In forex trading, one of the most important factors you'll need to come to terms with is interpreting the market's signals. These clues are important because they'll help you make decisions about when to get in, when to get out, and how much to buy or sell. Here's what you need to know to get this right.
As a trader, these signals are the critical information you always need to be looking for. That's because they can happen at any time of the day or night, and can often require immediate action if you want to take advantage of them. So what do you feel is the the best way to learn how to spot the signals the market is giving you?
Truthfully, this is a skill that only comes to you through continued study and actual trading experience. Having said that, the first thing you need to master is distinguishing between the various clues the market is trying to give you. In other words, before you can recognize and interpret market activity, you need to understand the different kinds of analysis.
Broadly, there are two kinds of analysis used by traders to determine which way the market might be headed. Technical analysis and Fundamental analysis. Let's look at each each one so you know what we are talking about.
Technical analysis (TA) depends entirely on understanding and interpreting data and price charts. You don't need any special knowledge about political or economic events to use Technical Analysis. That's why it's best to start with this one first, and only after you've mastered TA should you move on to fundamental analysis.
Being good at technical analysis means you are able to understand price charts and market indicators. Once you've learned to read charts, you'll be able to quickly pick up changes or continuations in trends, which will help you choose entry and exit points for your trades.
Fundamental analysis on the other hand focuses on political and economic factors. It ignores price data (charts and technical indicators), and considers economic policy settings, government announcements, relevant news and current events.
Those who prefer fundamental analysts believe technical analysis only tells you what has happened in the past, but it cannot predict the future. In their minds, prices are related to profits, which are affected by fundamentals more than anything else.
Being able to recognize what the market is saying and being able to act on that information is the key for forex trading success. That's why it's important that you learn about the both forms of analysis. Having an understanding of each one will enable you to identify market signals and trade them profitably, which is ultimately what you want to do.
As a trader, these signals are the critical information you always need to be looking for. That's because they can happen at any time of the day or night, and can often require immediate action if you want to take advantage of them. So what do you feel is the the best way to learn how to spot the signals the market is giving you?
Truthfully, this is a skill that only comes to you through continued study and actual trading experience. Having said that, the first thing you need to master is distinguishing between the various clues the market is trying to give you. In other words, before you can recognize and interpret market activity, you need to understand the different kinds of analysis.
Broadly, there are two kinds of analysis used by traders to determine which way the market might be headed. Technical analysis and Fundamental analysis. Let's look at each each one so you know what we are talking about.
Technical analysis (TA) depends entirely on understanding and interpreting data and price charts. You don't need any special knowledge about political or economic events to use Technical Analysis. That's why it's best to start with this one first, and only after you've mastered TA should you move on to fundamental analysis.
Being good at technical analysis means you are able to understand price charts and market indicators. Once you've learned to read charts, you'll be able to quickly pick up changes or continuations in trends, which will help you choose entry and exit points for your trades.
Fundamental analysis on the other hand focuses on political and economic factors. It ignores price data (charts and technical indicators), and considers economic policy settings, government announcements, relevant news and current events.
Those who prefer fundamental analysts believe technical analysis only tells you what has happened in the past, but it cannot predict the future. In their minds, prices are related to profits, which are affected by fundamentals more than anything else.
Being able to recognize what the market is saying and being able to act on that information is the key for forex trading success. That's why it's important that you learn about the both forms of analysis. Having an understanding of each one will enable you to identify market signals and trade them profitably, which is ultimately what you want to do.
About the Author:
To learn more about becoming a profitable trader, read this fibonacci forex trading article to see how to use this proven technique in your trading. Then read through the other posts to find the best advice on building a forex trading business.
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