Short-Term Currency Trends

Cashing in on Short-Term Currency Trends Most of the time, markets don't show a clear trend - they bounce back and forth between support and resistance levels. This sideways movement is called a trading range. Below is a strategy that can help you identify entry points on short-term trends, while protecting your profits with trailing stops. Trade Set-up The strategy uses two charts with different time periods (10-minute and hourly), along with two technical indicators: a 200-bar moving average and a 14-bar slow stochastic study. Step 1: Identify a trend Compare the moving averages on both charts. A trend may be developing when price is consistently above or below the moving averages on both charts. Step 2: Pinpoint entry Once you've identified a trend, look for the following two...

Read More

Using Technical Indicators

Price charts help traders identify trade-able market trends - while technical indicators help them judge a trend's strength and sustainability. If an indicator suggests a reversal, confirm the shift before you act. That might mean waiting for another period to confirm the same indicator's signal, or checking out another indicator. Patience will help you read the signals accurately and respond accordingly. Types of Moving Averages One of the most widely used indicators, moving averages help traders verify existing trends, identify emerging trends, and view overextended trends about to reverse. As the name suggests, these are lines overlaid on a chart that "average out" short-term price fluctuations, so you can see the long-term price trend. A simple moving average weighs each price point...

Read More

What is Technical Analysis?

Technical analysis attempts to forecast future price movements by examining past market data. Most traders use technical analysis to get a "big picture" on an investment's price history. Even fundamental traders will glance at a chart to see if they're buying at a fair price, selling at a cyclical top or entering a choppy, sideways market. Technical analysts make a few key assumptions: All market fundamentals are reflected in price data. Moods, differing opinions, and other market fundamentals need not be studied. History repeats itself in regular, fairly predictable patterns. These patterns, generated by price movements, are called signals. A technical analyst's goal is to uncover a current market's signals by examining past market signals. Prices move in trends. Technical analysts believe...

Read More

Calculating Metals P&L

Calculating Gold P&L Profit and loss calculations for spot gold are fairly simple. The smallest increment of a spot gold price is 0.01. The smallest trade you can place in spot gold is a single lot, or 10 troy ounces. At this level, each pip is worth $0.10. A change in price from 920.55 to 920.85 means a difference of 0.30, or 30 pips. If you are trading 1 lot, and each pip is worth 10 cents, then the profit or loss from this trade would be $3.00. If you decide to trade more than one lot, the value of each pip is simply multiplied by the number of lots you are trading. Rather than each pip being worth 10 cents, if you are trading 5 lots then each pip is now worth 50 cen...

Read More

Spot Gold Leverage & Margin

How leverage for spot gold works+ Leverage for spot gold trading is set at 100:1. This means that for every $1 you have in your account balance, you have $100 in buying and selling power for gold trading. As a result, leverage increase a client's buying and selling power and enables clients to participate in a market that may otherwise be cost prohibitive. Keep in mind that increasing leverage increases risk. How margin for spot gold works Margin is the amount of money you must have in your account to hold a particular trade. At 100:1 leverage, your margin factor is 0.01 (1%). This means that you are required to have a minimum cash balance of 1% of the total value of the positions you hold in your account at any one time. If you fall below this amount, your trade may be closed, otherwise...

Read More

Metals Market Drivers

The following factors may influence the price of metals: Hedge against inflation One of the most common description of gold and silver as an investment is as a hedge against inflation. The thinking is that as the inevitable decrease in buying power affects currencies, owning gold is one way to hedge against the value of your wealth decreasing. Doing so ensures that you will receive a commensurate amount of currency for the amount of gold you own, no matter what the inflation rate is. A "safe-haven" investment Another view of gold is as a "safe-haven" investment. During times of high volatility and risk, investors may move funds to gold as a way to safeguard against uncertainty. Understanding economic and political factors Indicators that impact inflation such as the Consumer and...

Read More

Metals Quotes

How to read a spot gold quote Reading a spot gold quote is very similar to reading a forex quote. It is even represented the same way (XAU/USD) and it's simple if you remember three things: The first symbol listed is 1 troy ounce of gold The value of the gold is always 1. The price literally translates to; 1 ounce of gold is equal to XXX.XX U.S. dollars. When the price or quote for gold goes up, gold has strengthened in value and is now worth more dollars than before. If the price of gold goes down, it takes fewer dollars to purchase 1 ounce of gold, and the value of the dollar has increased when compared to the value of gold. Bids, asks and the spread Just like other markets, spot gold and forex quotes consist of two sides, the bid and the ask: The BID is the price at which you...

Read More

Trading Spot Gold and Silver

What is Spot Metals Trading? Much like trading currency pairs, spot metals enables traders to take a long or short position in gold (XAU/USD) or silver (XAG/USD) while simultaneously taking the opposite position in the U.S. dollar or other major currencies. Spot gold and silver trades globally in an over-the-counter market, and prices float freely based on supply and demand. The spot price is the price quoted for the metal to be paid for (including delivery) two days following the date of the actual transaction (also known as the settlement date). Spot gold and silver trades a lot like currency pairs in the foreign exchange market. Trading is available 24 hours a day from Sunday at 6:00 pm ET to Friday at 5:00 pm ET. There is no central market however, the main centers for trading spot...

Read More

Calculating Profit and Loss

For ease of use, most online trading platforms automatically calculate the P&L of a traders' open positions. However, it is useful to understand how this calculation is formulated: To illustrate an FX trade, consider the following two examples. Let's say that the current bid/ask for EUR/USD is 1.4616/19, meaning you can buy 1 euro for 1.4619 or sell 1 euro for 1.4616. Suppose you decide that the Euro is undervalued against the US dollar. To execute this strategy, you would buy Euros (simultaneously selling dollars), and then wait for the exchange rate to rise. So you make the trade: to buy 100,000 Euros you pay 146,190 dollars (100,000 x 1.4619). Remember, at 2% margin (50:1 leverage), your initial margin deposit would be approximately $2,923 for this trade. As you expected, Euro...

Read More

Understanding Forex Quotes

Reading a foreign exchange quote is simple if you remember two things:       1. The first currency listed is the base currency       2. The value of the base currency is always 1. As the centerpiece of the forex market, the US dollar is usually considered the base currency for quotes. When the base currency is USD, think of the quote as telling you what a US dollar is worth in that other currency. When USD is the base currency and the quote goes up, that means USD has strengthened in value and the other currency has weakened. Rising quotes mean a US dollar can now buy more of the other currency than before. Majors not based on the US dollar The three exceptions to this rule are the British pound (GBP), the Australian dollar (AUD)...

Read More

Introduction to the Forex Market

What's Forex? "Forex" stands for foreign exchange; it's also known as FX. In a forex trade, you buy one currency while simultaneously selling another - that is, you're exchanging the sold currency for the one you're buying. The foreign exchange market is an over-the-counter market. Currencies trade in pairs, like the Euro-US Dollar (EUR/USD) or US Dollar / Japanese Yen (USD/JPY). Unlike stocks or futures, there's no centralized exchange for forex. All transactions happen via phone or electronic network. Who trades currencies, and why? Daily turnover in the world's currencies comes from two sources: Foreign trade (5%). Companies buy and sell products in foreign countries, plus convert profits from foreign sales into domestic currency. Speculation for profit (95%). Most traders focus...

Read More