Education

  • Trading Basics
  • Forex
  • Commodities
  • Indices
  • Cryptocurrency
  • Fundamental Analysis
  • Technical Analysis
What is a trading lot?
Lot size is a trading unit. For example, 1 lot of London gold is 100 ounces, and 1 lot in FOREX trading represents 100,000 base currency instead of 100,000 dollars. If your base currency is the US dollar, 1 lot represents USD100,000; if your base currency is the Euro, 1 lot means EUR100,000.
What is a pip?
A “pip“ denotes the minimum unit of change in the price of a financial instrument. In most cases it refers to the last decimal or digit of the price of a financial instrument. Suppose the price of EUR/USD was 1.13452 /1.13460 (bid price/ask price). If the price of EUR/USD is 1.13482 / 1.13490 now, it changes by 0.00030 or 30 pips.We use a 100,000 unit (1 standard lot) contract to demonstrate how a standard lot affects the value of a pip.Examples:1. The exchange rate of USD/JPY is 119.801, and (0.001 / 119.801) × 100,000 = USD 0.835 / pip.2. The exchange rate of USD/CHF is 1.00554, and (0.00001 / 1.00554) × 100,000 = USD0.994 / pip.The formula will be slightly different when the base currency is not the US dollar.3. Suppose the exchange rate of EUR/USD is 1.19301, then (0.00001 / 1.19301) × 100,000 = about EUR0.838.Converted into the US Dollar, the value of a pip is 0.838 × 1.19301 = USD1.Or in the simpliest manner, the pip value may be calculated directly in the counter currency:0.00001 x 100,000 = $1
What is a spread?
The bid price is the price at which you sell the base currency and buy the counter currency in the FOREX market. It is displayed on the left side of the quote sheet. The ask price is the price at which you buy the base currency and sell the counter currency. It is displayed on the right side of the quote sheet. For example, the EUR/USD quote is 1.13452/72 and the ask price is 1.13472. That means you can buy EUR1 for USD1.13472. The ask price is sometimes referred to as the bank bid price. The spread is the difference between the ask and bid price in the quote, i.e., the client’s trading cost.
What is leverage?
Simply put, leverage gives you the ability to trade beyond your account funds. With leverage, you can double your trading in a certain financial instrument without having to pay all the required funds. This means that you borrow a certain amount of money needed for the investment. So when you trade with leverage, all you pay is part of your position value.A CFD is a form of leveraged trading. As the amount required to open and maintain a position is called “margin“, leveraged trading is known as “margin trading“. The term “leverage“ is often used to denote that a small fluctuation in the price of a CFD can be magnified into a large change in profit and loss, with the degree of profit and loss depending on the degree of leverage used.
How to calculate leverage?
A “2%” leverage (or 1:50) means that a 1% change in the price of the asset will produce a 50% change in the price of the CFD.For example, a $1,000 balance with a 1:50 leverage ratio has a trading ability of $50,000, allowing traders to purchase financial products worth up to $50,000.
What is margin?
Each time you open a new position, a certain percentage of the balance of your account will be withheld as the initial margin for the opening of the new position. The price of the currency pair, your trading volume, and your margin dictate the margin level you need to reserve for each trade. The amount of the margin is usually indicated in the base currency.Maintenance margin is the minimum margin amount required to maintain the account when you hold the position. The margin ratio is equal to the available margin divided by the account equity, and the available margin is the equity minus the margin (used margin) required to establish an existing position.
How to calculate margin?
Initial margin = contract value of open position at opening price * initial margin ratio (%)Suppose you open a 200:1 leverage or 0.5% margin account.If you open a mini-lot position with you margin, you don’t have to use the full $10,000; you only need to provide an initial margin of $50 ($10,000 × 0.5%=$50).
What is maintenance margin?
Maintenance margin is the minimum margin amount required to maintain the account when you hold the position.Maintenance margin = contract value of open position at opening price * maintenance margin ratio (%)Maintenance margin ratio (%) = initial margin ratio (%) * 50%
What is overnight funding?
When you hold the position of a product overnight, your A/C may be charged / deposited into the product’s corresponding overnight interest.That is because when you trade a currency pair, the two currencies involved have overnight funding. For the currency you buy, you may receive interest, and for the currency you sell, you need to pay interest. The difference of interest on the currency pair will determine whether you will be charged or receive overnight interest corresponding to the product.
What is a balance?
Balance = Deposit – Withdrawal + Realised Total P/L of closed positions, excluding P/L of current open positions.
What is equity?
Equity = balance + unrealised total P/L of open positions + overnight funding of all open positionsEquity is the value of the cash account after closing of all positions, that is, the disposable funds that reflect conversion of your trading account positions at market price.
How should you distinguish between balance and equity?
Balance does not include the floating profits and losses in the position, while equity involves the floating profits and losses of open positions.In the case of no open position, equity equals balance.
How to calculate gross profits and losses?
Profits and losses of profit/loss of all positions (excluding overnight funding).Long: (current sell price – opening price) * trading lot * contract sizeShort: (opening price – current buy price) * trading lot * contract size
What is the available balance?
The floating P/L of the remaining amount of the account after deducting the initial margin (the account balance that can be used for opening new positions or withdrawal)Available balance = balance + unrealised total P/L of open positions + overnight funding for all open positions – total initial margin
What is a stop-loss order?
A stop-loss order allows you to set an automatic closing price in advance to avoid price fluctuations which may cause excessive losses to your position and to limit your losses. When the value of your position reaches or skips (the price may fluctuate higher or lower when fluctuations are excessive) this price, the stop-loss order will be triggered and your position will be automatically closed. This function does not guarantee that a position is actually closed at the price, due to market fluctuations that sometimes lead to “slippage”. When the market price reaches or skips your pre-set stop-loss level, your position will be closed at the next best price.Examples:The US30 CFD’s bid/ask price is $22,916.66/$22,919.86.You buy 10 US30 CFDs and place the stop-loss level at an sell price of $22,896.50.If the US30’s price suddenly drops from $22,916.66 to $22,886.40, your position will be closed at $22,886.40 instead of your original stop-loss price of $22,896.50.It is because the placement of a stop-loss order does not guarantee that your position will be closed at that price. When the stock price suddenly falls below $22,896.50, the stop-loss order is triggered and the position is automatically closed at the next best closing price, which is $22,886.40 in this example.
What is a trailing stop order?
The trailing stop order is one of the stop-loss orders designed to protect gains by enabling a trade to remain open and continue to profit as long as the price is moving in the investor’s favor, but closes the trade if the price changes direction by a specified pip amount.Example: Suppose you buy EUR/USD at 1.14106, and set a 500-pip trailing stop order. If the price rises to 1.14606, your stop-loss will increase from the initial level of 1.13606 to 1.14106 (by 500 pips). Then your stop loss level will remain at 1.14106 unless the price moves in the direction you are holding.You can use a trailing stop order to lock the stop-loss amount and reduce the risk to your acceptable range without limiting your profitable potential.
What is foreign exchange?
The foreign exchange (“FOREX” or “FX”) market is the largest financial market in the world. Compared with the New York Stock Exchange (with a daily trading volume of $100 billion), the FOREX market has a much greater daily trading volume, up to $4 trillion, making it the world’s most important financial market, providing ample opportunities for investors who participate in FOREX trading.
Why do we trade FOREX?
In general, FOREX trading does not entail commissions or fixed unit quantity, and trading costs are relatively low. It is only concerned with spread. The FOREX market is opened around the clock, so investors can trade at their preferred time. Unlike investors in mid-cap and small-cap stock markets, no individual investor in FOREX is able to dominate the FOREX market. In addition, FOREX trading is usually leveraged. Investors can control a very large amount of total contract value with a small margin. Leverage gives investors the ability to make high profits (but at the same time the losses are amplified). High liquidity, low barriers to entry, and the ubiquity of a variety of free tools on the market are also benefits of FOREX trading. Please note: Margin FX and CFD trading carries a high level of risk and is not suitable for all investors. Please read the Risk Disclosure Statement carefully before choosing to start trading.
Factors affecting FOREX
There are many factors affecting the medium and long-term trend of the FOREX market, including interest rates, gross domestic product (GDP), US non-farm payrolls (NFP), consumer price index (CPI), producer price index (PPI), durable goods orders, claims for unemployment benefits, industrial production index, trade balance, unemployment rate, retail sales, etc. Differences between published data and expectations will have different impacts on currency pairs.
What currencies should I choose to trade?
There are a wide variety of FOREX currency pairs. To engage in FOREX trading, investors generally choose to start with major currency pairs. Major currency pairs refer to those involving the US dollar. The most popular currency pairs are EUR/USD, USD/JPY, etc. This is because the countries represented by the currency pairs have great international influences and high trading volumes. The currencies are highly liquid in the market and have dramatic volatility. There are frequent major economic news and data releases (for example: NFP, inflation rate, and central bank policy) for investors to analyse currency trends. Therefore, it will be relatively simple for investors to start with these currency pairs.
Is currency trading carried out in pairs?
Yes. FOREX trading refers to transactions in which the investor buys one currency while selling the other currency. Currencies are traded through agents or brokers in pairs, such as AUD/USD or GBP/JPY.
Participants in FOREX and CFDs
Participants in the FOREX market mainly include commercial banks, which are the backbone of the FOREX market. Most large FOREX trades are executed at FOREX banks.They also include FOREX brokers who provide FOREX trading brokerage services. Usually, they must be approved by a local central bank branch. FOREX brokers generally do not trade FOREX. They only serve as a bridge between FOREX buyers and sellers on a handling fee or commission basis.In addition, there are importers and exporters and other FOREX suppliers and demanders. Importers and exporters are not only FOREX demanders (when they import goods) but also suppliers (when they export goods). Other FOREX suppliers and demanders refer to non-trade FOREX buyers and sellers, such as tourists.Finally, there are FOREX speculators, multinational corporations, central banks and FOREX administrative agencies engaged in FOREX trading. CFD trading participants mainly include trading brokers, speculators, their liquidity providers and exchanges.
How to understand a FOREX quote?
FOREX is quoted in currency pairs, such as GBP/USD or USD/JPY. In each of your FOREX trades, you buy one currency and at the same time you sell another. Take GBP/USD for example: GBP/USD = 1.51258The currency to the left of the slash (“/“) is called the base currency (the pound in the example), and the currency to the right is the counter currency (the dollar in the example). The base currency is the “basis“ on which you buy and sell currencies. If you buy GBP/USD, that means you buy the base currency and sell the counter currency, that is, you “buy pounds and sell dollars.“ If you believe the base currency will appreciate relative to the counter currency (the exchange rate rises), then you should buy it. Conversely, if you believe that the base currency will depreciate relative to the counter currency (the exchange rate drops), then you should sell it.
What are commodities?
Commodities refer to raw materials that are extensively used in industry or agriculture, and are purchased and sold on a wholesale rather than retail basis. Commodities are generally classified into three categories: 1. Energy – including crude oil, natural gas, etc.2. Basic raw materials – including gold, silver, copper, aluminum, etc.3. Agricultural products – including sugar, corn, soybeans, etc.
Why do we trade commodities?
Trading commodities can protect investors from inflation, as inflation hurts ordinary investment products. In times of inflation, returns on ordinary investment products such as bonds are relatively low, while the performance of commodities is generally in direct proportion to inflation. This is because when the prices of goods and services rise, the value of the commodities needed to produce these goods and services will also rise. So if your portfolio includes certain commodities, you may be able to reduce losses owing to inflation. Please note: CFD trading carries a high level of risk and are not suitable for all investors. Please read the Risk Disclosure Statement before choosing to start trading.
Factors affecting commodities
Supply and demand are important factors that affect commodities. Taking oil as an example, if the supply of oil is expected to be strong, and market demand for it does not change much, then the oil price will fall. Often, tensions in the Middle East affect the stability of the oil supply, resulting in a shortage of supply in the market, and pushing oil prices higher due to expectations for demand surpassing supply in the short term. Another important factor is inflation. When inflation rises, investors need more money in exchange for goods due to currency depreciation, which will also affect the price of commodities.
What commodities should I choose to trade?
If you wish to trade commodities, gold and crude oil will probably be your first choices to start because gold is an important hedging tool in the market. When the world encounters political instability or economic downturns, people will worry about currency depreciation, and gold will often become one of the options against currency depreciation. When an international emergency breaks out, the price of gold will experience large fluctuations. Unlike currency pairs, the price of gold is affected not only by the countries involved, but also by global factors. Therefore, gold provides investors with more investment opportunities.With regards to crude oil, investors would easily understand the reasons for fluctuations in its supply and demand by reading international news. Like gold, oil prices are affected by global factors, which provides more opportunities for investors.
What is a stock index?
A stock index is a group of data on multiple stocks that reflects the value of the constituent stocks on the market. It is often used to show the common characteristics of the constituent stocks, such as stocks that are traded on the same stock exchange, belonging to the same industry, or have similar market capitalisation. There are mainly three types of stock index by the method of calculation. The first type is price-weighted index, such as the Dow Jones Industrial Index, which is formulated by calculating the prices of a few constituent stocks. The second is market-value weighted index, which is based on the market capitalisation of different stocks in the index, such as the Standard & Poor 500, and the Hang Seng Index. The third type is market-shared weighted index, which is calculated based on the weighted average number of shares instead of market capitalisation.
Why do we need trading stock indices?
In contrast with the stock market, trading stock indices allow investors to enter the overall market without specific stock risks and to track the trend of the most active stocks. It is not the case that you may buy stock only when the market is predicted to rise. You may enter the market when it fluctuates in either direction, which increases your profit opportunities. Moreover, due to the high trading threshold, stock index trading usually requires a large investment amount, while stock index CFDs allow investors to trade smaller contracts, so they can buy a basket of stocks at lower costs and easily enter the investment arena.Please note: CFD trading carries a high level of risk and is not suitable for all investors. Please read the Risk Disclosure Statement before choosing to start trading.
Factors that affect stock indices
There are multiple factors affecting a stock index, chiefly in three macro aspects. First, changes in market interest rates will have a significant impact on the stock market. Generally, pricing for a stock index rises as interest rates fall, and falls as interest rates rise. Therefore, interest rate levels and the relationship between interest rates and the stock market have become important indicators for investors to go long or short stock indices. Whenever the government announces a rate cut or a reserve requirement ratio (RRR) cut, the borrowing costs in the market will fall, and the stock index often rises in the short term. However, when a rate hike is announced, the stock index reacts to the contrary.Secondly, inflation usually has a significant impact on the stock index. Modest inflation can stimulate the stock market, while severe inflation will weigh on it. Inflation occurs mainly because the central bank increases the money supply too quickly. Generally, the money supply is directly proportional to stock prices, i.e., a larger money supply will cause stock index pricing to rise. When the central bank tightens to suppress inflation by raising interest rates, the stock index will go down. Thirdly, government fiscal policies will have an impact on the stock market. The government’s substantial tax cuts, increased public spending, etc., may stimulate expectations for corporate earnings, causing the stock index to rise in the short term
What stock index should I choose to trade?
Before choosing a stock index for trading, you should first understand the similarities and differences between different markets, basic economic conditions related to stock indices, national policy changes, monetary policy directions and other fundamental factors. You also need to understand technical changes in the stock index, bull and bear cycles, etc. If you are familiar with some stocks, or a country’s economic conditions, you may choose to trade the local stock index. Or you can assess which market is more suitable for yourself based on the average daily trading volume of the stock market related to the stock index.
What are corporate actions?
Corporate actions refer to events that cause significant changes in the company’s share prices. When you are trading, the corporate action that heavily affects the stock price is usually distribution of dividends. If you hold a buy order for the stock index past the time of dividend distribution, you are entitled to the corresponding dividend. Conversely, if you hold a sell order for the stock index beyond the time of dividend distribution, you will need to pay a dividend.
What is a cryptocurrency?
Cryptocurrency is a digital or virtual currency that uses cryptography for security. The world’s first cryptocurrency bitcoin was launched in January 2009, followed by cryptocurrencies of various types in subsequent years.By using a virtual currency, each transaction is encrypted. The sender and the recipient are identified by a series of numbers, and the flow of each cryptocurrency is stored in a public account called a blockchain to further ensure the security of each transaction. You may use cryptocurrencies to make purchases or invest in them, and their value rises or falls in response to market variables. Cryptocurrencies are similar to real currencies in many ways. Currently, many platforms around the world accept bitcoin for purchases. However, unlike traditional currencies, transfers in a cryptocurrency do not require names, nor do they need an intermediary such as a bank, commercial account or payment system. Transfers are anonymous and private, with low even no fees incurred.
Why have cryptocurrencies emerged?
The first cryptocurrency, Bitcoin, was invented by a computer programmer named Satoshi Nakamoto in 2008. Now it is the most popular of the approximately 780 cryptocurrencies in circulation worldwide. Bitcoin was launched in 2009 at a price of $0.008 per Bitcoin.In 2009, Satoshi Nakamoto revealed his motives for inventing Bitcoin in his blog saying that he wished to develop a new open source and peer-to-peer electronic money system. Without a central server, this system completely removes the central or authoritative currency issuing organisation, because everything runs on the basis of objective program encryption rather than subjective trust.The fundamental problem of traditional currency is that it requires trust to operate. The central bank must endorse its currency issue and convince the public that the currency has legal effect and will not continue to depreciate. However, the history of many countries’ fiat currencies is teemed with violations of this trust. After the global financial tsunami in 2008, the Fed led the world’s major central banks in quantitative ease by printing money on a large scale. Central banks around the world competed to devalue their currencies. In the wave of credit bubbles, banks made large loans, making many people’s faith in the currencies falling sharply, and pushing them to the embrace of decentralised cryptocurrencies. Thus, cryptocurrencies have grown.
Why do we trade cryptocurrencies?
Firstly, the biggest reason for trading cryptocurrencies is to participate in the development of innovative global technology, because the launch of the world’s most important cryptocurrency represented the emerging industries and innovative ideas supported by the blockchain technology behind the currency. Investing in promising cryptocurrencies is equivalent to investing in the bright future of financial technology.Secondly, cryptocurrencies can be used to hedge against global paper money crises. If another severe global economic crisis breaks out, central banks will again begin to print money, probably leading to sharp depreciations of currencies relative to physical assets. As people around the world increasingly lose faith in central banks, cryptocurrencies may rise in value.As an emerging financial asset class, cryptocurrencies have larger degrees of single day volatility on average than most other existing financial assets. If you are familiar with the volatility of a particular cryptocurrency, you can improve your trading performance in a short period of time.
Factors affecting cryptocurrencies
1. Major global regulators’ ban on cryptocurrencies Opinions of national leaders and legislation have a significant impact on the world of cryptocurrencies. In September 2017, China announced that ICO-related operations were illegal, causing the price of Bitcoin to plummet.2. InvestmentAll cryptocurrencies, especially those that are little known, are easily influenced by investors who may intentionally manipulate the price trend. If an investor has a large amount of funds, he/she may target a certain cryptocurrency and spend heavily in promoting it in the hope of sending its price and market demand higher. The investor may then profit from higher prices.3. Central Banks, particularly the Fed’s policy orientationIf the Fed enters an easing cycle again by significantly lowering the benchmark interest rate, and other major central banks follow suit, probably triggering competitive currency devaluations worldwide, then the cryptocurrency market may turn bullish for a second time.
Which cryptocurrency should I choose to trade?
The launch of the world’s most important cryptocurrency represented the emerging industries and innovative ideas supported by the blockchain technology behind the currency. Investing in promising cryptocurrencies is equivalent to investing in the bright future of financial technology. If you believe in the business logic and the future of a cryptocurrency, you can invest in that cryptocurrency through our platform.If you subscribe to the concept of a public blockchain platform with smart contract functionality and believe that this business philosophy will continue to grow and grow fast, you may consider investing in cryptocurrencies such as Ethereum (ETH) and EOS. If you agree that the decentralisation concept of cryptocurrencies will become more popular, then consider investing in cryptocurrencies, such as Bitcoin (BTC).
Do I really own a cryptocurrency?
The fact that investors buy Bitcoin CFDs does not mean they actually own any Bitcoin. This is different from trading real Bitcoin, and investors do not need to have a Bitcoin e-wallet. Trading CFDs does not require a virtual currency exchange, which means you do not need to worry about potential security issues related to a money exchange. In a CFD transaction, you may be the buyer (holding a long position), believing the value of the cryptocurrency will rise. You may be the seller (holding a short position), assuming that the cryptocurrency price will fall.
What is fundamental analysis?
Fundamental analysis is conducted mainly through analysing economic, social, and political factors that influence the market demand and supply. Investors who rely on fundamental analysis must find out the various factors that affect the economy, such as those that will boost the economy to grow rapidly, and those that will drive it down.This method of analysis is based on the assumption that a country’s currency will be strong when its economic outlook is good. The reason is that the better a country’s economic conditions, the more foreign companies and investors will be willing to invest in the country, and they need to buy a large amount of local currency to acquire assets.For example, the US economy has been improving. As the US economy advances, it allows the policy makers to control the excessive growth of the economy and inflation by raising interest rates. Higher interest rates will make dollar-denominated assets more attractive, and lots of funds aiming to earn high interest may flow into the United States, pushing the value of the US dollar even higher.
Advantages of fundamental analysis
There are many advantages to trading based on fundamental analysis. Most importantly, changes in a currency pair, a country’s economic conditons, or corporate earnings, are the core factors in determining the medium-term and long-term trend of the currency or stock index.When you have enough knowledge about the industries and economic trending of a region (or a stock index or a firm), you may also choose to hold the relevant currency pair or stock index for a long time, without the need to trade tracking the daily quotes all the time. You may wait until your currency pairs or stock indices correct back or rally to go long or short.
Application of fundamental analysis
A variety of fundamental changes will influence currency pairs. Out of these changes, interest rate expectations tend to have the biggest impact on the strength of a country’s currency, and investors can trade accordingly.If a country’s released inflation data keeps surpassing the central bank’s target, the central bank will influence the local currency according to its own inflation target by raising or lowering interest rates.Usually, the central bank will raise interest rates to reduce the amount of money in circulation and curb inflation. If the central bank wishes to increase the amount of money in circulation, it may do so by lowering interest rates. Generally, as the difference between a high-interest currency with a low-interest currency widens, hot money will tend to flow into the high-interest money market, driving the demand for money higher. This is one of the reasons for the rise in medium-term and long-term exchange rates, and investors may capture these opportunities to invest.
How to Use Fundamental Analysis?
Fundamental analysis refers to analyzes the macroeconomic conditions of the country to predict the basic trends and exchange rate changes based on the driving factors of market fluctuations. Generally, when a country’s economy strengthens, its currency exchange rate will rise, and when the economy goes down, the currency exchange rate will decrease. Because the US dollar is the world’s trade and settlement currency, the US dollar has an absolutely dominant position and advantage in the foreign exchange market. The economic condition of the United States is the main factor affecting the foreign exchange market. Therefore, Its economic data gets the most attention from forex investors. According to statistical analysis, the effect of different economic data on the market in order from strong to weak is: Interest rate resolution, unemployment data, GDP, industrial production, foreign trade, inflation rate, producer price index, consumer price index, wholesale price index, retail price index, purchasing managers’ index, consumer confidence index, business climate Indexes, construction data, factory orders, personal income, car sales, average wages, commercial inventory, leading economic index and more.
How is the economic calendar used?
In addition to relying on technical analysis, fundamental analysis has an important impact on the exchange rate trend, and economic calendar will effectively help clients discover opportunities from the fundamentals.For example, if you wish to trade USD/JPY, then you would want to watch for events and data of the US and Japan before placing a trade, and should only look at the data for the next two weeks to analyse your position opening strategy. You can use our economic calendar to select the relevant data and analyse it yourself.
How do you analyse using market sentiment?
Theoretically, price fluctuations should fully reflect all the valid information on the market. Unfortunately, for investors, that is not always the case. It is impossible for the market to simply and directly reflect all the information, because not all investors will place orders in the same manner. Sometimes we need to measure the market sentiment. Through various trading data and ratios of long and short positions provided by brokers and third-party market analysis organisation, we can effectively know whether the current market sentiment is bullish or bearish, which is very useful for analyzing trading trends.
What is technical analysis?
Technical analysis is a framework method formed by major investors in their study of price fluctuations. It is assumed that investors can extrapolate current trading conditions and future price trends based on historical price fluctuations, because technical analysis assumes that the latest information on the market has been reflected in price fluctuations.Often investors look at past charts to find trends and patterns to help you get some good trading opportunities. When all investors rely on technical analysis, the patterns and indicators of these price fluctuations will fulfill themselves. As more and more investors look for the same price levels and chart patterns, these volatility patterns will be easier to form on the market.
Advantages of Technical Analysis
Technical analysis has many advantages. Usually, in technical charts on different financial instruments, you can find more specific buy/sell points, which are easy for each investor to learn. Moreover, in most cases, technical analysis reflects all news changes in the market. After all, investors alone cannot always monitor the important factors affecting the global stock and FOREX market every day. Therefore, changes in technical analysis may inform investors in advance of the future or latest major news so that investors may be prepared for position risk management.
Application of Technical Analysis
There are a wide variety of technical analysis applications, including universal indicators of RSI, MACD, KD, and moving average, and candlestick charts, which can help investors to assess the market, and make buy and sell decisions and implement take-profit/stop-loss strategies.Take the Relative Strength Index (RSI) as an example. It is similar to the random oscillator. With a scale from 0 to 100, it also indicates whether the market is overbought or oversold. Normally, an RSI of under 30 means an oversold market, and an RSI of over 70 indicates an overbought market. You may make a buy strategy when a particular asset is oversold, or go short when it is overbought.
How Is Technical Analysis Used?
Technical analysis refers to predict future price trends by studying past price and transaction data. Technical analysis mainly relies on charts and formulas to estimate the market cycle length, and identify the buying/selling opportunities. Depending on the time span available, you can use intra-day (eg, minute, hour) technical analysis, or use weekly or monthly technical analysis.

Technical analysis mainly include:

1. Discover trends

Finding a dominant trend will help you see the overall market trend and give you more insight. Weekly and monthly chart analysis is best used to identify longer-term trends. Once you find the overall trend, you can find trading opportunities in the desired time span.

2. Support and resistance

Support and resistance positions are the points on the chart that experience sustained upward or downward pressure. When these points show a recurring trend, they are identified as support and resistance. The best time to buy/sell is near support/resistance levels that are not easily broken. However, once these positions are broken, they tend to become reverse obstacles. Therefore, in a bullish market, the broken resistance position may become support for an upward trend; however, in a bearish market, once the support position is broken, it will turn into resistance.

3. Trend lines and Channels

Trend lines is a simple and practical tool for identifying the direction of market trends. The upward straight line is made up of at least two consecutive low points, and the straight-line extension helps determine the path the market will move. Conversely, a downward line is drawn by connecting two or more points. To a certain extent, the volatility of trading lines is related to the number of connected points.

A Channel is defined as a trend line that is parallel to the corresponding trend line. The two lines can indicate the price fluctuation range of upward, downward or horizontal.

4. Moving Average

A moving average shows the average price at a specific time during a specific period. Because the moving average lags behind the market, it may not be a sign of a trend change. For this reason, moving averages are generally used by combining two averages of different time spans.

The buy signal usually is when the short-term average line goes up crosses the longer-term average line, and the sell signal is when the short-term average line goes down crosses the longer-period average line.

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Disclaimer
Trading carries a high level of risk and may not be suitable for all investors. Before deciding to invest 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.
Risk Disclosure
Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.