Today in 2020, it feels like nearly everyone is trying to become a successful Forex trader. The foreign exchange market—also known Forex or FX— is a multinational marketplace for the exchange of national currencies. Forex trading is the exchange of blocks of currencies, always one specified currency for another. For example, you could trade the U.S. dollar (USD) vs. the Canadian dollar (CAD), the Euro (EUR) vs. the Japanese Yen (JPY), and so on.
While the stock market tends to be better known among the public, the Forex market is actually the largest and most liquid market in the world. Every day, trillions of dollars of currencies are exchanged.
If you’re looking for Forex trading strategies that work, below are five tried and true tips that you’ll want to know.
How to analyze the price pattern in the Forex market
Different traders use different techniques and to try and make millions in profit from Forex trading. Despite this, most savvy investors learned trading in the old fashioned way. They spent a lot of time learning price analysis, so as to be able to make better decisions without having remorse.
Analyzing the price pattern may seem easy, but it is a very tough job for novice investors. For those who aren’t familiar with the term, the price pattern is a naturally occurring pattern that appears (and typically repeats) when foreign currency prices are plotted on a graph over time.
In this article you’ll learn tactical tips to change the way you analyze the price pattern.
1. Analyze the daily time frame
This tip is simple. Stop looking at the chart in the hourly time frame.
If you try to make bold moves by analyzing the data in the hourly time frame, you have a long way to go. You have to find the trade setups in the daily time frame.
The daily time frame gives more important data to retail traders.
Once you start analyzing the daily time frame, you will be able to change things fast. Most importantly, the trend of a trading strategy will be easier. While daily time frame trading can be a boring technique, it will give you an important position from which to open your new trades. So, spend time analyzing the daily time frame.
2. Use the major chart pattern
This tip is also straight-forward. You should be using the major chart pattern from the start. A chart pattern is exactly what it sounds like. It is a pattern that appears within a chart when prices are graphed.
Forex chart patterns are important because specific patterns can be associated with a higher than average probability of follow-through in a particular direction. Meaning, they help you to play the statistical odds.
For this tip, you’ll need to use a reputable trading platform. Consider using Saxo’s platform since they are well reputed and they care about their clients. Once you get the best trading platform, it will be much easier to analyze the critical data.
The chart pattern will position you to securely trade the large market movements. People who are looking to find profitable trades by using the important indicators should focus on the major chart pattern.
3. News analysis as part of your trading business
Both global and regional news can create massive fluctuations in the price movement of international currencies. Failing to analyze major news events can result in big losses. People who are looking to build their empire in false pride often ignore the importance of major news.
If you’re going to be a Forex trader, then news analysis unquestionably needs to be a part of your trading business.
Unless you do this effectively, it will be tough to stay profitable and overcome your losses. Thousands of traders who have tried to develop themselves as full-time traders have failed because of their lack of knowledge in fundamental analysis.
Simply put, fundamental analysis is a way of looking at the Forex market by analyzing economic, social, and geopolitical forces. These forces can substantially affect the pricing of international currencies, often within a short period of time.
4. Know Your Charts (and Candlesticks)
In this tip, we are referring to candlestick patterns. Candle stick patterns are way to show all four metrics relevant to a single trading day in one simple visual.
Put simply, they show a currency’s opening and closing price as the thick part of the “candle” and the high and low prices of the day as extensions (“wicks”) protruding from it.
Knowing about the major candlestick pattern of a currency is a great advantage and can notably boost your performance.
People who are looking to build their empire in the Forex world have a lot to take in. To make things easier, you should study the Japanese candlestick pattern since it provides powerful data in a simple, visually accessible format.
But, knowing your price action trading strategy is not enough. It is a part of this business. You’ll also have to find your support and resistance levels to take advantage of this trading technique.
5. Money management
Money management might the most important factor in trading. Money management refers to how you manage the pool of money you have available to invest. It is the set of techniques that you use to maximize gains, minimize losses, and grow your trading account over time. Good money management is the key to preventing a total wipeout of your account.
People who ignore the role of money management often make big mistakes, as they don’t have the skills to analyze the price pattern effectively.
As you study the major price pattern with the help of a demo Forex trading account, you’ll slowly develop your skills.
Don’t be a greedy trader who always looks for the home run. At times you will badly hurt by this market. You’ll have to accept those scars and move forward anyway.
Learning Forex trading strategies that work
Most importantly, never break your tried-and-true trading rules or pretend you know everything about this industry. Be honest with yourself, because this is an ever evolving industry.
What questions do you have about Forex trading strategies that work? Ask them in the comments below.