Forex Trading Information

Donald O Ogilve asked:




There are essentially two steps to take in Investment or Trading – retrieve the relevant information; and make the correct decision based on that. The correct decision could be buying or selling, or perhaps none of the above, as the case may be.

I guess these two steps apply to pretty much everything we see in our lives. Look at the subject of war. Deciding to attack another country, even in peaceful times, might be justifiable if there is intelligence that shows that the other country is planning to attack. A similar principle applies to Investing. That’s why there is regulation around information and insider trading. If you have the information, you have the power. Someone has to make sure no one uses it inappropriately.

The key is to get the right information – legally – to ensure you are making informed decisions in your trading. To this end, there are different kinds of information to take into account. First, you have data. We’re talking about hard figures here…in the case of the Forex market, exchange rates right now, what they were a certain period ago. This could also take into account other figures that might help determine the direction of a currency pair at that unique moment in time, such as interest rates, Employment numbers etc.

You can get some of this data from your broker. Most brokers – the good ones anyway – provide a news feed with updates at intervals as to what is going on in the markets. The current price of your currency pair, along with what it was how ever many years ago, can be gotten from the software you use. You can get the rest of the data from a wide variety of sources, like the Bloomberg website or Yahoo Finance. The thing to note here is that most of this is data. By it’s nature, it is not subjective. A number is a number, regardless of where you get it from.

With the data out of the way, you move to the movements that the relevant currency pairs will make and why. This analysis is the major part of a Forex trade. It is also a subject of some argument amongst experienced Forex traders. This is because they like to break down analysis into two kinds; technical and fundamental. I’m not going to go into detail as that topic could be analysed in a whole book on it’s own. Fundamental has to with more of what the news is and how the economy is doing, while technical draws more from figures, price patterns. I personally do a little bit of both. I check the economic news and events. I then go to my charts and apply technical analysis to help me make my decision. I find that it is also very useful to listen to what analysts are saying and why. Most have a lot of experience and opinions on what they see in the Forex market. For anyone learning about Forex trading, it might be a little confusing. There will often be contradictory opinions. This is fine. What you need to pay attention to is the reasons why they believe the things they do. Building up an understanding of their reasoning will help you become a better Forex trader.

It might not be a bad idea to subscribe to a paid service for short while. In my case, it wasn’t too expensive, but it was a good way to learn a bit more detail from experts who might be unwilling to expose all the knowledge they have for free. I got out after a couple of months as a much better trader than I was when I started. You should also look at how other markets are reacting to events. The Stock Market, Oil, Gold…all have correlations with currency pairs that can be exploited for profit. There is also the Volatility Index which helps to tell how afraid investors are about the current market conditions.

With all of these at your disposal, making the right trading decision should be easier.