Saturday, August 29, 2009
Incorporating Price Action Into a Forex Trading System
For the past couple of years Forex market has become very famous. It is a common question that how many dealers make it in the Forex trading. Sadly only fiver percent are able to make it. One point can be that Forex dealers are not aware of the right area to concentrate their focus, in which direction and what decisions have to be taken. Price factor plays an important factor which is not given much importance by the Forex dealers. Technical indicators comprises of the majority of the Forex trading methods such as moving average, overbought/oversold state in an oscillator, crossover etc. The question arises that what are indicators? They are just a sequence of data points that are planned in a chart and these points are obtained from mathematical methods which are used for the price for any currency. In simple terms it is a chart of price planned in a such a way that we are also introduced to other price also. As a matter of fact that the majority of the readings acquired are totally derived from the price action. For example a long MA crossover signal the price has increased considerably to make the shorter period MA cross the long period MA producing a major signal. It is generally believed that MA crossover is the reason behind the increased price which is not a genuine reason as MA crossover signal appeared as the price rise. What I am trying to say is that eventually it is the price factor that will decide the functioning of the indicator and the outcome can be decided on any decision trading. If we try to figure out the trading outcome derived from technical indicators without including the price factor then you cannot get positive effects. For instance, a long signal produced by the MA crosses with the advancement of the market reaches to its resistance stage. There is no point of making use of the signal where the price all of a sudden makes a comeback from that important stage. The price factor justifies that the market is not yet ready to experience an increase. In this situation the market will definitely crash down ignoring MA crossover. Technical indicators are very essential feature of the trading. These assist us to see all those state those are sometimes difficult by only watching price factor. The involvement of the price factor in the Forex trading methods certainly will turn the difficulties in our support and will assist in increasing the trade. The question is how to prepare an accurate Forex trading method? First and foremost, it is very important to choose a trading system that matches your individuality so that you can easily follow it. The requirements and objectives are different for every trader and no system is complete in itself. It is you who have to take the decision of which style and technical indicators to adopt till the time you find the appropriate one. It is very important to know about what technical indicator you are using. The second step is to add in the price factor to the system that you have adopted. It is beneficial for you as it will guide you to take the long signals if the price factor informs that if the market it going to rise or not and taking short signals just in case the market is decreasing. Thirdly it is very essential to follow the method religiously you have selected for your Forex trading. It is recommended to try out first on a demo account then moving to the small accounts and in the end when you are comfortable in using and operating then shift it to the real account.