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Forex Term of the Week: Pennant
A continuation pattern in technical analysis formed when there is a large movement in a stock, the flagpole, followed by a consolidation period with converging trendlines, the pennant, followed by a breakout movement in the same direction as the initial large movement, the second half of the flagpole.
As can be seen in the above picture, there is a large rise in the stock, followed by a converging consolidation period that resembles a pennant and a resulting continuation of the initial trend.
Pennants, which are similar to flags in terms of structure, have converging trendlines during their consolidation period and they last from one to three weeks. The volume at each period of the pennant is also important. The initial move must be met with large volume while the pennant should have weakening volume, followed by a large increase in volume during the breakout.
Forex is a term used to described the trading of the world’s many currencies. Other terms used includes Foreign exchange or simply Fx. The Forex Market is the largest market in the world, with centres for it in Sydney, Tokyo, London, Frankfurt, and New York. Yes, I said it the largest market in the world! Here is why: Not only does this lucrative market have centres in all the high end places throughout the world, but it also provides enough activity to satisfy both buyers and sellers so profit loss is at a minimum and the market is constantly moving. Also to contribute to it’s greatness the Forex Market operates as an OTC(over the counter) Market; meaning that trading takes place directly between two parties enabling the buyer and seller to customize their deals, where as in the Stock Market trading is done by a central exchange and deals are standardized. As a result of the many advantages, trading in the Fx Market has amounted to more than three trillion US dollars. After hearing about the Fx Market’s consistency, wide spread trading opportunities and minimum profit loss, you’re probably wondering how it all works. When trading Forex there are two scenarios used to describe the current condition of the market. A bear market indicates that there has been a sustained fall in prices with slow recovery. The next market scenario is the bull market. It is characterized by enthusiastic and sustained buying. In trading Forex, you are basically buying one currency while at the same time selling another. The currency combination used in the trading process is called a cross; this is because one currency is being bought by another currency (i.e. the EURO/US dollar). The major and commonly traded currencies are EURUSD, USDJPY, USDCHF, and GBPUSD. To be a Forex Trader it is important to know about the spread and pips. The spread of a trade is the difference between the price that you sell currency (this is call a bid) and the price that you pay to buy currency (this is the traders request). When you trade the major currencies you will often hear that there is a three pip spread. A pip is the a small unit by which a cross price quote changes. To reveal a spread you must compare the bid and the ask price, for example EURUSD is quoted at a bid price of 0.9875 and an ask price of 0.9878. The difference is USD 0.0003, which is equal to three “pips”. To avoid the risks of making wrong investments it would be beneficial for you to join a trading team for accountability and education.
