Forex trading, just like most other types of trading, is very like a business. It involves making decisions, along with the risk of losing money as well. Forex is abbreviated for Foreign Exchange and it involves the trading of currency pairs, using exchange rate fluctuations to make a profit. Here is what you will need to know to start trading Forex.

Forex

Technical Analysis

First thing you will need to know is to learn how the basic concepts of trading forex. There are two main types of analysis that you can use to predict the direction of movement. The first method is technical analysis. This involves using the charts and historical data to figure out the pattern of movement in the exchange rates. This will require that you have a chart that you can apply the various indicators to try and figure out possible market movements. Using technical analysis, you can identify key support and resistance levels that will can help you predict where to take your profits or to cut losses.

 

Fundamental Analysis

Fundamental analysis is the other main way of trading. This involves the use of news and other market movers to predict where the currency exchange rate will go. The use of fundamental analysis tends to be a lot more predictable especially if there is a rumor going on or if there is a major event coming up. However, using fundamental analysis alone will not be able to identify your take profit levels or stop loss level. It also will not give you the best entry points to enter the trade. The drawback is that fundamental analysis may involve a lot of speculation unlike technical analysis.

Forex

Identify your trading method

Once you have studied the two types of trading, you will need to figure out which method you will want to use. There are two main types of trading. The most common type is intraday trading, which involves making trades for the short term, typically a few hours or a few days. The other type is swing trading. This involves opening a trade and hold it for a while, while letting it swing. This may tend to be safer since it is a lot easier to predict long term movement compared to the short-term fluctuations. Regardless, you will need to find out which method suits you the best before you start trading.

The above three methods summarize what you will need to know when trading forex. Remember that Forex trading, just like any other business, will involve a lot of risk.

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