TRUMarkets Basics
Understanding a Forex (FX) Trade Suggestion
Like all short-term trading, there are two necessary methods in forecasting the currency market:
- fundamental analysis and
- technical analysis.
Once the macro or fundamental issues are accounted for, technical analysis is the major tool for short-term trading. Technical analysis focuses on the study of price movements. For our short-term Forex trade suggestions, our team of analysts mainly use historical data to predict future currency movements.
TRUMarlets' Principles of Short-term Analysis
The premise of technical analysis is that all current market information is already reflected in the price of that currency; therefore, studying price action is all that is required to make informed trading decisions. The primary tools of the technical analyst are charts. Charts are used to identify trends and patterns in order to find trading opportunities.
Anyone who has ever traded shares, commodities and other instruments will appreciate that there are many different variations of how to analyse this historical data, however there are three underlying principles:
- 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 technical analyst is only concerned with price movements, not with the reasons for any changes.
- Prices move in trends: 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 (but no guarantee) that they will produce the expected results. It is also helpful that there are recognised patterns, which repeat themselves on a consistent basis.
- 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.
Types of Trades TRUMarkets Suggests
Short term: The trade will generally have a tight stop loss and the trade is anticipated to be closed after 1 -2 trading days.
Position trade: The trade is expected to be held for anywhere from 2 - 5 days and will be traded with a wider stop loss level and a smaller position size is recommended.
Medium term: The trade is expected to be held for a period of 5 days or more and will have the widest stop level amongst all the trade types and a very small position size is recommended. Mechanics Live Trades: All triggered trades, amendments to stop levels and set exit limits will be sent via SMS messaging between 9 .00am up to 7:30 pm. AEST. This will cover all live trades overnight for profit-taking or stop loss levels.
Pending Trades: These are trades we are suggesting as likely possibilities that have not triggered into a live trade. All changes and amendments will be updated via email between 9.00 am 7:30 pm. AEST This includes any trade suggestions, which are removed and are no longer valid.
A pending trade may trigger into a live trade (overnight). In this instance any conditions stated in the suggestion at the beginning will be valid until otherwise notified. Subsequently, it will then be treated in the same way as other 'live' trades.
Note: trades (entries and exits may occur) during the night session and SMSes will not be sent to notify when these prices are hit (since they can be entered into the system with your CFD provider beforehand). These may be covered the next day in our morning summary.
How do you Read the TRUMarkets' SMS/Email Forex Trade Suggestion?
An email and sms will be sent when a new trade has been identified. The email/SMS example would read as follows:
TRUMarkets: New FX Trade: (Position trade) Sell EURUSD @ $1.3012 on stop, Initial Stop loss 1.3177, Target 1.2720.
The currency pair is the Euro (EUR) and United States Dollar (USD).- In this trade suggestion example, TRUMarkets is suggesting that the EURO will fall in value to the USD so TRUMarkets is suggesting to short the EUR to the USD. i.e. As the EURO falls in value to the USD, it requires less USD to buy one EURO.
- We are suggesting to enter when the USD hits $1.3012 with the stop loss at $1.3177 (higher than the entry as we want the USD amount to fall. If the USD starts heading up, we want to ensure we preserve our capital so we exit at the stop-loss level).
- The profit target exit is $1.2720. This profit target is established on entry and when the target is attained, your trade will automatically be exited.
NOTE: Placing the Forex CFD trade is made simple by the CFD Provider as it is all automated. Once you log-on to the trading platform, it becomes self explanatory.
In this example, all you need to know is that you are:
- shorting (selling) the EURO (first or 'base' currency) compared the USD (the second or 'quote' currency) plus
- the entry price leve;, and;
3. the two exit levels: stop loss exit and target level exit.
