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What Is a Spot Trade?

A spot trade, also known as a spot transaction, refers to the purchase or sale of a foreign currency, financial instrument, or commodity for instant delivery on a specified spot date. Most spot contracts include the physical delivery of the currency, commodity, or instrument; the difference in the price of a future or forward contract versus a spot contract takes into account the time value of the payment, based on interest rates and the time to maturity. In a foreign exchange spot trade, the exchange rate on which the transaction is based is referred to as the spot exchange rate.

• Spot trades involve securities traded for immediate delivery in the market on a specified date.

• Spot trades include the buying or selling of foreign currency, a financial instrument, or commodity

• Many assets quote a “spot price” and a “futures or forward price.”

• Most spot market transactions have a T+2 settlement date.

• Spot market transactions can take place on an exchange or over-the-counter.

Understanding a Spot Trade

Foreign exchange spot contracts are the most common type and are usually specified for delivery in two business days, while most other financial instruments settle the next business day. The spot foreign exchange (forex) market trades electronically around the world. It is the world's largest market, with over $5 trillion traded daily; its size dwarfs both the interest rate and commodity markets.

The current price of a financial instrument is called the spot price. It is the price at which an instrument can be sold or bought immediately. Buyers and sellers create the spot price by posting their buy and sell orders. In liquid markets, the spot price may change by the second, as outstanding orders get filled and new ones enter the marketplace.

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Charts Used in Forex Trading

Three types of charts are used in forex trading. They are:

Line Charts
Line charts are used to identify big-picture trends for a currency. They are the most basic and common type of chart used by forex traders. They display the closing trading price for the currency for the time periods specified by the user. The trend lines identified in a line chart can be used to devise trading strategies. For example, you can use the information contained in a trend line to identify breakouts or a change in trend for rising or declining prices.

While it can be useful, a line chart is generally used as a starting point for further trading analysis.

Bar Charts
Much like other instances in which they are used, bar charts are used to represent specific time periods for trading. They provide more price information than line charts. Each bar chart represents one day of trading and contains the opening price, highest price, lowest price, and closing price (OHLC) for a trade. A dash on the left is the day’s opening price, and a similar dash on the right represents the closing price. Colors are sometimes used to indicate price movement, with green or white used for periods of rising prices and red or black for a period during which prices declined.

Bar charts for currency trading help traders identify whether it is a buyer’s market or a seller’s market.

Candlestick Charts
Candlestick charts were first used by Japanese rice traders in the 18th century. They are visually more appealing and easier to read than the chart types described above. The upper portion of a candle is used for the opening price and highest price point used by a currency, and the lower portion of a candle is used to indicate the closing price and lowest price point. A down candle represents a period of declining prices and is shaded red or black, while an up candle is a period of increasing prices and is shaded green or white.

The formations and shapes in candlestick charts are used to identify market direction and movement. Some of the more common formations for candlestick charts are hanging man and shooting star.

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Difference Between Spot Rate and Futures Rate
The currency spot rate is the current quoted rate that a currency, in exchange for another currency, can be bought or sold at. The two currencies involved are called a "pair." If an investor or hedger conducts a trade at the currency spot rate, the exchange of currencies takes place at the point at which the trade took place or shortly after the trade. Since currency forward rates are based on the currency spot rate, currency futures tend to change as the spot rates changes.

If the spot rate of a currency pair increases, the futures prices of the currency pair have a high probability of increasing. On the other hand, if the spot rate of a currency pair decreases, the futures prices have a high probability of decreasing. This isn't always the case, though. Sometimes the spot rate may move, but futures that expire at distant dates may not. This is because the spot rate move may be viewed as temporary or short-term, and thus is unlikely to affect long-term prices. 

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Two effective Trading Strategies using Williams % R

Williams % R for Trading Strategies is a very simple but effective is a technical analysis oscillator described by Lary Williams in the year 1973. It measures the capacity of bulls and bears to close prices each day near the edge of the recent range. Williams % R confirms the trend and gives us a warning of the upcoming reversal.

 

Williams % R gives us 3 types of trading signals. They are as follows-

1. It defines the overbought and oversold zone
2. It defines failure swings
3. It identifies bullish and bearish divergence

Case 1:

When the price closes below the 100 DMA and the Williams % R is below the 50 line, a short signal is generated. We will remain in the trade until the Williams % R gives closing above 50 line and the price closes above 100 DMA.

 

In the first scenario, as we can see in the chart, that when the price closes below the 100 DMA and the Williams % R was also below the 50 line, we could have taken a short trade. However, when the Williams % R crossed back above the 50 line, we could book our trade, thus making a fair amount of profit in the process.

 

 

Case 2:

When the price closes above the 100-period moving average,  from below, and the Williams % R is above the 50 line, a buy signal is generated. We will be there in the trade unless the Williams % R gives closing below 50 line or the price closes below the 100 DMA.

 

In the second scenario, we saw that as the price closed above the 100 DMA and as long the Williams % R is above the 50 line, we could remain in the trade. However, when the Williams % R closed below the 50 line, we could have exited the trade. This trade could give us very good profit.

 

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Trading with Elliott Wave (Part 1/2)

Technical analysis’ Elliott Wave theory is used to explain price changes in the stock market. Ralph Nelson Elliott created the hypothesis after observing and identifying recurrent, fractal wave patterns. Consumer behavior and stock price movements both exhibit waves. The theory holds as these are recurring patterns, the movements of the stock prices can be easily predicted. Investors can get an insight into ongoing trend dynamics when observing these waves which also helps in deeply analyzing the price movements.

What is Elliott Wave?

The Elliott wave principle is a form of technical analysis that helps traders in analyzing the financial market cycle. With the help of this Elliott wave theory, traders can forecast market trends by identifying extremes in prices and investor psychology. Elliott Wave Theory suggests that movements of the market follow a sequence of crowd psychology cycles. The Elliott Wave Patterns are formed according to the ongoing market sentiment, which alternates between bullish and bearish cycles.

 

How does Elliot Wave work?

The Elliott wave theory is a type of technical analysis that aids traders in understanding the cycles of the financial markets. By spotting extremes in price and investor psychology, traders can predict market patterns using the Elliott wave theory. According to Elliott Wave Theory, market movements are said to be influenced by a series of cycles in crowd psychology. The current market attitude, which alternates between bullish and bearish cycles, determines how the Elliott Wave Pattern is generated.

 

The concept of wave analysis as a whole does not equal to a typical blueprint formation where you just follow the instructions, unlike most other price formations. Wave analysis provides insights into trend dynamics and aids in a deeper understanding of price movements.

Decoding Elliott Wave Impulsive Pattern

Five sub waves make up an impulse wave, which moves overall in the same direction as the trend of the largest degree. The most prevalent and straightforward to identify motive wave in a market is this pattern. It is made up of five sub-waves, five motive waves, three of which are likewise motive waves, and two corrective waves. This is classified as a 5-3-5-3-5 structure, as was previously illustrated.

 

 

Its creation is governed by three unbreakable rules:

• Wave two cannot retrace the preceding wave more than 100%.
• Of waves one, three, and five, the third wave can never be the shortest.
• Wave four cannot ever advance past the third wave.

The structure is not an acceptable structure if one of these rules is broken.

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Trading with Elliott Wave (Part 2/2)

 

Decoding Elliott Wave Corrective Pattern

Corrective waves, also known as diagonal waves, are composed of three sub-waves or a combination of three sub-waves that result in a net movement that is perpendicular to the trend of the next-largest degree. 

 

Its objective, like with all motive waves, is to move the market in the trend’s direction.

 

There are five sub-waves in the corrective wave. The diagonal is different because it might seem like a wedge that is either extending or contracting. 

 

 

Depending on the sort of diagonal being observed, the sub-waves of the diagonal may not have a count of five. Every sub-wave of the diagonal, like the motive wave, never exactly repeats the previous sub-wave, and wave number three of the diagonal may not be the shortest wave.

 

Elliott Wave with Fibonacci

Corrective wave application emphasises the potential for cross-studying Fibonacci retracements. Fibonacci levels were not directly used by Elliott, although traders have done so to make the conventional theory more complex.

 

Which Fibonacci retracement levels might be applied at different stages in the trend are highlighted by the previously stated principles. The 23.6 percent -50 percent levels would be of special interest to a trader searching for a fourth wave given rule three, who would also be looking for it to be reasonably shallow. 

 

Additionally, we can look for the correct A, B, and C move to represent a retracement of 50% to 61.8% of the overall 1-5 impulse move.

 

Bottom line

For many people all across the world, Elliott Wave theory continues to provide markets a sense of structure. The capacity to constantly adjust the theory whenever a rule is breached can make it difficult to employ the theory as a trading tool. 

 

But it also significantly improves trend recognition’s level of clarity. Elliott’s original principles can be made as complex as a trader wants, but it is unquestionably an approach that many traders choose to prioritise in their market tactics.

 

We hope you found this blog informative and use it to its maximum potential in the practical world. Also, show some love by sharing this blog with your family and friends and helping us in our mission of spreading financial literacy.

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BTCUSD - "digital gold" remains under pressure
In June, the coin showed the worst dynamics in 12 years, losing 38% of its value, and in Q2 the indicators dropped by 58% to the values of 2011. In the near future, the overall pressure on the cryptocurrency sector may increase, as serious economic difficulties that have arisen for a number of large companies focused on digital assets have joined the problem of global monetary policy tightening.

During Q2, global regulators repeatedly raised interest rates, in particular, the US Fed adjusted them by 125 basis points in total, bringing them to 1.75%. Such a rapid tightening caused investors to fear a recession and led to their withdrawal from risky assets, including digital ones. A serious decline in prices caused problems for a number of companies, only increasing the panic in the cryptocurrency market. Thus, due to the liquidity crisis, the activities of the large Singapore cryptocurrency hedge fund Three Arrows Capital, known for its "bullish" bets, were discontinued. The credit company Celsius Network and the crypto exchange CoinFLEX have suspended withdrawals for customers, citing "extreme market conditions." In an effort to reduce losses, the Huobi trading platform plans to cut about 30% of employees, and the Hong Kong OSL exchange – about 15%.

In general, the fundamental picture continues to be unfavorable and, according to a number of experts, within a few months BTC will be able to reach the "bottom" in the region of 10K dollars per coin.

Technically, the price is close to the 18750 mark (Murray [2/8]), the breakdown of which will give the prospect of further decline to the levels of 15625 (Murray [1/8]), 12500 (Murray [0/8]) and 10000. With a breakout of the level of 25000 (Murray [4/8], Fibo retracement of 23.6%), growth will be able to resume to 28125 (Murray [5/8]), 31250 (Murray [6/8]).

Technical indicators do not give a single signal: the Bollinger Bands consolidate before a serious movement, the MACD histogram decreases in the negative zone, and the Stochastic is directed upwards.   

Resistance levels: 21875, 25000, 28125, 31250 | Support levels: 18750, 15625, 12500, 10000

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How to trade with High-Wave Candlestick Pattern?
Indecision candlesticks that resemble long-legged Dojis are known as High-wave candlestick patterns. Their lower shadows are lengthy, and their top wicks are long. They also have a larger physical body. They’re common near support and resistance levels, as well as during periods of consolidation. Bullish or bearish high wave candles are possible. 

What is High-Wave Candlestick Pattern?
A high wave candlestick pattern is an indecisive pattern that indicates neither bullish nor bearish market conditions. It generally happens at the levels of support and resistance. This is where bears and bulls compete to drive the price in a specific direction. Long lower shadows and long higher wicks are used to show the design of candlesticks. They, too, have little bodies. Long wicks indicate a lot of price movement throughout the period. However, the price eventually settled near the opening level.

In most situations, buyers attempt to raise prices but are met with fierce opposition. Similarly, sellers attempt to cut prices but find fierce opposition. Both fail to drive price in a specific direction, resulting in the candlestick closing near to where it began.

Formation 
The high wave candlestick is a unique type of spinning top basic candlestick with one or two lengthy shadows. The prices at the open and closing are not the same. They differ slightly from one another. The color of the body has no bearing here. The pattern looks like a long-legged Doji.

The High wave pattern indicates that market changes are rapid, just as most candles have long shadows. This could put the current trend in jeopardy. The significance of the candle, like in so many other examples, is highly dependent on the market setting.

How to interpret this pattern?
A high wave candlestick pattern can appear anywhere on the price chart of a stock or currency pair. This High-wave candlestick pattern could be regarded as part of a continuation pattern if it appeared in the middle of a move, either an upward trend or downwards trend. For example, if a stock is heading up and the high wave candlestick pattern appears, a consolidation could occur. After a few swings, the price of a range’s highs and lows may break out of the range and continue to rise.

If the high wave candlesticks appear in a stock that is going lower, a range may emerge, resulting in a sideways activity. When the consolidation period ends, the price may break out and continue to fall in line with the long-term decline.
 

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XRP USD - Murray analysis

 

Currently, the price has come close to the middle line of the Bollinger Bands in the area of 0.33, at the breakout of which the growth will be able to continue to the levels of 0.3906, 0.4395. The key for the "bears" remains the 0.293 mark, consolidation of the price below which will give the prospect of further decline to the level of 0.1953 (the lower limit of the descending channel.

 

 

The downward trend in the market remains, however, the upward reversal of the Stochastic does not exclude the continuation of corrective growth, but this is unlikely to lead to a reversal of the current trend.

 

Resistance levels: 0.3300, 0.3906, 0.4395 | Support levels: 0.2930, 0.2441, 0.1953