INTRODUCTION
-FOREX is the short form for foreign exchange.
-It has the market circulation of 7Quadrilion daily.
-Players in the financial market include:-
u Banks
u Corporations
u Investors
u Regulators
u Hedge funds
u Brokers
u Individuals
u Governments
u Insurance companies
-Some characteristics of forex include:-
i. High liquidity-high amount of money in circulation.
ii. Geopolitical dispersion-wors all over the world.
iii. Continuous operation-the market is available 24/5
iv. Leverage
v. Low capital-requires low capital to start.
vi. Freedom-the market can be accessed as long as you have internet connection.
-Broker- A firm between the retail trader and the market.
-Fx pesa (EGM) is an an online foreign exchange broker; a non dealing broker regulated by the capital market authorities.
-What can be traded with fx pesa:-
u Futures
u Cryptocurrencies
u Forex
u commodities
u Indices-a group of company stocks; most traded indices include NASDAC,S&P 500,DE40
u Stocks
u Exchange traded funds
-Most traded currencies include:-
1. GBP- great Britain pound
2. USD- united states dollar
3. CAD- canadian dollar
4. JPY- Japanese yen
5. NZD - New zealand dollar
-Currencies are quoted in pairs since you are simultaneously buying one and selling the other. The first currency is the base currency and and the other is the quote currency.
-When you execute a sell, you are selling the base currency and selling the quote currency.
-Bid price- same as sell.
-Ask price - same as buy
-spread - difference between bid and ask.
-pip-percentage in point. we get paid via pips.
-lot size
TECHNICAL ANALYSIS
1. UPTREND MARKET:
-Buyers are in control of the market. We should only look for buying opportunities on an uptrend market.
-It is made up of higher highs and higher lows (HH, HL)
-As a buyer we should always tend to buy low and sell high.
-On an uptrend market we consider buying positions when the market creates a high low.
2. DOWNTREND MARKET:
-A downtrend shows that sellers dominate the market.
-Made up of lower lows and lower highs (LL,LH).
-We only look for sell positions on a downtrend market and execute the trades on the lower highs.
3. SIDEWAYS/RANGING MARKET:
-A sideways market shows equal dominance between buyer and sellers.
-The market is made up of common highs and common lows.
-A ranging market has there main point; support, resistance and breakouts, which refers to critical price barriers. They are critical points or reference used to predict the market trend.
-Support- Zone on a chart where the price has fallen severally and has not broken.
-Demand is highest this point thus we only execute buy trades.
-Resistance- This is the zone on the chart where the price has risen to severally and cannot break.
-Sell at resistance; since supply is highest at this point.
-Breakout - This is the price that exceeds the support or resistance.
-Pending orders: Allows the trader to specify conditions for the execution of a trade in the future, rather than executing the trade at the current market price. Different pending orders include:-
- Buy limit-Set below the price, when the price rebounds from the bottom.
- Sell limit- Set above the price.
- Buy stop- Set above the price, we follow the market breakout.
- Sell stop- Set below the price, we're after the pullback.
- Use the 4hr and 1hr time frames to spot the structure on the chart (HH,HL,LH,LL).
FUNDAMENTAL ANALYSIS:
FACTORS AFFECTING THE MOVEMENTS OF AN ASSET;
- Monetary policies
- Inflation
- Speculation
- Recession
- Interest rates
- Deficits
- Unemployment
- Economic data
- Political conditions
- Central ban prices.
- Market sentiments
- Geopolitical events
- GDP
RISK MANAGEMENT
-Defined as the discipline applied in trading to minimize losses and maximize profits.
-Build and identify an effective trading strategy which should have a positive profit expectancy.
-”Don’t focus on making money, focus on protecting what you have”
-Have a predetermined stop loss before executing a trade.
-Risk per trade - depending on the amount of capital a trader is working with, the recommended risk per capital is 2%.
-Risk to reward ratio vs win ratio- Reward to risk ratio compares the pips between the entry price to take profit level and entry point to stop loss level.
-Do not fight the market trends.
-Trade what you see not what you think.
-Stop loss - Closes your trade automatically when your position takes a specified amount of losses.
-Take profit - Closes your trade when your position reaches a certain amount of profit.
-Always trade with a stop loss(SL) and a take profit(TP).
CHART PATTERNS:
- Continuation chart patterns - bullish flag, bearish wedge,
- Reversal chart patterns - show the price will change the direction; the end of a pattern and the start of a new one. They include; double top and double bottom
- Bilateral chart patterns - shows that the market can break either way. They include; Ascending triangle, descending triangle, symmetrical triangle.
-Use the below link to create your trading account and start trading; leave any questions on the comments section.
https://portal.fxpesa.com/live-application/?clickid=40583&affid=C00962913