The Forex market incorporates two primary types of Forex
trading strategies. One such Forex strategy is based on a
fundamental analysis and the other is based on a technical
analysis. As a trader, you will likely have to incorporate
both types of Forex strategies in your overall Forex
trading strategy. Fundamental analyses are based on
economic factors while technical analyses are based on
price. There is a general consensus among market
participants that the most highly traded currency pairs in
the Forex market tend to be technical and the more exotic
currency pairs tend to be more fundamental.
While both types of analysis are necessary for successful
and profitable trades, most traders tend to rely more on
one type than the other. When your Forex trading strategy
incorporates technical analysis, you must be prepared to
deal with the mathematical concepts necessary to manipulate
pricing data. Likewise, when you incorporate fundamental
analysis in your trading strategy, you must be prepared to
handle the multitude of economic factors necessary to base
your trades. In the end, the variety of economic data must
be converted into price predictions and many traders resort
to technical analysis because it is thought to have a built
in mechanism for completing the conversion. However,
incorporating a purely technical Forex trading strategy
without regard for the fundamental aspects of the market is
much like trading on luck. Sometimes you win, sometimes not.
Other factors that will influence your Forex trading
strategy are your ability to manage money and to handle the
psychological implications of participating in the Forex
market. While many people have profited from their Forex
trading strategies, losses are all but guaranteed with
Forex trading systems. One of the nuances of Forex trading
is that it involves calculated risks. If your financial
situation or emotional circumstance is such that you cannot
afford to sustain losses, you will likely loose more than
your investment dollars, particularly if your losses are
easily converted to physical illness.
It is important to develop a Forex trading strategy that
complements your lifestyle and temperament. You need to
understand the investment, the risks and the impact that
your choices will have on your investment dollars and your
lifestyle. In Forex trading, it is quite possible for a
loss to multiple itself as market conditions vary and
change. Your Forex trading strategy must include a plan of
action in the case of a loss as well as a win. Another
consequence of Forex trading is overconfidence.
Overconfidence has caused many traders to engage other more
costly and more risky trades following a win or series of
wins. You will have to be responsible to dedicate the time
necessary to track and analyze the trades that you engage.
It only makes since that you engage a number a trades that
you are reasonably able to manage during a given trading
session. Forex trading can also become addictive for
certain personalities. Your Forex trading strategy should
include indicators that alert you when it is time to enter
or exit trading. You cannot become overconfident about a
win or series of wins. Likewise you cannot become too
depressed over a loss or series of losses. FOREX trading
systems are based on calculated risks and the wrong
calculation leads to more risk and the potential for more
loss.
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Andrew Daigle is the owner, creator and author of many
successful websites including ForexBoost at
http://www.ForexBoost.com and
http://forex-trading-system.typepad.com , Free Forex
Training Resource for the Novice and Advanced Forex trader.
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