What are the Factors Affecting Gold Prices?

Gold price varies by its supply-demand. Naturally, the first question that comes to mind is “What is the factors affecting gold supply-demand?”. According to some experts, there are four major factors that affect gold prices. The change in these four basic factors will lead to changes in supply and demand, which will result in changes in gold prices, which is:

  1. Global Inflation
  2. Global Liquidity
  3. Global Geopolitical Risk
  4. Global Real Interest Rates.

 

Let’s dig some deeper insight:

1.Global Inflation

Inflation is the indicator that measures the increase in the general level of prices with the simplest definition. In an environment with inflation, the purchasing power of the money decreases, for example, 2 meters of fabric last year, which we can take up to 10 lira. So in summary, as we mentioned earlier, money has a lowering effect on the purchasing power. That is why investors increase their gold demand to protect their money. It would not be wrong to say that in the environment where global inflation is present, there will be increasing pressure on gold prices.

2.Global Liquidity

Global liquidity and gold prices are directly proportional. As liquidity ratio increases, gold prices are expected to rise and gold prices are expected to decrease as liquidity ratio decreases. If we interpret this in the simplest way; get 10 kg of apple on one side, 10 pounds of apples on the other you can get 10 pounds el apples are still 10kg while all available money to 15 TL to get all of the apples you will have to give the entire 15 lira. In the first case, when the weight of apples is 1 TL, the weight of apples increases to 1.5 TL with increasing money (liquidity). I mean, if there is an increasing supply of money (liquidity) across the limited resource gold, the price of gold will rise. On the contrary, gold prices will move in a downward direction.

3.Global Geopolitical Risk

Gold is the indispensable investment tool of investors in terms of not only global geopolitical risks but also all risks that may occur in the world. In the most remote countries of the world, it can be converted into cash, in the most developed countries. With the fact that gold is so convertible, we can say very clearly that the address of any global risk avoidance will be gold. It would not be wrong to say that global geopolitical risks and gold prices may rise in countries where the gold trade is high. With the simplest example, it is possible to see that even the smallest risk in the region is reflected in the oil prices, as the oil exports of Iraq and Syria, which are in the war now, constitute the most important part of the world’s oil exports.

4.Global Interest Rates

In its simplest definition, the real interest is the cost of the retained money. If you have 100TL money you have not invested in your bank account for 1 year, if you think that the real interest rate is 5%, your money will actually lose 5 TL. I mean, the cost of keeping your money is 5 TL. However, if you invested 100 TL in the rate of 5% real interest rate would be 5TL. As a result of Gold’s own structure, any periodic returns do not provide investors with any interest gains, except for the change in market prices. In a period when real interest rates are in an upward trend, investors prefer investment instruments instead of gold. As a result, it will not be wrong to say that gold prices will move downwards.

These four factors are among the main reasons that directly affect gold prices. Contrary to what most of us know, ”summer is coming, everyone will get gold, gold prices increase“ is absolutely not true.

Another 15 Rules for Trading in Forex (Extended Version)

In the previous article, I explain some basic rules in order to be a good trader. Here is the next 15 advanced rules that probably beneficial for you to develop yourself in forex trading world. Please always keep in your mind that other’s strategy won’t be match to the others. Above all rule, please Be Your Self! Everything will be returned to each person. While you find out which rules are most appropriate for you, consider some things that you can make reference to.

RULE 11: It is always be the best to close the position as soon as possible.
You have opened a position and persistently increasing the damage. In this case, immediately close the position and after a while to think that your loss will come back, or you can reduce your losses by doing more and more transactions in each loss may cause dangers. Close the position and settle for damage.

RULE 12: Don’t expect or pray for something.
Forex is not an instrument that can be condemned with prayer. Because of the nature of the work, people’s belief that psychology of things will somehow get better again causes their losses to increase. You’re alone, no one is helping you, your only helper is to be reasonable and your loss is going to return to the land instead of digesting the damage and taking profit from other transactions.

RULE 13: The market is very dynamic, don’t deal with the news. News is the date from which they were published.
When news comes out, it is either reflected in prices or reflected in prices until you do. So instead of trying to gain immediate earnings by following the news (because this gives rise to the greatest potential for harm), try to understand the market and how it works.

RULE 14: Don’t be a speculator. Don’t be a big earner.
Do not trade with the promise of very large earnings. Don’t fool yourself or anyone else. Processes that are perceived as edilerek scalping sonra in the market are usually done in 5-10 minutes after opening and 5-10 pips. However, the attempt to obtain 20-30 pips several times a day, which is actually a higher level, should be called olan scalping Ancak. You create your strategy in this way by giving weight to the process. Earn less, but lose less when you lose. If you have the right strategy and only 2 to 3 of your 10 transactions are closed with damage, you can get a tremendous return even in a few months. At the end of a trading week, try to double up in a month rather than trying to increase your money to 10 times. In this way you have the opportunity to be rich at least in one year.

RULE 15: Love losing money!
This rule may not seem logical to you. However, gold is in the rules. You can have transactions that result in losses as well as your profitable transactions. By accepting this, reducing the amount of loss in the resulting transactions, ie, agreeing to the loss of this will affect your overall performance positively.

RULE 16: If you are not getting results in a certain time period, close that process.
You have a prediction when you do something, and this prediction may take time to take place, but when you foresee a day that will result in a day, you still have to face the next day, if the position is too little or too little damage and you can’t get results.

RULE 17: Never experience great loss. (See Rule 5, 8, 10, 11, 15)
Great loss will have a structure that will lead to greater harm by affecting your psychology in a wrong way. The great loss is something that will completely destroy you, and you must stay away from it. Unless you have a very wrong strategy, if you do not act with a very low stop loss level or the use of a wrong leverage supported by large spreads, you will not be constantly harmed. Often the loss and general catastrophe happens with one or a few large losses resulting in great damage.

RULE 18: Small gains can make you rich.
Only a few 10 pips to 20 pips a day can make you rich even with a low capital and low leverage. If you can achieve this, don’t look for another way to get rich or gain much.

RULE 19: Do not expect to perform exceptionally profitable. Be reasonable.
Many people in the Forex market miss the opportunity to obtain reasonable income with the expectation of extraordinary earnings. It is unlikely that a statement of the FED about the market will bring your position to an enormous level of earnings. Instead of acting with this expectation, be reasonable and always make reasonable profits.

RULE 20: Regular income and controlled movement is very important. Ensure that your income is stable and continuous.
This rule is about getting regular and reasonable and controlled income every day. Do not allow control to be on the market or in your ambitions. You must make sure that even the worst scenario will not ruin you.
Don’t look at the way the rules look similar, all say something different from a different point of view; Of course you can be going out the same door.

RULE 21: You should behave differently with your lost positions and closing your lucrative positions.
Close the entire lost position at a pre-determined exit point after a reasonable expectation level. When you are in the position of your first expectation, try to reach the rest with the rest and the main goal.

RULE 22: As you build a wall with brick, continue to apply the winning strategy to your principles.
If you have a winning strategy and you are able to make reasonable profits every day, continue to earn reasonable with this strategy, and continue to gain the same type of transactions in the same way as you weave a house wall with bricks as long as there is no development that will change your strategy.

RULE 23: Do not change the horse when crossing the stream.
Apply this after you have opened a position that fits your strategy and identifies the points of departure where you will be lucrative or lost. Never again do analysis and play with your position. You are damaging your reasonable strategy, which you may have in the beginning, and you eliminate the possibility of making a profit.

RULE 24: Turn the terms in your favor.
All traders are at the same zero point when the transaction day starts. However, those who follow the rules and hold their stance in a stable position can win.

RULE 25: Believe in the power of the market.
The market always finds the truth with its dynamics. It is not affected by individual thoughts or processes of people. You stabilize your posture and decide what to do. The market is then helpful for you. It is a grinder for those who do not know what to do.

Introduction to Fundamental Forex Analysis

One of the oldest methods of analysis in the economics is fundamental analysis (FA). This facet of the analysis is much less easily applicable to trading. Concretely, FA focuses on considering the economic-fundamentals of the currency/foreign-exchange (forex), i.e the circumstance of financial aspects among various nations (that might be different continent as well). For this, we rely on several factors factors such as (firstly and essentially) the foreign national banks’ interest-rates, and economic—monetary  and financial— statistics. Hypothetically, if the economy of such nation is progressing nicely, investors should be encouraged to invest their fund to the currency, and in the meantime increases its price.

 

The Influence of (CB-central-bank) Interest Rates

CB’s rates are the foundation of the economy of particular nation. By the national banks rates, one can figure the loan rates of both the individuals and the companies, which may impacts the local economy.

This rates have two inverse impacts on the forex market: the shorter and more extended term influence.

If interest rates are low, credit is cheap. Businesses are therefore encouraged to invest, and households are encouraged to spend. If the rates are low, saving becomes less attractive. This situation is somehow generating growth. If interest rates are high, credit is more expensive and less accessible. It is therefore less profitable to invest for companies, and household consumption is constrained. In addition, the high remuneration of savings encourages them to spare as opposed to spend. This situation tends to dampen growth and rising prices

However, interest rates additionally have directly affect the forex market. Indeed, when the rate of a national bank is increasing, local currency turns out to be increasingly attractive since the deposits in this currency, cash are better remunerated.

Conversely, low interest rates result in less deposit installments, and therefore, keeping the currency is less appealing.

By this means, a drop in ECB rates, for instance, will have descending effect on the EUR / USD at the time of the announcement, as well as a rise in the Federal Reserve’s rate. . With the same contextual means, a rise in ECB rates will have a short-term raising effect on the EUR / USD, as well as a drop in the Fed’s rates.

It ought to likewise be noticed that to the degree that monetary standards are quoted in pairs, we must look at the rate-differential between both pairing currencies, the one with the best rate having a comparative advantage.

Higher rates in the United States than in Europe should therefore have a negative influence on the EUR / USD pair, while higher European rates would benefit the Euro and therefore lead to a rise in the EUR / USD pair.

Interest rates are therefore the economic pillars of the forex, the foundations of the global economy.

However, rates are not changed often, so operators rely on other data to analyze and forecast currency movements. This is what we will see below.

 

Influence of economic statistics

Numerous economic statistics are published every day: Unemployment rate, GDP, manufacturing indices, industry orders, consumer morale, etc., etc.

It is therefore a question of measuring all the factors having an influence on the economy. Normally, if a statistic is satisfactory, it should benefit the corresponding currency.

It should also be noted that some statistics are more influential than others. For example, weekly statistics are less important than monthly statistics, which themselves are less important than quarterly statistics.

To know if a statistic is influential or not, do not forget to check our forex economic calendar. We also draw your attention to the fact that statistical publications are often the occasion for violent movements. We will have to remain cautious about these figures.

 

The notion of consensus

the notion of consensus is paramount when one tries to predict the influence of a statistic on a currency. Indeed, several agencies conduct surveys before statistics publications, to find out what economists and traders anticipate.

Thus, very bad or very good statistics will have little influence if the consensus had anticipated it.

Conversely, a statistic that may appear satisfactory may have a negative impact if the market had hoped for even better!

 

How to take into account FA as a novice forex trader?

So we quickly understand that it can be difficult to rely on FA to make short-term trading decisions. However, some tips are to be deduced from these notions.

What you must remember:  Statistics and interest rates can be very influential on the forex. It is therefore advisable to remain cautious when they are published.

Either try to take advantage of the influence of statistics, which we think is very risky!

For more information on FA and news trading, we invite you to discover our dedicated section.

10 Basic Rules for Trading in Forex

There is no single generic recipe that will make a person become a profesional trader and make thousands of dollars overnight. However, there are several rules that can be a reference so that a trader is always in the right corridor to get to a successful investor/trader. Here are some rules that might be adopted so that you become a successful trader.

RULE 1: Making a disciplined transaction increases your profits.
Always act disciplined. This increases your profit while limiting your losses and you can make a net profit in total.

RULE 2: Act disciplined without exception in every process.
Imagine a smoking man who wants to quit smoking. This person has moved away from cigarette smoking for years. However, occasionally, one cannot take a single cigarette from time to time. It is not possible to say that this person quit smoking; at least one cigarette a day is still smoking and its health is threatened. The person who trades in the Forex market and has a good strategy, in addition to nine of every ten movements, adheres to the trading strategy and the discipline it determines; however, it may cause serious losses if one performs only one non-undisciplined operation in one of the ten procedures that is not in accordance with his strategy.

RULE 3: After the process of loss, bring your transaction amount to a lower level than normal.
Harmful processes have always led to more harm. If you’ve done a malicious procedure, reduce the amount of your process to half of the amount you normally trade, or even up to one-fifth if possible, until you return to your normal earnings range.

RULE 4: Do not turn your lucrative transactions into aggressive behavior.
You have found a profitable direction and you have earned a certain amount of money in this direction. In this case, you will be out of the market by calculating and closing the position at the appropriate time for your strategy with the profit to finalize this process. Don’t push the lot in order to increase the number of points or position the most profitable peak and make maximum profit.

RULE 5: Do not allow your biggest lost to avoid your most profitable operation in a given period.
Let’s say you’ve done 15 transactions in the last week, and 5 of these transactions have resulted in damage, which means that you have the potential to do a great deal of damage if your damage is the most profitable. As a rule, do not allow this and do no more damage than the profit you have at your most profitable position in a transaction.

RULE 6: Identify your methodology and follow it 100%.
Determine your transaction methodology. Follow 100% of this methodology during the day when applying what kind of action you are going to do at what times and what kind of rules you are doing.

RULE 7: Limit your daily loss.
Imagine that your fund has $ 5000 USD in your account, what is the amount of log loss in the logic boundaries, do you think it is 500 USD? In all cases, ensure that the total risk of StopLoss does not exceed 500 USD. When you reach this level, turn off your computer and rest for a while and start processing again the next day.

RULE 8: Get your current level to increase your transaction amount.
Imagine you’re dealing with 1 lot. At this level, do not go to 2 lot levels for a long time and before you start to make profit regularly.

RULE 9: Learn to terminate your lost and accept the damage.
Let’s say you open a position today and you’re hurting. In order to terminate your loss (do not misunderstand immediately in the opposite direction, please do not misunderstand) you do not need to catch the StopLoss level. Before this level is reached, you should be able to close the process by saying “OK, I am not on my successful day today”.

RULE 10: Be yourself, don’t be anyone else!
I do not go out of the range of 10-20 lots per day in my transactions; I often know that people who are more ignorant than me and those who start to do new transactions earn 100 bucks and make a lot of money. But, at the moment, I know that the lot count that will allow me to move comfortably is between 10-20 lots according to my transaction strategy and psychological construction and I am not going out of it. Find your own circumstances and best situation fits to you and take action on the appropriate conditions for you.

Frequently Mistakes in the Forex Market

Here below a list of some oversights (of course not all mistakes possibly done by traders) that are often made by traders whether intentional or not.

  • High Volume Operations: Leveraged transactions require a different risk perception than in the spot markets. The proportional difference (leverage) between your transaction size and your master is a factor you must consider. Taking positions using the whole or the majority of the capital in the Forex market may cause you to lose your capital in a short time.
  • Determining Levels of Profit and Loss Stop: As it should be, if we are moving within a strategy, we have a target price when we are in position, and in case the risk is realized, we determine the price at which our position will be closed, how much loss we will incur, and profit and loss stop orders.
  • Carrying the Position in the Loss for a Long Time: If we do not determine the level of loss in advance and we are carrying our losses for a long time with the expectation that the market will return to our favor, our capital can dissolve to a great extent.
  • Getting out of the profitable position in a short time: As an investor, the reason for our loss is the profit expectation and we want to maximize our profits. Otherwise, we cannot finance our losses and we will have to witness that our portfolio is shrinking. If we don’t want this to happen, what we have to do is to wait as long as we can in our profitable positions, to move our stop orders into the appropriate level, and to use the loss stopper on the trail (trailing stop).
  • Making Emotional Decisions: All traders are expected to be free of emotions without exception for a forex trader and the hardest part is always to make isolated decisions from emotions. We will be successful to the extent that we can maximize it.
  • Making Transactions to Be Done: Trading in financial markets is a serious business that requires attention. Rational investors are aware that non-serious transactions will not offer regular earnings.
  • Makingvery short- term transactions: It is not difficult to build a system with very short-term forecasts, but it is a very difficult and stressful task that requires follow-up for any investor.
  • Making an action without gaining experience: Starting a process without creating a profitable strategy with trial accounts can be the most costly way to learn how to trade.
  • Transacting Based on Single Indicator Reference: Only single indicators are not sufficient references for buy-sell. Indicators are used for confirmation purposes when entering the position after the line-up analysis.
  • Unplanned Action: All movements in the market are assumed to be irrational. In such an environment, one of the important requirements of not losing is to have a plan.
  • Not Stopping the Stop Level: If we change the stop level because we are afraid to face a growing loss, this may be a harbinger of greater damage.
  • Acting independently of the strategy : The most important part of a strategy is a loyal practitioner.
  • Very Frequent Processing: High transaction costs means high risk. However, frequent transactions can be exhausting and stressful for the investor.
  • Moving with sensations : If we are just entering the position with sensations we are very likely to be wrong. Rational decisions need to enter the position.
  • Opening a position within sufficient informatioIf we think that we have insufficient knowledge, we should practice until we feel sufficient and we should get support from others for our deficiencies.
  • Excessive self-confidence: It is desirable for the investor to trust him / herself, but it causes us to not be able to analyze our overconfidence errors and not to accept that we can be wrong.

 

Money Management – What is to be considered?

Under Money Management (MM), the correct classification and investment of your own money is considered. It is often not just the appropriate and necessary strategy to think about. Rather, the successful traders have come to success due to their MM strategy. Mostly not the big fund or investment is made, which is put on a single share. Rather, the right division of capital must be considered to deal wisely with losses. A good money management strategy deals well with individual losses. The loss is limited in order to have enough capital after numerous failed attempts to carry out further experiments. This type of action also gives rise to risk management. Basically, every dealer has the goal to increase his money. However, this is only possible if the losses are compared to the profit. The goal of MM is maximizing profits and minimizing losses. Of course, the two sides influence each other, which means, however, that a smart need for action exists. To pursue a good money management strategy entails a higher total income.

As mentioned before, there are different strategies to start with money management. There are three types of capital management, which are worth mentioning:

  1. Core Equity Method
  2. Total Equity Method
  3. Adaptive Core Equity Method

In the first method, the Core Equity Method, it is an approach that assigns an amount to each position opened that is subtracted from the total fund balance. If a balance of 100,000 euros is available, only 5,000 euros should be added to a selected position. This means that 95,000 euros would be available for other positions. If another position is to be opened, a capital allocation of 3,000 euros can be made. This amount must be deducted from the capital in order to use a remaining amount of 92,000 euros. This core capital method, also known as net balance, is widely used in the market.

In this type of variant, the Total Capital Method, all available capital is added to the speculative capital. Everything is lumped together, including profits and losses. With a starting capital of 100,000 euros, a profit of a share of 2,500 euros is added to the balance. If losses are made, they will again be deducted from the total balance. Due to the waiver of the net amount as in the first method, the whole 5000 euros more would be available for trading.

The last method, the Adaptive Core Equity Method, is a combination of the last two methods presented. This combination requires a MM of capital allocation in the core equity method. Subsequently, this allocation is adjusted to the increased or decreased risk. If you start again with a capital of 100,000 euros and invest in a position with 5000 euros, the residual speculation amount of 95,000 euros can be used. If the price moves in the direction of your own position, the risk on the entry price can be reduced. In addition, if a stop loss is introduced, the risk of losses can also be reduced.

 

Money Management – Protecting Your Fund at the Very Start

Thing that sit comfortably in the first list amongst the most significant errands of money management (MM) is the use of the available fund in a targeted and planned manner. This prevents traders from using their money because of emotions, which in many leads to losses. For this, traders without MM often forget the formation of reserves , which are of great importance in certain situations. If trading is just out of the feeling, Forex are more likely to be a game of chance, which they are not.

Scatter capital and use it purposefully
One of the biggest mistakes in Forex is putting all the money on an option (capital protection). MM plans to distribute bets across multiple options. If possible, this should have different terms and different underlying types. Furthermore, only a certain proportion of the existing capital should be put on a single option. Experts advise beginners to invest a maximum of between 5 and 10 percent of the credit in the purchase of an option. Even with several lossy trades there is still enough money left to trade.

Stay realistic and do not act out of boredom
To have a good MM, it also needs to be realistic. Although returns of up to 500 percent can be achieved with a single option, the rule is not. So it is much more promising to trade with smaller amounts and thus to achieve continuous profits. With this strategy, potential losses are not so high.

If there are no trends over a period of time, traders sometimes become impatient and speculate on some underlying asset. However, this only rarely succeeds. The same applies to acting out of boredom. After all, this is about the use of real money, so play, fun and excitement should not be in the foreground. In any case, the MMstrategy is one of the most important stock market strategies , which you can do for your success with a simple formula that aims to minimize the risk.

Always follow your own strategy and comply with rules
The basis for successful trading with Forex is the right strategy. This should be carefully selected and strictly adhered to. If uncertainty exists as to how well an order fits the chosen strategy, it is better to wait. As soon as there is a risk that a rule will be broken, it is advisable to take a break. Then it can then enter the market with a clearer head again.

There are many strategies when trading stocks, which can be taken into account and used. At the same time, however, it is important to ensure that your own budget is not overburdened so that you can continue to act actively. While most experienced traders are already experienced with money management, beginners who tackle a trading platform are often overwhelmed. They do not know exactly how they should proceed and what special features they have to observe. For this reason, not only are technical indicators to be considered, but at the same time, MM is an important factor to analyze in order to keep a budget permanently stable. MM has some basic rules to keep in mind. In addition, analysis methods must be combined with the MM in order to be able to benefit from the best results.

Basic 7 Tips for Dummies in Trading Currency and Cryptocurrency

Since and then, brokers have been offering us access to the foreign exchange by their trading platforms. It could be a specific platform of them or a more common platform like metatrader. They allow retail investors to trade currencies. Later, some online brokers also offer crypto-currency trading as well. Here, you will discover seven tips to successfully trade real and virtual currencies.

  1. TRAIN YOURSELF AND FIND OUT
    Be aware that trading currencies and crypto-currency requires some solid knowledge not only in financial and economic culture, but also many techniques related to trading. That consists of technical analysis and its mathematical indicators, graphical analysis and different figures and in some case the difference between the booking order and market orders.
  2. DO NOT GO AGAINST THE TREND AS IT IS YOUR FRIEND
    This means that in a bullish market you should buy while in a bearish market you need to sell rebounds.
    It is unconscious in terms of currency trading to think that the market is wrong. You need to avoid this.
    For encrypted currencies, if you expect to anticipate a trend before the introduction of an encrypted currency, you can participate in its ICO or Initial Coin Offering that will allow you to invest at a preferential price in cryptocurrency—in which you believe before its launch.
  3. LET THE PROFITS RUN AND CUT THE LOSSES QUICKLY
    If you are advised not to take your winnings too quickly on a winning trade, do not delay too much. It’s the best way to lose everything! Use target profit (TP) orders and for limiting losses, use stop orders. Better, use trailing stop orders to protect your profits or reduce a potential loss.
  4. OBEY STRICT RULES OF MONEY MANAGEMENT
    It is essential to set goals for profit and loss. And to respect them!
    Keep some distance from your trading and especially your earnings. Do not think that you are gifted because the market is always right.
  5. ALWAYS KEEP A FOOT IN THE REAL
    Although testing your strategy with a virtual account is recommended, do not consider that your performance on this account will necessarily be representative of your performance with a real account.
    Do not lose the meaning of the value of your money either. Do not take the game at the expense of your private or professional life. Do not spend 12 hours staring at your screen to follow the courses by chaining orders.
    And be careful, keep a foot in the real world, it is not necessarily obvious if the motto you trade is virtual! But it is possible. Rely on tangible elements and concrete information on which crypto-currency to invest in. Please, stay informed on crypto-currency websites review, developer training and skills, etc.
  6. PREPARE A STRATEGY BEFORE ENTERING THE MARKET AND DO NOT TREAT IMPULSIVELY
    They will prevent you from going astray and giving way to euphoria or panic. This is much more reliable in the crypto-currency market where volatility is such. Thus, that without a well-defined trading plan, you are sure to run for your loss.
    In addition, invest only money that you’re willing to lose and never ever, ever, ever, your savings precaution. Always bare in your mind why I strenghtened this part. Some of my colleagues really got bancrupt because of this bussiness.
  7. STAY SIMPLE IN YOUR STRATEGY
    Whether it is foreign currency (forex) or stock, or even trading encrypted currencies, an effective strategy remains a simple strategy, which you can explain in a few sentences, which is based on concrete, specific and factual and not on beliefs or fanciful anticipations.

Forex Basic : Develop Provitable Trading System

Almost all major investors make their transactions within a certain system. It is the first technical analysis which comes to mind in the financial markets. Principles and rules are determined and the system is developed for basic analysis. As the investments in the Forex market are generally short-term, the system is mostly developed for intra-day transactions.

Systems based on only one indicator are generally unsuccessful. Errors of systems created with a single indicator should be reduced by using other indicators. This is called filtering process.

The relationship between the formations in the charts and the indicators and even the general system should be tested.

TESTING THE SYSTEM

A system without a bunch of testing phases cannot be considered as robust. The improved system must be tested on past prices. This is called a backtesting process. It will be appropriate to cover the test period as long as possible. For example, it would be useful to test the system on an average of five years. It is useful to test the system practically in the demo account after the correct test. Because it is very common for many systems that are successful on paper to be unsuccessful in a real situation. In the demo account also test the system as long as possible. This phase is called forward-test.

The system can also be applied to the actual account if successfully tested the demo account. However, it should not be forgotten that one should not discontinue the process of back and forth testing in order to develop a successful system in the real account.

When developing the system, it should be kept in mind that not all prescriptions apply to each patient. Each pair has its own characteristic of movements. The performance of the systems might give different result in the pairs with higher volatility whilst the less volatility.

Other criteria are used for an objective testing process:

  • Total Net Earnings: The total net gain from the total gain in the test process is the total net gain. It is useful in terms of reliability.
  • Total number of transactions: The number of procedures in the testing process is also an important criterion. For the success of the system, it is beneficial that profitable positions are more than harmful positions. However, even more, risky systems that are not waiting for losses but waiting in the snow are being developed. The high number of operations means that the system is affected even by small fluctuations. Too much processing increases the expenses of the investor with commissions and spreads.
  • Percentage of Earnings / Loss: The percentage of profit or loss in the test process according to the initial capital.
  • Annual Earnings / Loss Percentage: The annual percentage of profit obtained during the testing process calculation is important in order to make a comparison with interest, inflation and return on other investment instruments. In case the test period exceeds one year, the value obtained by dividing the number of days in the test period by 365 is the year-to-date value of the profit obtained during the test period. The annual gain is calculated by dividing the total net profit by this value.
  • Drawdown: In the Forex market, the loss is a significant risk factor due to the leverage factor. Systems that can jeopardize the margin level and cause a heavy loss must be optimized.
  • Total Net Earnings / Risk Ratio: Each investment has a potential risk. The potential risk is the percentage of the maximum reduction in the balance during the testing process. The fact that the total net gain is less than 3 in terms of the gain/risk ratio divided by the potential risk ratio indicates that the system is useless.
  • Total Gain: It is the gain or loss that will be obtained if the parity is kept from the beginning of the test period until the end of the test period. When calculating this ratio, it should be taken into account whether the margin problem occurs in the test process due to the leverage factor, unlike other financial markets. At the end of the test period, the system should be questioned if a lower return than the buy-in value is achieved.
  • Percentage of Total Earnings: It is the rate obtained by dividing the total earnings by the starting capital.
  • Annual Percentage of Total Earnings: The one-year yield of total earnings is the percentage ratio of the initial capital. The system should be questioned if the percentage of return obtained during the testing process is lower than this rate.
  • Percentage of Earnings: Percentage of the number of positions closed by the gain in the test process, divided by the number of positions. The longer the duration of the test, the greater the importance of this ratio.
  • Total Earnings in Profitable Operations: It is obtained by collecting the yields obtained in the transactions which result in gains in the test process.
  • Average earnings per transaction: It is the rate obtained by dividing the total earnings by the number of transactions. The high rate is an important criterion for the success of the system.
  • Number of Losses: Number of positions closed during the test period.
  • Total Loss in Damage Resulted Processes: The sum of the losses incurred in the loss-closing positions during the testing process. Despite the small number of transactions, the high rate of loss strategy should be reviewed.
  • Average Loss in Harmful Processes: The total loss in the resulting transactions is calculated by dividing the total loss by the number of transactions.
  • Average Earnings / Average Loss Rate: Average profit in profitable transactions is calculated by dividing the average loss in harmful transactions.
  • Earnings / Loss Index: The success rate of the system can be measured by dividing the win ratios in the test phase by the loss rate. However, the profit or loss obtained during the testing process is not real. In terms of opportunity cost, it should be compared with the country’s interest rate. It is taken into account in the open positions. The index value varies between +100 and -100. Since this index expresses the gain or loss in the most accurate way, it is recommended to calculate each test period.
  • Yield-Risk Index: As we have already mentioned, the risk must also be calculated when calculating the return in the test process. Yield-risk index is used to measure the risk assumed for the gain in the test process.

 

OPTIMIZATION OF THE SYSTEM

Applied systems can be optimized to reduce the error rate and adapt to different pairs. For example, a 22-day moving average can be used in a system that produces an early receive signal as a result of the 20-day moving average. Parameters can be tried until the errors are minimized. Optimization should be implemented strictly for every system developed. However, it should be kept in mind that each system can produce false signals. Therefore, it is more useful to try to increase the success of the stop loss strategy instead of trying to optimize the system to give a 0 percent error.

Reducing the parameters applied in the system leads to an increase in the number of signals. The risk is increased in systems where the number of signals is too high. The growth of risk means the potential for growth in earnings, but in the case of such systems, if the stop loss strategy cannot be established, very serious losses may occur. Changing the parameters of all indicators while optimization is not a correct approach. Changing the parameter of a single indicator while optimizing (according to the science of economics, ceteris paribus, ie nothing else) is a more accurate approach. For the Forex trading platforms and other technical analysis software, it is possible to easily change the parameters of the indicators.

 

Forex Basic : The Trend (2) – The Shorter Trend and Trend Channel

Secondary Trend (known as Medium-term trend)

Prices for long-term trend move from time to time in the direction of the trend. These movements can often be considered as short-term fluctuations. However, these movements are characterized by a significant aspect and lasting from one month to several months are considered as the secondary trend and more commonly as the medium term trend.

In the long-term rising trend in the EUR-USD pair, there have been occasional mid-term downturns. The pair, which fell back to the main trend support after the mid-term downtrend in 2005, continued to rise again from this support . Mid-term downtimes are generally raised when the momentum of the long-term trend exceeds. Excessive prices in prices can be considered as a profit realization for many big players. However, prices resulting from the correction lead to a rise in demand and hence prices.

Short-Term Trend

The trends in one day to three weeks. The weight of short-term investment in forex markets is higher than other markets. However, short-term trends may be misleading due to the fact that they are highly affected by the instant developments. Therefore, it will be more useful for investors to determine the general direction by examining the long and medium term charts.

The short-term uptrend in the EUR / USD parity in 2001 was weakened by the 0.9390 resistance. The short-term trend line, which was tested twice by the slimming result, was broken in the third trial and the short-term rising trend movement ended.

Hourly and even shorter graphics are widely used for technical analysis in forex markets. However, it is a more convenient option to take advantage of the minimum four-hour charts as the downsizing of the charts increases the margin of error. The short-term uptrend in the hourly USD / CAD chart was the result of a third-time testing of the trend support and a subsequent break.

TREND CHANNELS
Trend lines are drawn with reference to rising peaks in rising trends and reference to higher peaks in downtrend trends. However, there is a correlation between support and resistance in trends. For example, while rising trends tend to rise, rising rates tend to rise. A similar relationship is also valid for the fall trends. Falling peaks tend to fall in the downward trend, while their downtrends tend to fall. Parities entering the trend channel provide convenience in short term transactions. Generally, the testing of the channel line is considered as an opportunity to sell, and to test the trend support as an opportunity to buy. However, the fact that this approach is too linear is a risk factor of its own. For example, trend support is expected to work in a rising trend channel. It may not work. In the event that the support starts to rise again, it may mislead investors. For this reason, it is advisable to use the formations and indicators that you can examine in the following pages of Forexturkce.com while reviewing the trend channels.

The long-term rising trend started in the EUR / USD parity, which began in 1998 and ended in 2000, following the breakdown of the lowering trend channel. The remarkable point in this graph is that prices continued to rise after breaking the trend channel, but then, in the medium term decline, the broken trend line line was still in support.