From the first article about the international currency you could learn that such Forex to what it can be useful to the inhabitant, got acquainted with some basic concepts, with the mechanism of functioning of the market. Now we will consider some aspects of work on Forex in more detail. In particular we will study operation of the mechanism called "a credit shoulder", we will get acquainted with bases of the technical and fundamental analysis.
In the previous article the example with purchase of 10 000 Swiss francs was given, and was mentioned that for this purpose there will be enough only a little more than 40 US dollars. Also it was said that we are obliged by it to the mechanism called "a credit shoulder". Now let's understand as this mechanism works at the market Forex.
So, imagine that you on the trading account have a sum of 100 US dollars. For simplicity of calculations we will accept the size of a credit shoulder 1:100. Let's say you consider that the Japanese Yen will grow soon, and decide to buy in the market Forex the greatest possible quantity of this currency. Taking into account your deposit in 100 dollars and a credit shoulder 1:100 you can operate with the sum of 10 000 dollars (100 dollars * 100 = 10 000 dollars). That is your dealing center, to be exact partner bank of the dealing center issues you the interest-free target credit for purchase of currency. Certainly, on what another, except as on transaction in the market Forex, this money you will not be able to spend. For receiving this credit you do not need to fill any forms, to collect references, to look for guarantors, to wait for some weeks as it occurs when receiving the credit in bank. Delivery of this credit happens "on the fly", that is at the time of transaction. Thus, the bank adds 9 900 dollars to your 100 dollars, and as a result you dispose of the sum in 10 000 evergreen American banknotes.
For this sum you buy Japanese Yen, we will allow at a course 1 to 120 (120 Japanese Yens for 1 American dollar). Total it turns out 120 * 10 000 = 1 200 000 Japanese Yens. Let's assume, your forecast about growth of yen exchange rate to dollar came true, and after a while (and it can be and some minutes and some months; remember, courses change very dynamically?) yen exchange rate to dollar makes already 1 to 119. Let here you be not confused by reduction of figure with 120 to 119: The yen really grew, after all it is necessary to pay for 1 dollar less Yens now. Still it is possible to tell "the dollar fell in relation to Japanese Yen", and then reduction of figure does not look illogical. Now you sell 1 200 000 Japanese Yens and receive 1 200 000: 119 = 10 084,03 dollars. After that, the bank takes away 9 900 dollars (You after all remember, what it borrowed them to us in hope for fast return of a debt?) and at you remains 10 084,03 - 9 900 = 184,03 dollars. Your profit made 84,03 dollars. Remarkably.
Now we will consider a situation, not absolutely pleasant for us, when you suddenly (that does not happen) were mistaken in forecasts, and yen exchange rate fell in relation to dollar and makes 121,21. In this case there is very a tickler: if to sell our 1 200 000 Yens, at a current rate, it is possible to help out 1 200 000: 121,21 = 9900,17 dollars. It is clear, that the change of course on one point and achievement of level 121,22 by it will already be not in interests of bank and therefore the dealing center will forcibly close the transaction on a current rate, the bank will take away back the lawful 9 900 dollars, and to you there will be 17 cents. Such situation is called "marzhin a stake" (English Margin call) – the phrase, very scary for traders. In this situation the trader working at the market Forex loses actually all the capital (in our example from 100 dollars there were 17 cents). How to learn to avoid similar situations we will talk later. I will tell only that it is the whole science which is called "attract management" (English Money Management).
How to build forecasts on Forex
The forecast in the market Forex is is not difficult at all. For this purpose there are many various techniques. As it was already told in the first article on InfoAdvisor.net about the market Forex, the greatest distribution was gained by the fundamental analysis and the technical analysis. Except these two types of the analysis there are such exotic as the astrological forecast, guessing on cards also others. I do not sneer at all. These techniques are really put into practice for drawing up forecasts of change of exchange rates in the market Forex. I can tell about their success of nothing as never used them and did not communicate with people who would use them. But more trust is inspired by evidence-based methods about which we now also will talk.
This type of the analysis, according to many traders, more difficult, than technical. It means studying of basic (fundamental) indicators of economy of that country or region which currency we analyze. Among such indicators it is possible to call the following:
- Payment and trade balance of the country;
- Indicators of the financial markets of the country, market indexes;
- Indicators of macroeconomic development: demand for real estate, cars, price level, productions, employment;
- Indicators of credit and monetary regulation of economy (interest rates of the central banks, volume of money supply in the country and others).
All above-mentioned factors in a varying degree influence exchange rates, and, analyzing them it is possible to define with high probability further development of a situation in the currency market. To use in work in the market , it is quite good to have economic education. However, and, without having it, and, having armed with patience, it is possible to learn to predict the markets (the literature benefit according to the fundamental analysis now enough). But even if you, for any reasons, do not wish to study this type of the analysis, it does not matter – for you it was already made by others, and you can easily use fruits of their work in work. The matter is that the majority of the dealing centers provide to the users the daily detailed analysis of the markets with the forecast of further development of a situation. And even if your dealing center of such information does not provide forecasts and analyses it is possible to find in the Internet without effort.
Therefore, this article InfoAdvisor.net does not set as the purpose to make of readers of experts of the fundamental analysis. If you have such desire, it is possible to address to specialized literature or in training centers.
It traditionally is considered simpler than the fundamental. This type of the analysis is based on the theory that the situation in the market which developed at the moment already of a code existed earlier and if to study as the market (in other words, in what direction the course of this or that currency started moving) after this situation behaved, it is possible to define as there will be a situation in the future. The technical analysis follows from the following postulates:
- The market considers everything. That is, all reasons of change of exchange rates which are considered by the fundamental analysis, are already considered by the market. Therefore the most important – studying of dynamics of exchange rates.
- The movement of the prices is subordinated to tendencies. It means that in the market at a given time there is a certain type of behavior of an exchange rate: "up", "down", or "on a place". This type of behavior is called as "trend", and there is respectively an ascending trend (the course grows), the descending trend (the course falls) and a lateral trend (the course considerably does not change). To define what now a trend in the market it is very important for successful trade.
- History repeats itself. About what it was already told slightly above. That is the similar situation already existed earlier and repeatedly. The analysis of these earlier existing situations can also bring us practical benefit.
I hope, I not strongly confused you. If to state the aforesaid words, more clear and close to life, to predict further dynamics of exchange rate it is necessary to look attentively at the schedule of a change of course and to try to find on it classical figures which are described in literature for a long time and about which we will talk in the following article . Judging by existence of these or those figures, it is possible to draw a conclusion on, whether the course will raise, go down, or remains invariable. And, already based on these conclusions to make trade decisions on Forex: to buy, sell, or so far to wait.
Summing up the result of the description of two main types of the analysis of the financial markets, I will tell that there is an old dispute: what of these types of the analysis is better for work in the market Forex. The definite answer to this question cannot be given. According to many traders in trade it is necessary to apply both types of the analysis. Though in the majority of the existing trade systems only one look is used. In my opinion, it is necessary to use that type of the analysis which to you is more congenial and then, working at Forex, you will be able to earn not only material reward, but also moral satisfaction.