For the beginner who wants to trade on the Forex market it is imperative to decide on what your trading strategy must be. There are many trading systems which suggest good things but I have to sound a word of caution. Many systems do perform, or at least they work for the person who devised them. But it could well mean it does not work for you. We all exhibit an particular methodology to everything that we carry out and one persons approach in the developing of a trading system may possibly not suit another. One tactic might rely on following a trending indicator for example. Practically all indicators are lagging, that is to say they tell you what has happened after the event. They will not tell you what is around the next corner. So such an approach is likely to be deficient in certain areas.
The soundest method when trading is to look for either continuation or reversal patterns. These are patterns, which historically have shown that the price is most likely to move either up or down. I say most likely quite deliberately. Remember, no one knows for sure which way the price will move. We are looking simply at probability and a few patterns exhibit a higher level of probability than others. There is nothing mystifying about price movement despite what some would have you believe. Remember, it is a constant battle involving buyers pushing the price up and sellers pushing the price down. Just like buying and selling fruit and vegetables from a market stall. It is a easy as that.
You will need some form of charting package if you are intending to trade but be wary not to get carried away with the array of indicators on offer. They may perhaps look very high tech but nearly all of them are not. Remember, they are indicators and can merely help to confirm or otherwise a specific price movement. As already mentioned nearly all indicators are lagging and only show you what has happened (which you can already establish from the price movement). They are all based on price and/or volume data, although there is no volume on the Forex market.
So do not get carried away with indicators only focus on price movement and chart patterns instead. There are just 3 indicators that I can think of that are leading indicators. These are fibonacci retracements and projections, pivot points and the Gartley pattern. I am a great believer in fibonacci patterns simply because they have a tendency to perform and I utilize them routinely. Many traders place major significance on pivot points. Consider this though. Pivot points are derived from a mathematical calculation taking the high ,low and closing price from the preceding day . I can see no technical explanation why that can mean something. All you can say is that if lots of traders employ it and respond to it the movement of price based on this can be a self- fulfilling prophesy. You decide. The Gartley pattern is a little known pattern that is fairly hard to put into words. However once one does present itself a highly profitable trade can result.
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The author has had a keen interest in trading for some time and has written many articles on the subject. Come and visit his latest website.
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