Forex trading strategies need to be developed in order to effectively trade the market. If you are serious about trading currency then you have to put in time, energy and resources into learning new trading techniques so that you will have a fighting chance at winning. You also need to be constantly improving your skills so that you will be able to adapt to changing market conditions.
There are two main differences between forex and stocks. Forex is a global market and shares can only be traded on one stock exchange at a time. Stocks however, can be traded anywhere across the globe and can be traded in any time frame.
The first part of understanding how to trade stocks is to know what you want to buy. You need to be able to clearly identify a market where your favoured currency is over-performing. For example, if you want to buy gold in Australia you will need to be sure that the Australian dollar is strong against the US dollar. The Australian dollar is strong against the US dollar as a result of the mining industry.
It is essential that you get the market data for your currency and are comfortable using it. This can be done easily using some basic software such as Forex Killer or Forex Chronologies.
Next, you should come up with a trading strategy. In fact, you should use the software to determine your trading strategy before you enter the market. You will want to ensure that you are able to quickly buy when the price is high and sell when the price is low.
Now you should use some trading indicators. These will let you know what to expect as far as market behaviour is concerned.
Keep in mind that a bad strategy is just like a bad investment. If you don’t realise the value of your strategy then you could find yourself out of money very quickly.
One of the first trading indicators you can use is volatility. It is important to look at the Volatility Index (VIX) as this will tell you about movements in the market and if you find it is not moving in a way that you want it to then you should examine your strategy.
Technical analysis is also important. This can include aspects such as the levels of support and resistance. It can also indicate support and resistance levels such as the triangle pattern and RSI.
Once you have identified some technical indicators you can use them to see if there is anything that you may be missing. If the VIX goes down and you do not think it is going to go back up, then you will need to re-evaluate your strategy.
Finally, you need to use any of the tools and trading indicators you have identified to find out actual market conditions. These can come from charts such as moving averages and oscillators.
This should not be done just by gathering information in a spreadsheet but actually looking at the real world to see what happens. By consistently checking your strategies and reviewing them regularly you will be able to become more proficient at trading currencies.