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7 Basic Principles of Currency Trading


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Many people are unaware of the principles that govern trading. Traders have their own strategies and techniques, and each of them work slightly differently. It's often hard for novices to understand these principles and the best way to start learning is by studying the markets using a system that works. A good system will show you what factors influence the prices of the currencies being traded and how they should be influenced. This knowledge allows you to make informed trades.

Trading

 

First, trading is buying something that you expect to get higher than its sale price in a short period of time. However, if you expect something to get lower than the current market price, then you favor buying and selling at a later time. The first 7 basic principles of trading are stop loss and take profit. It may seem complicated, but once you master it you'll be on your way to earning consistent profits from forex trading.

 

Fundamental analysis is an important part of any trader's education. Most experienced traders rely on technical analysis instead of fundamental analysis because technical analysis relies on past market data. Fundamental analysis, on the other hand, looks into how a particular currency would act in the future when taken out of the monetary environment. Both types of analysis are needed for successful traders. Unfortunately, most traders don't look into their markets enough and lose.

 

Some traders also rely on systems for trading. Systems usually include software that helps traders track signals and enter trades. Traders also use these systems to set stop losses and take profits. However, traders who want to succeed use both kinds of systems.

 

Next, there are fundamentals and the 7 basic strategies that traders should follow. These strategies are to support, trend, counter-trend, moving average convergence/Divergence, moving average convergence/ divergence, RSI, MACD, and price action. Forex traders can combine any of these strategies with a technical analysis tool like the moving average Convergence Divergence or moving average divergence MACD. A lot of trading systems will provide support as part of the 7 basic strategies. However, to be more successful, one should be able to apply the theory of demand and supply to determine their support and resistance levels.

 

The last part of the trading process involves the day trade. The trader plans his or her strategy for the day and enters trades accordingly. This part requires experience to become effective. Experienced traders have developed their own system to follow and develop good techniques for entering and exiting trades. To be successful in day trade, a trader must be disciplined and must have the mental capacity to stay calm in the face of volatile markets. If a trader follows these 7 basic principles and applies them effectively, they will greatly improve their chances of becoming a successful day trader.

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