Trading Forex can be a very profitable and satisfying experience if done correctly, however it can also lose you a lot of money just as fast as you'll make it if you don't know what you're doing!
To make it a success, there's a few simple, yet extremely important things you need to know, and learn. In this article, I will discuss how you can start trading, and making money just by learning a few simple yet very important things about Forex.
Firstly...
Many articles you'll read will tell you how you need to learn lots of technical analysis, and learn about many different indicators etc, however this is not the case. Infact, using too many indicators can actually confuse you when it comes to trading and make trading far too complicated!
MACD, Moving Averages, Pivotpoints, RSI, ADX, Bollinger Bands... these are just a few of the many indicators available now on most free charting software.
Many people will fill their chart with a bunch of these indicators but to be honest, they are not necessary. After all, the charts (price) is what makes the indicators move, not the other way round. (Some people fail to remember that simple fact).
Ok...Which Indicators Should You Use?
I like to keep it simple, which is why when I trade, I only use the stochastic indicator (full) as well as drawing on my chart various points of support and resistance (If you don't know what support or resistance means, then don't worry, I will explain this soon).
I use the stochastic indicator, and I generally only tend to trade when the stochastic gives a reading of 20 or lower...or 80 or higher! - 20 and lower is an indication that the market is oversold and a correction back upwards (although potentially only short-term) is likely to happen, whereas a reading of 80 or over is an indication that the market is overbought and therefore it is likely to fall.
What Is Support & Resistance?
Support and Resistance are very significant and important levels that MUST be taken into account when trading forex.
Support is when in the past the market has dropped to a certain level, and changed direction.
& Resistance is where the market has risen found "resistance" and changed direction.
Support & Resistance are very important, as past places of Support and Resistance can play
a big part in the way the market moves from day to day.
For Example...
If 1 week the EUR/USD moved up to 1.3700 stalled and changed direction, then a week later, or even 2 weeks or a month later, this may prove to be a key resistance level, as the market could move back up to this level and potentially stall again.
Fibonacci...Is It Useful?
Fibonacci I find is one of the most useful trading tools you can impliment to make successful trades. Fibonacci retracements are used where the market changes direction from an uptrend or downtrend. They are used to give good entry points back into the market, and can also be used to place strategic stop losses and take profits.
Fibonacci is very important, therefore If you don't know about it or understand it then I suggest you do some research on Fibonacci Retracements. (Youtube is good for this)
Ok... Enough of the info, How Do You Trade & Make Money??
Ok, lets cut to the chase... How do you make money trading forex.
I'm going to put this in the simplest explanation I can, without all the technical rubbish that really is of not much help and is just confusing, so here we go...
1) I get a chart up (I usually trade EUR/USD), so I get a chart up of the EUR/USD.
2) I add the Stochastic Full indicator to the chart (This will usually be on a tab above the chart, or options etc)
3) I add on certain points of Support & Resistance
4) I add fibonacci to my chart, if I feel that it is necessary (Fibonacci works well when the market is more volitile)
5) I switch between the 1hr, 2hr charts for overall direction (where I feel the market will go) - However I use a 5minute chart to actually get entry points into the market, and trade.
6) I look for small profit targets of 10-20 pips, and I only try and make between 10-30 pips a day (You DONT need a lot of pips to make good money in forex)
7) I look for the chart to reach points of support or resistance, and I refer to my stochastic to see whether it is reading a oversold or overbought number.