Market Analysis – Technical Analysis
This type of market analysis involves researching past asset prices and the reasons for their changing. This approach helps identify market trends and use them for making predictions.
For example, if an asset’s price had been rising for a month, then slightly fell, and then continued to go up, you can predict that the price will keep growing for another month, as it did before under similar circumstances.
This is a convenient way to visualize the asset price movement. Traders use candlestick charts to obtain more detailed information on prices they cannot get from line charts.
A candlestick chart consists of red and green candles. A green candle signals that a price has been rising, while a red candle signals the price has been falling.
Every candle has four important components: open price, close price, high, and low.
The area between the open price and the close price is referred to as ‘the body’ and is shaped as a green or a red rectangle.
The thin vertical lines between the open/ close price and the high or low are called ‘shadows’.
Open a Buy Trade
A buy trade is the same as a Bullish Trade. This means you open a trade based on an assumption that the asset’s market price will be rising.
Let’s assume you’ve just read an analyst’s report predicting that the price of gold will be going up, and you agree with it. You then open a buy trade and earn, as long as the price keeps rising.
Open a Sell Trade
A sell trade is the same as a Bearish Trade. This means you open a trade based on an assumption that the asset’s market price will be falling.
Let’s assume you’ve just read an analyst’s report predicting that the oil price will be going down, and you agree with it. You then open a sell trade and earn, as long as the price keeps falling.
This type of trading involves placing orders based on a long-term price direction. A trend may be ascending or descending.
An ascending trend takes place when the price keeps going up for a certain period of time. When the price keeps going down for some time, it’s a descending trend.
Here is an example: if Brent Crude rose from $26 to $42 within a week, this is an ascending trend, which is a good signal to open a buy trade. If the price continues growing, you’ll earn a good amount of money.
This is an order to open a trade as soon as the price has reached a predefined level.
For example, you don’t want to open a buy trade on crude oil while it stays at $49 a barrel, and you’re waiting for the price to go down a little. In this case, all you need to do is place a pending order on the trading platform, stating a price you’re comfortable with,- say, $48 per barrel. As soon as the price reaches this level, your trade will open automatically.
Assets – Financial Instruments: Assets are financial instruments you can use to trade on Libertex. They include stocks (such as Google, Apple, Tesla), commodities (crude oil), metals (gold, silver), currency pairs (EUR/USD, GBP/USD), and indices (Dow Jones, DAX).
Current Asset Price
A current asset price is the price of a single unit of an asset at any given moment.
For example, if a chart shows that EUR/USD is now trading at 1.2560., this means that you can currently buy 1 euro for 1.2560 US dollars. If the chart shows that Brent Crude costs $45.5, this means you can buy or sell a barrel of crude for $45.5, if you open a trade right away.
This is a type of order which allows you to close a profitable trade when a pre-set level has been reached. Thus, you automatically lock your profit and don’t miss a chance to get a favorable market price.
Let’s assume you buy EUR/USD, your investment amount is $2,000, and your Take Profit is $600. When the asset price reaches the desired level, the trade will close automatically, and you will lock $600 as your profit. If you don’t set a Take Profit, and the trend reverses, you may lose all your profit.
Setting your loss limit in a particular trade is the same as placing a stop loss order. When the price reaches the limit, your trade will close automatically. By placing a stop loss, you limit your losses significantly in the event of the asset price moving against your expectations.
Let’s assume you buy EUR/USD, your investment amount is $2,000, and your Stop Loss is $600. If the EUR/USD price unexpectedly goes down, and your loss from the trade reaches $600, the trade will close automatically, saving the better part of your investment.
A multiplier is a factor that increases both your potential profit and risks.
Let’s assume you buy EUR/USD, your investment amount is $50, and your multiplier is 100. In this case, your investment amount will go up 100 times, and so will the profit ($50 x 100 = $5,000).
With a multiplier, you can trade big, even with a modest account balance.
Important Note: Both your potential profit and loss change proportionally to the selected multiplier. This is why, for novice traders, we recommend using a minimal multiplier of 1, in order to avoid risks in an unfavorable market situation.