Before you jump into the market, it is in your best interest to find a forex trading course or mentorship/apprenticeship program to help you develop your trading strategy. This will not only drastically cut down on you learning curve, but will also save you money in the long run by avoiding unprofitable trades when you start.
The foundation of any good trading strategy is support and resistance levels. Most people know this, but many do not know why these two concepts work to make you money. If you sit back and think about it, it is pretty simple.
1. Unpredictable Currency Fluctuations - The beauty of the forex market is that almost anything can cause it to be volatile. This is important because traders make their profits by taking advantage of this volatility. Political events, economic policies, the weather, etc. all cause the markets to react. This leads to certain currencies being overvalued (your sell opportunity) and other currencies to be undervalued (your buy opportunity).
2. Low Forex Market Prices - It is imperative that you understand how to identify and take advantage undervalued currencies. These currencies are at their support level (low price) and will certainly make a rebound as more traders recognize the profit opportunity and buy into it.
3. High Forex Market Prices - Once you have purchased your currencies at their support level, it is time to ride you your trade until it reaches its resistance level. The resistance level is pretty much the opposite of the support level. It is the highest price the traders will pay for a particular currency. It is wise to slowly unload your trade as your currency bet reaches its support level. If you have too much of it as it reaches its support level, you may not be able to sell all of it as most traders will recognize there is no longer any upside potential for that particular currency.
External Resources:
Forex Trading Course Guide
Forex Trading Course Education
Thursday, May 7, 2009
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