There are many ways to approach trading Forex. There are hundreds, if not thousands, of strategies out there that traders use to help navigate the market and make money while doing so. The types of strategies fall into three broad categories which are news, fundamental and technical, which we will be highlighting in this article.

News traders use information resources to try to get an edge on the market by learning about market changing news events just as they happen. News trader operate under the assumption that they can get into the ground floor of profitable trades simply by watching the news or using other technology based news alert indicators. With social media resources such as twitter paired with smart phones this type f trading is becoming more prevalent because news from around the world is being released as it is happening.

Fundamental trading is the trading style where traders evaluate the value of a countries currency in relation to other countries based on analysis similar to company financial reports. The listen for economic announcements about key performance indicators such as GDP, unemployment rate and import and export rates to make decisions about their trades. They use these indications to get a true sense of a currencies worth before jumping into a trade.

Technical Trading

Lastly, is technical analysis. Technical analysts assume that past results and market fluctuations will help to predict future market moves. They are basically like Forex trading

historians looking at past currency charts to see what the market did in similar situations. Using computers and trading programs they assume that all other factors such as breaking news and economics announcements are already calculated into the exchange rate and thus they are not required to take them into account. Technical trading often times requires going back years and decades in the past to see how well current trading system would have worked. They then compare results and win/loss ratio to see if the system is worth trying in the present market.

Individual technical traders operate more like computers than human trader. Instead of using emotion or inferences to make trading decisions they use strict guidelines that must be fulfilled before entering into a trade. The parameters are set out beforehand so that once the goals are fulfilled the trade can just simply enter the trade without having to think about it. Operating without emotion allows technical traders to trade logically and without guessing even though their trading parameter may not be flawless.

Large institutions use huge data sets and super computers to create complex equation based on prior market moves. These computers take large years upon years of daily information across all currency pairs to create these equations in which best represent the movement of the past markets in similar situations. These financial institutions use these complex equations to trade billions of dollars a day in the Forex markets.

Is it a Trend or is it Ranging?

Fore technical traders, being able to notice the current condition of the market movement is one of the most highly prized goals. Generally speaking, the market is usually either trending, up or down, or bouncing back and forth off of a set range. These ranges are called the support and resistance and are one of the key indicators of technical trading.

If this is deciphered traders can than make more educated trades because the can infer where the market is moving. If the believe the currency pair is ranging and just hit support, they can assume that the market will bounce off that level and go in the opposite direction.

Other Indicators

Technical analysis based trading has a wide set of tools that can be used to help decipher the general movement of a currency pair. Some of the most used are Bollinger Bands, Moving Average Convergence Divergence, Fibonacci retracements amongst many others. With these tools technical trading becomes simpler because they crack the ever looming code of what the market is thinking

About the Author:
John Piper
is experienced in personal Forex trading with years of experience in the Forex market