Forex Investment Strategy Overview
Windowofworld.com – FOREX trading refers to an international currency, 24/7, over the counter, exchange market where different countries are bought and sold.
Trading is always carried out in pairs, assuming the price of the currency being bought goes up and the one that is being sold is down. It is the largest liquid financial market so it is impossible for any single investor to influence currency prices.
There are two types of FOREX investment strategies:
Technical analysis is mostly carried out by small and medium scale investors.
Technical analysis considers the factors that actually affect the market rather than the factors that can influence it. So the price quoted reflects all the factors that influence it. Only market-generated facts and figures are taken into account and factors such as fears, hopes, hopes or other changes are not taken into account. Thus, analysis is generally based on the following assumptions:
Prices reflect all actual market movements. That means price includes everything the market is aware of such as the supply and demand of foreign exchange, political factors, trade agreements, etc. It is not concerned with what has changed, it is concerned with actual change. This works on the assumption that the price can only take one of three directions:
to the side
It relies on market patterns that have been identified as significant. It means factors that are repeated or will produce the desired result.
History always repeats itself as human psychology changes very slowly over time. This means that market movements can be predicted.
VARIOUS TECHNICAL INDICATORS ARE:
1. INDEX OF RELATIVE STRENGTH:
It takes into account the ratio of the upward and downward movement in the index and expresses it in the range of zero to one hundred.
The chart includes a variety of hills, slopes, curves that develop on the chart over time and reflect some major and minor changes in the pattern. Some of the chart formations include:
FOUR SQUARE LENGTH
HEAD AND SHOULDER
DOUBLE TOP AND BOTTOM
The gaps represent areas on the bar chart where no trades have taken place.
UPGAP: formed when the lowest price on a certain day is more than the high price of the previous day.
DOWNGAP: formed when the highest price on a certain day is less than the lowest price on the previous day.
Various number theories are used in technical analysis such as:
The Fibonacci Theory
This indicates overbought or / and undersold conditions. It uses a scale of zero to one hundred percent.
This is where the current economic, political, and financial situation of the country currency is studied. The economic and political conditions of a country depend on many factors such as the interest rate, the unemployment rate, exports and imports, per capita income, the percentage of the population living above and below the poverty line, inflation, trade relations with other countries, tax policies, etc.
A fundamental analyst studies and evaluates all of these factors before making any decisions. It thus assists in long term decision making and generates short term returns with extraordinary developments.
Some of the indicators that help in fundamental analysis include:
1. DIRTY DOMESTIC PRODUCTS:
It reflects the total market value of all goods and services produced in a country during a given year.
2. RETAIL SALES:
This reflects the total revenue by all retail stores in a country.
3. CONSUMER PRICE INDEX:
This reflects changes in the prices of consumer goods.
4. BUSINESS CYCLE:
It reflects the various phases that a business goes through. These phases include:
5. MONETRY POLICY:
It controls the money supply in an economy.
Trading successfully requires knowledge, time and understanding of the market. You cannot make money continuously on the Forex market because of its volatility. So as a trader, you should try to consider both the technical and fundamental strategies of forex trading and make decisions based on market expectations and trends. Try trading with money you can afford to lose without regrets. Trade with logic and if you are unsure stop and rest for some time.