Forex Trading: Fundamental and Forex Technical Analysis Support
Forex technical analysis and fore trading in particular has gained a great deal of popularity amongst retail investors in the past decade due to its inherent flexibility and ease of access provided by the forex broker community. There are definitely high risks in this arena.
One should never invest money here that one cannot afford to lose. Unfortunately, many beginners get impatient with practice routines and building the experience base necessary for survival, thereby insuring their ultimate failure status within a few short months.
Success factors include knowledge, experience, and emotional control while sticking to a “step-by-step” trading plan. Knowledge starts with understanding fundamental and forex technical analysis.
As noted in our first article, currencies come in pairs, and the prevailing exchange rate is the market’s assessment of the relative strength of each country’s economic health, based on all available information in the market.
As new economic data or world events impact the global stage, analysts and traders assimilate the news and arrive at their opinion on how the market will react. Differences in opinion may result in wide fluctuations in pricing behavior until a new equilibrium is agreed upon, commonly referred to as new support or resistance levels.
These levels form the foundation of forex technical analysis...
Some economic data releases can affect the market more than others, but here is a brief list of a few of the major market-movers:
- Interest rate decisions by the Central Bank
- Retail sales figures
- Inflation (consumer price or producer price)
- Industrial production and GDP releases
- Business sentiment surveys
- Consumer confidence surveys
The best forex broker software trading platforms will keep you up to date on scheduled news releases for both countries of most major trading pairs. Anticipating a good trading opportunity is one thing, but being blindsided by an avalanche of trading activity is something else to avoid when placing a new position in the market. High volatility can jam broker servers and exempt brokers from fulfilling programmed stop-loss orders.
It is extremely difficult for the ordinary retail forex trader to compete on the basis of fundamental information with large banks, institutional investors, and major hedge funds. They have the staff and financial resources to divine the vagaries of the market, such that most traders will seek guidance on fundamental directions, but rely heavily on forex technical analysis to dictate their activities in the forex market.
Forex Technical Analysis is a discipline that studies previous pricing behavior for a security, commodity, or currency to make predictions about future pricing directions.
Skills learned in one investment genre or timeframe are easily transferable to another, making it a significant and flexible trading tool that most traders cannot live without.
Its guiding principles state that price is the ultimate representation of market forces, that pricing patterns tend to repeat themselves, and that pricing behavior often follows a trend.
Markets do resemble wave motions, as do forces in nature, and these wave-like patterns or fluctuations are consistent enough in their occurrences to facilitate consistent predicative modeling.
Forex technical analysis forms a key component of a trader’s decision-making process, and, although imperfect in its results, traders will uniformly confirm that making sense of the market and profiting from its movements would be impossible without it.
Forex technical analysis and pattern recognition form the individual steps in a detailed trading plan. Traders often paste the steps to their monitors to ensure that each one is met in a market situation before triggering an entry position, and then following the remaining steps to the letter when the time comes to close the position.
Next Article: How to convert knowledge to experience through simple forex courses made on your own (click below). Stay tuned!
3) Go to forex courses
Risk Disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.
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