How to read the Forex market.
When it comes to reading the Forex market it is important that you ask yourself the question. What is it that you want to read? Do you want to read about the general news in the currency markets? Do you want to read and learn about the technical aspects of the currency markets? What specifically is it that you want to read about?
Taking into consideration most investors would like to read about the Forex market with the intent of profiting from currency fluctuations I will share with you various ways you can give yourself the best opportunity for success. Keep in mind with any form of Forex investing the information flow you receive is not going to tell you where to put your stop loss and how to manage your risk. 90% or more of investors are wanting to read and learn about ways to buy into the Forex market and profit. Very few are wanting to read about how to manage their risk which is the single most important part of trading the Forex market. Click on this link for more information about Managing Forex Trading Risk.
Information flow about the Forex market is everywhere on the internet. The word Forex is one of the most expensive words to buy on Google if you are wanting to attract people who are looking for this term. In my experience, as a professional trader most websites, newspapers, economist’s articles, currency brokers content and online news articles are general in nature and what I call “financial entertainment”. The information you read is usually not specific enough to be of benefit to a Forex trader. This is because the people that are writing the articles are paid to write about the Forex market, they are not paid to risk their own money in the market to profit. Certainly, the general information flow provided online by most of the parties mentioned above can teach you the basics about the Forex market, but if you are reading this article you are likely interested in making money, therefore I recommend you do your best to learn about and read about the Forex market from traders who are risking their money in the market and profiting.
If you are keen to learn how to read the Forex market then you should begin by understanding what drives the currency market. Most novice traders in their hurry to try and make money skip the important step of really understanding what drives the value of currencies. This can’t be learned trying to study technical chart patterns but can and should be learned by understanding how Central Banks adjust their Monetary Policy Programs and Interest Rates. It is these fundamental decisions by Central Banks that drive currencies in major trends and offer significant profit opportunity for traders. Learning to read about what Central Banks are likely going to do with interest rates and stimulus programs is going to help you form what is called a “Fundamental View”, a direction you will likely prefer to trade the currency you are about to invest in. If investment banks and hedge funds determine a central bank is likely going to be raising the official interest rate in coming quarters it is highly likely those same investment banks and hedge funds will be buying that currency and driving the value higher. Professional traders will generally have a fundamental view of a currency they are going to buy and they will then use their technical charting pattern knowledge to determine a value proposition to enter the trade. For example, if a currency is trending higher it will be because of something fundamental. A professional trader will often wait for a pullback in price so they can buy into the fundamental trend. They will use some form of technical analysis to choose where they believe the trade offers value so they can join a trend that has the potential to continue. When they enter the trade, they will likely be using three key ingredients.
- Their fundamental view.
- Their technical view.
- Their risk management view of where to exit if price goes against them.
Three important things to read and learn before you invest in the Forex market.
- What drives the value of a currency? Form a fundamental view.
- How to determine a value proposition. Learn to have a technical view.
- How to manage risk. Learn the importance of managing risk.
Following are a list of the places you can find general information about how to read the Forex market. However, it is my strong opinion that you read about the Forex market from successful traders who are risking their own money and making money.
- Economists articles in the newspaper.
- Currency Exchange companies.
- Forex Brokers.
- Social Media.
- Online News sources.
Here at LTG GoldRock, we trade the Forex market every week along with our clients. We tell them specifically what we are buying and selling and provide them with daily fundamental and technical reports along with risk management advice on how to manage their positions. For new traders who are entering the Forex market we provide weekly live coaching and trading sessions live online demonstrating in the live market how the Forex market works fundamentally and technically as well as sharing how we manage our risk exposure to approximately 2% on each trade. You can register to join one of these live coaching and trading sessions by clicking here.
Learning to read the Forex market, where the major trends are, why they are happening and where the next major trend is likely going to be, comes down to reading and learning how Central Banks adjust monetary policy. Profiting from those major fundamental currency trends will then likely come down to your technical charting knowledge of identifying a value proposition and applying proper risk management in the event the trade moves against you.
If you would like to book a free 30-minute phone consultation to speak to one of our Senior Client Advisors regarding the relative client opportunities offered at LTG GoldRock and how you can follow along with our Professional traders each day in our live trading room please click here.