Forex Market: Introduction and Trading Strategies

The forex market is a great place to invest money. Consider some various factors. First of all, unlike the stock markets, the forex market is open 24 hours a day, excluding the weekends. Other factors include its geographical dispersion, the large trading volumes and the large number of traders in the market. A smart investor can easily grasp all the profits available in the "FX" market. Frankly speaking, with a little experience and with some knowledge, you too can be one of the "smart investors".

There are two trading strategies in the currency exchange market, that being, fundamental analysis and technical analysis. Let us have a real good look at each of the strategies.

Fundamental analysis, deals with the social and political indicators. Government policies, GDP reports, employment reports play a vital part in this type of analysis. Various industries as well as business cycles determine economic indicators. Using this data, the investor can predict the future of the currency. The stronger the indicators, the more better the future the currency has. This method is used by many long term traders. It can be difficult to fore see the market during a time of silent activity. Two minor strategies used in this analysis is capital flows and trade flows.

Capital flows is the flow of money through foreign direct investments, joint ventures,and third party licensing agreements that reflect the economic growth and financial stability of a country. Equity market investments, and fixed income market investments are common portfolio investments. Trade Flows is the international imports and exports carried out between different countries. It plays an important role in forex market as the importer needs to sell his currency in order to purchase the goods from the other country. It can be a great example of currency exchange and probably is the best way to predict the currency's future. Global news and happenings as well as a country's specific happenings also affect the forex market. So it is always good as a fundamental trader to keep a track of the world news and country's relations when investing in its currency.

The second trading strategy in the forex market is technical analysis. Unlike fundamental analysis, the technical Analysis predicts the future of the currency by having a look at its past. A technical analyst studies the graph showing the up and down pattern of the currency.

Tools used by a technical trader are: Relative Strength Index (RSI): This is a ratio of the up and down movements of a currency that equates on a scale of 0-100. A second tool is Fibonacci numbers theory: The Fibonacci number sequence (1,1,2,3,5,8,13,21,34...) is used by adding the first two numbers to arrive at the third. As a forex investor, one may use them to project profit targets and price retracements. The last tool is Elliot Wave Theory: It is based on wave patterns and fibonacci number sequence. Good Elliot wave patterns shows a five-way advance followed by a three way decline.

These are the two trading strategies used while investing in the forex market. Each has its positive and negative points so it's up to you to chose which one you wish to follow. A trading strategy harms only when you apply it without correct knowledge.

Article Source: http://www.share.onlypunjab.com

Before buying unsuccessful software online, get real forex knowledge about forex trading strategies. Carl investigates investments and talks about good trading strategies.

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