FOREX Trading Concepts

Forex trading can be rewarding, but it's also high risk.

Forex is the largest market in the world, with more than $2 trillion worth of currencies traded between banks, brokers, and major corporations every day. Trading the Forex can be enormously profitable, but savvy analysis and prudent money management are imperative.

Technical Analysis

Learning technical analysis is a must if you want to be successful in Forex. Technical analysis is the study of price graphs, indicators, and other price-related information to give you an idea of what you should be buying or selling in the Forex market.

Fundamental Analysis

Even if you base most of your decisions on technical analysis, it’s still a good idea to keep track of the major fundamental developments affecting the foreign exchange market. The major things to look out for are interest rates, GDP statistics, and changes in the rate of inflation.

Breakouts

A breakout occurs whenever a new price high exceeds an old price high. Many Forex traders buy breakouts to take advantage of the surge in buying interest they expect it to bring from the broader market, and will move out of the position if the price closes below the breakout high.

Moving Average Crossovers

Moving average crossovers are another popular signal Forex traders use to tell them when to buy and sell. They buy when the shorter-term moving average crosses above the longer-term moving average, and sell when the longer-term average crosses below the shorter-term average.

Mean Reversion

Mean reversion trades are the opposite of breakout trades, and involve buying a currency after it has fallen, when it is weak, and selling a currency after it has risen, when it is strong.

Money Management

The most important arbiter of success in Forex trading is prudent money management. Never enter a trade without knowing when and where you’ll get out, including if the transaction moves against you and you need to take a small loss in order to prevent a larger one.

References

• Investopedia.com: The Fundamentals of Forex Fundamentals
• Forex-strategies-revealed: Moving Average Crossover Strategy