Making Forex Predictions: We Explain Forex Trading StrategySummary: In this section, we explain forex trading strategies and why making forex predictions should be kept as simple as possible. To trade the Forex market profitably, the ability to make forex predictions is vital. An understanding of the main Forex trading strategies will help to bring you a consistent profit. This can be done only by the in-depth analysis of the market. Remember what we say elsewhere on this site - knowledge and research reduces the risks in any investment or trade. Forex strategy is based on two basic types of analysis. Just as in other areas of investment, these are fundamental analysis and technical analysis. Fundamental analysis is based on major economic indicators that help to determine the economic condition of a country. For the analysis of the USD different reports such as Non-Farm Payrolls, Retail Sales, Consumer Price Index or Federal Reserve interest rate–related announcements need to be studied to understand the major movements of the USD. Such economic news can have a major impact on the foreign currency market by making prices highly unpredictable and volatile. This is especially true within minutes of an announcement. Price gaps are possible at those moments meaning that in practical terms it is impossible to trade. If you have a stop loss at a particular price it might not be triggered so it is possible that a trader can suffer substantial losses.
The calendar of major news announcements is available from forex brokers or at some online services for free. Knowing in advance when to avoid the market can be a very profitable skill! Technical analysis is an indispensable tool to explain forex market movements. It involves studying the price behavior of currencies relative to each other, looking for trading signals . For technical analysis you need the chart for the currency pair you are studying and different technical graphical tools, or indicators, that can help you predict the future price behavior based on the past performance. Technical analysis is the major form of analysis for individual traders. Some of the popular technical indicators are different moving averages, Fibonacci grid,
Elliott Waves
analysis and Bolinger bands. For example, a profitable Forex strategy can be based on a combination of moving averages and Fibonacci analysis.
A successful market strategy should also indicate the entry and exit conditions and a stop loss strategy. As with any stop loss strategy, it should be updated if prices start moving in your direction. This will help to lock in some of your profits and is a sound money management technique. To read more about foreign exchange markets and currency trading, please follow these links:
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