Interbank crisis of confidence

The crisis
Signaled the beginning of the crisis was the withdrawal of license Sodbiznesbanka "May 13. Immediately after the Internet appears in several versions of "black list" containing names of the banks, which will soon be presented to claim the Central. The next was "Kredittrast, having common ownership with Sodbiznesbankom. Later, one after another to announce serious difficulties a number of small banks: "Dialog-Optim, Paveletsky, Promeksimbank, Meritbank, etc.: As of this moment the market began to MBC" frozen "- banks, fear of license from the contractors, do not willingly give each other in debt.
In June, the Internet is information about the alleged seizure of documents produced by the special services in several offices, "Guta Bank and the initiation of criminal cases against its leaders. Problems with law enforcement agencies from the bank actually occurred, but they datirovalis March 2003 presented in the Internet article did not specify the dates and were seen as a description of contemporary events. In the face of mounting crisis, the bankers did not clarify the truth of information - many banks closed limits "Gutu". Until that point, the crisis was an implicit phase and was perceived as a serious threat only to bankers - the general public to remain on the sidelines. Thunder gryanul July 1 - the media was informed that "Vneshtorgbank" will not give the group "Guta" credit of $ 400 million. The news led to a few large corporate clients, "Guta Bank began to withdraw their funds from the accounts. Indeed, the question of granting credit VTB "Gute" officially already considered solved. Therefore, the denial of credit was perceived as a very disturbing signal. All this has caused a new flow of cutting limits MBC, not only to "Guta Bank, but all credit to the organization at all. The crisis of confidence among banks reached a climax. Not knowing who is next on the withdrawal of licenses, bankers chose not to extradite each other loans. Market MBC shlopnulsya now each bank had to solve their own problems.
July 2, the depositors' Guta Bank began to prematurely close their deposits and withdraw money with credit cards. On the weekends, (3, 4 July) it was possible to see a queue at the ATM. The money from ATMs quickly ended, they were brought back, but it needed time. The time during which each owner of a plastic card uspeval tell your friends about the problem. And now the money has already been filmed, not only with cards issued "Gutoy, as with all issued by Russian banks. The crisis spilled into the streets, taking the face of mild panic and a nation of empty ATMs.
On Monday, July 5, depositors besieged office Guta Bank, stood queue of people trying to save their money faster. In a media information (and not subsequently confirmed) of the problems at Alfa Bank. " Now turn and appeared here. All Monday banks regularly gave money, working hours of some branches have been increased, done everything to bring down the panic. By the evening turns decreased, the situation has almost returned to normal. However, on the morning of Tuesday July 6 in Moscow, no one branch of Guta Bank has not started work. By the middle of the day "for technical reasons" were shut down all its branches in St. Petersburg, in the evening - in other cities. At the same time, the media has information on the possible withdrawal of the license of the "Guty".
July 7, reaches its climax the second stage of the crisis - all depositors besieged banks and ATMs, and recorded in the queue to withdraw money. Visa International is blocking the operation of plastic cards issued by "Guta Bank. Alfa-Bank is the staff of the holidays and increases the working day. At the same time, several aircraft and a lot of collector cars deliver cash in the offices of "Alpha". By the evening of the Alfa-Bank "takes an unprecedented decision - entered desyatiprotsentnaya Commission for early withdrawal of money from time deposits. In the media immediately began discussions on ethics and legality of this step, but it clearly is effective - the flow panikuyuschih investors recedes. By the end of the week number of those wishing to withdraw money urgently markedly reduced, and by the end of next Alfa Bank cancels commission. VTB has announced the purchase of "Guta Bank and the crisis ends. This is a landmark moment - as soon as FAS gives permission for the takeover, but it took less than one day (!), Officials immediately declare the resolution of the crisis.

Causes

Speaking on the causes of the crisis, first of all you need to indicate in its principal difference from the events of 1998. If ninety-eighth decline in the banks was due to budgetary crisis, the the state could not pay the debts, then this time it was just about the banking crisis, and therefore not such a global and disabilities caused by a young Russian banking system.
Remember how, in general terms, is banking business. Bank accumulates funds, taking money on deposit, then gives the money in the form of loans. Creditors returned the money with interest, and the bank pays to investors, earning the difference in interest rates. This scheme is highly simplified, but represents the essence. Obviously, the bank sets the line between the dates on which he returned the money and end dates of term deposits, and also takes into account the risks of a non-credit and early termination of the deposits. The Bank holds some of the "cushion" of cash and highly liquid assets in case of need for urgent payments. In the case of a sharp (unscheduled Bank) an increase in the number wanting to withdraw money, the bank takes the credit on the interbank lending market (ICB). At the same market bank "sells" surplus funds, reducing the size of his pillow. " To do otherwise (to keep the case without a huge "cushion" of liquid assets), the bank simply can not - because starting with a certain amount of "cushion" the profitability of banks is reduced to zero and even became negative in real terms. In fact, MBC reliable banking system to insure against unexpected "distortions" and local crises. The bank, suddenly found themselves cut off from the mechanism of ICB, in danger of falling victim to balance the gap - that is, fail not because there is nothing to pay at all, but because there is nothing to pay now, the money will be tomorrow. After all, the investor can collect the money before the end of the contribution, but the bank can not be issued by the borrower to return the loan ahead of schedule (for Russia in the general case, this is the case). That was what happened in early July - paralizatsiya market MBC has left the banks alone with panikuyuschimi investors who obankrotili some of them.
But what happens if suddenly a huge number of contributors (including the crisis of corporate clients) across the country want to withdraw money from accounts in Europe or the U.S.? In developed countries there is a system of the Central Bank overdraft lending commercial banks. At each commercial bank has a limit value is determined by the degree of reliability and many other parameters. In critical situation, the bank can get instant loan from the Central Bank (or the Fed in the case of States) to prevent the balance gap. The very existence of this scheme calms investors, reduces anxiety in the bad moments, and then - almost eliminates the likelihood of a crisis. In Russia, such a scheme does not work happened that, and the Central Bank spent a lot of time on the day the decision on granting the loan, thus exacerbating the crisis. This reason is likely to be resolved is not yet very soon. This is a matter of civility financial environment - banks must become more transparent, and state agencies more open and reliable. And in the end must be corresponding changes in the legislation.
Another reason relates to the current situation in the country. Since the arrest of Khodorkovsky, and as untightening situation with Yukos, began the flight of capital from Russia. Over the past six months have left the country for more than 15 billion dollars (according to the Center for Development "Sergei Aleksashkina), which is four times more than during the same period in 2003. This has created an exodus of funds from accounts in size and brought the crisis.
Interesting wording, explaining the reason for revoking the license of the Sodbiznesbanka:: failure of federal laws regulating banking activities, and regulations the Bank of Russia, as well as repeated violation of the law "on combating the legalization (laundering) of proceeds." In fact, this phrase has become a signal to top "freezing" the market MBC. Given the fact, taken from where the capital of banks registered in the period between 1990 and 2000, which meant that following the withdrawal of licenses for each may be - in Russia is virtually impossible to find a bank that is not suspected in the legalization of income.
It is impossible not to draw attention to the serious mistake of Viktor Zubkov - Chapter FCFM (Federal Service for Financial Monitoring). Commenting on the media situation with Sodbiznesbankom ", he stated that he FCFM have similar claims to have more banks. Hence the cause for the proliferation of fictitious "blacklists", which seems to not exist, and inflame the market MBC.
Another possible reason, which worsened the situation for "Guta Bank - is a strong drop in Russian stock market in recent months. There is reason to believe (opec.ru), that the bank had invested heavily in the shares of Yukos, which over the past two months before the crisis have lost the price up to 50%. In addition, June 16, the RTS has published a list of seven companies - participants in emergency section FORTS, which are not fulfilled obligations iyunskim futures. This list has been and Guta Bank. The situation with Yukos shares and futures can be a serious mistake risk management bank. It is unlikely that it could bring so much damage that there is a risk of bankruptcy, but in a tense situation, it was another reason for closing the limits on MBC "Gutu".
There is another reason for the crisis. In the media to actively (and the reasonable) mussiruetsya major topic of interest (and especially the public) banks in this crisis. There could be a coincidence that the information on the refusal "Gute" to grant a loan "Vneshtorgbank" soaked to the press in those days. And nothing could be so casual quick approval from the Federal Antimonopoly Service for the purchase of VTB 85.8% shares in Guta Bank, immediately after which the crisis was officially over. " According to the manual "Alfa Bank" ( "Russian Newspaper"), is confident that much of the information on Alpha, tsirkulirovavshaya in the media during a crisis - it is "proplachenny black PR." Ultimately, the state-owned banks have benefited, but all commercial losses to some extent.
All this suggests that state agencies are likely to deliberately ignore the crisis at its early stage. And as soon as the situation is resolved in a scenario, favorable gosbankam, have taken the necessary measures.

Consequences
There is reason to believe that we will see a continuation of the crisis in August and September. At this point, to be published financial statements of banks. And be aware of the value of losses incurred as a result of the July events. This can cause a narrowing of the new market MBC. At the same time, Central Bank will begin to study the information provided to it by commercial banks to participate in the system of deposit insurance. That's when the Central Bank is likely to begin to withdraw the license:
Will this second wave of crisis or will be relatively mild - is now difficult to predict. Most likely, it will look like a series of reviews of licenses with subsequent acquisitions. For investors it will be safe, because absorbing the bank will fully assume the obligations of uptake. Perhaps this procedure extend for six months and more - in order not to cause panic, while the collapse of several banks. And it may be triggered by a new crisis, as repeated attacks on non-resistant major banks - such as a "Guta Bank, and what remains" Alfa Bank. "
Ethics (and the legitimacy) of action of CB is in doubt, but ultimately this is a bit ozdorovit the Russian banking system. Indeed, Russia has to date more than 1300 commercial banks - the figure of at least an order of magnitude exceeds the "norm" for the economic development of the state.
Gosbankami absorption of small banks - although aggressive, but in general, is useful for Russia. Worse is that the absorption of large banks with an extensive branch network (like "Guta") might lead to monopolization of banking services "Sberbank and Vneshtorgbank. Given that holding to the terms of the commercial banks will bear the loss ( "Alfa Bank", according to various estimates, have lost during the month from 10% to 20% of the depositors and to 10 million dollars of direct losses), this will further increase the share of market attributable to the banks in which significant stakes in state-owned.
Regarding the legislative side, the following consequences. A law on payments to the Bank of Russia on deposits of individuals recognized in the bankrupt banks not involved in the system of compulsory insurance of individual deposits in Russian banks. " The law gives the government guarantees to depositors ruhnuvshih banks retroactively - on deposits, open since December 27, 2003. Another law makes changes to the law on the Central Bank and on banks and banking activities. " According to him, the Central Bank can now limit the amount of the interest rate commercial banks on time deposits. This should reduce the risks in the banking sector (of course, at the same time reducing the yield). Since 2006, will start in normal mode, the system of insurance of individual deposits. Banks are not logged on to take deposits from the population can not, then this is another way to reduce the number of banks, while reducing the risks of investment.
Furthermore - and I think Central Bank will, through legislation, to prevent Russia in branches of foreign banks, at least until 2006. On the one hand - it would effectively develop the Russian banks, on the other hand - would strengthen the monopoly and make the integration of Russia into the international banking system.
For ordinary investors, all this means: first, that the banking system in Russia in the next two - three years to become much more reliable, and secondly, that within the next year is possible "echoes" the last crisis, which may be destroying the nerves, but will represent a serious threat to the banks rather than investors.

Anton Plyasunov
(EA United Markets)

Participants in the stock market

The main actors in the stock market are, of course, big mutual funds, major investment companies and banks. They are such as accumulate funds of ordinary depositors, which is several hundred thousand. Their deals are always quite high and, as a rule, the deal does not go in one day, and stretched for a few, as appears on the market counterparties on the other side wanting to make a deal. Large investment companies have well-diversified portfolio of securities, which allows them to be in a stable condition in comparison to other investors.

Typically, the development strategies in such companies is a group of professional analysts, rating the most fundamental factors. The actions of these analysts, as a rule, is always limited and strictly controlled by the supreme leadership of the company, and are aimed at avoiding unnecessary risk investments with a proposal for a trader. Efforts to this command entirely recovered thanks to the high volume of transactions in which even minor fluctuations in price have a significant income. Moreover, the analytical departments of major investment firms and mutual funds have the latest software analysis and the latest developments in computer technology and telecommunications. Major investment companies also have a full range of information services, moreover, with their brokers on the exchange, they can make their own quotes purchase, speaking, in such a way as a market maker, but this will be written below.

A more limited companies have less capital. These companies typically can not carry out their transactions on favorable exchange rate for them, because of the small volume of transactions. Nevertheless, they have successfully diversified their capital, but were unable to keep up to date equipment and software are equally large companies. Analysis Division market less qualified, because of the fact that the company could not initially appoint a high salary for such a responsibility, and to link future earnings for future income earned through these traders for the company. Partly because of that company's traders enter into a risky transaction, in order to obtain more profit, but on the other hand, they risk a lot to lose. Because of these factors, companies with small capital, have fewer opportunities to generate income from investments in securities, as large companies, and the way to the Revenue for more risky.

However, the weak and vulnerable in terms of these factors are the ordinary investors. Going to the market through a broker, they enter into a minimum transaction allowed the market and a few lots. The situation is made worse at times and that those few lots were purchased through margin accounts, provided by a broker, at the price proposed by the broker. In such circumstances, ordinary investors can not have a well-planned portfolio of the 4-10 attacks. They lack the tools and opportunities to buy large batches of stock and to monitor each of them, as well as in margin account, they will be able to follow only the movements of quotations of securities 1-3, controlling the time the broker will offer to update your account or sell some of the securities .

Most ordinary investors, before arriving at an investor in the stock market, engaged in activities or as a non-investment, or playing the stock exchange. Sometimes these people lack the knowledge, and reading one or more pamphlets or books on market analysis, feel half-professional players, but it is not so, and as will be shown below those of ordinary players and investors in the vast majority of cases will directly depend on their the ability to control their emotions and psychological state, with control of open positions.

Ordinary investors, as opposed to investment companies are not able to get fresh quotes and economic news in real time and thus quickly respond to them, except for this market analysis of these investors restricted their personal views on the analysis. Software and computer-assisted ordinary investors also lagged behind those that are used in smaller investment companies. All these factors have led to the weak position of ordinary investors in the stock market.

Then look at the classification of participants in the stock market in market terms. In terms of strategy they are divided into four groups, each of which is in compliance with the name of four animals: bulls, bears, pigs, sheep.

As you know, bull horns, beat the enemy from the bottom up, so the bull market is associated with the buyer, the player who makes a bet on improving quotations and wins when prices rise. Bear on the contrary, the defense, beat the enemy paw down, so the bear went into the jargon of market participants, as the seller, the player who bet on the decline, and wins when prices fall.

Pigs are alchnye players. Having lost all of the greed of caution, they fall under the knife. Some pigs are buying or selling prohibitively high for those positions, progoraya at the first slight movement of the market is not in their favor. Other разоряются, perederzhav position, that is, continuing to wait for even greater profits, although the trend has turned.

Sheep are timid players boyazlivo following trends, rumors and gurus. From time to time they natsepiv a bychi horn or a well-bearskin, trying to act as experts. However, they are easily recognizable by жалобному bleyaniyu when the market come hard times, such as, for example, the lack of trend.

As soon as the doors open markets, the bulls are beginning to buy, bears to sell, close and violation of pigs and sheep. It is these groups of exchange, serving buyers and sellers, prices are formed, which in turn depend on the price of demand and price proposals. "The price of demand" is the price, which asks for the desired goods to the buyer, and the "offer price" is the price, which proposes to sell the goods. Disputes between buyers and sellers due to discrepancies in prices of supply and demand and are permanent.

Buyers want to pay as little as possible, and the sellers ¾ take as much as possible. If the two teams will each stand on their own, without changing the price of supply and demand, the transaction will never take place. If the deal does not take place, the market did not get the price of the paper, as the price of supply and demand only the desired price of the seller and buyer. A seller has a choice: either to wait for price increases, or to agree to a proposed lower price. A buyer also has a choice: either to wait for lower prices, or nadbavit its price. The transaction takes place at a time when both parties to assess the market the same way: a pushy bull, agreeing on the terms of the seller pays for the product more, or timorous bear, agreeing on the terms of the buyer sells the goods cheaper. Throgmorton Street ranged his presence led to action, and the bulls and bears. They speed up the negotiation process between the bulls and bears, as the competitors themselves are able to intercept and advantageous position before.

The buyer knows that if it is too long razdumyvat, another dealer, interfering in the bidding, uvedet goods. And the seller knows that if you do not sbavit price, another dealer, interfering in the bidding may go to the assignment of another seller. Abundance hesitant dealer encourages buyers and sellers be posgovorchivee with each other. The transaction takes place at a time when the two men ¾ the buyer and seller evaluate the market equally.

Work on the EUR / USD ungrateful occupation

Since the introduction of the single European currency has been a year and three months, a history, and now you can make the first analytical conclusions. It is known that at the time of emergence of the euro, many analysts things are the most favorable forecasts for the euro. Some believed that by mid-1999, the euro will reach 1.25, and will be confident in price relative to the U.S. in the future. However, history has shown otherwise. What are the possible causes of failures of the first euro?

There is already mass analysts expressing their own views on this matter. Most of them quite rightly argue that the projected economic growth of European countries is lower than projected, while growth in the U.S. economy above projected, because of this, investor sentiment has changed: the dollar becomes more attractive. There are also views regarding the internal contradictions of participants in the euro zone, vylivshihsya in the scandal with the appointments of key management positions and power. For the stability of the euro, above all, it was necessary to strengthen the credibility of the European Central Bank (ECB). To this end, the ECB in the early years of its operations is particularly important to establish its own distinct identity. Management of the bank was required to act in such a way as to eliminate the suspicion that, in its ranks, there are some kind of national coalition. The battle between the Dutch Wim Duysenbergom and Frenchman Jean-Claude Trichet for the appointment of the first president of the ECB has been counterproductive, switch attention to the professional abilities of candidates to contest states.

France wanted to nominate its own candidate for the post, others resisted. Absurd compromise achieved as a result, allowed France to claim that Duysenberg goes to resign from the post of ECB president in four years (instead of eight years) in favor of Trichet, while Duysenberg himself could deny such an intention. All this is not added to the prestige of his institution. Equally important was to establish proper accountability of the ECB to ensure the long-term political support for a common currency. Weakness explanation from the ECB of its economic policy in the event of any serious economic disruption in the euro area can only strengthen antiintegratsionnye sentiment in public opinion.

Significantly less, yet can not be so obvious to the countries participating in the euro zone, is the fact that the euro is based on a single monetary and currency policy, which is fully transferred to the supranational ECB and the EU, as well as vysokointegrirovannye cash and credit markets, the scope, depth and liquidity that has increased through the creation of the EMU. A single monetary policy could be effective only if the countries belonging to the euro would have the same level of development, but, as we know, this is not the case. Regarding the "strong" euro would not benefit primarily poor countries, as a relatively "soft" euro hurts the interests of most developed countries, notably Germany and the Netherlands, which will be subjected to inflationary pressures.

For the majority of the member countries of EMU (with the exception of Austria, Germany, Belgium, Luxembourg, the Netherlands and with well-known reservations France) until the mid-90's was characterized by considerable asinhronnost the economic cycle. It is therefore possible the emergence of so-called asymmetric shocks, that is, economic shocks that affect only a few euro. The transfer of currency and monetary policy to the Union of national States deprives the principal means of crisis management, while the Union is, by definition, can not adjust their policies to the current needs of individual countries, therefore in the euro zone will occur with greater frequency of crises affecting euro investment climate.

From the viewpoint of economic theory, the 11 Member States of EMU does not constitute "the best currency zone, and their decision to establish a union has been primarily political in nature. Therefore, while the EMU and the euro remained the experiment, the outcome of which has not been clear.

The main weakness of the euro as the currency is that it is not a sovereign state with clearly defined interests and political objectives, a conglomerate of various nations. Created by supranational bodies have a broad but still limited, delegated authority.

In the beginning many were interested in launching the euro this question: how fast (if at all a) other countries are reorienting their reserves to the euro? Stable transfer of reserves of foreign central banks in the euro would seriously support and strengthen the confidence of foreign investors in the new currency. However, povalnogo transfer of reserves in the euro did not take place. This protivodeystvoval a number of factors.

First, do not expect the transfer cost reserves from using a fixed rate, mostly pegged to the dollar or a basket of currencies dominated by the dollar. These states are unlikely to have made a significant change in the near future, after the introduction of the euro. In addition, most countries in Latin America and Asia have a stronger trade ties with the United States than with Europe. They are also not worth it to wait for dumping dollars. Certainly, you can only say that if changes in the structure of reserves in these states from the dollar and the euro will happen, then the process will be gradual and not significant.

Another prerequisite for becoming a reserve currency is the availability of financial markets, where central banks are willing to invest their foreign currency reserves. The global financial centers in Europe can be identified only Frankfurt and London, and the latter focuses more on America and Asia than in Europe. Certainly, U.S. financial markets are most developed in all respects, than Europe, which has added a lot of advantages in the fight for the role of the dominant currency. Moreover, the United States to pay interest on dollar assets of foreign currency authorities, who are placed in bank deposits or securities. Thus, financing the deficit by increasing U.S. commitments in relation to the official holders of dollar reserves virtually no different from the usual borrowing in the form of securities. The main advantage is that the medium-and long-term interest rates slightly lower than they would have been if the dollar does not have a reserve currency.

The advent of the euro has created an invisible competition between the two centers of the USA on the one hand and Europe on the other. And that would not say analysts loser in this competition, the currency will lose support and influence in the financial world, and the country's control. Following this logic, we can assume that the strong euro does not need the U.S., a weak euro does not need members of the eurozone countries, which means that both parties will take all steps within their power (of course within the limits of their knowledge and to the extent necessary) to reasonable strengthening its own currency.

It would probably volnodumstvom suggest that U.S. financial authorities have defined the strategic plan for the dollar to the Euro, but acknowledge that competition in the financial markets of the two currencies is quite reasonable. In turn, such a measure of competition, "spuskaemye above" may contain as improving the investment climate by changing the law, and the artificial equalization rate through currency intervention. It is these factors lihoradyat Market euros.

Primary treatment of 1,18 unlikely, could put on a suspicion, investors in euro-denominated assets, through which a 14 months old on the composition of the 0,94, marking thus fall to 20.5%. Actually, this is catastrophic decline, could only reduce the capital investors in euro-denominated assets, as well as almost non-existent in Europe risk financial instruments, giving 20.5% and more, to compensate for losses from the devaluation.

The consequence of this and has long listed the reasons for the decline rate. So if at the beginning of 1999, its assets transferred to the euro, investors are very cautious, but now seems to have disappointed the Europeans in the euro and the dollar to invest in financial market instruments.

This turn of events is not considered the financiers of Europe, opening the way to the euro, so the step response, a recovery of the euro. However, because of a fundamental nature, the basic trend of the ECB was unable to break. Remained only a violent attempt to confuse the desire medium-sized and small speculators, following the main trend and the bear. Violent actions of European powers to maintain the course was to conduct foreign exchange interventions by selling dollars in the foreign exchange market.

As history has shown, foreign exchange intervention can be as long, long day, or momentalnymi, long few seconds. Long intervention forced the ECB to dismiss the market large quantities of dollars, as in this case met the desire of all parties, namerivavshihsya exchange currency in the day, this was mainly on exporting and importing. In a lengthy ECB monetary intervention, usually begins slowly to meet the current requests for dollars, raising the rate for 15-40 points for 5-15 minutes. In total rate rises, as a rule, at 120-180 points for the day.

In the case of a sudden currency intervention ECB at one point dropping to the market a considerable amount of dollars, than immediately meets the current market demand for dollars and the remaining amount of an excess demand for euros, the price, which increases dramatically. This intervention resulted in a drastic course of isolation from their former values and temporary stabilization of its level of 90-150 points more original. Later, the stabilization of the course at this level might not happen: a course can quickly rolls back to a half-off, but it may gradually deduct points points. Further evolution rate will depend on the hands of market forces that shape demand and supply in the market, as well as follow-up the ECB.

The key to speculators, of course, are not the consequences of the intervention, but rather the very intervention. The sudden intervention undertaken by the ECB, is aimed not only to maintain the course, and cooling the hot heads of medium and small speculators, using the shoulders 40-100, and cling to the trend. Everyone is well aware that no place, no Dealing Center, is not capable of such a situation to close an open position on the stop-loss of 25-40 points. The office, in which speculators holding accounts may, in general, reduced to zero, or close the account, even if the rate was at an artificially elevated level of just a few seconds. It follows that the sudden intervention ECB could lead to a complete disaster and bankruptcy bills speculator. This is the most dangerous.

Experienced traders, did not recommend that work on the newly emerging markets, whose history has not yet made up of three years or more. They believe that, first, the young markets have not yet formed a group of professional participants of the bulls and bears in the market resulting in less predictable, and secondly, did not determine the potential effect on the market to external factors, including actions central banks and supervisory bodies.

The advantages of trading systems to other methods of decision-making in the securities market

The advantages of trading systems to other methods of decision-making in the securities market.


In order not to be at the scene of sheep and pigs, and if they have, then be able to quickly get out of the market, you need to understand the strategies of the market all the dealer groups, ranging from professionals to ordinary investors.

The approach any stockbroker to trade in a 100% mechanical, or by 100% subjective. Meanwhile, stockbroker, who have designed and well-designed trading system, there is no need to take commercial decisions themselves. They have a plan that says exactly what to do in any situation. All of them want to ¾ is to monitor the market to determine what actions are dictated by the trade and plan to order the broker. Most often, these plans are computerized trading. Dealer enters the market data and trading system was said to him what to do.

On the other hand someone who is not trading on the plan, has no fixed rules. It takes trading decisions subjectively, when he pushes the date, he has no guiding thread, except his idea of what will work well. While he tries to learn from previous mistakes ¾ this does not help, because the correct decisions are not always end in profit and incorrect decisions did not always end with losses. But do not categorically assess the chances of such dealer, dealer history knows examples of successfully applying the analysis of Hanna, Fibonachi or astrology, and providing that there is a market order, but in this case, their success can be largely attributed to good management techniques in cash and a disciplined risk control and not the correctness of the provisional theories or methods of prediction.

For dealer selling not characterized as mechanical and emotional side of decision-making. The effect of fear and greed just remarkable. The nature of rights is that under the influence of these feelings, he invariably takes a mistaken decision to speculative arena: so instead of closing the lucrative positions, he pays an additional application for the purchase of the broker at a time when the trend is already waning. One of the main distinguishing features of the professional dealer in the fact that they have learned to control their fear and greed. They do this through self-discipline, which implies that the decision-making process has a structure designed, moreover, they are subject to signals from trading systems ¾ in fact, it is the only way to minimize the emotional strain, will inevitably destroy each trader.

All are more or less successful Throgmorton Street, not to mention the big investment companies are applying a relatively mechanical approach may find themselves unaware. Instead, most fans are more likely to use a subjective approach, following the short-term changes in prices as a guru. Many professional financial managers will have a system that is 100% mechanical. Those who do not operate 100% mechanically, typically allow themselves only a tiny number of opinion beyond the scope of their system.

When fully mechanical approach at the dealer will have a group of markets with which it will work. He will be the mathematical formulas that are based on the previous price talk, when to buy and when to sell. Will the rules of entry, exit rules to the playback position and the rule for vyigryvayuschih positions. Will the rules, when the trade and when to complete each of the systems. The only challenge facing the dealer, will be in the initial selection of a suitable market for each of its mechanical trading system and optimizing its parameters on the basis of available historical data, so that does not fit your trading system using historical data, and simultaneously to achieve the statistical advantages according to which:

(the average winning trade) * (% of winnings) ¾ (the cost of a broker and slippage)> (mean losing the deal) * (% losses)

Such a statistical advantage, but could not reach traders selling subjectively based on their perceptions of the market. Their income is likely to depend on the simple everyday factors, since these factors, not to mention the impact of rumors and guru, will influence the perception that the subjective traders would see on a computer screen.

In technical analysis, there is a whole lot of mechanical trading systems automatically decision about buying and selling securities. Some of them are quite complex, have their own methodology and understanding the market and contain several indicators, while others are based on a single indicator: whether moving averages or parabolic system, and also show good results. Many disadvantaged experience, stock analysts are trying to use as much as possible indicators in the trading system, and at the outlet willing to get a single consolidated signal. Typically, these analysts use several indicators of trends for the signal to start the trend and a host of indicators characterizing the zone perekuplennosti and pereprodannosti. But such searches cherished system with multiple indicators, according to the author's work, the vast majority of cases are doomed to failure because of two simple reasons.

The first reason for this ¾ contradictory signals: for example, while the use of parabolic systems and grid systems on the market slightly trend often signals of different forces and, if considered oscillators, the more they can often conflict with each other. The second reason is undesirable use of multiple indicators ¾ this delay signals. Even if the system is, for example, the trend of several indicators to it, because of construction, it is necessary to receive signals from at least the majority of indicators. But due to the fact that the trend indicators are the delay or, at best, simultaneous, the signals from the trend indicators will come only after the beginning of a new trend, and the overall signal received at the time when the trend is maturity. At that time, professional Throgmorton Street will gradually close their positions, and Throgmorton Street with trading systems to help them by engaging with them in the transaction. Closing position at such dealer will also occur at a time when the trend has changed and has become a recruiting force. From all this it follows that the use of such trading systems are either not efficient or inefficient and risky.

By virtue of the above considerations, to use the trade system with a small number of indicators and a tendency to detect at an early stage, rather than catch it for the tail. "

Requirements for the trading system

Requirements for the trading system in the process of designing.


An important element without which the design of the system has proved to be not complete a psychological and capital trader. What is behind these resources? As has been discussed in the first chapter of the work, self-trader, and the ability to control their own behavior and emotion plays a significant role in obtaining profit and loss-making positions, as well as frequency of transactions. Trading systems are not self-sufficient after their launch, they can be interrupted at any time at the request of the trader, obessilivshego of the type of damages or the number of open positions in several markets. By virtue of this system is necessary to conform to a type of trader, the type of character.

This is very important, because otherwise even staying in the position of the trader will have an unspeakable delight of the type of profit more than he could count, or is in deperssii, the type of loss more than they can accept. These emotional states are equally bad effect on the psychological balance, and contribute to early care trader from the market. It follows from this fact, according to which it is important to focus the system on their own perception of the market, or customize your own perception of the market on the behavior of the system, otherwise there is an imbalance leads to early exit from the market.

Next type of restrictions on who is worth paying attention to is the capital trader ¾ the amount of funds available to the trader and may invest in the market. Most Western traders tend to figure at 25,000 U.S. dollars ¾ svoeobraznomu limit below which the chance to reach a positive income is very low due to the payment of commissions and slippage. If a trader is below the specified amount of money that the only possible way out could be a breakdown in trade with the placement of a very narrow defense suspensions, but this method is almost no trade in the form of implementing the system, and implied a subjective approach.

How to design a trading system

The structure of the trading system

The structure of the trading system needs to focus on the behavior of the market, specifically on the movement of the trend. To do this you need to first understand the components and life-cycle trend. Taking into account the previously described behavior stockbroker, and hence the movement of prices, we can assume that at any moment the markets are composed of three trends. The first trend is the longest, consisting of several months, should be used to determine the direction of the market, and to which you want to open positions. The second movement of the observed market correction could be a trend, which will consist of a few days, and which is determined by, the use of more sensitive indicators. The last movement of the market a little bit like a lateral trend, which is among the correction and the continuation of the basic trend is the short-term price movements in one or two days, used for precise input. For the exit should be used as a short-term movement, but in this case, the basic trend is not replaced by a correction, but a new trend in the opposite direction. Following such an understanding of the market, to open a position is necessary to use two or more trend indicator, signals the opening of the position and oscillator or trend indicator, and to close the position. A more detailed description of these indicators is disclosed below.

Rules for the opening position

Quite an interesting analogy hold the author of the book "Computer analysis of futures markets," Le Beau and Lucas between the entrance to the market and firing a handgun at a target: at first sight it is necessary (to find a direction). Then vzvesti trigger (ready), and then gently press the trigger (enter the market). In fact, the same two or even three-tiered process otyskivaniya happening at the moment of entering the market. In the first instance by using less sensitive indicator of trends, with a large order of the system determines the main direction of movement of the market, or the main trend. Then, after a long-term direction of the market has been defined, the next task to find the medium ¾ indicator, which gives a series of signals inside the long-term trend. These signals can occur at the end of the main trend correction. Also, a series of signals will be needed, because the first interim signal indicator medium arise before long-term indicator will allow the system to trade in that direction. It must be borne in mind a clear sequence of signals from different sensitivity of the indicators according to which the short-term signals arise first, then medium and finally, the long-term signals. By the time will determine the long-term trend, the first intermediate and short-term signals are already there and the system will be more important to get re-intermediate and short-term signals a few times within the long-term trend.

There is a relatively large set of useful intermediate indicators, which can be single or double moving averages, breakthroughs channel signals parabolic system, the regression line trends. Using the system, the importance of a separate intermediate indicator, usually suppressed in the combined system, the fact that the system is built around a combination of indicators that could in the worst case of conflict with each other. In such a situation, it is important to choose an indicator that the trader would have felt the trust and confidence which gave a series of short signals during prolonged trend.

Open positions run market activity, followed by the intermediate signal. In addition, there is the choice of launching mechanism. For example, you can place the entry point at the new peak or trough movement or select a point of entering the borders of today's peak or depression, having a warrant. Some traders are being very cautious, decided to await the entrance to a series of peaks or troughs in the desired direction, but such tactics lead to a loss of potential profit. If you trust the first signal system, the input can be selected at the first closing in the right direction, it is joining the program allows for the exchange complex MetaStock, on the basis of which the third part of the work will be carried out testing and optimization of the trading system. The important thing to remember here is that it is necessary that the price action confirmed the signals the rest of the indicators system and allowed the market to the run entering the system. Most good traders profit immediately after the start of the system, because their systems tend to behave synchronously with all three trends from the beginning.

Terms of closing the position

Once the rules were designed for the opening of the position should be identified and with the rules of entry, as defined in the view of many traders, a more awkward. The problem is that would be able to correctly identify the end of the main trend or the beginning of correction, furthermore, should be able to retain control over when they receive a small profit or loss.

It should be noted that the opening of positions on a signal system is not always profitable, since the trend indicators can make mistakes and, in this case should be determined to stop the signals that the system will close the position. Losses in the footsteps of the signals are needed to avoid catastrophic losses. Any experienced trader uses stop signals implemented protective suspension, and traders who speculate in the markets of non-stop losses, are doomed to failure, and the only thing that can change, so this is the time for which they razoryatsya. As correctly noted the authors above-mentioned book: stop loss is similar to the contributions to the insurance policy and should be viewed as a necessary fee for the business.

When trade takes place in the anticipated direction, the trader is faced with a choice between obtaining a rapid but steady income, or the continuation of trade in the hope of more gains. What a trader in such a situation? Perhaps one of the exits can be a floating suspension, while others may yield a oscillators whose ability to guess correct the trend and turning points are described below.

Using a stop signal

There are five types of the most popular stop signals used by the creators of trading systems:

1. The initial stop signal (max loss stop): The signal, which the filing when the advance of the percent loss from the original account or a fixed amount of funds in the open position.

2. "Floating" stop signal (trailing stop). The position is closed if the predetermined amount of current profits is lost, that is a stop signal to the market, and when profits decreased by a certain percentage or a specific value of a closed position. Floating stop signal relates to sledyaschim suspension.

3. Removing the profit (profit target stop): This closes the position of the stop signal, when a certain amount of profits that were originally defined by the trader.

4. The level of break-even (breakeven stop). Allows the user to determine the level of current income, and when the market exceeded this level, the price of opening the position of becoming a stop signal to the exit. So the trader actually insure their investment.

5. The lack of activity ¾ stop signals in time (inactivity stop). This type of stop signal starts when the market is unable to provide a certain percentage of income towards the open position during the designated period.

In addition to choosing the type of suspension should solve the problem of the value of suspension. Stop losses in the general case are divided into two categories: those near and far. Ideal same stop should be one of those that are located far enough to just go abroad or accidental, from a technical point of view, meaningless price movements, and at the same time be close enough for comfortable control risks in trade. In fact, the ideal goal of the suspension are mutually exclusive, which forced the search to bring to a halt, which are either too close or too far. It should consider all the pros and cons of each option.

Close stops offer the obvious advantage of small losses at each position and moderate overall risk to the portfolio of open bidding. However, this process leads to a weakening of the financial and psychological discomfort experienced by many of the stops on the bid, which could be very profitable if the original position allowed to go their way. Traders can avoid this problem by simply defining a convenient method of re-entering, which will return them to the market in the original direction just in time to catch most of the remainder of potential income. But, as always, a compromise. This logical step to return to the market will inevitably lead to increased activity of the system, which significantly increases the cost of transaction costs and slippage.

The system, which uses near-stop, face a disadvantage, as expressed in the increased percentage of loss-making trades, but will receive the privilege of a lower average losses. The system was far from the stop, would have a tendency to increase the winning bid per cent in relation to the system with close stops. Remote stop is not faced with the challenge of re-entering, and keeps control of the slip and the cost of fees. This picture dovershaetsya significantly increased the average losses on trade and significantly increasing overall risk to the portfolio. It seems that there is the choice of the lesser of two evils, or an acceptable compromise between the equally unpleasant possibilities.

On the basis of technical indicators can be developed is not perfect but still acceptable procedure, which will include the basic principle of the job stops, avoiding most of the problems associated with random fluctuations in prices. As one possible approach would be to use the standard deviation of prices from moving average and then place the stop a few steps away from the standard deviation of the rolling average.

As a practical matter, and perhaps as an effective alternative to complex approach, the standard deviation could be used by the average daily price range as the minimum distance for the job stops, which will help avoid most of the small fluctuations in prices, leading to derganiyam. To do this, you can simply install the 5-day or 10-day moving average of peaks and troughs, and then locate the source stopping at a minimum distance, which will be equal to the distance between the moving averages. As long as the market moves favorably, too, can stop coordinated this distance. This technique will help to avoid what is called "random fluctuations in the course of the day" because it keeps stopping far enough to avoid the daily fluctuations. In order to stop the position will require an abnormal fluctuation during the day or a series of hostile daily price changes. Maybe this method does not provide an ideal stop, but it can be very useful in the sense of finding the minimum distance to stop, to avoid unnecessary dergany.

Other possibilities job stops that fit the definition of ideal suspensions are a point on the graph, such as levels of support and resistance, peaks and troughs of recent days, parabolic stop and possible envelopes or trendline, but such methods as the resistance levels and virtually no support to programming and thus nerealizuemy as a trading system.

The preferred exit strategy

There are some of the most popular exit strategy. One ¾ method of joining and keep the position for more revenue. This method is more like investing than in the medium-term trade and working for long periods. The method of re-entry and retention is more appropriate so as to traders who are not opposed to large losses and painful Losing periods, which would deprive of courage, and very costly in the short trends. This method is suitable for trade only their own considerable capital and requires a great deal of experience, confidence and discipline, and most suitable large pension and mutual funds. The main component of the risk of this method for high-income pursuits is that a single trader almost inevitably ends in mid-output period of severe losses. The vast majority of traders can not withstand the kind of high income, they have missed, and they are psychologically unable to withstand the inevitable loss, regardless of how well they were trained or educated. At the same time, large mutual and pension funds in accordance with their strategy may prove to be more flexible.

Less popular exit strategy is a method aiming exit when traders closed, reaching pre-determined price targets. However, each strategy has its reverse side. In this case, there are some fundamental problems associated with the possibility of predicting certain levels with a certain degree of accuracy. Everyone can point out some obvious support and resistance levels, which could make the trend waver, but with the exception of the overall analysis, even doubtful that a more precise aiming in fact a real possibility. No one knows where the market is unlikely to be able to predict with any accuracy.

Trader using Sighting exits, gets the advantage in that he is not faced with the problem of monitoring large unrealized losses of revenue. On the other hand, it will definitely suffer from the frustration that many prices have not reached the predicted targets. Trader will also need to learn to withstand disturbances arising from the supervision of how received less income, while it can get more if there is a little more patience.

Another popular strategy ¾ a compromise that provides the advantage of rapid income and leave at the same time, the opportunity for more revenue. The essence lies in the fact that a trader uses a dual trading account and receive income from one position to priberezhennoy price targets, and the second position allows you to be open in the hope of getting a big win. This method requires a large capital investment, compared with a trade account, but it has obvious advantages in the event of traffic ugadannogo trend. Quick income of a single contract would always give more freedom to the second, and you can afford to be very patient. To deposit one win, one can give the position a second time to avoid the premature shutdown.

In addition to the benefits of this strategy, there are negative aspects. The apparent lack of a dual strategy is that if the position is open in the wrong direction, the losses will be at two positions instead of one, with the usual strategy. The dual strategy can be an excellent choice as an exit strategy only if the trader is a very good entry strategy, and is convinced that most of the trading to start in the right direction. But before you start using this strategy, make sure both would lead to such a strategy on historical data, especially when the entry strategy is not working properly.

Another method of entry, which could be applicable to one account, gives the very beginning of a space on the market in a broad suspension until it becomes perekuplennym or not to provide an unusually large movement in a predictable way. This is followed by a stop to narrow income in order to protect a large portion of the profits, but at the same time be able to generate revenue and further, if the market will continue to move in the right direction.

As an indicator of signaliziruyuschego perekuplennogo market can be used shestiperiodny index of the relative strength of the signal which will have to make the stop. For example, when the relative strength of the indicator rises above 75, then drops to 10 or more points, should raise the stop at the minimum price for the last three trading days and to adjust them to lift the market. Often, this process allows the market to remain strong in the throws and is very close to the top.

The use of oscillators and trend indicators

Consider a trend indicators and oscillators to guess the date of completion of the trend or the beginning of correction. As we know all the technical trend indicators are trend. Needless to build, be it moving averages, or grid system, said that they were already reacting to past trends in prices, signaling the beginning of a new trend only after it appeared, but did not predict its occurrence. They help find a new trend or to determine the nature and effect of new developments as soon as possible after its occurrence. But that is after its inception? This means that some time will be lost, and this time the trend will change and shifts in prices inappropriate direction. Therefore, the trader will lose profits, if he does not have a protective floating suspension.

Way out of this situation can serve as indicators of delay or hesitation oscillators ¾ some alternative indicators to monitor trends. Unlike last oscillators are highly effective in the absence of apparent trends, where the dynamics of the market boils down to movements within a relatively narrow corridor of horizontal price, otherwise known as "market corridor." It is a corridor of prices, as has been described in the first part of the work are changing the basic trends. This is the period when the bulls are no longer able to move the market higher and the bears have not yet felt its strength and remain inactive. In the corridor of the market price is so often changing the direction that the most difficult problem is to catch the beginning and end of short movements up or down. Under such conditions, most of the systems to monitor trends are weak or unprofitable. At the same time, the use of oscillators allows the trader successfully close the positions and withdraw from the deal.

The effectiveness of the oscillators is not limited, however, only the "market corridor. In conjunction with the analysis of price charts for the period of domination in the market of a certain trend oscillators are able to predict short-term critical periods in the dynamics of the market activity ¾ the so-called state perekuplennogo and resell the market. In addition, the oscillators can easily see a weakening trend ¾ before this is clearly reflected in the price: for example, the difference between the direction of the curve oscillator and price shows that adherence to a particular market trends coming to an end, and soon spread.

Strong main trend at the expense of the dramatic changes in price oscillator drive high up in the zone perekuplennosti. In the area perekuplennosti oscillator is until the power of the trend, as measured by the ability of prices to rise as fast, not waning. Then comes the period of short-term side-trend, consisting of two or three days. During this period, prices have not changed ¾ there is a short-term weakening of the main trend. It was on the short lateral trend curve oscillator out of the zone perekuplennosti, as evidenced by the reduction of the rate of growth of prices. This signal is an oscillator can serve as a signal output, followed by a change in trend is the opposite, or will be corrected. After the correction system will be necessary to re-enter, which was written in the next paragraph of this part of the work.

Re-entry

As already stated, the ideal stop losses could be developed if the attempt to place the stop just outside the border of random price jumps. But even an ideal stop can make mistakes when entering the market for big players trying to utyanut market to correct. In this case, if one of those stops work at a time when the trend is still a movement would require a method of re-entering, which will return back to the trader's market, at a time when short-term trend will resume its march towards a long-term trend. The method of re-entering will help avoid disruptions due to omissions of any significant price movements.

The previous section examined some of the closing of positions, which depended on the correct operating system. A good way distinguishes winning trade of losing, and perhaps this is the single most important element of any system. Unfortunately, traders often obscure position earlier than the main trend that can still significantly increase the profit system. In cases where the trend continues, there must be a way of re-entering the market. Strong trends are rare and too valuable to lose them, so that closing the positions the trader must be confident that he can return to the market, if the previous stop was premature.

The mechanism of income for the re-occurrences of signals can be quite different from the main entries, because the market is in the middle of a strong, well-expressed by the trend, where the fluctuations in prices are significantly higher than at the beginning of the trend. Being in the middle of the trend, the trader would no longer be needed signals trend indicators, but only signals oscillators with small orders for greater sensitivity.

Oscillators that define the area perekuplennosti or pereprodannosti may very well work in determining the re-occurrences. Assume that the system was stopped floating stop signal on profitable long position in the correct price, which was stronger than one would think. You can observe the behavior of the relative strength index, or stochastic oscillators in such a situation to get a signal at the end of this deviation. One technique is to wait until the Stochastic Oscillator falls below a certain level and then turn back. The fall of a stochastic oscillator to any value below 40, followed by a recovery, should initiate a workable re-entry. Typically, trade on the purchase, if not the market trend is caused by the collapse of a stochastic oscillator is below 20 or 30 and the subsequent turn. However, as a trader was on a clear upward trend, it is unlikely that the stochastic oscillator will reach a very low marks in 20 or 30 .. The stronger the trend, the higher the potential to turn a stochastic oscillator. If the Stochastic Oscillator falls only to 50 or 60 and then spread, perhaps, the system does not receive a signal to exit, closing the original position and should not be thinking about re-entry. When you start a new trade on the purchase, you can put a stop loss under the level of depression correction, and then raise it to a lack of damages will be made when a new peak. These trends are dying slow and difficult, so the chance to get a good trade, with re-entry is quite high, especially if you can enter after the fall, without waiting for the next peak.

The secret of the success of re-entering was to wait until the end of the time and start quickly purchased as soon as the system to find the direction of the main trend. Waiting until the market will make a new peak is too long wait, but must make sure enough evidence to show that the correction is indeed over. Here you can talk about a very subtle point that requires careful reflection, along with the availability of sensitive and reliable indicator.

As an example of how sensitive can be an indicator of re-entering, you should give the method is very short-term oscillator, such as a three-day relative strength index (RSI) as a starting signal of re-entering. Typically, a three-day RSI so often jumps, that he is a little bit as an indicator. Because this is a very sensitive indicator, any correction, strong enough to stop the system and close the original position, because of the relative three-day fall in a very low level. When the RSI turn back for the 50 mark, it will be possible to conclude that the correction is over. Hence, the need to buy the next day, when the market goes from the peak of the day, rising to the RSI value of 50.

Technology RSI has two mark the continuation of the trend (the value of +50, and confirmation), and at the same time, it quickly enough to return to the trader at the market well before reaching a new peak. Kontrtrendovye Other indicators, such as the stochastic oscillator,% K and the index of commercial channels, may also be used in this way. % K-this is a sensitive indicator, which will work nearly as well as a three-day RSI. The idea is to use one of these indicators to provide a signal about the end of correction. To do this, set the indicator more sensitive than usual, because in this case it is needed to measure short-term correction rather than a trend.

The theory of technical analysis

The theory of technical analysis

A technical analysis. Technical ??????? this study the dynamics of the market, mostly through graphs to predict the future direction of the price. Technical analysis includes several different approaches to the study of evolution of prices, which are interconnected in a single coherent theory. This type of analysis is to study the price dynamics of the market by analyzing patterns of three changes of market factors: price, volume and if we study the market srochn s ??????????? open interest (the amount of open positions). And, for the primary analysis are prices and changes in other factors are studied to verify the accuracy of the direction of the price. This technical theory, as in any theory, there are basic tenets.

Three axioms TA. Three postulate of technical analysis as follows:

1. The market takes into account all. This postulate is the most important in technical analysis, it is necessary for an adequate understanding of the perception of all methods of analysis. Its essence is that any factor affecting the value of ??????? economic, political, psychological previously taken into account and reflected on the price chart. In other words, any change in prices is an appropriate change in external factors. The main consequence of this premise is the need to closely monitor and study the evolution of prices. By analyzing price charts and additional indicators, a technical analyst ensures that the market itself shows him the most likely direction of the movement.

This conflicts with the basic premise of the analysis, which focuses on studying the factors which appear after the analysis of findings on the movement of the market. So if demand exceeds supply, the fundamental analyst concludes increase prices. Technical analyst also concludes "the other way around: if the price increases, the demand exceeds the supply.

2. The movement of prices is subject to trends. This assumption has been the basis for the establishment of the techniques of technical analysis, as affected by market trends, as opposed to the chaotic market can be analyzed. Among the provisions that the price is subject to trends resulting two investigations. The investigation first was that the current trend is likely to grow further, but did not apply to its own opposite, that is a consequence of these excluded disorderly, erratic market movements. The investigation is the second said that the current trend will grow until the motion will not be running in the opposite direction.

3. History repeats itself. Technical analysis and study the market closely connected with the study of human psychology. So graphic pricing models that have been identified and classified in the last hundred years, reflect the essential features of the psychological state of the market. First of all, they point out what ??????????? bychi or Bear dominate at this point in the market. And if in the past, these models are employed, there is every reason to assume that in future they will work, because they are based on human psychology, which over the years does not change. It could be the last ????????? "History repeats itself" a few other words: the key to understanding the future lies in exploring the past.

The objectives of TA. Technical Analysis - Applied Social Psychology. His appointment - to identify trends in the behavior of crowds, and their changes with a view to taking stock of reasonable solutions. Technical analyst identifies market sentiment, placing a combination of the following purposes:

1) Assessment of the current direction of prices, that is, identifying the trend. It is possible the following options:

1. Moving up;

2. downward movement;

3. Flat.

2) Evaluation of the duration and period of validity of this direction. Maybe:

1. short-term trend;

2. the trend of long-term effects;

3. started the trend;

4. maturity of the trend;

5. death, the completion of the trend.

3) Evaluation of the amplitude of price fluctuations in the current direction:

1. little change of course;

2. strong change of course.

The classification of TA. All the variety of techniques of technical analysis can be divided into two large ??????? graphical techniques and analytical methods:

Graphic technical analysis is an analysis of various market graphic models generated by certain laws of motion of the price of plots, with the aim of assumptions or change the likelihood of continuing the current trend. Postulates of this kind of technical analysis are listed below the basic concepts of technical analysis: the trend lines, levels of market support and resistance levels correction current trend.

There are two types of graphical models:

1. Models of fracture ?????????? generated graphs model, which under certain conditions, can anticipate the change of the current market trend. These include such models as the "head of the shoulders," "double peak", "double-base", "tri-peak", "triple-ground."

2. Models continue ?????????? generated graphs model, which under certain conditions, show that there is a possibility of continuing the current trend. Perhaps the tendency to develop too fast and is entered in the state perekuplennosti or pereprodannosti. Then, after an intermediate correction, it will continue its development in the direction of the previous trend. In this group, provide such models as the "triangle", "diamonds", "flags, pennants and others.

Each model has a specific mechanism for education and a graphical form. The dynamics of the volume of transactions is a factor in confirming the existence of a model. All models find an explanation in terms of the psychology of market participants. Despite the seeming simplicity of this method, it is one of the basic techniques of technical analysis, and on the effectiveness of the application shows good results. A major shortcoming of this method is that it is very subjective. Every technical analyst should be a good chartist (English chart? schedule), as well as any graphical model ???????? is formed at the conclusion of the current price trends and the emergence of the likelihood of continuing or breaking the current trend.

On the analytical methods include techniques that use filtering or mathematical approximation of the time series. In technical analysis as the basic time-series uses the ranks of the share price for a certain period of time, the volume of trade and the number of open positions.

The main tool is an indicator of analytical methods, which in turn is a set of functions from one or more of the basic time series with time-window. Indicators can be divided into five categories:

1. Indicators of the trend. These indicators include indicators that serve to measure the trend ¾ its strength and duration. A classic example trendopodtverzhdayuschih indicator was a "rolling average". The same class includes such well-known indicators like MACD, Directional Movement, Parabolic, and others.

2. Indicators of variability. Indicators for the second category are used for measuring the variability of prices up an asset base. Variability ¾ this notion, describing the amount of daily, independent of the main lines, the price fluctuations. Such indicators are particularly important for the analyst to change the term market trend, or a side trend. Signals such indicators that were built with a small time window allows log and leave the markets during the day. These indicators include: Chaikin's Volatility, Standard Deviation, Bollinger Bands.

3. Indicators point. Representatives of the categories used to measure the speed of price changes over time. This, in turn, Momentum Indicator, Relative Strength Index (RSI) and the Price Rate-Of-Change (ROC). Also, under certain conditions, can be used, and MACD. But nothing prevents the use of signals as indicators of the time to confirm the trend, and to predict the time it ends, that the majority of specialists and makes.

4. LEDs cycle. These indicators are used to identify the cyclical component, and their length. This is Fibonacci Time Zones, MESA Sine Wave Indicator, and others. These indicators work well only on the side trends. It is very important, these indicators for futures traders, who work in the commodity markets, corn sugar or oil - in markets with very high cyclical component.

5. Indicators of market forces. The fifth category used as a base of independent variables, or the volume of transactions, or the number of open positions. Indicators in this category, based on the volume of data sets, give signals the strength of the current trend. Indicators for this category are On Balance Volume, Volume Accumulation, and others.

Brief history of development of TA. History of Western technical analysis has little more than a century. In the early nineties the nineteenth century, the Wall Street Journal an article by Charles Dow, where he presented a set of principles, which, in his view, could enter into a transaction to buy and sell without much risk. They have also been formulated, and now has become a classic theory of the direction of motion stock market. The principles of this theory is now used in almost all modern methods of technical analysis implicitly. Charles Dow never wrote a book, limiting their editorial articles for the magazine Wall Street Journal. After the death of Doe was replaced by B. Hamilton, who article "The End of tide" has raised the reputation of charts during the stock crash of 1929, he summed up the situation and the main Dow theory in the book market barometer ", and in 1932 the publisher of stock byulleteny Robert Rea brought it to its logical conclusion in the book "Dow Theory."

Times of the Great Depression of the thirties were the golden age of stock charts. After the collapse of 1929, many analysts has been little work and a lot of free time, and they spent it on the discovery of new theories of exchange of knowledge. That decade was marked by publications such as the legendary dealer Shabaker, Rea, Elliott, Vaykoff, Gunn and others. Their study were in two different directions. Some (Vaykoff and Shabaker) viewed as a graphic chart recording the exchange of supply and demand. Other (Elliott and Gann) were looking for "secret order" on the stock exchange. Proceedings Ralph Elliott led to the wave theory, open to the technical analysis of the magic of Fibonacci numbers. The main tenets of this theory argue that the price dynamics of a market is developing wave and there are certain patterns in the education market waves. William Gann created a complex combination of geometric, algebraic principles, which traders have used successfully on emerging futures markets. It is legendary thirties have created an entire galaxy of stars and technical analysis is not a surprise - so much was the influence of the "Great Depression" by brokers and analysts that the development of analytical prediction had been the best effect.

In 1948, Edwards and Magee have published the book "The technical analysis of stock trends." There, they identified the models such as triangles, rectangles, "head and shoulders, and other graphical models, as well as the trend line, support and resistance. Almost all of the classic technical analysis of the figures were discovered in the first half of this century, but their authorship is difficult to establish.

Since the beginning of the war and the subsequent recovery of world economy in need as such technical analysis, and again there was no longer only in the early sixties with the advent of a new crisis. In this period were systematized the basic concepts and rules of technical analysis, but also developed algorithms that reduce the labor of basic techniques. This period includes the emergence on the American stock markets moving averages (MOP), which according to the market veterans were perenyaty from antiaircrafters, which in turn used them to laying on the aircraft. The founders of the exchange of MOP were Richard Donchian and Dzh.M.Hrest. Donchian was serving firm Merrill Lynch, he developed a method of stock market games based on several SS and Hrest was an engineer in the book "Miracle profitability early deals with shares, which became classics, he described the principle of the SS in relation to transactions with the shares.

With the advent of computers has become a technical analysis to be more matematizirovannuyu form, started with great speed to develop analytical methods that use mathematical aproksimatsiyu and filtering. By that time, the creation of Dzh.Vels Uaydlerom grid system that can detect trends and to determine the appropriateness of the speed of their work in their direction. Indicators per cent variation Williams, balance the volume of Joseph Granville has also been established and used for the first time at this time as many other indicators of the founders of which history is silent.

In the late 70's with such financial instruments to reduce the risk of futures and options. It should be noted, the practice of trade with empty baskets of rice (futures in Japanese) has been known to indigenous Japanese carriers have three hundred years ago.

The beginning of the eighties glorified the emergence of such names as John Murphy and Robert Prihter that honor belongs to systematize the methods and presentation of technical analysis as a separate application of science.

Nineties also brought its own contribution to the history of technical analysis, but no longer at the world level: since ancient times in history, there were the so-called "guru" - is the market cult figure who, by making a loud name on a few successful predictions began to circulate for a reasonable fee newsletters, which provide advice to investors to buy or sell any shares. Based on these recommendations have been different types of forecasting, ranging from analytical methods to ugadyvaniem in the form of clouds signs the purchase or sale. Gradually, some investors began to rely on these letters, then the entire market in the mass hysteria began to follow the visions. And as soon as this happened, then there is not predicted such a "specialist", the collapse (or growth). At the same time, thousands of market participants ??????????, and now "former Guru" disappear from the market. Such a definition with some adjustments to fit, and Elliott, and Gannu, and Murphy and many others. More information about this phenomenon can be found in a remarkable book, Alexandra Eldera "Trading for a living."