There are three general trading styles in forex. They are “technical trading”, “trading the news”, and the third style - if it could be called a style - is “guessing”, which unfortunately accounts for more than eighty percent of the traders in the market. In this article we will look at “guessing” and begin “Technical Trading”
Because most software programs are learned by trial and error with the occasional reference to the instructions, people feel that trading can be learned this way. Wrong ! The actual trading platform itself may be able to be learned this way, but because we are dealing with real money, your money, I advise you to print out the instruction manual of the platform you are using for your own good and use it. It may be up to 60 pages, and in color, but it will be the best use of ink you’ll ever put to paper.
The “guessing” style seems to be how most people trade. It isn’t the most profitable way to trade, but most people become initiated into forex informally. They hear the word somewhere and search it, someone tells them a bit about it and they explore it, and some attend an information seminar and decide try it on their own. The platforms provide all the information needed to use the software as well as information about the market and how it works, so armed with a little knowledge, off they go. What people hope to learn along the way is “what to do”. Without real knowledge novice traders wallow in a demo account for months or years never gaining the understanding or confidence to trade live, or conversely, trade live and consistently loose more than they gain. There are people out there with the dedication to learn, yes, but for most, instruction is necessary – especially in forex.
Some brokers offer complete software packages for the novice trader which “ do” much of the thinking for a person by providing a predetermined fixed method of which you have to follow. But the drawback to these is that the software is doing the trading – not you. In these instances you have to allow your losses to happen and accept the fact that you don’t know why.
The most predominant trading style is called “technical trading”. This is trading on the technical aspects of the charts. Loosely described, the charts are irregularly oscillating graphs representing the price changes in the currencies. You CAN be taught how to “read” these charts and in doing so understand what changes are going to occur next with reasonable accuracy and profit from it.
The “candlestick charts” in their basic form tell a trader most of what is needed. Add to that some unique tools such as Trend Lines and the Fibonacci Retracements tool to interpret and analyze them and the learned trader is well on the way to being successful. Movements of the charts have some predictability to them, enough so to have terms identifying certain movements such as Crowns and Retracements, and these movements combined with others provide the experienced trader with the information needed to execute a positive trade. Technical trading is an exciting way to trade. The complexity becomes simpler and more interesting the more you succeed. The satisfaction of mastering the platform and profitably anticipating the market is exhilarating.
