Can FOREX Trading Strategies Be The Key To Forex Trading Success?

By Richard M. Davieess

Trading strategies are crucial to being a successful FOREX trader. However, there are many different strategies for trading and thus FOREX traders must find their own unique style. Technical or fundamental analysis approaches are preferred by many traders, but the amalgam of both strategies will ensure a broad overview of the financial market.

Good trading strategy is not based on luck, but is based on technical analysis of market movements, both higher and lower. It FOREX, they often say, " The trend is your friend" which is the identification of patterns.

There are several analytical tools around to help you understand market movements. The novice FOREX trader would be smart to study every one individually to gain a working understanding of the ideas and uses. Once any tool is understood, it should be used while studying the rest. The tools tend to reinforce each other.

When using FOREX trading strategies, 'Support" is the bottom price level and one where the price tends to rise. 'Resistance ' is that level at the upper end where the currency rarely trades higher. Both support and resistance levels reflect the limits of price movements over a period of time.

Price are expected to continue in the direction they are moving when they break through support or resistance levels e.g. if the price falls below the resistance level, the price should continue to fall.

Price charts needs to be analyzed to look for any unbroken support and resistance levels. Though charts with longer time frames show more important support/resistance levels, analysis can occur over any amount of time. Support/resistance levels are a tool that traders can use to figure out when to enter or exit a trade.

SMA stands for the Simple Moving Average. It is a tool commonly used by FOREX trader to determine the tendency of a fall or rise in price. Generally speaking, if a price crosses over the SMA it will most likely continue in the direction in which it crossed the SMA.

These two trading strategies can be used in combination or individually. To be successful, a FOREX trader should have a large portfolio of trading tools that allow him to examine the conditions of the market and to verify or disprove the findings of a given study. If several of these tools show that the market is moving in a certain direction, the trader can act more confidently than when using only a single indicator.

You can use fundamental analysis in the same way to bolster your technical findings, and the reverse is true as well. In an ideal situation, to be a successful FOREX trader you must decide on your trading strategy by analyzing many factors.

A good trading strategy provides obvious guidelines for when to enter and exit a trade, what to anticipate in market movement, and how much loss can occur if the deal goes badly. Following these guidelines and understanding technical analysis can help you become successful at FOREX trading.