Global Currencies

Chapter 1

Forex Basics

Chapter 2

Fundamental Factors

Chapter 3

Technical Tools

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Introduction

Market Price Reflects All Known Information

Technical analysis is the study of market action, using charts, for the purposes of forecasting future price trends. The primary cornerstone of technical analysis is based on the idea that the currency price is a comprehensive reflection of all market changes in the balance between supply and demand as caused by traders' reactions to economic, political or psychological changes. The market price of any given currency takes into account the effect of all possible forces acting on that commodity, therefore those that adhere to technical analysis believe it is redundant to study fundamental analysis.

Chart Patterns

Much of the body of technical analysis and the study of market action have to do with the study of human psychology. Chart patterns, identified over the past century, reflect bearish or bullish market patterns and are based on traders' psychological reactions to certain supply/demand fluctuations. Assuming that the innate nature of human psychology does not change, patterns that have worked in the past are assumed to be viable forecasting tools for the future.

Concept of Trend

The third and final principle of technical analysis is the concept of trend. Market prices will continue in a trend until the trend reverses. The purpose of charting the price actions of a market is to identify trends in the early stages of their development with the intent of trading in the direction of those trends and continuing to ride these trends until they show signs of reversal.

In this lesson we are going to explore several key topics. We will start by describing chart types and the idea of trends. Next, we explore support and resistance levels and trendlines. Afterwards, we will look at common chart patterns that signify either an upcoming reversal of a trend or a period of consolidation during a continuing trend.

Risk Warning

Before deciding to participate in the Forex market, you should carefully consider your investment objectives, level of experience and risk appetite. Most importantly, do not invest money you cannot afford to lose.

There is considerable exposure to risk in any off-exchange foreign exchange transaction, including, but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair.

More over, the leveraged nature of forex trading means that any market movement will have an equally proportional effect on your deposited funds. This may work against you as well as for you. The possibility exists that you could sustain a total loss of initial margin funds and be required to deposit additional funds to maintain your position. If you fail to meet any margin requirement, your position may be liquidated and you will be responsible for any resulting losses. To manage exposure, employ risk-reducing strategies such as 'stop-loss' or 'limit' orders.

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Forex.com/UK acts as the clearing agent and counterparty to customers introduced by "Global Currencies" for an IB margined forex transactions. FOREX.com is a trading name of GAIN Capital - FOREX.com UK Limited and is authorised and regulated by the Financial Services Authority. FSA No. 190864.