what types of charts? let me tell you

 tags:- Line Chart,Candlestick Chart,Bar Chart,Candlestick Chart

 Line Chart

The line chart is the original type of chart. In order to plot it, a line connects single prices for a selected time period. The most popular line chart is the daily chart. Although any point in the day can be plotted, most traders focus on the closing price, which they perceive as the most important. (See Figure 5.4.) But an immediate problem with the daily line chart is the fact that it is impossible to see the price activity for the balance of the day.

Figure 5.4. An example of the line chart

Line charts are considered for technical analysis because due to the sophistication of current charting services, daily price activity does not need to be lost.

Daily line charts are useful when looking for the big picture or the major trend because, without line charts, intraday activity would be-come an unimportant detail. When plotted over a long stretch of time, such as several years, a line chart is easier to visualize. Also, technical analysis goes well beyond chart formation; in order to execute certain models and techniques, line charts are better suited than any of the other charts.

However the line chart is a continuous chart, and this is a disadvantage because price gaps cannot be charted on a continuous chart.

Bar Chart

The bar chart is arguably the most popular type of chart currently in use. It consists of four significant points (See figure 5.5.):

• the high and the low prices, which are united by a vertical bar;
• the opening price, which is marked with a little horizontal line to the
left of the bar;
• the closing price, which is marked with a little horizontal line to the
right of the bar.

Figure 5.5. An example of the bar chart.

 The opening price is not always important for analysis. Bar charts have the obvious advantage of displaying the currency range for the period selected. The most popular period is daily, followed by weekly. Other periods may be selected as well. An advantage of this chart is that, unlike line charts, the bar chart is able to plot price gaps that are formed in the currency futures market. Although the currency futures market trades around the clock, physically it is open for only about a third of the trading day. (Chicago IMM is open for business 7:20 am to 2 pm CDT.) Therefore, price gaps may occur between two days' price ranges. Incidentally, the bar chart is the chart of choice among currency futures traders.

Candlestick Chart

The candlestick chart is closely related to the bar chart. It also consists of four major prices: high, low, open, and close. (See Figure 5.6.) In addition to the common readings, the candlestick chart has a set of particular interpretations. It is also easier to view.

Figure 5.6. An example of the candlestick chart

The opening and closing prices form the body (jittai) of the candlestick. To indicate that the opening was lower than the closing, the body of the bar is left blank. In its original form, the body was colored red. Current standard electronic displays allow you to keep it blank or select a color of your choice. If the currency closes below its opening, the body is filled. In its original form, the body was colored black, but the electronic displays allow you to keep it filled or to select a color of your choice.

The intraday (or weekly) direction on a candlestick chart can be traced by means of two "shadows": the upper shadow (uwakage) and the lower shadow (shitakage).

Just as with a bar chart, the candlestick chart is unable to trace every  price movement during a day's activity.

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the fundamentals of technical analysis

 the fundamentals of technical analysis

Technical analysis is appointed to analyze market movement (the movement of prices, volumes and open interests) using the information obtained for a past time. Mainly, it is the chart study of past behavior of currencies prices in order to forecast their future performance. It is one of the most significant tools available for the forecasting of financial markets. Such analysis has been an increasingly utilized forecasting tool over the last two centuries.

The main strength of technical analysis is the flexibility with regard to the underlying instrument, regarding the markets and regarding the time frame. A trader who deals several currencies but specializes in one may easily apply the same technical expertise to trading another currency. A trader who specializes in spot trading can make a smooth transition to dealing currency futures by using chart studies, because the same technical principles apply over and over again, regardless of the market. Finally, different players have different trading styles, objectives, and time frames.

Technical analysis is easy to compute what is important while the technical services are becoming increasingly sophisticated and reasonably priced.

Prior to this historic open market intervention, technical analysis provided ample selling signals.

Price

The Fundamental Principles of Technical Analysis are based on the Dow Theory with the following main thesis:

1. The price is a comprehensive reflection of all the market forces. At any given time, all market information and forces are reflected in the currency prices.
2. Price movements are historically repetitive.
3. Price movements are trend followers. 

4. The market has three trends: primary, secondary, and minor. The primary trend has three phases: accumulation, run-up/run-down, and distribution. In the accumulation phase the shrewdest traders enter new positions. In the run-up/run-down phase, the majority of the market finally "sees" the move and jumps on the bandwagon. Finally, in the distribution phase, the keenest traders take their profits and close their positions while the general trading interest slows down in an overshooting market. The secondary trend is a correction to the primary trend and may retrace onethird, one-half or two-thirds from the primary trend.

5. Volume must confirm the trend.
6. Trends exist until their reversals are confirmed. Figure 5.1. shows example of reversals in a bearish currency market. The buying signals occur at points A and B when the currency exceeds the previous highs.

Figure 5.1. A reversal of bearish currency

Cycles of currency price change are the propensity for events to repeat themselves at roughly the same time and are an important ground to justify the Dow Theory.

Cycle identification is a powerful tool that can be used in both the long and the short term. The longer the term, the more significance a cycle has. Figure 5.2. shows a series of three cycles. The top of the cycle (C) is called the crest and the bottom (T) is known as trough. Analysts measure cycles from trough to trough.

Cycles are gauged in terms of amplitude, period, and phase. The amplitude shows the height of the cycle, the period shows the length of the cycle, the phase shows the location of a wave trough.

Figure 5.2. The structure of cycles

Figure 5.3. The two gauging measures of a cycle: period and phase.

Volume and Open Interest

Volume consists of the total amount of currency traded within a period of time, usually one day. For example, by year 2000, the total foreign currency daily trading volume was $1.4 trillion. But traders are naturally more interested in the volume of specific instruments for specific trading periods, because large trading volume suggests that there is interest and liquidity in a certain market, and low volume warns the trader to veer away from that market.

The risks of a low-volume market are usually very difficult to quantify or hedge. In addition, certain chart formations require heavy trading volume for successful development. An example is the head-and-shoulder formation. Therefore, despite its obvious importance, volume is not easy to quantify in all foreign exchange markets.

One method to estimate volume is to extrapolate the figures from the futures market. Another is "feeling" the size of volume based on the number of calls on the dealing systems or phones, and the "noise" from the brokers' market.

Open interest is the total exposure, or outstanding position, in a certain instrument. The same problems that affect volume are also present here. As it was already mentioned, figures for volume and open interest are available for currency futures. If you have access to printed or electronic charts on futures, you will be able to see these numbers plotted at the bottom of the futures charts.

Volume and open interest figures are available from different sources, although one day late such as the newswires (Bridge Information Systems, Reuters, Bloomberg), newspapers (the Wall Street Journal, the Journal of Commerce), Weekly printed charts (Commodity Perspective, Commodity Trend Service).

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Financial and Sociopolitical Factors

 tags:-Political Events and Crises,foreign exchange,The Role of Financial Factors

The Role of Financial Factors

Financial factors are vital to fundamental analysis. Changes in a government's monetary or fiscal policies are bound to generate changes in the economy, and these will be reflected in the exchange rates. Financial factors should be triggered only by economic factors. When governments focus on different aspects of the economy or have additional international responsibilities, financial factors may have priority over economic factors. This was painfully true in the case of the European Monetary System in the early 1990s. The realities of the marketplace revealed the underlying artificiality of this approach. Using the interest rates independently from the real economic environment translated into a very expensive strategy.

Because foreign exchange, by definition, consists of simultaneous transactions in two currencies, then it follows that the market must focus on two respective interest rates as well. This is the interest rate differential, a basic factor in the markets. Traders react when the interest rate differential changes, not simply when the interest rates themselves change. For example, if all the G-5 countries decided to simultaneously lower their interest rates by 0.5 percent, the move would be neutral for foreign exchange, because the interest rate differentials would also be neutral.

Of course, most of the time the discount rates are cut unilaterally, a move that generates changes in both the interest differential and the exchange rate. Traders approach the interest rates like any other factor, trading on expectations and facts. For example, if rumor says that a discount rate will be cut, the respective currency will be sold before the fact. Once the cut occurs, it is quite possible that the currency will be bought back, or the other way around. An unexpected change in interest rates is likely to trigger a sharp currency move. "Buy on the rumor, sell on the fact...".

Other factors affecting the trading decision are the time lag between the rumor and the fact, the reasons behind the interest rate change, and the perceived importance of the change. The market generally prices in a discount rate change that was delayed. Since it is a fait accompli, it is neutral to the market. If the discount rate was changed for political rather than economic reasons, what is a common practice in the European Monetary System, the markets are likely to go against the central banks, sticking to the real fundamentals rather than the political ones. This happened in both September 1992 and the summer of 1993, when the European central bankslost unprecedented amounts of money trying to prop up their currencies, despite having high interest rates. The market perceived those interest rates as artificially high and, therefore, aggressively sold the respective currencies.

Finally, traders deal on the perceived importance of a change in the interest rate differential.

Political Events and Crises

Political events generally take place over a period of time, but political crises strike suddenly. They are almost always, by definition, unexpected. Currency traders have a knack for responding to crises. Speed is essential; shooting from the hip is the only fighting option. The traders' reflexes tak over. Without fast action, traders can be left out in the cold. There is no timefor analysis, and only a split second, at best, to act. As volume drops dramatically, trading is hindered by a crisis. Prices dry out quickly, and sometimes the spreads between bid and offer jump from 5 pips to 100 pips. Getting back to the market is difficult.

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Economic Indicators part two

tags"Producer Price Index (PPI),Consumer Price Index (CPI),Gross National Product Implicit Deflator,Personal Income,CRB index,Leading Indicators,Employment Indicators,Auto Sales,Consumer Spending Indicators,Employment Cost Index (ECI),Merchandise Trade Balance,JoC,Gross Domestic Product Implicit,Producer Price Index (PPI)

didn't  see part one so you go here

Producer price index is compiled from most sectors of the economy, such as manufacturing, mining, and agriculture. The sample used to calculate the index contains about 3400 commodities. The weights used for the calculation of the index for some of the most important groups are: food - 24 percent; fuel - 7 percent; autos - 7 percent; and clothing - 6 percent. Unlike the CPI, the PPI does not include imported goods, services, or taxes.

Consumer Price Index (CPI)

Consumer price index reflects the average change in retail prices for a fixed market basket of goods and services. The CPI data is compiled from asample of prices for food, shelter, clothing, fuel, transportation, and medical services that people purchase on daily basis. The weights attached for the calculation of the index to the most important groups are: housing - 38 percent; food - 19 percent; fuel - 8 percent; and autos - 7 percent.

The two indexes, PPI and CPI, are instrumental in helping traders measure inflationary activity, although the Federal Reserve takes the position that the indexes overstate the strength of inflation.

Gross National Product Implicit Deflator

Gross national product implicit deflator is calculated by dividing the current dollar GNP figure by the constant dollar GNP figure.

Gross Domestic Product Implicit

Gross domestic product implicit deflator is calculated by dividing the current dollar GDP figure by the constant dollar GDP figure.

Both the GNP and GDP implicit deflators are released quarterly, along with the respective GNP and GDP figures. The implicit deflators are generally regarded as the most significant measure of inflation.

Commodity Research Bureau's Futures Index (CRB index)

The Commodity Research Bureau's Futures Index makes watching for inflationary trends easier. The CRB Index consists of the equally weighted futures prices of 21 commodities. The components of the CRB Index are:

• precious metals: gold, silver, platinum;
• industrials: crude oil, heating oil, unleaded gas, lumber, copper, and cotton;
• grains: corn, wheat, soybeans, soy meal, soy oil;
• livestock and meat: cattle, hogs, and pork bellies;
• imports: coffee, cocoa, sugar;
• miscellaneous: orange juice.

The preponderance of food commodities makes the CRB Index less reliable in terms of general inflation. Nevertheless, the index is a popular tool that has proved quite reliable since the late 1980s.

The “Journal of commerce” Industrial Price Index (JoC)

The “Journal of commerce” industrial price index consists of the prices of 18 industrial materials and supplies processed in the initial stages of manufacturing, building, and energy production. It is more sensitive than other indexes, as it was designed to signal changes in inflation prior to the other price indexes.

Merchandise Trade Balance

is one of the most important economic indicators. Its value may trigger long-lasting changes in monetary and foreign policies. The trade balance consists of the net difference between the exports and imports of a certain economy. The data includes six categories:

1. food;
2. raw materials and industrial supplies;
3. consumer goods;
4. autos;
5. capital goods;
6. other merchandise.

Employment Indicators

The employment rate is an economic indicator with significance in multiple areas. The rate of employment, naturally, measures the soundness of an economy. (See Figure 4.2.) The unemployment rate is a lagging economic indicator. It is an important feature to remember, especially in times of economic recession. Whereas people focus on the health and recovery of the job sector, employment is the last economic indicator to rebound. When economic contraction causes jobs to be cut, it takes time to generate psychological confidence in economic recovery at the managerial level before new positions are added. At individual levels, the improvement of the job outlook may be clouded when new positions are added in small companies and thus not fully reflected in the data. The employment reports are significant to the financial markets in general and to foreign exchange in particular. In foreign exchange, the data is truly affective in periods of economic transitio recovery and contraction. The reason for the indicators' importance in extreme economic situations lies in the picture they paint of the health of the economy and in the degree of maturity of a business cycle. A decreasing unemployment figure signals a maturing cycle, whereas the opposite is true for an increasing unemployment indicator.

Figure 4.2. The U.S. unemployment rate.

Employment Cost Index (ECI)

Employment cost index measures wages and inflation and provides the most comprehensive analysis of worker compensation, including wages, salaries, and fringe benefits. The ECI is one of the Fed's favorite quarterly economic statistics.

Consumer Spending Indicators

Retail sales is a significant consumer spending indicator for foreign exchange traders, as it shows the strength of consumer demand as well as consumer confidence. component in the calculation of other economic indicators, such as GNP and GDP.

Generally, the most commonly used employment figure is not the monthly unemployment rate, which is released as a percentage, but the nonfarm payroll rate. The rate figure is calculated as the ratio of the difference between the total labor force and the employed labor force, divided
by the total labor force. The data is more complex, though, and it generates more information. In foreign exchange, the standard indicators monitored by traders are the unemployment rate, manufacturing payrolls, nonfarm payrolls, average earnings, and average workweek. Generally, the most significant employment data are manufacturing and nonfarm payrolls, followed by the unemployment rate.

Auto Sales

Despite the importance of the auto industry in terms of both production and sales, the level of auto sales is not an economic indicator widely followed by foreign exchange traders. The American automakers experienced a long, steady market share loss, only to start rebounding in the early 1990s. But car manufacturing has become increasingly internationalized, with American cars being assembled outside the United States and Japanese and German cars assembled within the United States. Because of their confusing nature, auto sales figures cannot easily be used in foreign exchange analysis.

Leading Indicators

The leading indicators consist of the following economic indicators:

• average workweek of production workers in manufacturing;
• average weekly claims for state unemployment;
• new orders for consumer goods and materials (adjusted for inflation);
• vendor performance (companies receiving slower deliveries from suppliers);
• contracts and orders for plant and equipment (adjusted for inflation);
• new building permits issued;
• change in manufacturers' unfilled orders, durable goods;
• change in sensitive materials prices.

Personal Income

is the income received by individuals, nonprofit institutions, and private trust funds. Components of this indicator include wages and salaries, rental income, dividends, interest earnings, and transfer payments (Social Security, state unemployment insurance, and veterans' benefits). The wages and salaries reflect the underlying economic conditions.

This indicator is vital for the sales sector. Without an adequate personal income and a propensity to purchase, consumer purchases of durable and nondurable goods are limited.

For the Forex traders, personal income is not significant.

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Economic Indicators part one

tags: The Gross Domestic Product (GDP),Factory Orders,Inflation Indicators,Construction Indicators,Business Inventories,Durable Goods Orders,Consumption Spending,Investment Spending,Government Spending,Net Trade,Industrial Production,Capacity Utilization
Economic indicators occur in a steady stream, at certain times, and a little more often than changes in interest rates, governments, or natural activity such as earthquakes etc. Economic data is generally (except of the Gross Domestic Product and the Employment Cost Index, which are released quarterly) released on a monthly basis.

Economic Indicators part one

All economic indicators are released in pairs. The first number reflects the latest period. The second number is the revised figure for the month prior to the latest period. For instance, in July, economic data is released for the month of June, the latest period. In addition, the release includes the revision of the same economic indicator figure for the month of May. The reason for the revision is that the department in charge of the economic statistics compilation is in a better position to gather more information in a month's time. This feature is important for traders. If the figure for an economic indicator is better than expected by 0.4 percent for the past month, but the previous month's number is revised lower by 0.4 percent, then traders are likely to ignore the overall release of that specific economic data.

Economic indicators are released at different times. In the United States, economic data is generally released at 8:30 and 10 am ET. It is important to remember that the most significant data for foreign exchange is released at 8:30 am ET. In order to allow time for last-minute adjustments, the United States currency futures markets open at 8:20 am ET.

Information on upcoming economic indicators is published in all leading newspapers, such as the Wall Street Journal, the Financial Times, and the New York Times; and business magazines, such as Business Week. More often than not, traders use the monitor sources—Bridge Information Systems, Reuters, or Bloomberg—to gather information both from news publications and from the sources' own up-to-date information.

The Gross National Product (GNP)

The Gross National Product measures the economic performance of the whole economy.

This indicator consists, at macro scale, of the sum of consumption spending, investment spending, government spending, and net trade. The gross national product refers to the sum of all goods and services produced by United States residents, either in the United States or abroad.

The Gross Domestic Product (GDP)

The Gross Domestic Product (GDP) refers to the sum of all goods and services produced in the United States, either by domestic or foreign companies. The differences between the two are nominal in the case of the economy of the United States. GDP figures are more popular outside the United States. In order to make it easier to compare the performances of different economies, the United States also releases GDP figures.

Consumption Spending

Consumption is made possible by personal income and discretionary income. The decision by consumers to spend or to save is psychological in nature. Consumer confidence is also measured as an important indicator of the propensity of consumers who have discretionary income to switch from saving to buying.

Investment Spending

Investment—or gross private domestic spending - consists of fixed investment and inventories.

Government Spending

Government spending is very influential in terms of both sheer size and its impact on other economic indicators, due to special expenditures. For instance, United States military expenditures had a significant role in total U.S. employment until 1990. The defense cuts that occurred at the time increased unemployment figures in the short run.

Net Trade

Net trade is another major component of the GNP. Worldwide internationalization and the economic and political developments since 1980 have had a sharp impact on the United States' ability to compete overseas. The U.S. trade deficit of the past decades has slowed down the overall GNP. GNP can be approached in two ways: flow of product and flow of cost.

Industrial Production

Industrial production consists of the total output of a nation's plants, utilities, and mines. From a fundamental point of view, it is an important economic indicator that reflects the strength of the economy, and by extrapolation, the strength of a specific currency. Therefore, foreign exchange traders use this economic indicator as a potential trading signal.

Capacity Utilization

Capacity utilization consists of total industrial output divided by total production capability. The term refers to the maximum level of output a plant can generate under normal business conditions. In general, capacity utilization is not a major economic indicator for the foreign exchange market.

However, there are instances when its economic implications are useful for fundamental analysis. A "normal" figure for a steady economy is 81.5 percent. If the figure reads 85 percent or more, the data suggests that the industrial production is overheating, that the economy is close to full capacity. High capacity utilization rates precede inflation, and expectation in the foreign exchange market is that the central bank will raise interest rates in order to avoid or fight inflation.

Factory Orders

Factory orders refer to the total of durable and nondurable goods orders. Nondurable goods consist of food, clothing, light industrial products, and products designed for the maintenance of durable goods. Durable goods orders are discussed separately. The factory orders indicator has limited significance for foreign exchange traders.

Durable Goods Orders

Durable goods orders consist of products with a life span of more than three years. Examples of durable goods are autos, appliances, furniture, jewelry, and toys. They are divided into four major categories: primary metals, machinery, electrical machinery, and transportation.

In order to eliminate the volatility pertinent to large military orders, the indicator includes a breakdown of the orders between defense and nondefense.

This data is fairly important to foreign exchange markets because it gives a good indication of consumer confidence. Because durable goods cost more than nondurables, a high number in this indicator shows consumers' propensity to spend. Therefore, a good figure is generally bullish for the domestic currency.

Business Inventories

Business inventories consist of items produced and held for future sale. The compilation of this information is facile and holds little surprise for the market. Moreover, financial management and computerization help control business inventories in unprecedented ways. Therefore, the importance of this indicator for foreign exchange traders is limited.

Construction Indicators

Construction indicators constitute significant economic indicators that are included in the calculation of the GDP of the United States. Moreover, housing has traditionally been the engine that pulled the U.S. economy out of recessions after World War II. These indicators are classified into three major
categories:

1. housing starts and permits;
2. new and existing one-family home sales and
3. construction spending.

Private housing is monitored closely at all the major stages. (See Figure 4.1.) Private housing is classified based on the number of units (one, two, three, four, five, or more); region (Northeast, West, Midwest, and South); and inside or outside metropolitan statistical areas.

Figure 4.1. Diagram of construction of private housing

Construction indicators are cyclical and very sensitive to the level of interest rates (and consequently mortgage rates) and the level of disposable income. Low interest rates alone may not be able to generate a high demand for housing, though. As the situation in the early 1990s demonstrated, despite historically low mortgage rates in the United States, housing increased only marginally, as a result of the lack of job security in a weak economy. Housing starts between one and a half and two million units reflect a strong economy, whereas a figure of approximately one million units suggests that the economy is in recession.

Inflation Indicators

The rate of inflation is the widespread rise in prices. Therefore, gauging inflation is a vital macroeconomic task. Traders watch the development of inflation closely, because the method of choice for fighting inflation is raising the interest rates, and higher interest rates tend to support the local currency. Moreover, the inflation rate is used to "deflate" nominal interest rates and the GNP or GDP to their real values in order to achieve a more accurate measure of the data.

The values of the real interest rates or real GNP and GDP are of the utmost importance to the money managers and traders of international financial instruments, allowing them to accurately compare opportunities worldwide.

To measure inflation traders use following economic tools:

• Producer Price Index (PPI);
• Consumer Price Index (CPI);
• GNP Deflator;
• GDP Deflator;
• Employment Cost Index (ECI);
• Commodity Research Bureau's Index (CRB Index);
• Journal of Commerce Industrial Price Index (JoC).

The first four are strictly economic indicators; they are released at specific intervals. The commodity indexes provide information on inflation quickly and continuously. Other economic data that measure inflation are unemployment, consumer prices, and capacity utilization.

do you  wanna part two so you go here

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