Being successful as Trader really boils down to two things: Getting the Right information; and making the right trading decisions based on the information received. That’s it.
This goes without saying. One could also argue that it is true for almost everything in life. Take the Military for instance. Deciding the go to war, even in the time of peace, could be justified if the Government can prove that there is information that shows the other side is preparing for an attack. It’s the same with investments and, consequently, Forex trading. That’s why there are Insider Trading laws, to prevent people from using it overly to their advantage.
So, the question is, how do you get the right information – legally – to help you make the right trading decisions? Well, 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.
The currency prices – both current and historical – you can get from your Trading Software. The other bits can be gotten from a variety of news sources. Bloomberg news is a good example. Also, you will find that most Brokers provide some sort of news feed that will supply this kind of information as well. This is the sort of news that is not subjective. It will be fact, and therefore the same, regardless of where you get it from.
Once you have all the data, you have to try to understand the possible reactions the currency pairs will have and why. This is the analysis part of things. Some Traders prefer to do fundamental analysis, while others will look to the charts for guidance. I try not to get involved in the arguments about this. I prefer to do both of the above. I listen to the news and check how the Economy is doing etc. Then I go to the charts and finish off my analysis. It is very useful to listen in on what analysts are saying and why. Once again, the news sources will have analysts come on and give their two cents. You will often hear conflicting opinions. This is fine. What you need to pay attention to is the reasons why they believe movements will occur, not just what movements will occur. This will help develop your understanding of the markets.
In my case, I also subscribed to a paid service for a couple of months. It wasn’t necessarily cheap, 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 learnt from those initial months and began to make decisions myself.
You should also look at how the market is reacting to news as well. Are stocks going higher or lower? What about oil and gold? How do all of these affect the pairs I want to trade? There’s also the Volatility index, which is a measurement of how confident investors are in the markets at the moment.
Once that is done, I finally look at the Charts and do the Technical Analysis using standard tools such as Support and Resistance, and Trend lines. Once again, as a beginner, I took into consideration whatever experts said regarding this until I reached the point where I could do it myself. Even now, I still listen everyday to other trader’s opinions regarding the technicals as well.
Then I make a move, or not, as the case may be.