Problems of Used the Technical and Fractal Analysis on FOREX

Annotation: This article deal with the main problems of using the technical analysis on FOREX and to the defining the way of removing such problems. The major emphasis is laid to the techniques of synergetic approach because fractal analysis is one of the complicated kinds of analysis.

Key words: technical analysis, fundamental analysis, fractal dimension index, trader, pair of currencies, investment horizon. 

I Entry: FOREX is one of the most remarkable markets not for the only generation in many countries all over the world. It is characterized by many advantages such as: suitable conditions and wide possibilities. Many financial organizations, funds, commercial and central banks, and sole proprietorships are the participants of this market.  Each of such groups has its own interests and advantages on the FOREX, for example protecting the national currency or taking speculation profit. All participants fulfill their own main functions: writing trade rules, providing liquidity, regulating exchange rate. FOREX is a huge market embracing the world.

The problem of using the technical analysis, as a main kind of analysis for forecasting future exchange rate was described by such authors as J. Murphy [3], S. Achelis [1], A. Elder, E. Peters [7], B. Williams [2]. Thanks for Ukrainian authors O. Sochatska, E. Naiman [4, 5, 6], who in their researches has investigated the technical analysis problem; this kind of forecasting has become popular in our country. But some problems are not decision for this time.

II Problem: Exchange market traders require decision of such problems as choice effectively methods of trading, wage of new approaches and others. All these problems are the task of our article.

III Results: There are no statistic data about participant quantity, which prefer technical analysis and use it as their main approach.  Major criterion of choice of the kind of analysis is investment horizon of trader. Considering the answer to this question, we propose to divide traders into groups:

·        Intraday  investors (a day);

·        Shot term investors (a week);

·        Middle term investors (a month)

·        Long term investors (more then a month).

For intraday investors useful charts are: tic, 5, 10, 30, 60 min. charts (Figure 1). More long charts include shot charts. Usually chart with longer time period is characterized by a wide price diapason because, for example, during a moth courses are jumping stronger then during 5 min.  Therefore a rising or lowing of price on 5 min chart looks like strong signal but on month chart it is invisible. Thanks to volatility, investors may have profit if he works on long term periods, but shot term trading is not so profitable. Shot term trading is useful only if investor is using big lots. Many traders think that intraday trading is risky and useless. Advantages of intraday operation are possible to follow the market and to close all position in time.

If investor keeps position during a day and transfers it in to next day he has many risks because FOREX is working non-stop and profitable position today may be lost next day. For shot term investors useful charts are: all intraday and day charts (Figure 1). The day charts is one of the most popular and informative among traders. It is useful for all investors on the market. Shot term investors usually are content by not big profit. They open and close position all the time during the week. If intraday traders haven’t time for any analysis, but shot term investors are using the technical approach.

Middle term investors use week charts but main form of all is day charts. Such traders usually keep its position during long time and, as a result, have seriously risks. This group of market participants is using the technical and fundamental analysis.  I must mention that short term and middle term investors are the most active market segment.

Long term time period claims considerable capital recourses, professionalism, and knowledge. The main idea of long term trading is not speculative profit, but other strategic targets. Traders use a month chart but it is non informative (Figure1). Day chart is one of the most useful for long time investors as well.