Currency Forex Market Trading – Two Methods You Need To Know


If you are just getting started in it is important to become familiar with the two basis methods most traders use so that you can use them as part of your trading strategy.

Most traders refer to these methods as technical analysis and fundamental analysis.

Technical Analysis For Currency Forex Market Trading

Most traders who are not closely involved in national economic news prefer to use our this method, technical analysis, which is based around using charts and indicators to identify changing and continuing trends in the market. Most traders have systems relying on identifying charts and patterns which assume that in general, patterns will repeat and trends are predictable.

There are several different types of charts but they mostly display the same data (i.e. currency values) in different formats. Most people find candlestick charts easiest to read because they are very visual. They display the opening, closing, high and low prices of a currency pair over a certain period.

You can adjust the period that a chart covers and it is a good idea to do this when you think you have spotted a trend or pattern that fits your system. For example if you generally look at hourly charts, check your data by focusing down to 15 minute and even 5 minute periods to be sure that the signs are right there, before you open your trade. If you usually use daily charts, check the 4 hour and hourly charts too.

However, even the clearest pattern can be upset if major news is suddenly released indicating a move in the opposite direction. So even the biggest fans of technical analysis will at least keep one eye on news alerts. Most people check a daily calendar to see when reports and data are due to be released in the countries whose currencies they trade.

Fundamental Analysis For Currency Forex Market Trading

Fundamental analysis is based on the assumption that the underlying forces that drive changes in currency values are related to the economic strength and financial performance of the two nations whose currencies you are trading as a pair. In other words, a currency will rise in value relative to another currency when the first country’s economy shows signs of strengthening or the second country’s economy shows signs of weakening.

Trading based around this type of analysis relies on market news and interpreting the many signs of economic strength or weakness. However, not many traders would rely entirely on fundamental analysis these days.

It is difficult to get to grips with all of the different factors involved, and the news is often unpredictable. It is possible for traders to make money by focusing mainly on this method if they have a keen interest and involvement in international economic and financial developments. But they will still use our technical analysis method some of the time.

So, try to get a grasp of both types of analysis before deciding which one is best for you. Then concentrate on your chosen method but without completely ignoring other factors. This will give you the best chance of success in currency forex market trading.

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Forex Trading Secrets – Don’t Let Your Heart Rule Your Head

Most people when they think about tend to zero in on the practical side of trading like technical and economic analysis.

However, no  matter how important the technical stuff is to forex trading people often allow their emotions to take over often with disastrous results.

Allowing your heart to rule your head won’t get you very far in making money trading currency in the markets. If you allow yourself to be swayed by feelings of greed, anxiety or fear instead of following your proven strategy you will quickly lose money with your trades.

It is true that some successful traders talk about using their intuition to help them make money but this intuition is not based on these types of feelings. Instead it comes from their experience, which has taught them much about trends and patterns that they are not even conscious of.

One of the best ways to minimize the impact of emotions on your trading is only ever to trade with money that you can afford to lose. Do not be in a position where you rely on income from forex trading to pay the rent or food bills. Instead, consider the money spent as soon as you transfer it into your brokerage account, just as if you had used it to pay for a vacation.

Many people do not understand the importance of this. It seems counter intuitive. You might think that if you consider the money already spent you would be more reckless with it, while if it is important to you, you would take care not to lose it.

However, this reckons without the emotional factor. The impact of fear on a person’s trading is so great that the opposite is true. If the money is so important to you that you cannot afford to lose it, you will be carrying a huge burden of fear that will affect your decisions and almost certainly lead to losses.

But treating your investment as money spent is only the first step. Even if you have written off your investment and have plenty of other income for your everyday needs, you can become overcome by fears and anxieties simply because of the nature of the forex market itself.

Currency trading offers high margins and leverage which allow a trader to control many times the sum that is in his or her account. People are often seduced by the idea of making big profits into over committing their funds. Many brokers will allow you to open an account with a very small initial investment. If you then use the maximum leverage you could be committing a large part of your account balance on one trade.

This is fine while you are winning, but a couple of losses with high leverage will soon have most beginners running scared and making panic decisions. This is the main reason behind the sad fact that forex trading often does not make money for the people who need it most. There are people out there searching the internet for a broker who will let them start trading with only a few dollars. Those people have very little chance of making money.

So do you have to be rich to make money in the forex markets? Not necessarily. Rich people can fall into emotional trading too, especially if they acquired their wealth without having to learn good money management and emotional control.

On the other hand, people on a modest income can make money. However, you will at least need to have some disposable capital and be cautious in calculating your position size. And never forget that the forex trading secrets of successful traders always take account of the emotional factor.

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