FOREX, 10 BASIC STRATEGIES
forex, fx, trading, finance, currency, economy, investments
1 plotting trends and ranges of prices of the markets
Use graphics with long term time frames to decide between trends or fluctuating markets. Start the analysis charts daily, weekly, monthly, or even, whereas several previous years. A graphic large scale essentially shows the life of the market and provides a much clearer perspective of long term of the market situation.
Once you have analyzed the situation of the long-term market, you can parse the graphics with short-term time frames. Remember that the factor of chance in Forex ismuch higher the smaller the time frame (time frame) in a chart. Successfully predictthe behaviour of the price in short-term time frames is much more complicated. It isusually best to operate in the same direction as the trends in the medium and long term,even if only operated in the short term. If there is a strong and definite trend, it is best to switch to other types of strategy.
2 follow the trend
Once determined the trend, you should only open positions in the same direction. The market trends can be long, medium or short term.
You must first decide what kind of strategy to follow: long time or less time. This decision will determine the type of graphics you should use. But the strategy will be toalways follow the trend.
In case of an uptrend, regressions in the price be expected to buy the pair, to ensure a good entry price. In the event of a downward trend, we shall wait for a recovery in the price, before selling.
3 locate the support and resistance levels
Find support and resistance levels. It is best to buy close to the levels of support and sell near resistance levels. The level of resistance is usually a peak reached earlierby the price of the currency pair.
When a resistance is finally broken to the boost, this is converted automatically in asupport. Also when a bracket is broken down, this becomes in turn a resistance.
4 the setbacks or corrections
Correction of the market, up or down, usually through an important part of the previous trend. Corrections in a trend in simple percentages can be measured. A trace offifty per cent of a previous trend is the most common. The Fibonacci retracement of38% and 62% are also two levels more followed by Forex traders, including investors who operate large volumes, such as banks or financial institutions.
5 the trend lines
One of the simplest and most effective graphical tools are the trend lines. Draw a straight line joining two points on the graph. If the trend is bullish, the line is drawn below by joining two or more low points.
If the trend is bearish, it draws a line above the graph also joining two or more highpoints. Prices often respect these trend lines approaching them.
6 moving averages
Moving averages often offer signals of purchase and sale, reason why it is importantto take them into account. With the help of moving averages, it is possible to determine the status of a current trend.
One of the most common ways to use the mobile medeas is the use of two different socks in a same graph, and wait for the crossing of both. If for example we have abullish and prices were in a correction, at the time when a faster moving average (of10 days for example) cross over to above a moving average more slowly (20 days for example), this is probably a good buy signal.
7 the oscillators
Oscillators help identify markets in a State of overbought or oversold. Although moving averages provide a confirmation of the trend of the market, oscillators can often tell us the right time to open an operation.
Two of the most common oscillators are the index of relative strength (RSI) and stochastic. These two oscillators operate on a scale of 0 to 100. When the RSI is above 70, there is an effect of envelope buys, and when it is below 30, is indicative of oversold. The values of overbought / oversold for stochastic are of 80 and 20respectively.
8 the MACD
Indicator of convergence / divergence of the mobile average (MACD) combines a system of intersection of moving averages with mobile elements of overbought / oversold an oscillator. A buy signal occurs when the faster line crosses up slower, still both below zero line.
On the other hand, a signal occurs when the faster line crosses down the slower, stillboth above zero line.
The MACD histogram determines the difference between the two lines and gives anearly warning of changes in the trend. A histogram is this called since it uses verticalbars to show the difference between the two lines.
9 the ADX
The Average Directional Index (ADX) helps to determine whether a market is in a phase of trend or if it is oscillating between ranges. This tool measures the strength ofa trend or direction of the market, but does not indicate the same direction. Other indicators or tools should be used for that. A reading above 25, is usually an indication that the market is in a strong tendency, rather than fluctuating between ranges.
Training in technical analysis is something essential that all beginner trader must make. You can only improve and refine through practice and experience operating in the market. Continue reading, training and practice is very important for finding thestrategies that work best to each person.
Remember that follow strategies based on technical analysis also helps prevent to open operations based purely on emotions and impulses. Discipline is essential to achieve this.