Forex Trends Is The Way To Make Money In The Currency Markets
The way to make money with forex trading is by observing patterns and trends in the currency movements and then acting when a trend is about to form in a positive direction. When I say positive direction, this can be an upward trend when opening a trade or a downward trend when closing a trade.
Charts are used for this type of technical analysis. There are generally three types of chart used for this – line, bar and candlestick charts but the most common is the candlestick chart because most traders find them easier to read.
In a candlestick chart, a vertical column shows the high and low price whose width represents the opening and closing prices. The columns are traditionally coloured white for rising and black for falling prices but colours such as green for rising and red for falling are now becoming more common. This type of chart is preferred by many traders because it is easier to see the turning points where a price has reversed from an upward trend to a downward trend and visa versa.
Being able to identify a trend before it actually happens is the big secret and this is where skill and experience is so important. Some traders will observe a currency movement between two imaginary horizontal lines on a candlestick chart and any movement up or down between these lines is considered to be a sideways trend and any movement beyond these lines is considered an upward or downward trend and will consequently trigger an opening or closing trade.
Sometimes these lines are referred to as resistance lines because the currency price will usually fluctuate between them or ‘bounce’ off them as though they were a physical barrier. Of course they are imaginary and the positioning of these lines is the secret to success.
It is important to take your time and practice with paper trades until you are confident with your interpretation of currency movements and emerging trends before you start trading with real money. Forex is risky and even with the best systems there will always be losing trades. The secret is to ensure that there are more winning trades than losing trades.
Traditional traders prefer to work with charts and develop there own manual systems. It gives them a buzz to be able to read the market and spot a good time to open or close a trade. For others, it’s more do with just making money and increasingly there are some very good automatic trading systems, often referred to as robots, entering the market. Of course you have to set the parameters which are similar to the imaginary lines I’ve just mentioned but having done that you just sit back and let the robot open and close trades automatically.
However, even with robots, you should always paper trade until you are confident in setting the parameters correctly. When you purchase the robot software to run on your computer, it will come with detailed instructions and the ability to demo trade. Visit my blog for regular reviews of the latest robots as they hit the market.