To the degree that you constantly seek to increase your fx-related analytical skills set, the astuteness of your fx trading should grow proportionally. The reason is that trading fx is a knowledge game (i. e., the more knowledge you have, the more profitable your trading should become). Almost all this knowledge is available in reference books in any well-stocked public library or on the internet. It is only a matter of finding the spare time to acquire it and the patience – plus discipline – to perfect it. Learning advanced charting techniques is especially valuable. Bank fx dealers use such stuff on a daily basis and if you can understand where they probably placed their fx trades (as well as where they probably intend to get out), you can hop along for the ride too (and/or not get caught in their crosshairs when they all exit the scene en masse).
Finding fx trades that are “game changers” can be very profitable. Going long the USD/JPY in the first half of 2012 was such a trade.
How FX Analysis Skills Can Affect Your Profits
Like almost all other forms of major investments, the more you know about fx – before you start trading – the better off you will be. Fx is a global market that is highly responsive to both economic and political events. If you’re going to trade fx successfully, you need to know which events have the most impact and which don’t. You also have to know which currency pairs tend to move as a result of which announcement. Fine-tuning your knowledge about macroeconomics (particularly things like the effect of higher/lower “purchasing manager’s indices and national unemployment rates) is a good idea. Work on your advanced charting skills. Adding “Fibonacci retracement arrays” and “Ichimoku clouds” to your bag of tricks can be worth gold.
Gaining Better FX Analysis Skills
The internet is now filled with some excellent, free resources for learning more advanced technical analysis skills. Since most of this knowledge originally came from traders in the stock and futures markets of the world, you’ll find that most of the best charting websites concern themselves with stocks first. This is not a problem since the very same techniques can be very successfully applied to any currency pair chart. Indicators that you should learn how to use effectively include: simple and exponential moving averages, “MACD”, “Stochastic RSI”, “ROC”, “ATR”, “UO” and Bollinger Bands. Some of these are excellent for short-term fx trading; others are best used for long-term fx trading. You will need to experiment to see what works best for you.
Making The Most Of FX Analysis Skills
Where your finely honed analytical skills can become very profitable is if you can spot an inflection point before everyone else and position yourself inside the unfolding fx trend at a relatively low averaged cost. For example, few in the West saw the 2012 election of Japanese Prime Minster Shinzō Abe as a game changer par excellence. Those that did, however, piled into the long-side of USD/JPY either in late 2012 or early 2013. What happened next? The pair started to move upward in “startling” fashion. If you look at any long-term (i. e., monthly) charts of the USD/JPY, you can see that the pair has a lot of room to run. Even better, it’s also a “positive interest carry trade”.