Forex Education

Trading industry knowledge. Learn forex trading, investing in stocks, commodities.

  • Home
  • Choose a broker
  • Best Forex Brokers
  • Learn trading
  • Affiliate
  • Contact
  • About us
Home » Fundamental Analysis

Gold Head and Shoulders Pattern

by Fxigor

What is the Bearish Head and shoulder pattern?

The Bearish Head and shoulder pattern represents a trading pattern consisting of one lower top as the left shoulder, another highest top (head), and another lower top (right shoulder). This pattern with strong resistance usually signs a future bearish trend. 

You can now see the bearish head and shoulder pattern on this screen.

Head and shoulder pattern

free course banner

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

And when we trade gold, we can see this kind of pattern very often on four-hour daily and weekly charts. I want to tell you, too, that there is another pattern that’s very similar to the head and shoulder pattern. It’s a double-top pattern. So you have the first top, then you have a neckline, then you have a second top, and then you have a trend break.

double top

You can see right now on the screen:

monthly gold chart and douple top pattern

free course banner
fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Gold monthly chart. On this monthly chart, we can spot exciting patterns. We had two highs in the last couple of months, and now we are some bearish move. If you zoom in on this picture, you can see what I’m talking about. We can see two tops and some bearish moves right now that we need to describe technically and explain this in the fundamental approach. So let me see again, on the left side, we have the current double top monthly chart pattern, and I think it’s evident.

gold montlhy douple top pattern - zoom in

Whereas the first stop second top neckline breaks. And right now, we are in the moment when the neckline breaks are over, and we are in a bearish, bearish move on a monthly chart.

 

montlhy chart for gold in 2022

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

This summer, we have a head and shoulder pattern on the four-hour chart. So this summer can provide the potential bearish trend for the gold price.

Gold H4 chart - forex gold head and shoulders pattern today

If you go to the four-hour chart (image above), you can see in June that we have one high, then they had a head, then a second shoulder, and right now, we’re in a bearish move. Both indicators head and shoulders and double top on the monthly chart show a bearish trend. The good thing is the monthly chart bearish trend can be very, very long moved. So, we can have exciting spots to enter bearish trades all summer. Now we will try to describe this and answer the critical question why did this happen?

The interest rate in the US in the last 200 years

 

The first thing you need to know is that something has changed in the US market, and that is an interest rate hike.
We had a very low-interest rate during 1945 when the country wanted to raise the stocks and have more impact on development.

US interest rate in last 200 years

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Everything that happens, there is some story behind that. As you know, the interest rate in 2008 was 2.3%, but inflation and interest rate were no problems. Fourteen years ago, there was a crisis in real estate. But when the crisis started between the two seven and two eight, interest rates fell from 5.1 to 2.3 to curtail the subprime mortgage and banking crisis. And right now, we are trying to increase interest rates because we want to fight against inflation. So what happened on March 16, 2020, when it was a corona disease? The Federal Reserve interest rate was between zero and 0.2%. On March 17, we had an interest rate rise from zero point 25% to 0.5%. And in May, just two months later, we had another interest rate rise to 1%. And this is not the end.

interest rate increase in 2022 - Table screenshot

During this year, we can see interest rate rises, and this can happen just as a tool to fight against high inflation. And on the end, what we need to know is there is a scientist that will tell you that interest rate and the gold price, there’s no impact there, and there is no strong correlation. But if you just saw this graph in the last 20 years, you can see one essential thing. The thing that I want to tell you is straightforward. You want to increase the interest rate to fight against inflation, but you want to slow down your economy. Then when you do that, one essential thing will happen. Your currency, the dollar, in this case, will be stronger and stronger.

interest rate vs gold price

When we trade gold, we know that the gold price is the ratio between gold and the US dollar. So when I say 2000 gold, gold prices. So at that moment, you know if the dollar is stronger, the gold needs to be weaker. And if you see this in 20 13, 20 12, we had a considerable gold price, almost $2,000. And as you know, the interest rates were negative. Again, if you look at 2016 and 2017, you can see just like in the mirror route. Like in the mirror, you can see the price between the gold and the interest rate. So if we increase the interest rate, there is a fundamental impact and a fundamental explanation that gold price can fall. But I want to tell you one more thing that we must be careful about if this happens. If the stock market starts to go down, more people will not invest in stocks anymore, and maybe at that moment, people will begin to invest in precious metals like gold and silver, which can make gold bullish.

And very often, after this massive downtrend of gold in some moment, if the stock market crashes, we can see the gold pricing crave, so we need to be careful because if something changes, it’s not simply on the market; everything sometimes things can be complicated we can see the different price and gold we can see the market wants to see a weaker dollar, et cetera, et cetera. So I want to tell you we need to be careful. Please watch when you invest money anywhere. This is not an investment challenge; just talking about fundamental technical analysis. When investing, you must be careful; you must think there’s always a second story, the second side of the coin.

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Filed Under: Fundamental Analysis, Technical analysis

How to Trade the News in Forex Market?

by Fxigor

Trading the news is one of the most effective strategies in forex trading. It’s a way to predict market movement based on critical economic events or data releases before they happen. These announcements will affect the currency rate and thus provide an opportunity for traders to make money by predicting it correctly.

Trading before big news can be hazardous, especially if you’re a newbie trader. Still, even experienced brokers don’t recommend this type of action unless you have a few years of experience under your belt. That’s because reactions may not come immediately; they may take minutes, hours, days, or weeks depending on the types of data released and how strong their impact will be reflected in the market picture.

More importantly, before taking a position because of actual news, your broker needs to assess the market liquidity. Unfortunately, liquidity is not guaranteed before significant events, so it may be risky for you and your broker if you trade just before important announcements.

That’s why many brokers offer access to economic calendars, which allow traders to know beforehand when primary data or events will happen, giving them time to prepare accordingly depending on their investing strategies. Other than that, it’s best for newbie traders to invest in such short-term strategies as trend following, mean reversion, or grid trading systems which can produce more stable profits over shorter periods.

free course banner

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Suppose you’re a seasoned trader though, you should consider other types of price action analysis like candlestick patterns formed around those special times. For instance, if there’s a long candlestick formed around positive data announcement, it means that the market was already expecting the outcome of this event, but then it turned out to be worse than expected. Naturally, that would result in an immediate downside movement for that pair, so you should take advantage of this change and invest accordingly.

If, on the other hand, there’s a long wick at the top of the candle, it means that after initial downwards movement, prices went back up again, indicating bullishness among traders who may make them believe that price will go even higher. Thus you can cash in on their optimism by opening a buy position instead of selling or establishing short positions near resistance levels where profit is maximized compared to entering trades at lower levels. Be careful, though, if there’s a long black candlestick after a positive data announcement. That means that the market may not be making any immediate changes, and other traders believe that price will go even lower.

How to trade the news in the forex market?

To trade the forex news before any trade position, you need to analyze daily and weekly trading charts, create an overall economy shape analysis, analyze current and expected (projection made by analysts and forex websites) trading news outcomes. You need to choose either a directional or non-directional bias approach.

Directional bias means that you already have your setup, and you decided before the news that you will buy or sell some asset. For example, you think that the European Union economy is in the wrong shape and that the US economy has rising potential. However, the current chart shows a bullish EURUSD, and you want to BUY EURUSD after the news. So, you will make only BUY trade if you see good news in your favor.

free course banner
fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Directional bias strategy example – Interest rate increase example

The Bank of England’s Monetary Policy Committee (MPC) on December 15, 2021, voted by a majority of 8-1 to increase the Bank Rate by 0.15 percentage points to 0.25%. From December 15. 2021 we can see a bullish trend on the chart below.

Strategy:

  • Economic shape for GBP good
  • Economic shape for USD moderate-high inflation
  • Overall GBPUSD trend on weekly chart bullish
  • Interest rate decision – increase to 0.25% for GBP

BUY GBPUSD on 15. December 2021., after 1 hour or after the daily close. Put stop loss on December low price level, target open.

gbpusd chart after interest rate increase

Should I trade based on the news?

Yes, it would help if you traded based on the news, but the best way is to use it as an additional trigger. At the same time, the overall economic shape and current long-term technical analysis (chart analysis) need to support your trading decision. However, if you want to trade based on recent news (non-directional bias strategy), please do this strategy only if you trade highly uncertain trading events such as NFP. 

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Non-directional bias means that you do not have set up before the news, and you are ready to enter into BUY trade if news generates a rising trend, and you are prepared to enter into SELL trade if news causes a downtrend. Usually, traders apply non-directional bias strategies when they know that there will be substantial volatility and price change, and high uncertainty. For example, the NFP report trading strategy is an example of non-directional bias. Non-directional bias can be a strategy where traders before the news make two trades – one BUY and one SELL and they wait to see which one will be realized.

Traders can trade the following news:

  • Business sentiment surveys
  • Central bank intervention news
  • Consumer confidence surveys
  • Economic growth (GDP)
  • Employment data (unemployment, wage growth)
  • Housing data (sales, construction)
  • Industrial production
  • Inflation (CPI, PCE, PPI)
  • Manufacturing sector surveys
  • Interest rate decisions by central banks
  • Retail sales
  • Trade balance etc.

The most effective trading strategy outcome can happen when traders trade Central bank intervention or interest rate news. This news usually pushes big investors and governments into the trading market. For example, see the video below with trading example:

 

In the video above, we had an example of EURDKK currency pair.

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

EURDKK bank intervention example

At the end of December in the new Danish government intervened weak DaDenmark’sa. Denmark’s central bank sold 47 billion kroner ($7.1 billion) in December 2021 to protect its euro peg, the most significant monthly currency intervention to weaken the krone in seven years.

eurdkk danish krona intervention by goverment

 

EURDKK interest rate cuts trading example


On September 30. 2021, Denmark Cuts Key Rate to Minus 0.6% to Defend Currency Peg. After the new release, EURDKK started to rise because DKK was weak after the interest rate cut.

eurdkk price rise on september 30 after interest rate cuts for dkk

 

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Now that you know how to prepare for news trading, it’s time to talk about types of data that affect the forex market; let first, let’s analyze different scenarios depending on their nature:

Positive or bullish announcements are related to strengthening the economy, developing trade between countries, or resolving crises by offering global financial aid. So these would be things like GDP growth rates above expectations, unemployment rates below forecasts, or deals signing between two nations. All these pieces of information indicate vigorous economic activities, which usually produce bullish price movement for pairs. It would help if you looked out for a particular currency because it’s the most sensitive to these types of news and thus would move more than others.

Negative or bearish announcements are those related to slowing/reversing the economy, hindering trade between countries, or not finding a way out of crises. So these would be things like GDP growth rates below expectations, unemployment rates above forecasts, or deals renegotiation. All these pieces of information indicate weak economic activities, which usually produce bearish price movement in the forex market. It would help if you looked out for particular pairs in this city because it’s the most sensitive to these types of news and thus would move more than others.

High impact data have a more significant effect on forex pair price movement because it is easier to predict using technical analysis tools. As a result, there’s a big chance of gaining higher returns over shorter periods.

Low impact data, don’t hand, don’t move prices much, so they should be considered only if you plan to trade long-term.

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Now that you know what data to look for and how to print them, it’s time to discuss where and when particular announcements will be released. That way, you can develop a list of news and events coming up in the next few days which would affect prices so you can prepare accordingly:

First, most news announcements are released by national governments, central banks, and international organizations. You can find this information on forex calendars published online at different forums and specialized websites, so it shouldn’t be too hard.

Why not just look at the economic calendar?

The economic calendar can not tell you the future outcome and can not describe the reason for market behavior after the news event. It can be hard to predict data coming out of the European Union, for instance, because it involves 27 different countries, which makes it harder to cover all the releases. On top of that European Central Bank has this habit of releasing important news after the market closes, which offers some traders an opportunity of waiting for the US session to end before even checking if there are any data scheduled.

How do national governments and central banks significant release data?

More than 300 political events are listed on  Economic Calendar, including positive and negative announcements that affect currency prices in the forex market. So you only need one or two pieces of information about the country’s country’s public accounts balance, inflation rate, interest rates, or unemployment rates to understand the importance of each event.

Is the best moment to trade just after release or before release?

The best strategy is to trade after the economic event to see market behavior and avoid slippage and uncontrolled volatility in the first minutes. For short-time trades, it is wise to wait 5 minutes, while for a longer time frame, trades at least 1 hour after the news (sometimes wait for daily close before entering into the trade). However, suppose the news is dramatically different than expected and the price is going in your favor. In that case, you should enter as early as possible and put enough broad stop loss to avoid slippage and uncontrolled It’stility.

It’s important to know that significant announcements are usually published at 8:30 am, 12:30 pm, and 3:30 pm GMT (7:30 am, 11:30 am, and 2:30 pm EST). However, it varies depending on the country. There isn’t any critical data coming out.

Conclusion

Forecasting economic data can be a very profitable exercise as this way; you could gain a few pips from price movement before anyone else does. You should know that some traders try to profit from this information due to its volatility, so it’s not uncommon for financial institutions to offer unique services around these events, including news wires, online FX trading platforms, and others. Many people haven’t found their specific niche in the forex market, so maybe news trading will be the perfect solution for them.

Filed Under: Fundamental Analysis

What Are the Tools of Monetary Policy? – Monetary Policy Tools

by Fxigor

Monetary policy is operating economic actions for a drastic growth and investment of a country’s financial and economic policies. Regulated, administered, and monitored by the country’s central bank, a monetary policy is devised and implemented to control the domestic money supply and manage the interest rates and macro-economic objectives directly related to sustainability and overall economic matters. The understanding financial course of action involves employing physical and economic plans of activities and strategies enforced by the central bank, currency board, or any other monitoring authority of a country that is responsible for supervising and normalizing the money quantity in terms of economy and determine channel through which new money is distributed and supplied.

It involves meticulous management and administration of money supply and regulation of interest rates and schemes to control inflation, evaluate growth, and analyze consumption and liquidity. As a result, every country’s monetary policy and outcomes diverge according to the preferences and economic goals set on an annual basis. The economic state then evaluates these policies, investors, analysts, and financial analysts as decisions acquired through altered monetary policies strongly influence the markets’ overall economic pillars and other aspects.

What are the tools of monetary policy?

The monetary policy tools are reserve requirements, interest on reserves, the discount rate, and open market operations. These tools represent actions that a central bank can undertake to control the overall money supply and achieve sustainable economic growth.

The formulation of monetary policy is directly influenced by the exposure of multiple inputs from various sources. Therefore, the inculcation of different dynamics such as GDP, inflation rate, sector-specific growth rates, geopolitical parameters, and international markets such as the tariffs and oil embargo is necessary to analyze monetary policy and its formulation. Including these parameters would also allow the representation from small-scale and large-scale industries and businesses, business organizations, and government and non-governmental organizations.

free course banner

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Monetary policy

The monitoring establishments and authorities are looking for balanced policies and strategies to attain particular objectives on an annual or prolonged period. These authorities must implement situations that would automatically participate in a significant rise of GDP, reduce unemployment percentage, maintain foreign exchange Forex, and regulate inflation rates. For effective employment, scrutinizing strategies and policies can be combined with fiscal policies by the government regarding borrowing and exchange to keep the economy flowing. In the United States, the Federal Reserve Bank is the chief central bank responsible for maintaining and regulating monetary policies. The Federal Reserve Bank aims to reduce employment percentage while keeping track of inflation at the same time. Therefore, it is responsible for maintaining an economic balance between growth and inflation rate. It is also accountable for predicting the long-term interest rates and manage them to prevent them from increasing. Furthermore, it provides banks with liquid cash, evaluates and regulates it to avoid failure in banks and fiasco in financial sectors.

The Fed uses four parameters to analyze, evaluate, and understand monetary policy objectives.

Fed monetary policy tools

When the fed adjusts its interest rate, the four main monetary policy tools are:

  • The discount rate: This is the total interest rate provided by the reserve banks from the commercial banks for the short-term acquisition of loans.
  • Reserve requirements: This factor determines the level of reserves a bank is legally allowed to hold. The banks hold these deposit segments in the shape of cash in their vaults or deposits at the reserve bank. If the reserves are increased, it will significantly reduce the availability of funds in the bank system often lent to consumers and businesses.
  • Open market operations: This is the concept of buying and selling government-oriented bonds with commercial banks. The buying and selling of US government assets and securities are considered reliable in addressing monetary policies. This instrument is directed by FOMC and is regulated and implemented by the federal reserve bank of New York. The Federal Reserve lends to the commercial banks at the discounted rate, which assists and complements the open market operations, helps achieve the target federal funds rate, and acts as a principal source of liquidity. The discount rate is directly linked to the interest rates. Higher rates can impede the process of lending and spending by the customers and even businesses.
  • Interest on reserves: This is a considerably new and updated tool used by the Feds after the financial crisis of 2007 and 2009. Interest on reserves is applied on additional capitals accumulated at the reserve banks. Fed often requires commercial banks to hold a small percentage of their deposits on reserve, and in addition to these allotted reserves, commercial banks are often required to have further funds on reserve. Therefore, implementing interest on the reserve is said to use interest on reserves as a primary tool for monetary policy and shape bank lending.

What is the fed’s most important monetary policy tool?

The most important Fed’s monetary policy tool is the Open market operation.  Buying and selling government-oriented bonds with commercial banks can help Fed to achieve desired target federal funds rate. 

free course banner
fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

When inflation is the Fed aims to slow the economy, what is a tight money policy?

Tight money policy represents the course of action undertaken by a central bank to slow down overheated economic growth and reduce inflation.  Higher interest rates increase the cost of borrowing, reduce spending and reduce inflation.

Types of monetary policies

Monetary policies can be categorized as expansionary and contractionary. The former refers to the strategies to increase economic expansion and growth by enriching economic activity. To achieve this objective, the central bank or the establishment tends to lower the interest rate through different strategies to encourage the concept of spending and purchase. The latter involves the inculcation of a higher inflation rate and the cost of living and conducting business. As a result, the interest rates are increased, and the growth is significantly slower to bring down inflation. On the other hand, contractionary study measures involve a slow and steady chronic growth and increased rate of unemployment as well as keep the economy regulated.

Monetary policy tools examples:

  • Increase or decrease interest rate charged to commercial banks
  • Fed can increase the reserve requirement, and then the Federal Reserve will take money out of the money supply and increase the cost of credit.
  • Buying and selling government-oriented bonds with commercial banks
  • Fed can pay interest on reserves that allows Fed to place a floor on the federal funds rate.

 

 

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

The effectiveness of monetary policy related to the body is entirely independent of external and internal factors solely responsible for drafting, announcing, and implementing the vital pillars of economic function. These establishments should work independently and without external pressures that include government or political influences. Most central banks and the establishment responsible for implementing monetary policies are well known to receive political and governmental pressure, significantly influencing their decisions.

The credibility and value of Monterrey policies depend on the public credibility. If the policies implemented by the establishments are considered dependable, then the inflation rate is expected to drop and come down quickly. This can only happen if that central authority is independent of decision-making and liberated from political authority. To protect the authority from the potential political pressure, credible policies need to be drafted and implemented by establishments that will help them acquire public confidence.

What are the tools used to implement fiscal policy?

The main tools to implement fiscal policy are taxation (collecting tax on income spending etc. ), spending, and government expenditure.

Filed Under: Fundamental Analysis

What is Capital Market? Problems in Capital Market!

by Fxigor

A capital market is defined as the availability of a financial domain in which long-term debt and equity-oriented securities are purchased. This concept is opposed to the money market, where short-term and current obligations are processed and purchased. Capital markets are preferred mainly by savers and investors who are looking for far-fetched initiatives. Such financial domains assist the long-term investors in capitalizing in establishments and companies that guarantee long-standing results and investments. Establishments and financial invigilators such as the Securities and Exchange Board of India, Bank of England, and the US Securities and Exchange Commission are responsible for supervising and regulating financial affairs administered in the capital market. They also prevent these authorities and companies from investment frauds and other scams.

What is Capital Market?

The capital market represents an organized financial exchange system where buyers and sellers buy and sell debt and equity securities. In addition, capital markets bring buyers and sellers (individual and businesses) together to trade stocks, bonds, currencies, and other financial assets.

Capital markets act as a financial platform when there is a noticeable exchange between savers and purchasers. Financial investments and wealth savings are transferred between those with enough capital to invest and those looking to purchase capital. Two types of entities are a part of the capital market. One involves an entity with the required capital, such as institutional investors, whereas the other involves establishments, businesses, governments, and people seeking monetary assistance. Thus, there are two categories of capital markets.

  •  Stock market
  •  Bond market

Taking part in capital markets is ideal for channeling and moving money between the savers and those seeking capital. This platform steadily brings consistency and enhances transaction efficiencies. It is considered a financial field to interact and connect two entities looking to exchange securities. To comprehend the concept of Captain Markets, it is imperative to analyze the fundamental function. In capital markets, entities are involved in trade and investment between different financial bodies. The exchange between entities may occur through the stock market, the bond market, and the currency or foreign exchange market. Currently, capital markets are saturated in the world’s financial hubs, including New York, London, Singapore, and Hong Kong.

free course banner

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

The structural composition of capital markets includes the presence of suppliers and users/pursuers of funds. The supplier of capital funds includes large-scale households and establishments responsible for serving them. Similarly, pension funds, companies providing life insurance, nonprofit and charitable organizations, and non-financial companies generate and produce the immeasurable amount of the cash supplied and supplied to the entities on the lookout for resources. These include the home and motor vehicle purchasers, companies, governments, individuals, authorities responsible for financing the infrastructure investment, and non-financial establishments. The buy and sell of financial articles include equities and security, making it the primary objective of capital markets. Equities are synonymous with stocks that are labeled as a significant share in a company. Securities, on the other hand, are interest-oriented IOUs.

Problems in Capital Market

Problems in Capital Market can be:

  • The financial crisis and uncontrolled inflation
  • Inefficiency
  • Lack of adequate information about listed companies
  • Poor capital markets regulation
  • Low participation rate
  • Low returns on investments and lack of volume and volatility
  • Lack of transparency
  • Bad capital market policy
  • Poor customer service in capital markets system

Capital markets as an economic booster

Capital markets are considered a vital pillar in flourishing a country’s existing economy. Economic conditions are measured by the presence of monetary transactions and the transference of goods and services. Since capital markets are well known to move money from one place to another, it directly contributes to its economic sphere. Moreover, the channeling of additional funds from savers to specific institutions allows them to invest productively, therefore, directly contributing to the local economy.

Primarily, there are two featured types of securities. One is equity securities and debt securities. These entities are the types of investments that offer valuable output and evaluated risks to the users and receivers of the funds.

free course banner
fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Equity securities

This category of capital market relates to the stock market. These are the ownership share of a particular business. When someone claims that they own equity security of a company or establishment, then it means that they have the legal ownership of a small portion of that company; therefore, they are authorized to earnings and profit assimilated by the company. However, the invested money in equity securities is not supposed to be paid back by the business authority.

Debt securities

Debt securities are known as the bond market and categorized as IOUs materialized in the shape of bonds or notes. This concept involves borrowing and lending money that needs to be paid back at an allotted date with surplus interest. The securities can be purchased and sold on the primary or secondary market.

The capital market consists of primary markets and secondary markets. The former involves the trading of newly issued stocks and bonds as well as other securities. The latter is mainly focused on the transference and exchange of current or previous securities.

Capital markets are tightly knitted with each other across the world. Because of their higher interconnectivity, a slight disturbance in a single capital market can create instabilities affecting other markets and financial institutes of the world.

Purpose of capital markets

Capital markets act as a credible and authentic platform to provide monetary assistance in terms of investment and liquidity of assets to the savers. Without this platform, there will be a massive gap between investors and savers. The flow of cash can become stagnant otherwise, therefore, damaging the economy. On the other hand, the smooth facilitation and movement of capital between investors and savers can be used constructively for economic projects, therefore, giving a chance to enrich the national income and the overall GDP. With the help of this platform, long-term financial investment goals are mobilized, and investors can utilize these assets and use cash for the emergence of financial investments.

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Capital markets allow investors and savers to take part in the ownership of stocks and bonds, and other productive assets. In addition, financial instruments can be easily valued by taking part in financial markets. Lastly, capital markets facilitate settlement, provide insurance against derivative trading, and improve the overall constructiveness and productivity of capital allocation. More importantly, capital markets provide the investors with the easy availability and convenience of liquid cash and financial resources. Thus, companies can be easily sourced financially by taking part in the capital market and understanding its principles.

If capital markets are healthy and prosperous, businesses and entrepreneurs can acquire capital to use large-scale companies. They can also foster economic growth by creating new opportunities and ventures through business expansion. This significantly strengthens the economy. Businesses are provided with the availability of cash and liquid assets that can be provided to the global economies. Capital markets allow an influx of borrowers, lenders, spenders, and savers reliably to interconnect to formulate a balanced global economy. Individuals and companies can utilize funding acquired through the capital market to launch new businesses, expand the existing ones or invest in long-term plans.

Filed Under: Fundamental Analysis

Who Owns the Federal Reserve?

by Fxigor

The Federal Reserve Bank is also known as the Fed, is the central bank of the United States of America. It was created on 23rd December in 1913 with the depiction of The Federal Reserve act. After evident turbulences observed in the financial domain, there was an excessive need for a central banking authority or monetary regulatory to supervise the existing economic and capital resources predicaments. The Federal Reserve was aimed to limit and regulate financial threats such as the Great Depression and Great Recession in the 1930s and 2000, respectively. The main objective of the Federal Reserve was to observe a noticeable expansion in the original roles and responsibilities of the central banking authority. They were responsible for maximizing, employ and stabilize the current crisis and regulating the long-term interest rates. Currently, the Federal Reserve Bank is known has expanded its objectives and duties over the years. It has been successfully supervising and regulating the entire family of banks. In addition to that, adjustability of the financial system and the delivery of financial services to the depository institutions is a well-known mandate for The Federal Reserve bank. The Fed also consists of different economic and financial analysis branches and works on the countries’ economies’ perspectives.

Who Owns the Federal Reserve?

 Federal Reserve or FED is not owned by any organization because it is an independent government agency created by Congress that serves the public. Located in Washington, D.C., the Board of Governors is the governing body of the Federal Reserve System.

Which organization provides leadership for the Federal Reserve system?

Board of Governors provides leadership for the Federal Reserve system!

Currently, the Federal Reserve System is structured systematically. It has a board of governors that the president appoints explicitly. In addition, there is a separate umbrella of 12 regional-based Federal Reserve ties that are solely responsible for monitoring, supervising, assisting, and regulating commercial banks’ activities. The decisions and mandate layout by The Federal Reserve, directly and indirectly, affect the current structure of the US economy consequently the world. The indirect influence of the Federal Reserve’s responsibilities on the world’s economy makes it an indirect powerful actor for the global economy. The Federal Reserve Bank is an independent entity operating on independent clauses. It is not a government-related agency or a publicly owned company and has no elected official. Because of this reason, The Federal Reserve bank is not subjected to voters or shareholders. Since it is operated an independent mandate, privately owned banks and the leading financial activities are observed by the Federal Bank.

free course banner

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Historically, it has been mentioned that President Woodrow Wilson was in favor of a government-oriented central authority; however, Congress wanted to have 12 further sub-branches of the reserve to protect the diverse population of America. As a result of this compromise, The Federal Reserve is currently the most significant factor in the United States as it is not only overseeing the central banks. Still, he is also responsible for the additional financial activity throughout the country.

What was the purpose of the Federal Reserve Act Apex?

The purpose of the Federal Reserve Act Apex was to create a central banking system and create the Federal Reserve System.

The ownership of The Federal Reserve bank is in limbo. The president appoints and selects the chair of The Federal Reserve, currently Jerome Powell. The president and congress must team up to choose the Federal Reserve board of governors; however, the board members operate independently. Their terms and conditions do not coincide with the elected officials. After the president’s appointment, Congress must also provide its approval for the chair responsible for reporting back to Congress regarding the actions carried out t by the Fed.

The relationship between Congress and the Fed is directly proportional. Congress has the authority to modify and re-define the decrees demarcated by the Fed. Congress can limit, enhance and modify the Fed’s existing and subsequent powers. For example, Dodd-Frank Wall Street reform the Consumer Protection Act that reduced the Federal Reserve’s power to audit emergency loans by the Fed. This act required the Government Accountability Office to audit the emergency loans taken by the Fed during the 2008 financial predicament. The show also stipulated to reveal the names of commercial banks that receive emergency loans and TARP funds.

free course banner
fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Federal Reserve Funding

The decisions of Congress are directly influential to the Fed; however, Congress does not receive the funding. The primary source of funds for the Fed is through investments. The funds are acquired through the interest from US treasury notes received through open market operations. The interests are received through foreign currency investments, and the Fed also receives extra fees through the services provided to privately owned commercial banks. The benefits include check clearing, transference of funds, and automated clearinghouse operations. The bank also receives its funding through interest applicable on loans it provides to the sister banks. The central authority then utilizes these funds to complete its pending bills and profit the US treasury department.

What happened when the Federal Reserve limited the money supply?


When FED limits the money supply, the limited access to currency stifles business growth. At that moment, the money market is scarce, and the price of the money (interest rate ) rises.

 

Federal Reserve Structure

The dual mandate of The Federal Reserve bank allows 12 regional franchises to superintend the private banks. These branches are responsible for storing currency, exercising checks, formulate loans and provide it to the private banks within their jurisdiction. These private banks are also Part of The Federal Reserve banking system and must maintain reserve requirements. These private banks can borrow money from each other within their membership at the Fed funds rate whenever required. They also have the advantage of borrowing from the Fed’s discounted opportunity at a discounted rate.

To be a part of the Federal Reserve System, the commercial banks should own shares of stock in the 12 Federal Reserve banks. However, the stocks cannot be traded and do not provide complete voting authority to the sister banks. The member banks are asked to pay out dividends at a 6% rate by the law. The member banks should return all the profits after deducting expenses back to the US treasury.

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

The Federal Reserve Bank needs to stand independently and away from all sorts of political influences and pressure. The central bank can only fulfill its original intent if they are prevented from short-term and long-term political impact. A complete range of authority and liberty must be provided to the state to maintain expectations and operate effectively. The Fed would not pursue its role if governmental agencies and pillars were constantly interfering in its mandate. The hierarchical structure of The Federal Reserve bank consists of well-known and eminent economists and analysts. They are equipped with professional knowledge in public policy, economics finance, and central banking.

When does a Commercial bank borrow from a Federal Reserve Bank?

The Commercial bank borrows from a Federal Reserve bank when the Commercial bank’s lending ability is increased. Additionally, Commercial banks try to meet reserve requirements when their cash on hand is low before the close of a business day, so they borrow from a Federal Reserve Bank.

How can the Federal Reserve fight recession?

The Federal Reserve can fight recession by lowering the interest rates. Usually, FED can fight recession using the following regulations: open market asset purchases, reserve regulation, discount lending, and forward guidance to manage market expectations.

Accountability of FED

Despite its independence, the Fed is accountable and liable to the public and Congress. Being independent does not mean that fit can draft out its expectations for self-fulfillment. They are unsuitable to Congress, government institutions, and the public regarding forming rules and regulations. They communicate with the essential failures of the government to progress reports. They are required to provide a detailed analysis to Congress. The board members and the fact chair deliver a comprehensive been meticulously analyze monetary policy report twice a year. All these initiatives are propagated to ensure the accountability of it all to double-check the effectiveness of the central bank.
Sent from my iPhone

Filed Under: Fundamental Analysis

Diversify your savings with a gold IRA.

Gold & silver portfolio-building assistance from product professionals.

VISIT GOLD IRA COMPANY
  • 1
  • 2
  • 3
  • 4
  • Next Page »

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad
crypto trading capital ad
gold trading capital ad
low spread trading capital ad

Website categories

Main Forex Info

  • Forex Calendar 2022
  • Forex Holidays Calendar 2022 – Holidays Around the World
  • Non-Farm Payroll Dates 2022.
  • Key Economic Indicators For a Country
  • The Best Forex Brokers of 2022 (Ranked & Reviewed)
  • Best Forex Brokers by Monthly Traffic of 2022
  • Free Forex Account Without Deposit in Summer of 2022.
  • What is PAMM in Forex? Are PAMM Accounts Safe?
  • Stock Exchange Trading Hours
  • Which Forex Broker Accept Paypal? – PayPal brokers

Main navigation:

  • Home
  • About us
  • Forex brokers reviews
  • Investment
  • Education
  • Privacy Policy
  • Risk Disclaimer
  • Contact us

Forex social network

  • RSS
  • Twitter
  • FxIgor Youtube Channel
  • Sign Up. Get newsletter.

Spanish language

Spanish language website
Risk Warning: Trading leveraged products such as Forex and CFDs may not be suitable for all investors as they carry a high degree of risk to your capital. Trading such products is risky and you may lose all of your invested capital. Before deciding to trade, please ensure that you understand the risks involved, taking into account your investment objectives and level of experience.

Copyright Forex.in.rs 2007

Privacy Policy