Before, only long-term investors, banks, and people with more money could trade on the forex market. The trading is done through an agent or voice broker, who tells clients what's happening. In the end, a computerised automated system took its place. This was the first kind of strategy for trading forex.
With the help of a broker, a trader who works from home or in an office or a small investor can trade in real time with different banks. The broker then uses trading platforms that are run by computers. It has traders who work at live desks and put trades on the broker's books or with real investors. But when the trade was put in the broker's book, the traders lost 95 percent of their money. So the brokers think that this gives them an edge.
There are two main parts to a forex trading strategy. Technical analysis is the first part. The charts are the basis for the technical area. It watches how the market moves by using a mathematical formula. The traders find out about economic announcements and news that affects the forex market. Its basic side helps you figure out what you should and shouldn't do.
Indicators on charts are used in technical analysis. It helps figure out where there is resistance and where there is support. The situations in which prices change direction, stop, or get stuck are shown. The Fibonacci method is very accurate and often used to figure out where resistance and support levels are. Seven hundred and fifty years ago, Fibonacci found a way to make numbers that go in order. Its ratios can also be found in nature, like in sunflower seeds and the rinds of pineapples. This method is often taught in high school math classes. It is called the Fibonacci sequence. It talks about how to figure out the next number in a set of numbers.
If you put two Fibonacci numbers next to each other, you get the percentage ratios. After that, it can be put on the chart. You don't have to be a math genius, though, to do this. The Fibonacci sequence can be done by the charting forex software. As you move along the charts, you might find out where the key areas of resistance and support are. When used with the right indicators, the Fibonacci sequence can show how strong and moving the market is right now. Based on this mathematical rule, you can come up with a strategy that will make you the most money. The rules make it clear that what has happened in the past on the forex market can still happen again in the future.
The second part is the analysis of the basics. Every day, numbers are released that show how the economy of a certain country is doing. Take, for example, non-farm payrolls, which can affect the forex markets in ways that are hard to predict. The effects will depend on what was known before and what the numbers mean. Even for experienced traders, the most important rule is to stay away from the market when important news comes out.
Profits are made in forex trading almost in the same way as in a traditional business. The steps are easy to follow. You will buy something for less money and then sell it for more money. The only difference is that this can be turned around in forex trading.
It's very easy to do. Either "sell" or "buy" is chosen when a trade is made. The base currency will then buy or sell its opposite currency automatically in pairs. Every second, the price will change quickly. Say, for example, that you bought the GBP/USD pair. It means that you bought the pound currency and sold the dollar currency. You want the value of the pound to go up so that you can sell it on the forex market for more money. That would make money because of the difference in prices.
If the brokers let you use 200:1 capital leverage, you might be able to control more money than you actually have. The reason is that you bought one currency and sold another. So, you don't have to move your capital. The only important thing to think about is how much you can gain or lose when the value of a currency pair goes up or down. Aside from that, the basic strategies for trading forex are good.
