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Foreign Exchange Trade

When placing a foreign exchange trade, you are placing a trade on the Over the Counter (OTC) market. This is a global foreign exchange market and is not considered to be a centralized exchange as is the case for commodities and stocks. The foreign exchange trade consists of currencies that are traded in many different geographical locations. When trading in this market there are typically many different price quotations for a specific currency, however these price differences are marginal. This is unlike the stock market where the prices are uniform.

When understanding this market, it is important to understand that foreign exchange, otherwise known as forex, is the conversion of one country’s currency into another country’s currency. Also, this is a global market and it is the only financial market that is open 24 hours a day, except for the weekends. This market is also very sensitive to any new information whether it is unexpected or expected. This is due to the speculators who trade in this market. These speculators will quickly reassess their original trades to reflect any new information.

There are many market participants in the forex market including small retail forex brokers, individuals, banks and other financial institutions. The most influential market participant is the larger commercial banks. Additionally, large companies are also major players that make up a large portion of the volume that is traded each day. Those companies that have significant trade or capital flows are especially pertinent. Hedge funds and investment managers also make up a large portion of the volume and are major players.

The major currencies that are traded on the forex exchange are seven of the most liquid currency pairs in the world. These seven currency pairs account for more than 95% of the trading that takes place in this market.

USD/JPY – dollar/Japanese yen
EUR/USD – Euro/dollar
GBP/USD – British pound/dollar
USD/CHF – dollar/Swiss franc
AUD/USD – Australian dollar/dollar
USD/CAD – dollar/Canadian dollar
NZD/USD – New Zealand dollar/dollar)

Before you decide to join the growing list of forex traders, make certain you understand all the legalities and take a very close look at this market. There are an ever increasing number of forex trading platforms offered to traders. Check on each with the National Futures Association to be sure.

Continue your forex trading education and determine if this is the market that you would like to start trading. Good luck!


Market Direction: Why it is the market going up? Unless you are a sophisticated, full time, clairvoyance, market analyst, you probably do not have the time or the capabilities to answer that question. The only thing that should be important is having the ability to analyze what the market trend is doing. Using candlestick analysis, you can take advantage of the accumulative knowledge of everybody analyzing whether they should be buying or selling.

There are chess players that can anticipate seven moves ahead. There are a few market analysts that can successfully anticipate what all the prevailing factors are going to do to the market in the future. You do not have to have extraordinary insights. All you need to do is learn what is built into candlestick chart patterns. Candlestick signals and patterns illustrate the reoccurring investor sentiment that has occurred over and over throughout history. The graphics on a candlestick chart reveal what is occurring between the bullish and bearish sentiment. This may seem like a very simplistic view for analyzing markets, but that is the basic premise of candlestick analysis. It simplifies the analytical process.

The recent market trend, especially in the Dow has been very easy to evaluate. There is a trend channel! This makes trend analysis much easier for the candlestick investor. It provides a level to start watching for candlestick buy signals and the level for watching for candlestick sell signals. This helps the short-term swing trader, knowing what the trend should do over the next 3, 5, 7 trading days. When do the probabilities indicate it's time to take profits? When do the probabilities indicate to reestablish positions? Knowing the investor sentiment that forms specific candlestick signals allows an investor to move quickly in establishing or exiting successful trades.

DOW

Understanding what a trend should be doing over the near-term and long-term allows an investor to take advantage of price patterns that take some time to develop. Jay hook patterns produce a very big profits provided there is not a severe change of investor sentiment of the overall market trends. As illustrated in the CREE chart, the uptrend of the overall market allows for the development of the third leg of a Jay hook pattern. Predictable price movements obviously improve the ability to produce strong returns for a portfolio.

CREE

Predictability of price moves make for  strong stock returns, but even stronger option trading returns. Candlestick analysis exploits high probability reoccurring situations. Take advantage of the information developed by the Japanese Rice traders. It was created by common sense investment practices put into a graphic depictions.

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Good investing,

The Candlestick Forum Team


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