Advantages of Charting, News Feeds, and Market Commentary
August 1, 2018
Forex trading is speculating on the moves currency pairs are making with the purpose of making a profit. Mastering the art of speculation is every trader’s dream.
To be successful when trading forex means to consider multiple factors: fundamental and technical analysis, macro and micro picture, human nature, psychology, and much more. All these combined will lead to constantly making a profit on the forex market.
It is important that a forex trader is calibrating his/her expectations. If one is looking to make a profit every trading month, then this approach, in the end, will hurt the trading account.
The idea is for the trading account to grow over the long run. It is perfectly normal to have downturns when you trade for a living. What matters is to make the most out of them and survive on the long run.
Out of the factors mentioned above, fundamental and technical analysis are the ones traders are focusing the most. Not that the other ones are less important, but these two dominate when it comes to making a trading decision.
Charting and Trading the Currency Markets
Technical traders use charts for entering and exiting a trade. A technical trader uses indicators (trend indicators and oscillators) to find the right entry/exit or bases the trading decision on a trading theory.
There are multiple trading theories out there, like the Elliott Waves theory, Gartley, Gann, Drummond, Point and Figure, etc. All these theories are part of charting the currency markets with the idea of making a profit by determining a trend, or a market reversal.
The biggest advantage of using technical analysis is that the fear factor is left outside of the equation. This means that following a technical analysis setup should not interfere with what a specific news or economic release will show.
If a buy signal is generated, it should be taken. If a signal to exit a trade appears, the trade should be closed. This way, emotions are not interfering with the trading decision and performance is significantly improving.
Easier said than done. While having a proper trading plan in place is a good thing, execution is rarely perfect. Human nature plays an important role in tricking traders to either get out of a trade too early or to close a trade out of fear of losing.
Integrating News Feeds and Market Commentaries
News feeds and market commentaries are a great way to stay up-to-date with potential events that are influencing the forex dashboard. If one is considering the high-frequency trading influence on the currency pairs, then they are even more important.
Because the currency pairs react the most when news hits the wires, trading algorithms are programmed to buy/sell a specific currency pair based on the news. This news is not always an economic release, but can be a market commentary from a central banker or a snippet transmitted by a press representative from a central banker’s press conference.
Knowing when to find information is vital for the long-term profitability and news feeds are good places to look for an explanation or a reason why market moved. For technical traders that use a short-term approach, their importance is overstated.
However, for investors that look at the overall picture, consider global economy and trade on the bigger time frames, incorporating news feeds and market commentaries in a trading decision is one factor that makes the difference between success and failure.