FOREX Investing trading refers to an international, 24/7, over-the-counter, exchange market where currencies of various nations are bought and sold.
Trading is always accomplished in pairs assuming the price of currency bought to go up and that sold to fall down. It is the largest liquid financial market making it unthinkable for any single investor to influence the prices of currencies.
Table of Contents
There are two types of FOREX investing strategies:
- Technical analysis
- Fundamental analysis
Technical analysis:
Technical analysis is mostly launched by small and medium-size investors. The technical analysis evaluates factors that are really affecting the market rather than factors that can affect it. Thus the price quoted reflects all the aspects that have influenced it.
Only market-generated facts and figures are taken into account and elements like fear, hope, expectations or other changes are not considered. Thus the analysis is normally based on these suppositions:
- Price reflects all existing market movements. That means the price includes everything known to the market like the supply and demand of foreign exchange, political factors, trade agreements, etc. It is not concerned with what resulted in change but rather deals with real changes. It works on the presumption that price can take only one of the three directions:
- Upward
- downward
- sideward
- It rests on those market patterns that have been recognized as significant. That means those factors which are repetitive in nature or will produce desired consequences.
- History always repeats itself as human psychology changes very gradually with time. That is forex investing market movements are predictable.
Various technical indicators are:
Relative strength index:
It takes into account the ratio of upward and downward movements in the index and conveys it in the range of zero to a hundred.
Charts:
Charts include different hills, slopes, and curves that develop on a chart over time and reflect some major and minor differences in pattern. Some of the chart formations include:
- Triangle
- Rectangle
- Head and Shoulders
- Double Top and Bottom
- Saucers
- V
Also Read: Introduction to Charts And Candlesticks in Stock Market
Gaps:
A gap represents the zone on a bar chart where no trading took place.
- UPGAP: it is formed when the lowest price on a certain day is more than the highest price on the previous day.
- DOWNGAP: it is formed when the highest price of a particular day is less than the lowest price on the previous day.
Numbers:
Various number theories are used in technical analysis before forex investing:
- Fibonacci theory
- GANN
Stochastic Oscillator:
This Stochastic Oscillator indicates the overbought or/and undersold situation. It operates on a scale of zero to a hundred percent.
Fundamental analysis:
It is the one where the current economic, political, and financial condition of the country of currency is studied. A country’s economical and political condition depends upon multiple factors like the interest rate, unemployment level, exports, and imports, per capita income, percentage of the population living above and below the poverty line, inflation, trade relations with other countries, and tax policies, etc.
A fundamental analyst studies and evaluates all these aspects before coming to any decision. Thus it assists in long-term decisions making and making profits in short term through extraordinary developments for any forex investing strategy.
Also Read: Emotion In Investing – How Much Important?
Some of the indicators that assist in the fundamental analysis include:
Gross domestic product (GDP):
It recollects the total market value of all the goods and services produced in a country during a given year. It means the Gross domestic product (GDP) is the common measure of the value-added created through the production of goods and services in a country during a specific period. As such, it also estimates the income earned from that production or the total amount spent on final goods and services (fewer imports).
Retail sales:
This reflects total receipts by all the retail stores in any country. It means Retail sales is the sale of customer goods, or final goods, by businesses to end consumers, and contains in-store sales as well as online sales. Products may be durable (with a substantial expected shelf life) or perishable (such as groceries).
Consumer price index:
The Consumer Price Index (CPI) is a measure that studies the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is estimated by taking price changes for each object in the predetermined basket of goods and averaging them.
Business cycle:
It reflects different phases through which a business passes. These phases include:
- EXPANSION
- PEAK
- RECESSION
- DEPRESSION
Also Read: Can Money Buy Happiness?
Monetary policy:
It controls the supply of money in any economy. Monetary policy is the macroeconomic policy laid down by the central bank of any country. It involves the control of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic goals like inflation, consumption, growth, and liquidity.
Conclusion
Forex Investing trading strategy successfully needs knowledge, time, and understanding of a market. You cannot earn continually in a Forex Investing market due to its volatile nature.
Thus as a trader, you should try to evaluate both technical and fundamental strategies of forex investing trading and make decisions based on market expectations and trends.
Try trading with money that you can afford to lose without any guilt. Trade with logic and if you are not sure ceased and take a rest for some time.