Tuesday, April 26, 2011

THE RUDIMENTS OF FOREX TRADING

There are a lot people who have got their hands burnt in forex trading, for various reasons, such as greed, inexperience, naivety and much more. Fx is not a get rich quick investment and investors who approach trading with this mind set will hit the rocks. One of the peculiar reasons why the big dogs invest in Fx trading is because it is High risk investment market, and this is one of the attributes of Well informed investors.
Let me point out here that to go into Forex trading, you need to have a strategic plan on how you need to minimize your losses and maximize your profits.   
Study the following steps below.

1.    Understand the fundamental analysis involved; With respect to your opinion on technical analysis, there is no indicator any where that will give you a 90% signal direction. This is a market controlled by fundamental analysis, most especially News releases. Take for instance the current crises in Libya. There was no indicator any where that says the oil rich nation will be invaded. Such speculation could only come from economists who have an understanding on the effect of commodities demand in the world market. The effect in the currency market definitely favoured investors who are well inclined in understanding that the tripling effect of the crises may affect oil supply, and as a result push the dollar currency upwards. This is an indication that upward trend is the way to go.

2.   Respect Pivot Point; The resistance and support levels are very powerful indicators, that reveals currency trending patterns based on fundamental analysis. Of course other indicators are good views but the signals may not be certain. Lets face it, no indicator any where predicted the fall of oil prices during the economic recession. Every speculation that was given got a spark from various economic events in oil exporting countries. If you really want to profit in Fx trading forget about does complex confusing technical analysis, and start paying attention to economic indices, most especially oil price fluctuations.

3.    Throw that Robot in the Bin; I get amazed when i hear some traders say they use robot to trade. How can you trust your investment to a robot program written by a human. Real and knowledgeable investors do not even pay attention to such. The robot software, will definitely not stand the test of time. It is so dumb not to know that a thought of war in an oil producing state, could cause oil prices to take a flight, which will have a spill over effect on currency trends.
To be knowledgeable in Fx trading, you need to understand the economics involved. I would be doing some explanations on this in subsequent posts.
If you really want to make a wise decision in Forex Trading, follow oil prices closely.