Forex indicators

Acceleration / Deceleration Oscillator Accumulation / Distribution Alligator Average Directional Movement Index Average True Range Awesome Oscillator Bears Power Bollinger Bands Commodity Channel Index DeMarker Envelopes Force Index Fractals Gator Oscillator

Ichimoku Kinko Hyo Market Facilitation Index Momentum Money Flow Index Moving Average Moving Average Convergence / Divergence Moving Average of Oscillator On Balance Volume Parabolic SAR Relative Strength Index Relative Vigor Index Standard Deviation Stochastic Oscillator Williams Percent Range

    Forex technical indicator is a mathematical manipulation of a security price and volumes aimed at forecasting of future price changes. Trader is able to make decisions about how and when to enter or exit market, which position it is more suitable to open, on the basis of signals from technical indicators.

    There are a lot of technical indicators although many of them have very slight differences.

    According to their functions, indicators can be divided into three groups:

• Trend indicators help to assess the price direction and detect the turn moments synchronously or with a delay.
• Oscillators allow one to find the turning moments a little in advance or synchronously.
• Psychological indicators provide the information about the overall mood of market participants.

    Technical indicators can be drawn up in a separate indicator window or they can be imposed directly into the price chart. For better forecasts several indicators may be used.

    Metatrader 4 has a variety of built-in indicators. Use the menu at the top of the page to find out more about them.

Williams Percent Range

Williams' Percent Range

Williams' Percent Range Technical Indicator (%R) is a dynamic technical indicator, which determines whether the market is overbought/oversold. Williams' %R is very similar to the Stochastic Oscillator. The only difference is that %R has an upside down scale and the Stochastic Oscillator has internal smoothing.

To show the indicator in this upside down fashion, one places a minus symbol before the Williams' Percent Range values (for example -30%). One should ignore the minus symbol when conducting the analysis.

Indicator values ranging between 80 and 100% indicate that the market is oversold. Indicator values ranging between 0 and 20% indicate that the market is overbought.

As with all overbought/oversold indicators, it is better to wait for the security's price to change direction before placing your trades. For example, if an overbought/oversold indicator is showing an overbought condition, it is wise to wait for the security's price to turn down before selling the security.

An interesting phenomenon of the Williams' Percent Range indicator is its uncanny ability to anticipate a reversal in the underlying security's price. The indicator almost always forms a top and turns down a few days before the security's price tops and turns down. Likewise, Williams Percent Range usually creates a bottom and turns up a few days before the security's price turns up.

Calculation

Below is the formula of the %R indicator calculation, which is very similar to the Stochastic Oscillator formula:

 %R = (HIGH(i-n)-CLOSE)/(HIGH(i-n)-LOW(i-n))*100

Where:

CLOSE - today's closing price;
HIGH(i-n) - the highest high over a number (n) of previous periods;
LOW(i-n) - the lowest low over a number (n) of previous periods.

Stochastic Oscillator

Stochastic Oscillator

The Stochastic Oscillator Technical Indicator compares where a security's price closed relative to its price range over a given time period. The Stochastic Oscillator is displayed as two lines. The main line is called %K. The second line, called %D, is a moving average of %K. The %K line is usually displayed as a solid line and the %D line is usually displayed as a dotted line.

There are several ways to interpret a Stochastic Oscillator. Three popular methods include:

• Buy when the Oscillator (either %K or %D) falls below a specific level (for example, 20) and then rises above that level. Sell when the Oscillator rises above a specific level (for example, 80) and then falls below that level;
• Buy when the %K line rises above the %D line and sell when the %K line falls below the %D line;
• Look for divergences. For instance: where prices are making a series of new highs and the Stochastic Oscillator is failing to surpass its previous highs.

Calculation

The Stochastic Oscillator has four variables:

%K periods. This is the number of time periods used in the stochastic calculation;
%K Slowing Periods. This value controls the internal smoothing of %K. A value of 1 is considered a fast stochastic, a value of 3 is considered a slow stochastic;
%D periods. This is the number of time periods used when calculating a moving average of %K;
%D method. The method (i.e., Exponential, Simple, Smoothed, or Weighted) that is used to calculate %D.

The formula for %K is:

%K = (CLOSE-LOW(%K))/(HIGH(%K)-LOW(%K))*100

Where:

CLOSE - today's closing price;
LOW(%K) - the lowest low in %K periods;
HIGH(%K) - the highest high in %K periods.

The %D moving average is calculated according to the formula:

%D = SMA(%K, N)

Where:

N - smoothing period;
SMA - Simple Moving Average.  

Standard Deviation

Standard Deviation

Standard Deviation is designed to measure the market volatility. This indicator describes the range of price fluctuations relative to simple moving average. So, if the value of this indicator is high, the market is volatile, and prices of bars are rather spread relative to the moving average. If the indicator value is low, the market can described as having a low volatility, and prices of bars are rather close to the moving average.

Normally, this indicator is used as a constituent of other indicators. Thus, when calculating Bollinger Bands, one has to add the symbol standard deviation value to its moving average.

Calculation

StdDev = SQRT (SUM (CLOSE - SMA (CLOSE, N), N)^2)/N

Where:

SQRT - square root;
SUM (..., N) - sum within N periods;
SMA (..., N) - simple moving average having the period of N;
N - calculation period.

Relative Vigor Index

Relative Vigor Index

The main point of Relative Vigor Index Technical Indicator (RVI) is that on the bull market the closing price is, as a rule, higher, than the opening price. It is the other way round on the bear market. So the idea behind Relative Vigor Index is that the vigor, or energy, of the move is thus established by where the prices end up at the close. To normalize the index to the daily trading range, divide the change of price by the maximum range of prices for the day. To make a more smooth calculation, one uses simple moving average. 10 is the best period. To avoid probable ambiguity one needs to construct a signal line, which is a 4-period symmetrically weighted moving average of Relative Vigor Index values. The concurrence of lines serves as a signal to buy or to sell.

Calculation

RVI = (CLOSE-OPEN)/(HIGH-LOW)

Where:

OPEN - opening price;
HIGH - maximum price;
LOW - minimum price;
CLOSE - closing price.

Relative Strength Index

Relative Strength Index

The Relative Strength Index Technical Indicator (RSI) is a price-following oscillator that ranges between 0 and 100. When Wilder introduced the Relative Strength Index, he recommended using a 14-day RSI. Since then, the 9-day and 25-day Relative Strength Index indicators have also gained popularity.

A popular method of analyzing the RSI is to look for a divergence in which the security is making a new high, but the RSI is failing to surpass its previous high. This divergence is an indication of an impending reversal. When the Relative Strength Index then turns down and falls below its most recent trough, it is said to have completed a "failure swing". The failure swing is considered a confirmation of the impending reversal.

Ways to use Relative Strength Index for chart analysis:

• Tops and bottoms. The Relative Strength Index usually tops above 70 and bottoms below 30. It usually forms these tops and bottoms before the underlying price chart.
• Chart Formations. The RSI often forms chart patterns such as head and shoulders or triangles that may or may not be visible on the price chart.
• Failure swing. ( Support or Resistance penetrations or breakouts) This is where the Relative Strength Index surpasses a previous high (top) or falls below a recent low (bottom).
• Support and Resistance levels. The Relative Strength Index shows, sometimes more clearly than price themselves, levels of support and resistance.
• Divergences. As discussed above, divergences occur when the price makes a new high (or low) that is not confirmed by a new high (or low) in the Relative Strength Index. Prices usually correct and move in the direction of the RSI.

Calculation

RSI = 100-(100/(1+U/D))

Where:

U - average number of positive price changes;
D - average number of negative price changes.

Parabolic SAR

Parabolic SAR

Parabolic SAR technical indicator has common characteristics with the moving average indicator, except for it moves with a greater acceleration and changes its position in terms of the price.The indicator is applied directly on the price graph and is situated below the prices on the bull market (Up Trend) and above them on the bear market (Down Trend).

If the price crosses indicator's lines Parabolic SAR changes its direction. In this case indicator values will be situated on the other side of the price while the maximum or the minimum price for the previous period would serve as the starting point. When the indicator makes a turn, it gives a signal of the trend end (correction stage or flat), or of its turn.

It is possible to define exit points with great precision using this indicator. Long positions should be closed when the price sinks below the SAR line, short positions should be closed when the price rises above the SAR line.

It is often the case that the indicator serves as a trailing stop line.

If the long position is open (i.e., the price is above the SAR line), the Parabolic SAR line will go up, regardless of what direction the prices take. The length of the SAR line movement depends on the scale of the price movement.

Calculation:

For long positions:

SAR (i) = ACCELERATION * (HIGH (i - 1) - SAR (i - 1)) + SAR (i - 1)

For short positions:

SAR (i) = ACCELERATION * (LOW (i - 1) - SAR (i - 1)) - SAR (i - 1)

Where:

SAR (i - 1) - Parabolic SAR indicator value in the preceding bar;
ACCELERATION - acceleration factor;
HIGH (i - 1) - previous period maximum price;
LOW (i - 1) - previous period minimum price.

The value of the indicator increases if the price of the current bar is higher than that of the previous one on bull market and vice versa. The acceleration factor (ACCELERATION) will double at the same time, which would cause Parabolic SAR and the price to come together. In other words, the faster the price grows or sinks, the faster the indicator approaches the price.

On Balance Volume

OBV - On Balance Volume

On Balance Volume indicator was invented by Joseph Granville who linked the volume to the price change. When the security closes higher than the previous close, all of the day's volume is considered up-volume. When the security closes lower than the previous close, all of the day's volume is considered down-volume.

OBV changes precede price changes. The theory is that smart money can be seen flowing into the security by a rising OBV. When the public then moves into the security, both the security and the On Balance Volume will surge ahead.

If the security's price movement precedes OBV movement, a "non-confirmation" occurred. This may happen when the security rises without, or before, the OBV as well as when the security falls without, or before, the On Balance Volume Technical Indicator. This usually defines bull market tops or bear market bottoms.

The OBV is in a rising trend when each new top is higher than the previous one and each new bottom is higher than the previous one. The dropping trend is characterized by the decrease of tops and bottoms. The tendency is undefined when indicator moves sideways.

There are two ways in which the On Balance Volume trend can be broken. The second way the OBV trend can be broken is if the trend changes to a doubtful trend and remains doubtful for more than three periods. If the trend is broken and remains doubtful for only two periods before changing back to a rising trend, the On Balance Volume is considered to have always been in a rising trend.

When the OBV changes to a rising or falling trend, a "breakout" has occurred, which usually precedes price changes. In case of upside breakout it is recommended to buy and to sell when the breakout is downside. Positions should be held until the trend changes.

Calculation:

If the current close is greater than the previous one:

OBV (i) = OBV (i - 1) + VOLUME (i).

If the current close is lower than the previous one:

OBV (i) = OBV (i - 1) - VOLUME (i)

If the current close is equal to the previous one:

OBV (i) = OBV (i - 1)

Where:

OBV (i) - On Balance Volume indicator value in the current period;
OBV (i - 1) - On Balance Volume indicator value in the previous period;
VOLUME (i) - volume of the current bar.

Moving Average of Oscillator

Moving Average of Oscillator

Moving average of the oscillator is based on the difference between the oscillator and oscillator smoothing. MACD base-line is used as an oscillator while signal line plays the role of the oscillator smoothing.

Calculation:

OSMA = MACD-SIGNAL

Moving Average Convergence / Divergence

MACD - Moving Averages Convergence/Divergence

MACD shows the two moving averages of price correlation and follows the tendency. This technical indicator is based on the difference between 12- and 26-period exponential moving averages. For a clearer definition of the buying/selling moment the signal line equal to 9-period moving average is plotted. It is recommended to use MACD in wide-swinging trading markets.

MACD signals:

• Crossovers: When the MACD falls below its signal line it is recommended to sell. If it rises above - the buying signal occur. It is also popular to buy/sell when the MACD goes above/below the nought line.
• Overbought/oversold conditions: When the shorter moving average pulls away dramatically from the longer moving average, it is likely that the security price is overextending and will soon return to more realistic levels.
• Divergences: the signal is based on divergences between price and MACD, which as a rule leads to the tendency change.

A bullish divergence occurs when the Moving Average Convergence/Divergence indicator is making new highs while prices fail to reach new highs.

A bearish divergence occurs when the MACD is making new lows while prices fail to reach new lows.

Both of these divergences are most significant when they occur at relatively overbought/oversold levels.

Calculation:

The MACD is calculated by subtracting the value of an exponential moving average from a 12-period exponential moving average. A 9-period dotted simple moving average of the MACD (the signal line) is then plotted on top of the MACD.

MACD = EMA(CLOSE, 12)-EMA(CLOSE, 26) SIGNAL = SMA(MACD, 9)

Where:

EMA - Exponential Moving Average
SMA - Simple Moving Average
SIGNAL - signal line of the indicator.

Moving Average

MA - Moving Average

Shows the average instrument price value for a certain period of time.

There are several types of MA:

• Simple Moving Average (SMA)
• Exponential Moving Average (EMA)
• Smoothed Moving Average (SMMA)
• Linear Weighted Moving Average (LWMA)

These types differ from each other in weight coefficients, that are assigned to the latest data. In simple moving average all prices of a certain time period have equal weight. EMA and LWMA assign more weight to the latest prices.

While calculating moving average such parameters as closing and opening prices, price maximum and minimum, trade volume and sometimes other indicators' data are used as well as the moving average of moving averages themselves.

Selling and buying signals appear when prices cross the indicator lines and proceed up or downwards. This trading system that is based on the moving average, is not designed to provide entrance into the market right in its lowest point, and its exit right on the top. Instead it allows to act according to the trend.

Moving averages may be also used with other indicators.

Calculation:

Simple Moving Average (SMA)

Simple, in other words, arithmetical moving average is calculated by summing up the prices of instrument closure over a certain number of single periods (for instance, 12 hours). This value is then divided by the number of such periods.

SMA = SUM (CLOSE (i), N) / N

Where:

SUM - sum;
CLOSE (i) - current period closing price;
N - number of periods in calculation.

Exponential Moving Average (EMA)

Exponentially smoothed moving average is calculated by adding the moving average of a certain share of the current closing price to the previous value. With exponentially smoothed moving averages, the latest prices are of more value. P-percent exponential moving average will look like:

EMA = (CLOSE (i) * P) + (EMA (i - 1) * (100 - P))

Where:

CLOSE (i) - current period closing price;
EMA (i - 1) - preceding period moving average value;
P - percentage of using the price value.

Smoothed Moving Average (SMMA)

The first value of this smoothed moving average is calculated as the simple moving average (SMA):
(SMA).

SUM1 = SUM (CLOSE (i), N)
SMMA1 = SUM1 / N

The second and succeeding moving averages are calculated according to this formula:

SMMA (i) = (SUM1 - SMMA (i - 1) + CLOSE (i)) / N

Where:

SUM - sum;
SUM1 - total sum of closing prices for N periods, calculated from the previous bar;
SMMA (i - 1) - smoothed moving average of the previous bar;
SMMA (i) - smoothed moving average of the previous bar (excluding the first one);
CLOSE (i) - current closing price;
N - smoothing period.

Linear Weighted Moving Average (LWMA)

In the case of weighted moving average, the recent data is of more value than more early data. Weighted moving average is calculated by multiplying each of the closing prices within the considered series, by a certain weight coefficient.

LWMA = SUM (CLOSE (i) * i, N) / SUM (i, N)

Where:

SUM - sum;
CLOSE(i) - current closing price;
SUM (i, N) - total sum of weight coefficients;
N - smoothing period. 

Money Flow Index

MFI - Money Flow Index

Money flow index is an indicator of the intensity of investing in a security. Interpretation of the indicator is similar to Relative Strength Index with the only difference that volume is taken into consideration when using MFI.

When analyzing the money flow index one needs to take into consideration the following points:

• If prices grow while MFI falls, there is a great probability of a price turn;
• Money Flow Index value, which is over 80 or under 20, signals correspondingly of a potential top or bottom of the market.

Calculation:

The calculation of Money Flow Index includes several stages. At first one defines the typical price (TP) of the period in question:

TP = (HIGH + LOW + CLOSE) / 3

Then the amount of the Money Flow (MF)is calculated:

MF = TP * VOLUME

If today's typical price is larger than yesterday's TP, then the money flow is considered positive. If today's typical price is lower than that of yesterday, the money flow is considered negative.

A positive money flow is a sum of positive money flows for a selected period of time. A negative money flow is the sum of negative money flows for a selected period of time.

Then one calculates the money ratio (MR) by dividing the positive money flow by the negative money flow:

MR = POSITIVE MONEY FLOW / NEGATIVE MONEY FLOW

And finally, one calculates the money flow index using the money ratio:

MFI = 100 - (100 / (1 + MR))

Where:

HIGH - current bar maximum price;
LOW - current bar minimum price;
CLOSE - current bar closing price;
VOLUME - current bar volume.

Momentum

Momentum

The Momentum Technical Indicator measures the amount that a security's price has changed over a given time span:

• As oscillator, following the trend. When the indicator bottoms and turns up it is recommended to buy. When the indicator tops and turns down it is better to sell. Extremely high or low values of Momentum is a sign of the continuation of the current tendency. The downward turn following extreme values shows the continuation of the price growth.
• As a leading oscillator, based on an assumption that an increasing trend usually ends with a rapid price increase, while decreasing trends ends with a rapid price decline.

As a market tops, the Momentum indicator will climb sharply and then fall off resulting in divergences between the indicator and prices.

Calculation:

Momentum is calculated as a ratio of today's price to the price N periods ago:

MOMENTUM = CLOSE (i) / CLOSE (i - n) * 100

Where:

CLOSE (i) - current bar closing price;
CLOSE (i - n) - closing bar price N periods ago.

Market Facilitation Index

 Market Facilitation Index

Market facilitation index was created by Bill Williams. It shows the change of the price for one tick.

The increase of the indicator means that the number of players who open position in the direction of the trend is also rising.

The decrease of the indicator shows the volume fall. It means the market participants lack the interest.

The decrease of volume along with the growth of indicator's index is the sign that most likely the market is not supported with the volume from traders, and the price is changing due to brokers and dealers speculations.

The increase in volume along with the continuous drop of the index shows that there is a battle between bulls and bears, characterized by a large sell and buy volume, but the price is not changing significantly since the forces are equal. One of the parties usually wins the battle and it influences whether the trend will continue after this bar or the direction is going to change. This kind of bar is called "curtsying".

To calculate Market Facilitation Index you need to subtract the lowest bar price from the highest bar price and divide it by the volume.

BW MFI = (HIGH - LOW) / VOLUME

Where:

HIGH - maximum price of the current bar;
LOW - minimum price of the current bar;
VOLUME - current bar volume.

Ichimoku Kinko Hyo

Ichimoku Kinko Hyo

Ichimoku Kinko Hyo Technical Indicator is designed to work on weekly and daily charts. It characterizes the market trend, support and resistance levels, points out signals to buy or to sell.

Indicator's lines are based on four different time intervals, which set the dimension of its parameters:

• Tenkan-sen - the average price value during the first time interval defined as the sum of maximum and minimum within this time, divided by two;
• Kijun-sen - the average price value during the second time interval;
• Senkou Span A - the middle of the distance between two previous lines shifted forwards by the value of the second time interval;
• Senkou Span B - the average price value during the third time interval shifted forwards by the value of the second time interval;
• Chinkou Span - the closing price of the current candle shifted backwards by the value of the second time interval.

The area between the Senkou Span A and Senokou Span B lines is hatched with another color and called "cloud".

• If the price is inside the cloud, the market is considered to be of no trend while the sides of the cloud become levels of support and resistance.
• If the price is above the cloud, both lines of the cloud become the support levels.
• If the price is below the cloud, both lines are considered to be the resistance levels.

If the Chinkou Span line traverses the price chart in the top-down direction it is signal to sell while if the Chinkou Span line traverses the price chart in the bottom-up direction it is signal to buy.

Kijun-sen points out the market movement. The price will rise if it is situated above this line. The crossing of this line by price forecasts the trend change.

Tenkan-sen indicates the market trend. If it rises or falls, then there is an upward or downward tendency respectively, while its straight direction means that the market has gone into the channel.

Tenkan-sen and Kijun-sen generate signals to buy or to sell:

If Tenkan-sen traverses Kijun-sen in top-bottom direction then it is a signal to buy, while the opposite direction may be considered as the signal to sell.

   

Gator Oscillator

Gator Oscillator

Gator Oscillator is based on the Alligator and shows a degree of convergence/divergence of the balance lines. The top bar chart is the difference between the values of the blue and the red lines. The bottom bar chart is the absolute difference between the values of the red line and the green line, but with the minus sign, as the bar chart is drawn top-down.

   

Fractals

Fractals

Only short periods of time (15?30 percent) account for trend changes. Most lucrative periods are usually the case when market prices change according to a certain trend.

Invented by Bill Williams, Fractal indicator allows to detect the bottom or the top of the market.

There are upwards and downwards fractals. The first one consists of a series of at least five bars, with the highest maximum in the middle, and two lower maximums on both sides. The second one is identical to the first except for it has downward configuration. The fractals have High and Low values and are indicated with the up and down arrows.

The fractal needs to be used in combination with Alligator. You should not proceed with a buy transaction, if the fractal is lower than the Alligator's Teeth, and you should not close a sell transaction, if the fractal is higher than the Alligator's Teeth. After the fractal signal has been created and is in force, which is determined by its position beyond the Alligator's Jaw, it remains a signal until it gets attacked, or until a more recent fractal signal emerges.

Force Index

FRC - Force Index

Force index estimates the force of bulls during increases and the force of bears during decreases. This index was invented by Alexander Elder. It connects the basic elements of market information: price trend, its drops, and volumes of transactions. Force index may be used in combination with the moving average as well as separately. With a short moving average contributes it is possible to find the best opportunity to open and close positions. If the approximations are made with long moving average, the index can forecast trend changes.

Following signals are used in this indicator:

• It is better to buy when the forces fall below nought in the period of increasing tendency;
• The force index signalizes the continuation of the increasing tendency when it reaches the new top;
• The signal to sell comes when the index becomes positive during the decreasing tendency;
• The force index signalizes the continuation of the decreasing tendency when the index falls to the new bottom;
• The signal of a trend change appears after the Force index stays at one level for a certain period of time. This happens when the price changes are not backed with a sufficient volume change.

Calculation:

The force of every market movement is characterized by its direction, scale and volume. If the closing price of the current bar is higher than that of the preceding, the force is positive. If the current closing price is lower than that of preceding, the force is negative. The greater the transaction volume is, the greater the force is.

FORCE INDEX (i) = VOLUME (i) * ((MA (ApPRICE, N, i) - MA (ApPRICE, N, i-1))

Where:

FORCE INDEX (i) - current bar force index;
VOLUME (i) - volume of the current bar;
MA (ApPRICE, N, i) - any moving average of the current bar for N period;
simple, exponential, weighted or smoothed;
ApPRICE - applied price;
N - smoothing period;
MA (ApPRICE, N, i-1) - any moving average of the previous bar.

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Envelopes

Envelopes Indicator

Envelopes technical indicator is formed on basis of two moving averages. The band margins shift depends on the market volatility: the less stable the market is, the more the shift is.

The upper and the lower margins of the indicator's band define the price range. Signal to buy appears when the price reaches the margin lower of the band; signal to sell appears when the price reaches the upper margin.

The use of the Envelopes indicator is based on the fact that even after periods of high volatility provoked by overzealous sellers and buyers, they usually stabilize and return to their normal level.

Calculation:

UPPER BAND = SMA (CLOSE, N) * [1 + K / 1000]
LOWER BAND = SMA (CLOSE, N) * [1 - K / 1000]

Where:

UPPER BAND - indicator's top line;
LOWER BAND - indicator's bottom line;
SMA - simple moving average;
CLOSE - closing price;
N - averaging period;
K / 1000 - the value of the deviation from the average (in tenths of per sent).

DeMarker

DeM - DeMarker

DeMarker Technical Indicator is based on the comparison of the current bar maximum with the previous one. If the previousbar maximum is lower than that of the current, the respective difference between two is registered. If it is higher or equal to the current, the nought value is registered. The differences received for N periods are then summarized used as the numerator of the DeMarker. Then the numerator is divided by the same value plus the sum of differences between the price minima of the previous and the current bars. If the price minimum of the current period is higher than that of the previous, the nought value is registered.

When the indicator is below 30, the upward price reversal should be expected. When the indicator rises above 70, the downward price reversal should be expected.

Using longer periods when calculating the indicator helps to catch the long term market tendency. Indicators based on short periods let you plan the transaction time so that it falls in with the major trend.

Calculation:

The value of the DeMarker indicator for the i interval is calculated as follows:

• The DeMax (i) is calculated
  If HIGH (i) > HIGH (i - 1) , then DeMax (i) = HIGH (i) - HIGH (i - 1),
  otherwise DeMax (i) = 0
• The DeMin (i) is calculated
  If LOW (i) < LOW (i - 1), then DeMin (i) = LOW (i - 1) - LOW (i),
  otherwise DeMin (i) = 0
• DeMarker indicator is calculated:
  DMark (i) = SMA (DeMax, N) / (SMA (DeMax, N) + SMA (DeMin, N))

Where:

HIGH (i) - current bar maximum price;
LOW (i) - current bar minimum price;
HIGH (i - 1) - previous bar maximum price;
LOW (i - 1) - previous bar minimum price;
SMA - simple moving average;
N -  number of periods used in the calculation.

Commodity Channel Index

CCI - Commodity Channel Index

Commodity Channel Index Technical Indicator measures the deviation of the commodity price from its average statistical price. High values of the index indicate that the commodity price is too high, while low values show that the price is unusually below average. Commodity Channel Index usually varies in the range of +100. If index value is higher than +100 it informs about overbuying state of the market with a probability of decay.

The values below 100 indicate the overselling state and increase is to be expected.

This indicator is also used to find divergences that appear if the price reaches its new maximum while indicator is staying on or below the previous maximum. This divergence is normally followed by the price correction.

Calculation:

1. To find a typical price it is necessary to add the maximum, the minimum, and the closing prices of each bar and then divide the result by 3.
   TP = (HIGH + LOW + CLOSE) / 3
2. To calculate the n-period simple moving average of typical prices.
   SMA (TP, N) = SUM (TP, N) / N
3. To subtract the received SMA(TP, N) from typical prices (TP) of every previous n-period.
   D = TP - SMA (TP, N)
4. To calculate the n-period simple moving average of absolute D values.
   SMA (D, N) = SUM (D, N) / N
5. To multiply the result.
   SMA (D, N) ia 0,015
   M = SMA (D, N) * 0,015
6. To divide M by D.
   CCI = M / D

Where:

HIGH - bar maximum price;
LOW - bar minimum price;
CLOSE - closing price;
SMA - simple moving average;
SUM - sum;
N - number of periods used for calculation.

Bollinger Bands

BB - Bolinger Bands

Bollinger Bands Technical Indicator (BB) is similar to Envelopes. The only difference is that the bands of Envelopes are plotted a fixed distance (%) away from the moving average, while the Bollinger Bands are plotted a certain number of standard deviations away from it. This number depends on volatility: distance increases during unstable market period and decreases during less volatile periods.

Bollinger Bands are usually plotted either on the price chart, or on the indicator chart. The important feature of the Bollinger Bands indicator is that the prices tend to remain in between the top and the bottom line of the bands, in periods of high volatility the bands widen leaving a lot of room to the prices to move in and during standstill periods the band contracts.

Sheer price changes tend to happen after the band has contracted, while prices breaking through the upper band is a sign of a continuation of the current trend.

Reverse of trend may occur if the tops and bottoms outside the band are followed by tops and bottoms inside the band.

For forecasting price guiding lines it is necessary to know that the price movement that has started from one of the band's borders usually reaches the opposite one.

Calculation:

Bollinger bands are formed by three lines. The middle line (MIDDLE LINE, ML) is a usual moving average

ML = SUM (CLOSE, N) / N = SMA (CLOSE, N)
The top line (TOP LINE, TL) is the same as the middle line shifted upwards by a certain number of standard deviations (D).
TL = ML + (D * StdDev)
The bottom line (BOTTOM LINE, BL) - the middle line shifted down by a certain number of standard deviations
BL = ML - (D * StdDev)

Where:

SUM (..., N) - sum for N periods;
CLOSE - closing price;
N - number of periods used for calculations;
SMA - simple moving average;
SQRT - square root;
StdDev ? standard deviation:
StdDev = SQRT (SUM ((CLOSE - SMA (CLOSE, N))^2, N)/N)

It is recommended to use 20-period simple moving average as the middle line and two standard deviations to calculate the band borders. Besides, moving averages of less than 10 periods are of little effect.

Bears Power

Bears Power

Sellers (bears) and buyers (bulls) participate in market bargaining, and their everyday struggle ends up with higher or lower closing price in comparison to the previous day. This struggle occurs because the bulls strive to increase price and push it down from bears' side. 

Bears Power technical indicator was invented by Alexander Elder. It is used to estimate the balance of bears power, and with its own fluctuations, points out possible changes in trends. The indicator is based on difference between minimal price LOW and 13-periods exponential moving average EMA.

Bears Power is often used together with trend indicators. Signal to buy appears when trend indicator goes up; index of Bears power goes up too although staying below nought line. It is desirable for the divergence of bottoms on the indicator graph to form.

Awesome Oscillator

AO - Awesome Oscillator

Awesome Oscillator technical indicator was invented by Bill Williams. It shows what is happening to the market driving force at the present moment.

AO signals to buy:

• "Saucer" is the signal to buy which appears when the direction changes from the downward to upward with the second column is lower than the first one and is colored red and the third column is higher than the second and is colored green. It is generated when the bar chart is higher than the nought line.
• "Nought line crossing" is a signal to buy which appears when the bar chart passes from the negative values to that of positive. Two columns are necessary for it: one of them has to be below the nought line while another has to cross it.
• "Two tops" signal is generated when the bar chart values are below the nought line and when a top pointing down is followed by another one which is higher thus closer to the nought line. If the bar chart crosses the nought line in the area between the tops, the signal to buy is not generated. If an additional higher top is formed and the bar chart has not crossed the nought line, an additional signal to buy will appear.

AO signals to sell are identical to signals to buy, but turned upside down towards nought line.

Calculation:

Awesome Oscillator bar graph is a difference between 5-periods simple moving average, built on central points of the bar (H+L)/2 and 34-periods simple moving average built on central points of the bar (H+L)/2.
MEDIAN PRICE = (HIGH + LOW) / 2 AO = SMA (MEDIAN PRICE, 5) - SMA (MEDIAN PRICE, 34)

Where:

MEDIAN PRICE - median price;
HIGH - maximum bar price;
LOW - minimum bar price;
SMA - simple moving average.

Average True Range

ATR - Average True Range

Average True Range Technical Indicator is the indicator of market volatility. Introduced by Welles Wilder, it is used as a component of numerous other indicators and trading systems.

ATR often reaches a high value at the bottom of the market after a sheer fall in prices provoked by panic sales. Low values of the indicator are typical for the periods of long duration horizontal movement at the top of the market which happen during consolidation. In this case, low values of the indicator are typical. The growth of ATR value forecasts a trend change, while low indicator's value is a sign of a weak possibility of change.

Calculation:

True Range is the greatest of the following three values:

• difference between the current maximum and minimum;
• difference between the previous closing price and the current maximum;
• difference between the previous closing price and the current minimum;
• Average True Range is a moving average of values of true range.

Average Directional Movement Index

Average Directional Movement Index

Average Directional Movement Index Technical Indicator (ADX) determines a price trend and its direction. It was developed and described in detail by Welles Wilder in his book "New concepts in technical trading systems".

This method implies comparison of the 14-period +DI one and the 14-period -DI either by putting the charts of indicators one on top of the other, or + by subtracting +DI from -DI. When +DI is higher than -DI it is recommended to buy, and to sell when +DI drops lower than -DI.

In order to eliminate false signals W. Wilder added "a rule of points of extremum". This rule implies that the "point of extremum" is the point when +DI and -DI cross each other. If +DI raises higher than -DI, this point will be the maximum price of the day when they cross. If +DI is lower than -DI, this point will be the minimum price of the day they cross. This points are essential for determining a market entry level.

Calcaulation:

ADX = SUM ((+DI - (-DI)) / (+DI + (-DI)), N) / N

Where:

N - number of periods used in the calculation;
SUM (..., N) - sum for N periods;
+DI - positive directional index;
-DI - negative directional index.

Alligator

Alligator

The market movement is not stable. Mainly it doesn't move anywhere, thus traders mostly benefit from trend fluctuations.

Alligator Technical Indicator combines moving averages that use fractal geometry and nonlinear dynamics.

The blue line (Alligator's Jaw) is a 13-period smoothed moving average, shifted to the future by 8 bars;

The red line (Alligator's Teeth) is a 8-period smoothed moving average, moved into the future by 5 bars;

The green line (Alligator's Lips) is a 5-period smoothed moving average, moved by 3 bars into the future.

Alligator's Lips, Teeth and Jaw show interaction of different time periods. As clear trends can be identified only 15-30% of the time, it is crucial to follow them and avoid working on markets that fluctuate only within certain price periods.

When the Jaw, the Teeth and the Lips are closed or intertwined, it means the Alligator is going to sleep or is already sleeping. When it sleeps, its hunger is growing - the longer it will sleep, the hungrier it will wake up. The first thing it does after it wakes up is to open its mouth and yawn. Then it starts feeling the smell of food: flesh of a bull or flesh of a bear, and the Alligator starts its hunt. When Alligator feels full it starts losing interest in food-price (balance lines join together) - this is the time to fix the profit.

Calculation:

MEDIAN PRICE = (HIGH + LOW) / 2
ALLIGATORS JAW = SMMA (MEDIAN PRICE, 13, 8)
ALLIGATORS TEETH = SMMA (MEDIAN PRICE, 8, 5)
ALLIGATORS LIPS = SMMA (MEDIAN PRICE, 5, 3)

Where:

MEDIAN PRICE - median price;
HIGH - the highest price of the bar;
LOW - the lowest price of the bar;
SMMA (A, B, C) - smoothed moving average. Parameter A is for data to be smoothed, B is the smoothing period, C is shift to future. For example, SMMA (MEDIAN PRICE, 5, 3) means that the smoothed moving average is taken from the median price, smoothing period equals to 5 bars and shift being 3;
ALLIGATORS JAW - Alligator's jaw (blue line);
ALLIGATORS TEETH - Alligator's teeth (red line);
ALLIGATORS LIPS - Alligator's lips (green line).

Accumulation / Distribution

Accumulation / Distribution

The more expanded the volume of trade is the more noticeable the price changes will be. Accumulation/Distribution Technical Indicator is determined by the changes in price and volume. This indicator is a less commonly used variant of the indicator On Balance Volume. When the Accumulation/Distribution indicator grows, it means accumulation of a currency, as the overwhelming share of the sales volume is related to an upward price movement. When the indicator drops, it means distribution (or selling) of the currency, as most of sales take place during the downward price trend.

Divergences between the A/D indicator and the currency price indicate the upcoming change of prices. As a rule, in this case, the price tendency moves in the direction in which the indicator moves. For instance, if the indicator is growing, and the price of the security is falling, a soon turnaround of price is expected.

Calculation:

A certain share of the daily volume is added to or subtracted from the current accumulated value of the indicator. The nearer the closing price to the maximum day price is, the greater added share will be. The nearer the closing price to the minimum day price is, the higher the subtracted share will be. If the closing price is precisely in between the maximum and minimum of the day, the indicator value remains unchanged.

A / D(i) =((CLOSE(i) - LOW(i)) - (HIGH(i) - CLOSE(i)) * VOLUME(i) / (HIGH(i) - LOW(i)) + A / D(i-1)

Where:

A / D(i) - value of the Accumulation / Distribution Indicator for the current bar;
CLOSE(i) - closing price of the bar;
LOW(i) - minimum price of the bar;
HIGH(i) - maximum price of the bar;
A / D(i-1) - value of the Accumulation / Distribution Indicator for the previous bar.

Acceleration / Deceleration Oscillator

Acceleration / Deceleration - AC

Such factors as acceleration and deceleration play an important role in the functioning of the market. The driving force of the market, changing its direction, slows down to zero and accelerates moving to the opposite direction; at this moment the price itself changes.

Acceleration/Deceleration Technical Indicator (AC) measures acceleration and deceleration of the current driving force. This indicator will change direction before any changes in the driving force, which, in its turn, will change its direction before the price.

Acceleration/Deceleration Oscilator (AC) is designed to measure current driving force of acceleration and deceleration. This indicator is used as a signal of earlier warning as it changes direction before any changes in the driving force, which, in its turn, will change its direction before the price.

If indicator is higher than nought, then the acceleration continues the upward movement (or downward movement if it is below nought). The crossing of the nought is no regarded as a signal. To control the market and make decisions using this indicator it is necessary to watch for changes in color. It is not recommended to buy when the indicator is colored red and sell when it's green.

If you enter the market in the direction of the driving force two green columns should be higher than nought and two red columns - lower than nought, depending on the opening position. If the driving force is directed against the position to be opened three red columns over the nought line are needed for a short position and three green columns below the nought line for a long position.

Calculation

AC bar chart is the difference between the value of 5/34 of the driving force bar chart and 5-period simple moving average, taken from that bar chart.
MEDIAN PRICE = (HIGH + LOW) / 2
AO = SMA(median price, 5)-SMA(median price, 34)
AC = AO-SMA(AO, 5)

Where:

HIGH - maximum price;
LOW - minimum price;
SMA - Simple Moving Average;
AO - Awesome Oscillator.

Forex trading in the US

• The NFA – the National Futures Association. The NFA is a self-regulatory organization for the US futures industry. Its purpose is to safeguard market integrity and protect investors by implementing forex regulations. Membership in NFA is mandatory for any futures or forex broker operating in the US .It is an independent regulatory body with no ties to any specific marketplace.

• The CFTC – the Commodity Futures Trading Committee. Created by congress, the Commodity Futures Trading Commission (CFTC) was formed in 1974 as an independent agency with the mandate to issue forex regulations for financial markets in the United States. The CFTC's forex regulations assure the economic utility of the markets by encouraging their competitiveness and efficiency, and protecting market participants against and abusive forex trading practices.

    The CFTC has some regulatory authority over retail off-exchange forex markets. The Commodity Exchange Act (CEA) allows the sale of over-the-counter forex futures and options to retail customers if, and only if, the counterparty (the person on the other side of the transaction) is a regulated entity.

    These regulated entities include the following: financial institutions, such as banks and savings associations, registered broker-dealers and certain of their affiliates, registered futures commission merchants (FCMs) and certain of their affiliates, certain insurance companies and their regulated affiliatess financial holding companies, and investment bank holding companies. Under the CEA, the CFTC has the authority to shut down any unregulated entity that acts as a counterparty to forex futures oroptions transactions with retail customers. The CFTC also has the authority to take action against registered FCMs and their affiliates for violating the anti-fraud and anti-manipulation pro-visions of the CEA in connection with OTC forex transactionsinvolving retail customers, but the CFTC cannot adopt rules toregulate these transactions. NFA  (National Futures Association) has rules to protect customers in the retail off-exchange forex market.

    As mentioned later in this article, firms that introduce customers to forex dealers do not have to be regulated entities. NFA’s rules provide, among other things, that a forex dealer FCM must take responsibility for the activities of unregulated entities that solicit retail customers. Additionally, NFA’s rules require forex dealer FCMs to: observe high standards of commercial honor and just and equitable principles of trade in connection with the retail forex business; supervise their employees and agents and any affiliates that act as counterparties to retail forex transactions; maintain a minimum net capital requirement based on the value of open customer positions; and collect security deposits from those customers. NFA’s forex rules do not apply to all FCMs and their affiliates, however. Therefore, you should ask the dealer if NFA regulates its forex activities.

Forex trading in the UK

In the United Kingdom, operations of Forex brokers are regulated by FSA - Financial Services Authority.

    The Financial Services Authority is non-governmental, independent body, whose primary function is to make financial retail markets --that is, the markets that most of us use for trading-- work more efficiently. Their main goal is, essentially, to ensure that retail customers (that is, the little guys on the bottom of the financial dog-pile) get a fair deal.

    Starting in 2004, the FSA has created a UK-wide strategy to build up the country's financial capability (in all markets, not just Forex), as well as raise confidence among consumers. In other words, they've put plenty of rules in place that make consumers more comfortable taking part in the market.

   This affects UK brokers who work on behalf of residents in the UK in several ways. For one, according to FSA regulations, all legit Forex brokers must meet strict financial standards. These brokers are required to work with FSA financial regulators, submitting regular financial reports and proving that they follow regulations at all times. Brokerage firms who are found in violation are either fined or, in extreme cases, have their regulatory status terminated.

   While strict rules may keep some good brokerage firms from operating in the UK, these harsh rules are generally pretty good for you. Since the FSA keeps records of any formal proceedings they've had to enter into against regulated firms, any information about rule breakers (that is, Forex brokers that you shouldn't trust) are kept on record. Simply by visiting the FSA website, you can find out if the firm you're considering using has had any serious problems or infractions. And that's very useful information - after all you can lose your money on the Forex market because of a bad broker.

Forex trading in India

India has a rather strict foreign currency exchange policy - even though many liberalization measures have been taken recently, it's still an economically isolated, or highly protected country. Indian currency - rupee, is highly regulated by the national banking authority - Reserve Bank of India, and so Indian citizens still cannot freely exchange rupee to other currencies, they have to prove their need and there are annual limits for different needs (more). Even popular money transfer systems such as Western Union - which is spread worldwide and available to everyone, are forbidden in India - residents can only receive money, but not send.

   However, because of the globalization there is a definite need to open the economy, so Reserve Bank of India has been softening rules and regulations in recent years.

   One of the important changes in regards to Forex trading is that in year 2008 Reserve Bank of India has finally allowed currency futures trading. Speculative trading became a permissible operation too - since it became impossible to ask for a proof of a hedging need. 

   We at Forex4you are happy that one of the biggest and the most perspective country in the world is finally joining the world of opportunities of Forex trading market!

   More details are available on the official website of RBI - here.

   Note that Indian brokers are only allowed to provide USD/INR pair at the moment. Since we're located outside India, in British Virgin Islands, we do provide customers with many more pairs, many of which are much more interesting for traders because of their nature. Rupee, being a highly regulated currency, is not as volatile as other currencies and doesn't allow as much analysis since movements depend on RBI decisions and not on market events.

   Our another advantage over brokers registered inside India is that we don't have any fees or minimum transactions/deposits. Services are much more affordable at our company!

   Even though we're registered outside India, we do have an office in Mumbai where an Indian company that has a contract with us, provides our Indian stakeholders with support and consultations.

Forex Training

  It is necessary to test your knowledge and skills in practice before trading on Forex. A demo-account might be used for that purpose, but it must be kept in mind that it does not reflect the refinements of trade, such as its psychological side.

    Until recently there didn't exist other means. Our company was one of the first, who offered beginners a new way of learning Forex by practicing trade skills using real money at minimal risk:

• First of all, deposit currency is US/Euro cents, which allows the use of the same kind of numbers while lowering the cost of deposit by 100 times.
• Secondly, the minimum amount of a transaction is 0.01 (or 1,000 points of a base currency), which significantly lowers the risk of loss.

    The "Forex Training" service gives our clients an opportunity to conduct in practice the financial transactions using various strategies at minimal costs, thus overcoming psychological difficulties and helping to predict the likelihood of the success for larger sums.

    This service is the result of a long history of foreign exchange market development, beginning with the 100-thousand contracts. For those even the change of 5-10% in six or twelve months is a sufficient profitability level provided by many banks at no risk. Over time, investors felt the need to participate in trading using smaller amounts of money, but at higher level of risk and return.

    This has been made possible through leverage. Companies started to offer margin loan services in exchange for certain bonds on an account, which were much smaller than the amount of the transaction. Due to its relevance, this service became popular among investors with relatively small capital. Originally, lots were as much as 100,000 US dollars with a bond of 1,000 or with leverage of 1 to 100 (lot amount is 100 times more than a bond).

    fx4u-cent has become a new level in the development of margin loan services. In fx4u-cent the bond is 1,000 times less than a standard contract of 100 thousand (lot 0.1). Many brokers also use the term "micro" for cases with a bond of 10 USD (lot 0.01) but in fact none of them really offers this kind of service.

    E-Global Trade & Finance Group, Inc. within the scope of the "Forex Training" program offers a minimal lot of 0.0001 with only 10 cents necessary for a trade at 1 to 100 leverage, thus falling under fx4u-cent conditions. This has become possible due to the adoption of US/Euro cents as a currency. Therefore, having an account of 2,000 cents and conducting a 0.01 lot transaction, a client actually operates with a lot of 0.0001, because the size of the account (US /Eurocents) is 100 times less of a US dollar/Euro account.

    fx4u-cent accounts have many advantages as compared to demo or fx4u-micro accounts. Today it is the best way to learn how to trade because it offers practice with real money at risks less than those of other types of accounts. Success in fx4u-cent increases the likelihood of the same results with dollar/Euro accounts.

    After training, the customer can evaluate his own work and draw conclusions on what percentage of profitability he achieved by assessing the number and level of depositing in critical situations. At this point he can decide whether he is experienced enough to start working with eGlobal-mini where depositing amounts are greater.

    The experience of many traders shows that in most cases, making a deposit in situations of low margin level increases the chances of reaching the break even point. Moreover it creates a decent profit.

    E-Global Trade and Finance Group, Inc. offers a wide range of quick and round-the-clock services to make a deposit in critical situations.

    We want our clients to learn and make a profit!

    We recommend you to start trading on the foreign exchange market with the "Forex Training" service.

    The purpose of the competitions, special events and analytical support provided by the Company is to help traders in understanding the beneficial effect of the following factors:

• work with free monetary means;
• the opportunity to edit the account;
• support of analysts and consultants;
• systematic approach in trade with a minimum level of influence of the psychological aspect.

    An "fx4u-cent" account can be opened here.

    You can read user manuals of the trading terminal here.

Central banks

Central banks shape the monetary policy and thecredit policy of the country. The main goals of every central bank are tomaintain price stability, to control inflation and to participate on the Forexmarket.

    Some of the world's most influential central banks are:

• The Bank of Japan
• The European Central Bank
• The Bank of England
• The US Federal Reserve System

Forex history

In 1967, a Chicago bank refused a college professor by the name of Milton Friedman a loan in pound sterling because he had intended to use the funds to short the British currency. Friedman, ho had perceived sterling to be priced too high against the dollar, wanted to sell the currency, then later buy it back to repay the bank after the currency declined, thus pocketing a quick profit. The bank's refusal to grant the loan was due to the Bretton Woods Agreement, established twenty years earlier, which fixed national currencies against the dollar, and set the dollar at a rate of per ounce of gold.

    The Bretton Woods Agreement, set up in 1944, aimed at installing international monetary stability by preventing money from fleeing across nations, and restricting speculation in the world currencies Prior to the Agreement, the gold exchange standard--prevailing between 1876 and World War I--dominated the international economic system. Under the gold. exchange, currencies gained a new phase of stability as they were backed by the price of gold. It abolished the age-old practice used by kings and rulers of arbitrarily debasing money and triggering inflation. But the gold exchange standard didn't lack faults. As an economy strengthened, it would import heavily from abroad until it ran down its gold reserves required to back its money. As a result, money supply would shrink, interest rates rose and economic activity slowed to the extent of recession. Ultimately, prices of goods had hit bottom, appearing attractive to other nations, which would rush into buying sprees that injected the economy with gold until it increased its money supply, and drive down interest rates and recreate wealth into the economy. Such boom-bust patterns prevailed throughout the gold standard until the outbreak of World War I interrupted trade flows and the free movement of gold.

    After the Wars, the Bretton Woods Agreement was founded, where participating countries agreed to try and maintain the value of their currency with a narrow margin against the dollar and a corresponding rate of gold as needed. Countries were prohibited from devaluing their currencies to their trade advantage and were only allowed to do so for devaluations of less than 10%. Into the 1950s, the ever-expanding volume of international trade led to massive movements of capital generated by post-war construction. That destabilized foreign exchange rates as set up in Bretton Woods.

    The Agreement was finally abandoned in 1971, and the US dollar would no longer be convertible into gold. By 1973, currencies of major industrialized nations became more freely floating, controlled mainly by the forces of supply and demand which acted in the foreign exchange market. Prices were floated daily, with volumes, speed and price volatility all increasing throughout the 1970s, giving rise to new financial instruments, market deregulation and trade liberalization.

    In the 1980s, cross-border capital movements accelerated with the advent of computers and technology, extending market continuum through Asian, European and American time zones. Transactions in foreign exchange rocketed from about billion a day in the 1980s, to more than .5 trillion a day two decades later.

How to earn money with Forex

Since it might be a bit complicated for a beginner to figure out how to make money in Forex, we offer you this example:

    You believe that the Euro to US Dollar (EURUSD) rate will increase, and on your balance you got 2000 USD (fx4u-classic account). At the price of 1.2750 you buy 150,000 Euro for 150,000 * 1.2750 = 191,250 USD.

    This is possible because of the credit, which allows you to make transactions worth 100 times more than funds available on your balance (in this specific case, the maximum sum available for transactions is 2000 * 100 = 200,000 USD).

    After a period of time, the exchange rate increases. You sell 150,000 Euro at the rate of 1.2850 and get 150,000 * 1.2850 = 192,750 USD back!

    Thus, after buying at a low rate and selling at a high rate, the difference 192,750 - 191,250 = 1500$ is your profit! You have earned 75% of initial funds in your account, while the rate increased just by 0.8%.

    Another way of making a profit on Forex is based on the decrease of the quotation rate of the EURUSD currency pair:

    Having created a real account with 200 USD in it (same type of account - fx4u-classic), you determine the upper and lower limits on the Euro to Dollar chart and sell 15,000 Euro (0.15 lot) at the upper limit for a price of 1.2850 (bid price) USD for 1 Euro, which equals 19,275 USD (15,000 Euro multiplied by the rate of 1.2850).

    You have funds in USD in your account, but you can sell Euro using the automatic borrowing system. Hence, the company lends you 15,000 Euro free of charge, which you can sell by sending a selling request. Due to the leverage, the actual deposit is 100 times less than the sum sold: 15,000/100 = 150 euro. At a rate of 1.2850 this equals 192,75 USD. This very sum is going to be a deposit for a credit (marginal) transaction for your account. The maximum possible deposit in this case equals 200 USD.

    Then during the day the price drops to the lower limit and you decide to buy 15,000 Euro at a price of 1.2750 (ask price) USD for 1 Euro, which equals 19,125 USD. The 15,000 Euro that you have bought are written off your account towards the repayment of the company loan, while the difference is left in your account.

    Thus, due to the fall in the exchange rate you earn the difference between sold and bought, which is 19,275 - 19,125 = 150 USD. You managed to earn 75% (150 dollars) of your initial sum of 200 USD due to a rate decrease by 0.8% (from 1.2850 to 1.2750) in only one day.

    The company takes a commission in the form of the difference between the ask and bid prices or spread, which in this example is 3 USD (spread of EuroDollar pair equals 0.0002 or 2 pips). More detailed information on terminology is in the Glossary.

    In these examples, the spread is not taken into consideration while calculating percentages of rate changes because of its non-essential influence on the results. In the case of mircoForex or eGlobal-standard the calculations are similar with a difference only in account currency  US cents for micro, USD for mini & standard.  The consecutive use of the transactions shown gives the income of 75%+75% = 150%. In actual practice a much greater return may be achieved by using corresponding money management methods. Risk management methods also play an important role in trade .

WHAT IS FOREX?

As far as the freedom from any external control and free competition are concerned, FOREX is a perfect market. It is also the biggest liquid financial market. According to various assessments, money masses in the market constitute from 1 to 1.5 trillion US dollars a day. (It is impossible to determine an absolutely exact number because trading is not centralized on an exchange.) Transactions are conducted all over the world via telecommunications 24 hours a day from 00:00 GMT on Monday to 10:00 pm GMT on Friday. Practically in every time zone (that is, in Frankfurt-on-Main, London, New York, Tokyo, Hong Kong, etc.) there are dealers who will quote currencies.FOREX is a more objective market, because if some of its participants would like to change prices, for some manipulative purpose, they would have to operate with tens of billions dollars. That is why any influence by a single participants in the market is practically out of the question. The superior liquidity allows the traders to open and/or close positions within a few seconds. The time of keeping a position is arbitrary and has no limits: from several seconds to many years. It depends only on your trading strategies. Although the daily fluctuations of currencies are rather insignificant, you may use the credit lines, that are accessible even to currency speculators with small capitals ($ 1,000 - 5,000), where the profit may be impressive. (You can learn more about it in the section: The main principles of trading.)The idea of marginal trading stems from the fact that in FOREX speculative interests can be satisfied without a real money supply. This decreases overhead expenses for transferring money and gives an opportunity to open positions with a small account in US dollars, buying and selling a lot of other currencies. That is, on can conduct transactions very quickly, getting a big profit, when the exchange rates go up or down.

THE MARKET

The currency trading (FOREX) market is the biggest and the fastest growing market on earth. Its daily turnover is more than 2.5 trillion dollars, which is 100 times greater than the NASDAQ daily turnover.
Markets are places to trade goods. The same goes with FOREX. The Forex goods (or merchandise) are the currencies of various countries. You buy Euro, paying with US dollars, or you sell Japanese Yens for Canadian dollars. That's all

How does one profit in Forex?

Very simple and obvious: buy cheap and sell for more! The profit is generated from the fluctuations (changes) in the currency exchange market.
The nice thing about the FOREX market, is that regular daily fluctuations, say - around 1%, are multiplied by 100! (in general, Easy-Forex™ offers trading ratios from 1:50 to 1:200). If, for example, the exchange rate of "your" pair of currencies increased by 0.6% in the last 4 hours, your profit will be 60% on your investment! Such can happen in one business day, or in a few hours, even minutes.
Moreover, you cannot lose more than your "margin"! You may profit unlimited amounts, but you never lose more than what you initially risked and invested.
You can implement your choice (the pair of currencies, the volume amount) under any direction to which the market is moving, and yet make profit. It does not matter whether the exchange rate is going up or down: you can always decide to buy Euro and sell dollar, or vice versa - buy dollar and sell Euro. You don't have to physically possess certain currencies in order to perform "buy" or "sell" with them.

HOW TO DO TRADE FOREX

You select the pair of currencies with which you wish to make a Forex deal. You determine the volume (the amount of the deal). You deposit the "margin" (collateral needed to facilitate the deal. Usually - only a very small portion of the whole deal, say: 1% or 1:100).
Before you finally activate the deal, you can still "freeze" it for a few seconds. That enables you to either change the terms, or accept it as is, or altogether regret the whole idea. The "freeze" feature is a unique service by Easy-Forex™.
When your Forex deal is running (you hold an "open position"), you can monitor its status and check scenarios online, whenever you wish. You may change some terms in the deal, or close it (and cash the profit, if any, or minimize the loss, if any). Moreover, Easy-Forex™ lets you determine a "take-profit" rate, with which the deal will close automatically for you, when and if such rate occurs in the market. Meaning: you do not have to stay near your computer when you hold open positions.