Posted on 26 September 2011
Tags: action, barrier, bullish signal, cartographers, center, chartists, Close, Combining, Constantly, convergence, crossover, cultivate, currency, currency pairs, Day, decline, directional, ema, entry, exchange, exponential, extreme variations, figure, forecasting, foreign exchange market, foreign exchange markets, forex, height, highs lows, idea, indicator, influence, Longer, MACD, majority, mark, Method, momentum, moving, Moving Average Convergence Divergence, moving averages, opportunity, pair, period, place, position, possibility, power, pressure, range, Readings, reference, relationship, rise, scenario, series, Setup, Shift, Short, Shrewd, snap, statistical index, statistical methods, statistical probability, statistical procedure, stochastic, stochastic oscillator, stock, stock market, strategy, technical traders, technique, Term, term trends, threshold, time, title, Trade, trader, Trading, trigger
Shrewd technical traders and stock market cartographers are aware of both the stochastic and moving average convergence divergence (MACD) indexes. These statistical methods assist the foreign exchange markets by separating the series of opportunities in currency pairs.
While both techniques are straightforward to apply, but their technical use is likely to diminish as the prices tend to vary each day. Nevertheless, traders and chartists can separate cost-effective setups in the market that have a higher statistical probability by aggregating the power of both oscillators.
Short-Term Trading:
Stochastic oscillator is used to identify the nearest figure to the high/low range of the currency over a given period of time. This statistical index exhibits the trading pressure in the foreign exchange market. Constantly rising levels indicate buying power in the market, whereas relatively decreasing¬ levels point towards selling pressure.
Hence, the oscillator reveals extreme variations experienced in price levels, from 20 and 80 on barrier sets. Readings under the lower threshold mark signify that the market has been sold above the price; whereas readings above the higher mark represent the market has been overbought.
This technique can isolate highs/lows in the market; therefore, it is effective for short-term trading.
Longer-Term Trading:
This statistical procedure is useful for range-bound markets. It is based on moving averages; whereby, a 26-day and 12-day exponential moving average (EMA) is established with a trigger moving average by a nine-day.
MACD primarily identifies the relationship between prices, due to which bullish and bearish reactions will be generated on a high/low moving average indicator. A bullish signal is transmitted when the MACD index rises beyond the trigger line. This method reveals long-term trends.
Forex “Snap” Strategy:
Combining both the methods, the basics idea with trading on the “snap” procedure is dependent on the influence of both the indexes. Forecasting the long-term trends by MACD and using the stochastic for reference, it enables the trader to cultivate entry opportunities in the foreign exchange market.
However, in the given scenario, the majority traders will opt to regulate the limits of the indicator such that the number of periods, and the longer-term trends are able to meet and coincide. Eventually, a prolonged, continuous stochastic D% line is the finest indicator of directional bias with the MACD line.
Momentum Shift:
The MACD practically proves the long term upside bias in the currency pair. With further prolonged MACD, it will stimulate the speculators to enter while the shorter K% stochastic line “snaps” reverse upward or continues the generally rising trend.
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Posted on 07 March 2011
Tags: accurate results, amp, assessment, Basic, Behaviors, broad spectrum, climatic conditions, combination, condition, currency, demand, demand and supply, distinct methods, Economical, economics, energy, environment, environmental factors, exchange rate, exchange rates, factors, forex, Forex Market, Forex market trader, forex markets, forex rate, forex rates, forex traders, Forex trading, Fundamental, fundamental analysis, future events, future market, future predictions, government, government policies, Implement, important factors, inflation, Intrinsic value, investments, investors, management, market, market behavior, market price, market trading, Markets, Methods, misjudge, mistake, movement, movements, Portfolio, predictions, price movements, quantitative factors, seasonal factors, statistical methods, Technical, technical analysis, the intrinsic value, trader, traders, Trading
Generally, two distinct methods are used for the analysis and to predict the forex market behavior. These two methods are Technical analysis and Fundamental analysis. Both of these methods distinctly vary from each other; however forex traders can use both of these methods to get accurate results for the reading of forex markets.
These two methods work for the same goal i.e. to forecast the movement or price of the forex market. In technical analysis, traders can study and determine the effects of market movement, while in the case of fundamental analysis traders can study the causes that trigger the market movement.
Majority of traders prefer fundamental analysis due to its broad spectrum. It can be used for both qualitative and quantitative factors involved in market movement.
Fundamental & Technical Analysis in Combination
Basically fundamental analysis is based on the future predictions about the price change based on future events. It uses various important factors and statistical methods for predicting the effects of future events such as how they will affect demand and supply and the forex rates.
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