Forex trading refers to an international, 24/7, over the counter, exchange market where currencies of different nations are bought and sold. Trading is always done in pairs assuming the price of currency bought to go up and that sold to fall down. It is the largest liquid financial market making it impossible for any single investor to influence the prices of currencies.
There are two kinds of Forex investing strategies:
TECHNICAL ANALYSIS FUNDAMENTAL ANALYSIS
TECHNICAL ANALYSIS:
Technical analysis is mostly undertaken by small and medium size investors. A technical analysis considers factors that are actually affecting the market rather than factors that can affect it. Thus the price quoted reflects all the factors that have influenced it. Only market generated facts and figures are taken into account and factors like fear, hope, expectations or other changes are not considered. Thus the analysis is generally based on these suppositions:
* Price reflects all actual market movements. That means price includes everything known to the market like supply and demand of foreign exchange, political factors, trade agreements etc. It is not concerned with what resulted in change rather deals with actual changes. It works on the assumption that price can take only one of the three directions:
Upward, downward and sideward
* It rest on those market patterns that have been identified as significant. That means those factors which are repetitive in nature or will produce desired results.
* History always repeats itself as human psychology changes very slowly with time. That is market movements are predictable.
VARIOUS TECHNICAL INDICATORS ARE:
1. RELATIVE STRENGTH INDEX:
It takes into account the ratio of upward and downward movements in index and expresses it in the range of zero to hundred.
2.CHARTS:
Charts include various hills, slopes, curves that develop on a chart over a time and reflect some major and minor changes in pattern. Some of the chart formations include:
* TRIANGLE * RECTANGLE * HEAD AND SHOULDERS * DOUBLE TOP AND BOTTOM * SAUCERS * V
3.GAPS:
A gap represents area on a bar chart where no trading took place.
* UPGAP: it is formed when the lowest price on a particular day is more than the highest price of previous day.
* DOWNGAP: it is formed when highest price of a certain day is less than the lowest price on previous day.
NUMBERS:
Various number theories are used in technical analysis like:
* Fibonacci theory * GANN
STOCHASTIC OSCILLATOR:
This indicates the overbought or/and undersold condition. It uses a scale of zero to hundred percent
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