People, interested in the field of trading are quite aware of foreign currency exchange, which is in itself is a very demanding and dynamic arena of investment. True knowledge regarding the various comprehensions, complexities and technical intricacies related to the Forex market can help you to grow your capital with each passing day. Though there are no hard and fast strategies applicable in the market of currency exchange but a bit of market analysis on your part can help you to earn more profit with every passing day.
The field of Forex trading involves quite a high level of risk. So, it becomes very necessary for you to determine to which extent you can handle risk according to your financial goals. The size of the trading account need to be calculated prior to making any investment, where one should always take into consideration the profit/loss targets along with the personal risk tolerance. As far as forex trading is concerned, there are some currencies that are considered to be more volatile than others. Due to this reason, certain conservative traders religiously follow the risk and money management rules, to avoid losses as much as possible.
Importance of proper Forex analysis
Studying the recent market trend will help you form a good idea regarding the modern prevalent Forex trading system. The investors should be well aware of the applicable government policies as well as the moving averages; this will assist them in identifying and following the trends in a better way. You must prudently work out on which market you should invest in. The Forex market operates throughout the day, and hence it is practically not feasible for every trader to follow its each and every movement for the entire 24 hours. Researches have proved that the US and the European markets are certainly two of the most liquid markets of all. But this definitely does not mean that any other trader investing in these markets will meet success. Their success rate solely depends on their strategies, plans and Forex market analysis.
Technical/Fundamental Forex Analysis
Technical and fundamental analysis are considered to be indispensable parts of gaining profit while trading Forex. The trader must have the ability to evaluate the currency value by taking into consideration the factors that tend to influence the value; but alone this is not sufficient. One must invest a bit of time in getting conversant with graphs and charts, as the real value serves as a reflection of the Forex market analysis for a certain span of time. While making the researches and doing all the analysis, it becomes prudent to identify the patterns. It has been seen time and often that patterns keep on repeating on a consistent basis; and so it will clever on your part if you could somehow take advantage of this probability factor. This indicates that only fundamental Forex analysis is of no such use without analyzing the forex chart patterns.
Knowing The Graph And Chart Indicators
Charts and graphs are the basis of any technical currency trading strategy. Candlestick charts reflects the highest, lowest, opening and closing price by the assistance of a vertical bar placed on a shaft. The candlesticks on the chart denotes the varied price ranges of a certain currency pair for a given period of time. A trader should be capable of studying and interpreting the chart to plan the appropriate strategies related to buying and selling.
If you find the candlestick to be colored then it indicates that the opening market price is above the closing price. On the other hand, if the candlesticks appear to be hollow, then it indicates that the opening market price is below the closing price.
For The Beginners
A small information for the beginners, the colored or hollow parts of the Forex candlestick is referred to as the body of the chart; however, the lines that you can find positioned below and above the body are called the shadows.
If you find that the candlesticks have a long body then it denotes stronger activity, while if it has a short body then signifies lesser activity. A long shadow on the upper side means that the prices went up due to heavy buying activity, but selling overdid the buying activity and as a consequences the prices came back to a level which is much nearer to the opening price. In a case, where you find both the upper and the lower shadows to be long then it reflects a situation where buyers and sellers bot are deemed to be uncertain. When a candlestick body becomes very short and appears like an inverted cross or a plus sign, then it suggests that the opening as well as the closing prices are same.
This particular pattern is popularly known as a Doji. If you come across a Hammer or a Hanging man in a chart then it signifies that the price has picked lately.
I guess, you have already started considering that manual Forex analysis is not at a simple matter. For an easier and simpler form of learning, many are these days, opting for automated Forex trading robots. There are even more intricacies and strategies involved in Forex analysis, that can only be understood after you start indulging in real-time Forex trading activities.