Buying currency is something that takes place on the currency foreign exchange also known as the forex exchange. Forex trading is the buying and selling of one currency against another currency simultaneously. When you trade forex, you place an order to buy or sell the first currency pair at the current exchange rates. The exchange rate is the number of units of one currency that is needed to purchase another foreign currency, or unit of another currency. Exchange rates are constantly in flux and depend on factors such as the economy, politics and world events.
When buying currency it is important to understand that exchange rates are quoted in currency pairs. The first currency is considered the base currency and the second currency is the counter or quote currency. The forex investor understands that the exchange rate tells you how much you have to pay in the quote currency to get one unit of the base currency, when buying currency. If you are selling currency, the exchange rate tells the investors how much you would get in the counter or quote currency when you sell one unit of the base currency.
When placing an order to buy currency or sell a currency pair you must take a position. Basically you place an order, also known as the “opening trade” so that you take a position based on the currency exchange rate. Once you place the order you must wait to see if the value of the position that you took will grow into a profitable situation. This profitable situation depends on whether or not you were longing or shorting when you placed the trade.
When you buy a currency pair (longing) you are buying the base currency and selling an equal amount of the quote currency to pay for the base currency. When you sell a currency pair (shorting or short selling) you are selling the base currency and buying an equal amount of the quote currency to buy the base currency.
This can get rather confusing for first time forex traders so it is wise to have a complete understanding of what it means to short sell as opposed to longing. Additionally when buying currency, you want to be sure you have your stop loss set. Stop loss orders limit risk by assisting traders with closing out of losing trades.
There is a lot more to FX trading however once understood it is a great way to make money investing. Continue to research forex trading and find out if it works for you.
Market Direction: Candlestick analysis is a true indicator of what is occurring in investor's minds. Have you ever pondered why when one of your stock positions announces great news, the stock price goes down. How often have you witnessed the announcement of bad economic news and the markets go up? Candlestick reversal signals should make you more cognizant of investor thinking at turns in the markets. If the economic horizon does not look very good based upon the news that is currently being reported and the stock market is going up, that should make you stop and think. If the candlestick signals reveal a bullish tendency in the face of bad economic news, there must be another dynamic for the future economy that is not being expressed.
When a price trend moves in the opposite direction of current news and announcements, there should be a simple assumption. Investors are looking at something in the future that is dismissing the current days announcements. Candlestick signals reveal exactly what is going on in investor sentiment. Positive trading on bad news or bearish trading on good news simply reveals the investors are now looking to see what the next prospects will be for a company. Let the market tell you what the market is doing.
The use of candlestick analysis and fundamental research creates a very powerful profitable platform. Many fundamental investors will not even acknowledge technical investing. Many technical investors see very little use for fundamental analysis. However, applying technical analysis to companies that have a good fundamental situations developing makes for a stronger profit combination. CHK is a position the Candlestick Forum has been monitoring/recommending over the past few months. Having an understanding for the underlying fundamentals of a company allows for more aggressive and profitable entry and exit strategies.
The Haynesville drilling leases in Louisiana are known to be very strong oil and gas field producers. CHK has a large participation in that area. An oil and gas company such as Chesapeake will be influenced by market prices in the gas and oil area. A fundamental a strong company will eventually be discovered and move with a good bullish trend. Unfortunately for the fundamental purest, investing in a strong company does not necessarily equate to making a profit. Using candlestick analysis can greatly improve the profitability of a fundamentally positioned portfolio. Candlestick signals clearly define the timing for entering or exiting positions. They reveal when investor sentiment is changing despite the fact the fundamentals may not be changing.
The CHK chart reveals the trading patterns that can visually be recognized. Is there a time to buy and a time to sell? Definitely, but the stimulus to be ready to buy on the next candlestick buy signal results from having some fundamental background about the strength of a company. As illustrated in the CHK chart, early August revealed a strong sell signal and early September provided another strong buy signal.
Utilizing the chart patterns and signals allows an investor to pinpoint when to get in and when to get out of a position. The assessment of other indicators, such as the 50 day moving average acting as support, and the appearance of a bullish harami made for a strong entry back into a price trend. The Bullish Harami, followed by a gap up through the tee line when the stochastics were in the oversold condition made for a very compelling buying opportunity. This information puts the probabilities are highly in ones favor. Setups such as these makes it easier to formulate extremely profitable option trades.
Patterns have predicted results. Signals at obvious support and resistance levels make buying and selling decisions that much easier. A lot of option traders lose money because they are shooting from the hip. Candlestick analysis provides alignment of indicators and signals that produce an extremely high probability, high profit option trade positioning.
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