Forex trading has been hailed by some as the new investment strategy for the masses, the means by which any of us can make money, regardless of what is happening in the national
There is no doubt that it is becoming increasingly popular among amateurs who are looking to make a little extra cash on the side. But at the same time, we cannot ignore the fact that the majority of beginners make bad decisions that end up costing them money.
This is not to say that there is no room in the exciting world of currency trading for the small-time or amateur investor. The golden rule that so many fail to follow, though, is to cover off the basics, get the right infrastructure in place and follow a logical strategy.
First and foremost, that means checking the likes of http://trustedforexbroker.com/ and setting yourself up with an account using a reliable and externally accredited forex broker. With that done, before you can start trading, you need to get to grips with some of the key indicators.
Moving average indicator
The most basic and fundamental forex indicator of them all is the moving average, and it is from this that everything else stems. It is important because it removes the distractions and blind alleys of short term fluctuations in price and lets you see the overall trend. And that is the first clue to understanding whether the currency pair you are looking at is going up or down in value.
It might be the most important, but the moving average is not enough in its own right. The trouble is, it only tells you what has already happened. What we need is an indicator of what is to come.
Relative strength index
The relative strength index tells you whether the asset under examination is being overbought or oversold. By providing a picture of the momentum, you are given clues on whether those trends we saw using the moving average are likely to continue, increase or most critically of all, reverse.
Average true range
So now we know whether the trade is heading up or down, and we have an idea of whether that pattern is likely to change. The next thing topic to consider is volatility. High volatility means the potential for large scale unexpected changes. That can spell opportunity if you get it right, but it can also lead to disaster if you are on the wrong side of the change. And for the novice, the latter is the more common.
The average true range indicator takes the mathematics to the next level, but from the beginner’s perspective the primary value of this tool is that it gives you guidance on where to place your stops orders. Feed this into your strategy, use your stops and most important of all, once you have them in place, do not be tempted to change them, whatever happens.
There are tens of other indicators, and as you become more experienced, you can start to factor them into your trading. But as you start out, keep it simple, use the above three and hone your trading skills.