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| Usage Of Candlesticks Chart in Forex Trading Posted: 02 Mar 2011 07:14 AM PST When investing in the forex market, the most important thing is to predict the price of a stock. No matter what type of stock you are investing in, whether it is currency, commodity or stocks, one has to make sure that he is following the right trend in order to ensure maximum profits. There are many methods of studying the forex market, specially with the technology in place, computerized analysis are more popular these days and give more accurate results. One of the most popular and the oldest method of studying and predicting the market is the Candlestick or commonly known as the Japanese Candlestick Chart. Candlestick Chart Candlestick chart or more commonly known as the Japanese Candlestick chart is the most common method of analyzing and predicting the trend of a stock. In today's ever fluctuating market, the candlestick plays a vital role in forex trading and money making. History Candlestick is derived from the ancient technique used by the Japanese rice traders in the 17th century where they used to keep a track of the past prices and based on the past trend, they predicted the future price. This technique was later used by the western financial experts in the modern day Forex trading. The purpose is still the same; predict the future price based on the past prices.
Use in Modern Day Forex Trading The modern day is more demanding than ever; giving more option to trade and more chances to make and lose money. The need of the time is to have good tools to make sure you invest in the right stock and in the right trend. Candlestick is the oldest and the most widely used tool by all companies and individuals as it gives more accurate trends and predictions. Formation of Candlestick Chart Candle stick is a type of chart which shows different values regarding a stock's price. It is called Candlestick because it looks like a candle on the chart having a body and wick on top and bottom. The color of the body of candle shows the trend of the price during a certain period of time; either upward or downward. When looking at a candle, it shows four values. Open, Close, High and Low. The body of the candlestick shows the difference between the opening and closing prices whereas the wick known as shadow shows the high and the low price of that period of the candle. Types of Candle There are many types of candle in the candlestick chart. There are two basic types where if the body is white, it shows a bullish trend and if it is filled black, it is a bearish trend. Then there is further classification of candle types based on their combination and trends. Following are a few common terms used while studying the candlestick chart, Long white, Hammer, Piercing line, Bullish engulfing lines, Morning star, Bullish doji star, Long black, Hanging man, Dark cloud cover, Bearish engulfing lines, Evening star, Doji star, Shooting star, Long-legged doji, Dragon-fly doji etc. All these patterns are studied over different periods of time to get accurate prediction. Usual terms are long and short days spread over one week to three months time. People who liked this Post also read
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| Posted: 02 Mar 2011 05:22 AM PST As the name suggests 'margin call', it has nothing related to do with the margin which you might be able to save by earning in the forex market. Whenever you anticipate any bad news coming, you need to realize that you'll be on a margin call any minute. The situation of a margin call could be related to with that of when you were called to your principal's office during your school days. It includes the same fright which you used to feel entering your principal's office thinking where did you go wrong. Why Margin Call Exists?Just like this is a margin call option in other markets such as commodities etc, there is also the option of margin call in Forex markets. This situation arises when a forex trader has a low balance in their account or is going to reach a point where it would become difficult for them to manage their funds, then their broker calls them to increase the money in the account. Nature of Forex MarketThe Forex market is the only market worldwide which runs 24hours around the clock. Due to this factor it is believed to be the most volatile market to invest into. When the Forex broker gets in touch with the trader, he is willing to take the risk on behalf of trader by adding more funds. However, the trader is responsible for all the decisions he makes.
As suggested above, being the most volatile market, Forex market is believed to be the most profile at times. However, with the changes around the global market, there are situations when the market go against you and would have to do make a difficult decision of what your Forex strategy should be. At this time, several positions come in front of you and several go away from you and here comes the need for a margin call. Try and Prevent the Margin CallIf we wish to minimize your risk then you need to make sure you try and prevent the margin call. This would only be possible when you set a limit of the open position you wish to grab. The more open positions you keep in front of you, the more riskier it would be for you. Therefore, most traders try and limit their positions so that they never have to face the opportunity of making a margin call.
Investors in Forex Market only generate profits if they are good enough at managing their money. For instance if you use your money and try and make all the profit in one day then you are most likely to lose out on all. Therefore, its suggested that you play safe and prevent the margin call. Maintain Appropriate Amount of FundsIf you own a shop where daily inventory level increase and decrease, then in the same manner you need to maintain your Forex account. Just like you reorder the inventory when it decreases, you also need to add funds to your account by making a margin call. This probably could be termed as a warning for the trader to tell him that he is running low on funds. Methodology To AdoptIt's not the worst position of being on a margin call, but it would be recommend that you evaluate your decisions first and then go ahead with them. For instance, if you are low on funds and you wish to take an aggressive approach then you are most likely to lose out on all the stock which you hold. Therefore, try to maintain a ration where you can show enough money and do not require a further backup. People who liked this Post also read
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