Basic Forex trading strategies

There are two basic strategies that are used when trading Forex, one is called Technical analysis and one is known as Fundamental analysis. Technical analysis is more often used by private traders than fundamental but in this articles we will look at both these methods and see how they each apply to Forex trading.

Fundamental Analysis

If you are of the opinion that establishing the value of a company is a difficult task, then imagine how difficult it is to decided what the value of a country is.

Using Fundamental analysis in the Forex market is very difficult indeed and is normally only done to predict long term trends. There are many private traders however that trade based on the latest news releases and this has been done with varying degrees of succes. There are a lot of fundamental indicators including ;

• Non-farm Payrolls
  
• Purchasing Managers Index (PMI)
  
• Consumer Price Index (CPI)
• See also our list of Market Indicators
  

Retail Sales

It is important to realise that these are not the only reports that you need to be aware of. There are a number of meeting and announcements announcing inflation, interest rates and other issues that affect currency values. One of the really important meetings that you have to watch out for is the Federal Open Market Committee.

By simply reading these reports you can get a better understanding of long term market trends and profit in the short term by looking for special events as a good time to trade.

At eToro we provide our traders with the latest news and events so you will always be up to date with global happenings that can affect your trading.

Technical Analysis

Technical analysis in the Forex market is all about analyzing price trends.technical analysts of the FOREX trading market analyze price trends. Some of the most common forms of technical analysis used in FOREX are:

• The Elliott Waves
  
• Fibonacci studies
  
• Parabolic SAR
  
• Pivot points

A lot of technical analysts tend to combine technical studies to make more accurate predictions on your behalf. Others prefer to create trading systems in an effort to repeatedly locate similar buying and selling conditions.

Deciding on the strategy to use.

Most successful traders develop a strategy and refine it over a period of time. Some people will focus on one particular study or calculation, while still some others use broad spectrum analysis as a means of deciding which trades to make. Most experts are likely suggest that you try using a combination of both fundamental and technical analysis, with which you can make long-term projections and also determine entry and exit points. Of course, in the end, it is up to you, the individual trader to decide what works best for yourself..

When you are ready to try trading in the FOREX market, you should open a Free Demo account and practice until you can make a profit on a consistent basis. Many people who fail have a tendency to jump into the FOREX market and quickly lose a lot of money simple because of a lack of experience. It is important to take your time and learn to trade properly before you start committing resources.

You also need to be ale to trade without emotion and most importantly remember "The Trend is your Friend"