Section 10 - Chapter 6 - Foreign Exchange (Currencies)

Section 10 - Chapter 6 - Foreign Exchange (Currencies) - Presented by Rohan Sharma - The CMT Coach - Chartered Market Technician CMT Level 1 Study Material - CMT Level 1 Chapter Wise Short Notes - CMT Level 1 Course Content - CMT Level 1 2025 Exam Syllabus

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1. Chapter 6 – Foreign Exchange (Currencies) SECTION 10 - COMPARATIVE MARKET ANALYSIS Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

2. Agenda What Is Foreign Exchange? Benefits for Investors Base Currency Pips and Spreads Available Data What Does a Technical Analyst Need? This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

3. Foreign Exchange (Currencies) Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

4. Forex Trading Key Facts About Forex Trading ✅ Market Hours: 24/5 (Sunday 5 PM EST - Friday 5 PM EST) ✅ Major Pairs: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD ✅ Leverage: Commonly 50:1 (USA), up to 500:1 (international brokers) ✅ Lot Sizes: Standard (100,000), Mini (10,000), Micro (1,000) ✅ Spread: The difference between bid and ask price ✅ Pips: 1 pip = 0.0001 in most pairs (except JPY pairs, where 1 pip = 0.01) ✅ Margin: The amount required to open a leveraged trade ✅ Swap: Interest paid or earned for holding trades overnight

5. Forex Trading In a forex currency pair, there are two currencies: • Base Currency: The first currency in the pair (e.g., in EUR/USD, EUR is the base currency). • Quote Currency: The second currency in the pair (e.g., in EUR/USD, USD is the quote currency). Interpretation: • The pair shows how much of the quote currency is needed to buy 1 unit of the base currency. • Example: If EUR/USD = 1.10, it means 1 EUR = 1.10 USD. Examples of Base & Quote Currencies in Popular Pairs: Pair Base Currency Quote Currency Meaning EUR/USD EUR USD 1 EUR = X USD GBP/JPY GBP JPY 1 GBP = X JPY USD/CHF USD CHF 1 USD = X CHF AUD/CAD AUD CAD 1 AUD = X CAD

6. Forex Trading Currency Pair Classifications 🔹 Major Pairs (Most Liquid) • EUR/USD • GBP/USD • USD/JPY • USD/CHF • AUD/USD • USD/CAD 🔸 Minor Pairs (Crosses) • EUR/GBP • EUR/AUD • GBP/JPY • AUD/JPY 🔻 Exotic Pairs (High Volatility) • USD/TRY • EUR/SEK • USD/ZAR

7. Forex Trading Pips & Spreads in Forex Trading 📌 What is a Pip? A Pip (Percentage in Point) is the smallest price movement in a currency pair, usually 0.0001 for most pairs (except JPY pairs, where it's 0.01). 📉 Example of Pip Movement: • If EUR/USD moves from 1.1000 to 1.1005, that's a 5-pip increase. • If USD/JPY moves from 145.50 to 145.80, that's a 30-pip increase. 💰 Pip Value Calculation: Pip value depends on lot size: Lot Size Units Traded Pip Value (USD, for USD-based pairs) Standard Lot 100,000 $10 per pip Mini Lot 10,000 $1 per pip Micro Lot 1,000 $0.10 per pip

8. Forex Trading 📌 What is the Spread? The Spread is the difference between the Bid Price (Sell) and Ask Price (Buy). It’s how brokers make money. 📉 Example of Spread Calculation: If EUR/USD bid price = 1.1000 and ask price = 1.1002, the spread = 2 pips. 💰 Types of Spreads: 1. Fixed Spread – Set by broker, doesn’t change much. 2. Variable Spread – Changes based on market conditions (wider in volatility).

9. Forex Trading Cheat Sheet for Forex Analysis 📊 Fundamental Analysis (Macroeconomic Factors) • Interest Rates (Central Bank Decisions: Fed, ECB, BoE, BoJ ) • Inflation Rates (CPI, PPI) • GDP Growth • Employment Data (NFP, Unemployment Rate) • Geopolitical Events (Wars, Elections, Trade Policies) • Risk Sentiment (Safe-haven vs. risk-on currencies)

10. Forex Trading Cheat Sheet for Forex Analysis 📈 Technical Analysis (Chart Analysis) • Support & Resistance Levels • Trendlines (Uptrend = Buy, Downtrend = Sell) • Moving Averages (SMA, EMA) • Fibonacci Retracement • Candlestick Patterns ( Doji , Engulfing, Hammer, Shooting Star) • Indicators: RSI (Overbought/Oversold), MACD (Trend Confirmation), Bollinger Bands (Volatility)

11. Forex Trading 💰 Benefits of Forex Trading for Investors ✅ High Liquidity ✅ 24/5 Market Availability ✅ Leverage = Higher Profit Potential ⚡ ✅ Low Transaction Costs 💲 ✅ Profit in Rising & Falling Markets ✅ Diversification ✅ No Market Manipulation ✅ Automated Trading & Algorithmic Strategies

12. Forex Trading Forex vs. Stocks vs. Crypto: A Comparison for Investors Feature Forex 🌍 Stocks 📈 Crypto ₿ Market Size $7.5+ Trillion/day ~$200 Billion/day ~$50-100 Billion/day Trading Hours 24/5 (Mon-Fri) 9:30 AM - 4 PM EST (Stock Exchanges) 24/7 Liquidity Very High (Easier to enter/exit trades) Moderate (Depends on stock) Moderate to Low Volatility Moderate (Stable vs. Exotic pairs) Moderate (Depends on sector) Very High (Rapid price swings) Leverage Up to 500:1 (Varies by broker & regulation) Typically 2:1 (Regulated brokers) Up to 125:1 (On some exchanges)

13. Forex Trading Forex vs. Stocks vs. Crypto: A Comparison for Investors Feature Forex 🌍 Stocks 📈 Crypto ₿ Market Manipulation Risk Low (Decentralized & highly liquid) Higher (Pump & dump, insider trading) High (Whales & market hype) Profit Potential Profit from long & short trades Primarily from long positions Long & short, but with extreme swings Transaction Costs Low Spreads & Commissions Broker commissions + exchange fees Exchange fees (0.1% - 2%) Regulation & Security Highly regulated (SEC, FCA, ASIC) Well-regulated (SEC, NYSE, etc.) Less regulation, risk of hacks/scams Hedging & Diversification Great for hedging economic risks Good for long-term growth Good for alternative investments

14. Chapter 7 – Digital Assets SECTION 10 - COMPARATIVE MARKET ANALYSIS Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia