Forex investing is a sublime form of investment opportunity with an inherent associated element of high risk. To succeed, you may need to use computer programs for calculating and analyzing market conditions. Even then you would need to know, some advanced investing practices especially if you were intending to be a day-trader.
The first thing to do is to study different techniques in forex trading, and see which one suits you the best. Read as many forex ebooks as possible before venturing into actual trading. Even then, start with a small amount of money and get a feel of the market before committing yourself to bigger investments. The cardinal principle in either case is that, the money you invest in the beginning is something you could well afford to loose without worrying too much about. Remember, forex trading is not a get rich scheme. The more mistakes you make in your initial trading days, the more likely you will emerge stronger. Learning from your mistakes is a great way to learn forex trading, simply because it precludes the possibility of you making the same mistakes again. Therefore, the key point to remember is that, the money you invest in your initial trading days should be money you could well afford to loose.
Advanced forex investing concepts is generally meant for the day trader. And day trading is something you should avoid in your early days in forex trading. Then you might ask, why learn of advanced forex trading concepts when you are still trying to grasp the basics of forex trading? That is because, it is better to train your mind at the outset itself on what are the intricacies of forex trading, whether it be day trading or long-term trading. So if you know a few of the basics on advanced forex trading concepts, you would be better positioned to decide on what suits you the best—that is day trading, position trading or trading over a longer time frame.
Day trading essentially means that you enter the market at the beginning of the day and exit it the same day, or in some instances the next day, in which case you pay a roll over fee to the broker. In the process you either make a profit or loss. It sounds simple, but in effect it is a lot more difficult in reality. In essence you have very little time frame to book a profit and that could happen only if you have made your judgment clearly. Now what are these advanced forex trading concepts that could help you in day trading? It is nothing but some vital technical analysis point of view pertaining to forex trading. Before telling you what advanced forex trading concepts is all about, it is worthwhile remembering that, while technical analysis has more to do with day trading, fundamental analysis is helpful to the long-term trader. Ideally you should use a combination of both types of analysis at any point of time in forex trading. But it is just that you use more of technical analysis in day trading. Of course we will learn more of fundamental analysis and technical analysis later on in the articles Fundamental Analysis in Forex Trading and Technical analysis in Forex trading.
Day traders have to be focused on price movements within a short frame of time, and that calls for making the right decisions pertaining to entry and exit from the market. You have very little time to reconcile your thoughts, and that calls for using advanced software. Before you use software to chart your thoughts, you need to be aware of the basics of advanced forex trading concepts.
Ever heard of the word ” leading indicators”? Most likely you may not have heard of it. As the name suggests, lead indicators are designed to indicate lead price movements. Most of the lead indicators that we know today are based on price movements over a previous period. For example stochastic oscillator is one such lead indicator. Agreed this is quite a bombastic word. But it is a word that you will run into in many a technical analysis. Supposing you hear of a 20-day stochastic oscillator what does it mean? It simply means that here is a stochastic indicator that would use the past twenty days of price action for calculation purposes. This is not the time to learn what a stochastic indicator is, but it would suffice for the moment if you are aware of this word. All that you need to know now is that it is a leading indicator.
Now that you know that a leading indicator uses data from a specific past period in time, you would be wanting to know if there are other leading indicators? Yes indeed there are others too. Commodity Channel Index (CCI), Momentum, Relative Strength Index (RSI), and Williams %R are few of the popular leading indicators.
If you were a day trader, you could be using these leading indicators and yet face a problem. Why is that so? Firstly, these indicators were developed for the stock market decades ago, when the concept of real time information was simply non-existent. So what happens when you use it for day trading in forex? It might work fine in a trending market but in a non-trending market, these indicators just don’t seem to work. The problem is further compounded by the fact that, any new news releases causes the currency price to move drastically, more in relation to the news release, than what should have happened as per the prognosis of the leading indicators.
So over a period of time, more interesting tools were developed for forex trading, particularly for day traders. They were called advanced technical indicators. Some of the advanced technical indicators are geometric patterns, fibonacci vortex, and time and price patterns. Using these features, plenty of software is available that could be of immense help to day traders in the forex market. One such software is Wave 59 day trading software that is excellent for day traders and veteran forex traders alike. In short the moral of this article is that, day trading is a minefield that is best negotiated with sufficient forex trading experience. As you now know the basics and the technicalities to look for in day trading, you should strive to learn as much as possible before proceeding to invest in currency markets.