Beginners are usually very zealous investors, but unfortunately also more often than not uninformed. This is a sad fact, because it is certainly no fun to lose all the money you have borrowed or save for the purpose of growing it. Although there is much to learn about trading Forex, getting a good grasp on the basics is very important. In fact the key to making money is in the basics and not all the advanced stuff. For a new trader learning what works best is the single most important step to take.
In Forex there are different types of tools that help us traders define and interpret the market data. In this article let's explore the 2 most commonly used tools and their strategies.
First is Fundamental analysis, heavy weights like Warren Buffet and George Soros swear by Fundamental Analysis. Fundamental analysis is news, it is information that will sway the minds of people and cause them to behave in a certain manner. A savvy trader whop knows how to "read the wind" will know from which direction this "wind" is blowing and then trade accordingly. Fundamental Analysis helps define the trend and for all traders trading with the trend is always good as that increases your probability of a successful trade. For example if the trend is on a downtrend, you should look at your set ups to go short. Since the trend is already falling, there will be more sellers than buyers, if you become a buyer; you basically give your money away to the sellers! Unless you have a lot of money to spare my honest suggestion is sticking to trend trading regardless of the trading plans you use. A counter trend trade is always risky and frankly I would rather not lose any hair by taking such risk as the returns do not justify the actions.
The second newer tool is Technical Analysis, the fact that there are charts means that you are using technical indicators already! Technical analysis is defined as the study of past price actions to determine future movements. Pure technical analysts believe that history will repeat itself and look to the charts to show this as the case. In a way that is correct, as a trader you deal with people, and people tend to be fairly predictable if charted on a large scale. Individually humans are hard to guess, but when you start taking large groups of people and then track their actions over a long period of time you will see patterns emerge. That is what technical indicators do, they define these patterns and then based on what we know happened in the past, there is a high probability that it will happen in the future. For example, you use 2 indicators on your candlestick chart, a stochastic slow and 2 EMA lines. When the stochastic hits a oversold position and the 2 EMA lines cross upwards you go long (buy) when it is in reverse you go short (sell)
Regardless of what sort of tools you decide to use, always integrate them with proper money management. For money management is the only way that will allow you to make consistent profits and grow your account steadily.
About the Author
Dr. Joshua Geralds is a successful investment specialist with over twenty years experience increasing the income of people world wide. For a limited time get his free Money Management to a Million Dollars e-course here: http://www.pipsalot.com
