If you strive to become a successful Forex trader, you need to create your personal trading strategy. In the trading practice there is no trading strategy, which could be equally suitable for all traders. Every trader should create a trading strategy by himself, which would be suitable for the trading conditions by all parameters.
There are traders, who are guided only by technical analysis when trading, while others prefer fundamental analysis. But there are such traders, who carry out both technical and fundamental analysis in order to determine the most appropriate points of the market entry and exit.
Technical analysis supposes a concept, that prices are moved by trends. There is an established phrase “trend is your friend”. All the movements on the market have their images, which were studied over years. An absolute understanding of these trends is a guarantee of a correct and efficient trading strategy. There are various analytical instruments, which help to understand all market movements. If you are a beginner, you need to study well every instrument separately in order to get practical knowledge and understanding of these instruments.
As soon as you begin to understand one instrument action, you should start using it and at the same time study other instruments. Support and resistance levels are used in many trading strategies. The support is applied to the price level, which is repeatedly seen as the basis – when the price gets to this level, it has a trend to the price rise. The resistance levels are upper prices, a currency trading is seldom implemented here. Support and resistance levels contain basic price movements only over some period of time. When currency prices break through the price support and resistance levels, they continue to rise. In order to find the support and resistance levels it is necessary to analyse price diagrams of not broken support and resistance levels. The diagram analysis may be implemented during any period of time. The usage of support and resistance levels helps a trader to determine when it is better to enter or leave the market.
Moving average is one more instrument for the trading strategy creation. Simple moving average SMA shows the price in the period of time determined by you. Moving averages are used to remove short-term price fluctuations; it helps to ascertain a broad picture of the market events. Traders use moving average to determine a trend of prices future increase or downturn. If price lines intersect above the moving averages, this trend will likely continue on the market. And vice versa, price lines, which cross below the moving averages, will likely continue descending movement.
To perform a full-fledged analysis of the Forex market, a trader should have several trading instruments in his/her arsenal. If several indicators show that the market began to move in a certain direction, a trader may rather confidently enter the market, relying upon one indicator’s signals.
A fundamental analysis can be performed according to the same scheme. Every trading strategy, developed by a trader, must give clear guiding principles about the time, when it is better to enter or leave the market, and what market movements are expected in the near future. The creation of the individual trading strategy in combination with technical analysis will help you to become more than just a successful trader on the Forex market.