There is a huge amount of learning to trade forex. Just browse through the Forex Factory Forum, and you could find a lengthy post of systems or methods that you can adopt to be your system to trade forex.
There is no easy way to become a good forex trader. You can not just open a forex account and become a success overnight. Its taken me six months perusing the forex factory forum and coupled with my experience in trading the stock, commodities and futures market since 1980’s to come with a system that are comfortable for me to trade forex.
I am quite well verse with all the technical indicators employed in the stock, commodities and futures market But for forex, the technical analysis utilized have to be more refine since trading in forex is a 24 hours session with market participants covers the whole stretch of the globe. What you need is capital, could be just a few US dollar; a computer and internet connection. Another point to considere is that the Forex market does not have the same mode of thought as the stock market when it comes to the Bearish vs Bullish attitude. Forex market do have trends and cycles like the stock market but it is not the driving force. When one currency hits tough times, another currency will benefit since forex trading involves exchanging one currency for another.
There are over 1,000 stocks on Bursa Saham and over 8,000 different stocks on the NASDAQ and the NYSE and that can be very expensive in terms of time trying to keep on top of them all and we normally have to depend on the professional such as the market analyst. There are only four major currencies and around thirty other currencies to deliberate in the foreign exchange market. It is much easier to control and everybody have the opportunity to participate and determine the direction of the forex market. Therefore, analysts do not have an affect on the forex market as they do in the stock and commodity markets.
My trading system is combination of the simple Moving Average cross with some traditional Technical indicators such as RSI, Bollinger band (BB) and newer technical indicators such as lag indicators. I utilized filters to confirm my entry. Such filters incorporate technical indicators such as CCI, Stochastic, MACD and RSI.
But indicator is a derivative of price movement, and thus all the information in the indicator is in the price. Therefore, knowing the price action is the best way to trade and it involves knowing all the indictors mentioned above and also knowing your currency pair inside and out. This why I am sticking to the USDJPY and the 1 min timeframe only until I fully mastered it.
I also need to look for trend, support and resistance using trendlines, Fibonacci retracement, swing high and low, pivot points, the opening price ,the high and low of previous day. and higher time frames to see what is happening because that is where price turns. You can trade the turn and when it doesn't turn you can trade the break.
To identify major trend I utilized three longer period moving averages.
In my charting, I utilize the 20 period Simple Moving Average-SMA (which is incorporated in BB) , 60 period Exponential Moving Average (EMA) and also the 200 period EMA. I do this because I want the shorter averages to track the prices closer - and I’m interested in the spread along with the ‘orientation’ of the 20 and 60 EMAs, but I also want to see an average price over the last 200 period.The 20 SMA and 60 EMA help determine structure (uptrend/downtrend) and also to develop low-risk, high probability trade set-ups (entries) in a trending environment (buying pullbacks to the 20 or 50 EMA in a rising trend, for example). The cross of 60 and 200 EMA determine major trend in the time frame.
Moving average could also determine support and resistance. As price pullback, the 60 and 200 EMA will act as support and if price on it’s way upward, the two EMA’s will act as a resistance.
Chart patterns such as head and shoulder, triangles, double bottom or top and also candlesticks chart pattern are tools utilized to analyze price action. For example, a star pattern at support/resistance or outside BB could indicate a reversal.
