Chart Patterns | SigmaForex

* Chart Patterns - The Basics To be profitable in today's world technology and advancement, one must be proficient and reading and more importantly understanding chart patterns and basic technical indicators. Below is just a few basic points to help your understanding of technical analysis and currency chart reading. * Pricing Price reflects the perception and action taken by the market participants. It is the urgency between buyers and sellers in the trading pit that creates price movement. Thus, all fundamental factors are quickly discounted in price. Therefore, by studying the price charts, you are indirectly seeing the fundamental and market psychology all at once - after all the market is feed by two emotions - Greed and Fear and once you understand that, then you begin to understand the psychology of the market and how it relates to the chart patterns. Data Window. Most computer programs will display a small box of data usually called a display window which will contain the following items: O = Opening Price H = Highest Price L = Lowest Price C = Close or Last Price Tr = Volume or number of trades ( not contracts ) in that time period. * Price Bars Price bars are a linear representation of a period of time. This enables the viewer to see a graphic representation summarizing the activity of a specific time frame. As an example, we use one minute and five-minute bars for our system. Each bar has similar characteristics and tells the viewer several important pieces of information. First, the highest point of the bar represents the highest price that was achieved during that timer period. The lowest point of the bar represents the lowest price during the same period. Regular bars display a small dot on the left side of the bar which represents the opening price of the period and the small dot on the right side represent s the closing price of the period. * Market Types The market often display's some very familiar patterns of price movement. Once a pattern is established, it becomes the most probable course of future price action until the market changes. There are two types of markets which become important for the beginning trader to identify; trending and trend-less. Each market type has two specific patterns which you will also notice over time. These market types and patterns can be defined as follows: Trending - Steady elongated price movements with less than a 45-degree angel with occasional pauses, profit taking, or resting periods. Uptrends - A pattern of higher highs and higher lows. Downtrends - A pattern of lower lows and lower highs. Trend-less - Erratic price movements which are often steep ( greater than 45 -degree angle ) and cannot sustain and therefore must reverse. Although the movements can move many points in a short period of time, they often result in very little net price movement over time. Choppy - An erratic pattern of higher highs and lower lows. Sideways - A narrow pattern of lower highs and higher lows. While up-trend and down-trend days can offer excellent trading results, choppy markets often create stop outs, while sideways markets produce for little in either direction. Our trading objective is to get into a trending market and ride until we make our target objective. * Volume Four easy rules to follow regarding Volume: 1. When prices are rising and volume is increasing, prices will continue to rise. The uptrend is being confirmed. 2. When prices are rising but volume is decreasing, the uptrend is losing momentum and may be near the end. 3. When prices are falling and volume is increasing, prices will continue to fall. 4. When prices are falling and volume is decreasing, the downtrend is losing momentum and may be near the end. * Forex vs. Equities If you are interested in trading currencies online, you will find that the Forex market offers several advantages over equities trading. * 24-Hour Trading Forex is a true 24-hour market, which offers a major advantage over equities trading. Whether it's 6pm or 6am, somewhere in the world there are always buyers and sellers actively trading foreign currencies. Traders can always respond to breaking news immediately, and P&L is not affected by after hours earning reports or analyst conference calls. After hours trading for U.S. equities brings with it several limitations. ECN's (Electronic Communication Networks), also called matching systems, exist to bring together buyers and sellers - when possible. However, there is no guarantee that every trade will be executed, nor at a fair market price. Quite frequently, traders must wait until the market opens the following day in order to receive a tighter spread. * Superior Liquidity With a daily trading volume that is 50x larger than the New York Stock Exchange, there are always broker/dealers willing to buy or sell currencies in the FX markets. The liquidity of this market, especially that of the major currencies, helps ensure price stability. Traders can almost always open or close a position at a fair market price. Because of the lower trade volume, investors in the stock market are more vulnerable to liquidity risk, which results in a wider dealing spread or larger price movements in response to any relatively large transaction. 100:1 Leverage 100:1 leverage is commonly available from online FX dealers, which substantially exceeds the common 2:1 margin offered by equity brokers. At 100:1, traders post $1000 margin for a $100,000 position, or 1%. While certainly not for everyone, the substantial leverage available from online currency trading firms is a powerful, moneymaking tool. Rather than merely loading up on risk as many people incorrectly assume, leverage is essential in the Forex market. This is because the average daily percentage move of a major currency is less than 1%, whereas a stock can easily have a 10% price move on any given day. The most effective way to manage the risk associated with margined trading is to diligently follow a disciplined trading style that consistently utilizes stop and limit orders. Devise and adhere to a system where your controls kick in when emotion might otherwise take over. * Lower Transaction Costs It is much more cost-efficient to trade Forex in terms of both commissions and transaction fees. Most Forex Brokers charge no commissions or fees whatsoever, while still offering traders access to all relevant market information and trading tools. In contrast, commissions for stock trades range from $7.95-$29.95 per trade with online discount brokers up to $100 or more per trade with full service brokers. Another important point to consider is the width of the bid/ask spread. Regardless of deal size, forex dealing spreads are normally 5 pips or less (a pip is .0005 US cents). In general, the width of the spread in a forex transaction is less than 1/10 that of a stock transaction, which could include a .125 (1/8) wide spread. * Profit Potential In Both Rising And Falling Markets In every open FX position, an investor is long in one currency and short the other. A short position is one in which the trader sells a currency in anticipation that it will depreciate. This means that potential exists in a rising as well as a falling market. The ability to sell currencies without any limitations is another distinct advantage over equity trading. In the US equity markets, it is much more difficult to establish a short position due to the Zero Uptick rule, which prevents investors from shorting a stock unless the immediately preceding trade was equal to or lower than the price of the short sale. Funding Methods Safety of funds plays an important role in any type of business; we make our best efforts to ensure protection of customers’ money. * Minimum deposit required for funding new accounts: Our accounting department is ready to help you fund your new account or add funds to an existing account. For Standard Dealing Desk Accounts the minimum deposit is $ 500, and for the No Dealing Desk Accounts the minimum deposit is $ 2000. * Deposit instructions: You must open a web account and associate it with your live account to insure security of transactions in your account How to do so? 1. Open web account 2. Login and associate your Live Trading Account with your Web Account 3. Login to your Web Account and click 'Make a Deposit" * Deposit methods 1- Bank wire transfer A wire transfer is a transfer of money from one bank account to another. The actual transfer is done by the bank, and neither the sender nor the recipient of the money sees or touches the actual funds. Deposit Time 1-5 business days SigmaForex does not guarantee deposit times in the event of a margin call Fees None SigmaForex will not be held responsible for charges or fees assessed by going through an intermediary bank. Withdrawal Eligibility Immediate availability Restrictions The account holder name of the funds must always match the name listed as the customer on the trading account. 2- E-gold payments Open www.e-gold.com- Create new e-gold account - Issue transfer request from your e-gold account to SigmaForex e-gold account. Deposit Time Immediate deposit SigmaForex does not guarantee deposit times in the event of a margin call Fees None SigmaForex will not be held responsible for charges or fees assessed by going through an intermediary bank. Withdrawal Eligibility Immediate availability Restrictions The account holder name of the funds must always match the name listed as the customer on the trading account. You do not have an account yet? Open Live Account