Technical analysis Of the financial market

Asian Fund Club · #1 23rd November 2008, 02:53 PM

hi guys. here i will discuss about technical analysis of the financial market.. how technical analysis may help us as a forex trader. as you know forex market is the most volatile. i will post a lot of information regarding technical anlysis in financial market.

Adheer · #2 23rd November 2008, 04:04 PM

Quote:

Originally Posted by Asian Fund Club

hi guys. here i will discuss about technical analysis of the financial market.. how technical analysis may help us as a forex trader. as you know forex market is the most volatile. i will post a lot of information regarding technical anlysis in financial market.

Excellent idea. Since we will be discussing technical analysis, I presume we will be basing our opinions and statements based on statistics and facts.

Quote:

as you know forex market is the most volatile

Since you state that the forex market is the most volatile market, could backup you claim with any facts or is this folklore ?
How does volatility of the forex markets compare with the other markets (equities, commodities, financial derivatives, bullion etc) ?
In my opinion, there is no basis to the claim that the forex markets are most volatile.
Kindly elaborate.

Asian Fund Club · #3 23rd November 2008, 10:58 PM

Quote:

Originally Posted by Adheer

Excellent idea. Since we will be discussing technical analysis, I presume we will be basing our opinions and statements based on statistics and facts.

Since you state that the forex market is the most volatile market, could backup you claim with any facts or is this folklore ?
How does volatility of the forex markets compare with the other markets (equities, commodities, financial derivatives, bullion etc) ?
In my opinion, there is no basis to the claim that the forex markets are most volatile.
Kindly elaborate.

ive been trading in forex for the last two years. based on my experience whats makes forex become very volatile compare to others is because the market is so big. The FX market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global forex and related markets is continuously growing. Traditional turnover was reported to be over US$ 3.2 trillion in April 2007 by the Bank for International Settlement. Since then, the market has continued to grow. According to Euromoney's annual FX Poll, volumes grew a further 41% between 2007 and 2008.

The foreign exchange market is unique because of:

1. its trading volumes

2. the extreme liquidity of the market

3. the large number of, and variety of, traders in the market

4. its geographical dispersion

5.its long trading hours: 24 hours a day except on weekends (from 5pmEST n Sunday until 4pm EST Friday)

6.the variety of factors that affect exchange rates.
7.the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)

8.the use of leverage

As such, it has been referred to as the market closest to the ideal perfect competition, notwithstanding market manipulation by central banks. According to the Bank for International Settlements,average daily turnover in global foreign exchange markets is estimated at $3.98 trillion. Trading in the world's main financial markets accounted for $3.21 trillion of this. This approximately $3.21 trillion in main foreign exchange market turnover was broken down as follows:

$1.005 trillion in spot transactions

$362 billion in outright forwards

$1.714 trillion in forex swaps

$129 billion estimated gaps in reporting

hope it answered your question.

Adheer · #4 23rd November 2008, 11:17 PM

Quote:

hope it answered your question.

Perhaps I was not clear in the previous post. I was trying to understand whether forex is more volatile purely from a technical standpoint.

I meant, if you applied standard volatility parameters like Average True Range, Standard Deviations, Bollinger Bands etc on the major forex pairs (or the Dollar Index), and then applied the same parameters on the S&P 500, GSCI and other commodity index etc, which ones will indicate high volatility ?

A side-by-side comparison does not seem to indicate that the forex market is the most volatile market.

You are correct, the leverage is highest in the forex market. But leverage implies risk and not volatility. Say, if the EUR/USD moves by 2% in a day. Now, trader A is leveraged 100:1 and trader B is leveraged 200:1. The extent of their losses (or profits) will be different (based on their leverage) but the volatility experienced by both traders is the same.
That is what I am trying to explore. If two traders trade in different markets - say trader A trades in equities and trader B trades in forex, both use the same leverage - then which market has greater intrinsic volatility ?

Anyways, that is not the moot point of the discussion. Please proceed, I look forward to your postings.

Asian Fund Club · #5 23rd November 2008, 11:26 PM

Quote:

Originally Posted by Adheer

Perhaps I was not clear in the previous post. I was trying to understand whether forex is more volatile purely from a technical standpoint.

I meant, if you applied standard volatility parameters like Average True Range, Standard Deviations, Bollinger Bands etc on the major forex pairs (or the Dollar Index), and then applied the same parameters on the S&P 500, GSCI and other commodity index etc, which ones will indicate high volatility ?

A side-by-side comparison does not seem to indicate that the forex market is the most volatile market.

You are correct, the leverage is highest in the forex market. But leverage implies risk and not volatility. Say, if the EUR/USD moves by 2% in a day. Now, trader A is leveraged 100:1 and trader B is leveraged 200:1. The extent of their losses (or profits) will be different (based on their leverage) but the volatility experienced by both traders is the same.
That is what I am trying to explore. If two traders trade in different markets - say trader A trades in equities and trader B trades in forex, both use the same leverage - then which market has greater intrinsic volatility ?

Anyways, that is not the moot point of the discussion. Please proceed, I look forward to your postings.

i never been involved in other market. my only trading experience is only in forex. its ok adheer. perhaps we may change view and knowledge here so we may develope a good community in this forum..

Niks · #6 24th November 2008, 07:28 PM

Excellent discussion, thank you both.

Asian Fund Club · #7 24th November 2008, 10:00 PM

first lets define the subject. technical analysis is the study of market action, primarily through the use of chart for the purpose of forecasting the future price trends

The Following User Says Thank You to Asian Fund Club For This Useful Post:
Niks (24th November 2008)