With the stark future facing the American economy its only logical that profit seekers would take their search for profitable gains worldwide. The economy is truly global in scope and the emergence of India, China as well as Europe have changed the landscape of a world that was once dominated by America and Russia.
Other countries currencies matter now. It's a new world and if you want to profit from the new markets created by these world powers, keep it simple. Most new Forex traders overcomplicate the situation. They see the wildly gyrating tick by tick pricing and become greedy by the thought of profiting from every tick.
Not gonna happen. Other than the timed to the second news announcements that shake the market most other movement is simply the normal operation of the currency exchange business. Trying to predict and time the random buys and sells of banks as they exchange currency is foolish.
Stop looking at the 1, 15 and 30 minute charts. Switch to 1 hour and greater and the larger trend of the market begins to expose itself. That's where your should be betting should be concentrated. Even when playing the market as a day trader I always try to make my bets in the direction of the larger trend. This will give your trades the secondary protection of the overall trend in the event that your intra-day play is wrong. Using this method has saved my bacon more times than I can count.
Exposing the trend is pretty simple if you have a basic charting application. Add a 72 period Moving Average Exponential (MAE) to the chart in red. Add a 24 period Moving Average Exponential (MAE) to the chart in yellow.
The crossing lines easily expose the trend when viewing on a one hour or greater chart. Trading just the MAE crosses would get you in trouble but as secondary support to your main trading strategy it can work wonders for saving bad deals.
Keep your Indicator usage simple too. Indicators can be useful when you understand their limitations. A lot of traders have an over reliance on indicators and believe that if they place enough of them on a chart that the computer will magically become a forex psychic. Wrong!
All indicators lag the market even the leading indicators. If you have an indicator that updates every minute you could easily be in a situation where the indicator updates one minute after you go broke! But there are a few indicators that can greatly enhance your trading success when used correctly. They include the Commodity Channel Index (CCI), Relative Strength Index (RSI) among others.
Future articles in this series will show you how to properly apply the information provided by these tools until then look them up. They're pretty straight-forward in their standard usage and very useful but I'll show you how to use them in a sideways manner that gives you a truer picture of the trading market.
Until then keep it simple. You'll sleep better and profit more.