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Educational materials

Gulf FX education departmentprovides you with primary information on Forex trading to learn and start trading.Every learning material available to you has been simplified to understand Forex trading better.

History of the Market

Gulf FX market was formed in the year 1970s where Bretton Woods Accord was formed and established after World War II to reestablish the world’s economic state. The Bretton Woods Accord made decisions to all major currencies to be pegged from US dollar to gold at a cost of $ 35per ounce. Only those world currencies who pegged to the US dollar were able to fluctuate by one percent. Most of the Euro countries were forced to move their reliability on the dollar in the year 1970s hence forming the Smithsonian Agreement and the European Joint Float which did not differ from the Bretton Woods Accord but rather allowed more fluctuation in the currency values. All agreements dint succeed hence there was no room for pegs and currencies were able to fluctuate freely.

Dealers used the fluctuations appropriately in the foreign exchange market and were able to learn the change in the cost and ongoing events, a dealer can purchase or sell a currency against another with an aim of making a profit beyond the price fluctuations.

Trading Hours

The FX market is a worldwide entity. There is an open market where traders carry out business 24 hours, 5 days a week. The market opens on Sundays at 21:00 GTM and closes on Fridays at 21:00 GTM.

Here's a chart that contains the forex market hours:

TIME ZONEGMTEST
London Open08:003:00 AM
London Close17:0012:00 PM
Tokyo Open00:007:00 PM
Tokyo Close09:004:00 AM
U.S Open13:008:00 AM
U.S Close22:005:00 PM

Trading Pairs

Is the composition of both a base currency and a quote currency in which the first pair represents the base currency and the second pair represents the quote currency, for example EUR/USD, the euro is the base currency while the USD is the quote currency. Traders carry out trade by purchasing or selling the base currency using the quote currency.

Leverage

A loan a trader receives from the broker showing the traders end result. The leverage is simply calculated by multiplying the leverage by how much amount you would like to trade with. .

Market Orders

There are two types of orders; take-profit and stop-loss. Take- profit orders ensures the trader that his/her position is closed when he/she makes a certain amount of profit while a stop-loss ensures that the cost will not decrease or increase more than your expectation and protects you from further losses.

One cancels another (OCO) is a strategy that ensures that after closing of the position of all take-profit and stop-loss are cancelled. If a trader wishes to have another order before closure of a position, he/she can place an If-done order.

Spreads

Spread costs are payments brokers are given by traders to run every trade. It’s the difference between the buy price and the sell price.

Triangles

There are three different types of triangles:

1. Symmetrical Triangle

A symmetrical triangle occurs when a trader begins to notice that a currency pairs' high and lows are converging together at a specific point. This pattern occurs when the market is making lower highs and higher lows. When you use your drawing tool to trace down the lower highs and trace up the higher lows, you'll notice the triangle form (seen below).

What's happening right now is the Buyers and Sellers are in a tug of war and neither one is showing any sign of winning. That is, until price "squeezes" its way out of the triangle, causing a new trend.

When the lower highs and higher lows converges at a point or when price breaks through one of the lines, a breakout will ensue in the direction in which the resistance or support was broken.

 

2. Descending Triangle

In a descending triangle, we notice a convergence from equal lows and lower highs. In other words, if you were to draw this pattern onto a chart, you would notice that the lower line was flat and the top line is slanting down and to the right.

This pattern could be an indication of a bearish signal, but traders should observe the break, as descending triangles lead to a continuation pattern or a strong reversal signal.

Example below:

 

In this example provided by Autochartist, note the green line indicating the lower highs, while the blue line indicates lows the equal lows. After the lines converge, traders should expect a powerful trend to emerge.

3. Ascending Triangle

While the descending triangle is characterized by equal lows and lower high, the ascending triangle is characterized by equal highs and higher lows. When drawing an ascending triangle, you'll notice that the top line is fairly flat and the bottom line will be making its way up and to the right.

This is usually considered a bullish signal, but this isn't always the case. As with the other triangles, once a convergence is made a powerful bullish or bearish trend can occur. Traders must keep an eye on the market to see which way this trend is going.

 

FX Educational Chart Patterns

This is the tendency of the price to repeat its past pattern in the Forex market leading to strong trends in the market. The following are some of the chart patterns leading to strong trends in the forex market;

i. Descending triangles

ii. Ascending Triangles

iii. Channel

iv. Double tops and Bottoms

v. Flag/ pennants

vi. Head and shoulders

vii. Symmetrical triangles

viii. Wedge

ix. Reverse head and shoulders

Triangles are of three types;

1. Symmetrical Triangle

This type of triangle happens when a trader starts to realize high and low pairing of the currency meeting at a given point. This type of pattern occurs when the market incurs higher lows and lower highs.The buyers and sellers battle without anyone showing a sign of winning until price gets out of this triangle leading to a new trend.Convergence of the higher lows and lowers highs at a given point or breaking of price through one of the lines, a breakout directed towards broken resistance or support ensues.

 

2. Ascending Triangles

Unlike descending triangle that has equal lower high and lows, the ascending triangle contains equal higher lows and lows. Once you draw an ascending triangle you will realize a fairly flat top line while the bottom line is making its way up and towards the right.

Such a signal is usually considered bullish but this is not normally the case. Also in this triangle, once convergence is achieved, a powerful bearish or bullish trend is likely to occur. Traders must carefully watch the market trend and predict the direction of trend.

 

Descending Triangle

In a descending triangle, we notice a convergence from equal lows and lower highs. In other words, if you were to draw this pattern onto a chart, you would notice that the lower line was flat and the top line is slanting down and to the right.

This pattern could be an indication of a bearish signal, but traders should observe the break, as descending triangles lead to a continuation pattern or a strong reversal signal.

Example below:

 

In this example provided by Autochartist, note the green line indicating the lower highs, while the blue line indicates lows the equal lows. After the lines converge, traders should expect a powerful trend to emerge.

Double Top and Double Bottom

In the market place, double tops and double bottoms occur when the market tries to breakthrough a previous high or low, but doesn't have the strength to do so.

An easy way to think of it would be if you imagined the currency candles on your chart as a person trying to swim upstream. They go as far as they can, get exhausted and are pulled back by the tide. They make one more valiant attempt to swim upstream and make it to the same spot as they did before. Now that they're really tired, there's no place for them to go but to float downstream.

This is what happens in the market place.

 

In the picture above, we see a Double Top. Note the large M formation that price has made.

When you spot the Double Bottom, which resembles a large W, we have an indication of a bullish trend emerging. Adversely, a Double Top, which looks like a large M, indicates a bearish trend.

Head and Shoulders

Named after its appearance, the Head and Shoulders looks much like its namesake. A trader can spot the Head and Shoulders formation when price has made three highs; two equal highs with one greater high occurring between the two equals. Much like the double top and double bottom patterns, price was rejected and a breakout was unable to occur. As a result, we have a strong reversal trend will ensue after the right price has moved past the resist point, known at the neck line (the line formed by the low points between the left shoulder and head and the head and right shoulder).

 

Chart Patterns

In the Forex market, price has a tendency to repeat past patterns. Think of price like an animal. Animals have habits that they exhibit. For example, a man may have the habit of bending down and picking up coins. Will he pick up the coins every time? Maybe, and maybe not. But what if this man makes a notable motion before he picks up his dropped coin. Perhaps every time he wipes his nose after dropping a coin, he will bend down and pick it up. In this case, the act of him wiping his nose will be the pattern that leads to him doing an expectable "trend".

Just as the man gave an indication of his future movements, so too does price on the Forex market.

Below, you'll find chart patterns that are known to cause strong trends in the market.

 

In this example provided by Autochartist, note the green line indicating the lower highs, while the blue line indicates lows the equal lows. After the lines converge, traders should expect a powerful trend to emerge.

Ascending Triangle

While the descending triangle is characterized by equal lows and lower high, the ascending triangle is characterized by equal highs and higher lows. When drawing an ascending triangle, you'll notice that the top line is fairly flat and the bottom line will be making its way up and to the right.

This is usually considered a bullish signal, but this isn't always the case. As with the other triangles, once a convergence is made a powerful bullish or bearish trend can occur. Traders must keep an eye on the market to see which way this trend is going.

 

Double Top and Double Bottom

In the market place, double tops and double bottoms occur when the market tries to breakthrough a previous high or low, but doesn't have the strength to do so.

An easy way to think of it would be if you imagined the currency candles on your chart as a person trying to swim upstream. They go as far as they can, get exhausted and are pulled back by the tide. They make one more valiant attempt to swim upstream and make it to the same spot as they did before. Now that they're really tired, there's no place for them to go but to float downstream.

This is what happens in the market place.

 

In the picture above, we see a Double Top. Note the large M formation that price has made.

When you spot the Double Bottom, which resembles a large W, we have an indication of a bullish trend emerging. Adversely, a Double Top, which looks like a large M, indicates a bearish trend.

Head and Shoulders

Named after its appearance, the Head and Shoulders looks much like its namesake. A trader can spot the Head and Shoulders formation when price has made three highs; two equal highs with one greater high occurring between the two equals. Much like the double top and double bottom patterns, price was rejected and a breakout was unable to occur. As a result, we have a strong reversal trend will ensue after the right price has moved past the resist point, known at the neck line (the line formed by the low points between the left shoulder and head and the head and right shoulder).

 

In the Autochartist example above, you can see that the Autochartist has labeled the neckline as the blue line. In this example, Autochartist estimates that price has a good chance of moving below the neck line, therefore causing a bearish reversal trend.

Reverse Head and Shoulders

The Reverse Head and Shoulders pattern follows the same rules as the Head and Shoulders pattern, except the pattern signifies a bullish trend. In the Reverse Head and Shoulders pattern, we are looking for three instances where price has made new lows; one low followed by a greater low, followed by a low equal to the first low. This formation will create our "reversed" left shoulder, head and right shoulder.

After the formation is complete, a bullish trend will occur if price moves past the neckline (which is formed by tracing the two equal highs between left shoulder and head and head and right shoulder.)

 

In this Autochartist example, the signal finding software estimates that there's a 70% chance a bullish signal will emerge. In this case, the trend will emerge the moment that price moves up past the green neckline.

Channel

A channel forms when we're able to trace a currency pair's highs and lows and draw a parallel line from these highs and lows. A channel usually tends to indicate a relatively strong trend with price staying in the lines until a breakout occurs.

 

In the Autochartist example above, we see a Channel Down formation forming. The Autochartist sentiment estimates that a Bullish breakout will occur after price breaks a resistance line.

Wedge

Wedges are very similar to the Triangles patterns that I have listed above. Both patterns are formed by tracing lows and highs to a certain convergence point. The difference between triangles and wedges is that support and resistance lines with wedges aren't positive and negative slopes. In other words, a wedge is a convergence of highs and lows where the support and resistance lines are sloped in a similar direction.

 

If we take a look at the above example, we can see that this formation is similar to a triangle formation, but in this case both the resistance and support lines are sloped in a positive direction.

Flag/Pennant

Flag and pennant patterns occur after the market has made a powerful up or down trend and is followed by a sideways market. To better visualize what's happening during a flag pattern, think of the powerful up or down trend as the flag's "pole" and the sideways market as the flag or pennant's "cloth".

Flag patterns happen quite often in the market. Traders should take note of when price begins to level out after a powerful trend (flag). Depending on the flag's slope, this can be an indication of a continuation pattern (which means that price will continue with the trend) or a reversal pattern (which means that a trend will occur in the opposite direction).

 
  • 10,000 for the gold account
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Gulf FX only trades with a customer that it considers such a business to be appropriate and to confirm the validity it will rely on data given by the client in their application form. Thus, it’s important for a customer to provide reliable information and to communicate immediately to us in writing in case there would be adverse change in data you have given.

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