Before, the forex market was limited only to long-term investors, banks and people who have greater capitals like hedge funds and high net worth individuals like millionaires. The trading occurs via an agent or voice broker who will inform clients on what is going on. Later on, it was been replaced by a computerized automated systems. This was the early form of forex trading strategy.
Forex trading strategy comprises two major components. The first component is technical analysis. The technical area is based from the charts. It uses a mathematical formula to observe the market price movements. The traders learn about announcements and news on economics and other fundamentals which influences the forex prices. Its fundamental side is helpful in proper identification of the do’s and don’ts.
Technical analysis uses chart indicators. It is helpful in determining the areas of resistance and support, pivot points, major trends, etc. The situation where the price reverses, stop or get stuck are revealed. The method that is very accurate and popular in calculations of the levels of resistance and support is the Fibonacci. Seven hundred fifty years ago, Fibonacci discovered a sequential number form. Its proportions are also found in nature such as sunflower seeds, and pineapple rinds. This method is commonly learned in mathematics during your high school days, called as Fibonacci sequence. It says about finding the next number given with a series of numbers.If Fibonacci numbers are put adjacent to each other, the percentage ratios are obtained. It can then be plotted on the chart. However, you don’t need to become a math wizard just to do this. The charting forex software is able to do the Fibonacci sequence for you. The key areas of resistance and support are potentially revealed to you as you move along the charts. The Fibonacci sequence combined with proper indicators can show the strength and momentum of the latest market condition. It will then help you to come up with a strategy that will be most profitable to you just by basing on this mathematical rule. The rules clearly states that history can really be repeated, as what has happened before in the forex market can still happen in the future. This turns out to be true most of the time. You dont have to be correct 100% of the time to make money if forex. You just have to be right more times than wrong. Its that simple.
The second component is the fundamental analysis. Each day, there are figures being disseminated to reveal some economic circumstances of a particular country. Take for example, non-farm payrolls that can possibly bring unpredictable effect on the forex markets. Another major driver of currency prices are the Interest Rate changes and announcements of such news. The impacts will depend on the previous data and the figures implications. The most important rule for beginners even for veterans is to keep away from the market when important announcements take place.
Forex trading profits are being made almost similar to a traditional business. The procedure is very simple. You are going to buy something at a lower price then sell it at higher prices. The only difference is that in forex trading this can be reversible. You can sell a currency pair now and then buy it back later at a lower price to make a profit.
The process is very easy. A trade is being placed either in the sell or buy categories. Then the base currency will automatically buy or sell its opposite currency in pairs. The price will lively change every second. Take for instance; you purchased the GBP/USD pair. It literally means that you have purchased the pound currency and sold the dollar currency. You want a rise on the pound’s value which will later on have a higher price when you resell it in the forex market. That would make a profit on the value difference.
If the brokers allow you to have 200:1 capital leverage, then you can possibly control a lot of money than what you really have. It is because you have bought one currency and sold the other. So, your capital can stay unmoved. The only crucial part which should be considered are the proportions which can be either gained or lost whenever changes in currency pair values occurs. Other than that, the basic forex trading strategies are great.
InstaForex is an innovative company which has developed a robust and unique web trading platform for foreign currency trading which was developed by traders who understand the needs of a successful trader. Thus clients are assured of our a great winning combination: uncompromising financial professionalism and the flexibility and speed of online trading. Also at InstaForex, you can find a detailed report on market outlook on a daily, weekly and monthly type report. They also make available market commentary which can be handy when doing your homework before trading.