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How to Draw Trend Lines?

by Fxigor

What is the trend line?

The trend line is a line that connects price highs or lows to show the prevailing direction of price on the chart. Trend lines are graphical representations of support and resistance and can be rising and falling.

In case of an increasing trend, the line will show the trade is in an uptrend and opposite.

How to draw a trend line?

To draw a trend line, we need to connect either highs or lows using a diagonal line. To draw an upper trendline, we need to connect successive price reaction lows. To draw a down trendline, we need to connect successive price reaction highs (peaks). The trendline importance depends on the number of lows and highs that are connected. For example, the upper trendline that connects 5 lows has greater significance (stronger support) than the trendline that connects 2 lows.

Valid trendlines need to connect at least 3 lows for the upper trendline or 3 high for the down trendline.

How to draw an upper trend line?

To draw an upper trendline, we need to connect successive price reaction lows. For example, below is presented an upper line that connects 5 lows:

upper trend line

When we draw trendlines, we need to connect lower lows, and below is a common mistake where trendline does not connect lower lows:

upper trend line in wrong way

Below is a bullish (upper) trendline that is drawn on the bitcoin chart:

 

draw upper trendline

How to draw a bearish trendline?

To draw a down trendline, we need to connect successive price reaction highs (peaks). Below is presented bearish trend line that connects 3 lows:

down trendline

How to draw a trendline during volatility?

During volatility, if the price has a huge spike, we can use a close price instead of a high or low price to draw a trendline. However, we need to wait for trendline confirmation, and at least several highs or lows need to be connected using our trendline.

See the example below: euruad bearish trendline during huge volatilityIn the upper corner of this image, we can see an example of huge volatility and how to draw a trendline.

Trendline drawing tips

If you go for bigger frames such as monthly, daily, weekly, four-hour charts, you will find them the best line trends.
There are times you have to face situations such as the cylindrical sticks overlapping the trend lines. You can manage it by making the stick a bit low or high. However, you must avoid cutting the cylindrical lines from between.
You must not use force to adjust a trend line in the chart. If it isn’t the right fit, then you must leave it there.
You have to utilize points one and two to draw the trend lines, but there must be proper space between them. Traders will not accept lines that are nearby.

When you use the breakout process on the trend line, you have to hang there for the price to break on the line. The trend lines will guide you to choose the buying and selling chances, and sometimes you can even do business with the top and purchase at the bottom of the trend line. If you have larger frames, they will have more importance than the smaller ones.

Filed Under: Education

Everything About Dow Jones Industrial Average – Dow 10 Years Chart

April 4, 2021 by Fxigor

What is Dow Jones?

Dow Jones or Dow or DIJA represents a stock index of 30 blue-chip industrial and financial companies in the United States. The Dow Jones index is price-weighted and does not account for changes in market capitalization. Dow Jones & Co. was founded in 1882 by Charles Dow, Edward Jones, and Charles Bergstresser.

What is Dow Jones today?

In the real-time chart below, let us see how much is the dow jones right now and Dow Jones change today:


Dow Jones industrial average index real-time
If you have a passion for investing in stocks and shares, then it is pretty apparent that you would have come across DOW JONES. When we talk about this stock index, we should have a reasonably good idea about DJIA. It tracks the movement of the most famous, large, and publicly owned companies that are from the blue-chip category. The shares and stocks that are part of DJIA are traded quite extensively on the NASDAQ and NYSE.

It would be pertinent to mention here that Dow Jones has been christened in commemoration of C. Dow. He gave birth to this index way back in 1896 with Edward Jones, his business partner.

Why is it called Dow Jones? Dow Jones index got its name based on two founders Charles Dow and Edward Jones (Dow + Jones).

There are a few things unique about DJIA. It stands second as far as the age of stock indexes is concerned. The first one being DJTA. The main objective of DJIA was to be a barometer of the economy of this country from a broader perspective. If you are looking for a benchmark index for the USA’s best stocks, there are reasons to believe that it is the best. It is an index based on price weightage, and as mentioned earlier, it tracks the best and widely traded shares.

There is no doubt that this an overall index in the USA and across the world. All the firms that make up the DJIA can easily be classified as top-notch companies. They boast of stable earnings, consistently and continuously. Some big names that are part of DJIA are Microsoft Corporation and many other such big words.
The DJIA has traveled quite a distance since it began its journey. When it started, DJIA had only two companies. Most of these 12 companies were from various sectors covering sugar, gas, cotton, railroads, tobacco, sugar, etc. It also would be interesting to mention here that in the early part of the last century, the economy was almost totally dependent on major industrial companies’ growth, as discussed above. Even today, a strong Dow is seen as a reflection of a strong U.S economy. However, the index composition changed with time. There are many instances where a company has been taken off from the DJIA list and replaced with a new, purely based on merit and performance. Suppose a company ends up losing a significant portion of its market capitalization because of various reasons. In that case, it gets replaced by a new company that has the credentials and money to replace the outgoing company.

Dow Jones Chart 10 Years

Below is presented Dow Jones 10 years chart:

Dow Jones U.S. Small-Cap Total Stock Market Index

Below is presented last 10 years’ chart of the Dow Jones small-cap index. Dow Jones adjusted for inflation index showed interesting return. Dow Jones average annual return last 10 years was 10.43% for small caps (annualized for inflation).

Dow Jones historical chart – Dow Jones 100 year chart

Below is presented closing price of the Dow Jones industrial average for the last 100 years:


Dow jones historical prices by year – Dow Jones industrial average historical annual data

This Dow Jones graph above presents historical closing prices for the Dow index from 1915 till 2021. The first increase in price Dow had in 1980. Dow Jones 1980 till 2000. increased up to $10000.   If we analyze the Dow Jones industrial average’s closing price, we can see the rapid gain in the last 10 years. Dow Jones’s 100-year chart showed that in 2007 Dow’s industrial average price was $12050 while in 2009 went down to $6547. So in just two years, Dow’s price has halved. After that, from $6547 in just 12 years, the Dow price has risen above $3000.

Dow returns by year – Dow Jones historical prices by year from 1915

YearDow Year OpenDow Year HighDow Jones Year LowDow Year CloseAnnual% Change
191574.4554.6399.2154.2299.150.8149
191695.2798.81110.1586.4295-0.0419
191787.8796.1599.1865.9574.38-0.2171
191880.9776.6889.0773.3882.20.1051
191999.7982.6119.6279.35107.230.3045
192090.01107.23108.8566.7571.95-0.329
192173.3972.6781.563.980.80.123
192293.2478.91102.7678.5998.170.215
192394.8798.77105.3885.9195.52-0.027
192499.6595.65120.5188.33120.510.2616
1925134.4121.25159.39115151.080.2537
1926153151.08166.14135.2157.20.0405
1927176.07155.16200.93152.73200.70.2767
1928226.17203.35300191.333000.4948
1929313.54307.01381.17198.69248.48-0.1717
1930236.04244.2294.07157.51164.58-0.3377
1931138.6169.84194.3673.7977.9-0.5267
193264.5374.6288.7841.2259.93-0.2307
193384.559.29108.6750.1699.90.6669
193498.16100.36110.7485.51104.040.0414
1935120.35104.51148.4496.71144.130.3853
1936162.07144.13184.9143.11179.90.2482
1937166.45178.52194.4113.64120.85-0.3282
1938132.36120.57158.4198.95154.760.2806
1939142.57153.64155.92121.44150.24-0.0292
1940134.64151.43152.8111.84131.13-0.1272
1941121.93130.57133.59106.34110.96-0.1538
1942107.15112.77119.7192.92119.40.0761
1943134.92119.93145.82119.26135.890.1381
1944143.32135.92152.53134.22152.320.1209
1945169.66152.58195.82151.35192.910.2665
1946191.52191.66212.5163.12177.2-0.0814
1947177.48176.39186.85163.21181.160.0223
1948179.78181.04193.16165.39177.3-0.0213
1949179.67175.03200.52161.6200.130.1288
1950216.28198.89235.47196.81235.410.1763
1951257.41239.92276.37238.99269.230.1437
1952270.35269.86292256.35291.90.0842
1953275.84292.14293.79255.49280.9-0.0377
1954334.34282.89404.39279.87404.390.4396
1955442.69408.89488.4388.2488.40.2077
1956493.21485.78521.05462.35499.470.0227
1957476.07496.03520.77419.79435.69-0.1277
1958491.26439.27583.65436.89583.650.3396
1959632.57587.59679.36574.46679.360.164
1960618.02679.06685.47566.05615.89-0.0934
1961691.74610.25734.91610.25731.140.1871
1962639.14724.71726.01535.76652.1-0.1081
1963714.69646.79767.21646.79762.950.17
1964834.09766.08891.71766.08874.130.1457
1965910.7869.78969.26840.59969.260.1088
1966872.78968.54995.15744.32785.69-0.1894
1967879.48786.41943.08786.41905.110.152
1968903.96906.84985.21825.13943.750.0427
1969875.72947.73968.85769.93800.36-0.1519
1970753.12809.2842631.16838.920.0482
1971884.87830.57950.82797.97890.20.0611
1972950.08889.31036.27889.151020.020.1458
1973924.071031.681051.7788.31850.86-0.1658
1974759.13855.32891.66577.6616.24-0.2757
1975802.89632.04881.81632.04852.410.3832
1976975.2858.711014.79858.711004.650.1786
1977894.37999.75999.75800.85831.17-0.1727
1978821.13817.74907.74742.12805.01-0.0315
1979844.38811.42897.61796.67838.740.0419
1980891.14824.571000.17759.13963.990.1493
1981932.95972.781024.05824.01875-0.0923
1982884.53882.521070.55776.921046.540.196
19831190.781027.041287.21027.041258.640.2027
19841178.591252.741286.641086.571211.57-0.0374
19851327.991198.871553.11184.961546.670.2766
19861793.11537.731955.571502.291895.950.2258
19872277.531927.312722.421738.741938.830.0226
19882061.482015.252183.51879.142168.570.1185
19892510.332144.642791.412144.642753.20.2696
19902679.452810.152999.752365.12633.66-0.0434
19912929.042610.643168.832470.33168.830.2032
19923284.083172.43413.23136.63301.110.0417
19933524.923309.23794.3332423754.090.1372
19943794.223756.63978.363593.353834.440.0214
19954494.283838.485216.473832.085117.120.3345
19965739.635177.456560.915032.946448.270.2601
19977447.016442.498259.36391.77908.30.2264
19988630.7679659374.277539.079181.430.161
199910481.569184.2711497.129120.6711497.120.2522
200010729.3811357.5111722.989796.0310787.99-0.0617
200110199.2910646.1511337.928235.8110021.57-0.071
20029214.8510073.410635.257286.278341.63-0.1676
20039006.648607.5210453.927524.0610453.920.2532
200410315.5110409.8510854.549749.9910783.010.0315
200510546.6610729.4310940.5510012.3610717.5-0.0061
200611409.7810847.4112510.5710667.3912463.150.1629
200713178.2612474.5214164.5312050.4113264.820.0643
200811244.0613043.9613058.27552.298776.39-0.3384
20098885.659034.6910548.516547.0510428.050.1882
201010668.5810583.9611585.389686.4811577.510.1102
201111957.5711670.7512810.5410655.312217.560.0553
201212966.4412397.3813610.1512101.4613104.140.0726
201315009.5213412.5516576.6613328.8516576.660.265
201416777.6916441.3518053.7115372.817823.070.0752
201517587.0317832.9918312.3915666.4417425.03-0.0223
201617927.1117148.9419974.6215660.1819762.60.1342
201721750.219881.7624837.5119732.424719.220.2508
201825046.8624824.0126828.3921792.223327.46-0.0563
201926379.5523346.2428645.2622686.2228538.440.2234
202026890.6728868.830606.4818591.9330606.480.0725
202131576.4330223.8933171.3729982.6233153.210.0832

What is the average return for the Dow Jones?

Below is the calculated average return for the Dow index from 2011-2021, 2001-2021, and 1991-2021.

What is Dow Jones’s average return for the last 10 years?

  • The total Dow Jones Industrial Average Return for the last 10 years adjusted for inflation is 122.010%.
  • Annualized Dow Jones Industrial Average Return for the last 10 years adjusted for inflation is 8.302%.
  • Total DJIA Return (Dividends Reinvested) for the last 10 years adjusted for inflation is 180.419%.
  • Annualized DJIA Return (Dividends Reinvested) for the last 10 years adjusted for inflation is 10.862%

What is Dow Jones’s average return last 20 years?

  • The total Dow Jones Industrial Average Return for the last 20 years adjusted for inflation is 109.782%.
  • Annualized Dow Jones Industrial Average Return for the last 20 years adjusted for inflation is 3.774%.
  • Total DJIA Return (Dividends Reinvested) for the last 20 years adjusted for inflation is 238.185%.
  • Annualized DJIA Return (Dividends Reinvested) for the last 20 years adjusted for inflation is 6.282%

What is Dow Jones’s average return last 30 years?

  • The total Dow Jones Industrial Average Return for the last 30 years adjusted for inflation is 454.899%.
  • Annualized Dow Jones Industrial Average Return for the last 30 years adjusted for inflation is 5.878%.
  • Total DJIA Return (Dividends Reinvested) for the last 30 years adjusted for inflation is 1027.519%.
  • Annualized DJIA Return (Dividends Reinvested) for the last 30 years adjusted for inflation is 8.410%

 

Dow Jones historical data in Excel

Please download Dow Jones history 10 years data
Please download Dow Jones 100 years historical data

Dow Jones market capitalization

Market capitalization or market cap is the total market value of the company’s outstanding shares. To calculate a company’s market capitalization, you need to multiply the current stock price by the total number of shares. Dow Jones market capitalization in 2020 was around 8.94 trillion dollars.

Stocks having better value are the ones that carry greater weight as far as the overall index is concerned. Earlier, the average was calculated by dividing the price of 12 stocks after summing up the stock prices on a particular day. This has gone through many changes over time, and it may have happened because of many reasons. Stock splits, mergers and acquisitions may have led to these changes over time.

Dow Jones components

Dow Jones components represent 30 stocks that are price-weighted. The Dow 30 or DIJA index is calculated using a divisor to normalize the index components.

Dow Jones components are the following 30 companies:

CompanySymbolIndustryDate addedIndex weighting
UnitedHealth GroupUNHManaged health care9/24/20127.12%
Goldman SachsGSFinancial services9/20/20136.97%
The Home DepotHDRetailing11/1/19995.42%
BoeingBAAerospace and defense3/12/19875.00%
MicrosoftMSFTInformation technology11/1/19994.73%
AmgenAMGNPharmaceutical industry8/31/20204.68%
Visa Inc.VFinancial services9/20/20134.55%
Caterpillar Inc.CATConstruction and Mining5/6/19914.50%
HoneywellHONConglomerate8/31/20204.34%
McDonald'sMCDFood industry10/30/19854.34%
SalesforceCRMInformation technology8/31/20204.32%
The Walt Disney CompanyDISBroadcasting and entertainment5/6/19913.97%
3M CompanyMMMConglomerate8/9/19763.76%
Johnson & JohnsonJNJPharmaceutical industry3/17/19973.24%
JPMorgan ChaseJPMFinancial services5/6/19913.16%
The Travelers CompaniesTRVFinancial services6/8/20093.16%
American ExpressAXPFinancial services8/30/19822.99%
NikeNKEApparel9/20/20132.80%
WalmartWMTRetailing3/17/19972.69%
IBMIBMInformation technology6/29/19792.60%
Procter & GamblePGFast-moving consumer goods5/26/19322.59%
Apple Inc.AAPLInformation technology3/19/20152.44%
Chevron CorporationCVXPetroleum industry2/19/20082.27%
Merck & Co.MRKPharmaceutical industry6/29/19791.52%
Dow Inc.DOWChemical industry4/2/20191.31%
IntelINTCInformation technology11/1/19991.27%
VerizonVZTelecommunication4/8/20041.16%
The Coca-Cola CompanyKOFood industry3/12/19871.05%
Walgreens Boots AllianceWBARetailing6/26/20181.03%
Cisco SystemsCSCOInformation technology6/8/20090.98%

The index has to be often re-valued to accommodate new entrants and, after taking into account, firms or companies that may have been forced to move out for various reasons. The number of companies moved to 30 way back in 1928. However, what is pertinent to mention here is that the Dow Index composition has changed around 60 times since 1928. The first change happened about three months after the component index of 30 was created. The Great Depression saw many changes to its overall components. One of the most significant changes perhaps happened in 1932, when eight out of thirty stocks in the DOW had to be replaced.

There have been many changes to the composition of the Dow over the past 125 years or so. One of the most significant changes happened in 1997 when Bethlehem Steel, Texaco, Woolworths, and Westinghouse Electric were replaced by Johnson & Johnson, Hewlett-Packard, Travelers Group Wal-Mart, respectively.

In 1999 some more changes happened when Union Carbide, Chevron, Sears Roebuck, and Goodyear Tire were shown the door, and in their places, Intel, Home Depot, SBC Communications, and Microsoft were added. Many other changes to the composition of the 30 happened in 2018 and 2020. Therefore, such changes are part and parcel of the journey of DJIA, and most certainly, many more changes to the composition will happen over the years.

What are 30 stocks in the Dow Jones?

Dow Jones companies list is:

  • 3M Company
  • American Express
  • Amgen
  • Apple Inc.
  • Boeing
  • Caterpillar Inc.
  • Chevron Corporation
  • Cisco Systems
  • Dow Inc.
  • Goldman Sachs
  • Honeywell
  • IBM
  • Intel
  • Johnson & Johnson
  • JPMorgan Chase
  • McDonald’s
  • Merck & Co.
  • Microsoft
  • Nike
  • Procter & Gamble
  • Salesforce
  • The Coca-Cola Company
  • The Home Depot
  • The Travelers Companies
  • The Walt Disney Company
  • UnitedHealth Group
  • Verizon
  • Visa Inc.
  • Walgreens Boots Alliance
  • Walmart

 

How is the Dow Jones calculated?

Dow Jones index value represents the sum of all 30 stocks’ prices divided by a Dow divisor. Dow Jones index calculation is based on price-averaged calculation and determining Dow divisor. The Dow divisor is a figure used to normalize the value of the Dow Jones Industrial Average, and it is regularly updated to ensure that structural changes to the market.

Over a while, a new concept known as Dow Divisor was used as a constant for calculating the DJIA index. The constant was predetermined and helped determine the impact of a single point move as far as the 30 stocks are concerned. However, there are situations and times where the divisor had to be changed to ensure that the overall value of the DOW remained consistent. The divisor, of course, keeps change, and you find it out by referring to various sources of information. The WSJ or the Wall Street Journal gives the interested stakeholders the latest divisor.

Not many people may be aware that the DOW index is not calculated using the WAA or the Weighted Arithmetic Average. Therefore it may not be an accurate reflection of the overall market capitalization of the various components of DJIA. However, this is not the case with other indexes like S&P 500 and others. The Dow Index is the total share of stocks’ price movement as far as all the components are concerned after being divided by the divisor number mentioned above. In a practical situation, if there is a single point movement in any single stocks that make up the 30 total numbers, this will move the index by the same number of points.

Is Amazon in Dow Jones?

No, Amazon company is not in the Dow Jones index. Amazon needs to split its shares by 10-to-1 or more to reduce them to a level at which Dow Jones can consider this company. Dow index can not accept share that is more than $3000 such as Amazon. Amazon didn’t split its stock since 1999. This is the biggest problem for the Dow Jones index because some big and excellent companies are not listed. In 2020, the Dow rose just 7.3%, while the Nasdaq gained 24%, and the S&P 16%.

What’s the difference between the Dow Jones and the NASDAQ?
Dow Jones Industrial Average consists of 30 major companies traded on the NYSE, while the NASDAQ index has more than 3000 companies. Dow index is based on average price calculation where the stock split is not considered. In contrast, NASDAQ is based on the average Market capitalization (Price * Outstanding shares) of the companies index. The NASDAQ stock market depends largely on the technology sector’s performance, while Dow’s performance is focused on the 30 major companies as a group and not as individual stocks.

Conclusion

To conclude, some critics strongly believe that a stocks’ price may not be the right way to reflect a company’s overall performance that belongs to the list of the 30. Market cap is perhaps a more accurate way of looking at the strength and possible weaknesses of companies.

Filed Under: Indices

What Does Break Even Mean in Forex? – Break Even in Options

by Fxigor

What is break-even?
The break-even point in business is the point at which total cost and total revenue are equal, in other words, “even.” To calculate the break-even point in business, you need to divide your total fixed costs by the difference between the unit price and variable costs per unit.

But, in trading, we have a break-even term too.

What Does Break-Even Mean in Forex?
Break-even in forex means that your trading position neither makes nor loses money. For example, if you buy EURUSD at a 1.3120 price level and then you a close position at 1.3120 price level with zero profit and zero dollars loss, you are break even. Usually, breakeven in trading works when you move stops from your first stop position into your original entry position once the price has moved in your favor.

Break-even example in forex trading:

  1. You buy EURUSD at 1.3120
  2. Price goes to 1.32 level.
  3. You set stop loss at 1.3120 (break-even level).
  4. If the price falls to 1.3120, you will have zero profit and zero loss, and you will be break-even.

The percentage for break-even while trading is a useful statistic for traders because it shows how often the trader has to win to break even. This will help in decision-making. He will use different stop losses to manage the risk and set targets for the rewards he wishes to achieve. For a break, even the trader does not make money, and he also does not lose money, though he is investing his time. If the number of trades won is higher than the break-even percentage, the trader is making a profit. If the percentage of trades won is lower than the break-even calculated, the trader is losing money.

Break-even percentage calculation

To calculate break-even percentage in forex trading, you need to divide stop loss and  stop loss and target price sum like in the following formula:

Breakeven= (Stop-loss/(Target + Stop-loss)) X 100

For calculating the break-even percentage for a particular trading strategy, the settings for stop-loss and target defined by the trader are considered. Different parameters are used for measuring the target, stop-loss, like ticks for futures trading, cents for stocks, and pips for forex trading. In other cases, the amount of money is used for specifying stop loss and target profit. The calculation shows the number of winning trades for break-even in percentage terms.

Many traders do not use the same target or same stop-loss for each trade. In these cases, the average profit or win and average loss for the different trades are considered for calculations. The average stop-loss is the average loss, while the average profit becomes the average target. The calculation for break-even percentage is provided below.

What does break even mean in options? 
In options trading, the break-even price can be Call Breakeven or Put Breakeven as the price at which investors can choose to exercise or dispose of the contract without incurring a loss. In the case when a trader buys an option, call position you own can be profitable at expiration, If remains above the strike price plus your initial investment:
Call Breakeven = Call Strike Price + Call Purchase Premium
In the case when a trader sells an option, “Put position,” you can be profitable at expiration if it remains below the strike price minus your initial investment:
Put Breakeven = Put Strike Price – Put Purchase Premium

Break-even options trading example:
For example, if you have a call option with a strike price of $40 and your cost per option share is $1.50. Adding $1.50 to $40 tells you that your breakeven price is $41.50.
For example, if you have a put option with a strike price of $40 and your cost per option share is $1.50. Subtracting $1.50 to $40 tell you your breakeven price is $38.50.

Application of the break-even percentage

The break-even percentage determines whether the trading strategy formulated will provide sufficient winning trades. The trader is making a profit, using different settings for stop-loss and targets. It will help if the trader is using a new trading strategy; it will help determine the number of trades required to profit when the stop-loss and target settings are optimized. The trader winning a greater percentage of trades than the break-even will make a profit, while a trader losing a greater number of trades compared to break-even will make a loss.

The win rate and risk/reward ratio are calculations related to the trade. The risk/reward compares the risk for each trade with the reward targetted. The win rate calculates the number of trades which the trader is winning, expressed in percentage terms. These calculations and statistics can complement the trader’s break-even calculation to make a decision and formulate the right strategy.

Setting the right target.

Traders should be aware that setting targets that cannot really produce break-even percentages is misleading because they are not realistic. A trader may feel tempted to set the target, which is significantly higher than the stop-loss, thinking that he will require only a few winning trades to break even under these conditions. Yet, the trader is not aware of the reality of achieving difficult targets. If the target is extremely high, the trader will never achieve it since the prices or value of the security will not increase to a very great extent in most cases. In other cases, there will only be very few winning trades for high targets, so the trader will lose money since the percentage of losing trades will be more.

So while developing a trading strategy or system, the trader should first determine the target profit, stop-loss levels that are realistic, easily achieved, and then calculate the break-even levels. Though most beginners are happy to break even when they start trading, traders should be aware that their goal is to make a reasonable profit since they are spending time and also taking the risk of investing their money. The same time could be utilized elsewhere to make some money with far lower risk. Hence the trader should aspire to win more trades compared to the break-even he has calculated. The trader’s first target has to achieve while perfecting his trading strategy is not the ultimate goal for profitable trading.

Filed Under: Education

FX Trading Regulation – Forex Rules and Regulations

by Fxigor

Significant facts about all brokers

As a noun, the word ‘broker’ means a dealer, agent related to anything; we also have called them as a person who negotiates, a trafficker. Overall, it means “a person who buys things and then sells them to others.” It is the kind of process of buying and selling. We have people in our society and in-country or the world who are indulged in this profession, which helps them run their business. Besides, as a verb, it was means “any arrangement or a form of settlement or order of the things.”
On the other hand word “regulation” means order, rule, mandate, which we see the political parties give in their assembly any procedure or requirement. So, on the whole, as a sentence, it means “an order, directive, or any contract relating anything that has to be maintained by the authority.” So it is like the planning of the regulations as well.

What is the regulated broker?
A regulated broker represents a safe and legit trading broker compliant with the international authority’s various rules and criteria to secure trading and good customer service. Each country has its own regulatory body that monitors brokers and traders (customers) to complain to the regulatory authority if they have problems with their accounts, withdrawal issues, and scam attempts.

 

Forex rules and regulation

The main Forex rules and regulation are:

  • Regulated forex brokers must have enough funds to cover clients’ investments.
  • Platforms must comply with fair representation legislation.
  • Risks need to be presented well to the clients.
  • The broker needs to be open for Regular Audits and Investigation.
  • Suitability rule.

 

Broker regulations are the kind of regulation that has great significance in it. Broker regulations are related to the state and authority. There are few methods or criteria while choosing a broker, one of which is the regulatory status. Regulatory status is known to be the process under which the regulatory body is governed. In general, it means to confirm a rule: any such specification, a policy, standard, or law, law of any order or statement.


Works or duty of a broker.

Whatever work they do, every person has some different duty, or if not, they have different rules and other things to follow. The broker’s responsibility is that they have to conduct the business they are doing without any regulations. So, it acts or poses as a kind of a direct risk to the clients’ security. This security of the clients means the protection of the clients’ money or wealth.

The purpose of broker regulations.

As such, the brokers have some specific duties, and so the purpose for which the broker regulations is, is that this same approach is used to ensure or to make sure that all the requirements a governance needs can be met without any stop or any difficulty or trouble. This is known as the unnecessary duplication of efforts and hard work and the very activity done from resources.

Regulator list for a forex broker

Another term that has been derived from broker regulations is the regulatory body. The regulatory body is also known as a regulatory agency. A regulatory body or regulatory agency is a public authority or a public right, or any government agency responsible for running or exercising the autonomous authority, which means having the right and the power to make your own decisions and implement your ideas. It is not dependent upon authorities; instead, it is independent of and free from the branches or any army of any authority. Army means any group or any member of the authority.

Currency Broker Regulation Grades – Broker Licenses

SO where is the problem
– Most of (more than 90% of all broker companies) Forex broker companies start WITHOUT licenses like St Vincent incorporation or in Seychelles, Nevis, or other offshore jurisdiction.

broker grades - forex rules and regulations

Name the regulatory bodies working for foreign exchange:
In the United States, two regulatory bodies are working for foreign exchange: the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). Please see more regulatory authorities below:

A-Grade brokers regulation

These are strong reputation brokers. This means high capital requirements, rigorous trading rules, laborious and high reporting standards, and more challenging (expensive) penalties for non-compliance. USA (Commodity Futures Trading Commission CFTC, NFA) – Japan (FSA Japan) – United Kingdom ( Financial Conduct Authority FCA) – Australia (Australian Securities and Investments Commission ASIC) – Singapore (Monetary Authority of Singapore MAS) – Hong Kong ( Securities and Futures Commission SFC) – Switzerland (Financial Services and Markets Authority FSMA) – Germany (Federal Financial Supervisory Authority BaFIN)

B-Grade brokers regulation

Capital requirements, physical presence rules, simplified reporting standards, fit and proper tests, and lower tax rates. – The Bahamas (Securities Commission of the Bahamas SCB) – Cyprus (Cyprus Securities and Exchange Commission CySEC) – Czech Republic (Czech National Bank CNB) – Latvia (FCMC) – Malta ( Malta Financial Services Authority (MFSA)) – New Zealand (Financial Markets Authority New Zealand FMA) – South Africa ( Financial Services Board FSB) – United Arab Emirates Dubai (Dubai Financial Services Authority DFSA)

C-Grade brokers regulation

Little or no regulation compared to the other grades. – Belize (International Financial Services Commission IFSC) – British Virgin Islands (British Virgin Islands Financial Services Commission BVI FSC) – Cayman Islands (Monetary, Regulatory and Advisory Body of the Cayman Islands CIMA CIMA) – Mauritius (Financial Services Commission – Mauritius FSC) – Saint Kitts and Nevis (Financial Services Regulatory Commission – St. Kitts) – Seychelles (Seychelles Financial Services Authority SFSA) – Vanuatu (Vanuatu Financial Services Commission VFSC)

US-regulated forex brokers

CFTC regulated forex brokers are:

  • Forex.com
  • Interactive brokers
  • Trade Station
  • AMP global

 

NFA registered forex brokers are:

  • FOREX.com
  • OANDA
  • Ally Invest
  • Interactive Brokers
  • TD Ameritrade etc.

 

FSA Japan

FSA regulated brokers are:

  • RBC Capital Markets (Japan) Limited
  • KKR Capital Markets Japan Ltd.
  • Clear Markets Japan Inc.
  • CIBC World Markets (Japan) Inc.
  • TF Global Markets (Japan) Limited.
  • VANTAGE CAPITAL MARKETS JAPAN K.K.
  • Citigroup Global Markets Japan Inc., etc.

 

FCA Regulation

What does it mean to be FCA regulated?
To be FCA regulated means to be authorized to offer financial services in the UK. FCA or Financial Conduct Authority is the conduct regulator in the UK. All firms that offer financial services in the UK must be authorized by FCA and be and be part of the public record that shows details of firms, individuals, and other bodies.

Now let us see the best-regulated forex brokers in the UK:

FCA regulated forex brokers in the UK are:

  • HotForex and HF Markets
  • FXTM
  • FXCM
  • Tickmill
  • eToro
  • Plus500
  • ETX Capital
  • City Index
  • Windsor Brokers
  • Core Spreads
  • Forex.com
  • FxGrow
  • OANDA
  • Orbex
  • Hantec Markets
  • Admiral Markets
  • Exness
  • ActivTrades
  • Saxo Bank
  • Finotec
  • DeltaStock
  • LCG
  • GKFX
  • Alvexo
  • ThinkMarkets
  • XM
  • Bulbrokers
  • ATC Brokers
  • Spread Co
  • FXGM
  • Interactive Brokers
  • CMC Markets
  • FXOpen
  • Abshire-Smith
  • Capital Index
  • HYCM
  • Swissquote
  • Credit Financier Invest
  • Darwinex
  • EverFX
  • XTB
  • IG
  • One Financial Markets
  • Velocity Trade
  • CPT Markets
  • MARKETSX
  • DF Markets
  • ICM Capital
  • Blackwell Global
  • Price Markets
  • XGLOBAL Markets
  • Hirose Financial UK
  • PhillipCapital
  • Valutrades
  • ADS Prime
  • OneTrade
  • VARIANSE
  • FCI Markets
  • AAATrade
  • FX Giants
  • Land-FX
  • Fortrade
  • Global Market Index
  • CrescoFX
  • Equiti Global Markets
  • Boston Merchant Financial
  • IronFX
  • INFINOX
  • One Global Market
  • TIOmarkets
  • LegacyFx
  • AMP Global
  • FxView
  • Skilling
  • Axi
  • USGFX
  • Financial Spreads
  • ATFX
  • OctaFX
  • Vantage FX
  • FxPro
  • MultiBank
  • Forex24
  • Trading 212

 

Brokers work on the Lower standard.

Usually, it so happens that the brokers or so-called workers work for the finance or finances. They are distracting registered with the industry related to money, or finance that is the financial industry. They are registered for it and work for you.

Serving process of the brokers.

As we know that the brokers serve and work for the finances, so it includes people for whom they work of broker regulations is done. Brokers deal with the clients. They efficiently do their work and give the best of their ability not to have any point to complain.

Suitability rule.

The suitability rule is the rule or the kind of work that includes serving the clients. And the conduct of the brokers must be based on this rule. On the whole, it is a requirement or stated requirement that the regulatory body has implied. In this processor stability rule, the brokers advise about the business or investment they have done or are interested in. It will ensure the clients that the investment they have made is going to help or benefit them or not. This way, the client will be satisfied that they are making the right decision or not through their recommendations.

What is the Regulator body goal?

Let us see examples:

CFTC Mission Statements

The mission of the Commodity Futures Trading Commission (CFTC) is to foster open, transparent, competitive, and financially sound markets.

CFTC

Our aim is to regulate in a way that adds the most benefit to those who use financial services. Our Mission explains what we prioritise and why. It describes the framework we use to make decisions, the reasoning behind our work and how we choose the best tools for the job.

FCA

Protect consumers – to secure appropriate protection for consumers.
Integrity – to protect and enhance the integrity of the UK financial system
Promote competition – to promote effective competition in consumers’ interests

FCA

The ASIC Act requires us to:

maintain, facilitate and improve the performance of the financial system and entities in it
promote confident and informed participation by investors and consumers in the financial system
administer the law effectively and with minimal procedural requirements
enforce and give effect to the law
receive, process and store, efficiently and quickly, information that is given to us
make information about companies and other bodies available to the public as soon as practicable
take whatever action we can, and which is necessary, to enforce and give effect to the law.

This is an example of the leading roles that Financial regulatory bodies have.

Filed Under: Finance education

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