What Is The Best Forex Trading System For You?

Provided By Ultimate Trading Systems

Choosing Your Forex Trading System

All successful traders have a forex trading system that they follow to make profitable trades. This forex trading system is generally based on a strategy that allows them to find good trades. And the forex trading system is based on some form of market analysis. Successful traders need some way to interpret and even predict the movements of the market.

There are two basic approaches to analysing market movements, in both equity markets and the FOREX market. These are technical analysis and fundamental analysis. However, technical analysis is much more likely to be used by traders. Still, it’s good to have an understanding of both types of analysis, so that you can decide which type would work best for your forex trading system.

In fundamental analysis, you are basically valuing either a business, for equity markets, or a country, for FOREX. If you think it's hard enough to value one company, you should try valuing a whole country. It can be quite difficult to do, but there are indicators that can be studied to give insight into how the country works. A few indicators you might want to study are: Non-farm payrolls, Purchasing Managers Index (PMI), Consumer Price Index (CPI), Retail Sales, and Durable Goods.

Most traders in the FOREX market only use fundamental analysis in their forex trading system to predict long-term trends. However, some traders do trade short-term based on the reactions to different news releases. There are also quite a variety of meetings where you can get quotes and commentary that can affect markets just as much as any news release or indicator report. These meetings often discuss interest rates, inflation, and other issues that have the ability to affect currency values.

Even changes in how things are worded in statements addressing these types of issues, such as the Federal Reserve chairman's comments on interest rates, can affect your forex trading system. Two important meetings that you should watch for are the Federal Open Market Committee and the Humphrey Hawkins Hearings.

Just by reading the reports and examining the commentary, a FOREX fundamental analyst can get a better understanding of most long-term market trends and how they will affect their forex trading system. Keeping up on these developments will also allow short-term traders to profit from extraordinary happenings. If you do decide to follow a fundamental forex trading system, you will want to keep an economic calendar handy at all times so you know when these reports are released. Your broker may also be able to provide you with real-time access to this kind of information.

Just like their counterparts in the equity markets, technical analysts who use a forex trading system analyze price trends. The only real difference between technical analysis in FOREX and technical analysis in equities is the time frame. FOREX markets are open 24 hours a day.

Because of this, some forms of technical analysis that factor in time have to be modified so that they can work in the 24 hour FOREX market. Some of the most common forms of technical analysis used in a forex trading system are: Elliott Waves, Fibonacci studies, Parabolic SAR, and Pivot points.

A lot of technical analysts combine technical indicators to make more accurate predictions to aid their forex trading system. (The most common tendency is to combine Fibonacci studies with Elliott Waves.) Others prefer to create entire forex trading system in an effort to repeatedly locate similar buying and selling conditions.

Whichever form of analysis you choose, it’s best to make sure you learn as much as possible about it and your market. Then you will be able to use you knowledge to create a forex trading system that will suit your needs, and help you to become a profitable trader in the FOREX market.

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