Education

CompanyLiberty Finance developed ten lessons for the traders (both beginning, and practicing), each of which is devoted to one subject. In them an idea of what is trade on "Forex" and as it is possible to earn is given. These lessons will allow to be guided better in how there takes place the auction on "Forex", to estimate a ratio of risks and profits and, eventually, to make the justified trade decisions. The summary of lessons is given below.

Movements in the foreign exchange market: bases

The auction in the Forex market takes place in the mode of continuous changes of quotations of assets — currency pairs. This dynamics is defined by a ratio of supply and demand. Why the ratio of supply and demand which defines the course of the auction on "Forex" changes? Because there is a set of the influencing factors: events in policy and economy, the publication of statistical data and forecasts, operations of key financial regulators and others.

Basic concepts

The trader earning or planning to earn by trade on Forex has to own a conceptual framework which is used in trading.

Some examples of key terms:
  • «pips» — the smallest step in the price movement;
  • «lot» — the minimum sum of the opened position;
  • «leverage» — the loan at the broker allowing to trade on "Forex" at rather small sum of own means..
How to place the order?

The warrant is an order on opening (closing) of a position which is sent by the trader to the broker. If, for example, during trading on "Forex" it is staked on growth of an asset, then the long position, otherwise — short opens (for sale of euro). Closing of a position is carried out in the direction opposite to opening. There are different types of warrants — market, limited, stop.

Technical analysis: how to understand schedules?

The technical analysis is a research of dynamics of quotations for the purpose of definition of market trends and acceptance on this basis of the justified decisions on opening (closing) of positions. At trade on "Forex" the trader can observe continuous change of quotations in a graphic form. There are several types of schedules — linear, bars (column) and Japanese candles which are under construction on various temporary periods (timeframe).

Levels of support and resistance. Concept of moving average of an indicator.

Support and resistance — important levels near which the movement of the price can stop (temporarily or to be developed in the opposite direction). Support is an obstacle for the movement of quotation down, resistance — for the movement up. These levels are used in trade on Forex for opening (closing) of positions.

In a technical expertize moving averages which are formed by averaging of the price for a certain period enjoy popularity. For definition of market trends and for forecasting, as a rule, the current price is compared to moving average.

Trends and trend lines

The trend is the direction of the price movement which is ascending (growing), descending (falling) and side (флэт). Trends can be defined by trend lines. For Forex trader knowledge of a trend, the provision of a current rate of rather trend lines and also the fact of breakdown of these lines and the further movement of the asset price are important.

Trend indicators indexes

Indicators indexes of a trend are tools of a technical expertize which are used in trade on "Forex" and show the presumable direction of the price movement. The most popular of indexes of a trend:

  • ADX (index of average orientation);
  • MACD (convergence and divergence of moving average);
  • Momentum (technical indicator of speed);
  • Linear Regression (Linear Regression).
Indicators oscillators

Indicators oscillators are the tools of a technical expertize showing points of a probable turn of the prices during trading on "Forex". Are the most popular in this group of indicators:

  • Stochastic (stochastic);
  • RSI (relative strength index);
  • CCI (index of the commodity channel);
  • Fractals (fractals);
  • Alligator indicator (Alligator indicator).
Trading psychology

Successful trading on "Forex" is not only knowledge of tools of the analysis and forecast, but also control of emotions which, certainly, cover in this or that type of any trader. Two main feelings by which trade is followed — greed and fear. In trading it is impossible to get rid of emotions, but quite it can control them.

Capital management

One of components of success in trade on Forex — competent management of the capital. Managing the capital, the trader has to consider a ratio of profits and risks. It can be calculated as a difference between the potential profit and expenses incurred for generation of profit. When you learn to manage correctly the capital, will notice improvement of results of your trade.

Bases are Movements in the foreign exchange market.

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Supply and demand.

For definition in what direction the economy of the concrete country will move in the nearest future, traders resort to various types of economic indicators and data, such as gross internal product (GIP), volumes of import and export, employment rate, unemployment rate, growth percent, debt volume, and many other factors. All this together is called "bases".

the Cost of currency depends on any changes in supply and demand in the market. For example, when in the world the great demand for dollars is recorded, the dollar raises in cost. In case there is a surplus in the offer of dollars in the market, or for some reason in them there is no big need, then the dollar goes down in price.

the Price of currency pairs

Trade in world currency pairs represents a ratio of growth or falling in the price of one currency against the background of another. Each world currency has 3-alphabetic reduction where the first currency of any couple is known as basic currency (base currency). At any moment the price shows the cost of basic currency expressed in terms of the second – key currency (leading currency).

For example when the price for couple of EUR/USD is 1.4000, it means that you can exchange 1.4 US dollars for 1 euro. In case euro grows in the price, the price of vapors of EUR/USD as there is demand for US dollars for purchase of euro also increases. Happens also to euro: when euro goes down in price, couple of EUR/USD also go down in cost, owing to the fact that there is a smaller need for US dollars for purchase of euro.

the Cost of key currency is not the only factor of pricing of this or that currency pair. Any change of cost of basic currency, certainly, also affects this interrelation. Using the same example if now the US dollar goes up in price, then couple of EUR/USD will fall in price, and, therefore, the need for dollars not so of a bike for purchase of euro. Respectively, if the dollar falls in cost, then the price of vapors of EUR/USD will grow as in the world the big need for US dollars for purchase of euro is recorded.

Besides, increase or depreciation of each currency pair directly depends on the cost of its key currency. In addition to it, increase or a padaniye in the price of the same currency pair corresponds to jumps in the price of its main currency in inverse relation.

Thus if the trader predicts growth of economy of the USA, and dollar cost after it, then he, most likely, will sell to

couple of EUR/USD as at such scenario it will fall in price. In case, according to the trader, there is a growth of economy of the EU and, respectively, the price for euro, in its interests there will be a purchase of couple of EUR/USD.

Interest rates

One more important factor which influences pricing of currency is the interest rate which the central bank of the concrete country establishes as collecting for use of its money. Interest rates constantly change therefore it is necessary to monitor their changes constantly.

For example if the U.S. Federal Reserve (widely known as FRS) lowers an interest rate, then, as a rule, the cost of US dollar will fall therefore the price for couple of EUR/USD will grow. If FRS raises rates, then the US dollar, as a rule, goes up up in price, and the cost of vapors of EUR/USD falls.

If the European Central Bank (ECB), an analog of FRS in the European Union, makes the decision on increase in an interest rate, then, as a rule, euro rises in price, and couple of EUR/USD will become cheaper. In case the ECB lowers interest rates, euro will fall in price while couple of EUR/USD will fall in cost too.

the Central banks always balance with

, adapting to changes in the market. If the currency of the country rises in price, as a result, also its export rises in price, and there can be a problem of refusal of importers in favor of more available options. Besides, there are cases when decrease in interest rates is directed to priming of economy, however if rates too low, inflation can become the following succession of events. In that case for delay of growth it will be necessary to raise the stakes again.

higher interest rates, as a rule, attract more foreign investments (for this reason growth of currency of the country in most cases depends on interest rates). At the same time low interest rates stimulate crediting process within the country and, therefore, economic growth.

Lesson 2 – Basic concepts

To go in step with the main trends in the world financial markets and to be able to do profitable business in the market, you need to know certain terms and concepts. There are several main terms which meet in trading.

Pips

At the exchange and the market of futures they are often called by a tic or point. It is the smallest unit in trading. Pip is an extreme right figure in the price offer.

Lots and leverage

Trade currencies are expressed in lots. The price of full lot is 100 thousand units of a certain currency, pass lot makes 10 thousand pieces. The average trader is not always able to afford to operate with such large sums. For this reason, brokers Liberty Finance offer services leverage (leverage) that even the trader with average balance on the account was able to afford trade in the market.

Lesson 3 – How to place the order?

This lesson is devoted to how to place the order (order) about the conclusion of the transaction on the specified price. Before we pass to consideration of the matter, it is necessary to give definition to some terms. Bid – it is the price which the trader is ready to pay, Ask – it is the price for which the trader is ready to sell, a difference between them is called Spread.

If you consider that the price will rise, you should take a long position (long position). Otherwise it is better for you to sell currency and to take a short position (short position). Thus, the covering of certain positions to redeem currency at lower price has to be your purpose.

Orders type

The most widespread, main type of the warrant is market order (market order). It is better to place this type of the warrant while you want to take a position. If the movement in the market too fast, is the serious probability that you receive your warrant at other price. Thus, the difference between the actual price and the price on which you calculated is called slippage (slippage).

If you do not want to risk and do much harm to the warrant, placement of the postponed warrant will be the best option (pending order). In that case you expect that in the market there will be certain conditions.

There are four types of the postponed orders:

  • Limit order for purchase (Buy Limit) takes place when you consider that the price will grow after falling to a certain level. You can place the limit warrant for purchase when the required price is equal to the postponed order.
  • Stop order for purchase (Buy Stop) will serve you in a situation if in your opinion, the price grows after increase to a certain level. This order is placed at Ask price.
  • Limit order for purchase (Sell Limit) takes place if you think that the price will fall after achievement of a certain level. As a rule, the warrant will be activated when the price of Bid reaches the postponed order.
  • Stop order for purchase (Sell Stop) it is useful in case, in your opinion, the price falls below a certain level. This order is placed at Bid price.

Also, there are also other types of the postponed orders. Most often traders use stop-loss order (Stop Loss). It is necessary for automatic closing of your positions and a stop of process of losses in case the price begins to move in the undesirable direction.

For example, if you took a long position, you probably place stop loss below an entrance. This step will protect you from sudden falling of the price. In case you on a short position, stop loss it is placed above an entrance.

The sliding/floating stop (trailing stop) does the system of more flexible. In case the price moves to your advantage, stop loss goes after the price.

One more widespread type of the postponed warrant is «Take profit» (Take Profit). This warrant automatically closes a position as soon as the desirable price is reached. This type of the warrant protects the trader from unpredictable movements in the market. On a long position the take-profit has to be located above, than the current price, and on short — below the current price.