product This type of data measures the prices of goods that one country trades with others. It is important because it is an indicator of pressure on prices, possible problems with the exchange rate and changes in competition. Economists compare export prices with price indicators on the domestic market to get an idea of the pressure on prices for foreign buyers exerted by domestic producers. Economists also monitor import prices to determine the level of external pressure on prices and evaluate these indicators. Manufacturer's prices and wholesale prices In this type of data, factory prices are measured – that is, how much it costs the manufacturer to manufacture goods without adding extra charges. It is important because it can be used as a leading indicator of price pressure affecting domestic production volumes. It should be borne in mind that during a recession, the industrial Price Index (Producer Price Index, PPI) may exaggerate the pressure on prices. On the other hand, during periods of inflation, PPI can downplay prices, because contracts and purchases of raw materials are usually negotiated in advance long before production and release of products. Price expectations: surveys The purpose of these surveys is to study the opinion of manufacturing companies regarding inflation. In simple words, this type of data sums up what company directors think about the impact of inflation on their business at the moment and in the near future. It is important because it allows you to look into the heads of people working in the trenches of production. It can serve as a warning about possible changes in prices. Economists, as a rule, track changes in the trend of this indicator in order to predict a possible increase or decrease in pressure on prices. Wages, labor income, labor costs Salaries and labor incomes give us an idea of how much people earn from their jobs. Labor costs are how much the labor of workers costs the manufacturer. All these indicators reflect labor costs and the impact on consumer incomes. They are important because they reflect the pressure on prices and demand within the economy. Salaries and incomes are closely related to the current phase of the economic cycle. If incomes are growing faster than consumer price inflation, it means that real spending is growing, which is an indicator of the health of the economy. Unit labor costs In this type of data, the cost of labor per unit of output is measured. In other words, how much the labor costs for the production of one unit of goods cost the manufacturer. It is important because it is an indicator of the competitiveness of businesses and pressure on prices within the country. For example, if a company is engaged in production in a country with cheap labor, and sells its goods abroad, these are large potential profits. Conversely, if a company's production is located in a country with expensive labor, then it probably will not be able to withstand competition with foreign companies using cheaper labor. This is a key indicator of labor efficiency. If unit labor costs decrease, it means that the same amount of products can be produced for less money, since manufacturers will need to pay their workers less for the output of each unit of production. Which, of course, makes the manufacturer more competitive. If labor costs start to rise, then this can pose a threat to the viability of companies, because the production of products will start to cost them too much. Obviously, companies need to earn money to stay in business, so cheap labor is always preferable. Consumer or retail prices This type of data measures the price of a basket of goods and services consumed by an ordinary family to maintain the current standard of living. It includes clothing, food, rent, transportation expenses, and so on. In general, everything you need for food, sleep and earning enough money to survive. It is important because it reflects the inflation experienced by a typical family of a particular country. Here you need to ask yourself this question – are ordinary goods in general more expensive or cheaper for consumers? Will the consumer have more money in his pocket at the end of this year than at the end of the previous one? The answer can tell us a lot about whether the standard of living is rising or falling and what part of the economic cycle we are in now. Conclusion As you can see, when it comes to publishing fundamental economic data, many key concepts have to be taken into account. If you have difficulty assimilating or remembering all this information – try not to overload yourself! Use all the information and then you will earn more than the rest! Good luck!
Education
by DeGRAM
29
Economic data that a trader should be able to understand.Part 1. No matter how well you use technical analysis, you should still follow the fundamental news. Fundamental news can push the market against you and destroy any pattern and even reverse the trend. Every professional trader uses an economic calendar for this purpose. Thanks to the data from the economic calendar, you can predict when the market may start behaving unusually, and with proper analysis of the reports, you will be able to determine the future price movement. Today we will talk about these reports, what they mean and what to do with them. Employment The employment data takes into account the total number of employees – both ordinary employees and self-employed citizens. Employment data are important because they are an indicator of the current potential of a country's economic productivity. The production of goods and services directly depends on how many people have the desire and opportunity to work. If all of them are employed, it means, obviously, the country is not able to produce more, because it has no unused labor force. Employment is highly cyclical because when demand for goods and services increases, companies tend to increase working hours instead of hiring new workers. When the economy begins to deteriorate, companies prefer not to reduce working hours, but to get rid of extra workers, because layoffs allow you to save on pension and other deductions, which are usually very expensive. Economists track the addition of working hours and the number of overtime hours, defining them as positive changes for the employment sector. If these indicators begin to fall, it may mean a slowdown in the economy or a potentially possible entry into the recession phase. Unemployment The unemployment data takes into account the total number of people who can and want to work if they have the opportunity, but do not have a job. Unemployment is highly cyclical for the same reasons as employment. They are opposites of each other. These data are important because they are an indicator of excess labor, which economists tend to regard as wasted resources. Unemployment is also called unemployment. There is a natural unemployment rate. Companies can only hire a certain number of people. At some point, the competition for employees becomes very high, because there are few vacancies. This, in turn, increases inflation, as hours worked and average hourly wages increase. People are starting to have more disposable income that they can spend inside the economy on expensive items such as cars and houses, which will cause inflation to rise. The inflation rate is of great interest to us, as central banks pay a lot of attention to it. Keeping inflation at the levels outlined in their policies and financial mandates is part of their job. Too high or too low inflation will force the central bank to intervene in financial markets. Personal income and Disposable Income In these data, the total income of the population after deduction of taxes to the state is taken into account. They are important because they are the basis for consumption and for personal savings within the economy. Personal consumption and spending account for about half to two-thirds of GDP in developed countries, which makes these indicators extremely important. When people's personal incomes grow, chances are high that they will start spending more money inside the economy. When there is a shortage of personal income, it is very unlikely that people will have a desire to spend the little money they have on goods that are not necessary for survival. Economists pay attention to the steady growth of real personal income. If it is too fast, it will cause a sharp increase in inflation. If it is too slow, it can lead to deflation, which is very bad for the economy (and for the positions of bankers of the central bank). By the way, we will devote a separate article to inflation and deflation, as this is a very important topic. Don't be afraid, we've got it all covered! Consumer and Personal Expenditure, Private Consumption In this type of data, total expenses are measured. In other words, how much each person consumes on average. They are important because they are a key component of GDP along with personal and disposable income, as they show how much money each person is ready to spend on goods and services at the moment – both necessary and just desired. Don't forget, spending is something very serious for developed countries. Economists track the dynamics of changes in real interest rates in order to adjust their views on the economy. For example, if expenses grow by 6%, and prices rise by only 4%, then real expenses have increased by only 2%. Positive and negative changes in spending on durable goods (for example, cars, washing machines, agricultural equipment) can be an early signal of changes in the economic situation. An increase in the number of purchases is regarded as a positive phenomenon, while a decrease in purchases is generally considered negative for the economy. an overview of the rest of the economic data can be found in the next article. all the best.
Education
by DeGRAM
9