Basic FOREX Trading Strategy
As is the case with all investments, investors looking to invest in the FOREX market require a basic understanding of the available FOREX trading strategy. In this regard, when trading in FOREX, there are two principal methods of strategy available to both institutional and individual investors – the technical analysis strategy and the fundamental analysis strategy.
Technical Analysis Strategy
Those who utilise the technical analysis strategy for FOREX trading do so by analyzing price trends over a period of time. However, as the FOREX market is a continuous one, i.e. it is open 24-hours a day, certain quirks need to be included in the methodology that allows for this function.
Here, although there are a number of different technical analysis strategies available, the most commonly used method is known as the Elliot Waves strategy, which tries to predict currency movements in ‘wave’ patterns, with the fifth wave pattern seen as being the time to buy/sell a position in a currency.
Fundamental Analysis Strategy
Unlike technical analysis traders, fundamental strategists look to underlying factors to try and determine where a currency is going to move to. Here, to a fundamentalist, factors such as the consumer price index, retail sales, interest rates, gold prices, will all play a major factor in their determining whether or not a currency is going to appreciate or depreciate against other currencies, which will have the same built-in analytical mechanisms. Not surprisingly, fundamental analyism is not for the feint-hearted and the jargon used can appear overwhelming at first. Nonetheless, as a long-term projection of where foreign currencies are likely to move to, the fundamentalist approach does appear to be the system considered more favourable by professional FOREX traders.
Which System Should You Use?
Determining which FOREX trading strategy you should use is very much a personal issue. Most analysts tend to favour one system over another – and, usually, it is the system they feel more comfortable with. Having said this, there is absolutely nothing wrong with you, as an individual FOREX trader, making use of both systems to try and help you determine whether you are going to make a reasonable profit selling your base currency now, or holding on for a little longer to see if you can make that little bit more profit.
What You Should Expect from a Basic FOREX Trading Course?
Foreign exchange trading can be a very lucrative addition to anyone’s investment portfolio strategy. Unlike other types of more ‘domestic’ investment tools however, trading in FOREX can, at first glance, appear exotic and dangerous – in that it is not limited by geographic or time boundaries. By partaking in a FOREX trading course, however, you can easily overcome these fears and come to enjoy a new and invigorating way to earn good profits from a relatively straight forward investment market. If you are going to take part in a basic FOREX course, the following are some of the fundamentals you should be looking to learn:
Investment Strategies
As with all of the different types of investment markets, trading in FOREX is based on a number of different recommended investment strategies. However, because the FOREX market is neither centrally located in one place, nor limited by the boundaries of an opening and closing bell, the types of investment strategies used by traders differ slightly from other types of markets. In this regard, FOREX traders tend to use one of two different types of investment strategy – a fundamental approach and a technical approach. If you are already experienced in stock market investing, then the technical approach to FOREX trading should not be too difficult for you to pick up – although it does have one or two quirks. Fundamental FOREX strategy, on the other hand, may take you a little longer to grasp. Either way, before you attend any FOREX course you need to ensure that the course is going to fully explain these varying investment strategies to you.
Jargon
FOREX trading is littered with the use of very specific jargon. Unless you are aware of what this jargon signifies, you may find that you lose money very quickly. It really is essential that any training course you take explains to you the meaning and use of FOREX jargon – preferably with a glossary of these terms being provided to you.
An Explanation of the Software
Regardless of which investment strategy you select, FOREX trading makes use of a fair amount of software to help determine when to buy/sell currencies. If you intend to make a profit out of FOREX trading, you will need to have a thorough explanation of the different types of software packages available to you and how they work.
Working Out When to Buy and Sell
Obviously, as a potential new trader in FOREX you are going to want to know when is going to be the best time to buy/sell your base currencies. Most training courses should not only be able to provide you with an understanding of this via an explanation of the different investment strategies, but should also give you practical experience of this via the option of partaking in simulated trades using dummy trading accounts. Once you have experienced this first-hand, you should then be in a much better position to trade FOREX.
Historical Overview
Rounding off your FOREX trading course should be an historical overview of the FOREX market. With the additional insight into how FOREX markets came about, you should be able to get a better understanding of why certain foreign currencies trade the way they do against each other and hopefully this will give you a better chance of making a real profit out of including FOREX trading in your investment portfolio.