Forex Trading (3)

The Forex trades 24 hours a day, and any time during those 24 hours you can turn on your computer and sit down to trade. The most important first step of success in trading currencies is determining market direction. The fact is if you want to make money currency trading, you will have to take a bullish or bearish position. One or the other - never both. You cannot make money taking a bullish and bearish position at the same time; you would be in a net zero position, making and losing the same amount of money with every pip movement.

People trade according to their personalities. Aggressive people love to scalp, while passive people prefer long-term trading. Figuring out your trading style is very important before you trade. However, whether you are a passive trader or an aggressive trader, you need to be able to determine market direction before you trade. You need to learn how to find the current trend before you enter the market, because you need to trade in the direction of the trend at all times. Do not fight the trend. Fighting a trend is like trying to swim upstream through violent forceful rapids. It doesn’t work. Traders can make many mistakes. The biggest mistake is trading in the wrong direction.

As the market moves, it will only move in one of three directions: up, down, or sideways. When it moves in any direction, it waves. Those waves become the emotional enemy of most traders. For some traders, it can take years to trust those waves and ride them to their end target. The more information you can gather as to why the market should bounce in a certain direction at a certain price point, the higher the probability for success.

In the currency market or on the Forex, each country around the world has approximately 20 major fundamental announcements annually for investors to monitor. The importance of the announcements shifts as the economy shifts. Governments report the health and overall economic well-being of a country to investors via fundamental announcements, which are the economic indicators of the country.

You can keep up with all major government reports that affect the Forex at www.markettraders.com or www.forextips.com, under the heading “Economic Reports”, or in leading newspapers, such as the Wall Street Journal, the Financial Times, or the New York Times. Although newspapers are great resources for information on fundamental announcements, the Internet is now the number one source for investors.

When a fundamental announcement is about to occur, investors usually stop buying or selling right before the announcement. If the news is good, prices may go up, and if it is bad, prices may go down. Either way, to play it safe, they usually wait until the announcement is read before they take
a position in the market. Within seconds after the announcement is read, a frenzy of buying or selling starts to take place, potentially creating a dramatic price change in only a couple of seconds.

Most fundamental announcements create a dramatic change in the market. The only thing in life that remains consistent is change. Currencies may aggressively react to fundamental announcements or they may not. Successful and educated traders respond, rather than react, to those announcements. They are well prepared and ready to switch from being a bull to becoming a bear. Trading on the Forex with or without fundamental announcements can create an environment where there are unexpected surprises, creating trading ranges of perhaps 150 to 300 pips in a single four- to five-hour trading session.

Your future depends on many things when you trade. In this market, it depends mostly on you - your education, your emotions, and what you do with them.