Forex and Money Market

As you’ve probably observed, all markets seem to be trapped when their assets trade within a range. When a currency trends sideways, investors wait for the market to make up its mind and choose a direction. Thus, making money depends on determining the trend and the timing of that trend.

In Forex, the most traded pairs include the EUR/USD. This cross is usually used as the barometer for the economy as each monetary unit depicts the environment of the country it represents. Since the Euro was introduced over 10 years ago, the currency has passed parity with the greenback and has astonished participants with its ability to climb and drop with the release of important fundamentals.

But after it reached record highs, the Euro region was hit with a severe debt crisis that stemmed out of Greece. This brought the Euro zone to its knees. And since May of 2010, investors began to follow the region’s happenings with devotion. These individuals benefit from sudden announcements and speeches delivered by key players.

Trading the Forex market has never been as exciting as it is today.

Those who refuse to follow EUR/USD fundamentals have found that Fibonacci retracements are great tools in easy chart reading. Those who follow the release of events understand what it is to trade “near term prospects.” These, basically, are what the market expects will occur in the two regions. They make money by trading the Euro and Dollar forecasting how the currencies will react.

Forex participants often include technical analysis as part of their routine. Once you start trading the Forex market, you find that it’s perhaps one of the best tools for understanding what’s happening in the exchange. As you increase your expertise at reading charts, you find that you begin to identify specific patterns that recur with frequency. Among these are continuations and reversals. These are usually identified by the formation of what’re known as wedges.

A wedge can confirm the continuance of an established movement or of a reversal. In terms of looks, it’s closely related to other Forex elements i.e. a triangle except, for that wedges tend to slant in a particular direction. The symmetrical triangles on the other hand, usually point sideways, indicating the path of the movement.

Furthermore, it’s important to note that the wedges develop over a much longer span of time; they can take anywhere from three to six months to form in a chart.

The mere issue that a wedge can signal a continuation or a reversal can make it confusing for a newbie to forecast price action. However, note that the dropping wedge is generally hawkish; and the climbing wedge is often dovish. An easy way to discern whether it’s a continuation or one of the profitable reversal patterns is to look at the trend lines. If the currency values reach above these, it’s likely that the trend is going to forge on. A movement below the lines would signal a reversal.