Trading manual part 4: Different ways of trading

Trading manual part 4: Different ways of trading

Before you could even start trading Forex, you should be aware of the various trading
styles there exists within the market. There are different styles with their own pro’s
and con’s. Let’s have an in-depth look into it!

The Forex market is mainly based on this trading style as so
many traders are using it. And as you’ve learned earlier, the more traders are in the
same direction, the stronger the price will react!

The different trading styles are perfectly combinable to get your overall vision on the
market straighter. This will more than likely help you to get a better emotional
control and a stronger psychological game. So, let’s start with the trading style we
will be using!

trading strategies

Fundamental trading

Fundamental trading is better known under the term ”news trading”. Fundamental
trading can be seen of one of the popular trading ways before technical trading.
Fundamental analysis is the interpretation of statistical reports and economic
indicators. Things like changes in interest rates, employment reports, and the latest
inflation indicators all fall into the realm of fundamental analysis.

The technique is mainly used by traders who usually use the high importunacy news
releases in order to determine the direction of their trades. The theory behind this, is
that on the short term, the price will follow the direction of the news outcomes. They
believe that this is somewhere around 90% accurate.

Given the impact the economic indicators could have on the market; it is important
to know beforehand when these are due for release. Therefore, we are using an
economic calendar to check all news releases at the start of the day. On the
economic calendar you can also find the importance ofthe news (high, middle, low).

Fundamental trading and news outcomes left traders confused alone pretty often. To
give you an example; High important news is released about the U.S. Dollar. You
expect the price to make a price movement either up or down. However, the price
from the EUR/USD doesn’t move after the news outcomes. Fundamentals are a great
complement on your daily trading routine, but we should definitely not use them as our
main source!

Technical analysis

Despite all the fancy and exotic indicators and trading tools these days, technical
analysis focus just on the supply and demand in the market. Technical analysis is a
method of analysing the statistics which have been generated by previous market
activity. As a technical analyst you are using charts and some tools to identify
patterns from the past that can suggest in the future.

You need to think off support and resistance levels, but also trend
lines and Japanese candlestick analysis will be discussed extensively. As so many
traders using the technical way of analysing these days, the price react strongly on it.
As loads of traders see a certain price level as a potential reversal point from the past,
the price will surely react on this level as there are so many orders out there!

Every trader has his/her own trading system. Technical trading can be done in
countless ways as there are so many strategy’s and indicators around. Some people
are comfortable with short term trading, while others prefer the long term trading
style! Every successful trader should be aware of the fact that he/she will need to
create his/her own trading style in order to succeed. You need to be fully comfortable
with your trading style in order to become a consistent trader.

 

Continuation of different ways of trading in our next post, Don´t miss it!!

 

Check out our trading strategies: Trading strategies for forex , CFD and crypto

 

 

Comments are closed.