What is Forex?

Forex is a short term used for ‘Foreign Exchange’. Forex is the exchange of foreign currencies. The value of a specific currency constantly changes against the value of another currency.

What is over the Counter (OTC) trading?

OTC is a market that is conducted directly between dealers and principals through a telephone or computer network rather than a regulated exchange trading floor. OTC trading with CREDENCE SECURE LIMITED means that you trade currencies with the aim to make a trading profit through the 

fluctuation between the currency values. You don’t actually take delivery of these currencies.

Who participates in the Forex market?

Individual investors and speculators, businesses (importers and exporters), multinational corporations, banks, mutual fund companies, pension funds, insurance companies, hedge funds, central banks and government agencies are just some of the market participants.

Is Forex risky?

Yes, we advise all our clients that foreign exchange trading involves a substantial amount of risk. However, the profits can be unlimited.

How fair is the Forex market?

Forex is considered by some people as the fairest market because of its size and number of participants.

When is the Forex market open for trading?

The Forex market is open 24-hours a day, 5 days per week. Forex trading provides a great opportunity for investors to trade anytime of the day or night.

How do I know which currency will go up or down?

You are buying and selling money. In the Forex market, you need to think of money as a commodity; buying a currency means a trader is expecting the value to increase and on a high alert to sell a currency if the value would decrease. Like any other commodity, the price of currencies is displayed in quotes in the retail market and traded in currency pairs, like the Euro and US Dollar (Euro/USD) or the US Dollar and the Japanese Yen (USD/JPY).

What are the most commonly traded currencies?

The most commonly traded currencies are USD, EUR, JPY, GBP, CHF, CAD and AUD. The most commonly traded currency pair is the EUR/USD.

What is margin?

Margin is a collateral that an investor or trader is required to keep to cover potential losses. For example if the margin requirement is 5% and a trader wishes to buy $1 million (10 lots) USD/JPY, $50,000 US dollars is the margin required in his or her account (5% of 1,000,000=$50,000).

What is the difference between market and limit orders?

Market orders are executed immediately at the current market price. Limit orders are orders that a trade should be executed in the future, when the market price reaches a specified price trigger.

What does it mean to be ‘long’ or ‘short’ a currency?

Being long means buying a currency against another currency. Being short means selling a currency against another. If a trader goes long EUR/USD, he or she buys Euros and sells US dollars. Buying a currency is closely associated with taking a long position in that currency. A trader decides to be in a long position in a currency if he or she forecasts that the currency will appreciate in value against another currency. If a trader goes short EUR/USD, he or she sells Euros and buys US dollars. Selling currency is synonymous with shorting that currency. A trader would go short a currency if he or she nurtures the belief that it will depreciate in value against another currency.

What is the ‘bid’ and ‘ask’?

Bid is the price at which buyers offer to buy currencies from the sellers. Bid is the price at which sellers offer to sell currencies to buyers. For example EURUSD is being quoted at 1.29752/1.29760. The bid is the left of first of the two quotes (1.29752). This is the conversion rate when you sell EUR and buy USD. The ask is the second of the two quotes. This is the conversion rate when you buy EUR and you sell USD.

What is a pip?

A pip is the smallest price movement. For example on EURUSD, if the price changes from 1.29752 to 1.29762 the price moved with 1 pip (10 points).

What is a fractional pip?

A fractional pip is a tenth of a pip. This feature allows traders to benefit from the smaller price increments and moves in the market. For example, instead of quoting prices with 4 digits i.e. EURUSD at 1.2975/1.2976 CREDENCE FOREX can quote the pair as 1.29752/1.29760 with the last digit quoted as a subscript.

What is spread?

Spread is the difference between the bid and the ask price of two currencies. If for example the EURUSD is traded at 1.29752/1.29760 then the spread is 0.8 pips.

What is leverage?

Leverage is used to significantly increase your purchasing power. A smaller margin deposit can control a much larger total contract value.

How do I manage my risk?

There are a ton of tools to manage risk such as stop loss orders, lower leverage and many more.

What is technical analysis?

Technical analysis is dependent on historical data using charts and graphs with an aim to identify patterns which could be extrapolated to predict future price movements. Technical chartists believe that the rudimentary information on the market is in the historical price charts themselves.

What is fundamental analysis?

Fundamental analysis relies on economic indicators along with economic, business and political news to identify buying and selling opportunities. Some fundamental analysts believe that the past prices do not correlate with the future prices.

What identification documents do I have to supply and why?

When you register for a live trading account with CREDENCE SECURE LIMITED you are required to upload your passport or ID card; a bill or statement (e.g. telephone bill, bank statement) showing your residential address. We do this to ensure the safety and validity of your account.

How do I deposit money with Credence Secure Limited ?

In the website you can deposit money with your credit card e.g. MasterCard, Visa, and Visa electron, and Wire Transfer. 

What is the minimum deposit amount to activate my Real account?

There is no minimum amount. You are welcome to deposit any amount you feel confident with to begin trading immediately.

What is the minimum deposit amount to activate my Real account?

There is no minimum amount. You are welcome to deposit any amount you feel confident with to begin trading immediately.

How do I know that the money on my Real account is safe?

The money transferred to CREDENCE SECURE LIMITED is deposited in segregated bank accounts under the name CREDENCE SECURE Client Funds. The said accounts are used only for deposits and withdrawals of clients. These funds cannot be used to pay back creditors of CREDENCE SECURE LIMITED in the event of default of the company. The main aim of the directive is to protect the clients’ interests.

Am I charged fees or commissions on deposits or withdrawals?

No. CREDENCE SECURE LIMITED does not charge any fees or commission for depositing or withdrawing funds. Please note that your bank, credit card provider may charge you for the use of their services.

How do I withdraw money?

You will find the withdrawal forms for your account in the online section. To withdraw money, you must have supplied the required documentation. A withdrawal to a bank account where initial deposits have been performed by credit cards will be executed back to credit card or to bank account at company’s discretion and policies.

Can I withdraw my money if I have open position?

Yes. If the free margin exceeds the amount specified in the withdrawal request. The free margin is calculated as equity less any necessary margin required to maintain the open positions.

Introduction to Technical Analysis

The technical analysis is the study of price movement. You can look at historical prices and determine the current trading conditions and potential changes in the market. The main concept for using technical analysis in forex is that all current market information is reflected in the market price.

Chart

A price chart is a sequence of prices which are plotted over a specific time frame. The vertical axis on the chart, represents the price scale and the horizontal axis represents the time. The three most popular chart types are the line chart, the bar chart and the candlestick chart.

The line chart draws a line from one closing to the next closing price. When you combine them together with a line, you can see the general price movement over a certain period of time. For technical analysis, the line chat gives a fairly good idea of where the price of a currency pair has travelled over a given time frame.

The bar chart shows the opening and closing prices, as well as highs and lows. The bottom of the vertical bar indicates the lowest traded price for that time period whereas the top bar indicates the highest price within that same period. For technical analysis, the vertical bar itself, indicates the currency pair’s trading range. By including open, high, low and close information, bar charts allow you to have a more detailed analysis rather than the standard line chart.

The candlestick chart is the most commonly chart used by Forex traders. It still indicates the high to low range with a vertical line. The larger block of the candlestick in the middle indicates the range between the opening and closing prices of a currency pair. Traditionally, If the block in the middle is filled or colored, then the currency closed lower than it opened. On the other hand, If the block is white or unfilled, then the closing price is higher than the opening price.

Support and Resistance

One of the most commonly used lines is the support and resistance lines. The support levels indicate the price where the majority of traders believe that prices are oversold and that they will move higher. At the resistance levels the price indicates that the majority of investors believe that the price will move lower. As long as the currency pair’s price moves between a support and resistance level, the trend is likely to continue. However, a break of a support level can be a sign of a reversal of the trend and a break of a resistance line can be a sign of an acceleration of a trend.

When prices pass through resistance, that resistance line could potentially become a support line. Similarly, when a support level is broken and prices fall below that support line, that support level becomes a resistance level. The more often a currency rate tests a level of support or resistance without breaking it, the stronger the area of resistance or support is. Lastly, when support or resistance levels break, the strength of the follow through move depends on how strongly the broken support or resistance had been holding.

Trend Lines

The trend lines can be very accurate if they are drawn correctly. In a basic form, an uptrend line is drawn along the bottom of easily identifiable support areas. On the other hand, when there is a downtrend, the trend line is drawn along the top of easily identifiable resistance areas.

To draw a trend, you only need to locate two major tops or bottoms and connect them. If you draw a stiff trend line, then is less reliable and it will most likely break. Similar to support and resistance lines, trend lines tend to become stronger the more times they are tested. It is highly advisable not to draw trend lines to fit in the charts. If the trend line does not fit, then that trend is not considered valid.

Price Channels

Price channel is a continuation pattern bound by a trend line and a return line. They can be used to determine good places to buy or sell. Both the tops and bottoms of channels represent areas of support or resistance. To create an ascending channel you need to draw a parallel line at the same angle as an uptrend line and then move the line to position then it touches the most recent peak.

An ascending price channel is considered a bullish signal. Forex traders tend to go long when prices reach the trend line (support) and are more likely to go short the market when it reaches the return line (resistance). On the other hand, a descending channel is considered bearish. Traders will look to go short when the market reaches the trend line (resistance) and will look to go long the market when it reaches the return line (support).

Fibonacci

The Fibonacci number is a sequence that is made by simply starting at 1 and adding the previous number to arrive at the new number.

0+1=1, 1+1=2, 2+1=3, 3+2=5, 5+3=8, 8+5=13, 13+8=21, 21+13=34, 34+21=55,…

The ratio of any number to the text number in the series approaches 0.618 after the first 4 numbers. For example 34/55=0.618. In addition, the ratio of any number that is found in two places to the right approaches 0.382. For example 34/89=0.382. The ratio of any number to the number that is found three places to the right approaches 0.236. For example 21/89=0.236. These relations in the numbers of the series are the basis of the ratios that are used to determine price retracements and price extensions during a trend.

Traders use Fibonacci retracement levels to find potential support and resistance levels. To apply Fibonacci levels to your charts you will need to identify Swing High and Swing Low points. A Swing High, is a candlestick with at least two lower highs on both the left and right of itself. A Swing Low is a candlestick with at least two higher lows on both left and right of itself. For example, if a price retraces from a Swing Low, it will encounter resistance at one of the Fibonacci levels. If a price retraces from a Swing High, it will encounter support at one of Fibonacci levels.

Moving Averages

Moving Average is an average of a shifting body of prices calculated for a given number of days. It makes it easier to visualize market trends. The Simple Moving Average (SMA) is calculated by summing up each interval’s price and dividing the sum by the number of intervals covered by the moving average. The SMA shows the overall sentiment of the market at a certain time. It gives a broader view and gauge the general direction of a currency pair’s rate.

Exponential Moving Average (EMA) is a weighted average of a price which puts a higher weight on recent data point. Because it gives more weight to the most recent data, EMA enables traders to react faster to recent currency pair rate changes.

Moving Average Convergence-Divergence (MACD) is used to determine trends in momentum whether it is bullish or bearish. The MACD is calculated by subtracting a longer EMA from a shorter EMA. The most common values are the 12-day and 26-day EMA. Based on the differential, there is a 9-period moving average that is calculated that is usually named as signal line. Due to the exponential smoothing, the MACD is quicker and tracks recent price changes faster than a signal line. When MACD crosses the signal line meaning that 12-day moving average is higher than the rate of change of the 26-day moving average this is considered a bullish signal.

Bollinger Bands

Bollinger Bands is a chart indicator developed by John Bollinger. The indicator is used to measure market’s volatility. Bollinger Bands widen during periods of high volatility and they narrow during periods of low volatility. In general lines, the price tends to return to the middle of the bands. When the prices continually touch the upper Bollinger Band, the prices are thought to be overbought and this triggers a selling signal. On the other hand, when they touch the lower Bollinger Band prices is reconsidered to be oversold triggering a buy signal. This means that Bollinger Bands act like dynamic support and resistance levels. In a longer time frame Bollinger Bands tend to be stronger.

The Parabolic System, Stop and Reverse (SAR)

The aforementioned indicator helps you determine where a trend might be ending. A Parabolic SAR places dots or points or a parabola line on a chart aims to indicate potential market reversals. When the dots or points or parabola line are below the candles this is considered as a buy signal and when the dots or points or parabola are above the candles then this is considered as a sell signal. So for traders who hold open positions may consider Parabolic SAR as a good indicator whether and when they should exit the market.

Relative Strength Index (RSI)

This indicator identifies overbought and oversold conditions in the market. The RSI is based on the difference between the average of the closing price on up days vs. the average closing price on the down days, observed over a 14-period. It is scaled from 0 to 100 and in general lines readings below 30 indicates oversold while readings over 70 indicate overbought. RSI is well known because you can use it to confirm trend formations. If you are looking at a possible uptrend, then make sure the RSI is above 50. If you are looking at a possible downtrend, then make sure that the RSI is below 50.