Apply “the secret” to forex trading success

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What’s “the secret” behind successful traders?

The
Forex market is the largest trading network in the world with $1.8 trillion
dollars being exchanged every day. There are dozens of different currencies
traded but the big players to focus on are all traded with the US dollar and
include:  EUR (Euro), GBP (British
pound), JPY (Japanese yen), CHF (Swiss franc), AUD (Australian dollar), NZD
(New Zealand dollar), and the CAN (Canadian dollar). 

Each
of these currencies is exchanged with the currency of other nations at
different exchange rates-which are always in a state of flux because the market
trades around the clock (Sunday through Friday).

The
volatility and sheer size of the market means that there is ample fluctuation
to produce big profits-and losses. The challenge for the investor, as always, is
to predict which direction the rates of currency pairs will fluctuate. 

The
beginning point in any investment
strategy

is determining what type of analysis will be used to help guide enter and exit
decisions. Investors who use fundamental analysis look at a nation’s interest
rates and other economic indicators when deciding to enter or exit a
position. 

Fundamental
investors tend to trade based upon news releases and economic data from the
nations involved in the currency pair. 

Briefly,
technical analysis involves the interpretation of price performance and chart
patterns-all historical data.  Some
technical indicators used in this type of analysis include:

  • Moving averages including Simple
    & Exponential
  • Breakout Points
  • Lines of Support & Resistance

Technical
traders do not believe that the past necessarily predicts the future-but that long-
and short-term trends can be identified and exploited to help guide current
decisions on entry and exit points on positions. 

Technical
traders try to identify current trends in the Forex market to determine entry
and exit points.  If they are correct,
they can ride a trend (in either direction) for a profit until an exit point is
reached (when the trend is ending).

The
most successful traders on the Forex tend to look for long-term trends and
favor technical analysis. Fundamental traders have to enter and exit positions
very quickly in order to capitalize in price fluctuations caused by news events
(interest rate changes, release of economic data, etc.) and are therefore more
vulnerable due to excessive trading. 

If
there truly was “a secret” to trading success on the Forex, the top investors
all tend to agree on the following:

  1. Choose currency pairs involving U.S.
    dollar (has volume to produce the price fluctuations necessary for big profits
    and the liquidity to enter/exit positions at will)
  2. Find currency pair through backtesting
    that has most profit potential (pip movement) and least volatility through use
    of technical analysis
  3. After determining trends, set stops and
    exit points for both protection and maximum profitability
  4. Review charts once per day (overtrading
    and day trading can hurt your portfolio)
  5. Remain patient and exit positions once
    technical decision point has been reached

If
there really is a secret to trading success on the Forex it has to be patience.
Trading strategies are never perfect because the market will never be
predictable 100% of the time.

There
will be times when any strategy fails and stop points are reached before
profits are realized. Continuous back testing, remaining patient, and setting
stops are the true secrets of Forex success.

This article was submitted by UBCFX.
ForexLive

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