The more liquid a currency pair, the smaller the spread (bid/ask).
EURUSD 8pm to 12pm, less volatile, better entrance because you pay the spreads. Rollover charges are from differences in currency interest rates.
Increasing interest rates negatively affect stock markets, people pull out of stocks, wearing currency.
Important interest rates to follow:
- Bank of England (BOE)
- US Federal Reserve (FED)
- European Central Bank (ECB)
- Bank of Japan (BOJ)
import > exports = trade deficit (-) "Is deficit greater than market expectations?" If yes, it can cause negative price movement.
Purchasing Power Parity (PPP) - goods' price should equal in terms of exchange rate (arbitrage). Study competitive markets and tradable goods (not things like real estate).
If i(US) = 3% and i(CAD) = 1%, USD depreciates against CAD; i.e. CAD/USD = 1.5 will drop.
Create and update calendar of economic indicators including CPI, PPI, and GDP.
There are leading and lagging indicators. Leading change before the economy follows. Lagging change after economy follows particular trend.
Econometric analysis quantifies qualitative fundamental factors into mathematical models.
RSI = (sum of price rises)/(sum of all price fluctuations) * 100%. <25 oversold="">75 = overbought. RSI covers around 25 days.
Use Momentum +RSI +MA +BB for entrance and exits.
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Balance: $3234
The position I spoke of a day or so ago was kicked out (-$70) as the price did not break through the week's resistance level identified. Lesson learned there. One position still remains from yesterday. Bollinger Bands were used (Trend Bounce). The standard deviations were adjusted to 1.8 last night. The expectation is to have a slightly early signal to follow.
In MT5, text spoke of limit and stop orders. They are still a bit confusing. Pending orders seem a useful feature to be incorporated soon.