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What is Technical Analysis?

What is Technical Analysis?

In investing, fundamental analysis is the analysis of the fundamentals of a company, i.e. whether its business is thriving or going down the pan. Technical analysis doesn’t concern itself with company fundamentals, it attempts to predict the future price of a stock based on previous prices and charts. Stock charts are a reflection of price movements over time and the volumes of stocks traded.

According to technical analysis any news about a company can be seen in the charts first and if you are adept at reading the signs then you will see which way a stock price is headed before any news is announced by the company.
Technical analysis is based on the following assumptions – prices are determined by supply and demand, supply and demand is a result of both rational and irrational behaviors, prices move in trends and these trends are generally long-lasting, changes in supply and demand can be spotted by analyzing the way the stock price behaves.

Why bother with technical analysis?

It is easier than fundamental analysis and faster.

It does not make us of company accounts and therefore cannot be manipulated by companies, it tells you what to buy and sell and when. Technical analysis based on the behavior of crowds, if people expect a certain thing to happen upon a certain signal, then they will react in a particular way when they see that signal. If enough people react in the same way then the expected outcome is achieved and the analysis becomes self-fulfilling i.e. a stock price goes up because enough people buy the stock because they expected it to go up. Many hundreds of expert analysts use technical analysis and thus influence stock prices by reacting to the same signals.

There are many indicators that are used in technical analysis, but one of the principal indicators is the 200 day moving average. If a stock falls below its 200 day moving average this is considered a bad signal and people tend to sell the stock. If a stock goes above its 200 day moving average this is generally considered a good sign and people tend to buy.

If 80% of stocks in the stock market are above their 200-day moving averages, this is considered to be overbought and so people tend to sell the market. If less than 20% of stocks are above their 200-day moving averages, this is considered to be oversold and a signal to buy.

There are many other indicators used in technical analysis such as the relative strength index, Bollinger bands etc… and any online stock trading site will allow you to include them automatically on any charts you may wish to look at, you don’t need to work them out yourself. A study of all the different indicators is probably not necessary but if you are serious about investing or trading the stock market you will certainly need to learn about the main indicators.

Archived under Technical Analysis Comments

Are The Markets On Pause for Bernanke?

Are The Markets On Pause for Bernanke?

Since late August 2010, the major stock market indexes have rallied sharply higher. The catalyst for the rally was the announcement of QE-2(quantitative easing) by the Ben Bernanke in Jackson Hole, Wyoming. The U.S. Dollar Index has been declining sharply ever since that announcement and the stock markets have inflated higher. Now the Bernank will start holding press conferences after their FOMC announcements. This is something new by the Federal Reserve as they try and become more transparent to investors and the public. Congressman Ron Paul(R-Texas), has been recently breathing down the back of the Federal Reserve in his new position as head of the subcommittee that oversees the central bank.

The big question that many traders and investors are asking, what will the Federal Reserve bank do for an encore to QE-2? How can the central bank keep the liquidity(money) flowing into the stock market after QE-2 expires? Many investors believe that the Federal Reserve will start QE-3 if the stock market starts to falter or is unable to stand on its own feet after the Fed no longer does quantitative easing.

The last Federal Reserve Chairman was Alan Greenspan.

He was know for talking in circles to politicians. There were actually people hired by the financial media that would try and interpret what he said after a meeting with the U.S. Congress. We can only wonder if Ben Bernanke will take a page out of Greenspan’s book.

Gold and silver have told the world that the Federal Reserve and other central banks have continued to simply create money in order to keep the markets floating higher. In my humble opinion, gold and silver are the central bank’s worst nightmare because it simply tells us that money is being created on a daily basis. Eventually, the Federal Reserve Bank will be forced to strengthen the U.S. Dollar. The big question that traders must ask, is when that will happen?

In the meantime, the Federal Reserve seems to be one step ahead of all the investors in the world at this time. High oil, unemployment, and overall inflation, have not stopped this market from advancing. The U.S. Dollar Index is now trading at a new two year low. The U.S. Dollar Index has declined by nearly 17.0 percent since June 7, 2010. Commodities and commodity stocks have surged higher since the Federal Reserve began its QE-2 program. Stocks such as AK Steel Holdings Corp.(NYSE:AKS), Caterpillar Inc.(NYSE:CAT), and Newmont Mining Corp.(NYSE:NEM) have all benefited from the action by the Federal Reserve. If the Fed decides to stop inflating the markets these leading stocks and others could be in for a sharp correction.

It will be interesting to see what the Federal Reserve Chairman, Ben Bernanke, will have to say in this press conference on Wednesday. Will he defend the U.S. Dollar or just push any questions aside like his predecessor Alan Greenspan did? Get the popcorn ready we shall soon enough.

Nicholas Santiago

Archived under Bernanke Comments

Why You Need Fundamental Analysis

Why You Need Fundamental Analysis

Fundamental analysis is based on the factors that drive an economy. It assumes that there are supplies and demands for currencies. These factors can be predicted based on this information. Anything is a factor in fundamental analysis as long as it does not employ price.

Some of the areas that are covered are the economic state of the country, the monetary policy of the country and the forces that drive supply and demand such as social political and economic. This can mean interest rates, inflation, unemployment, gross domestic product, housing starts and many others forex trading tips serve as indicators of price action.

Based on all of the information gathered from the above one should be able to forecast what is happening and what will happen with the currency of that country. Each country will release information on a regular basis. Each announcement should be noted on the calendar so that you can find out what it is and how will affect you.

Certain information will have volatile effects on the market, some will cause some changes and others will have no effect. As an informed trader, at some point you will know what each of these things mean and what to do with that information.

Fundamental analysis involves anything other than price action. Fundamental analysis along with technical analysis is the important basics in forex trading. Each of these work together and knowing them is invaluable. When you get to where you are trading regularly, you will set up the best forex trading plan based on these factors. Do all that you can to learn about each of them and you will set yourself up for a win. The more that you study the more successful you will be. If you think this is a way to make a quick buck, you will be surprised when you lose all your money. It takes learning a lot of information and being able to apply it.

Archived under Fundamental Analysis Comments

The Canadian Exchange Rate

The Canadian Exchange Rate

Trade rates are rates at which nations currencies are exchanged, that is, the worth of one currency by way of another. A lot of nations now use the American greenback as the usual in opposition to which to measure the value of their own currency. As the good majority of Canada’s international commerce and monetary transactions are with the US, the worth of the Canadian dollar in relation to the US dollar is of prime importance to Canada.

The dollar grew to become the official financial unit of the Province of Canada on 1 January 1858 and the official foreign money of Canada after Confederation. Its “spot” or present market worth has approximated the US$ till the previous’s recent decline, the significant exception being in the course of the US Civil Struggle, when the Canadian dollar rose to US$ 1.45. From 1879 to 1914 Canadian and American currencies had been on the gold standard and were therefore each defined by mounted and equal units of gold.

Following World Battle I, apart from the transient period between 1926 and 1929 when Canada returned to the gold normal, the Canadian dollar has been both pegged at a particular value in relation to the US dollar (1962-70) or allowed to fluctuate in line with international demand and supply. From 1952 and 1962 and since 1970, the Canadian dollar has fluctuated or “floated.” During these intervals the BANK OF CANADA has purchased and bought overseas alternate to smooth out daily fluctuations in the rate. It has additionally raised or lowered Canadian interest rates, relative to these in the US, to encourage or discourage funds flowing into Canada that improve or decrease the worth of the Canadian dollar. Since being unpegged in 1970 the Canadian dollar has traded as high as US $ 1.04 in 1974 and reached a historic low of nearly US $ 0.63 in the summer of 1998.

The exchange rate of the Canadian dollar is influenced by numerous elements moreover direct government trade rate policy. Affluent business conditions abroad, particularly within the US, containment of Canadian inflation, improved labour productiveness, good grain harvests, new resource developments and expanded home and foreign direct funding in export-oriented industries all help to stimulate exports and put upward stress on the dollar’s overseas worth. An increase in international tourists visiting Canada has an analogous effect. Conversely, the other of these forces places downward strain on the dollar’s exterior value. In addition, considerations about whether or not the province of Qubec will remain within the Canadian federation are inclined to put downward stress on the Canadian dollar.

By mid-1998 the financial turmoil and financial uncertainty in Russia and much of Asia raised fears about the energy of currencies of some developed countries like Canada. Canada exports significant quantities of resource-based mostly products to Asian international locations, which are actually unsure markets. As properly, Russia, with its much-depreciated foreign money, is a competitor of Canada for a lot of such products. Because of these damaging components, currency speculators have been moving funds out of Canada to the US in anticipation of a weaker Canadian dollar. Their own actions have induced their expectations to be realized, regardless of the Financial institution of Canada spending billions of dollars ($ 5.eight billion in August 1998 alone) shopping for up Canadian currency to attempt to reduce the extent of its depreciation in international change markets.

This decrease dollar does, nevertheless, have advantages for Canadian corporations exporting products to the US and elsewhere. The place such products are priced in US dollars, the revenues to Canadian corporations, when it comes to Canadian dollars, increase. The place the products are denominated in Canadian dollars, they turn out to be cheaper to overseas consumers, so more of them are sold. Either means, exporters benefit. But there are prices too. Canadians import services equivalent to just about 40% of the full output of the economy (Gross Domestic Product), with about 76% of those being from the US. When the value of the Canadian dollar falls, all these services and products value extra for Canadians to buy. The lower greenback raises inflationary pressures, which may unfold all through the financial system, despite the fact that the unemployment rate remains quite high.

The present downward stress on the greenback has primarily been brought on by intense speculation moderately than main weaknesses in the Canadian economy. Due to this, the Financial institution of Canada responded by raising the Bank Price by one per cent. Though this improve raises costs for borrowers, larger rates of interest discourage capital flight from Canada and assist to stabilize and even improve the value of the dollar. As soon as the speculation mania has subsided, it will be doable for the Bank Price to be lowered once more, thereby decreasing the rate of interest structure.

Archived under Exchange Rates Comments

Forex Books

Forex Books

Some of the more all-encompassing forex trading books include one by Cornelius Luca entitled Trading in the Global Currency Markets. This book analyzes different global currencies as well as what forces drive the market. It discusses new technologies used in the market while presenting better understandings through colorful graphics and other real-world examples. Technical Analysis Applications in the Global Currency Markets, also by Cornelius Luca is just another edition, expounding upon the key aspects of forex trading for beginners. This book contains a cd-rom which demonstrates some of the methods discussed in this book. Steven Achelis book Technical Analysis from A to Z demonstrates 102 alphabetized technical indicators in the forex market. Moving from forex trading books encompassing the technical aspects, Mark Douglas has a book entitled The Disciplined Trader: Developing Winning Attitudes which, as the title leads one to believe, focuses on the necessary attitudes and behaviors for success in the forex trading market.
There are many different categories for forex trading books. One of them is introductions to foreign exchange as well as money markets. Within this category there are a handful of top-rated books in which you should indulge. Philip Gotthelf presents the book Currency Trading: How to Access and Trade the Worlds Biggest Market which presents a grand overview about how to take advantage of the currency markets and any fluctuations therein. UK London Reuters Limited provides a grand introduction to financial education training through the publication of An Introduction to Foreign Exchange and Money Markets. Julian Walmsley presents International Money and Foreign Exchange Markets: An Introduction which functions as one of the most essential pieces of reading for any undergrad, or specifically MBA, student in the fields of finance, business, or banking.
Another essential category is fundamental analysis. R. Mark Rogers offers a Handbook of Key Economic Indicators which provides quickly accessed information which relates to U.S. economic indicators specifically for analysts as well as traders. This book includes data, tables, graphs, charts, as well as explanations for the inflation, consumer spending, and employment figures listed for each month. Louis B. Mendelsohn offers a more advanced Forex Trading Using Intermarket Analysis which offers applications of intermarket analysis for some of the most widely traded foreign exchange markets. It seeks to identify trends in prices and other market influencers. Another great offer is in E. Stansbury Carnes book The Atlas of Economic Indicators: A Visual Guide to Market Force which is geared toward professional investors, executives, as well as students and individual investors. It is a very handy and accessible resource which also includes graphs and charts. Jack D. Schwager and Steven Turner combine to produce A Study Guide for Fundamental Analysis which famously provides the foremost authority on the subject, offering insight on future trading in three different volumes.
In conclusion, forex trading books can cover a multitude of categories from the aforementioned to technical analyses, strategies for profits, basic understanding of the forex trading system, and other more intricate subcategories in the field of forex trading.

Archived under Forex Comments

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