Retracement And Reversal That You Should Know in Forex

Retracement and ReversalHave you ever been in a situation where it looks like prices are likely to continue to move upwards (uptrend / uptrend) and you are getting ready to install a long position (buy orders), but what happens then is the price rebounded down and getting down?

This Situation may occur when the trader is not aware of the difference between retracement and reversal. Instead be patient and follow the downtrend (a downtrend) as a whole, traders believe that the case is a condition retracement so put a buy order.

In this article, you will learn the characteristics of a retracement and a reversal in forex trading, how to recognize it, so it is not wrong in determining the real market conditions.
What is Fibonacci?

Fibonacci price movement can be defined as the reverse direction for a while against the trend. Another way to see this is to look at the price movement area that moves against the trend but then returned to continue the trend.

What Is a Reversal?

Reversal is defined as the change in the price of the reversal of the overall trend. When turning to the uptrend downtrend, reversal occurs. When downtrend turned into an uptrend, a reversal also occurred. Using the same example above, the form of reversal can be described as follows:

What Should You Do?

When faced with the possibility of retracement or reversal, you have three choices:

When you have put the position, you can continue to hang on to your position. This can cause you to lose (loss) if retracements turned out to be a long-term reversal.
You can close your position and re-enter when the price starts to move in the direction of the overall trend again. Of course there is the possibility of loss of trading opportunities when the price suddenly moves sharply in one direction while you do not have time to install position. If you decide to re-enter, you will be charged a spread of more than one time.
You can close your position permanently. This could lead to a loss (if the price moves against you) or large gains (if you cover when the price is at the level of the top or bottom).

Since reversal can occur anytime, determine which is best is not always easy. That is why using a trailing stop loss can be a good way to manage risk when you use a trading strategy to follow the trend.

You can use a trailing stop loss to ensure profits stay where you can always get the number of pips though the situation is a long-term reversal.

Best Time To Trade Forex

Often novice traders assume that any time is a good time for trading, but this is not right. The movement of the forex market is strongly influenced by forex trading hours in the global financial markets, namely:
– Tokyo session
– London session
– New York session

Trading activity on the forex market hours in the London session more than the other sessions. In addition, there are certain days where the activity of market movements will occur more.

From the following table we can see moving average pips every day of the week:
Currency Sunday Monday Tuesday Wednesday Thursday Friday
Best Trading Time

We can see from the table above, that in those days in the mid-week movement occurs more frequently, then the day is what is the best day for forex trading.

When you look at the schedule on the forex market, we see that Friday was a pretty busy day until at 12:00 ET (00:00 pm or Saturday), after which the activity will drop dramatically until the close of the New York market hours at 5 : 00 pm.

The days where there is a high market movement this is the best time for forex trading because it is likely to get into a bigger profit.

Pick The Right Time To Trading

Although the forex market is open 24 hours a day does not mean that an activity transaction (price movements) in a non-stop at any time. Therefore, it is important for traders to wisely manage and choose the best forex trading hours.

It is not possible for a trader to trade every day in every session forex. Everyone needs a break, as it is for the trader.

In addition to learning about the forex trading strategies and ways, each trader must understand exactly WHEN the hours of the best forex trading, or vice versa can also be said: Every trader must understand WHEN schedule forex market is not appropriate for trading.

By knowing and running the trading activities at the right time will help increase opportunities for profit / profit in trading.

Considerations Choosing the Best Forex Trading Hours:

The time when the two trading sessions take place at the same time (overlap). Usually at this time of financial news broadcast anyway and the result would be the movement of the market in a particular direction. You can easily search for information on the opening hours of the forex market.

European Session (London) tend to be more active than the other sessions.

On the days in the middle of the week usually occur more market movement, where the difference in the price difference will be large enough for couples major currencies.

Schedule Missing Forex Trading Right For:

Sunday where most people rest and not work

Friday afternoon American time (ranging on Saturday 1: 00-5: 00 pm), which decreases market liquidity due to a transition period to the end of the week.

Feasts where many people enjoying a day off

The days where there are certain major events

You can use this information to set up and choosing the right forex hours for you to undertake trading activities, but if you do not have time during the hours recommended, do not be discouraged. There are other ways that can be used, for example using the strategy as ‘swing trader’ or ‘position trader’.

After you determine when the best time for forex trading, there are also other things that you should know, that the effect of the news on the forex market. Use the forex calendar for information on economic news broadcast because often this will lead to currency price movements is very large in a short time. In addition, also learn what the most influential forex news on the market.

Bullish Trend For U.S. Dollar

Bullish  Trend For U.S. DollarUS dollar up trend is in the spotlight today. The greenback rose to a seven-month high against the yen earlier Wednesday, while US dollar index, which monitors the value of the dollar against six major currencies, rallied almost four percent since early July respond to positive economic sentiment US On Tuesday, the index reached 82 930, highest level of the year, after experiencing weakness in the first four months was 1.2 percent.

Hope that differences in monetary policy will continue to widen US policy in Europe and the UK will push up the value of the dollar index investors in line with consideration for US interest rate hikes, according to Capital Economics.

“The dollar rose against other major currency pairs in one year. But we do not believe this rally will stop, look at the prospect of monetary policy considerations US and other countries, “wrote an analyst at Capital Economics.

“At the end of 2015, we predict the dollar will strengthen further against the euro to $ 1.25, $ 1.60 against sterling, and 120 yen,” they added. On Tuesday the greenback (dollar) trading at $ 1.3121 against the euro, $ 1.6584 and 104.81 yen against sterling.

Fueling speculation the Federal Reserve in mid-2013 when the institute issued a plan to slash its quantitative easing program. But the current implementation of the increase in interest rates remains uncertain.

Last month the Fed minutes showed some policy committee members want to raise interest rates when the economy looks repair. However, overall the other members feel the need to monitor the data further before action.
By contrast, Europe looks dovish policy. Estimates of the increase in interest rates by the Bank of England faded amid concerns that arise as a result of the weakening of the wage data, while the European Central Bank (European Central Bank – ECB) is expected to take a step easing quantitative easing.

“We agree with the overall market view on interest rates in the future in the UK respond to market expectations of growth recently. And we also agree with the general view that interest rates in the euro zone will remain at the lower threshold for the foreseeable future, “said Capital Economics.

“Nevertheless, we still feel that the investors were too optimistic about the outlook for interest rates in the United States and that the Fed will tighten monetary policy more aggressively than originally envisaged, along with the strengthening labor market that affect the appearance of upward pressure on wage inflation,” added analysts.
“Our view is that the dollar will go higher,” said Ray Attrill, head of FX strategy at National Australia Bank.
If the Fed indicates a more hawkish tone again at the next meeting, investors may begin to take into account the rise in interest rates in the second quarter of 2015 rather than mid-year, thus encouraging the strengthening of the greenback, he said. “The next Fed meeting will be a catalyst for further strengthening”.

However, he acknowledged the risks: “When the moon is a statement similar to the statement issued in June – when they repeat the wording then there is a risk that the initial curve moved to the United States will respond to price adjustment due to tightening plan in 2015 that has been done in the weeks later. ”

Standard Chartered’s Callow index predicts the dollar will rally until the end of the year, but the dollar is not going to give too good results against some of the major currency pairs Asia.
“Our forecast is $ 1.27 to the euro and 106 yen to the dollar-motivated by positive economic developments in the United States, compared with Japan and the euro zone,” he said. “What are the factors determining a fundamentally better.”

Abenomics News – Real Time Economics

Forex trading tutorials factsJapanese Prime Minister Shinzo Abe Plans to build the economy, which has been hampered by several things over the past year, is currently facing a critical moment.

According to Goldman Sachs Bank, there are several determining factors before the end of the year, which will be a key determinant of the success of the program Abenomics, such as change of cabinet, the possibility of expanding the program aggressive easing by the Bank of Japan (BOJ), and the decision whether to raise taxes for the second time in 2015.

“Abenomics approaching a decisive moment, with a very important decision that a tax increase in next year,” said Naohiko Baba, chief Japan economist at Goldman Sachs in a report. The government is scheduled to determine the increase in the consumption tax from 8 percent to 10 percent – in December.
Inability to increase taxes can be interpreted not only as a failure Abenomics program, but as a failure of fiscal consolidation in the field, said Baba, a risk that will be faced by foreign investors involved in the economy with debt-gross domestic product (debt-to-GDP), the largest in the world.
Revenues and exports must increase and rate the level of support for the cabinet should be high in the coming months in order to be successful Abenomics – all of it is a big enough challenge, Baba added.

Abe replace his cabinet on Wednesday, an effort to revitalize the economy and security agenda amid slump support for the cabinet. Replacement is done by replacing the cabinet ministers were incompetent and scandal – to ensure that the government can progress in a wide range of policies. He maintains key ministers, including the finance minister, foreign minister, and minister of the economy, and appointed five women to equal the record of the first cabinet of Junichiro Koizumi in 2001, according to AFP.

Stumbling block

Abenomics, the term given to the massive economic program launched last year, including monetary easing, fiscal stimulus and structural reform. However, so far the economy does not show a positive response, as had been anticipated by various parties.

The increase in the sales tax from 5 percent to 8 percent – were implemented in April – dropping the economy into the worst decline since 2011, while the economy is still grappling with sluggish wage growth declining inflation.
The consumer price index (consumer price index) rose 3.3 percent nationally in July, but remained under the Central Bank’s inflation target after taking into account the impact of the tax increase.

These factors refer to Abenomics failure, according to Charles Dumas, chief economist and chairman of Lombard Street Research, who said that the inflation target will not be achieved without a devaluation of the currency and / or expansion of quantitative easing (QE) Bank of Japan. “Kuroda had to choose between devaluation, with the risk of the commitment to QE will end up with a financial crisis, or ignore Abenomics,” he said, pointing at the BoJ governor.

Three Important Indicator

According to Baba from Goldman Sachs, Abenomics is at the intersection, with three indicators – wages, exports and cabinet approval rate – the key to success. “These elements become essential to neutralize the negative effects of the consumption tax hike recently, the pursuit of the need to raise taxes again in 2015, and encourage structural reform measures to achieve sustainable economic growth,” said Baba.

Nominal wages rose 2.6 percent in July, due to a salary bonus in the summer. Bank estimates that wage growth will be steady at 1 per cent in the coming months.
Exports did not increase; much of the growth is expected to compensate for weak domestic demand. According to Reuters, in June, exports fell 1.9 percent compared to the same period last year.

The level of support for the cabinet, dropped below 50 percent in many polls that were held in the summer, with a few things on the political agenda – such as reforms to collective rights to self-defense – does not have the support of the masses. However, the level of support remains high by historical standards including, meaning the political situation remains stable look, according to Goldman Sachs.


Quantitative Easing – That You Should Know

Quantitative EasingQuantitative easing (QE) is a monetary policy of the Central Bank is used to stimulate the economy when monetary policy is no longer effective standards. Central bank implements quantitative easing by purchasing financial assets in the manner specified number of commercial banks or other private institutions, thus raising the price of financial assets and lower yield, and at the same time increase the monetary base (money supply).

This is different from the usual policy of buying or selling short-term government bonds that aim to establish the value of inter-bank lending rate at a specific target.

Expansionary monetary policy (easing) to stimulate the economy is usually carried out by the Central Bank by way of purchase of government bonds with the aim of lowering short-term interest rates in the short term. However, when short-term interest rates already close to or reaches zero, this method can not work anymore. QE can then be used by the authorities to stimulate the economy further by buying long-term assets, thereby decreasing long-term interest rates further.

Quantitative easing can be used to help keep inflation in order not to fall over again at the bottom of the target. This policy is often seen as the final step in an effort to stimulate the economy.

The purpose of QE is to increase the money supply rather than to lower the interest rate can not be lowered anymore. However, if the Central Bank also purchases financial assets are more risky than government bonds, it can cause a decrease in the yield of the asset.

QE will only be applied if the Central Bank has control over the currency used by the country concerned. Central banks in the euro zone countries as a whole cannot take action to increase the money supply so that the policy should be set by the European Central Bank (European Central Bank – ECB)

History of Quantitative Easing

before 2007

First implemented quantitative easing by the Bank of Japan (BOJ) to fight deflation in early 2000, began on March 19, 2001 Bank of Japan for several years, even until February 2001, states that “quantitative easing” was not effective, and refused to implement the monetary policy. The BOJ has set short-term interest rates at zero level since 1999.

With the QE, liquidity flooded commercial banks to support lending to the private sector, and lead to excessive reserves. BOJ achieve this by buying more government bonds than required for setting interest rates at the zero level. BOJ then do also purchase securities with collateral assets (asset-backed securities) and extend the term of the purchase program.

BOJ to raise commercial bank account balance of 5 trillion yen to 35 trillion yen (approximately $ 300 billion) over a period of four years starting in March 2001, the BOJ also increase the number of long-term Japanese bonds that can be purchased per month.

After 2007

After the events of the global economic crisis in 2007 – 2008, a similar policy has been adopted by the United States, United Kingdom, and the euro zone. Quantitative easing implemented by countries such as the short-term nominal interest rates are at or near zero. In the United States, this rate is called the federal funds rate, in the United Kingdom called the official bank rate.

At the height of the financial crisis of 2008, the Central Bank of the United States and United Kingdom implementing quantitative easing as a monetary policy that aims to get out of the financial crisis.


According to the International Monetary Fund (IMF), the QE policy implemented by the Central Bank of developed countries since the financial crisis of 2008 contributed to the decrease in systematic risk (systemic risk) that occur after the bankruptcy of Lehman Brothers. The IMF also stated that these policies contribute to the restoration of market confidence and the release of the G7 economies from the lowest point in mid-late 2009.

Economist Martin Feldstein argues that QE2 (quantitative easing phase 2) the cause of the rise in the stock market in mid-2010, which resulted in economic growth in the United States in late 2010 Former Federal Reserve Chairman Alan Greenspan calculated that since July 2012 there has been little influence on the economy. Jeremy Stein Federal Reserve officials said that the policy of quantitative easing asset purchases massively large role in supporting economic activity.
Economic Impact of QE

Quantitative easing could lead to a rise in inflation is higher than the targeted amount of easing in the event of excessive and too much money is created by way of purchase of assets.

However, there is the possibility of failure in achieving the goal of QE if the banks remain tight in lending to consumers and businesses. However, QE can impact yields lower. However, there will be time lag between monetary growth and inflation; inflationary pressures with respect to monetary growth caused by QE may occur before the Fed acts to anticipate. Inflation risk will be reduced if the economic development of the system exceeds the speed of increase in money supply due to easing.

When the factors of production in the economy grew because of the increase in the money supply, the value of the currency unit can be increased, even though the currency is available in large quantities in the circulation. For example, if the economy of a state to output at a rate equivalent to the amount of debt, inflation pressure can be neutralized.

This will only happen when banks issue loans, rather than precipitating his money. In a period of high economic output, the Central Bank always has the option to restore the backup level to a higher level by increasing the interest rate or other means, thereby effectively reversing (neutralize) easing measures that have been taken.

Increasing the amount of money supply tends to weaken the exchange rate of the country’s currency relative to other countries, through the interest rate mechanism. Low interest rates led to a lack of foreign interest against the currency, resulting in a flow of capital out of the country, resulting in the weakening of the country’s currency.

This brings advantages for exporters in the country, and low interest rates will also benefit the borrower, because less interest to be paid. But otherwise bring harm to the creditors as yields obtained from fewer loans because interest rates are low. Currency debasement is also bad for importers, as the cost of imported goods is higher due to the devaluation of the currency.