By Peter Lim
When it comes to forex trading, there is one particular aspect that differentiates it from other types of trading. This aspect is that forex traders are predominantly technical based, depending a lot of fast entry and exit following charts. Forex traders adopt fundamental analysis only to give them a better economic picture and projection of an overall currency trend.
However, there are particular times when the forex trader has to watch out for significant fundamental developments such as economic matters, especially when there are reports and news release pertaining to international interest rates of the major currencies. This is because everything might be quiet before a news release, with prices breaking out only in a strong move upon the release of the news or after an important meeting.
Therefore, in forex trading, in considering the technical setups, the forex trader has to be aware of the dates of the release of major reports, including what the “chairman of the Fed” says. Certain comments may be construed as bullish and may cause forex prices to move strongly and vice versa.
It would be wise for the forex trader to determine a few reliable source of financial news feeds, and to apply the information from the news channels to his trading.
In any profitable trading system, the forex trader must know how to buy and sell the currency pairs, set appropriate stop losses, and set profit limits, and exploit the power of leveraged margin to his trades.
If he fails to follow these important principles, losses can easily follow and losses can exceed whatever profits and can ruin a man.
In a technical trading system, the forex trader will use some indicators to gauge the market direction . He will need to set up his charts with the right combination of indicators, and more importantly how to use them correctly.
To accelerate one’s learning, a forex trader may use a trade simulator, called a trade sim for short. A trade sim provides simulation of actual forex price movements so that the forex trader can practise his entry and exit of his trades, and improve upon the timeliness of his trades.
From my own experience, I like to tell traders who are beginners to watch for 3 main technical trading setups which are broadly, to trade with the breakout of a trend, to trade with a strong trend, and lastly to trade the tops and bottoms of the market.
Following a period of consolidation which is represented on the charts as a rectangular pattern, a breakout can result in good gains. To trade with the trend means to make several trades as the prices continue to move up, and to buy on the dips and to sell on the rebound. To trade the tops and bottoms, a forex trader needs to recognise toppish and bottoming chart patterns, including Japanese candlestick charting to catch a glimpse of the future.
The biggest advantage of forex trading is that a lot of money can be made ( or lost) within a very short period of time.
Therefore, it is always best for a less experienced forex trader to get under the tutelage of an experienced professional trader to walk him through the ropes.
Good traders are never born. Traders become good through gaining skills and from learning through experience. Either they pay their dues in the market, gaining experience from disappointing trades that went wrong, or they can have a smoother transition into the lucrative field of forex trading by getting a successful professional trader to mentor them.
Academic and head knowledge is useful,but it is always skills and experience that will determine how successful and profitable a trader is. Get trained, be prepared, be capitalised and you can become a successful forex trader.
Peter Lim is a Certified Financial Planner. To discover how you can benefit from the secrets of successful forex trading as revealed by a profitable professional forex trader, and start to earn a 5 figure income from trading forex, visit the author’s blog at http://1forex-trading.blogspot.com
This article was originally published By www.ezinearticles.com
