The world’s largest trading network is Forex Trading and dozens of different currencies are being traded on a daily basis. However, the biggest currencies that is being traded with US dollar include the following:
AUD (Australian Dollar)
CAN (Canadian Dollar)
CHF (Swiss Franc)
GBP (British Pound)
JPY (Japanese Yen)
NZD (New Zealand Dollar)
All of these currencies are being exchanged with the currency from another country at different rates. Forex is characterized by its utmost volatility and since the market is extremely big there will be enough fluctuation that can generate large profits and also losses.
The best way to start investing in Forex is to know which type of analysis must be used to assist in making different entry and exit point decisions. People who use fundamental analysis will determine the specific interest rates and other economic factors of a country before deciding an entry or exit point. The same analysis is used to trade according to news releases and other economic information from two countries involved in the currency trade.
Technical analysis, on the other hand, is used to interpret the prices of the countries involved in the currency trade as well as the patterns seen on charts including the historical data. Some factors involved in this type of analysis include:
Simple and Exponential Moving Average
Support and Resistance Lines
Individuals that use technical analysis follow the concept that both short- and long-term trends can be determined and exploited to assist in making decisions for the entry and exit points. This type of analysis determine the present and existing trends in Forex Trading. If their decisions are correct, they can go with the current trend on either direction to generate profit until reaching an exit point particularly if the trend is waning.
Successful Forex Traders are studying the market for long-term patterns and therefore prefer technical analysis. Fundamental analysis requires that traders make quick entry and exit point decisions in order to exploit the price variations corresponding to the news released such as economic data and interest rate fluctuations. This type of analysis is a lot more risky because of excessive trading done.
If there are true secrets to Forex Trading success, successful traders would agree with the following:
U.S. Dollar currency pairs because it has the volume to generate bigger profits on its price fluctuation as well as making entry and exit point decisions as desired
Technical analysis that will determine a currency pair that will generate the most profit or pip movement, which can be done through back testing
Setting limits and exit points after knowing the trends so maximum profit and protection are achieved
Analyze charts once on a daily basis to avoid overtrading and day trading, which can damage your trading portfolio
Patience is the key to making the right decisions especially when technical analysis is completed
The last secret, Patience, is the one that will work in every way for Forex Trading. There will never be a full proof trading strategy since the market is not 100% predictable all the time. There are times when strategies fail and limits are reached before you gain profit. It is imperative that back testing is continuous, set limits and remain patient all throughout so that you become successful in Forex Trading.