25/07/2024

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A Beginner’s Guide to the Forex Market

A Beginner’s Guide to the Forex Market

A lot of people would have heard of the term technical analysis and this is no surprise as it has existed for over one hundred years now. Technical analysis is explained by the analysing of past price data which can determine price movement in the future, so in other words it is the study of priced in order to perform better and more successful trades. With all of this technical analysis, it has been concluded that you do not actually need to invest huge sums of money to be able to learn how trading is done. Once technical analysis has been explained, you will see that it is not very difficult to understand or as terrifying as some may think. Once the basics have been explained to you, you will see that it is easy to learn and gain information from the Forex charts and then you can most easily make a profit. However, one should not think that trading as a whole is an easy activity; it is something that takes rather a lot of training and is in fact a skill that will take a few years to perfect. Even after a few years you will still be learning from mistakes. One of the best things that you can do is to enrol on some sort of trading course; the best I have ever come across is Bill Poulos’ day trading course. Bill Poulos’ Forex Income Engine will provide you will all the knowledge and hints and tips that you will ever need, as well as a constant supply of free resources on the member website. Bill Poulsor is someone who has learnt from his mistakes and is willing to impart all his knowledge that he can to help others learn.

Technical analysis has a proven track record of success and uses a lot of past and/or current behavior in order to forecast upcoming behavior. This process succeeds because humans are very predictable and will more often than not replicate their behavior when under similar conditions again and again. People must, however, remember not to over analyze as you must take everything with a pinch of salt for with every chart analysis you make, several other traders are analyzing the same charts you are, leading to a very intricate, complicated trading lifestyle. Charts are not to be underestimated though, as they are the main factor in most technical analysis, the main chart types being line, candlestick, point, bar, figure and renko.

Trends can be very simple to locate when you are looking at a chart, however you must be able to know how to draw your own trend lines. To do so you have to at first know the definition, which is that trend lines are lines that begin at the start of a trend and then come to a halt at the end of the trend, all you have to do it to choose all the smallest lows in a move and then draw in a straight line, which will connect both of the bottoms. Sometimes you will not be able to draw a trend line on the chart and you must be sure that the trend line you have drawn is identifying the actual direction of a price move.

Once you are used to the system of trend lines, you can then start to look for break outs. These are when any part of the price bar penetrates a line that you have drawn. I would recommend being suspicious of false break outs, however, as these may cause a lot of damage to your trades. There are other lines known as support and resistance lines. These are very well respected by all technical traders. A support line can be explained by the following example; when a price attains a certain worth, a trader will pull the value of the currency back up, preventing the currency from falling any further, and is called support because the trader is supporting the price. Resistance lines are like support in that a currency seller will maintain control of the prices and then stop them from increasing in price. The levels of resistance actually point to the price to which most investors feel prices will decrease whereas support levels point to the price where they feel prices will increase. Once again, you can identify these lines by drawing on your charts. It is recommended that you always know the support level for the currency that you are trading in.

The term ‘Trader’s Remorse’ is defined as the traders need to question the new values after the incursion of resistance or support levels. After this period or remorse, the price action is vital, as it is the case that the new price level is not justified and this will cause the prices to return to their previous worth or traders will agree to the new prices and so the prices will be able to keep moving in the direction of infiltration.

The next bit of Forex that you need to know about is what an Indicator is. Indicators are mathematical calculations that have been applied to a security’s value. The resulting value is then planned on a chart and used to predict price variances. The four basic indicators used in Forex measure the following; velocity, momentum, volatility. Volume is another indicator but it does not hold in Forex. There are two terms then are often heard when you listen to market analysts, these two being convergence and divergence. The first term, convergence always refers to two indicator lines that are moving closer together and is generally seen on the price chart and indicates that prices are going to move sideways or have a narrow high-low range. Two more trading terms that are used in the Forex market are Benchmark Levels and Retracements. The term benchmark levels refer to the all past highs and lows on a price chart. Although you cannot use them as indicators and apply them to a chart, you can use them to indicate price actions for the future. Retracements cannot be predicted but people still try. There are many things you should look out for when trading and beware of making mistakes; one such piece of advice is to look out for round numbers and also to take into account the rule of 30{3bb2a8e703be8d5bb7fc1289a915cd39229c5bcd006c8cdf059732c7e19a8eab}. It can be assumed that most traders will put into position stops that will ensure they avoid losing more then their set percentage, in this case 30{3bb2a8e703be8d5bb7fc1289a915cd39229c5bcd006c8cdf059732c7e19a8eab}. There are issues with this rule; however, as most of the time you will never know where a lot of traders entered the market.

Now that you have a lot of knowledge as far as technical analysis goes in the Forex market, you will be able to study your charts with a set of fully opened eyes. Whilst studying the charts, everything will become more familiar and you should be able to utilize them to the best of your ability which will help your trades to improve. One thing that every trader should remember is that you should always be on the lookout for changes in the market and trends that are emerging or likely to emerge. If you feel that you do need more information on trading in the Forex market then as previously mentioned, you can always enroll on a day trading course.