There are several different ways to trading the forex market but these strategies can be narrowed down to three main types: fundamental trading, technical trading, and mechanical trading.
Fundamental Trading
Fundamental analysts take a look at economic reports in order to gauge interest rate changes for a country. In turn, rate expectations determine currency demand, which is a major factor in determining whether a currency will rise or fall in value.
Fundamental analysis involves watching economic releases or listening to policy statements of central bankers. These are used under the assumption that positive economic expectations result to a boost in the currency's value while negative economic expectations lead to a drag in the currency's value.
What is Technical Trading?
Technical traders take a look at chart formations, Japanese candlestick patterns, and technical indicators in order to predict future price behavior. Technical analysis revolves around the concept that previous price behavior can be an indication of how prices will move in the future.
This kind of trading makes use of forex charts and multiple time frames. This depends on whether the trader is scalping, looking for a day trade, taking swing setups, or establishing a longer-term position play on a currency.
Mechanical Trading
Mechanical systems comprise a set of indicators and trading rules. The combination of these generate buy or sell signals for the trader to execute.
Several traders prefer this kind of trading because it provides the freedom and flexibility that other kinds of trading usually don't. Having a mechanical system doesn't require a trader to stay in front of the platform watching price action all day or waiting for an economic report to be released.
In addition, mechanical trading systems aren't complicated by human error or human emotion. While some traders make errors in punching in numbers for prices or position sizes, mechanical systems can come with program commands that eliminate these mistakes. On top of that, while humans can get distracted by the fear of losing or greed for larger returns, mechanical systems can implement trade signals without any emotion whatsoever.
Some traders opt to combine these three different kinds of trading to suit their needs. The bottom line is that one needs to decide what kind of trading he is comfortable using and which one can be able to help him secure profits consistently.
Fundamental Trading
Fundamental analysts take a look at economic reports in order to gauge interest rate changes for a country. In turn, rate expectations determine currency demand, which is a major factor in determining whether a currency will rise or fall in value.
Fundamental analysis involves watching economic releases or listening to policy statements of central bankers. These are used under the assumption that positive economic expectations result to a boost in the currency's value while negative economic expectations lead to a drag in the currency's value.
What is Technical Trading?
Technical traders take a look at chart formations, Japanese candlestick patterns, and technical indicators in order to predict future price behavior. Technical analysis revolves around the concept that previous price behavior can be an indication of how prices will move in the future.
This kind of trading makes use of forex charts and multiple time frames. This depends on whether the trader is scalping, looking for a day trade, taking swing setups, or establishing a longer-term position play on a currency.
Mechanical Trading
Mechanical systems comprise a set of indicators and trading rules. The combination of these generate buy or sell signals for the trader to execute.
Several traders prefer this kind of trading because it provides the freedom and flexibility that other kinds of trading usually don't. Having a mechanical system doesn't require a trader to stay in front of the platform watching price action all day or waiting for an economic report to be released.
In addition, mechanical trading systems aren't complicated by human error or human emotion. While some traders make errors in punching in numbers for prices or position sizes, mechanical systems can come with program commands that eliminate these mistakes. On top of that, while humans can get distracted by the fear of losing or greed for larger returns, mechanical systems can implement trade signals without any emotion whatsoever.
Some traders opt to combine these three different kinds of trading to suit their needs. The bottom line is that one needs to decide what kind of trading he is comfortable using and which one can be able to help him secure profits consistently.
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Want to find out more about forex trading, then visit Katherine Mendoza's site on how to choose the best trading strategy for your needs.
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