Stock Diamond - Technical Analysis Education

So how do you make money?

You make money as the exchange rate between the two currencies either goes up or down

By now you should have a good understanding of how the currency market works and how the currency pairs are set up. The reason why you need to understand this is so you can begin to trade and make money in the currency market. You will be able to make money as the currency pair moves up or down. As you buy the pair and it goes up in price, you will make money and as it goes down in price you can make money by selling the currency pair. Below are some examples of buying long and selling short.

When you open a position with a currency pair, you can either be long or short the pair. Another way to describe this is that you will either buy or sell the pair. When you go long the pair you are anticipating that it will increase in price. When you go short the pair you are anticipating that the pair will decrease in price. When you open a position, either long or short, you don't actually pay money in the case of buying or borrowing money when selling. No money actually comes into or out of the account, until the conclusion of the trade.

Long:
This is a position you will take if you anticipate that the currency pair is going to rise. When taking a long position, you are buying the pair. Because no money leaves your account when you buy the position, you are required to have a certain amount left in the account to cover any losses. This amount is referred to as the minimum margin requirement. As the pair increases in price, your profits begin to increase, but are not deposited into your account until after the position is closed. However, should the pair decrease in price, your account value will decrease, but money will not be taken out of the account until the conclusion of the trade.

Charting

• Charts can be set up to show multiple time frames and/or currency pairs.
• Charts give a visual picture/image of a currencies overall movement.
• Charts can be customized to show various chart types such as bar, line, or candlestick charts.

Short:
This is a position you will take if you anticipate that the currency pair is going to go down. When taking a short position, you are selling the pair. Because no money is borrowed in your account when you short the position, you are required to have a certain amount left in the account to cover any losses. This amount is referred to as the minimum margin requirement. As the pair decreases in price, your profits will begin to increase, but are not deposited into your account until after the position is closed. Should the pair increase in price, your account value will decrease, but money will not be taken out of the account until the conclusion of the trade.

Charting and technical analysis is a method of forecasting price movements by looking at price charts. When utilizing any type of technical analysis, you need to stick to the basics, which means using strategies that have a proven track record. Almost every trader uses some form of technical evaluation to make buying and selling decisions. At the most simple level, technical evaluation helps traders determine ideal entry and exit points for a trade. They provide a visual representation of the historical price action of whatever is being studied. These are just a few market conditions that charts identify for a trader. Depending on their level of sophistication, charts can also help much more advanced studies of the markets. On the surface, it may appear that technicians ignore the fundamentals of the market while surrounding themselves with charts and data tables. However, a technical trader will tell you that all of the fundamentals are already represented in the price. They are not so much concerned with a natural disaster or an awful inflation number causing a recent spike in prices as they are understanding how that price action fits into a pattern or trend. Even more important, is under-standing how that pattern can be used to predict future price movements.

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Like bar charts, candlestick charts can be used to forecast the price movement of a currency pair. Because of their colored bodies, candlesticks provide greater visual detail in their chart patterns than bar charts. Candlestick charts calculate and display price data using the Open, High, Low, and Close prices based on the chart interval being used. These charts have been around for a long time and originated in Japan. Each candle is made up of a body and an upper and lower shadow (wick). The body is the area between the open and close price and the shadow is the range the price moved above and below the body. Candlestick charts provide the added benefit of color to show whether the price has gone up or down. On the VT Trader charts, you will see blue as the price moves up and red as the price moves down; although, you can change the color as desired. The color of the candlestick depends on whether or not the price closes higher or lower than where it opened.

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Source tradesteps4x.com