Posted by forex at 2:28 AM
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1. Choose a foreign currency to follow and specialize in it. Ideally it will be one where you know a bit about the politics, economy and culture of the country or region. Currency moves generally are influenced by the news and economic trends, so follow the news and economic indicators closely.
2. Find a forex ETF that represents that currency. There are a number of ETFs available for most major currencies and you can choose one with a ETF finder such as the one at Yahoo! Finance.
3. Trade before political news. A smart time to trade forex is before elections or dramatic political events are about to happen in a country. Often the market will become wary of a currency if there is the potential for an unstable or anti-business politician to rise to power. This is a good time to short sell the currency ETF of that country. The reelection of a successful leader can be an appropriate time to buy Forex and bet on an increase in value.
4. Trade during conflict. Growing internal domestic unrest can be cause for selling or shorting, which is selling borrowed shares to buy back later at a lower price, the currency ETF. Obviously, saber rattling and other signs of a looming conflict with another country can affect currencies.
5. Trade based on economic news. Each country releases its macroeconomic data at different times, and right before a news release is a good time to trade if an investor believes they understand what direction things are headed. For example, if your research makes you believe the economy is getting better, then unemployment indicators may announce a drop in unemployment, causing the currency of the country to rise. You should buy the appropriate currency ETF before unemployment news is released to profit on the news.
6. If you are successful trading a particular currency, move into researching a new one and begin trading the additional currency as well.