Trade Fundamentals in Exchange
Markets
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Content
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The Exchange Trade History and Its Concept
Fundamental Analysis
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Technical Analysis
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Factors affecting the market tendencies
Monetary policy
Economic calendar
Chart types
Trend and tendencies
Reversal patterns
Capital Management
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Market enter signals
Trading plan
The Exchange Trade History and Its Concept
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Exchange (Bursa lat.)
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Found in 15th century, Brugge.
Exchange Market Types
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Stock
Mercantile (Commodity Exchange)
FOREX
“In usum negotiatorum cujuseungue nationis ac Linguae”
(“For sales people of all nations and languages”)
Commodity Exchange
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Instruments:
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Highly liquid goods and raw materials
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Clearing organizations
Professional participants
Private investors
Organizers
Subjects
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Stock Exchange
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Instruments:
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Shares of leading companies
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Clearing organizations
Depositories
Professional participants
Private investors
Organizers
Subjects
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Foreign Exchange
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Instruments:
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Currency
Ingots
Precious metals ware
Subjects
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Central banks
Commercial banks
Professional participants
Pension funds
Insurance companies
Multinational corporations
Private investors
FOREX Market Advantages
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Minimal capital investments
High liquidity
No direct sales
Exchange at any time
High yield
Large trade volume
 FOREX
What is it?
Concepts
CFD (Contract for difference)
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Contract for Difference allows to earn on both rise and fall of price
value
Margin
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Amount taken as a collateral for position opening
Taken at the time of trade opening at the open price and does not
change anymore
Margin trading
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The system works through a brokerage company providing leverage
Margin Trading Features
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Small start-up capital
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Loans are granted in any currency
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Trading is carried out without real money
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Loan granting is charge-free in case of intraday trading
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Broker allows interest on customer’s available funds
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Trade is conducted remotely
Exchange rates
Base currency
Quote currency
Quote type
EUR
USD
Reverse
GBP
USD
Reverse
USD
JPY
Direct
USD
CHF
Direct
GBP
CHF
Cross rate
CAD
JPY
Cross rate
FOREX:
Predictable!
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Capital movement
Data release and its expectation
Policymakers announcements
Fundamental Analysis
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Definition
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Purpose
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Method of price change forecasting through studying macroeconomic
factors that influence the price
Determination of a financial asset true value based on some
macroeconomics factors
News type
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Unexpected
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Scheduled
Factors Affecting the Market
Political
Psychological
Economic
Force-majeure
Instability in the country
Meeting expectations
Monetary policy
Natural disasters
Elections
Underestimation of
events
Economic development
Terrorism acts
Scandal resignations
Mistaken expectations
Meeting of senior officials
Official statements
Press-conferences
Political scandals
Catastrophes
Monetary Policy
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CB Interest rate correction
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Change of required reserves rate
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CB Interest rate – a rate at which commercial banks borrow funds
from the Central Bank.
Required reserves is a share of bank deposits in the Central Bank
Open market operations – is a purchase/sale of
government securities (bonds)
Currency Intervention
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Definition
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Market enter of the CB for the purpose of forced adjustment of the
national currency rate
Target
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National currency cheapening of countries-exporters
Country’s Economic Development Data
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Inflation
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Unemployment
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Socioeconomic phenomenon when a part of population cannot find a job
GDP
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Depreciation of paper money due to its issue in sizes exceeding the turnover
needs that is accompanied by commodities price upturn and real wages drop.
Consumption + government spending + investments + export – import
Trade Balance
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The difference between exports and imports of goods
Economic Calendar
Trading Sessions
Session
Stock Exchange
GMT +3
Asian
Tokyo, Singapore,
Sydney.
01:00 – 09:00
European
London, Frankfurt,
Paris.
8:00 – 16:00
American
New York
14:00 – 22:00
Technical Analysis
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Definition
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Purpose
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Research method for market dynamics based on studying historical
data
Forecasting of the future price movement
Axioms
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Price includes everything
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Price moves in a certain direction
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History repeats itself
Chart Types
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Line - closing price is marked only for every next period.
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Bar – shows maximal (high) and minimal prices (low), opening
and closing prices.
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Japanese candlestick – a rectangle between opening and
closing prices called candlestick body. A dash from a
candlestick body to maximal (high) and minimal (low) price
values within this timeframe is called shadow.
Line Chart
Japanese Candlestick
Chart Timeframes
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М1, М5, М15, М30, H1, H4, D1, W1, MN
1M
1M
5M high
1M 1M
close
1M
open
low
Black Candle Formation
max
high
open
close
min
low
White Candle Formation
high
max
close
open
min
low
Trend Reversal Signals
Shooting star
Evening star
Morning star
Doji
Open price = Close price
Trend
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Trend is a vector of price movement
Main rule: “Trend is your friend”
Conclusion: “Do not work against trend”
Trend Classification
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By duration
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Long-term– from 6 months to several years
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Medium-term– from 2 weeks to 6 months
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Short-term– up to 2 weeks
By movement direction
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Ascending – price goes up.
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Descending – price goes down.
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Flat – no certain move direction
Trend Line
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Definition
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Lines
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The line connecting successive data values ​for determining market
direction.
Support line – connects key lows of the market.
Resistance line – connects key highs of the market.
Levels
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Historical level– distinguishing level which the market remembers for a
very long time.
Psychological level – level occurring near round price values.
Downtrend
Uptrend and Local Trend
Flat
Reverse Pattern
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1. Head & Shoulders
Head
1st shoulder
2nd shoulder
=
Neck’s line
sell
Continuation or Reverse Pattern
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Triangle
buy
1
Min= 200 pips
=
2
3
4
=
5
sell
Capital Management
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Investors
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Positional
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Speculative
Tactics
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Averaging
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Locking
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Pyramid
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Theory of probability
Trading Plan
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Definition
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Systematic description of individual trading
Sections
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Descriptive part
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Information Analysis
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Forecast
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Market enter signals
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Target levels calculation
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Threats
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Trade opening or closing
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Results analysis
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FOREX entered the modern life and took its important
place in it
FOREX gives opportunity to earn money by your own
effort and intellect
FOREX and everything related to it are destined for
success
History of FOREX is just beginning
Everyone has a chance to do part for the history of FOREX
development!