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Trade with money you can
afford to lose: Trading FOREX Markets is speculative and can result
in loss, it is also exciting, exhilarating and can be addictive.
Identify the
state of the FOREX market: What is the market doing? Is it trending
upwards, downwards, is it in a trading range. Is the trend strong or weak,
did it begin long ago or does it look like a new trend that's forming.
Getting a clear picture of the market situation is laying the groundwork
for a successful trade.
TIP:
Basic Forex trading strategy begins with fundamental and technical
analysis. Fundamental analysis is mainly used to anticipate and better
understand long-term trends in the currency market. Technical analysis
is widely used to examine the FOREX because it identifies and measures
sustained trends.
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Determine what time frame you're trading on: Many FOREX traders get in
the market without thinking when they would like to get out, after all the
goal is to make money. This is true but when trading, one must extrapolate
in his mind's eye the movement that one expects to happen. Within this
extrapolation, resides a price evolution during a certain period of time.
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Attached to this is the idea of exit price. The importance of this is to
mentally put your trade in perspective and although it is clearly
impossible to know exactly when you will exit the market, it is important
to define from the outset if you'll be 'scalping' (trying to get a few
points off the market) trading intra-day, or going longer term. This will
also determine what chart period you're looking at.
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If you trade many
times a day, there's no point basing your technical analysis on a daily
graph, you'll probably want to analyze 30 minute or hour graphs.
Additionally it is important to know the different time periods when
various financial centers enter and exit the market as this creates more
or less volatility and liquidity and can influence the FOREX market movements.
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