Forex Tutorial How to find your Trading Style
Do you want to fish or do you prefer ski downhill? How do you answer questions that might also have an impact on the success of your trading through the trading system that you use. The forex market offers many opportunities that can be taken to gain profits in forex trading. But for success, you must first know your strengths and weaknesses. Most forex tutorials only teach “the right way to trade”. And this is not entirely true. As an adult, you will be difficult to change your trading style, while the market changes over time. Therefore, it is far easier to find a trading technique that suits your personality rather than trying to adjust to the trading methods of others who might be “expert traders”. This forex tutorial article will discuss how to find your trading style.
So why is downhill fishing and skiing so important? Believe it or not, this is a question about trends and against trends in trading. Anglers are a trend, skiers are likened to trends. Traders are trendy, they are like anglers who throw bait many times before finally getting fish. On the other hand, the skier descends the hill, looking for a sensation of speed before he reaches the end of his goal. If you pay attention to this, it is similar to looking for profits as soon as possible because of the fast currency price movements. Does fishing always lead to trends and ski against trends? Of course not. However, the activity you choose must reflect your trading style.
The second question that is also important is whether you are more comfortable using a short or long-term time frame? Generally, traders who trade based on trends will choose a longer time frame because the trend in forex trading develops based on the month rather than days. Whereas those who like to take advantage of market changes that are fast changing will operate in shorter time frames.
Usually, an effective short time frame is an hourly chart with an average profit / risk target of at least 30 points, because the nature of the spread market causes smaller time frames to be less effective. For example, EUR / USD pair, which is the most liquid instrument in the world and usually the width of the bid and ask spread is 3 points. A trader with a 10 point profit target should get 13 profit points (10 points + 3 spread points) but sometimes he only gets 7 points (10 points – 3 spread points). This is what causes many traders to think negatively because of the difficulty of finding profits on a short time frame.
Type of Analysis
After you determine the best time frame, the next question is: what type of analysis will you use for forex trading? Today there is a lot of debate between fundamentalists and technicalists.
Fundamentalists mock tenical efforts to predict future price movements by looking at current price movements on the chart. Proponents of fundamental analysis consider technical analysis such as ancient rituals to predict the future of the entrails of dead animals. News, economic reports and comments from monetary officials are fundamental tools of fundamentalism. Teknikalis ignores the data as something sad and contradictory, they believe the market response in addressing the news will be reflected in the previous price movements and will be a clue to future price movements.
Which will be the winner? None. Trading from a technical or fundamental point of view is like a figment, like boxing in the race for a world title with one hand tied to the back. Fundamentalists can talk, due to global demand for oil will push crude oil prices to $ 100 / bbl and they buy the Canadian dollar as the greenback, but if seen on the USD / CAD short-term chart it looks oversold, then most likely they will lose money – even when a few moments later their analysis was correct. Conversely, a technician uses Fibonacci numbers to determine the price benchmark suddenly there is economic news that makes market turmoil, the level of resistance that has been made will be devastated because traders try to close their positions.
Fundamental for Longterm, Technical for Shortterm
You need to remember, that fundamental factors tend to have a strong impact on long-term trading, while technical aspects will have a strong impact on short-term trading. For the long term, it will usually respond to economic news such as GDP growth, interest rates and other economic factors.
For example, we see the movement of GBP / USD in 2005 in the picture above. At that time the Federal Reserve Bank of New York was raising interest rates by 200 basis points from 2.25% to 4.25%, while the Bank of England, which was at that time the UK was experiencing an economic slowdown and depressed consumer sentiment, choose to reduce interest rates from 4.75% to 4.5%. The difference in interests between the two currencies was confirmed to almost 0% (as of early 2006, it had reached 0%). Traders who transact long and short term are equally benefited because GBP / USD is declining.
This pattern is similar to the USD / JPY movement but reversed. USD moves while the Japanese Yen stays 0%, this causes traders to take positions with a 20% profit expectation in a matter of months. In 2006 analysts predicted the US tightening cycle would be over soon while Japan would only begin, traders responded immediately so that they made substantial profits and the analysis they made proved correct.
From the above events we can see that fundamental factors have an effect in the long term, while technical analysis reacts in a shorter period of time. Perhaps one reason why this happens is that on a smaller time frame news information is not a meaningful consideration, therefore prices tend to move to the support and resistance areas. For example, as shown on the hourly chart of EUR / USD below, pay attention to the swing high area and the swing low, traders can put up a Sell position when the price is in the resistance and Buy area in the support area to get a profit.
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Whether you are a long-term fundamentalist trader or short-term technical, the forex market can all accommodate your style. Although the conflict between the two has never been resolved, the undeniable truth is that you must use the style that best suits your personality. If not, you can’t succeed. Therefore, the first question for a beginner forex trader is not “Will the price go up or down?” But “What is my trader?”