Pips and Stocks

Those of you contemplating on getting in on stocks or in the stock market, should take time to learn about highs/lows, bid/asks, charts, pips, spreads and so on to avoid up-and-coming* the high plunges. Staying informed is the key to successfully gaining in any stock market exchange industry. Despite, you want to commit oneself to charts and information that offers you trueness in the stock market, Forex exchange markets, and other stock industries. Failing to do so could lead to financial blunder.

About Stock Charts:

Charts are engaged in stock market exchange and Forex trading industries. The charts are guides, that aid strategists by allowing them to read, interpret through indicators, which submit signals. Inside the boundaries, the charts are treks, inherent strategies, powers, and so more.

In AMEX's, strategists and investors base their bids/asks, or buy and sell on under and highs. The high and low in some instance have pips, currencies, spreads, or shares, which traders make good use of stock charts to keep up with these factors in stock exchange.

In the stock biz, small and large cyber-banking institutions, as well as large and small companies globally invest in stocks, or forex stock exchange. Brokers, investors and traders use charts, which the strategists are, issued recites on both sides, which make up ask and bid phrase, depending on the stock market. The bids make up pricing, which initiates once indicators inside the boundaries programs alert traders on Seat Questioning that sprouts between buying currencies on conflicting sides. Once the brisk' come in, the tradesman might select the option "ask" once the pricing occurs. The trader fundamentals proof on his, 'ask' which could alter.

Quotes enable traders to set their marks on pips, which can decide statistics that rise, in excess the averages. In AMEX's, decimals convert in some instances to match exchange within the currencies of any participating country engaging in stock exchange. Decimals base values, which are dependable at all times.
Charts read out prints of daily activities in stock market exchange. The charts present the highs and lows, as well as various other factors in stock marketing, which are invaluable to anyone trading, investing or brokerage in the market.

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What is the Forex technical analysis?

The forex technical analysis is concerned with what has actually happened in the forex market, rather than what should happen.
A forex technical analysis will study the price and volume movements and from that data create charts (derived from the actions of the market players) to use as his primary tool. The technical analyst is not much concerned with any of the “bigger picture” factors affecting the market, as is the fundamental analyst, but concentrates on the activity of that instrument’s market.


Technical analysis is based on three underlying principles:
1. Market action discounts everything
This means that the actual price is a reflection of everything that is known to the market that could affect it, for example, supply and demand, political factors and market sentiment. The pure technical analyst is only concerned with price movements, not with the reasons for any changes.
2. Prices move in trends
Forex Technical analysis is used to identify patterns of market behaviour which have long been recognised as significant. For many given patterns there is a high probability that they will produce the expected results. Also there are recognised patterns which repeat themselves on a consistent basis.
3. History repeats itself
Chart patterns have been recognised and categorised for over 100 years and the manner in which many patterns are repeated leads to the conclusion that human psychology changes little with time.
List of categories of the technical analysis theory:
• Indicators (Oscillators, eg: Relative Strength Index RSI)
• Number theory (Fibonacci numbers, Gann numbers)
• Waves (Elliott wave theory)
• Gaps (High-Low, Open-Closing)
• Trends (Following Moving Average)
• Chart formations (Triangles, Head & Shoulders, Channels)

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Technical Analysis Discounts Everything Especially in Forex

One of the underlying tenets of technical analysis is that historical price action predicts future price action. Since the forex is a 24-hour market, there tends to be a large amount of data that can be used to gauge future price activity, thereby increasing the statistical significance of the forecast. This makes it the perfect market for traders that use technical tools, such as trends, charts and indicators.
It is important to note that, in general, the interpretation of technical analysis remains the same regardless of the asset being monitored. There are literally hundreds of books dedicated to this field of study, but in this tutorial we will only touch on the basics of why technical analysis is such a popular tool in the forex market.
As the specific techniques of technical analysis are discussed in other tutorials, we will focus on the more forex-specific aspects of technical analysis.

Minimal Rate Inconsistency
There are many large players in the forex market, such as hedge funds and large banks, that all have advanced computer systems to constantly monitor any inconsistencies between the different currency pairs. Given these programs, it is rare to see any major inconsistency last longer than a matter of seconds. Many traders turn to forex technical analysis because it presumes that all the factors that influence a price - economic, political, social and psychological - have already been factored into the current exchange rate by the market. With so many investors and so much money exchanging hands each day, the trend and flow of capital is what becomes important, rather than attempting to identify a mispriced rate.

Trend or Range
One of the greatest goals of technical traders in the FX market is to determine whether a given pair will trend in a certain direction, or if it will travel sideways and remain range-bound. The most common method to determine these characteristics is to draw trend lines that connect historical levels that have prevented a rate from heading higher or lower. These levels of support and resistance are used by technical traders to determine whether or not the given trend, or lack of trend, will continue.

Generally, the major currency pairs - such as the EUR/USD, USD/JPY, USD/CHF and GBP/USD - have shown the greatest characteristics of trend, while the currency pairs that have historically shown a higher probability of becoming range-bound have been the currency crosses (pairs not involving the U.S. dollar). The two charts below show the strong trending nature of USD/JPY in contrast to the range-bound nature of EUR/CHF. It is important for every trader to be aware of the characteristics of trend and range, because they will not only affect what pairs are traded, but also what type of strategy
Common Indicators
Technical traders use many different indicators in combination with support and resistance to aid them in predicting the future direction of exchange rates. Again, learning how to interpret various forex technical indicators is a study unto itself and goes beyond the scope of this forex tutorial. If you wish to learn more about this subject, we suggest you read our technical analysis tutorial.
A few indicators that we feel we should mention, due to their popularity, are: Bollinger bands, Fibonacci retracement, moving averages, moving average

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Why Forex Traders Prefer Technical Analysis

Until relatively recently fundamental analysis, or looking at past political and economic events to help them predict price movements in the underlying currencies they traded, is how most traders arrived at trading decisions.
However, fundamental analysis requires a trader to absorb lots of diverse information from many sources and considerable knowledge to interpret it accurately. Couple this with basic disagreements as to what information is important and what weight to assign it and you can begin to see why this method took enormous resources and time. Two characteristics not commonly associated with the individual investor.

The end result was that for years currency trading was the exclusive playground of large banks or other institutions with the resources to accomplish this type of analysis
Now, the rise of computing power and the proliferation of electronic information sources have lead to a fundamental shift in the way most traders analyze the technical analysis.

Today most traders employ another, more automated, form of analysis known as technical analysis. This involves the combined charting of real-time and historical price movement data of currencies. Today this is mostly accomplished using computers which have the ability to do the sometimes complex math quickly in near real-time.
Technical analysis really boils down to simply taking the over one hundred years worth of recorded historical price data available from the foreign currency market and running it through a computerized charting application to look for patterns and trends.

Once these patterns or trends are identified they must be quantified in there ability to predict price moves in a particular direction. Once done, a trader can then look at the manner in which a currency's price is currently moving and compare this to similar past patterns to predict the future direction of movement.
So, while technical analysis still requires skill, experience, and judgment the fact that it is more automated and less subjective than the research involved in fundamental analysis contributes to it's popularity. The debate over which method is better will probably never be resolved, but most traders feel that technical analysis is easier to learn and master.
There are three underlying principles one must be familiar with to fully understand technical analysis.
First, there are many factors, such as political or economic events, that will produce price movement in a particular currency pair. However, these factors, or reasons, are not what's important to technical analysis, but rather the price movement itself.

Second, technical analysis assumes that pricing moves follow a trend that can be discerned by tracking the patterns that emerge over time in the market.
Finally, the trends and patterns that emerge from historical charting and analysis of price will also be reflected in future price action movements. This is because, in the view of the technical analyst, the trading psychology of humans remains for the most part constant over time. So market participants will react in similar fashion to similar news in the future the same as they have in the past.

This "wisdom of crowds" or at least the predictability of crowds is dismissed by followers of the fundamental analysis approach. They hold to their belief that a deep understanding of the factors that affect pricing and not a reliance on patterns is the only way to produce reliable long term results.
In spite what the fans of fundamental analysis say the majority of traders today rely almost entirely on a some form of technical analysis for trading currency.
No system, whether based on fundamental and technical analysis, can accurately predict price movements every time but a good technical trader who takes the time to learn a sound methodology can do quite well

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Technical Analysis To Profit In Forex Trading

There are two basic ways to approach the analysis of the FOREX markets: Technical analysis and Fundamental Analysis. Someone who is using a fundamental analytical approach will look at the current economic climate, political events, a variety of economic indicators, and so on to try to predict currency moves. What we will examine is technical analysis, or the use of historical price patterns in economic data to predict future moves in the FOREX. We will also look at the tools used for technical analysis.

The three major assumptions underlying technical analysis are:
1 - All market forces are taken into account in price movement. Many things can affect the price of a currency. Some of these factors would be economic conditions, political happenings, natural disasters, seasonal supply and demand and even the weather. Technical analysis, however, does not attempt to take these into account because the market has already done that. Rather, a technical analyst is concerned with the actual movements of the market, not with the reasons for the movement.
2 - There are observable trends in currency prices movements. There are known market patterns that follow predictable paths.
3 - There are historical trends in price movements. Over a century of FOREX data collection has shown that human nature interacts with events in predictable ways. Thus, when circumstances are similar in the market, the same patterns will show up.

Technical Analysis: Is It Necessary?
Day traders in the FOREX usually use technical analysis most heavily, though they may supplement it with fundamental analysis. Technical analysis has the huge advantage of being applicable to a wide range of currencies and markets simultaneously. To properly do fundamental analysis requires a good knowledge of events and conditions in a certain country so the number of markets any particular trader can analyze by the fundamental approach is necessarily limited.
Technical analysis can seem so complicated to the beginner that they may be tempted to wonder if it is really needed. The truth is that all investing requires a strategy and technical analysis is a proven way to set strategy by predicting FOREX movements. Of course, no strategy or method is always successful, which is one reason many technical traders also do some fundamental analysis as a supplement.

Using Price Charts In Technical Analysis

Charts lie at the heart of technical analysis and you will find a good selection available from any online FOREX broker. Not only are the charts updated constantly, real time, but they can be viewed in a variety of ways. You can see movement over various periods of time, broken down into different time scales, and with various analytical overlays applied. With the software provided you can see the broad picture over a long period or zoom into the most minute detail. The basic software is free from most online Forex brokers but there may be a fee for the more professional, in-depth, information.

Sometimes the charts are a built-in part of the broker's software package. Alternately, they may be available on the broker's website.
Practice, or demo, accounts are available from most brokers on their website. These allow you to use the charts and tools of that particular software to learn the techniques of following charts, noticing and learning about trends and studying market movements. Nothing can substitute for this valuable period of becoming intimately familiar with charts and market behavior.

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Currency technical analysis

Currency technical analysis makes the following assumptions:

1. Markets Discount
All fundamentals show up quickly in the price action, when you use technical analysis. You are therefore studying the fundamentals as they are - not trying to guess their impact - and of course, you’re studying human psychology as well.

2. Trends Persist
Currency technical analysis can prove this - just get out a chart of any currency, and you’ll see long term trends - many lasting for several years.



History Repeats
The basis of currency technical analysis, is that what has happened in the past, will happen again - and that’s why it’s so effective.
Human behaviour repeats itself - and since price patterns reflect shifts in human psychology, we can assume that certain patterns and trends will repeat themselves.

Your Aim
Your aim is to use technical analysis to catch, and hold the longer-term trends. Keep in mind that human behaviour does repeat itself - but humans can be unpredictable as well!

Keep in mind that technical analysis is an art, not a science. Be wary of theories that say they can predict with scientific accuracy - they can’t! - If they could, we’d all know the price in advance - and there’d be no market.
The good news is that by using technical analysis in the money markets, you can get the odds on your favour - and make big long-term profits.

Trade the Odds with Currency Technical Analysis
In gambling, the aim is to get the odds in your favour - and in trading, your aim should be to trade only when the odds are in your favour. You won’t win every trade - but neither can the top football players score from every kick at the goal.
By following the information outlined here, and putting in a little work and preparation, you could soon be racking up huge long-term profits by using currency technical analysis

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The Logic Behind Technical Analysis

Let me first say that I do not now engage in technical analysis; nor, have I ever engaged in technical analysis. I do not believe doing so would be a productive use of my time.
Having said that, I do not claim technical analysis has no predictive value. In fact, I suspect it does have some predictive value. The Efficient Market Hypothesis is flawed. It is based upon the (unwritten) premise that data determines market prices. As Graham so clearly put it in Security Analysis.

The Efficient Market Hypothesis is not the only argument against technical analysis. There is also empirical evidence that questions the utility of technical analysis. However, empirical evidence alone is not sufficient to prove technical analysis has no predictive power. If most knuckleball pitchers had limited success, the knuckleball might be an inherently ineffective pitch, or there might be a better way to throw it. The same is true of technical analysis.
Technical analysis is logically valid. Not only is it possible that some form of technical analysis might have predictive power; I would argue it necessarily follows from the above assumptions that some form of technical analysis must have predictive power.

So, why don't I use technical analysis? I believe fundamental analysis is a far more powerful too. In fact, I believe fundamental analysis is so much more powerful that one ought not to spend any time on technical analysis that could instead be spent on fundamental analysis. I also believe there is more than enough fundamental analysis to keep an investor occupied; so, he shouldn't devote any time to technical analysis. Personally, I feel I am much better suited to fundamental analysis than I am to technical analysis.

Of course, there is no reason why this argument should hold any weight with you. I also believe there is sufficient empirical evidence to support the idea that fundamental analysis is a far more powerful tool than technical analysis.
Even though I believe there must be some form of technical analysis that does have predictive power, the mental model of investing which I have constructed does not allow for such a form of technical analysis. In other words: logically, there must be an effective form of technical analysis, but practically, I pretend there isn't.

Why? Because I believe that's the most useful model. One should adopt the most useful model not the most honest model. I'm willing to pretend technical analysis does not work, even though I know some form of it must work.
Really, this isn't all that strange. In science, I'm willing to pretend there are random events, even though I know there must not be random events. In math, I'm willing to pretend zero is a number, even though I know it must not be a number. A model with random events is useful. In most circumstances, a refusal to allow for random events would be harmful rather than helpful. The model with random events is simpler and more workable. The situation is much the same with zero. It isn't a number. To include zero as a number, you would have to put aside the principles of arithmetic. So, we don't do that. In school, you were taught that zero is a number, but that there are certain things you must never do with zero. You accepted that, because it was a simple, workable model.

I propose you do much the same in the case of technical analysis. You should recognize the logical validity of technical analysis, but create a mental model of investing in which technical analysis has no utility whatsoever.

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