First Stept into Forex
If you want to make money on the financial markets whether it is in stocks, foreign exchange or warrants, you must first learn a few things about the way currencies work and about the indicators you can use to guide your investments. The first thing any trader must do is to choose a currency pair and specialize in it. This way, you will know how the pair evolves and how fast. If you are a beginner, it is advisable you take on the euro-dollar pair as its fluctuations are less dramatic.
Trade for half an hour or an hour to find a trend before you invest more. Find a trend using moving averages (simple, weighed and exponential). Confirm a trend using the Relative Strength Idex (RSI), the Moving Average Convergence -Divergence (MACD) and the slow Stochastics. A few theoretical observations might be useful at this point.
The MACD indicator is calculated upon the value of moving averages. The most commonly used are those at 9, 12 and 26 days. The principle is simple, probably the most simple: when the averages come to a crossing point, there is a signal to buy or sell. The stochastic is a technical indicator that connects the closing prices with the usual range of parity. It can also detect oversold and overbought areas.
The RSI is another technical indicator that is part of the class of oscillators just like the stochastic. If a parity is defined as oversold by the RSI method, then theoretically it gives a buy signal because it can not remain oversold for long. On the contrary, an overbought parity will tend to see its RSI falling in the near future. But any trader should be careful about the false signals because a currency can remain oversold or overbought for long time. Thus, this indicators are rather difficult to grasp, but with a bit of practice and intuition, you will master them.