Success in trading forex online depends on the ability of a trader to see trends and developing events. In this article, we discuss how great traders get informed in forex trading.
Success in trading forex requires an ability to see developing and upcoming events. It also requires knowing as to why the prices of currencies are where they are. It’s about seeing the past, present, and forecasting the future.
So, how do great traders get informed in forex trading?
First, these traders understand overall macroeconomic climate as well as events affecting specific currencies which they trade. If US Dollar and Euro pair is traded, careful attention is paid to what the central banks (The Fed and The European Central Bank)in these countries are doing.
This information is provided in the news and economic reports. But, these successful traders don’t get these news by surprise. They anticipate them by looking up the Economic Calendars.
Second, great traders also understand relationships between the markets. This is called inter-market analysis. If they trade currencies influenced by commodity prices(such as Aussie Dollar, Canadian Dollar or South African Rand, they know that falling commodity prices will likely depress these currencies.
Political events can also affect currencies. If there’s much instability going on in the world, often a flight to quality takes. Currencies such as US Dollar or Swiss Franc are considered to be safe havens.
But that’s not all. Top traders watch trends on continuing basis. Their trading desks have more than one screen, so much data is displayed. You’ll find charts of multiple currencies on these screens.
What’s more, successful forex traders look at currency trends from more than one perspective. They may have a dollar daily chart to display trends for the past several months, a 1-hour chart for trends of the past several days, and a 5-minute chart for the past several hours.
Of course, slightly different time periods can be used such as 4-hour, 15-minure, and 1-minute charts. The idea of this is to seen trends within trends.
This way it is possible to see how short- and intermediate-term trends are developing within the long term. That gives a better picture.
Top traders can see divergences as well. For example, they can see a currency making new highs (or highs not seen in a while), yet the oscillators (such as RSI or MACD) show a loss of momentum, meaning that the currency rise is likely to lose steam and lead to a fall.
Great forex traders know how to select information. Often, it is a mistake of new traders to look at too much information or have too many technical tools on the screen (like 8 oscillators). This only leads to confusion and bad trading decisions.