Benefits Of Technical Analysis In Forex Trading

Technical analysis is the most common method of analysis in forex trading. Technical analysis involves the use of charts to investigate and predict the price movement of a currency pair. Many forex traders love to use technical analysis for the many benefits that they gain from this analysis technique.

Here are some of the benefits of technical analysis.

Provides Traders With Current Price Information

As a trader, when you chart a price chart for your currency pair of interest, it gives you all the information you require.

Depending on the formulae you use on your charts, you have historical data as back as you like and predict future prices.

This ensures that you can easily make your decision on what position you will take on your trade.

Another piece of information that you get from the technical analysis is the presence of a trend. A trend indicates that there the price is persistently moving in a particular direction.

As a trader, you can take advantage of the trend to profit. When you identify a trend, technical analysis will help you find the best point to enter and exit the trade profitably.

Helps Traders Identify Trends

Technical analysis charts help traders identify the presence of trends in the market. A trend could either be upward or downward.

An upward trend indicates that the price is rising. A downward trend indicates that the price is going down.

By using technical analysis, you can identify when markets are trending and you can take advantage of them.

When you have a trend, technical analysis provides you with support and resistance points. These are points at which the price of the currency pair will either be at the lowest or highest respectively.

With these points, you can pick a point at which to take a position on trade. You can easily predict the highest and lowest points of the price and can take your profit before your trade turns.

Helps Traders Identify Patterns

In addition to trends, technical analysis helps to identify patterns. This is because technical analysis also involves the use of historical data.

Thus, as a trader, you can go back a few hours, days, weeks, months, and even years to check how the currency pair performed.

With this historical information, you can see how the price of the currency pair moves at certain times.

You can compare that with the present to help you make up your mind and take a profitable position on your currency pair of interest.

Saves Traders Times

Technical analysis saves time for traders and allows them to trade with speed.

Unlike fundamental analysis, you don’t have to investigate the performance of the economy of a country before you take a position. Much of the information you need to decide on fundamental analysis takes time before you can get it.

All you need to do is press a button and you have a chart on your screen. If you have the right skill, the chart can tell you everything you need to know to make a profitable trade. You can now make your decision and take a position that you can expect to profit from.

The time saved by using technical analysis allows traders to enter into several trades in a given trading session.

Easily Available

When it comes to technical analysis, you don’t have to invest a lot of resources. Charting tools are easily available and freely provided on your trading platforms. If you know how to use them, you don’t need to pay for additional information or tools to help you make up your mind.

Best For Both Short And Long Term Trades

You can use technical analysis for as long or a short a period you want to hold your trade position.

You can use technical trading for both short and long-term trades. Based on your analysis, you can hold your position for a quick profit. Alternatively, you can hold it for longer to ensure that you make a larger profit.

Conclusion

Technical traders love their technical analysis. It provides information quickly and ensures that you can get into the market in the prevailing conditions. It is easy to do and is the best for traders who intend to make lots of trades in the trading session.

Moving Averages for Smoothing Time Series Data

Moving averages or MAs are useful for smoothing time series data, unearth underlying trends and determine components used in statistical modeling. Smoothing refers to eliminating random variations that might appear as roughness in a raw time series data plot. It minimizes the noise to enhance a signal that may show cycles and trends. Analysts also know the smoothing process as filtering the data.

MA was developed in the 1920s and is the oldest known process used for smoothing data today. The method depends on the idea that observations that are close in time are more likely to have similarities in values. The averaging eliminates the noise of random variation from the data.

Time Series Forecasting

Forecasting via time series uses data using historical values and related patterns to predict any future activity. This is mostly related to trend analysis, cyclical fluctuation analysis, and seasonality. Success is not a guarantee with this method as with any forecasting technique.

Components of Time Series

The things affecting an observation’s values in a time series are its components. They include:

  • Trend
  • Seasonal and cyclic variations
  • Random movements
  1. Trend

The trend indicates the general data tendency to decrease or increase over a long period. A trend is a smooth, average, and long-term tendency. It is not absolute that the decrease or increase is in one direction over the given time frame. A tendency may decrease, increase, or stay stable in different time frames. However, the overall trend must be either stable, downward, or upward.

2.    Seasonal and cyclic variations

Seasonal and Cyclic Variations are defined as periodic or short-term fluctuations.

3.    Random Movements

Some movements are irregular and random. They are uncontrollable, unexpected, and erratic.

How to Analyze Time Series Data

You can use statistical techniques to analyze time series data in two ways. One is for generating inferences on how variables affect other variables on interest over a period and how to forecast any future trends.

What are Moving Averages?

Moving averages or MAs are a series of averages that are calculated via sequential data point segments on a series of values. Their length defines the data points that you should include in each average.

·         One-Sided MAs

One-sided MAs are inclusive of both the current and previous observations per average

·         Centered MAs

Centered MAs include the previous and future observations and calculate the average at a particular point in time. The centered MAs use observations surrounding it in both directions and are also referred to as two-sided MAs.

Centered intervals pan out evenly for odd observation numbers as they allow an even number of observations before and after the MA. If you have an even length, the calculations adjust and vary by using a weighted MA.

How Moving Averages Reveal Trends

MAs can eliminate seasonal patterns and reveal any underlying trends. If you need to eliminate seasonal data in your data, you must set the length of your MA to be equal to the length of the pattern. If you don’t have any seasonal data, select a reasonable length. The longer the length, the smoother the lines. Seasonal data in this context has nothing to do with literal seasons. It refers to a repetitive pattern in your data with a fixed length.

The downside to using MAs to smooth data series is that these calculations rely on historical data. This reliance on historical data means the timeliness of the variables is lost. This is one reason why you should use a weighted MA as the variable’s current values are accorded more importance.

Data Expectations

Calculating an MA of a time series makes some data assumptions. It assumes that both the seasonal and trend components have been eliminated from the time series. This makes your time series static and does not indicate any obvious trends such as decreased movement or seasonality.

You can use various methods to eliminate seasonality and trends from time series data when you are forecasting. Two of the best methods are the differencing method, modeling the behavior and removing it from the series.

Moving Average as a Data Preparation Technique

MA can be used as a data preparation method for creating smoothed versions of the original data. Smoothing helps to minimize the random variations and expose the underlying process’s structure.

Conclusion

You can use moving averages for smoothing time series data or eliminating random variations to give a smoother data plot. This smoothing process is also known as filtering and is a useful way of revealing underlying market trends.

3 Forex Trading Mistakes that Are Affecting Your Account

Successful forex traders know what, when, and how to trade currency pairs. Their experience lets them apply trading tricks that may seem abnormal to many forex traders.

The opposite is true for beginner traders. They easily blow accounts by making mistakes that you can easily avoid by reading and understanding this article.

Whether you are a beginner or intermediate forex trader, reading this article will equip you with tricks to enjoy reliable, and profitable trading. Find out more below.

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A Discussion on Day Trading Futures Contracts

Futures are an appealing business aspect for day traders. You don’t require lots of money to begin, and you can get significant returns if you are smart. The amount of cash flow needed to qualify for day trading futures contracts depends on the futures you intend to trade.

Futures contracts have distinctive “day trading edge” prerequisites, which means you need to have variable amounts of cash in your account to engage in trading the different types of futures contracts.

If you possess a limited account, you’re restricted to futures that have limited day trading profits. A massive account grants you greater versatility with regard to what stocks to exchange, and the discussion below will help you make a credible decision.

Day trades vary in length; it could be several minutes or, at times, the entire trading sitting. As a trader, you need a lot of knowledge, discipline, and practice to succeed in futures contract endeavors.

Understanding Futures Contracts

Futures are derivative monetary agreements that oblige the parties involved to trade an asset at a foreordained future date and cost. The subscriber should buy, or the vendor should sell the fundamental resource at the set value, paying little heed to the current market cost at the lapse date.

Fundamental resources include actual products or other monetary instruments. Futures feature the amount of the fundamental resource and are normalized to ease trading on a prospects exchange. Futures, therefore, can be utilized for exchange speculation.

“Futures” and “futures contracts” allude to the same thing. For instance, someone can say they purchased oil futures, which is the same as an oil futures contract.

Such prospects incorporate oil, securities, or even the S&P 500 index prospects. Futures are also perhaps the most direct approaches to finance oil prospects.

Futures are normalized, unlike forwards. Forwards contracts are relative kinds of contracts that capture an upcoming cost in the present; however, forwards contracts are exchanged OTC (over-the-counter) and possess adaptable terms amongst the counterparties.

What Are the Pros of Day Trading Futures?

Futures Markets Are Very Liquid

Future agreements are exchanged in immense numbers each day, consequently making them very liquid. The steady presence of purchasers and vendors in imminent markets guarantees market requests can be put rapidly.

Positions Close at Day’s End

All positions with regard to futures should culminate at the day’s end, and no positions should remain open overnight.  This means that a futures investor should rest well at night because there is no risk.

Understanding Futures Is Quick

You can learn a lot about the futures markets in a brief period by day trading. Informal investors ordinarily execute a couple of exchanges each day; contrast that with position brokers who may make just one exchange in a week.

Therefore, as a day trader, you grow your knowledge and experience on trading futures contracts the more times you trade

Futures Markets Level the Trading Ground

It is hard to rely on insider information with regard to futures contracts. For instance, who can with certainty confirm the U.S Federal Reserve strategy? The answer is no one.

Unlike solitary stocks with corporate directors or insiders who can leak data to their family members or acquaintances to lead in liquidation or mergers, futures will, in general, exchange market aggregates that don’t leave them vulnerable to insider trading.

What Are the Cons of Day Trading Futures?

Utmost Discipline Is Required

For a day trader to be successful, they must have utmost discipline when trading futures. However, there is always a lure to execute marginal trades or overtrade in futures.

Commissions Are Quite High

In day trading, commissions can accumulate very quickly. Numerous day traders close shop in the long run because the commission bill is massive.

For instance, a broker with $10,000 in their account trades a single online mini- S&P contract. They may have between$3,000 and $5000 in commissions toward the year’s end. To break even a day trader needs a profit margin of at least 25% from their trades.

Earning A Profit Is Tricky

The vast majority of who day exchange futures can’t rake in cash. An absence of readiness and order is generally their downfall. Day trading can be an unforgiving undertaking.

Nonetheless, for those willing to be disciplined, devise a plan, and put in the work, day trading on futures can be a profitable undertaking.

Final Thought

To sum it all up, depending on the broker you hire and your account status, you could be eligible for day trade futures contracts. However, like any other day, trading tool futures have their pros and cons, as illustrated above.

Can You Really Manage Loss in Forex Trading?

Can You Really Manage Loss in Forex Trading?

Forex traders are always scouting the internet for articles on how they can minimize losing trades. Any wise forex trader should not be naïve of the losses. Sometimes the best approach is always to expect and accept that losses here and there in trading otherwise you might quit trading before you even begin. Luckily, there are certain strategies that can minimize loss in trading.

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