There are many ways to trade with Forex. Short term day trading is one of the most popular ways. There are also traders who follow a more fundamental approach to Forex. These people are more medium-to-long term investors. If you’re not clear on what the differences are, that will be explained later in the article. Essentially what I’m going to talk about is how to trade exactly like the most successful Forex traders in the world. That’s right, you’re going to learn to Forex trade just like the banks.
Let’s first start off with the different ways to trade Forex. Firstly, day traders are more focused on short term profits. These are the traders who sit in front of their monitors endlessly watching charts go up and down FXORO . They purely analyse data from charts, also known as technical analysis. These traders are usually in and out of positions every few hours to every few minutes. Although this approach to trading can earn a lot of money, those that learn to Forex trade this way often find themselves being obsessive and highly stressed. One of the dangers of short term day trading is, since it’s more focused on chart movements they would be less likely to follow important news events that could quickly impact a currency’s value.
People who learn to Forex trade with fundamental analysis, do more than stay up to date with the latest economic news, which is sometimes the perception. Being a fundamental type of trader means you learn to Forex trade with some background knowledge in economics. No, it doesn’t necessarily mean you need to have a college degree. Basic fundamentals can be learned from either home study programs or even short courses. People with fundamental knowledge have a better understanding of how one economic situation can affect a certain country’s currency value. Based on the news they receive and the knowledge they know, they are able to make more educated guesses to base their (medium to long term) trades on. It’s not better or worse than the technical day trading approach, it’s just a different.
The difference between these two types of traders and banks are, banks actually have the best of both worlds. Those that work in the foreign exchange departments in major banks learn to Forex trade using technical analysis and well as fundamental analysis. But the banks use the technicals as short term analysis to decide when to enter a position, rather a short term trade. Prior to placing the trade, the banks would have studied the currency trade. Besides using fundamentals and economic news, they would also use economic data/charts to decide if the trade is viable long-term.
Although people have their preferences to which approach is best for them, there’s no doubt that the banks’ approach has more chance of getting it right. People often disregard one approach over the other for various reasons. This only robs them of valuable information to place great trades on, therefore turning over more profit. So, learn to Forex trade using both technical analysis and fundamental analysis for the greatest probability of success in Forex trading.