Learn Forex Trading

Technical charts play a key role in understanding the Foreign exchange market. To understand the market movements, to study the shifting psychology of the market, to gauge the strength of the bulls and bears, it is important you know how to read the charts. In the next few moments, I am gonna try and convince you of it’s benefits.

Forex Charts – The genesis of Technical analysis

The Forex market sometimes is a mind game. The action here is pretty fast and you need to be alert to be a part of it and to benefit. The most important part is being able to spot a trend and ride with it. Now, how do you recognize a market trend without handy info? This is where the charts come into play. The art of reading the charts is called Technical Analysis. The charts help you unravel the mystery of where the market is going. You can get minute by the minute picture or if you are a long term trader, the long term picture using a daily or weekly time frame chart. Technical analysis also helps you study the historical pattern of a currency enabling you to make some key predictions in the market movements. This ability is what separates the successful traders from the mediocre.

Characteristics of Technical Analysis

Usually, the charts are available from your broker you sign up with. The most popular free forex trading system software packages are MetaTrader and Dealbook 360. Each has it’s own restrictions like time bound usage, but can always be renewed.

The charts are offer real time data empowering you to watch the market movements live. You will updated tick by tick where the market is headed and can perform real time technical analysis. You can watch a currency in multiple time frames to understand both the micro and macro picture of a particular currency.

In addition to the bare charts, the software provides you with analytical tools like Indicators.

Some of the indicators are Relative Strength Index, Moving Averages, Convergence and Divergence, etc. They make the job of analyzing the market bit easier through pre-calculated mathematical formulas that are represented in visual format.

Technical Analysis literally decides your career in the market. If you are good at it, you will be undoubtedly successful. If you fail to read the signals the charts project, the future may not be bright for you here. Lastly, Technical Analysis removes the doubt and uncertainty from trading by providing precise information about the market movements.

Do not read me wrong. I meant Forex Analysis and not Forensic Analysis. Forensics is the art of dissecting the dead, while Forex is the art of buying and selling currency against another. My apologies if I confused you.

Alright, lets move ahead.

The Forex market analysis works just the way Stock market analysis does. Here it is all about the currencies, the factors that influence them, their movements etc. It is inevitably important for traders to learn the art of analysis if they want to succeed in this market. One also has to understand the fact that, it is an inexact science. The rules are very dynamic and work based on market psychology.

Are You Better Off Playing The Ponies?

Forex markets may remind one of Horse racing. Nevertheless, in horse racing, the liability is faster than in the forex market. If the jockey loses focus even for a second, he is sure to lose the race. It isn’t the case in the Forex market. The market movements are based on analysis of the situation. The reaction maybe fast, but the time taken to announce the news isn’t.

Certain people think that the forex market is safer than stock market because it involves money and everyone needs money. They believe the stock markets are not stable because not everyone needs a Hewlett Packard Share, while everyone needs money. The truth is contrary to this. The factors that affect the forex market are very sensitive and strong, like an earthquake, wars, recessions, inflation and other natural and man made disasters. Everything related to a country’s economy affects the forex market.

There are many commercial Forex analysis services today in the market. I explained this in detail in my previous post. Be careful who you go with. Follow the guidelines I gave in my last post. Follow trial and error to some extent, but always look for third party recommendations.

Get into online chat groups related to forex or join yahoo groups. By joining these communities, you can get better educated on the service available as well as new analytical trends in the market. It is important to stay updated always.

In addition to this, there are free services from reputed companies like Reuters, CNN, Bloomberg.com that provide on time market analysis. Their basic services are offered free of cost. These are companies that you can depend on all the time because they are all a household name. They simply can’t afford to cheat you.

A trader in the forex market requires to have his ears on the ground almost all the time. For a one man show operation, this is virtually impossible. Certain companies on the Internet have capitalized on this opportunity leading to the rise of the Forex Alert services.

Forex Alerts - Definition

Forex Alerts services provide in time news related to the Forex market with expert analysis. Many of the services also offer ready made signals together with the analysis, in order to help the trader take instant action. As I said previously, the Forex market is a fast moving market, and unless you are trading the long term charts, you have to think and act fast, to participate in a potential gain, or avoid a disaster. Forex Alerts supposedly help you do that. By providing timely information coupled with the exact market trend, they enable you to take swift trading decisions.

What basically happens behind the scenes is a team of professionals will be monitoring the market constantly for trading opportunities. They will also be analyzing the global news related to the currency being watched. Whenever, there is an opportunity, they instantly update you using a desktop software. Many of the alert services keep in mind your individual preferences for profit taking and stop loss levels. Today there are services that cater both the day trader and long term swing and position traders.

Forex Alerts – A ready market adviser

Forex Alert services are like a ready market adviser. Of course, the adviser is electronically available and not live. A good trader can use alert services to help him make better decisions or re-enforce the decision he has already taken. The global financial world has an incredible amount of data gathered and dispersed daily and it is impossible for one person to digest it all. The alert services recycle this info in a condensed and easy to ready manner leaving the execution part to you, the trader.

Lastly, if utilized properly, Forex alert services can help you organize your time better. They aid you in freeing up your time for other important parts of your life, like your family, or say, your day job, if you have one. Before signing, just make sure you tie up with a company with a proven and successful track record.

Appreciate the risk before trading in the Forex Market

Forex trading from the surface looks very lucrative. Many people often ignore the risk involved in this market and plunge in the hopes of a brighter future. The thrill of getting involved in the BUY and SELL market veils the eyes of many, eventually ending up losing all they invest. One has to understand that the Forex market is different from other markets. Overall, the working principles are similar, yet there is a world of difference in the way the forex market movements are structured,and the other markets like stocks and bonds perform. The currencies are more sensitive to external factors and one can lose money at the blink of an eye.

Scam Brokers and Bucket Shops

The Forex industry has seen a lot of scam brokers and small bucket shops in the past. You have to be very careful as to where you put your money. A small mistake can lead to a deadly result. Do your research on the Internet, look for reviews and personal recommendations from trusted authorities. When looking for the right broker, along with your research, stick to instincts too. If you feel fishy about a broker, move forward. Like wise if you feel good about a particular broker, go ahead with them. Ask the right questions and do not hesitate to look into the company background and such. Whatever it is, research, research, research.

One other way to look for a good broker is their experience. Get to the bottom of their history and see how long they have been in the field. The more their age, the better. Experienced companies provide better services, while inexperienced ones have a lot of mistakes to make and grow. Aged companies can also help you in giving better market advises and help you trade better. The best example is FXCM.

The last advise I can give is references. Ask the broker for references from past and current clients. This will give you a good idea of where the company stands in terms of its own success, growth and the satisfaction of customers. If they have a good success curve, you know you have found your choice. If not, scratch them off.

Don’t Be Reckless

One of the biggest risks in Forex is the problem of addiction. People, regardless of their gain or loss, get addicted and empty their pockets into the markets and end up broke or filthy rich. This is dangerous in both the cases. There is no guarantee that one will always win. This characteristics also gives the paint of gambling to the forex market.

To end this article, let me tell you, do not put all your eggs in one basket. If the basket breaks, the eggs break too. In stead make a smart move by investing only that money that you are comfortable losing. This will lead to peace of mind and better trading decisions. In the unfortunate case that you lose money, you still can resume life normally.

Expert Traders often use the automated trading methodology to execute market orders when they are not able to be in front of their computer. The Forex market, like its counterparts (Stock and Bonds) does not have a central exchange. All trades are conducted online through a trading software 24 hours a day and 5 days a week.

It maybe 3 in the morning, but a trader using the automated technology will not miss a trade. All he has to do is input the currency pair and targeted amount that he wants to buy or sell. To execute the trade, he has to set a deadline, which if hit, executes the trade.

One can limit automated trading sessions according to their needs. It can be a 24 hour period or even longer if required. It depends upon the opportunity and the trading strategy. As a follow up, a trader can setup multiple set of trades, all on automation.

Automated trading kills trading indecisions

In trading, indecision is a common element. A trader may see an opportunity, but maybe weary of executing it, regardless of how good it maybe. Using the right software, the trader can avoid the volatility of the mind. The trader can set the right rules and can also edit any of the trades he manually set. Automated trading at times offers peace of mind.

Online trading is virtual. There is nothing tangible bought or sold. Since a country’s economy can change due to extreme external influences like natural disasters, Geo-political wars, etc, it is not recommended to take part, unless experienced in the market behavior. The initial account opened should be a test account to understand and test automated trading.

Automated trading, while offering peace of mind and emotionless trading, can be disastrous in certain conditions. Since it cannot sense and judge external events, it can, many of the times, lead to heavy capital losses.

Lastly, it is all about experience. Once you have gained enough understanding as well as confidence in your automated strategy, you can take the risk of trading while you sleep, or even if you are out of town celebrating your big wins.