Trading Strategies for FOREX , Every successful FOREX trader has and uses a strategy. All strategies are different. A strategy that works for one trader may not be successful for the next trader. Each trader developes his or her own strategy, based on a variety of reasons. Some traders use fundamental analysis to develop a strategy. Some use technical analysis. Many use a combination of the two to plot the best entry and exit points in the market, thus developing a strategy.
Trading Strategies for FOREX
Fundamental analysis focuses on current events in the political and economical conditions. Technical analysis, on the other hand, focuses on historical data, and operates on the premise that prices move by trends. Trends in the market movement can be identified by their patterns, and with technical analysis, these trends and patterns have been studied for a very long time.
Before you start FOREX trading, you need to have a working knowledge of both fundamental and technical analysis. These two analysis will be used throughout your FOREX trading career. Also learn about support and resistance levels. In FOREX trading, support refers to the bottom price level, with the belief that historically, when the price reaches that bottom level, it will start to rise again. The resistance levels are the high prices for a currency.
When a currency is measured using support and resistance strategy, the prices of that currency can be expected to follow the trend in the direction that it is moving more accurately. To find support and resistance levels, use price charts, with given periods of time, to view the high and low prices of that currency. Longer time frames give you a better understanding of that particular currency’s support and resistance.
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You also need to learn to work with Moving Averages when developing your FOREX trading strategy. The average price during a specified time period over a different specified time period is the SMA or Simple Moving Average. By paying attention to Moving Averages, you can avoid short term price fluctuations. By using the SMA, you can see if a price will likely rise or fall. If the price goes below the SMA, it will most likely continue to fall, and if it goes above the SMA, it will likely continue to rise.
A successful FOREX trader uses all tools at their disposal to develop FOREX trading strategies, and they are constantly adjusting their strategies to enjoy even greater success. In FOREX, one piece of information or data is not enough. You must learn to compare data with other data to support those findings before making trade decisions based on the data.
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Start with technical analysis, and back it up with fundamental analysis. Your trading strategy should have clear rules about when you enter and exit a market, and what to expect from your open positions. You must also determine how much loss you are willing to take before exiting a market as well.