Fundamental Analysis: The Index of Real Estate as an Economic Indicator

Posted by admin on December 10, 2010
Dec 102010
 

Whether you are trading Forex in Singapore or any other part of the world, the principals of trading and market analysis stay the same. In this article we will discuss one of the most important indicators of Fundamental analysis of the market that can be found in the economical calendar on Trading in Singapore site or on the site of any Forex broker.

The global financial crisis was not born in the USA accidentally. The figures of the real estate market in the USA represent important information for the entire economy of the world, because they show the situation of the largest in the world economical system – the United States of America. Moreover, the data of USA real estate market is directly related to mortgage rates and terms of economic cycles. Consequently, a smart trader must make a deep research of the USA economy and also the world economy before starting trading. Real estate indicators have a great influence on the growth or decrease of value of the national currency, especially of the USD. This process doesn’t happen directly, but through the securities market. If the indicators rise, then bonds are falling and the shares rise in value.

The real estate information is announced approximately on 15th working day of every month. Moreover, the analysis of the real estate situation in USA is performed at all stages: permission for construction works, the completed building, the sale of new houses and existing ones, the construction costs.

If the indicator for the beginning of construction work has a number of 1.5-2 million, it means that the USA economy is growing; and if the level is reduced to a million – it indicates a recession.

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Technical Analysis As The Most Effective Analysis Of Forex Market

Posted by admin on November 26, 2010
Nov 262010
 

Technical analysis in Forex trading is used to study financial markets with a help of graphs and charts. The target of the technical analysis is to predict future price behavior. As a rule, the price forecasting is based on the historical rates and current market situation. Technical analysis includes several approaches to study the dynamics of price behavior.

A research of the future behavior of Forex prices in technical analysis is based on three market criteria – price, volume and number of open positions. The main factor for technical analysis is prices. The other criteria are studied in order to confirm the accuracy of price dynamics.

Let’s look on the main three axioms of technical analysis theory:

1. Market “sees” everything. This axiom is the most important in the theory of technical analysis. Its understanding is important for a correct understanding of all methods of technical analysis. The basic meaning of this postulate is that any criteria (political, economic, psychological), affects the prices and is recorded in the Forex charts. In other words, any change in prices is the result of changes in external factors. Means that every trader must carefully monitor and study the price dynamics when trading Forex online.

When analyzing price charts and using different indicators, a Forex trader comes to the conclusion that the market itself shows him the most likely price direction (rising, falling, neutral). This approach is different from the fundamental analysis, which focuses on the study of factors. Only after the evaluation of external factors traders may make conclusions about the market future movements. They have to consider a complex of different factors disregarding the price criteria. As you can see, the technical analyst’s priority is a price rather than any external factors.

2. Price movements are done in trends. This axiom is the basis for the formation of all methods of technical analysis as Forex market is a subject to trends and can be objectively evaluated. As Forex market movements are done in trends, we can see two scenarios: the first one is that a trend is likely to be further developed and will not turn to the opposite direction. The second scenario is that current trend may continue until the reverse process begins.

3. History repeats itself. The theory of technical analysis and research on Forex market dynamics are closely connected with a study of human psychology. For example, the graphs of price movements that were created and analyzed over the past 100 years reflect the major features of the psychological state of the market. First of all, the graphical interpretation indicates the type of mood that prevails at present in the market (bullish or bearish type of mood). Consequently, if in the past these models worked effectively, there is a reason to believe that in future they will work successfully too as their foundation is built on the human psychology that remains almost unchanged over the years. The motto of Forex trading is: The key to the future is a study of the past.

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A Role Of Fundamental Analysis In Forex Trading

Posted by admin on November 19, 2010
Nov 192010
 

All Forex trading courses and training materials always include two large sections: fundamental and technical analysis of Forex market. According to our researches, we came to the conclusion that it is necessary to know about the fundamental analysis, but its role in successful trading is exaggerated.

Let’s discuss the basics of fundamental analysis. The main target in fundamental analysis is to predict new trends in price movements. Life cycles of the fundamental factors can be divided into short and long. Short life cycle of an event lasts no more than a day and sometimes even less than an hour and includes all unexpected economical or political news and events. Very often this news is associated with force majeure like earthquake, terrorist acts, etc. Long term cycle lasts from several weeks to several years. Fundamental factors of long-cycle are all factors that affect the global and national economy situation (inflation, unemployment, etc).

The bulk of the traders in Forex market are speculators. It applies to both small traders and banks. The main difference between a speculator and the investor is the duration of time he/she stays in the market. If you have brought EUR in February and sold it in May – you are an investor. But we don’t have many traders like that. Most traders perform transactions within days or maximum within a week when they close trading positions before a weekend. Accordingly, the fundamental factors of long life cycle for such traders are not very important.

When talking about the fundamental factors of a short life cycle, it is still difficult to see their importance. If it comes to natural disasters, you need to be quick enough to open a trading position in a right moment, because in most cases you will miss the moment. When it comes to expectations of news, it also looks complicated. As an example let’s consider the unemployment rate announcement in USA. If the news will coincide with the predicted value, it is unlikely that the USD will change.  Means that you will have a trading opportunity only when the news doesn’t coincide with the expected one. The question you have to ask yourself whether it is better to buy or sell when there is a difference between the actual and expected announcement.

Fundamental analysis will not let you decide when to open a trading position. Making decisions basing only on fundamental analysis is extremely difficult, as you have to handle a huge volume of information. Besides it will take you much time to read all reports, news and briefs. 

To sum it up, on our opinion a trader needs to have a handy economical calendar of important economic events, but only for avoiding opening a trading position before the announcement of big and important news. Because it may cause high volatility of the market and prices will move unpredictably before a trend will take a direction. The market may sweep your stop orders by closing your position and then return to its original level.

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