From all financial tools, the forex market in the best way approaches for the technical analysis, for some reasons:
1. Forex surpasses all other markets in volume. This volume for last thirty years has grown approximately for 2 000 percent, from 1 billion a day in 1974 to approximately 2 billion dollars in 2005, therefore liquidity of the market is almost unlimited.
2. The currency market is never closed within trading week; therefore here there is no escalating or delays of client warrants. Here practically is not present gaps, leading to uncontrollable losses. Trading week begins in Sydney, in Australia, on Monday morning, when in the North America and Europe still Sunday and comes to an end in New York Friday afternoon.
3. We know two basic types of the markets – trend and lateral. It is much easier to gain money on trend market. Currencies, as a rule, go more long-term trends which can proceed within many months or even years. It does their ideal for trade with trend systems. For the same reason the analysis of graphic patterns work well. At so wide circulation of the market in the world the huge role in movement of currencies is played by behavior of crowd, namely it – a basis of tools and methods of the technical analysis.
4. Partially thanks to the size, forex is less volatile, than other markets. Lower volatility means smaller risk. For example, a day trading range of index S&P 500 – from 4 to 5 percent, while a day range of euro – about 1 percent.
5. Forex is the ideal market for “an inter market” method of the market analysis developed many years ago by Louis B. Mendelssohn. Veterans of trading know that the markets are interdependent, when one is stronger than others influence movement of the chosen currency pair. The program of the analysis of Mendelssohn, Vantage Point, finds out the latent repeating patterns occurring between the connected markets. Using neural networks for the analysis of the data from set of the connected markets (drawing above see), the program projects averages, which anticipate turns of real averages (drawing more low) in 80 % of cases see.
Do not forget also about fundamental factors.
Successful forex – traders, like commodity and stock colleagues, should not forget about the fundamental factors, influencing the market of currencies.
1. Decisions on change by the central banks of the interest rate.
2. Figures of the governmental debt and a budgeted deficit show changes to the best or the worst. Deficiency growth, for example, often foretells increase in interest rates as the government competes to a private sector for the investment capital. Distinction between the share market and forex consists that growing rates usually are favorable news to currency.
3. The quarterly account about gross national product (a total internal product).
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