Trading Guides

What is “last look”?

The Japanese candlestick tells uses a box and whiskers type format, changing between two colors dictating whether it closed higher or lower. Japanese candlesticks can be used for any time frame, and are used to describe the price action during that time frame.

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What is technical analysis?

Technical analysis is a type of analysis derived purely from charts and the price movement of the security. The basis of technical analysis is that past price movement is a good indicator for future price movement. Technical analysis uses statistical trends such as trading volume and historical support / resistance levels to gauge the movement of the price in the future. This in contrast to fundamental analysis, which involves looking at a security from a financial and economic point of view.

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What is fundamental analysis?

Fundamental analysis involves looking at the security from a financial and economic point of view. Typically, Fundamental Analysis is a method of determining a security or products real market value. Usually, traders and investors tend to look at the longer-term view of the market, looking at financial statements and economic data such as market share, industry growth, competition, business cycles and regulation. Therefore, this type of analysis is probably not suitable for shorter timeframes.

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What are swaps?

The swap is essentially a fee for holding a position overnight. Generally, this fee is to do with the central banks’ interest rates of the underlying currencies quoted in the currency pair with brokers possibly adding an extra commission on top of swap. This fee can either be debited or credited to your account depending on the interest rate differential.

For example, let us take the GBP/USD. If we are long the currency pair and the central bank interest rate for the UK is higher than the US’ central bank, you should experiencing something called a positive carry – where the interest rate received from holding the GBP position long is higher than the interest rate paid holding the USD short.

In contrast, if we were short the currency pair we would experience a negative carry – where the interest rate received from holding the USD position long is lower than the interest rate paid holding the GBP short.

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What is a Japanese Candlestick?

The Japanese candlestick tells uses a box and whiskers type format, changing between two colors dictating whether it closed higher or lower. Japanese candlesticks can be used for any time frame, and are used to describe the price action during that time frame.

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What is a resistance level?

A resistance level is a general level where prices have not been pushing upwards for a certain period. This occurs when there are sellers at the price level, preventing the price of the asset surpassing above that level. With regards to technical analysis, a resistance level may be drawn with a line across the highest highs for the time being considered.

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What is a support level?

A support level is a general level where prices have not been falling below for a certain period. This occurs when there are buyers at the price level, preventing the price of the asset dropping below that level. With regards to technical analysis, a support level may be drawn with a line across the lowest lows for the time being considered.

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How to determine the base currency

When looking at a currency pair, the base currency is the first currency quoted. For example, in GBP/AUD, GBP would be the base currency. The currency after the base currency is the quote currency. The notation is how much of the quote currency would you need to get 1 unit of the base currency.

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What is the bid / ask price?

The bid and ask price (from the client’s perspective) is the highest price that a group of buyers / group of sellers are willing to pay / sell and asset for. The difference between the bid and ask price is called the spread. A variable spread occurs when the bid and ask price to fluctuate due to the demand and supply of the currency pair. In comparison, a fixed spread ensures the difference between the bid and ask price stays consistent, regardless of market conditions.
However, sometimes currency prices change irrespective of Economic, Political and Central bank factors. During non-turbulent times, the currency pair may hit strong support / resistance levels in which buyers / sellers increase or decrease their exposure to the currency.

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Black Bull Group Limited (trading name: BlackBull Markets) is a company registered and incorporated in New Zealand (NZBN 9429041417799) located at Level 22, 120 Albert Street, Auckland 1010. Black Bull Group Limited is a registered Financial Services Provider (FSP403326) and holds a Derivative Issuer Licence issued by the Financial Markets Authority.

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Risk Warning: Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money you cannot afford to lose. You should make yourself aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any questions or concerns as to how a loss would affect your lifestyle.

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