Posted by forex at 4:55 AM
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1. Do both fundamental and technical analysis of the markets under consideration. When you do fundamental analysis, you will limit yourself to a review of basic conditions and what is causing them to occur. For instance, if a particular country was in an economic depression, you would want to understand its cause and what is being done about it. Technical analysis is simply taking a snapshot of a trend and note its effect on currency valuations when it last occurred. There are services to which you can subscribe that can help you do both.
2. Factor in your trading decisions both the information that you have uncovered through analysis and the rumors that you hear. If you are new to the business, you will find that an online membership in a reputable forex website will be a valuable source for determining what to do with this information (see Resources below).
3. Extend you logic to stay ahead of the market. Most trades are based on an approach where “B” logically follows “A.” Go a step further by deciding what “C” will be, assuming that “B” will happen. Let's say that a small country is rebounding, and it's safe to say that its condition will positively impact its own currency. Going a step further, let's presume that country sells much of its production to a major country. Savvy currency traders will make trades based on the relationship of those two currencies, thus the “C” in this example.
4. Develop a good understanding of the environment on those countries whose currency is of interest. For example, a major weather system can have a huge impact on a country. For example, in 2006, Hurricane Katrina devastated American oil output, which forced the country to buy more from OPEC and Argentina. This purchase resulted in major swings in currencies of both the United States and its trading partners, and many currency traders made huge profits from trades based on those circumstances.
5. Become risk-averse. Before each trade, be sure your judgment is based on a thoughtful analysis of all known facts. That way, you will minimize the down-side of the trade and have positive results more of the time.