Things A Forex Trader Must Know, Forex Market Trading Basics

Tuesday, March 4, 2008

Things a Forex Trader Must Know

Like all other financial products traded in different markets, currency trading also requires vast knowledge to be profitable. No trader can blindly trust his/her trading system or generated Forex signals. Knowledge of market and international affairs is must for Forex traders. Below are some basic things that a Forex trader must know.

The nature of market and currency movement patterns. On close examination you can find that there are many currency pairs which go up or down with movements in other currency pairs; some go in same direction, while others in opposite direction.
Fundamental trading tools. Here your ability to grasp international matters comes in to play. You must know about countries of which currencies you are trading, including the GDP growth, economics, politics, policies, geography, and more
Risk reducing strategies. Including hedging by trading different (opposite) currency pairs or buying and selling same currency pair by timing the execution, arbitraging practices like triangle arbitrage, hedging arbitrage and netting arbitrage.
Carry trades strategy. So that traders can better profit from the interest rate difference between two currencies of a pair.
Pivot points. So that traders can better analyze currency pairs and can roughly predict upcoming movements.
Support and resistant points, and break-out points. Bollinger bands are so far the best indicator for this.
News trading. Things can change drastically within a minute or so; be vigilant.
Trend analysis tools and trend following.
Day trading, swing trading and scalping strategies.