IM Academy is an online educational platform covering topics ranging from financial markets to e-commerce and social media. Now in its 10th year of operations, the Academy has reached an international scale, including IM Academy Spain, Italy, France, and Germany. While it’s expanded its range of services in recent years, its flagship academy remains FRX, which focuses on the foreign exchange market. FRX Academy students build an understanding of the forex market through a scaffolded approach, first studying the basics of the market, such as participants and key contributing factors, then progressing to more advanced topics related to pattern-based technical analysis and risk mitigation.
What Is the Forex Market?
The forex market is a global decentralized market where currencies are exchanged. It’s the largest and most liquid financial market in the world, with a daily turnover of trillions of dollars. The forex market operates 24 hours a day, five days a week, allowing participants to exchange currencies across different time zones.
Commercial and investment banks play a significant role in the forex market by facilitating currency transactions for clients, including corporations, governments, and individuals. Central banks, such as the Federal Reserve in the United States and the European Central Bank in Europe, are responsible for implementing monetary policies and can directly influence currency values through interest rate decisions and intervention in the foreign exchange market. In addition, multinational companies engage in forex markets to conduct international business transactions, manage foreign exchange risks, and repatriate profits earned in different currencies.
Hedge funds, pension funds, and other large financial institutions participate in the forex market to diversify their investment portfolios and speculate on currency movements. Individuals can access the forex market through online trading platforms.
At IM Academy, students study the nuances of how these participants affect the market. For example, changes in interest rates set by central banks can influence currency values. Higher interest rates tend to attract foreign investment, leading to an appreciation in the currency. Economic data, such as gross domestic product growth, inflation, employment figures, and trade balances, also impact currency values. Additionally, political stability and geopolitical events play a role in market movement.
IM Academy’s Pattern-Based Approach
After developing a foundational understanding of the basics of the forex market, IM Academy students study a variety of strategies that market participants use to engage in the market. IM Academy’s approach to financial education tends to emphasize detailed chart analysis and pattern-based strategy. Here are four of the crucial concepts that students at FRX Academy use to hone this approach.
1. Support and Resistance
Support and resistance levels are key technical analysis concepts used to identify price levels at which a currency tends to find buying support or encounter selling pressure. Forex market participants use these levels to make decisions on when to enter or exit exchanges.
A support level is a price level where demand for a currency is strong enough to prevent it from falling further. It can be seen as a floor beneath the current price. Market participants often believe that when the price approaches a support level, there’s a higher likelihood of the price bouncing back up.
On the other hand, a resistance level is a price level where selling pressure is strong enough to prevent the currency pair from rising further. It acts as a ceiling above the current price. When a price nears a resistance level, there’s a higher probability of the price reversing and moving downward.
IM Academy students study how these support and resistance levels are identified by analyzing historical price data, chart patterns, and significant price levels that the currency pair has previously struggled to move beyond.
2. Fibonacci Patterns
IM Academy students study how Fibonacci retracement and extension levels are derived from a sequence of numbers where each number is the sum of the two preceding ones (e.g., 0, 1, 1, 2, 3, 5, 8, 13, etc.). Fibonacci retracement involves using this sequence as a means of identifying potential price reversals or extensions in the market.
At IM Academy, students dive deep into Fibonacci retracement, which is used to identify potential levels where a currency pair may retrace its previous move before resuming the primary trend. They also learn how Fibonacci extensions are used to identify potential price targets beyond the current price trend. Extension levels can act as potential areas of
support or resistance where forex market participants may consider taking profits or reversing their positions.
3. Bollinger Bands
Bollinger bands are a volatility indicator that consists of a centerline, which marks a simple moving average, and two standard deviation bands above and below it. IM Academy students study how these bands can help identify periods of low or high volatility in the market and can be used to determine potential entry or exit points.
When the price of a currency is within the bands, it indicates a period of relatively normal price movement. However, when the price moves toward the upper band, analysts may consider the currency pair to be overbought, and a price reversal or consolidation may occur. Conversely, when the price approaches the lower band, it may indicate oversold conditions, potentially leading to a price bounce or reversal.
4. Elliott Waves
Elliott wave theory suggests that market prices move in predictable patterns called waves. These waves consist of impulse waves, which move in the direction of the main trend, and corrective waves, which move against the main trend. IM Academy students study how some market participants use Elliott waves to analyze and forecast future price movements in the forex market.
According to Elliott wave theory, an impulse wave consists of five smaller waves: three upward waves and two downward waves. These waves collectively form the main trend. The theory posits that after the completion of the impulse wave, a corrective wave follows, typically consisting of three smaller waves.
At IM Academy, students study how some analysts use Elliott waves to identify and predict patterns in the forex market. Participants attempt to recognize the current wave count, then make informed decisions about entering or exiting, setting profit targets, and managing risk.
Elliott wave analysis requires a deep understanding of wave patterns, as well as the ability to differentiate between valid wave counts and false signals. It can be a complex analysis technique and often requires significant practice and experience to apply effectively.
It’s important to note that while these concepts can be useful in analyzing the forex market, they shouldn’t be used in isolation. At IM Academy, students learn about a complex combination of technical analysis, fundamental analysis, risk management, and understanding market dynamics. Additionally, it’s crucial to remember that the forex market is inherently unpredictable, and past performance isn’t indicative of future results. Therefore, market participants should exercise caution and employ proper risk management strategies when applying these concepts.
Note: IM Mastery Academy is not an advisory or broker service. IM Mastery Academy provides online educational services only.