The Basic of Technical Analysis

Support A term used in technical analysis indicating a specific price level at which a currency will have the inability to cross below. Recurring failure for the price to move below that point produces a pattern that can usually be shaped by a straight line. A support level penetrated becomes resistance.
Resistance A term used in technical analysis indicating a specific price level at which a currency will have the inability to cross above. Recurring failure for the price to move above that point produces a pattern that can usually be shaped by a straight line.
Trend Trend is simply, the overall direction prices are moving, UP, DOWN, OR FLAT.
Channel - When prices trend between two parallel trendlines they form a Channel. - When prices hit the bottom trendline this may be used as a buying area and when prices hit the upper trendline this may be used as a selling.
Double top (reversal formation) For obvious reasons this is often called an "M-top". The market is failing twice at a resistance and is reversing then sharply. A break of the support would indicate further losses towards the target that can be evaluated through the following procedure. The vertical width of the "M" (price difference) is projected downwards from the breakpoint of the support.
Double bottom (reversal formation) The opposite of Double top. (often called an "W-top"). When the market is failing twice at a support and is reversing then sharply. A break of the resistance would indicate further rising towards the target that can be evaluated through the following procedure. The vertical width of the "W" (price difference) is projected downwards from the breakpoint of the resistance.
Triangle The triangle formation can be quite difficult to analyse and the fact that a few different types of triangles exist doesn't make this task any easier.
Head and Shoulders Formation of left shoulder forms a new high with a corrective dip, next rally forms higher high = head, correction from head goes below high of left shoulder and near as low of the left shoulder correction, breaching up trendline, rally of right shoulder does not breach head high, retracing half to three quarters of head correction.
Fibonacci PIVOT POINTS. For reasons that remain unknown, major ratios drawn from Fibonacci numbers describe a predictable interaction between trend and countertrend movement in markets. The most important ones to remember are 38,2%, 50% and 61,8%.

Spot and Forward Trading

Spot Definition : Exchange of two currencies at an agreed upon exchange rate for cash delivery. Cash delivery is considered to be two business days, except for the Canadian dollar, which is one business day.
Bid/Offer Bids and Offers are quoted in terms of the base currency. 1 Base unit is how many units of the other currency
Forward Outright A Forward Outright is a single exchange of two currencies at a predetermined rate for future delivery. (Spot + Forward Points)
FX swap A Foreign Exchange Forward is an exchange of two currencies at a predetermined rate for any date other than spot delivery. A FX Swap is an agreement to make an initial exchange of currencies for spot value with a reversal of that exchange at some future date. Differs from a forward outright in that two deliveries take place. Comparable to borrowing or lending.
Premium/Discount Premium/Discount is the interest rate differentials between two currencies
Calculating Premium and Discount Calculating exemples

Technical Indicators

Average true range (ATR) A measure of volatility introduced by Welles Wilder in his book: "New Concepts in Technical Trading Systems." Wilder originally developed the ATR for commodities but the indicator can also be used for Forex. Simply put, a currency experiencing a high level of volatility will have a higher.
BOLLINGER BAND Developed by John Bollinger, Bollinger Bands are charted by calculating a simple moving average of price, then creating two bands a specified number of standard deviations above and below the moving average. You can draw the simple moving average analysis on the same chart as the Bollinger Bands analysis, using the same interval. In addition, Bollinger Bands are usually plotted with a bar analysis so that the proximity of the bands to the prices can be easily observed.

(CCI)Commodity Channel Index Commodity Channel Index (CCI) was originated by Donald Lambert in 1980. It is based on the assumption that a perfectly cyclical commodity price approximates a sine wave. Designed to be used with instruments, which have seasonal or cyclical tendencies, Commodity Channel Index is not used to calculate cycle lengths but rather to indicate that a cycle trend is beginning.
Linear Regression Linear regression is a statistical tool used to measure trends. Linear regression uses the least squares method to plot the line. The linear regression line is a straight line extending through the prices.
(MACD)Moving Average Convergence Divergence Moving Average Convergence Divergence or MACD as it is more commonly known, was developed by Gerald Appel to trade 26 and 12-week cycles in the stock market. MACD is a type of oscillator that can measure market momentum as well as follow or indicate the trend.
Momentum Momentum is an oscillator that measures the rate at which prices are changing over the Observation Period. It measures whether prices are rising or falling at an increasing or decreasing rate. The Momentum calculation subtracts the current price from the price a set number of periods ago. This positive or negative difference is plotted about a zero line.
MOVING AVERAGE A Moving Average is a moving mean of data. In other words, Moving Averages perform a mathematical function where data within a selected period is averaged and the average 'moves' as new data is included in the calculation while older data is removed or lessened. Moving Averages essentially smooth data by removing 'noise'. This smoothing of data makes Moving Averages popular tools in identifying price trends and trend reversals.
PARABOLIC TIME PRICE(SAR) Parabolic Time Price is a system that always has a position in the market, either long or short. You would close out the current position and enter a reverse position when the price crosses the current Stop And Reverse (SAR) point. The SAR points resemble a parabolic curve as they begin to tighten and close in on prices once prices begin to trend. This explains the name - Parabolic Time Price.
(ROC)Rate of Change Rate of Change is an oscillator that measures how fast the momentum of the market is changing over the Observation Period. Rate of Change is very similar to Momentum in that it compares the current price with the price a specified number of periods ago, however Rate of Change is calculated differently. Where Momentum subtracts the current price from the price a specified number of periods ago, Rate of Change divides the current price by the price a specified number of periods ago and then multiplies the result by 100
(RSI)Relative Strength Index Developed by J. Welles Wilder and introduced in his book New Concepts in Technical Trading Systems. RSI calculates the difference in values between the closes over the Observation Period. These values are averaged, with an up average being calculated for periods with higher closes and a down-average being calculated for periods with lower closes. The up average is divided by the down average to create the Relative Strength. Finally, the Relative Strength is put into the Relative Strength Index formula to produce an oscillator that fluctuates between 0 and 100.
Slow Stochastic Stochastics are an oscillator developed by George Lane and are based on the following observation: As prices increase - closing prices tend to be closer to the upper end of the price range. As prices decrease - closing prices tend to be closer to the lower end of the price range. Slow Stochastics are based on Fast Stochastics but provide a slower, smoother response to price movements. Slow Stochastic consist of two lines, %K and %D: - The %K line in Slow Stochastic is the same as the %D line in Fast Stochastic. - The %D line in Slow Stochastic is a Simple Moving Average of %K Slow Stochastic. This line is smoother than the %K and provides the signals for an overbought / oversold market.
Standard Deviation A measure of dispersion of a set of data from their mean. The more spread apart the data is, the higher the "deviation". In statistics is can also be calculated as the square root of the variance A. Volatile price would have a high standard deviation. In mutual funds, the standard deviation tells us how much the return on the fund is "deviating" from the expected normal returns.
STOCHASTICA Stochastics are an oscillator developed by George Lane and are based on the following observation: As prices increase - closing prices tend to be closer to the upper end of the price range. As prices decrease - closing prices tend to be closer to the lower end of the price range.

Types of Chart

Introduction ?A chart is a graphical representation of price movement over a specific period of time and is composed of an x-axis (time) and a y-axis (price).
Line Chart A line chart shows a line connecting the "closing prices". The closing is the last price recorded at the end of a specific period of time (session).
Bar Chart Bar chart: Basically all characteristics mentioned for the line chart also hold true for the bar chart. However, the construction is a different one. The bar chart is composed of a high (highest price during a session), a low (lowest price during a session) and the close.
Candlestick Chart? The building blocks for the candlestick chart are the high, the low, the opening and the closing. The difference to the bar chart is that the open and the close form the cornerstones for the, so called, real body.

Types of Orders

Types of OrdersGTC' (Good Till Cancelled) Orders When placing an Order, you must specify for how long the Order is to be valid. The GTC Order is a very common type of Order; it remains valid, 24 hours a day, until you cancel it. 'Day' Orders Day Orders are good until 23:00 CET time.
Market Order ? An order to buy or sell which is to be done at the price immediately available; the ‘spot’ rate, the current rates at which the market is dealing.
Limit Order ? An instruction to deal if a market moves to a more favorable level (i.e. an instruction to buy if a market goes down to a specified level, or to sell if a market goes up to a specified level) is called a Limit Order.
Stop Orders ? An instruction to deal if a market moves to a less favorable level (i.e. an instruction to buy if a market goes up to a specified level, or to sell if a market goes down to a specified level) is called a Stop Order.

OCO Order - One Cancels the Other ? An 'OCO' ('One Cancels the Other') Order is a special type of Order where a Stop Order and a Limit Order in the same market are linked together. With an OCO Order, the execution of one of the two linked Orders results in the automatic cancellation of the other Order.
IF DONE Order An IF DONE Order is a two-legged order in which the execution of the second leg can occur only after the conditions of the first leg have been satisfied. The first leg, only a Limit, is created in an active state and the second, which can be a Stop, a Limit, or an OCO, is created in a dormant state.
Loop Order? ? A Loop Order is a perpetual or repeating order placed in anticipation of a cyclical movement in the market. It is a pair of matching orders where the first leg is active and the second dormant. When the desired price is reached for the active order, it is executed, the dormant order becomes active, and a new order (a copy of the one just executed) is created in a dormant state. This process repeats until the order is explicitly cancelled.

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The 8 most important trading recommendations ?

• The Trend is your friend.
• In up-trends, buy the dips; in downtrends, sell bounces.
• Let profits run, cut losses short. Always use protective stops to limit losses and move them only to reduce potential losses or protect newly achieved profits.