Actually, Forex trading is like whether prediction. Currency doesn’t change in random fashion. Instead it changes in predefined fashion that is defined by the market demand. Therefore trading is not impossible provided study and experience is performed correctly.
Currency prediction for Forex trading is performed in two major ways. First the technical indicators, second, the market analysis based on economical and news trends. Both must be done in concurrent fashion.
Beginners could predict only based on technical analysis but advanced traders must predict based on news heard related to economy trends.
Technical analysis is a smart way to predict currency change based on mathematical formulas. Users may not need to know mathematical details concerned with this type of analysis. They need to know only how those indicators used in correct way.
For instance, for stochastic indicators, this way to predict currency change implies that to see if the indicator number goes very low or very high for relatively long period. In this case a trading event appears and the trader may buy or sell the currency being traded.
On the other hand, economical analysis is used to predict for currency change based on the financial state of the country owning the currency being traded. This depends on the industrial level of the country and also the political state of the country. For instance, if the country is in war, it will affect the currency value of that country.
As mentioned above, this type of analysis needs advanced traders to be able to use it. The simpler is the technical indicators and even not all of them as some indicators may be difficult to use.
A Forex trading strategy is a way to predict currency change based on combination of technical indicators and news analysis. For instance a Forex strategy may have two technical indicators like stochastic and MACD and no news analysis included in the strategy.
For more successful strategy, the trader must use less amount of indicator for simplicity, as a general rule, more simple equal more success. This applies to many fields in our life and not only in Forex trading.
Predicting Currency change in more simple fashion, will give you rough idea to help make decision to buy now or sell now. The ability to well predict for currency change is the key to success in trading. In other words, failing to predict how the currency is going lead to failure in trading at all and lead to losses.
Source by Youssef Edward