There are four levels of forex traders, new traders start at level One and progress to Level Four.
Level 1 - Unconscious incompetence -- You don’t know enough about the spot forex to ask someone with experience good questions. You are staring at red and green indicators and very little makes sense. We were all there once. You are in the first grade of the forex, swallow your pride and start learning and papertrading.
We often hear the expression “reading the chart” and a lot of people trade using nothing more than support and resistance or candlestick patterns. A seasoned trader with years of experience under his belt has a certain kind of “sense” for market direction even without the use of indicators, but a new trader needs a little help. This help comes from indicators. There are thousands of indicators all over the internet; some are free and some are not, but we are going to focus on the main indicators, those that are commonly used and, of course, free.
Each and every trader is unique. The way they trade, the analysis they apply and the risks they take. No two are a like. However there are some common strategies, as well as mistakes that are made by both experienced traders and newcomers in the Forex world.
Fundamental analysis allows a trader to attempt to predict future Forex price movements by studying macro economic factors & indicators. These economic indicators, released at different times throughout the financial year can have significant impact on the price, and supply & demand of specific currency pairs.
When it comes to Forex market movements, economic data is often a significant catalyst for short time currency price changes. It is not only U.S. economic news that can influence a change if the markets, but other news from all over the world as well. With most brokers offering at least 8 currencies to be traded, there will always be some kind of economic data being released on a day to day basis. A general rule of them is that no less than seven pieces of news, or economic data are released by the eight major currencies or countries each and every day.
From the moment you move from a demo trading account to a live account, risking your own time and money, your complete psychology will change. It is important to understand how trading psychology can affect your judgement on the Forex market, and also how to control these feelings, ultimately allowing you to remain successful over a number of years.
Market psychology is the overall feeling that the Forex market is experiencing at any one time. For example It could, at a particular time feel greed, fear or even have certain expectations that cause traders to either buy or sell.
To newcomers in the world of Forex, the ever changing prices of currency pairs can be quite daunting. Many new traders often wonder what factors cause these frequent currency price changes and the effect this has on the market.
Simply put, the prevailing exchange rate represents the rate at which supply and demand factors alter. Generally, the more buyers than sellers there are, the more the market rate increases. Where as the more sellers than buyers there are for a particular currency, the more it moves down.
We talked about trend lines, explaining their advantages and disadvantages. The next step we must take after learning about trend lines is to get familiar with channels. Well, the channel is the trend line’s big brother, being composed of a trend line and another parallel line on the other side of the trend.
You may have heard experts talking about Double Tops, Triangles or Head and Shoulders etc. These are all chart patterns and they help us spot a possible strong move before it happens. Once you are familiar with the basic chart patterns, you can look on your charts and see how price behaved once a pattern was complete. Chart patterns are a bit difficult to spot at first, but once you get used to them, you will see them all over the place. For this purpose, we are going to use a lot of pictures.